Cumberland Cnty. Hosp. Sys., Inc. v. Price

CUMBERLAND COUNTY HOSPITAL SYSTEM, INC.d/b/a CAPE FEAR VALLEY HEALTH SYSTEM, Plaintiff, v. THOMAS E. PRICE,¹ Secretary of the United States Department of Healthand Human Services, Defendant.

5:15-CV-319-D

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA WESTERN DIVISION

February 28, 2017

MEMORANDUM AND RECOMMENDATION

In this action, plaintiff Cumberland County Hospital System, Inc. d/b/a Cape Fear Valley Health System ("plaintiff" or "CFVHS") challenges the final decision of defendant Secretary of the United States Department of Health and Human Services ("HHS") Thomas E. Price ("the Secretary") concerning plaintiff's claims for Medicare reimbursement for services it provided to patients identified herein as M.H. and C.B.² (or in context individually, "the patient" or "the beneficiary"). The case is before the court on the parties' motions for judgment on the pleadings. D.E. 67, 69. The motions were referred to the undersigned magistrate judge for a memorandum and recommendation pursuant to 28 U.S.C. § 636(b)(1)(B). See D.E. 75. For the reasons set forth below, it will be recommended that plaintiff's motion be allowed, the Secretary's motion bedenied, the Secretary's final decision denying plaintiff's claims be reversed, and this case be remanded for reimbursement of plaintiff by the Secretary.

BACKGROUND

I. STANDARDS FOR MEDICARE APPEALS PROCESS

"Medicare is a federal program providing subsidized health insurance for the aged and disabled [and] [t]he Secretary of Health and Human Services . . . is charged by Congress with administering the Medicare statute." Almy v. Sebelius, 679 F.3d 297, 299 (4th Cir. 2012). The part of the program at issue in this case, Part A, covers insurance benefits for inpatient hospital and other institutional care. See 42 U.S.C. §§ 1395c to 1395i-4. In general, no payment may be made under Medicare Part A unless the services provided were reasonable and necessary. 42 U.S.C. § 1395y(a)(1)(A).

In Cumberland Cty. Hosp. Sys., Inc. v. Burwell, 816 F.3d 48 (4th Cir. 2016),³ the Fourth Circuit outlined the Medicare appeals process:

To obtain reimbursement for Medicare services, a healthcare provider must, in the first instance, submit a claim to a Medicare Administrative Contractor, a private contractor retained by HHS to make an initial determination regarding whether and in what amount the claim should be paid. See 42 U.S.C. §§ 1395ff(a), 1395kk-1(a). That determination by the Medicare Administrative Contractor may, under a program that Congress established in 2010, be audited by a different third-party government contractor, known as a Recovery Audit Contractor. See id. § 1395ddd(h)(3). Congress created that audit program to serve "the purpose of . . . recouping overpayments," and it incentivized the Recovery Audit Contractors by paying them "on a contingent basis for collecting overpayments." Id. § 1395ddd(h)(1). Healthcare providers wishing to challenge these initial claim determinations by the Medicare Administrative Contractor or the Recovery Audit Contractor must pursue a comprehensive, four-step administrative review process before seeking review in court.

At the first step, a healthcare provider dissatisfied with either the initial determination or the results of an audit may seek a redetermination from the original Medicare Administrative Contractor. See 42 U.S.C. § 1395ff(a)(3). At the second step, if the healthcare provider is dissatisfied with the redetermination, it may seek reconsideration by a Qualified Independent Contractor ("QIC") another third-party government contractor retained to independently "review the evidence and findings upon which the [previous determination was] based." 42 C.F.R. § 405.968(a)(1); 42 U.S.C. § 1395ff(c). In doing so, the QIC may receive and consider "any additional evidence the parties submit or that the QIC obtains on its own." 42 C.F.R. § 405.968(a)(1). At the third step, the healthcare provider may challenge the QIC's decision by requesting a hearing before an ALJ. See 42 U.S.C. § 1395ff(d)(1); 42 C.F.R. § 405.1000. The ALJ hearing process is administered by OMHA [i.e., Office of Medicare Hearings and Appeals], a division within HHS that is independent of and funded through an appropriation separate from the division that oversees the contractors' review during the first two steps of the administrative review process. See Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub.L. No. 108-173, § 931, 117 Stat. 2066, 239699; Statement of Organization, Functions, and Delegations of Authority, 70 Fed.Reg. 36386-04 (June 23, 2005). At the fourth step, the healthcare provider may appeal the ALJ's decision to the Departmental Appeals Board for de novo review. See 42 U.S.C. § 1395ff(d)(2). The Departmental Appeals Board's decision becomes the final decision of the Secretary, which may then be reviewed in court. See id. § 1395ff(b)(1)(A); 42 C.F.R. § 405.1130.

