Brooks Home Care Servs. v. Becerra

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BROOKS HOME CARE SERVICES, INC. v. XAVIER BECERRA, Secretary, United States Department of Health and Human Services

Civil Action No. 3:23-CV-0477-S

United States District Court, N.D. Texas, Dallas Division

March 29, 2024

MEMORANDUM OPINION AND ORDER

KAREN GREN SCHOLER UNITED STATES DISTRICT JUDGE

Before the Court is Defendant Xavier Becerra's Motion to Dismiss Plaintiffs Amended Complaint (“Motion”) [ECF No 34]. The Court has reviewed the Motion, Appendix in Support of Xavier Becerra's Motion to Dismiss Plaintiffs Amended Complaint (“Appendix”) [ECF No. 35], Plaintiffs Response to Defendant's Motion to Dismiss (“Response”) [ECF No. 38], Defendant's Reply to Support Motion to Dismiss [ECF No. 44], and the applicable law. For the following reasons, the Court GRANTS the Motion.

I. BACKGROUND

Plaintiff Brooks Home Care Services, Inc., provides home health services to Medicare beneficiaries in Dallas, Texas, and the surrounding area. Pl.'s First Am. Compl. (“Complaint”) [ECF No. 24] ¶ 10. Medicare is a national health insurance program established through the Social Security Amendments of 1965 and is managed by the Centers for Medicare and Medicaid Services (“CMS”), which is an agency within the United States Department of Health and Human Services (“HHS”). Id. ¶¶ 11, 15. As a Medicare provider, Plaintiff submits claims for payment to Palmetto GBA, a Medicare Administrative Contractor. Id. ¶ 17. Those claims are subject to review by a Unified Program Integrity Contractor (“UPIC”) for suspected fraud, waste, abuse, and improper payments. Id.

On February 24, 2022, the UPIC Qlarant issued a notice of suspension of Medicare payments to Plaintiff pursuant to 42 C.F.R. § 405.371(a)(2). Id. ¶ 36. According to Qlarant, CMS determined that there was a “credible allegation of fraud” related to Plaintiffs services billed to Medicare and suspended all Medicare payments to Plaintiff. Id. ¶¶ 36-40. Plaintiff filed a rebuttal statement with Qlarant on March 7, 2022, which Qlarant found did not justify terminating the suspension. Id. ¶¶ 52-53. Plaintiff filed a supplemental rebuttal statement with Qlarant on August 1,2022, which Qlarant did not respond to. Id. ¶¶ 54, 63.

On January 24,2023, Qlarant notified Plaintiff that it had “received Medicare payments in error, which has resulted in an extrapolated overpayment of $746,757.75 for the universe of claims with paid dates from April 20, 2019[,] through April 19, 2022.” Id. ¶ 66. Subsequently, on January 30, 2023, Palmetto GBA issued an initial request regarding the overpayment which included a notice of Plaintiff s right to appeal. Id. ¶ 67. According to Plaintiff, Qlarant had been aware of the overpayment since August 15, 2022, when it first prepared an overpayment report. 7d¶68.

Plaintiff filed suit regarding the February 2022 suspension. See id. ¶¶ 2-3. Specifically, Plaintiff alleges that Defendant Xavier Becerra, in his capacity as Secretary of HHS, has illegally suspended Medicare payments without the opportunity to dispute or contest the suspension because it is not considered an “initial determination” which can be appealed. See id. ¶¶ 1-2, 70. Plaintiff further claims that Defendant “violated 42 C.F.R. § 405.372(c) by delaying over 150 days to lift the Medicare payment suspension[.]” Id. ¶¶ 7-8, 69. Plaintiff brings claims for violation of the Takings Clause of the Fifth Amendment, violation of its due process, violation of its patients' due process rights and access to Medicare, arbitrary and capricious actions by Defendant, and ultra vires withholding of Medicare payments. Id. ¶¶ 71-111. Plaintiff also requests a preliminary injunction, permanent injunction, and declaratory relief. Id. ¶¶ 112-20. Defendant moves to dismiss based on Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction, and 12(b)(6) for failure to state a claim upon which relief can be granted. See Mot. 1-2. Because the Court finds that it lacks subject matter jurisdiction, it does not reach Defendant's 12(b)(6) arguments.^[1]

II. LEGAL STANDARD

“Federal courts are courts of limited jurisdiction, and absent jurisdiction conferred by statute, lack the power to adjudicate claims.” La. Real Est. Appraisers Bd. v. Fed. Trade Comm 'n, 917 F.3d 389, 391 (5th Cir. 2019) (quoting Texas v. Travis Cnty., 910 F.3d 809, 811 (5th Cir. 2018)). Courts “must presume that a suit lies outside this limited jurisdiction, and the burden of establishing federal jurisdiction rests on the party seeking the federal forum.” Howery v. Allstate Ins. Co., 243 F.3d 912,916 (5th Cir. 2001) (citing Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377(1994)).

