First Houston Health Care LLC v. Burwell et al
Filing
29
MEMORANDUM OPINION AND ORDER granting 13 MOTION to Dismiss, denying as moot 27 MOTION for Discovery, denying as moot 28 EMERGENCY MOTION. Sylvia Mathews Burwell terminated. (Signed by Judge Sim Lake) Parties notified. (aboyd, 4)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
FIRST HOUSTON HEALTH CARE,
L.L.C. ,
§
§
§
Plaintiff,
§
§
§
§
§
§
§
§
§
§
§
v.
SYLVIA MATHEWS BURWELL,
Secretary, UNITED STATES
DEPARTMENT OF HEALTH AND
HUMAN SERVICES, and PALMETTO
GBA, L.L.C.,
Defendants.
CIVIL ACTION NO. H-14-3055
MEMORANDUM OPINION AND ORDER
First
Plaintiff,
Houston") ,
brings
Houston
this
Health
class
Care,
action
L.L.C. ,
against
("First
defendants,
Sylvia Mathews Burwell, Secretary of the United States Department
of Health and Human Services
L.L.C.
("PGBA"),
judicial
review,
("Secretary"),
for emergency mandamus and,
declaratory relief,
and
Palmetto GBA,
alternatively,
for
compensatory damages,
and
attorney's fees arising from the revocation of plaintiff's Medicare
billing privileges
and
termination of
its
provider agreement.
Pending before the court are Secretary Burwell's Motion to Dismiss
for Lack of Subj ect Matter Jurisdiction and Failure to State a
Claim
(Docket
Entry
No.
13),
Plaintiff's
Motion
for
Limited
Discovery on Jurisdictional Issues and Brief in Support Thereof
(Docket
Entry
No.
27),
and
Plaintiff's
Emergency
Motion
for
Mandamus Relief
(Docket Entry No.
For the reasons stated
28).
below, the Secretary's Motion to Dismiss will be granted, and First
Houston's Motion for Discovery and Emergency Motion for Mandamus
Relief will be denied as moot.
I.
Factual Background
First Houston is a
home health care provider that at all
relevant times was employing approximately 38 employees, treating
approximately
90
patients,
and
receiving
Medicare
payments
amounts totaling approximately one million dollars a year.
Houston alleges
that
on April
30,
2014,
it
sent
in
First
notice of an
address change to PGBA, and that on June 1, 2014, it relocated its
offices from 6300 Hillcroft Street, Suite 310, Houston, Texas, to
8303 S.W. Freeway, Suite 710, Houston, Texas.
On or about June 26,
2014, PGBA conducted an enrollment audit at First Houston's former
location, and in a letter dated September 11, 2014, PGBA notified
First
Houston that
its Medicare
billing privileges were
being
revoked and its provider agreement terminated effective June 26,
2014, because an on-site visit revealed that as of that date First
Houston was no longer operating at the only address that PGBA had
on file,
i.e.,
6300 Hillcroft,
Suite 310,
Houston,
Texas.
PGBA
notified First Houston that if it disagreed with its revocation and
termination
officer.
it
could
First
request
Houston
reconsideration
requested
from
a
reconsideration,
hearing
and
on
October 16, 2014, PGBA notified First Houston that the decision to
-2-
revoke its Medicare billing privileges and terminate its provider
agreement had been affirmed.
PGBA also notified First Houston that
it could request review by an Administrative Law Judge ("ALJ").
On
October 24, 2014, First Houston filed this action. 1
II.
The Secretary's Motion to Dismiss
The Secretary argues that this action is subject to dismissal
for lack of subject matter jurisdiction under Federal Rule of Civil
Procedure 12(b) (1) or, alternatively, for failure to state a claim
for
which
relief
may
be
granted
under
Federal
Rule
of
Civil
Procedure 12(b) (6) because First Houston has failed to exhaust its
administrative remedies as required by the Medicare provisions of
the Social Security Act.
A.
Standard of Review
1.
Rule 12(b) (1) Standard
Federal Rule of Civil Procedure 12(b) (1) governs challenges to
the court's
subject matter
jurisdiction.
"A case
is properly
dismissed for lack of subject matter jurisdiction when the court
lPlaintiff's Original Complaint-Class Action for Emergency
Mandamus and, Al ternati vely, Judicial Review, Including Application
for TRO and Declaratory Relief, and for Compensatory Damages, and
At torneys Fees ("Plaintiff's Original Complaint "), Docket Entry
No. I, pp. 1-5, 12-14.
See also Plaintiff's Emergency Motion to
Extend Ex Parte Temporary Restraining Order, Docket Entry No. 12,
and exhibits thereto; and Secretary Burwell's Motion to Dismiss for
Lack of Subject Matter Jurisdiction and Failure to State a Claim
("Secretary's Motion to Dismiss"), Docket Entry No. 13, pp. 3-4
(stating material facts).
-3-
lacks
the
case."
statutory or constitutional
power to
adjudicate
the
Home Builders Association of Mississippi, Inc. v. City of
Madison, Mississippi, 143 F.3d 1006, 1010 (5th Cir. 1998).
"Courts
may dismiss for lack of subject matter jurisdiction on anyone of
three different bases:
supplemented
complaint
by
(1) the complaint alone;
undisputed
supplemented
by
facts
in
the
undisputed
(2) the complaint
record;
facts
plus
or
(3)
the
the
court's
resolution of disputed facts."
