The opinion of the court was delivered by: Percy Anderson United States District Judge
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Plaintiff Marco Garcia ("Plaintiff") commenced this action on May 13, 2011 pursuant to the Administrative Procedures Act ("APA"), 42 U.S.C. Â§ 1395ff(b)(1)(A) (incorporating the judicial review procedure of 42 U.S.C. Â§ 405(g)),*fn1 to challenge the decision of defendant Kathleen Sebelius, Secretary of the United States Department of Health and Human Services (the "Secretary") to recoup what the Secretary determined were overpayments billed under Plaintiff's Medicare provider number.
The Parties filed Trial Briefs and exchanged proposed Findings of Fact and Conclusions of Law.*fn2 On November 8, 2011, following the filing of the Administrative Record ("AR") and briefing by the parties, the Court, sitting without a jury, conducted a bench trial. Having considered the materials submitted by the parties and reviewing the evidence, the Court makes the following findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a):
A. Statutory and Regulatory Background
1. The Medicare Act, established under Title XVIII of the Social Security Act, 42 U.S.C. Â§Â§ 1395-1395ggg, pays for covered medical care provided to eligible aged and disabled persons. During the time at issue herein, the statute consisted of three main parts: Part A, which generally authorizes payment for covered inpatient hospital care and related services, 42 U.S.C. Â§Â§ 1395c to 1395i-5, 42 C.F.R. Part 409; Part B, which provides supplementary medical insurance for covered medical services, such as physicians' services, 42 U.S.C. Â§Â§ 1395j to 1395w-4, 42 C.F.R. Part 410; and Part C, which authorizes beneficiaries to obtain services through HMOs and other "managed care" arrangements, 42 U.S.C. Â§Â§ 1395w-21 to 1395w-28, 42 C.F.R. Part 422. This case involves Medicare Part B.
2. In administering Part B, CMS acts through private fiscal agents called "carriers.*fn3" 42 U.S.C. Â§ 1395u; 42 C.F.R. Part 421, Subparts A and C, and 42 C.F.R. Â§Â§ 421.3 and 421.5(b). Carriers are private entities who, under contract with the Secretary perform a variety of functions, such as making coverage determinations in accordance with the Medicare Act, applicable regulations, the Medicare Part B Supplier Manual or other agency guidance, determining reimbursement rates and allowable payments, conducting audits of the claims submitted for payment, and rejecting or adjusting payment requests. In addition, upon receipt of a claim for services rendered, the carrier pays the Medicare beneficiary on the basis of an itemized bill, and pays the Medicare supplier on the basis of an assignment of benefits executed by the beneficiary. 42 U.S.C. Â§ 1395u(b)(3)(B). These carrier functions are prescribed by regulation. 42 C.F.R. Â§ 421.200.
3. Part B resembles "a private medical insurance program that is subsidized in major part by the federal government." Schweiker v. McClure, 456 U.S. 188, 190 (1982). As with private medical insurance programs, the statute and its implementing regulations set forth conditions and limitations on the coverage of services and items (42 U.S.C. Â§Â§ 1395k, 1395l, 1395x(s)), exclude certain services and items from coverage, and otherwise specify various limitations. See also 42 U.S.C. Â§ 1395y(a)(2)-(16); 42 C.F.R. Â§ 411.15(a)-(j). For all services and items, Medicare coverage is limited to services that are medically "reasonable and necessary" for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member. 42 U.S.C. Â§ 1395y(a)(1)(A); 42 C.F.R. Â§ 411.15(k)(1). Although "reasonable and necessary" is not defined in the Act, Congress has vested final authority in the Secretary to determine what items or services are "reasonable and necessary." See 42 U.S.C. Â§ 1395ff(a); Heckler v. Ringer, 466 U.S. 602, 617 (1984). Consistent with this authority, the Secretary has promulgated regulations relating to the "reasonable and necessary" requirement.
4. In exercising their regulatory functions, carriers conduct post-payment audits to ensure that payments are made in accordance with applicable Medicare payment criteria. When audited, a Medicare provider seeking payment must provide sufficient evidence to establish the medical reasonableness and necessity of the services billed to Medicare. 42 U.S.C.Â§Â§ 1395g(a), 1395l(e), 1395gg; see also 42 C.F.R. Â§ 411.15(k)(1).
5. Overpayments are Medicare payments a provider or beneficiary has received in excess of amounts due and payable under the statute and regulations. See 42 U.S.C. Â§ 1320a-7k(d)(4)(B). Once a contractor determines an overpayment has been made, the amount so determined is a debt owed to the government and the contractor must attempt recover from the provider, unless the overpayment can be waived. The Act provides for a waiver of repayment liability for a provider when it has been determined that it "did not know, and could not reasonably have been expected to know, that payment would not be made for such services." 42 U.S.C. Â§ 1395pp(a). The Act also provides for waiver of recovery when it is determined that the provider is "without fault" in incurring the denial of payment. 42 U.S.C. Â§ 1395gg(b)(1).
