Serving the home health, home care and hospice industry since 1999.

by Elizabeth Hogue, esq.

The U.S. Court of Appeals for the 5th Circuit issued an opinion on March 27, 2018, in Family Rehabilitation, Inc. v. Azar, No. 17-11337 (5th Cir. Mar. 27, 2018), that says that monies cannot be recouped from a home health agency until after hearings have been conducted by an administrative law judge (ALJ). The Appellate Court reversed the decision of the lower court and remanded the case back to the lower court.

Now the lower U.S. Federal District Court has issued an opinion on June 4, 2018, that agrees with the Appellate Court. Family Rehab., Inc. v. Azar, No. 3:17-CV-3008-K (N.D. Tex. June 4, 2018). According to the Court, monies cannot be recouped from providers that appeal denials of claims until after an ALJ hearing has been held!

The federal district court also issued a temporary restraining order (TRO) against the Centers for Medicare and Medicaid Services (CMS) prohibiting recoupment. The TRO was based on the Court's finding that Family Rehabilitation will likely prevail on the merits of its procedural due process claims. 

Family Rehabilitation received a notice of overpayment from the Medicare Program in the amount of $7.6 million in October, 2016. The notice of overpayment was based on a ZPIC audit conducted in 2016 of 43 claims. An extrapolation resulted in the $7.6 million overpayment.

Family Rehabilitation appealed under what the Court described as "Medicare's Byzantine four-stage administrative appeals process" and "the harrowing labyrinth of Medicare appeals." After requests for reconsideration were denied, the Agency was subject to recoupment. The Agency filed timely requests for hearings before an ALJ.

ALJ's are required by statute to hear cases and issue a decision within 90 days. "Yet," said the Appellate Court "an ALJ hearing is not forthcoming - not within 90 days, and not within 900 days." In fact, it will likely be at least another 3 to 5 years before an ALJ hears the Agency's appeals.

Based on the above, the Agency sued for a temporary restraining order and an injunction to prevent the Medicare Administrative Contractor (MAC) from recouping overpayments until administrative appeals are concluded. The Agency says that it will be forced to shut down due to insufficient revenues long before the appeals process is complete. The Agency claims that the delay (1) violates its rights to procedural due process, (2) infringes its substantive due-process rights, (3) established an "ultra vires" cause of action and (4) entitles it to a "preservation of rights" injunction under the Administrative Procedure Act, 5 U.S.C Section 704-05.

In considering the Agency's request, the Appellate Court first noted that full relief in this case cannot be obtained at a post-deprivation hearing because the Agency will be closed long before ALJ hearings are held if recoupment occurs. The Court found that the Agency may suffer irreparable harm in the form of going out of business and disruption to Medicare patients. Consequently, the Court could decide the case.

The Court went on to say that it cannot rule on the substance of the Agency's appeals, but providers may request that benefits be maintained temporarily until statutory and constitutional procedures have been followed. Since the Agency asked for temporary suspension of recoupment until hearings are held, as opposed to permanent reinstatement of benefits, the Court can rule on the Agency's request.

Finally, the Court noted "HHS' ostensibly Sisyphean attempts to combat the problem" of a backlog of appeals before the ALJ.

This case is definitely one for providers to watch. It now looks possible for providers to avoid recoupment in the face of multi-year wait times for hearings before ALJ's!

©2018 Elizabeth E. Hogue, Esq.  All rights reserved. Reprinted by permission. No portion of this material may be reproduced in any form without the advance written permission of the author.

©2018 by Rowan Consulting Associates, Inc., Colorado Springs, CO. All rights reserved. This article originally appeared in Tim Rowan's Home Care Technology Report. One copy may be printed for personal use; further reproduction by permission only.