Clark v. Tarrant County, Texas, 798
F.2d 736, 741 (5th Cir. 1986).
Rule 12 (b) (1) challenges to subject
matter
two
jurisdiction come
"factual" attacks.
(5th Cir.
1981).
in
forms:
"facial"
attacks
and
See Paterson v. Weinberger, 644 F.2d 521, 523
A facial
attack consists of a Rule 12 (b) (1)
motion unaccompanied by supporting evidence that challenges the
court's jurisdiction based solely on the pleadings.
Id.
A factual
attack challenges the existence of subject matter jurisdiction in
fact -- irrespective of the pleadings -- and matters outside the
pleadings -- such as testimony and affidavits -- are considered.
Id.
Because the Secretary has not submitted evidence outside First
Houston's pleadings
in support of her Rule
12 (b) (1)
motion to
dismiss, the motion is a facial attack; and the court's review is
limited
to
jurisdiction. 2
jurisdiction,
whether
First
the
Houston,
complaint
as
the
sufficiently
alleges
party asserting
federal
has the burden of showing that the jurisdictional
2The underlying facts stated in
-4-
§
I, above, are not disputed.
Alabama-Coushatta Tribe of Texas v.
requirement has been met.
United States, 757 F.3d 484, 487
(5th Cir. 2014).
When facing a
challenge to subject matter jurisdiction and other challenges on
the merits, courts must consider the Rule 12(b) (1)
jurisdictional
challenge before addressing the merits of the case.
2.
rd.
Rule 12(b) (6) Standard
Under Rule
8 of
the
Federal
Rules
of
Civil
Procedure,
a
pleading must contain "a short and plain statement of the claim
showing that the pleader is entitled to relief."
P. 8(a) (2).
Fed.
R.
Civ.
A Rule 12(b) (6) motion tests the formal sufficiency of
the pleadings and is "appropriate when a defendant attacks the
complaint because it fails to state a legally cognizable claim."
Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001), cert.
denied sub nom Cloud v. United States, 122 S. Ct. 2665 (2002).
The
court must accept the factual allegations of the complaint as true,
view them in a light most favorable to the plaintiff, and draw all
reasonable inferences in the plaintiff's favor.
rd.
To defeat a
motion to dismiss pursuant to Rule 12(b) (6), a plaintiff must plead
"enough facts to state a claim to relief that is plausible on its
face."
Bell Atlantic Corp.
(2007).
"A claim has facial plausibility when the plaintiff pleads
factual
content
that
allows
v.
Twombly,
the
court
127 S.
to
draw
Ct.
the
1955,
1974
reasonable
inference that the defendant is liable for the misconduct alleged."
Ashcroft v.
Iqbal, 129 S. Ct. 1937, 1949
-5-
(2009)
(citing Twombly,
127
s.
"The plausibility standard is not akin to a
Ct . at 1965).
'probability requirement,'
but
it
asks
for
more
than a
possibility that a defendant has acted unlawfully."
Id.
sheer
(quoting
Twombly, 127 S. Ct. at 1965).
"Where a complaint pleads facts that
are
a defendant's liability,
'merely consistent with'
short
of
the
line
between
entitlement to relief. '"
1966).
possibility
Id.
and
it
'stops
plausibility
(quoting Twombly,
127 S.
Ct.
of
at
When considering a motion to dismiss, district courts are
"limited to the complaint, any documents attached to the complaint,
and any documents
attached to
the
motion to dismiss
central to the claim and referenced by the complaint."
Fund V (U.S.), L.P. v. Barclays Bank PLC,
Cir. 2010)
that
are
Lone Star
594 F.3d 383, 387 (5th
(citing Collins v. Morgan Stanley Dean Witter, 224 F.3d
496, 498-99 (5th Cir. 2000)).
Applicable Law
B.
Subchapter XVIII of the Social Security Act includes "Health
Insurance Benefits for the Aged and Disabled," commonly known as
the Medicare Act.
Health
and
See 42 U.S.C.
Human
1395, et seq.
§
("DHHS") ,
Services
The Department of
through
the
Secretary,
administers the Medicare program and has delegated this function to
the
Center
for
Medicare
and
Medicaid
Services
("CMS").
The
Medicare Act covers services furnished to beneficiaries by home
heal th
§
care
1395x(m)
i
providers
such
42
Part 484.
C.F.R.
as
First
-6-
Houston.
See
42
U.S.C.
Medicare providers undergo a
process of
survey and certification whereby a
accrediting
organization
determines
whether
Medicare's participation requirements.
1395bb.
See
requirements).
also
42
C.F.R.
they
comply
See 42 U.S.C.
424.510
§
state agency or
(stating
§§
with
1395aa,
participation
Home health care providers furnishing services to
Medicare beneficiaries must enroll
obtain a billing number.
in the Medicare program and
See 42 U.S.C.
1395cc.
§
Providers must
also meet and maintain enrollment requirements set forth in the CMS
regulations, i.e., 42 C.F.R. Part 424, subpart P (requirements for
establishing
and
maintaining
Medicare
billing
privileges).
Enrollment confers program billing privileges, i.e., the right to
claim
and
receive
Medicare
payment
for
provided to the program's beneficiaries.
424.505.
health
care
See 42 C.F.R.
§§
services
424.502,
Changes to enrollment information, including, inter alia,
a provider's practice location, must be reported to CMS within 90
days of a change.
42 C.F.R.
§
424.516(e) (2).
