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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.

BMD Appellate Win Clarifies Waiver of Contractual Right to Arbitrate

Brennan, Manna & Diamond, LLC attorneys David M. Scott, Lucas K. Palmer, and Krista D. Warren prevailed before the United States Court of Appeals for the Sixth Circuit regarding if/when a party waives a contractual right to arbitrate. Borror Property Management, LLC v. Oro Karric North, LLC, No. 20-3146 (the “Decision”).

Relief for Ohio Under the Federal American Rescue Plan Act

On March 11, 2021, President Biden signed the American Rescue Plan Act (the “Act”) — a $1.9 trillion COVID-19 relief package — a significant portion of which will be directed to the State of Ohio to support economic recovery, as outlined below.

Cleveland Manufacturer Violated OFAC Sanctions By Allowing Shipments To Iran - Know Your Customer and Know Their Customer

UniControl, Inc., a Cleveland, Ohio manufacturer of process controls, airflow pressure switches, boiler controls and other instruments, agreed to pay the Office of Foreign Assets Control “OFAC,” the financial enforcement agency of the U.S. Treasury Department, $216,464 to settle its liabilities for violations of the Iran Sanctions Program. OFAC stated that “this enforcement action highlights the importance of identifying and assessing multiple warning signs that indicate a foreign trade partner may be re-exporting goods to a sanctioned jurisdiction.”

Ohio Breach of Contract Statute of Limitations Shortened to 6 Years

On March 16, 2021, Governor DeWine signed into law S.B. 13 which shortens Ohio’s statute of limitations for filing lawsuits based on breach of contract. A statute of limitation is the time period within which a party must file a lawsuit before its claim expires as a matter of law.

Chinese Product Tariff Challenge Causes Flurry of Importer Lawsuits

A lawsuit filed late in 2020 at the U.S. Court of International Trade (“CIT”) challenging the U.S. Trade Representative’s (USTR) implementation of Section 301 “List 3” and “List 4” duties on products from China, HMTX Industries LLC et al. v. United States (Court No. 20-00177), has resulted in the filing of thousands of additional lawsuits brought by other affected importers. There are now 3,700+ companies added to the list, including Ford, Home Depot, Target, Tesla, and Walgreens, along with many other smaller importers.