6. Upon a determination of an overpayment, the Medicare contractor issues a notice of "initial determination" indicating the amount deemed owing. 42 U.S.C. Â§ 1395ff(a)(1); 42 C.F.R. Â§ 405.920. If the claimant is dissatisfied with the initial determination, a "redetermination" may be requested by the same contractor. 42 U.S.C. Â§ 1395ff(a)(3); 42 C.F.R. Â§ 405.940. Next, if the claimant is dissatisfied with the contractor's redetermination, a "reconsideration" may be requested by a "qualified independent contractor" ("QIC"). 42 U.S.C. Â§ 1395ff(b)(1)(A) & (c); 42 C.F.R. Â§ 405.960.
7. A still dissatisfied claimant may request a hearing, "as provided in [42 U.S.C. Â§] 405(b)," before an administrative law judge ("ALJ"). 42 U.S.C. Â§ 1395ff(b)(1)(A), (E) & (d)(1); 42 C.F.R. Â§ 405.1002. The participation of CMS and/or its contractors in an ALJ hearing is allowed if they elect to do so, but not required. 42 C.F.R. Â§Â§ 405.1010(a), 405.1012(a). The ALJ's decision, in turn, may be reviewed by the Medicare Appeals Council of the Departmental Appeals Board. 42 U.S.C. Â§ 1395ff(d)(2); 42 C.F.R. Â§ 405.1100. Once this administrative process is exhausted, the claimant may then seek judicial review, "as provided in [42 U.S.C. Â§ ] 405(g)," of the final agency decision of the ALJ or the Appeals Council, as applicable. 42 U.S.C. Â§ 1395ff(b)(1)(A), (E); 42 C.F.R. Â§ 405.1136.
8. A dissatisfied Medicare provider must present its claim through the designated administrative appeals process and exhaust available administrative remedies. 42 U.S.C. Â§ 1395u(b)(3)(C); 42 U.S.C. Â§ 1395ff(b) (incorporating by reference 42 U.S.C. Â§ 405(b)); see also, 42 C.F.R. Â§ 405.801 et seq. (describing the administrative appeals process for Part B).
B. Plaintiff's Overpayment
9. Plaintiff is a licensed medical doctor with a Medicare provider number. (AR1409-10.) In December 2004, Plaintiff began working with Sleepless in L.A. Diagnostic Inc. ("Sleepless"), a sleep diagnostic center located at 1127 Wilshire Boulevard, Suite 305, Los Angeles, California. Complaint Â¶ 16. Plaintiff was affiliated with Sleepless from December 2004 through March 2006. AR 1411. From December, 2004, through November, 2005, Sleepless billed Medicare for various services under Plaintiff's individual provider identification number. See AR 1304.
10. All claims were processed under Plaintiff's individual provider identification number and all Medicare checks were made payable to Plaintiff. (AR 1305.) Plaintiff testified that his duties included providing services to beneficiaries, including reviewing test results and making recommendations. Plaintiff stated that his duties were to "[b]asically review the patients' symptoms, reasons for the tests, what tests were ordered, review how the tests were done and whether . . . I agree with the results and then the recommendations." AR 1414: 24-1415: 2.
11. National Heritage Insurance Company ("NHIC"), the Part B carrier, initially processed and paid the claims. Later, the California Benefit Integrity Support Center ("CAL-BISC") conducted a post-payment audit of the claims. See AR 15. As part of the audit, CAL-BISC randomly selected claims for 40 beneficiaries during the time period of December 1, 2004 through November 30, 2005. Id. CAL-BISC determined that the records furnished were insufficient to support the reasonableness and medical necessity of the services billed. Id. On September 11, 2006, CAL-BISC conducted an on-site provider location verification visit, and found that Plaintiff was not at the location listed as the physical address. AR 56. As a result of the post-payment audit, and an on-site visit that determined Plaintiff was not operating as required, NHIC pursued all Medicare payments paid to Plaintiff from the time period of December 1, 2004, though November 30, 2005, as overpayments. AR 56. Therefore, overpayments were assessed on all paid claims billed with Plaintiff's provider identification number and name during the time period of December 1, 2004, through November 30, 2005. AR 1305.
12. On July 12, 2007, Plaintiff requested a redetermination. AR 1286. In this request, Plaintiff argued that the demand for repayment was wrongly addressed to him and should have been issued to Roxanne Khadem and Sherri Noori of Sleepless because he had nothing to do with billing Medicare. Id. Nothing in the Plaintiff's letter objected to the amount or appropriateness of the overpayment amount. Id. Plaintiff did not submit any medical records or additional information with his request. Id.; see also A.R. 1304.
13. On September 12, 2007, NHIC issued an unfavorable redetermination decision stating CAL-BISC was correct in assessing an overpayment on the claims for service dates between December 1, 2004, and November 30, 2005. AR 1304. The decision reiterated that a claim for Medicare benefits is only valid if there is adequate documentation in the medical records to verify the services billed. AR 1305. As part of its audit, Cal-BISC received medical records for thirty-eight ...