A provider's Medicare billing privileges many be revoked and
its provider agreement terminated for a number of reasons including,
inter alia, failure to comply with any enrollment requirement and an
on-site review showing that the provider is not operational.
C.F.R.
§
424.535(a)-(b)
i
42 C.F.R.
§
424.510(d) (6).
42
Providers whose
Medicare billing privileges are revoked and provider agreements
terminated may pursue an administrative appeal under 42 C.F.R. Part
498.
See 42 C.F.R.
§
424.545(a)
and (b).
A provider begins the
administrative appeal process by asking for reconsideration of the
-7-
decisions
to
revoke
billing
42 C.F.R.
agreements.
privileges
498.5(1).
§
and
terminate
A provider that receives an
unfavorable decision upon reconsideration may request
before an ALJ.
See 42 C.F.R.
§
provider
498.40.
a hearing
An unfavorable decision by
an ALJ may be appealed to the Departmental Appeals Board ("Board").
42 C.F.R.
Following an unfavorable decision from the
498.80.
§
Board, a provider may seek judicial review in federal court. See 42
u.S.C.
§
1395cc(h) (1) (a); 42 C.F.R.
§
498.90.
The Medicare Act incorporates two key provisions of the Social
Security Act dealing with judicial review of agency actions.
The
first key judicial review provision of the Social Security Act
incorporated into the Medicare Act is 42 U.S.C.
provides
a
strict
administrative
exhaustion
§
405(g), which
requirement
as
a
prerequisite to judicial review:
Any individual,
after any final decision of
[the
Secretary] made after a hearing to which he was a party
. may obtain a review of such decision by a civil
action commenced within sixty days after the mailing to
him of notice of such decision. . . The findings of [the
Secretary] as to any fact, if supported by substantial
evidence, shall be conclusive.
. The judgment of the
court shall be final except that it shall be subject to
review in the same manner as a judgment in other civil
actions.
The second key judicial review provision is 42 U.S.C.
The
Medicare
provisions of
subchapter
Act,
§
at
42
405 (h)
[Medicare]
U.S.C.
§
1395ii,
§
provides
"shall also apply with respect
405(h).
that
the
to this
to the same extent as they are applicable
with respect to subchapter 11 [Social Security]."
provides:
-8-
Section 405(h)
The findings and decision of the [Secretary] after a
hearing shall be binding upon all individuals who were
parties to such hearing. No findings of fact or decision
of the [Secretary] shall be reviewed by any person,
tribunal, or governmental agency except as herein
provided.
No action against the United States, the
Commissioner of Social Security, or any officer or
employee thereof shall be brought under section 1331 or
1346 of Title 28 to recover on any claim arising under
this subchapter.
The second sentence of
Secretary's
§
405(g)
§
405(h) precludes judicial review of the
determinations
under
the
Medicare Act
pursuant
unless its exhaustion requirements are met.
sentence forecloses
to
The third
al ternati ve routes of review under federal
question jurisdiction or jurisdiction based on the United States'
status as a defendant.
C.
Analysis
1.
Subject Matter Jurisdiction
The Secretary moves to dismiss for lack of subject matter
jurisdiction, and First Houston moves for jurisdictional discovery.
These
motions
present
the
jurisdictional
issue
of
whether
an
exception applies to the administrative exhaustion requirements set
forth above
if a
Medicare provider may be unable
to
complete
administrative review because revocation of its billing privileges
and termination of its provider agreement effectively close that
provider's business.
The Secretary argues that
Plaintiff is dissatisfied with
[the]
Secretary's decision to revoke its Medicare billing
privileges and its Medicare provider agreement. Instead
of challenging that decision through the Secretary's
administrative process, Plaintiff is attempting to bypass
that process completely,
seeking from this Court
-9-
injunctive relief to undo the revocation decision and a
declaratory judgment finding that the revocation was
improper. However, Congress has not provided this Court
with jurisdiction to consider Plaintiff's claims.
Plaintiff's request is barred by sovereign immunity as
Congress has prohibited federal court jurisdiction to
review the Secretary's decision unless and until
Plaintiff
has
channeled
its
claims
through
the
administrative process created by the Medicare statute.
It is undisputed that Plaintiff has failed to do SO.3
The Secretary explains that
Plaintiff's billing privileges were revoked pursuant to
42 C.F.R. § 424.535(b) of the Secretary's regulations.
The revocation ends Plaintiff's ability to submit claims
to the Medicare Program.
Since the "standing and
substantive basis" of the Secretary's revocation is the
Medicare Act and the revocation is
"inextricably
intertwined" with benefit determinations, Plaintiff's
claims "arise under" the Medicare Act.
See Heckler v.
Ringer, 466 U.S. 602, 622-24 (1984) i Weinberger v. Salfi,
422 U.S. 749, 760-61 (1975).
As such, Plaintiff must
exhaust its administrative remedies before seeking
judicial review of the Secretary's revocation decision. 4
Without disputing that providers must ordinarily exhaust their
administrative remedies before seeking judicial review in federal
court, First Houston argues that the Secretary's exhaustion defense
does not apply to the claims asserted in this action because First
Houston
is
not
seeking
benefits
but,
instead,
is
seeking
to
challenge the procedures used in administering the Medicare Act.5
3Secre tary's Motion to Dismiss, Docket Entry No. 13, p. 1.
4Id. at 5.
