Kostenko v. U.S. Department of Health and Human Services

Filing 22

MEMORANDUM OPINION AND ORDER: The Court does ORDER that the 4 MOTION of the United States of America to Dismiss for Lack of Subject Matter Jurisdiction be GRANTED; the Court further ORDERS that the Plaintiff's 1 PETITION be DISMISSED WITH PREJUDICE as to Plaintiff's exclusion claim and DISMISSED WITHOUT PREJUDICE as to Plaintiff's debt waiver claim. Signed by Judge Irene C. Berger on 1/4/2013. (cc: attys; any unrepresented party) (slr)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
BECKLEY DIVISION

MICHAEL MERRITT KOSTENKO,
Plaintiff,
v.

CIVIL ACTION NO. 5:12-cv-01882

U. S. DEPARTMENT OF HEALTH AND
HUMAN SERVICES, and
SECRETARY KATHLEEN SEBELIUS,
Defendants.

MEMORANDUM OPINION AND ORDER

The Court has reviewed the Motion of the United States of America to Dismiss for Lack of
Subject Matter Jurisdiction (Document 4) and supporting memorandum (Document 5), Plaintiff’s
response in opposition (Document 8) and Defendant’s reply (Document 9), together with
Plaintiff’s Petition (Document 1). After careful review, the Court grants Defendant’s motion.

I.

FACTUAL BACKGROUND

Plaintiff is a physician who received a scholarship from the National Health Services Corp
(“NHSC”) Scholarship Program, 42 U.S.C. § 2541, in 1980 to finance his medical education.
(Document 5 at 1-2); (Document 1 at 1). The NHSC Scholarship Program “provides funding for
medical students in return for service in communities under served by health services.” U.S. v.
Baker, 2012 WL 3612273 (M.D.Fla. August 21, 2012). Under the NHSC Act at the time, if the
scholarship recipient breaches his contract “‘by failing (for any reason…) either to begin such

individual’s service obligation. . . or to complete such service obligation,’ the United States is
entitled to recover three times the amount of scholarship funds awarded, plus interest.” United
States v. Vanhorn, 20 F.3d 104, 107 (4th Cir.1994) (citing 42 U.S.C. § 254o (b)(1)(A) (1988)).
On June 2, 1994, this Court found that Plaintiff failed to meet his service obligation, and
thus, granted the Government’s motion for summary judgment and ordered that “the Government
is entitled to all damages calculated pursuant to 42 U.S.C. § 2540 (b)(1).” U.S. v. Kostenko, Civil
Action No. 5:92-cv-1025 (S.D.W.Va. June 2, 1994) (Hallanan, E). On March 22, 1995, the
Fourth Circuit Court of Appeals affirmed “on the reasoning of the district court.” U.S. v. Kostenko,
50 F.3d 8, 1995 WL 120682 (4th Cir.1995) (per curiam).
By letter dated August 20, 1997, the Department of Health and Human Services (“HHS”)
notified Plaintiff that if he did not negotiate a Repayment Agreement with the Department of
Justice (“DOJ”) within sixty (60) days or establish an offset agreement to have his Medicare and/or
Medicaid reimbursements directly applied to his account, then his case would be immediately
referred to the Office of Inspector General (“OIG”) to initiate exclusion proceedings against him.
(Document 4-3 at 2). The letter further stated that his “program exclusion will remain in effect
until [his] entire debt has been paid.” (Id.).
By letter dated January 30, 1998, the OIG notified Plaintiff that because of his failure to
pay his debt or to enter a repayment plan, he was “being excluded from participation in the
Medicare program pursuant to [S]ection 1892 of the Social Security Act . . . [and was] also being
excluded from participation in the Medicare, Medicaid, and all Federal health care programs as
defined in section 1128B(f) of the Act.” (Document 4-4 at 2) (emphasis in original). The letter
further noted that “[t]hese exclusions are effective 20 days from the date of this letter and will

