United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
JAMES F. HOLDERMAN, District Judge.
On January 21, 2014, Plaintiff PrimeSource Healthcare of Ohio, Inc. ("PrimeSource") filed a three-count complaint (Dkt. No. 1, "Complaint" or "Compl.") against Defendants Kathleen Sebelius, in her role as Secretary of Health and Human Services ("the Secretary"), and CGS Administrators, LLC ("CGS") (collectively, "Defendants").
PrimeSource seeks a writ of mandamus compelling the Defendants to: (1) produce documents so it may begin the Medicare Appeals Process (Count I); (2) void six "prepayment screens" imposed by Defendants (Count II); and (3) provide PrimeSource with the evidence used as the basis for the prepayment screens (Count II). (Compl. ¶ 4.) PrimeSource also seeks damages arising out of Defendants' alleged continued violation of PrimeSource's procedural due process rights under the Constitution's Fifth Amendment (Count III). ( Id. ¶¶ 47-48.)
Defendants have moved to dismiss (Dkt. No. 10, "Defs.' Mot.") all three counts alleged against them pursuant to Fed.R.Civ.P. 12(b)(1). For the reasons explained below, the Defendants' motion is granted.
Under the Medicare Act, 42 U.S.C § 1395 et. seq., an individual entitled to payment of Medicare benefit claims may assign this right to a physician. Id. §§ 1395u(b)(3)(B); 1395u(i)(1). In turn, that physician may reassign those payment rights to a medical supplier or provider. Id. § 1395u(b)(6). Those seeking benefits under the Medicare Act are collectively referred to as claimants. Id.
To administer paying Medicare claims, the Department of Health and Human Services ("HHS") contracts with companies that review, approve, and pay Medicare claims as the Secretary's agent (the "Contractor"). (Defs.' Mot. at 2.) The Contractor is required to issue an initial determination on a claim for benefits no later than 45 days after receiving the claim. 42 U.S.C. § 1395ff(a)(2)(A). Because of this narrow 45-day window between the filing of a claim and a Contractor's required determination, it is common for the Contractor to approve a claim initially. (Compl. ¶ 17.) The Contractor can then review the claim in more detail after payment in a post-payment review. ( Id. )
If the Contractor discovers a claim should not have been paid in post-payment review, it may seek to recoup that overpayment. ( Id. ) The Contractor does so by issuing overpayment demand letters which set out what claims have been reviewed and disapproved. ( Id. ) These mistaken claims may also form the basis of prepayment screens. ( Id. ¶ 19.)
According to the Medicare Program Integrity Manual, CMS Pub. 100-08, a Contractor may impose a prepayment screen on individual entities in the following circumstance. ( Id. ¶ 1, 20 (citing Medicare Manual Ch. 3, §§ 3.2, 3.4).) After the Contractor conducts a series of post-payment reviews (an "Audit"), the Contractor discovers the claimant is submitting claims not supported by Medicare regulation. ( Id. ) A prepayment screen prohibits a claimant from receiving any payment until each claim is reviewed and preapproved by the Contractor's reviewer. ( Id. ¶ 20.)
Providers subject to prepayment review are required to submit supporting medical documentation for each claim affected by the screen. 42 U.S.C. 1395l(e). This is to verify that the services provided were appropriate, medically necessary, and not excessive. Id. The screen remains in place until the Contractor lifts it. (Compl. ¶ 20.)
PrimeSource provides podiatric services to Ohio nursing home patients. ( Id. ¶ 2.) These patients have assigned their rights to payment of certain Medicare Part B benefits to six physicians. ( Id. ) The physicians have in turn re-assigned their rights to PrimeSource. ( Id. ) CGS is a Contractor for and duly-authorized agent of HHS. ( Id. ¶ 3.) In this role, CGS reviews Medicare claims on behalf of HHS, determining whether to pay them and the amount to be paid. (Defs.' Mot. at 1.)
PrimeSource claims that CGS, and by extension the Secretary, has violated numerous Medicare regulations in processing the claims at issue in this suit. (Compl. ¶ 3.) Specifically, PrimeSource claims that CGS has placed six prepayment screens upon PrimeSource, and its affiliated physicians, without conducting the Audit required by Medicare regulations. ( Id. ¶ 4b.)
Importantly to the case at bar, if a provider disagrees with the denial of a claim, the Medicare Appeals Process ("MAP") contains five specific, integrated phases by which a claimant may challenge that denial. ( Id. ¶ 15.) Those phases are: (1) a redetermination, by the Contractor (utilizing staff that was not involved in making the initial claim determination); (2) a reconsideration, by a qualified independent contractor; (3) a hearing, by an Administrative Law Judge; (4) an appeal, to the Medicare Appeals Council; and finally (5) judicial review, by a District Court Judge. 42 U.S.C. § 1395ff; 42 CFR 405, subpt. I.
Beginning in July 2013, CGS began a post-payment review of services performed by PrimeSource's six physicians. (Compl. ¶ 23.) Because of the error rate and the total number of purported overpayments Defendants discovered during the review, the Defendants informed PrimeSource via letter that claims for certain services would be subject to a prepayment screen. ( Id. ¶ 23.) The above letter also indicated that if PrimeSource disagreed with the review's findings, it could appeal. ( Id. ¶¶ 16, 23.) However, it also stated that PrimeSource could only do so within 120 days of receiving a series of overpayment demand letters, which would lay out the claims being rejected and could be used to begin the MAP. ( Id. )
Although PrimeSource had not received the overpayment demand letters at the time of filing its complaint ( Id. ¶ 16.), it has since received them. (Dkt. No. 16, "Pl.'s Oppn.", at 1.) However, PrimeSource maintains it still has not received all the claim information examined during Defendants' Audit and used to justify imposing the prepayment screens against PrimeSource (the "Probe Data"). ( Id. at 1-6.) PrimeSource also alleges claims for services outside of those CGS specified in its letter have been delayed by the prepayment screen and that many more claims are being unduly delayed. (Compl. ¶¶ 33-34.)
PrimeSource, again, filed the Complaint in response, seeking a writ of mandamus to compel the Defendants to: (1) produce documents so it may begin the Medicare Appeals Process (Count I); (2) void six "prepayment screens" imposed by Defendants (Count II); and (3) provide PrimeSource with the evidence used as the basis for the prepayment screens (Count II). (Compl. ¶ 4.) PrimeSource also seeks damages arising out of Defendants' alleged continued violation of PrimeSource's procedural due process rights under the Constitution's Fifth Amendment (Count III). ( Id. ¶¶ 47-48.)
On April 9, 2014, Defendants subsequently filed their motion to dismiss for lack of subject matter jurisdiction. Defendants argue that this court lacks mandamus jurisdiction, because PrimeSource must first appeal the prepayment screen through the various MAP phases. (Defs.' Mot. at 6-9.) Defendants, additionally, claim that ...