The Medicare Act establishes deadlines for each step in the administrative review process and specifies the consequences when such deadlines are not met. The Act directs that the first two steps of administrative review be completed by the [MAC] and the QIC, respectively, within 60 days. 42 U.S.C. §§ 1395ff(a)(3)(C)(ii), 1395ff(c)(3)(C)(i). If the QIC fails to meet this deadline, the healthcare provider may bypass the QIC determination and "escalate" the process by requesting a hearing before an ALJ, even though a decision by the QIC is ordinarily a prerequisite to such a hearing. Id. § 1395ff(c)(3)(C)(ii). With respect to the adjudication by an ALJ, the Medicare Act provides that an ALJ "shall conduct and conclude a hearing on a decision of a [QIC] . . . and render a decision on such hearing by not later than the end of the 90-day period beginning on the date a request for hearing has been timely filed." Id. § 1395ff(d)(1)(A); see also 42 C.F.R. § 405.1016(c) (providing a 180-day deadline if the appeal had been escalated past the QIC level). If the ALJ does not render a decision before the deadline, the healthcare provider may bypass the ALJ and again escalate the process by "request[ing] a review by the Departmental Appeals Board . . ., notwithstanding any requirements for a hearing for purposes of the party's right to such a review." 42 U.S.C. § 1395ff(d)(3)(A). Finally, if the Departmental Appeals Board does not conclude its review within 90 days, id. § 1395ff(d)(2)(A), or within 180 days if the appeal had been escalated past the ALJ level, 42 C.F.R. § 405.1100(d), the healthcare provider "may seek judicial review [in a United States district court], notwithstanding any requirements for a hearing for purposesof the party's right to such judicial review," 42 U.S.C. § 1395ff(d)(3)(B); see also 42 C.F.R. § 405.1132.

In sum, in order to exhaust the administrative process for reimbursement of Medicare services, a healthcare provider must present the claim in the first instance to a Medicare Administrative Contractor and thereafter engage the process of review and appeal set forth in § 1395ff. While the statute imposes deadlines for completion at each step of the process, it also anticipates that the deadlines may not be met and thus gives the healthcare provider the option of bypassing each step and escalating the claim to the next level, ultimately reaching judicial review by a United States district court within a relatively prompt time.

816 F.3d at 53-54.

II. CASE HISTORY AND COURSE OF TREATMENT OF M.H. AND C.B.

CFVHS's complaint arises from its claim against HHS for reimbursement in the principal amount of approximately $66,000.00 for services provided at its inpatient rehabilitation facility ("IRF") to M.H. from 25 June 2013 through 10 July 2013 and to C.B. from 20 April 2012 through 9 May 2012. Administrative Record ("AR") 35, 40. The principal amount of the claim for services to M.H. totals $44,665.95, AR 3731, and the amount for services to C.B. $21,375.36, AR 520, 528.

A. M.H.

M.H. was admitted to the hospital on 21 June 2013 and a consultation for the appropriateness of IRF care was conducted by Zane Walsh, M.D. on 24 June 2013. AR 3607-09. In the consultation, Dr. Walsh identified the following diagnoses for M.H.: (1) left frontal infarct; (2) multiple prior infarcts; (3) coronary artery disease; (4) status post CABG (i.e., coronary artery bypass grafting); (5) osteoarthritis; (6) status post bilaterally knee arthroplasty; (7) spinal stenosis; (8) renal artery stenosis; (9) vertebrobasilar insufficiency; (10) positive cardiolipin antibodies; (11) gouty arthritis; (12) hyperlipidemia; and (13) adult onset diabetes. AR 3607.

Dr. Walsh described the history of M.H.'s then present illness as follows:

This is a pleasant gentleman known to me from prior rehabilitation. He was recently in rehabilitation, did well and went home. While he was in outpatient therapy he had acute increase in right-sided weakness. He was admitted, had a MRI and was found to have subacute infarct. He has been managed conservatively. He had cardiac enzymes which were unremarkable.

He is having an EEG. I am asked to evaluate for transfer back to rehab.

AR 3607.

Dr. Walsh's review of symptoms stated:

Patient denies headache or nausea. No chest pain or shortness of breath. No abdominal pain. Says his primary difficulty is his balance and getting to standing. Once he gets standing he says he does better. He is unable to get out [of] a chair by hi[m]self. He wants to be independent, at least with assistive device prior to discharge home.

AR 3608.

Dr. Walsh recommended the following IRF care for M.H.:

1. Patient is a good candidate for acute inpatient rehabilitation. I believe he can tolerate 3 hours of therapy a day 5 days a week, specifically 2 hour[s] of physical therapy (PT) a day 5 days a week for gait training, transfer training strengthening, activities of daily living (ADL) retraining. Additional 1 hour of occupational therapy a week for ADL retraining. I believe his risk of

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