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remain in effect until [his] debt has been completely satisfied.” (Id.). Furthermore, “[a] detailed
explanation of the authority for this exclusion, its effect, the right to waiver, and [his] appeal rights
[was] enclosed and [was] incorporated as part of this notice by specific reference.” (Id.). The
enclosure detailed his right to and procedure for appeal in accordance with 42 CFR 1001.2007. (Id.
at 4). It stated that “[a request for a hearing before an administrative law judge] must be made in
writing within 60 days of [his] receiving the OIG’s letter of exclusion.” (Id.). Plaintiff did not
respond.
In July 2001, Plaintiff entered into a Settlement Agreement with the DOJ and OIG.
(Document 4-5 at 2), (Document 1 at 2). The Settlement Agreement stated that “[a]s of July 6,
2001, the total amount owed under the Judgment…is $956,680.13, which includes the principal,
accrued interest and late payment charges, if any.” (Document 4-5 at 2). Plaintiff agreed “to
make an initial payment of $10,000.00 upon signing this Agreement and to make payments of at
least $10,000.00 per month…until notified otherwise by amendment to this Agreement issued by
the U.S. Department of Justice.” (Id. at 3). In consideration of Plaintiff’s agreement to satisfy his
debt, the OIG “agree[d] to stay the effect of the exclusion on [Plaintiff’s] eligibility to receive
reimbursement from Medicare, and further agree[d] to notify the appropriate Federal and State
agencies that [Plaintiff] is eligible to receive payment under any Federal health care program, as
defined in 42 U.S.C. § 1320a-7b(f).” (Id.). The agreement also provided that Plaintiff “remains
excluded ‘until such time as the entire past-due obligation has been repaid,’ and that this
Agreement provides for a stay of the effect of the exclusion only while [Plaintiff] is in full
compliance with its terms.” (Id.). Furthermore, Plaintiff’s failure to comply with the payment
terms would “result in the OIG rescinding the stay of exclusion from participation in Medicare,

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Medicaid, and all other Federal health care programs until the entire Judgment amount and accrued
interest . . . have been paid in full to the satisfaction of the PSC [Program Support Center] and the
OIG [Office of the Inspector General].” (Id.).

The Settlement Agreement stipulated that

“[s]hould a default on the Agreement occur, [Plaintiff] waives all procedural rights including but
not limited to notice, hearing, appeal, and administrative and judicial review, with respect to the
immediate reimposition of the exclusion under 42 U.S.C. §§ 1320a-7b(14) and 1395ccc(a)(3).”
(Id.)
By letter dated July 26, 2001, the OIG notified Plaintiff that “[e]ffective with the date of
this letter, [his] exclusion from participation in Medicare, Medicaid, and all Federal health care
programs has been stayed.” (Document 4-6 at 2). The letter further advised Plaintiff that
“[f]ailure to adhere to the terms of the repayment agreement will result in the stay being lifted and
the exclusion going back into effect in accordance with the terms outlined in our January 30, 1998
letter to [him].” (Id.)
In his Petition, Plaintiff states that he “had to cease repayment under the terms he had
previously agreed to, on or about February 22, 2005.” (Document 1 at 3). He alleges that
“[d]uring this time of economic and professional hardship, it was not possible for [him] to resume
the $10,000/month payments on the loan and penalties he had previously agreed to, and that
amount rapidly grew to over $1,000,000.” (Id. at 4).
By letter dated June 27, 2008, HHS advised Plaintiff that he was “in default of the
repayment terms as stipulated in the settlement agreement [he] entered with the United States on
July 26, 2001.” (Document 4-7 at 2).