Under Rule 12(b)(1) of the Federal Rules of Civil Procedure, a party may challenge the subject matter jurisdiction of the district court to hear a case. The district court may dismiss for lack of subject matter jurisdiction based on the complaint alone. Ramming v. United States, 281 F.3d 158,161 (5th Cir. 2001) (citing Barrera-Montenegro v. United States, 74 F.3d 657, 659 (5th Cir. 1996)). The court must accept all factual allegations in the complaint as true. Den Norske Stats Oljeselskap As v. HeereMac Vof, 241 F.3d 420,424 (5th Cir. 2001) (citing Williamson v. Tucker, 645 F.2d 404,412 (5th Cir. 1981)).

If the court determines that it lacks subject matter jurisdiction, it must dismiss the action. FED. R. CIV. P. 12(h)(3).

III. ANALYSIS

When dealing with claims “arising under” the Medicare Act, federal courts only have jurisdiction over a “final decision” of HHS. Fam. Rehab., Inc. v. Azar, 886 F.3d 496, 500 (5th Cir. 2018) (citing 42 U.S.C. § 405(g)-(h)^[2]). “A claim arises under the Medicare Act if‘both the standing and the substantive basis for the presentation' of the claims is in the Medicare Act.” RenCare, Ltd. v. Humana Health Plan of Tex., Inc., 395 F.3d 555,557 (5th Cir. 2004) (quoting Heckler v. Ringer, 466 U.S. 602, 606 (1984)). Ordinarily, a provider may only file suit in a district court after exhausting its administrative remedies. Fam. Rehab., 886 F.3d at 500 n.4 (citations omitted). This means a provider must either (1) satisfy all four stages of administrative appeal and receive a decision from the Medicare Appeals Council (“Council”), or (2) escalate its claim to the Council and wait 180 days for the Council to act or fail to act. Id. at 500-01.

It is undisputed that Plaintiffs claims-which challenge a Medicare suspension as a Medicare provider-arise under the Medicare Act. See Mot. 1; Resp. 1, 5. Therefore, the Court considers whether Plaintiff exhausted its administrative remedies. Plaintiff does not allege that it exhausted administrative remedies by receiving a decision from the Council or waiting 180 days after escalating its claim to the Council. See Compl. ¶ 70.^[3] Instead, Plaintiff invokes two exceptions to the administrative exhaustion requirement. Plaintiff argues that the Court has subject matter jurisdiction under the collateral claim exception and the “no review at all” exception. Resp. 5-10.

A. Collateral Claim Exception

Plaintiff argues that the Court has subject matter jurisdiction under the collateral claim exception established in Mathews v. Eldridge, 424 U.S. 319 (1976). See Compl. ¶ 12; Resp. 5-8. In Eldridge, the Court held that “jurisdiction may lie over claims (a) that are ‘entirely collateral' to a substantive agency decision and (b) for which ‘full relief cannot be obtained at a postdeprivation hearing.'” Fam. Rehab., 886 F.3d at 501 (quoting Eldridge, 424 U.S. at 330-32). A claim is not collateral if it requires the court to “immerse itself' in the substance of the underlying Medicare claim, requires the court to demand a “factual determination” as to the application of the Medicare Act, or if it seeks relief that would be “‘administrative,' i.e., the substantive, permanent relief that the plaintiff seeks or should seek through the agency appeals process.” Id. (citations omitted). Put another way, “[i]f the court must examine the merits of the underlying dispute, delve into the statue and regulations, or make independent judgments as to plaintiffs' eligibility under a statute, the claim is not collateral.” Id. at 503 (citations omitted). A plaintiff establishes that full relief cannot be obtained at a postdeprivation hearing if it ‘“raise[s] at least a colorable claim' that erroneous recoupment will ‘damage [it] in a way not recompensable through retroactive payments.'” Id. at 504 (second alteration in original) (quoting Eldridge, 424 U.S. at 331).

As to the first Eldridge element, the Court concludes that Plaintiffs claims are not collateral to a substantive agency decision for two reasons. First, Plaintiff seeks substantive relief in the form of monetary repayment. Plaintiff asks the Court to order Defendant to “reimburse [it] for its services (including those previously suspended) and do so until the government provides a hearing[.]”. Compl. ¶ 8. In fact, each of Plaintiff s claims request relief related to the payments Defendant has withheld. Claim 1 seeks compensatory damages to “justly compensate” for payments withheld. Id. ¶ 122(a). Claims 2 through 4 each request injunctive relief requiring Defendant to “temporarily rescind the Medicare payment suspension” until Defendant holds a hearing and issues a “decision in conformance with constitutionally required procedures.” Id. ¶¶ 92, 99, 106, 111. Plaintiff clarifies in its Response that temporarily rescinding the suspension would include “the return of [Plaintiffs] earned Medicare payments illegally taken after the suspension was terminated.” Resp. 4-5; see also id. at 7 (“Again, Plaintiff seeks the return of its illegally confiscated property.”). “Although [Plaintiff] sues for money damages rather than Medicare benefits, the money damages [it]...