5Plaintiff's Amended Response to Defendant HHS' s Motion to
Dismiss for Lack of Subject Matter Jurisdiction and for Failure to
State a Claim ("Plaintiff's Amended Response"), Docket Entry
No. 22-2, pp. 6-7.
-10-
Citing wolcott v.
Sebelius,
635 F.3d 757,
765
(5th Cir.
2011),
First Houston argues that mandamus jurisdiction is available in
exceptional
cases
such as
this. 6
Al ternati vely,
First Houston
argues that this court has subject matter jurisdiction to review
the revocation of its Medicare billing privileges under the "no
review at all" exception to the exhaustion requirement recognized
by the Supreme Court in Shalala v. Illinois Council on Long Term
Care, Inc., 120 S. Ct. 1084 ( 2 000) . 7
(a)
The "No Review At All" Exception Does Not Apply
Because First Houston conflates the Illinois Council analysis
with questions of whether the procedural steps required by
§
405(g)
can be waived under Mathews v. Eldridge, 96 S. Ct. 893 (1976), and
whether
the
"clandestine
policy"
exception
recognized
by
the
Supreme Court in Bowen v. City of New York, 106 S. Ct. 2022 (1986),
apply to the facts of this case, the court will address all three
possibilities for avoiding the exhaustion requirement. s
(1)
The Exception to the Exhaustion Requirement
Recognized in Illinois Council Does Not Apply
The Supreme Court has determined that Congress intended an
exception to the administrative exhaustion requirement in
§
405 (h) ,
6Id. at 8-11.
7Id. at 11-14.
See also id. at 6 ("Plaintiff only asserts
mandamus jurisdiction and, alternatively, the 'no review at all'
exception to administrative exhaustion.
.") .
SSee id. at 13-14.
-11-
where it "would not simply channel review through the agency, but
would mean no review at all."
Illinois Council, 120 S. Ct. at 1097
(construing Bowen v. Michigan Academy of Family Physicians,
s.
Ct. 2133
claim
under
bringing it
judicial
"Under this exception,
(1986)).
the
Medicare
before
the
Act
federal
[Secretary]
review would have
review entirely."
in
the
if
effect
106
a party may file a
court
without
first
further postponement of
of
foreclosing
Southwest Pharmacy Solutions,
judicial
Inc. v. Centers
for Medicare and Medicaid Services, 718 F.3d 436, 440-41 (5th Cir.
2013),
cert.
denied,
134
S.
Ct.
Counc i 1, 120 S. Ct . at 1098 - 99) .
898
(2014)
(citing
Illinois
The Secretary argues that the
Illinois Council exception only applies in cases where there is no
opportunity for any judicial review.
Because First Houston is
entitled to post-deprivation review, the Secretary argues that this
exception does not apply.
The court agrees with the Secretary that
the Illinois Council exception does not apply here.
Asserting that
almost
all
of
its patients are covered by
Medicare, First Houston argues that as a practical matter it will
receive no review at all because its business will no longer be
viable if
its Medicare billing privileges are
provider agreement is terminated.
revoked and its
First Houston argues that the
fact that it is guaranteed to close its doors as a result of the
Secretary's decisions means that it could not obtain any meaningful
review if it
is
forced to exhaust
its administrative remedies
before seeking judicial review in federal court.
-12-
But the cases
that have applied the "no review at all" exception recognized by
the
Supreme
Court
in
Illinois
Council
make
it
clear
that
application of this exception does not depend on the timing of
judicial review, but, instead, on whether the plaintiff is entitled
to "no review at all."
See Physician Hospitals of America v.
Sebelius, 691 F.3d 649, 659 (5th Cir. 2012)
(holding that financial
hardship to plaintiffs in exhausting administrative remedies is no
more
than
a
delay-related
College Hill.
(" [W] here
Cathedral
Rock
Inc. v. Shalala, 223 F.3d 354, 361
the
participate
hardship);
Secretary
in
the
terminates
Medicare
a
program
North
(6th Cir. 2000)
provider's
for
of
agreement
failure
to
to
comply
substantially with the agreement or the Medicare regulations, the
provider is entitled to a hearing and then judicial review of the
Secretary's final decision after the hearing.
§
1395ii and
altogether;
§
. Application of
405(h) in this case will not prevent judicial review
Beechknoll
simply
must
exhaust
remedies before this review can take place.
its
administrative
Therefore, we conclude
that the [Illinois Council and] Michigan Academy exception [are]
not applicable in this case"; Council for Urological Interests v.
Sebelius,
Illinois
668 F.3d 704,
Council
712
exception
(D.C.
Cir.
applied
to
2011)
a
(holding that the
category of
affected
parties who could not seek administrative review as providers and
therefore
faced a
serious practical
roadblock
to
having their
claims reviewed in any capacity, administratively or judicially) .
In
Illinois
Council,
120
S.
Ct.
-13-
at
1093,
the
Supreme
Court
acknowledged that the delay involved in requiring "virtually all"
claimants
to exhaust
their administrative
remedies
comes at
a
price, "namely, occasional individual, delay-related hardship," but
explained that
in the
context
program such as Medicare,
of
a
massive
health and safety
"this price may seem justified."
The
Supreme Court has consistently drawn a distinction between "a total
preclusion of review and postponement of review."