The letter further stated that “[d]efaulting on [his]

settlement agreement will result in [his] stay of exclusion being lifted and [he] will be permanently

4

excluded from further participation in the Medicare/Medicaid programs.” (Id.). Plaintiff was also
advised that “[i]f the Department of Health and Human Services (DHHS) does not receive a
payment from [him] to bring your account current by July 27, 2008, the DHHS will initiate
actions to permanently exclude [him] from participating in the Medicare/Medicaid programs,
pursuant to paragraph 8 of the settlement agreement.” (Id.) (emphasis in original).
By letter dated August 29, 2008, the OIG notified Plaintiff that he had defaulted on his
repayment agreement, and therefore, “[his] exclusion from participation in Medicare, Medicaid
and all Federal health care programs has been reinstated effective August 12, 2008 and will remain
in effect until [his] debt has been completely repaid.” (Document 4-8 at 2), (Document 1 at 4).
In a letter dated January 14, 2011, Plaintiff requested “re-consideration of [his] Public
Health Services Corps Scholarship Service termination.” (Document 4-9 at 2). Specifically,
Plaintiff requested an administrative hearing “to address if proper cause existed for [his] being
terminated by the Dept of HHS in the early 1990s” and “[r]econsideration of [his] default status
and Medicare exclusion.” (Id.)
By letter dated March 14, 2011, HHS advised Plaintiff that it “cannot accommodate [his]
request for an administrative hearing or reconsideration of [his] NHSC SP default status” because
“the courts found that [he was] properly placed in default of [his] service obligation, effective July
27, 1985, and [is] liable for monetary damages.” (Document 4-10 at 2). HHS further noted that
“[t]here is no mechanism for review of this judgment by HHS.” (Id.). Furthermore, the letter
stated that “the HHS Office of Inspector General (OIG) will not reconsider [Plaintiff’s] exclusion
from Medicare and all other Federal health care programs at this time . . . because [he] violated the
terms of the settlement agreement, the stay was lifted and the exclusion was re-imposed, effective

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August 12, 2008. (Id.). The letter also advised Plaintiff that [he is] not eligible to be reinstated
until [his] entire past-due obligation has been paid.” (Id.).
On April 4, 2011, Plaintiff wrote to HHS and requested a waiver of his NHSC debt.
(Document 1 at 5); (Document 4-11 at 2). By letter dated May 2, 2011, HHS notified Plaintiff
that it was in receipt of his April 4, 2011 letter regarding his request for a waiver of his NHSC
scholarship program judgment debt and enclosed “information on the conditions necessary for a
waiver and the instructions for submitting a waiver request.” (Document 4-12 at 2).
Plaintiff alleges that on September 14, 2011, he received an email from HHS notifying him
of HHS’s receipt of his completed paperwork necessary for lawful consideration of a waiver.
(Document 1 at 5). However, Defendant attached a letter from Plaintiff to HHS’s Office of Legal
and Compliance, dated September 20, 2011, wherein Plaintiff states “further to your email, dated
September 16th, 2011, please see enclosed 2009 W2 and 2008 W2 and income tax return.”
(Document 4-13 at 3).

Defendant asserts that “HHS is currently conducting a review of

Plaintiff’s financial documentation and plans to issue a waiver decision when this review is
complete.” (Document 5 at 6).

II.

