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CLIENT ALERT: Prohibition on Recoupment Prior to Exhaustion of Administrative Remedies

In April, the Fifth Circuit Court of Appeals, in Family Rehabilitation, Inc. v. Azar No. 17-11337 (5th Cir. 2018), held that district courts are authorized to enjoin the Centers of Medicare & Medicaid Services (“CMS”) and its contractors from recouping alleged overpayments prior to the completion of the administrative appeal process.

As many people who routinely handle government claim appeals know, recoupment on the alleged overpayment cannot be stayed after a decision is rendered at the reconsideration level (Level 2). Meaning, recoupment can begin while three (3) additional stages of appeal remain to be exhausted. See MLN Matter Number: MM6183, as revised.  This rule significantly impacts providers subject to recoupment because it often takes three (3) to five (5) years before the Administrative Law Judge (“ALJ”) (Level 3) renders a decision on appeal.  Meaning, if the claims were correctly billed, the government will have already recouped the reimbursement on the claims by the time the case presents itself to the ALJ.

For many providers, including Family Rehabilitation, Inc., by the time the ALJ renders a decision, the negative impact of the recoupment will have significantly affected the operation budget of the practice. This may result in a practice or provider closing the business and/or filing for bankruptcy before the final decision on the overpayment is ultimately rendered.

The potential impact on providers from the ALJ’s backlog preventing timely decisions on appeal is demonstrated from Family Rehabilitation, Inc.’s allegations. Family Rehabilitation, Inc. is a provider in Texas that receives approximately 94% of its revenue from Medicare claims. In 2016, the Zone Program Integrity Contractor (“ZPIC”) audited claims and determined that Family Rehabilitation, Inc. had been overpaid on 93% of the 43 claims submitted for review.  The ZPIC extrapolated this amount and rendered an ultimate overpayment decision of $7.89 million. Family Rehabilitation, Inc. timely appealed to the Medicare Administrative Contractor (“MAC”), which denied the request for redetermination, and the request for reconsideration was subsequently denied. This outcome at the first two levels of appeal is not uncommon as contractors are routinely paid based on the amount of overpayments that they determine.

Thereafter, Family Rehabilitation, Inc. timely appealed the denials to the Administrative Law Judge who, because of an enormous backlog of appealed claims, determined that it would be at least three (3) to (5) years before Family Rehabilitation, Inc.’s appeal could be heard and decided. In the interim, Medicare was authorized to begin recoupment on the $7.89 million, essentially preventing any payment to Family Rehabilitation, Inc. by Medicare.

By the time the ALJ would hear the case and render a decision, Family Rehabilitation, Inc. would likely be bankrupt or shutdown because of the lack of payments from Medicare. Therefore, Family Rehabilitation, Inc. filed for a restraining order and preliminary injunction. The District Court for the N.D. of Texas decided that it did not have jurisdiction to hear the case because Family Rehabilitation, Inc. did not yet exhaust its administrative remedies, which would take at least another three (3) to five (5) years.

On appeal, the Fifth Circuit decided that Family Rehabilitation, Inc. could proceed with its motion for injunctive relief, staying the overpayment recoupment, under the “collateral-claim” judicial exception, ultimately waiving the requirement to exhaust administrative remedies.

Although the Fifth Circuit’s decision does not require the District Court to grant the injunctive relief on overpayment recovery,[1] this decision does give providers a path to seek injunctive relief while they wait for their claims to be heard by the ALJ. If injunctive relief is granted, it may stop the recoupment of claims while appeals are pending before the ALJ.

If you are a provider or practice facing recoupment while your claims are stalled in the administrative appeal process, please contact us, and we discuss your options for appeal and to apply for injunctive relief to enjoin further recoupment efforts.

Should you have any questions concerning the recoupment process and the administrative appeal process in general, please contact Amanda L. Waesch, Esq. (alwaesch@bmdllc.com) or Bryan E. Meek, Esq. (bmeek@bmdllc.com), who are attorneys in Brennan, Manna & Diamond’s Provider Relations, Audits, and Appeals Unit, a division of BMD’s Healthcare Department.

 

[1] As of May 18, 2018, the U.S. District Court for the N.D. of Texas has yet to rule on Family Rehabilitation, Inc.’s Motion for Temporary Restraining Order and Injunctive Relief.

CLIENT ALERT: Construction Law Update: Communication is Key! And Other Lessons Learned From A Recent Public Project Court Decision

In a recent decision, the Ohio Court of Claims entered a $2.2 million judgment in favor of the general trades contractor, and against a public university, in connection with an on-campus renovation project. Mid American Construction, LLC v. Univ. of Akron, Ct. of Cl. No. 2016-00685JD, 2018-Ohio-4513.

CLIENT ALERT: Ohio Incentivizes Cybersecurity Measures

On November 2, 2018, Ohio’s Data Protection Act (“DPA”) went into effect. The DPA incentivizes Ohio businesses to proactively address cybersecurity and data protection by providing an affirmative defense/safe harbor for claims related to data breach. However, the safe harbor is only applicable if the organization can prove “reasonable compliance” to the DPA.

CLIENT ALERT: Update on Discrimination

The “#metoo” presence and the recent Kavanaugh confirmation hearings have brought sexual discrimination issues to the forefront of the American mind. Always an incendiary and confusing topic, it also includes various permutations of issues involving sex, sex stereotyping, sexual orientation, and transgender situations.

CLIENT ALERT: Ohio Supreme Court Rules that a Subcontractor's Construction Defects are Not a Covered "Occurrence" Under a CGL Policy

Although a growing number of states have held that CGL policies provide coverage for damages caused by the defective work of subcontractors, the Ohio Supreme Court has refused to join the national trend. In Ohio N. Univ. v. Charles Constr. Servs., Inc., 2018-Ohio-4057, the Ohio Supreme Court recently ruled that a subcontractor’s faulty workmanship is not a covered “occurrence” under a typical CGL policy.

CLIENT ALERT: Taxpayer Passport Application will be Denied Due to Unpaid Taxes

In late 2015, Congress passed The Fixing America’s Surface Transportation Act (FAST) into law. This law allows the IRS and State Department to refuse to issue a Passport if the taxpayer has a seriously delinquent tax debt. The law also permits the IRS and State Department to revoke a taxpayer’s Passport for these same delinquent tax debts. To be considered a seriously delinquent tax debt, the tax debt must total more than $51,000.