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MedPro Health Providers, LLC v. Hargan

United States District Court, N.D. Illinois, Eastern Division

October 19, 2017

ERIC HARGAN, Acting Secretary, U.S. Department of Health and Human Services, ADVANCEMED CORPORATION, and NCI INFORMATION SYSTEMS, Inc., d/b/a ADVANCEMED, Defendants.


          MATTHEW F. KENNELLY, District Judge

         MedPro Health Providers, a home healthcare agency, has filed suit against the Secretary of the U.S. Department of Health and Human Services (HHS), [1] AdvanceMed Corporation, and NCI Information Systems, Inc. in connection with alleged violations of the Medicare Act and its implementing regulations. In addition to bringing a fraud claim against AdvanceMed on behalf of itself and a proposed class of similarly situated healthcare providers, MedPro also seeks a writ of mandamus directing the Secretary to require compliance with the applicable regulations. Defendants have moved to dismiss MedPro's claims for lack of subject-matter jurisdiction. Defendants also have moved to dismiss NCI on the ground that it is not a proper defendant. For the reasons stated below, the Court grants defendants' motion to dismiss for lack of subject-matter jurisdiction.


         1. Regulatory background

         The Secretary of HHS has delegated the responsibility of administering the Medicare program to the Centers for Medicare & Medicaid Services (CMS). CMS, in turn, contracts with private entities to administer various aspects of the program. AdvanceMed is one such contractor. As a Zone Program Integrity Contractor (ZPIC) for CMS, AdvanceMed is tasked with identifying suspected cases of Medicare fraud and otherwise preventing the mistaken overpayment of Medicare funds to healthcare providers.

         CMS and its contractors have the authority to temporarily suspend Medicare reimbursement payments to a provider if they "possess[ ] reliable information that an overpayment exists, " even if additional information is needed for a final determination. 42 C.F.R. § 405.371(a)(1). Generally, the suspension may last no more than 180 days. Id. § 405.372(d)(1). A provider must be given an opportunity to submit a rebuttal statement explaining why the suspension should be lifted. Id. § 405.372(b)(2). If the provider submits a statement, "CMS, the intermediary, or carrier must within 15 days, from the date the statement is received, consider the statement (including any pertinent evidence submitted), together with any other material bearing upon the case" to determine whether the facts justify terminating the suspension. Id. § 405.375(a). The Medicare Program Integrity Manual further provides that "ZPICs shall carefully review the provider's rebuttal statement and pertinent information, and shall consider all facts and issues raised by the provider." Medicare Program Integrity Manual § The written notice of a determination to continue a suspension must contain "specific findings on the conditions upon which the suspension is . . . continued . . . and an explanatory statement of the determination." 42 C.F.R. § 405.375(b)(2). Such determinations are not appealable. Id. § 405.375(c). A suspension is rescinded as soon as CMS or its contractor determines whether the suspected overpayment exists. Id. § 405.372(c)(1)(ii). The suspended Medicare payments are then released to the provider, less the amount of any overpayment found. Id. § 405.372(e)

         Although suspension determinations are not appealable, providers are entitled to appeal any subsequent overpayment determination through a four-part administrative process that culminates in a decision by the Medicare Appeals Council. See Id. § 405.904(a)(2). The Appeals Council's decision is final and thus subject to judicial review in federal district court. 42 U.S.C. §§ 405(g)-(h), 1395ff(b)(1)(A), 1395ii; 42 C.F.R. § 405.1130.

         2. The lawsuit

         The Court takes the following factual allegations from MedPro's complaint and the exhibits attached to the complaint. MedPro is an Illinois home healthcare company that is authorized to provide services to Medicare beneficiaries. AdvanceMed, acting in its capacity as a Medicare contractor, conducted a review of 32 of MedPro's patient charts in March 2016. In November 2016, AdvanceMed notified MedPro that it was suspending Medicare payments to the company "based on reliable information that an overpayment exists or that the payments to be made may not be correct." Compl. ¶ 22. Specifically, AdvanceMed stated that a review of the records provided by MedPro in March revealed evidence that the company was "billing Medicare for services that were not medically reasonable or necessary and where the required face-to-face encounters and physician recertification were invalid." Compl., Ex. 1 at 1. The notice of suspension stated that if MedPro submitted a written rebuttal statement addressing why the suspension should be removed, CMS would "review that statement (and any supporting documentation), along with other materials associated with the case." Id. at 1-2.

         On December 6, 2016, MedPro submitted a rebuttal statement and "substantial supporting documentation, " which included "3 banker's boxes" of additional medical documentation and an affidavit from a primary care physician. Compl. ¶¶ 24-25. On December 28, 2016, AdvanceMed informed MedPro that, after reviewing the rebuttal statement and supporting documentation, CMS had decided to continue the suspension of payment. MedPro's chief executive officer, Rizaldy Villasenor, discussed the suspension with L. McGee, an AdvanceMed program integrity analyst, and Kathlene Gruettner, a supervisor at AdvanceMed, via conference call in early January 2017. During this call, Villasenor asked Gruettner why AdvanceMed's December 2016 response to the rebuttal statement did not address the supporting documentation submitted along with it. Gruettner responded that it is AdvanceMed's policy not to review additional documentation like the medical records submitted with MedPro's rebuttal statement. She stated that AdvanceMed was not obligated to review the additional documentation and that it never does so. Gruettner further stated that CMS did not want AdvanceMed to review additional documentation submitted by service providers.

         MedPro filed the present lawsuit against the Secretary, AdvanceMed, and NCI Information Systems in February 2017. MedPro alleges that the Secretary's refusal (through AdvanceMed) to review the additional documentation submitted with MedPro's rebuttal statement constitutes a failure to carry out the duties prescribed by 42 C.F.R. § 405.375(a) and section of the Medicare Program Integrity Manual. MedPro further alleges that the Secretary's failure to ensure the enforcement of these regulations has deprived MedPro of its right of review. Accordingly, MedPro seeks a writ of mandamus requiring the Secretary to order an immediate review of its rebuttal statement and the documents submitted along with it. MedPro also alleges that AdvanceMed committed fraud by making false representations to MedPro and similarly situated providers that AdvanceMed would (and did) review supporting documentation submitted with a rebuttal statement in accordance with the applicable regulations.

         3. Subsequent events

         AdvanceMed terminated MedPro's payment suspension on April 26, 2017, while this lawsuit was pending. See Mot. to Dismiss, Ex. 2. On the same day, AdvanceMed notified MedPro that it had found MedPro had been overpaid by Medicare in the amount of $6, 937, 712.00, based on an extrapolation of overpayments found in a statistically valid sample of claims and medical records. Id., Ex. 4 at 3. MedPro signaled its intention to appeal ...

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