(declining
to
apply
a
presumption
in
favor
of
Id.
at 1097
preenforcement
review, and citing Thunder Basin Coal Co. v. Reich, 114 S. Ct. 771,
776 n.B (1994)
(strong presumption against preclusion of review is
not implicated by provision postponing review))
The Illinois Council Court explained that the "no review at
all" exception is not intended to remedy isolated delay-related
cost
and
hardship
inconvenience,
likely found
applies generally,
but
is
instead
intended
to
deal
in many cases based on how the
resulting
in a
complete denial
of
statute
judicial
review:
[W]e do not hold that an individual party could
circumvent § 1395ii's channeling requirement simply
because that party shows that postponement would mean
added inconvenience or cost in an isolated, particular
case. Rather, the question is whether, as applied
generally to those covered by a particular statutory
provision, hardship likely found in many cases turns what
appears to be simply a channeling requirement into
complete preclusion of judicial review.
. Of course,
individual hardship may be mitigated in a different way,
namely, through excusing a number of the steps in the
agency process, though not the step of presentment of the
matter to the agency . . . But again, the Council has not
shown anything other than potentially isolated instances
-14-
with
of the inconveniences sometimes
postponement of judicial review. 9
associated
Illinois Council, 120 S. Ct. at 1098-99.
with
the
For example, in Council
for Urological Interests, 668 F.3d at 712, the court found that an
entire category of certain third parties lacked standing under the
Medicare Act to bring an administrative claim and that there was no
sufficient proxy to bring an administrative claim on their behalf.
The court therefore held that the
"no review at all"
exception
applied because this category of third parties had no judicial
review at all.
Id.
First Houston has not shown that the Medicare Act generally
applies to foreclose judicial review to a category of parties or
claims.
Instead,
First Houston has focused exclusively on the
specific financial inconvenience that it will suffer if it cannot
obtain
judicial
remedies.
review
Because
prior
once
to
First
exhausting
Houston
its
has
administrative
exhausted
its
administrative remedies First Houston will be entitled to judicial
review of the Secretary's decision to revoke its Medicare billing
privileges and provider agreement, and because the harm that First
Houston argues
it will
suffer if
it
is
forced
to exhaust
its
administrative remedies before seeking judicial review constitutes
only an isolated, delay-related harm, the court concludes that the
9Whether individual harm should be mitigated through waiver of
some of the administrative exhaustion requirements was addressed by
the Supreme Court in Eldridge, 96 S. Ct. 893, and is addressed here
in the next section, i.e., § II.C.1(b)
-15-
Illinois Council exception does not apply.
See Physician Hospitals
of America, 691 F.3d at 659.
(2)
Waiver
of
Some
Exhaustion
Requirements
Recognized in Eldridge Does Not Apply
Citing Eldridge, 96 S. Ct. at 893, and City of New York, 106
S. Ct. at 2022, and asserting that the substance of the allegations
in this case are that the government is applying a clandestine
policy to eliminate Texas home care providers, First Houston argues
that the Secretary's administrative exhaustion defense does not
apply to the facts of this case because "[t] his case does not
affect the merits of Medicare benefits,
and Plaintiff makes no
claim to such benefits in disputing the illegal revocation brought
by the government under the guise of 42 C.F.R.
The Supreme Court's opinion in Eldridge,
§
424.535." 10
96 S.
Ct. at 893,
does not provide an exception to the administrative exhaustion
requirement, but instead prescribes when a court may waive some of
the
exhaustion
requirements
under
§
405(g).
Id.
at
900.
Explaining that there are waivable and nonwaivable components to
§
405(g) 's requirement that an individual claimant present a claim
to an agency before seeking judicial review, the Court stated that
[t] he waivable element is the requirement that the
administrative remedies prescribed by the Secretary be
exhausted.
The nonwaivable element is the requirement
that a claim for benefits shall have been presented to
the Secretary.
Absent such a claim there can be no
l°Plaintiff's Amended Response, Docket Entry No. 22-2, p. 8.
-16-
"decision" of any type.
And some decision
Secretary is clearly required by the statute.
Id.
by
the
Stating that the exhaustion requirement should be
at 899.
waived where the plaintiff raises at least a colorable claim that
is "entirely collateral" to its substantive claim,
and where an
"erroneous termination would damage
in a way not
[the claimant]
recompensable through retroactive payments," id. at 901, the Court
held that the plaintiff's claim that a pre-deprivation hearing was
constitutionally
required
was
"entirely
collateral"
to
substantive claim of entitlement to disability benefits.
900-901.
his
Id. at
The Court explained that because of the plaintiff's
physical condition and dependency upon the disability
benefits, an erroneous termination would damage him in a
way not recompensable through retroactive payments. Thus
denying Eldridge' s substantive claim
or
upholding i t .
. at the post-termination stage
would not answer his constitutional challenge.
Id. at 901.
Because
First
Houston
has
presented
its
request
for
reconsideration of the revocation and termination decisions of the
Secretary,
First Houston
--
like the plaintiff
in Eldridge
appears to have fulfilled the nonwaivable element of administrative
exhaustion,
i.e.,
presentment to the Secretary.
court must
determine
exhaustion required in
if
§
the
remaining
405(g)
steps
Therefore,
of
should be waived.
waive the administrative exhaustion requirements,
the
administrative
In order to
the court must
first find that the claims First Houston asserts in this case are
"entirely collateral"
to its claim before the
-17-
Secretary.
The
secretary argues that the Eldridge waiver does not apply because
the claims that First Houston has asserted in this action are not
"entirely collateral H to the substantive claims that First Houston
has presented to the Secretary.ll
The Secretary explains that
As
[Eldridge]
was further clarified in
[City of
New York], however, these types of collateral claims are
ones in which the plaintiffs were neither seeking nor
were awarded benefits.