PROCEDURAL HISTORY

On June 5, 2012, Plaintiff filed a Petition for Waiver from Public Health Services Corps
Scholarship in the Southern District of West Virginia (Document 1), wherein Plaintiff requests (1)
a “judicial order for HHS to grant waiver” and (2) a “judicial order removing HHS exclusion of
petitioner from Medicare, Medicaid and federal insurance participation.” (Id. at 6). On August 6,
2012, Defendant, HHS, filed a motion to dismiss for lack of subject matter jurisdiction (Document
4) and supporting memorandum (Document 5). In support of the motion, Defendant asserts that
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the Court lacks subject matter jurisdiction for two reasons: (1) “Plaintiff has failed to exhaust the
administrative remedies available for waiver of his National Health Service Corps debt” and (2)
“Plaintiff has failed to timely exhaust the administrative remedies available for appealing his
exclusion from federal health care program such as Medicare and Medicaid.” (Document 4 at 1).
On September 10, 2012, Plaintiff filed his response in opposition (Document 8), wherein he argues
that HHS’s “decision of non-response is not reasonable.” On September 17, 2012, Defendant
filed its reply (Document 9), wherein it argues that Plaintiff’s response was untimely as it was filed
three days past the deadline established by Magistrate Judge VanDervort’s order entered on
August 7, 2012, and contends that Plaintiff has failed to demonstrate the Court has subject matter
jurisdiction over his claims.
On September 25, 2012, Plaintiff filed a Clarification (sic) of Misrepresentations by the
U.S. (Document 10), and then on September 28, 2012, Plaintiff filed a Supplemental (sic)
Memoranda to Issue 10 of Petitioner (Document 12). On October 22, 2012, Plaintiff filed a
Notice to Court of Petitioner’s Intent to Amend Complaint (Document 22). On November 5,
2012, Plaintiff filed his First Amended Petition for Judicial Review of Public Health Service Corps
Scholarship Waiver Decision. (Document 16). On November 19, 2012, Defendant filed its
Motion to Strike First Amended Petition (Document 17). Plaintiff did not respond to Defendant’s
motion.

On December 10, 2012, the Court granted Defendant’s motion and ordered that

Plaintiff’s first amended petition be stricken from the record. (Document 18).

Then, on

December 12, 2012, Plaintiff filed a “Notice” of Petitioner Exercising Option under 28 U.S.C.
2675 and Motion for Case Statement Order (Document 19), which Defendant responded to on
December 26, 2012 (Document 20). On December 28, 2012, Plaintiff filed a Request of

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Clarification of Claim (Document 21), wherein “Petitioner prays for clarification by the Court as
to standing of current Claim 1. As a Federal Tort Claims Act 2. As a RICO Claim, 3. For
non-monetary relief and 3. Progression under FTCA for alleged intentional negligence.”

III.

STANDARD OF REVIEW

If subject matter jurisdiction is challenged pursuant to Rule 12(b)(1), the Plaintiff bears the
burden of showing that federal jurisdiction is proper. William v. Meridian Management
Corporation, 50 F.3d 299, 304 (4th Cir.1995) (citation omitted). “[A] defendant may challenge
subject matter jurisdiction in one of two ways.” Kerns v. U.S., 585 F.3d 187, 192 (4th Cir.2009)
(citing Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir.1982). First, the defendant can contend “that
the jurisdictional allegations of the complaint [are] not true.” Adams, 697 F.2d at 1219. In that
event, “‘[a] trial court may then go beyond the allegations of the complaint and in an evidentiary
hearing determine if there are facts to support the jurisdictional allegations,’ without converting
the motion to a summary judgment proceeding.” Kerns, 585 F.3d at 192 (quoting Adams, 697 F.2d
at 1219). In the alternative, the defendant may argue – as Defendant does here- “that a complaint
simply fails to allege facts upon which subject matter jurisdiction can be based.” Adams, 697 F.2d
at 1219. In that case, “all the facts alleged in the complaint are assumed to be true.” (Id.). In
essence, Plaintiff “is afforded the same procedural protection as he would receive under a Rule
12(b)(6) consideration.” (Id.).

IV.

