5th Circuit Ruling Affirms Denial of Injunctive Relief Against Medicare Recoupment during the Administrative Appeals Process

On September 18th, a panel of the Fifth Circuit affirmed a lower court ruling denying injunctive relief against recoupment for Medicare providers still faced with an overpayment demand after going through the first two steps of the administrative review process. In affirming the lower court’s decision, the Fifth Circuit affirmed that the government had provided adequate process and complied with the statute.

Medicare processes over one billion claims each year. Because it cannot feasibly inspect each one, the Medicare program assumes that every claim is valid and then conducts audits on samples of claims to detect potential improper payments. 42 U.S. Code Section 1395ff provides a four-step administrative review followed by federal court review Medicare providers must navigate when seeking to challenge recoupment efforts. The statute requires an ALJ hearing and decision within 90 days of a request. However, because of significant backlog, it could be several years before providers get a hearing. At the peak of the backlog, the system faced 10 years of pending appeals.

Sahara Health Care is a home health agency. In 2017, a Medicare contractor audited a sample of Sahara’s claims, and calculated that the Department of Health and Human Services (HHS) had overpaid approximately $3.6 million. Sahara objected, and after two levels of the administrative appeal process, it reduced the amount to roughly $2.4 million. Sahara exercised its statutory right to an ALJ hearing within 90 days of its request. Although the statute requires an ALJ hearing and decision within 90 days, because of the massive backlog, there was a 3 to 5 year waiting period. HHS began recoupment of overpayments from Sahara after step two of the administrative review process. Sahara sought injunctive relief, asserting that its due process rights were being infringed by the government’s recouping of overpayments without the ALJ hearing.

A district court granted the government’s motion to dismiss, holding that Sahara lacked a property interest in delaying recoupment and that the government provided an adequate framework for challenging the process. A panel of the 5th Circuit affirmed the lower court’s holding. While it did not decide whether Sahara had a property interest, it said that Sahara was provided with an adequate process. It further reasoned that Sahara had a meaningful opportunity to be heard, as Sahara was already heard twice in the form of two steps of the administrative review process, and was able to obtain a meaningful reduction in recoupment from the process.

Although at the height of the backlog of Medicare appeals, providers in some jurisdictions were successful obtaining injunctive relief, providers should be mindful that this decision likely forecloses the possibility of injunctive relief in this jurisdiction for Medicare providers faced with recoupment of an alleged overpayment after going through the first two steps of the administrative appeals process.

For any questions regarding the 5th Circuit opinion, please contact your regular HLP attorney, or Partners@thehlp.com, or call (212) 734-0128 or (248) 996-8510.

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