. i here Plaintiff in substance
and effect seeks relief that would eliminate a revocation
determination and would enable Plaintiff to submit claims
to the Medicare program. These claims are "inextricably
intertwined H with benefit determinations.
. and their
"standing and substantive basisH arise under the Medicare
Act.
. Therefore the claims are not collateral
and the Court has no jurisdiction under this theory.12
The court agrees with the Secretary that the Eldridge waiver does
not apply here.
The complaint in this action asserts claims for violation of
First Houston's rights to due process and equal protection of the
law, but also seeks injunctive and declaratory relief as well as
damages
(from defendant
Palmetto GBA,
L. L. C.)
arising from its
contention that the defendants' decisions to revoke its Medicare
billing privileges and to terminate its Medicare provider agreement
were
in error.
Al though First
Houston has
framed
asserted in this action in constitutional terms,
the
claims
First Houston's
claims in this case are essentially the same claims that First
Houston made to the Secretary,
i . e.,
claims seeking to rescind
llSecretary's Motion to Dismiss, Docket Entry No. 13, pp. 17 -18.
12rd.
-18-
improper revocation of its Medicare billing privileges and provider
agreement.
See Affiliated Professional Home Health Care Agency
["APRO"] v. Shalala, 164 F.3d 282, 285-86 (5th Cir. 1999)
that
"to
claim[s]
fully
that
address
[the
plaintiff
health
care
(noting
agency's]
[its] due process and equal protection rights were
violated through the improper enforcement of Medicare regulations,
a
court
would
necessarily
have
to
immerse
itself
in
those
regulations and make a factual determination as to whether
[the
plaintiff health care agency] was actually in compliance").
See
also Cathedral Rock, 223 F.3d at 363
(explaining that the claims
must be completely separate from the claim that the plaintiff is
entitled to benefits or continued participation in the Medicare
program; if they are "inextricably intertwined" with the claim for
benefits or participation, they are not entirely collateral) .
In APRO, 164 F.3d at 282, as here, a Medicare provider filed
suit without first exhausting its administrative remedies alleging
that
the
defendants,
i.e.,
the
Secretary
and
a
government
contractor like PGBA, improperly and arbitrarily enforced various
Medicare rules and regulations.
APRO argued that the court could
waive exhaustion of administrative review if the claims it had
asserted were collateral to those made to the Secretary and could
not
be
remedied
by
administrative
review.
Rejecting
APRO's
contention that it had asserted collateral claims that could not be
remedied by administrative review, the Fifth Circuit held that
-19-
APRO's claim is not a collateral claim for purposes of
exhaustion.
Although its claim is framed in constitutional terms and seeks compensatory and punitive damages,
APRO also seeks to rescind the termination of its
provider status and to halt the suspension of its
Medicare payments.
Such relief is unquestionably
administrative in nature.
Additionally, to fully address APRO's claim that [its]
due process and equal protection rights were violated
through the improper enforcement of Medicare regulations,
a court would necessarily have to immerse itself in those
regulations and make a factual determination as to
whether APRO was actually in compliance.
Given the
administrative nature of that inquiry, it cannot be
reasonably concluded that APRO's claim is collateral to
a claim for administrative entitlement.
The constitutional nature of APRO's claim does not, by
itself, alter that conclusion.
The Supreme Court has
recognized that the constitutional tenor of a claim is
not a determinative factor in deciding whether a claim is
collateral.
Instead, the exhaustion requirement is
applicable to a constitutionally-based claim when that
claim is "inextricably intertwined H with a substantive
claim of administrative entitlement.
In this case,
there is little doubt that APRO's claim is "inextricably
intertwined H with a demand for benefits.
APRO,
164 F.3d at 285-86
2013,
2020-23
(1984),
2467-68 (1975)).
(citing Heckler v.
and Weinberger v.
Ringer,
Salfi,
95 S.
104 S. Ct.
Ct.
2457,
See also Cathedral Rock, 223 F.3d at 363 (holding
that plaintiff's claim was not collateral
"because a
favorable
resolution of [its] claim would result in the reinstatement of its
Medicare provider agreement H )
As in APRO,
•
164 F. 3d at 282,
the claims asserted in First
Houston's complaint are fundamentally claims for Medicare benefits
and thus are not entirely collateral either to the claims that
First Houston made to the Secretary, or to claims for benefits that
Medicare
providers
are
regularly
-20-
required
to
present
to
the
secretary in order to exhaust their administrative remedies before
filing suit in federal court.
First Houston has framed its claims
in constitutional terms by alleging denial of due process and equal
protection of the
law,
but
First Houston essentially seeks to
prevent improper revocation of its Medicare billing privileges and
provider agreement, which are administrative remedies.
164 F.3d at 285-86
See APRO,
(claim not collateral even though framed in
constitutional terms because Plaintiff sought to halt suspension of
its Medicare payments).
money damages
sought
would
Medicare
Although First Houston has sued PGBA for
instead of Medicare benefits,
compensate
billing
provider agreement.
First
privileges
Houston
and
the money damages
for
revocation
termination
of
its
of
its
Medicare
Thus, First Houston's claim for money damages
is an indirect suit for Medicare benefits.
If
First
Houston
were
to
succeed
injunctive or declaratory relief,
in
obtaining
permanent
defendants would be prevented
from recouping any alleged overpayment, thus giving First Houston
a greater entitlement to present and future Medicare benefits.