DISCUSSION

The threshold question for the Court to consider is whether it has federal subject matter
jurisdiction in this case. Not only does Plaintiff bear the burden of showing that the Court has
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subject matter jurisdiction, but he also “bears the burden of pointing to . . . an unequivocal waiver
of immunity.” Williams, 50 F.3d at 304 (quoting Holloman v. Watt, 708 F.2d 1399, 1401 (9th
Cir.1983), cert. denied, 466 U.S. 958 (1984) (“The party who sues the United States bears the
burden of pointing to…an unequivocal waiver of immunity.”))
Although Plaintiff does not state that the Court has subject matter jurisdiction or why, he is
acting pro se, and therefore, his pleadings are entitled to liberal construction. Estelle v. Gamble,
429 U.S. 97, 106 (1976). Plaintiff is requesting a “judicial order for HHS to grant [him a] waiver,
alleging that HHS has failed to respond to his request for a waiver of his NHSC debt requested on
April 4, 2011, and a “judicial order removing HHS[’s] exclusion of [his] Medicare, Medicaid and
federal insurance participation.” (Document 1 at 1, 9). With respect to Plaintiff’s first claim, it is
clear from Plaintiff’s petition that he is suing a federal agency based on its decision or rather lack
thereof, thereby, invoking the Administrative Procedure Act (“APA”) pursuant to 5 U.S.C. § 702.
Plaintiff’s second claim, regarding his exclusion of Medicare, Medicaid and federal insurance
participation invokes the Social Security Act, codified at 42 U.S.C. § 1395ccc.

V.

ANALYSIS

A. Judicial Review under the Administrative Procedure Act
“The APA waives the government’s sovereign immunity from suit and permits federal
court review of final agency actions, when the relief sought is other than money damages and the
plaintiff has stated a claim ‘that an agency or an officer or employee thereof acted or failed to act in
an official capacity.’” Comsat Corporation v. National Science Foundation, 190 F.3d 269, 274
(4th Cir.1999) (quoting 5 U.S.C.A. § 702)). “[T]he APA is not an independent grant of subject
matter jurisdiction to the federal courts . . . [r]ather 28 U.S.C.A. § 1331 serves as the jurisdictional
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basis for federal courts ‘to review agency action.’” Sigmon Coal Co., Inc. v. Apfel, 226 F.3d 291,
301 (4th Cir.2000) (quoting Califano v. Sanders, 430 U.S. 99, 105 (1977)). However, the APA
does not apply “to the extent that – (1) statutes preclude judicial review; or (2) agency action is
committed to agency discretion by law.” 5 U.S.C. § 701(a).
Pursuant to the APA, “[a] person suffering legal wrong because of agency action, or
adversely affected or aggrieved by agency action within the meaning of a relevant statute, is
entitled to judicial review thereof.” 5 U.S.C. § 702. However, the APA limits judicial review to
“[a]gency action made reviewable by statute and final agency action for which there is no other
adequate remedy in a court.” 5 U.S.C. § 704. Therefore, “the statute requires two essential
elements as a prerequisite to judicial review: (1) final agency action and (2) no other adequate
remedy in a court.” Klein v. Commissioner of Patents, 474 F.2d 821, 824 (4th Cir.1973). “Agency
action” is defined in 5 U.S.C. § 551. That section provides that “‘agency action’ includes the
whole or a part of an agency rule, order, license, sanction, relief, or the equivalent or denial
thereof, or failure to act,” 5 U.S.C. § 551(13), and also that “‘order’ means the whole or a part of a
final disposition . . . of an agency in a matter other than rule making.” 5 U.S.C. § 551(6).
“[A]n agency action may be considered ‘final’ only when the action signals the
consummation of an agency’s decisionmaking process and gives rise to legal rights or
consequences.” Comsat Corporation v. National Science Foundation, 190 F.3d 269, 274 (4th
Cir.1999) (citing Bennett v. Spear, 520 U.S. 154, 177-78 (1997)). One of the main reasons for this
so-called “finality rule” is “that the agency is specifically suited to deal with the type of cases in
question, and it would weaken its effectiveness for the courts to abort the administrative procedure
before the agency has completed its task.” Klein, 474 F.2d at 825.

