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Title A & K Medical Supplies v. Kathleen Sebelius.

May 1, 2012

TITLE A & K MEDICAL SUPPLIES
v.
KATHLEEN SEBELIUS.



CIVIL MINUTES - GENERAL

Present: The Honorable CHRISTINA A. SNYDER

CATHERINE JEANG Not Present N/A Deputy Clerk Court Reporter / Recorder Tape No. Attorneys Present for Plaintiffs: Attorneys Present for Defendants: Not Present Not Present

Proceedings: (In Chambers:) Bench Trial

INTRODUCTION

On December 9, 2010, plaintiff A & K Medical Supplies ("A&K"), a provider of durable medical equipment ("DME"), filed the instant action against Kathleen Sebelius, in her official capacity as Secretary of the Department of Health and Human Services ("defendant" or the "Secretary"). A&K seeks judicial review of a decision by the Secretary, through the Medicare Appeals Council ("MAC"), to dismiss A&K's request for review of an unfavorable decision concerning a claim for DME reimbursement.

A&K filed its opening trial brief on November 4, 2011. The Secretary filed her opening trial brief on December 5, 2011.*fn1 After considering the parties' arguments, the Court finds and concludes as follows.

STATUTORY AND REGULATORY BACKGROUND

A. The Medicare Program

The Medicare Act, established under Title XVIII of the Social Security Act ("the Act"), 42 U.S.C. §§ 1395 et seq., pays for covered medical care provided to eligible aged and disabled persons. The statute consists of four main parts: Part A, which generally authorizes payment for covered inpatient hospital care and relatedservices, 42 U.S.C. §§ 1395c to 1395i-5, 42 C.F.R. Part 409; Part B, which provides supplementary medical insurance for covered medical services, such as doctors' visits, diagnostic testing, or covered medical supplies, such as durable medical equipment, prosthetics and orthotics, 42 U.S.C. §§ 1395j to 1395w-4, 42 C.F.R. Part 410; Part C, which authorizes beneficiaries to obtain services through HMOs and other "managed care" arrangements, 42 U.S.C. §§ 1395w-21 to 1395w-28, 42 C.F.R. Part 422; and Part D, which will provide prescription drug benefits to beneficiaries. 42 U.S.C. § 1395w-101, et seq. Medicare Part B is at issue here because A&K's request for review bythe MAC involved claims for DME reimbursement. SeeAdministrative Record ("AR"), 47--51

B. Medicare Carriers

In administering Medicare Part B, the Center for Medicare and Medicaid Services ("CMS") acts through private fiscal agents called "carriers." 42 U.S.C. § 1395u; 42 C.F.R. Part 421, Subparts A and C, and 42 C.F.R. § 421.5(b). Carriers are private entities who contract with the Secretary to 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. See 42 U.S.C. § 1395u(b)(3)(B); 42 C.F.R. § 421.200.

C. Payment to Medicare Suppliers and Recovery of Overpayments

Medicare processes "hundreds of millions" of claims annually. SeeHeckler v. , 466 U.S. 602, 627 (1984). To maximize cash flow to Medicare providers and promote administrative efficiency, carriers typically authorize payment on claims immediately upon receipt of the claims so long as the claims do not contain glaring irregularities. SeeMaximum Comfort v. Leavitt, 512 F.3d 1081, 1084 (9th Cir. 2007) (finding that, for reasons of administrative efficiency, immediate payments are made to Medicare providers); In re TLC Hospitals, Inc. v. U.S. Dep't of Health & Human , 224 F.3d 1008, 1014 (9th Cir. 2000) (finding that immediate payment to Medicare suppliers is necessary to provide for cash flow). In exercising their regulatory functions, carriers conduct post-payment audits to ensure that payments were 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 ...


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