Moreover, the court could not fully address First Houston's claims
that
its
constitutional
rights
were
violated
through
enforcement of Medicare regulations without having
improper
"to immerse
itself in those regulations and make a factual determination as to
whether [defendants were actually in compliance] .
II
Id. 13
The court
l3See also Plaintiff's Motion for Limited Discovery on
Jurisdictional Issues and Brief in Support, Docket Entry No. 27,
(continued ... )
-21-
therefore concludes that the claims First Houston has asserted in
the complaint filed in this court are not so collateral to the
claims
that
First
Houston
made
to
the
Secretary
to
rescind
revocation of its Medicare billing privileges and termination of
its Medicare provider agreement that the exhaustion requirement
should be waived as to those claims.
(3)
The "Clandestine Policy" Exception to the
Exhaustion Requirement Recognized in City of
New York Does Not Apply
First Houston asserts that the court can exercise subj ect
matter
jurisdiction
because
this
lawsuit
falls
under
the
clandestine agency policy exception to the exhaustion requirement
recognized by the Supreme Court in City of New York, 106 S. Ct. at
2022.
The Secretary argues that the "clandestine policy" exception
cont inued)
pp. 2-5 (articulating a number of underlying legal and factual
disputes that would require the court to immerse itself in the
Secretary's regulations, e. g., whether First Houston failed to give
notice of a change of address within 90 days as required by 42
C.F.R. § 424.516(e); whether First Houston was required to give
notice of its address change prior to the June 26, 2014, on-site
review; whether PGBA's revocation action was premature and denied
First Houston the full 90-day period to file a CMS-855A to report
its relocation; whether PGBA intentionally delayed issuance of the
notice of revocation until First Houston's 90-day period for
reporting its change of address had expired; whether First Houston
is operational at its new location; and whether the regulations
support a revocation action based upon the fiction that a provider
is not operational at its former address); Plaintiff's Emergency
Motion for Mandamus Relief and Brief in Support Thereof, Docket
Entry No. 28, pp. 6-9 (raising issues as to whether the statute or
the regulations require providers to obtain permission from CMS to
relocate, and whether revocation was unwarranted and illegally
imposed) .
13 ( • • •
-22-
is
inapplicable because the
facts
of this case are materially
distinguishable from those at issue in City of New York.
The
secretary argues:
The case before the Court is distinguishable from [City
of New York] in several prominent ways:
1) Plaintiff
fails to identify any "clandestine policYi" 2) it
challenges the application of promulgated regulations (42
C. F. R. § Part 424, Subpt. P); and 3) Plaintiff is a
business
entity
seeking
to
challenge
a
billing
revocation; it is not a class of mentally-impaired
individuals seeking critical Social Security benefits.14
In City of New York the plaintiffs brought a
due process
challenge based on an alleged clandestine, internal agency policy
that had the effect of denying them disability benefits.
2024.
Id. at
"The gravamen of [the plaintiffs'] complaint was that [the
Secretary] had adopted an unlawful, unpublished policy under which
countless deserving claimants were denied benefits."
Id. at 2026.
Plaintiffs contended that the systemwide policy eliminated certain
steps
from
bypassing
the
an
agency's
established
standard
evaluation
requirement
process,
thereby
for
an
individualized
assessment of each claimant's ability to work.
Id.
Upon comparing
the facts in City of New York to those in Eldridge,
Court concluded that the plaintiffs'
their claims for benefits,
the Supreme
claims were collateral to
in part because "[t]he class members
neither sought nor were awarded benefits in the District Court, but
rather challenged the Secretary's failure to follow the applicable
regulations."
Id. at 2032.
14Secretary's Motion to Dismiss, Docket Entry No. 13, p. 16.
-23-
The present case is distinguishable.
City
of
New
York,
First
Houston
Unlike the plaintiffs in
does
not
allege
any
facts
suggesting the existence of a clandestine, unpublished policy and
does not challenge the process by which any such clandestine policy
was formulated.
The administrative appeal process available to
First Houston is the same process that is available to all Medicare
providers.
the
§
Code
That process is published in the United States Code and
of
Federal
1395cc(h); 42 C.F.R.
Regulations.
§
498.5(a).
See
42
U.S.C.
§
405(b),
Accordingly, the court concludes
that the claims that First Houston has asserted in the complaint
filed in this action are not entirely collateral to the claims that
First Houston made to the Secretary, and that because the claims
asserted in this action are not entirely collateral to the claims
made to the Secretary, the requirement that First Houston exhaust
its administrative remedies before seeking judicial review should
not be waived as to those claims.
(b)
The Court Lacks Mandamus Jurisdiction
The mandamus
statute provides that
"[t] he district
courts
shall have original jurisdiction of any action in the nature of
mandamus to compel an officer or employee of the United States or
any agency thereof to perform a duty owed to the plaintiff."
U.S.C.
§
1361.
28
Although the Supreme Court has not decided whether
mandamus relief is available for claims arising under the Medicare
Act,
see Heckler,
104
S.
Ct.
at
-24-
2022,
the
Fifth Circuit
has
determined that
§
405(h) does not preclude mandamus jurisdiction to
review otherwise unreviewable procedural issues.
at 764-65 (citing 28 U.S.C.
does not provide a
relief
that
First
§
1361).