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Under the APA, “[a] reviewing court shall – (1) compel agency action unlawfully withheld
or unreasonably delayed; and (2) hold unlawful and set aside agency action, findings, and
conclusions found to be (A) arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law.” 5 U.S.C. § 706. “Review under this standard is highly deferential, with a
presumption in favor of finding the agency action valid.” Ohio Valley Envt’l coalition v. Aracoma
Coal Co., 556 F.3d 177, 192 (4th Cir.2009) (citing Natural Res. Def. Council, Inc. v. EPA, 16 F.3d
1395, 1400 (4th Cir.1993)).

i. Plaintiff’s Request for a Waiver of his NHSC debt.
The Court lacks subject matter jurisdiction with respect to Plaintiff’s request for a waiver
of his NHSC debt because HHS has not issued a final decision. Under Section 62.12 of the Code
of Federal Regulations, a NHSC debtor “may seek waiver or suspension of the service or payment
obligation incurred under this part by written request to the Secretary setting forth the bases,
circumstances, and causes which support the requested action.” 42 C.F.R. § 62.12(b)(1). “The
Secretary may waive or suspend any service or payment obligation incurred by a participant
whenever compliance by the participant (i) is impossible, or (ii) would involve extreme hardship to
the participant and if enforcement of the service or payment obligation would be against equity and
good conscience.” 42 C.F.R. § 62.12(b)(2).
In other words, “appeal may be made to the Secretary of DHHS as the agency overseeing
the program, who in proper circumstances may cancel, waive, or suspend the scholar’s obligation”
U.S. v. Vanhorn, 20 F.3d 104, 112 (4th Cir.1994) (citing 42 U.S.C. § 254o (c)(3) (1988); 42 CFR §
62.12 (1992)). According to the Fourth Circuit Court of Appeals “[a]gency action is then
reviewable by a court of law and may be overturned when that action is arbitrary, capricious, an
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abuse of discretion, or otherwise not in accordance with the law.” Vanhorn, 20 F.3d at 112 (citing
5 U.S.C. § 706(2)(A)(1988)) (emphasis added).
In the instant case, Plaintiff wrote to HHS on April 4, 2011, and requested a waiver of his
NHSC debt. (Document 1 at 5); (Document 4-11 at 2). By letter dated May 2, 2011, HHS notified
Plaintiff that it was in receipt of his letter and enclosed “information on the conditions necessary
for a waiver and the instructions for submitting a waiver request.” (Document 4-12 at 2). Plaintiff
wrote a letter to HHS’s Office of Legal and Compliance, dated September 20, 2011, wherein he
states “further to your email, dated September 16th, 2011, please see enclosed 2009 W2 and 2008
W2 and income tax return.” (Document 4-13 at 3). Defendant asserts that “HHS is currently
conducting a review of Plaintiff’s financial documentation and plans to issue a waiver decision
when this review is complete.” (Document 5 at 6).
Defendant argues that “because HHS has not issued a waiver decision, Plaintiff’s
administrative remedies have not been exhausted.” (Document 5 at 13). However, Plaintiff
argues that “HHS[’s] non-action, decision of non-response, is not reasonable.” (Document 8 at 4).
Plaintiff contends that “HHS has not communicated since September of 2011 HHS[‘s] email
confirmation of [Plaintiff’s] completed file for waiver request, and could have at any time
preempted this Judicial Review by having answered [Plaintiff’s] waiver request.” (Id.).
Plaintiff has failed to carry his burden of persuasion in showing that the Court has subject
matter jurisdiction. See, William, 50 F.3d at 304. Although Plaintiff has sought waiver from the
Secretary, the Secretary has not yet reached her decision. Therefore, the Court has no final agency
action to review, and thus, no subject matter jurisdiction. The Court finds that HHS’s motion to
dismiss should be granted with respect to Plaintiff’s request for a waiver of his NHSC debt.

