United States District Court, N.D. Illinois, Eastern Division
ANDREW IVANCHENKO, M.D., P.C., an Illinois corporation, and ANDREW IVANCHENKO, M.D., individually Plaintiffs,
SYLVIA MATHEWS BURWELL, Secretary of Health and Human Services, and ANDREW SLAVITT, Acting Administrator for the Centers for Medicare and Medicaid Services, Defendants.
MEMORANDUM OPINION AND ORDER
Virginia M. Kendall U.S. District Court Judge.
a suburban Chicago doctor and his medical practice, sued the
Secretary of the Department of Health and Human Services
(HHS) and the Acting Administrator for the Centers for
Medicare & Medicaid Services (CMS) seeking: (1) a
preliminary injunction enjoining the agency from recouping
approximately $14, 000 in Medicare funds per week while they
await a de novo hearing by an Administrative Law
Judge (ALJ) into Plaintiffs' alleged overbillings; and
(2) a writ of mandamus ordering the Secretary to ensure that
Plaintiffs and other healthcare providers receive such a
decision by an ALJ within the 90-day time frame outlined in
the Medicare Act. (Dkt. 1 at 12.) Defendants have moved to
dismiss the suit pursuant to Rule 12(b)(1), arguing that the
Court lacks subject-matter jurisdiction to consider
Plaintiffs' plea for relief because they have failed to
exhaust their administrative remedies. For the reasons
discussed herein, Plaintiffs' complaint  is dismissed.
evaluating a motion filed pursuant to Rule 12(b)(1), the
Court must “accept as true all well-pleaded factual
allegations and draw all reasonable inferences in favor of
the plaintiff.” Evers v. Astrue, 536 F.3d 651,
656 (7th Cir. 2008) (citation omitted). Plaintiff Andrew
Ivanchenko, a physician, has operated a medical clinic
providing pain relief services in Chicago's suburbs for
over 10 years. (Dkt. 1 ¶ 12.) Over 40% of his
practice's income (approximately $14, 000 per week) is
derived from the treatment of Medicare Part B patients.
(Id. ¶ 15.) Without the revenue received from
treating Medicare patients, Ivanchenko's practice cannot
remain in operation. (Id. ¶ 16.)
September 2013, CMS retained Cahaba Safeguard Administrators,
LLC (Cahaba), a Medicare contractor, to perform an audit of
Plaintiffs' Medicare billings. (Dkt. 1 ¶ 18.)
Cahaba's review of Plaintiffs' Medicare billing was
routine and not prompted by any allegations of wrongdoing.
(Id.) Cahaba, which was paid on a contingent basis,
audited 30 patient files and determined that all of the
claims included overbillings and should have been denied.
(Id. ¶¶ 19-20.) Cahaba then extrapolated
the 100% overbilling rate from the sample of patient files it
reviewed to all of Plaintiffs' Medicare billings between
January 2010 and August 2013, and determined that Plaintiffs
should repay HHS $2, 794, 380.84. (Id.) Plaintiffs
submitted a first-level administrative appeal - a
redetermination of the overbilling by the contractor, which
was denied. (Id. ¶ 22.) Plaintiffs then filed a
timely second-level administrative appeal for
reconsideration, which was considered by a different
contractor, which upheld the initial findings of overbillings
but resulted in the application of a different recoupment
formula and a slightly lower repayment amount. (Id.
¶¶ 23-24.) Following the denial of the second-level
administrative appeal, HHS informed Plaintiffs that it would
start recouping the overpayments by withholding approximately
$14, 000 per week in Medicare reimbursements from Plaintiffs.
(Id. ¶ 26.) Then, in June 2016, Plaintiffs'
timely filed their third-level administrative appeal, seeking
a de novo review of the overbilling determination by
an HHS ALJ. (Id. ¶ 26.) Although the Medicare
Act details that ALJ decisions should be rendered within 90
days of receiving an appeal, the Agency's ALJs have been
inundated with similar administrative appeals and the
Plaintiffs' third-level administrative appeal will
apparently not be heard for several years. (Id.
¶¶ 8-10, 34.) Because recoupment payments have
already started, Plaintiffs assert that the medical practice
will close long before the administrative appeal will be
heard, necessitating the injunction halting the recoupment of
approximately $14, 000 per week. (Id. ¶¶
30-31.) Plaintiffs also request that the Court issue a writ
of mandamus prohibiting Defendants from continuing to operate
an administrative scheme that deprives them and other
providers of the opportunity to a timely decision by an ALJ,
and that the Court order the Defendants to take immediate
action to ensure that Plaintiffs and similarly situated
providers receive decisions from an ALJ with 90 days of
receiving a request for a hearing. (Id. at 12.)
assert that the Court lacks jurisdiction and must dismiss the
suit pursuant to Federal Rule of Civil Procedure 12(b)(1).
“Motions to dismiss under Rule 12(b)(1) are meant to
test the sufficiency of the complaint, not to decide the
merits of the case.” Ctr. for Dermatology &
Skin Cancer, Ltd. v. Burwell, 770 F.3d 586, 588 (7th
Cir. 2014). “In all cases, the party asserting federal
jurisdiction has the burden of proof to show that
jurisdiction is proper.” Travelers Prop. Cas. v.