Wolcott, 635 F. 3d
However, the mandamus statute
jurisdictional basis for the other types of
Houston
seeks
from
injunctive relief and declaratory judgment.
the
Secretary,
Id. at 766.
i.e.,
Moreover,
mandamus is not appropriate when a plaintiff seeks redetermination
of
an
administrative
decision,
or
when
a
"j udicial
decision
favorable to the plaintiff would affect the merits of whether the
plaintiff is entitled to benefits."
stated
in
§
II.C.1(a)
and
(b),
Id. at 764.
above,
the
For the reasons
court
has
already
concluded that the claims First Houston has asserted in this action
do not raise otherwise unreviewable procedural issues but, instead,
seek redetermination of administrative decisions that if decided
favorably to First Houston would entitle First Houston to benefits
in the form of participation in the Medicare program.
For these
reasons, the court concludes that it lacks jurisdiction to review
First Houston's claim for mandamus.
stated in
§
Al ternati vely, for the reasons
II.C.2, below, the court concludes that the Secretary
is entitled to dismissal of First Houston's claim for mandamus for
failure to state a claim for which relief may be granted.
2.
Plaintiff Fails to State a Claim for Mandamus Relief
Mandamus may only issue when
right to relief;
(1)
the plaintiff has a clear
(2) the defendant a clear duty to act, and (3) no
-25-
other adequate remedy exists.
Wolcott, 635 F.3d at 768.
Moreover,
the duty at issue must be "ministerial and so plainly prescribed as
to be free from doubt."
(5th Cir. 1992).
merely
enforces
existence."
Giddings v. Chandler, 979 F.2d 1104, 1108
"[M] andamus does not create or expand duties, but
clear,
non-discretionary
duties
already
in
Wolcott, 635 F.3d at 768.
First Houston seeks "an order directing Defendants to rescind
the revocation of its Medicare billing number and its termination
from the Medicare program because it is indisputable
home
care
provider
is
\ operational,'
and
it
is
an
[that]
abuse
the
of
discretion to impose the unwarranted sanctions. ,,15 Plaintiff argues
that
[t]he revocation imposed by Defendants[] under 42 C.F.R.
424.535(a) (5) was imposed only because the provider was
allegedly "no longer operational" - albeit at the wrong
address.
Plaintiff is operational and did not warrant
the revocation. Yet, the government would rather force
the provider's closure than admit it was mistaken in
revoking the provider's billing privilege.
Without
doubt, it is a clear abuse of discretion for Defendants
to impose the unwarranted revocation, ignore evidence
that indisputably establishes operational status, and
then deny Plaintiff meaningful and legitimate review
procedures.
Because the action can be classified as
challenging the procedures used in administering the
Medicare Act, mandamus jurisdiction is available. 16
§
15Plaintiff's Original Complaint, Docket Entry No.1, p. 1.
See also Plaintiff's Emergency Motion for Mandamus Relief, Docket
Entry No. 28, p. 1 ("Plaintiff seeks mandamus relief to compel the
HHS Secretary to rescind a revocation action that was imposed in
violation of her duties under the law.").
16Plaintiff's Response to Defendants' Motion to Dissolve
Ex Parte Temporary Restraining Order, Docket Entry No. 11, p. 4.
-26-
Even if mandamus jurisdiction exists,
First Houston has not
stated a plausible claim for mandamus relief because First Houston
has
failed
to
plead
facts
reasonable inference (1)
that
permit
court
to
draw
a
that First Houston has a clear right to
rescission of the defendants'
decisions to revoke
billing privileges and provider agreement,
has a clear,
the
its Medicare
(2) that the Secretary
non-discretionary duty to rescind its decision to
revoke First Houston's Medicare billing privileges and provider
agreement, or (3)
that no other adequate remedy exists.
Nor has
First Houston pleaded any facts suggesting that the Secretary has
denied First Houston access to administrative review, or that the
administrative review procedures to which First Houston has access
are
inadequate
to
afford
First
Houston
the
relief
it
seeks.
Instead, First Houston argues only that administrative review is
"not
winnable. "17
Therefore,
the
court
concludes
that
the
Secretary's Rule 12(b) (6) motion to dismiss First Houston's claim
for mandamus relief for failure to state a claim should be granted.
III.
Conclusions and Order
For the reasons stated in
§
II.C.1, above, the court concludes
that Secretary Burwell is entitled to dismissal of First Houston's
claims because the court lacks jurisdiction to adjudicate them.
Accordingly,
the
claims asserted against
DISMISSED for lack of jurisdiction.
17Id. at 12.
-27-
Secretary Burwell are
Alternatively, for the reasons
stated in
Burwell
§
II.C.2,
above,
the
court
is entitled to dismissal
of
concludes
that
Secretary
First Houston's
claim for
mandamus
for failure to state a
claim for which relief may be
granted.
Therefore, Secretary Burwell's Motion to Dismiss for Lack
of Subject Matter Jurisdiction and Failure to State a Claim (Docket
Entry No. 13) is GRANTED.
Because the court has concluded that it lacks jurisdiction to
consider any of the claims that First Houston has asserted in this
action, Plaintiff's Motion for Limited Discovery on Jurisdictional
Issues (Docket Entry No. 27) and Plaintiff's Emergency Motion for
Mandamus Relief (Docket Entry No. 28) are DENIED as MOOT.
SIGNED at Houston, Texas, on this 16th day of December, 2014.
SIM LAKE
UNITED STATES DISTRICT JUDGE
7
-28-
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?