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B. Judicial Review under the Social Security Act.
Plaintiff was originally excluded from participation in the Medicare program pursuant to
Section 1892 of the Social Security Act (the “Act”), codified at 42 U.S.C. § 1395ccc. (Document
4-4 at 2). In addition, Plaintiff was also excluded from participation in Medicare, Medicaid, and
all federal health care programs “pursuant to the authority contained in [S]ection 1128(b)(14) of
the Act.” (Document 4-4 at 2). Section 1128(b)(14) of the Act codified in 42 U.S.C. § 1320a-7,
provides in pertinent part:
The Secretary may exclude…from participation in any Federal health care
program… [a]ny individual who the Secretary determines is in default on
repayments of scholarship obligations or loans in connection with health
professions education made or secured, in whole or in part, by the Secretary and
with respect to whom the Secretary has taken all reasonable steps available to the
Secretary to secure repayment of such obligations or loans…
42 U.S.C. § 1320a-7(b)(14). Under the Act, “[a]ny individual, after any final decision of the
[agency] made after a hearing to which [the excluded individual] 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.” 42 U.S.C. § 405(g); see Statler v. DHHS, 2011 WL 972584 (W.D.Va.
March 16, 2011) (emphasis added). 42 U.S.C. § 405(h) provides in pertinent part:
…No findings of fact or decision of the Commissioner of Social Security shall be
reviewed by any person, tribunal, or governmental agency except as herein
provided. No action against the United States…shall be brought under section 1331
or 1346 of Title 28 to recover on any claim arising under this subchapter.
42 U.S.C. § 405(h). In Shalala v. Illinois Council on Long Term Care, Inc., the Supreme Court
noted that “those words [‘to recover on any claim arising under this subchapter’] clearly apply in a
typical Social Security or Medicare benefits case, where an individual seeks a monetary benefit
from the agency (say, a disability payment, or payment for some medical procedure), the agency

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denies the benefit, and the individual challenges the lawfulness of that denial . . . [t]he statute
plainly bars § 1331 review in such a case.” Shalala, 529 U.S. at 10. “Courts interpret ‘arising
under’ broadly as including claims that are ‘inextricably intertwined’ with benefits determinations
under the Medicare Act.” United States Dep’t of H.H.S. v. James, 256 B.R. 479, 481 (W.D.Ky
Nov. 3, 2000) (citing Heckler v. Ringer, 466 U.S. 602, 615 (1984)).
Pursuant to 42 U.S.C. § 1320a-7(f)(1), “any individual . . . that is excluded . . . from
participation [in federal health care programs] is entitled to reasonable notice and opportunity for a
hearing thereon by the Secretary to the same extent as is provided in section 405(b) of this title, and
to judicial review of the Secretary’s final decision after such hearing as is provided in section
405(g) of this title.” 42 U.S.C. § 1320a-7(f)(1) (emphasis added).
i. Plaintiff’s Exclusion Claim.
The Court lacks subject matter jurisdiction with respect to Plaintiff’s exclusion claim
because Plaintiff did not timely exhaust his administrative remedies, and furthermore, Plaintiff’s
Settlement Agreement precludes judicial review of his claim. In his Petition, Plaintiff “requests
[a] judicial order removing [his] HHS exclusion . . . from Medicare, Medicaid and federal
insurance participation.” (Document 1 at 6). Defendant contends that “Plaintiff’s request that the
Court ‘remove’ his exclusion must be denied because there is not a final decision, and therefore no
basis for the Court to exercise subject matter jurisdiction.” (Document 5 at 13). Defendant argues
that “[s]ections 205(g) and (h) of the Social Security Act, codified at 42 U.S.C. § 405(g) and (h),
bar judicial review of claims arising under the Act prior to a final decision by the Secretary.”
(Document 5 at 13) (citing Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1, 14