Good, 689 F.3d 714, 722 (7th Cir. 2012) (citing
McNutt v. Gen. Motors Acceptance Corp., 289 U.S.
178, 189 (1936)).
a federal health insurance program for the elderly and
disabled, processes over a billion claims for payment each
year. Due to the volume of claims, Medicare claims are often
paid up front, and sometime later, Medicare contractors may
conduct post-payment audits to ensure payments were made in
compliance with Medicare's payment criteria. If the audit
determines that Medicare overpaid a provider for some reason,
the money is recouped from subsequent payments paid to the
Medicare Act establishes a four-level administrative appeals
process for providers and beneficiaries to challenge adverse
initial determinations made by the contractors. 42 U.S.C.
§ 1395ff. After receiving an initial adverse
determination, a healthcare provider can file their first
level administrative appeal before the Medicare
Administrative Contractor, which is typically the contractor
that made the initial determination. 42 U.S.C. §
1395ff(a)(3). If unsatisfied with the redetermination, the
provider can file a second-level administrative appeal, the
“reconsideration.” Reconsiderations are conducted
by Qualified Independent Contractors (QIC)-contractors that
did not take part in the initial determination. Id.
§ 1395ff(c). If the healthcare provider wishes to appeal
the reconsideration, it may submit a third-level
administrative appeal-a de novo review and hearing
by an ALJ. Id. § 1395ff(b)(1)(E)(i),
(b)(1)(E)(iii), (d)(1)(A). The Medicare Act directs the
agency to conduct and render ALJ decisions within 90 days of
the request for a hearing. Id. §
1395ff(d)(1)(A). The fourth and final administrative level of
Medicare appeals is another de novo review by the
Departmental Appeals Board (DAB), which can also conduct
hearings. Id. § 1395ff(d)(2). The Act
stipulates that the DAB should render a final decision or
remand the case to the ALJ for reconsideration within 90 days
of the request for appeal, or 180 days in cases where there
was no ALJ decision and the case was escalated to the DAB. 42
C.F.R. § 405.1100. Finally, after completing this
four-level administrative appeal process, healthcare
providers may seek judicial review. 42 U.S.C. §
1395ff(b)(1)(E)(i), (b)(1)(E)(iii); 42 C.F.R. §
Medicare Act also provides for “consequences of failure
to meet” several of the administrative appeal
deadlines, by allowing claimants to escalate their appeal to
the next level of the administrative appeals process if the
relevant reviewing body does not comply with the time frame
set forth in the Act. For instance, if the ALJ fails to
render a decision within 90 days of the request for an
appeal, the claimant may escalate its appeal to the
fourth-level DAB appeal. 42 U.S.C. § 1395ff(d)(3)(A).
Similarly, if the DAB does not render a timely decision, the
claimant may escalate its appeal to the district court.
Id. § 1395ff(d)(3)(B). The Act precludes
claimants from filing actions in district court until they
have received a final decision from the DAB or escalated
their appeal after not receiving a timely decision from the
DAB. See Id. § 1385ff(d)(3)(B); 42 U.S.C.
§ 405(g)-(h); 42 C.F.R. § 405.1130.
seek a preliminary injunction on the basis that the
Secretary's delay in rendering a timely ALJ decision
violates the Medicare Act and the Due Process Clause of the
Fifth Amendment. While the Court sympathizes with
Plaintiffs' plight, the Court lacks subject-matter
jurisdiction to consider their request for injunctive relief
because they have failed to exhaust their administrative
remedies. “Judicial review of claims arising
under the Medicare Act is available only after the
Secretary renders a ‘final decision' on the
claim.” Heckler v. Ringer, 466 U.S. 602, 605
(1984) (emphasis added); 42 U.S.C. §§ 405(g)(h).
This means that parties whose claims “arise
under” the Medicare Act can seek judicial review only
after exhausting the full four-step administrative review
process, or escalating their claims after the statutory
periods for review have elapsed because “Title 42
U.S.C. § 405(h), to the exclusion of 28 U.S.C. §
1331 (federal-question jurisdiction), makes § 405(g) the
sole avenue for judicial review of all “claim[s]
arising under” the Medicare Act.” Id. at
2013-15; see also Michael Reese Hosp. & Med. Ctr. v.
Thompson, 427 F.3d 436, 440 (7th Cir. 2005)
(“Section 405(h) precludes federal question
jurisdiction unless the Medicare program's administrative
review process has been exhausted.”).
Medicare Act's “exhaustion requirement serves an
important purpose, preventing the premature interference with
agency processes so that the agency can function efficiently
and can correct its own errors, as well as affording the
parties and the courts the benefit of the agency's
experience and expertise and compiling a record which is
adequate for judicial review.” Michael Reese Hosp.
& Med. Ctr., 427 F.3d at 441. The Supreme Court has
held that the Medicare Act's administrative procedures
are the sole remedy when an “individual seeks a
monetary benefit from the agency (say, a disability payment,
or payment for some medical procedure), the agency denies the
benefit, and the individual challenges the lawfulness of that
denial, ” as is the case here. Shalala v. Illinois
Council on Long Term Care, ...