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(2000); Heckler v. Ringer, 466 U.S. 602, 614-15 (1984); Weinberger v. Salfi, 422 U.S. 749, 763-65
(1975)).
As stated above, under the Act, “[a]ny individual, after any final decision of the [agency]
made after a hearing to which [the excluded individual] 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.” 42 U.S.C. § 405(g); see Statler v. DHHS, 2011 WL 972584 (W.D.Va. March 16, 2011)
(emphasis added). By letter dated January 30, 1998, HHS’s OIG notified Plaintiff that he was
being excluded from participation in the Medicare, Medicaid, and all federal health care programs
effective twenty (20) days from the date of the letter. (Document 4-4 at 2). The letter also advised
Plaintiff that he could request a hearing before an administrative law judge by making a written
request within sixty (60) days of the receipt of the letter in accordance with 42 CFR 1001.2007.
(Document 4-4 at 3). Plaintiff did not make a written request for a hearing within sixty (60) days of
his receipt of the letter; and therefore, no hearing was held. Instead, thirteen (13) years later, by
letter dated January 14, 2011, Plaintiff requested an administrative hearing and reconsideration of
his default status and Medicare exclusion. (Document 4-9 at 2). Plaintiff did not exhaust his
administrative remedies within the time allotted. The Court cannot allow Plaintiff to circumvent
the administrative process by now hearing his claim. Because Plaintiff did not request a hearing
within sixty (60) days, and therefore, did not obtain a “final decision of the [agency] made after a
hearing to which [he] was a party,” the Court does not have jurisdiction to hear Plaintiff’s
exclusion claim.
Furthermore, Plaintiff’s claim “arises under this subchapter” because he is seeking a
monetary benefit from the agency, which the agency has denied, and is now “challenging the

15

lawfulness of that denial.” Shalala, 529 U.S. at 10; see United States Dep’t of H.H.S. v. James, 256
B.R. 479, 481(W.D.Ky Nov. 3, 2000). Because U.S.C. § 405(h) bars Section 1331 review, the
Court has no jurisdiction to review the agency’s authority to exclude Plaintiff from participation in
Medicare, Medicaid, and all federal health care programs.
Even if the Court were to rule otherwise, the Settlement Agreement Plaintiff entered into in
July 2001 provided that “[s]hould a default on the Agreement occur, [Plaintiff] waives all
procedural rights including but not limited to notice, hearing, appeal, and administrative and
judicial review, with respect to the immediate reimposition of the exclusion under 42 U.S.C. §§
1320a-7b(14) and 1395ccc(a)(3).” (Document 4-5 at 2-5). In the Petition, Plaintiff admits that
“[he] had to cease repayment under the terms he had previously agreed to, on or about February
22, 2005.” (Document 1 at 3). Plaintiff breached his settlement agreement. By letter dated June
27, 2008, HHS advised Plaintiff that if HHS did not receive a payment from him to bring his
account current by July 27, 2008, then HHS would “initiate actions to permanently exclude [him]
from participating in the Medicare/ Medicaid programs, pursuant to paragraph 8 of the settlement
agreement.” (Document 4-7 at 2) (emphasis in original). By letter dated August 29, 2008, HHS
notified Plaintiff that his exclusion “has been reinstated effective August 12, 2008 and will remain
in effect until [his] debt has been completely repaid.” (Document 4-8 at 2). Because Plaintiff
agreed to forego “judicial review with respect to the immediate reimpostion of the exclusion”
should he default on the Settlement Agreement, and then subsequently did default, Plaintiff is
precluded from seeking judicial review.

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VI.

CONCLUSION

Wherefore, based on the findings herein, the Court does hereby ORDER that the Motion of
the United States of America to Dismiss for Lack of Subject Matter Jurisdiction (Document 4) be
GRANTED.

The Court further ORDERS that Plaintiff’s Petition (Document 1) be

DISMISSED WITH PREJUDICE as to Plaintiff’s exclusion claim and DISMISSED
WITHOUT PREJUDICE as to Plaintiff’s debt wavier claim.
The Court DIRECTS the Clerk to send a copy of this Order to counsel of record and to any
unrepresented party.

ENTER:

17

January 4, 2013