United States District Court, N.D. California
ORDER RE: CROSS MOTIONS FOR SUMMARY JUDGMENT, Re:
Dkt. Nos. 57, 63
MARIA-ELENA JAMES, United States Magistrate Judge
before the Court are Plaintiff Julie Hindley fdba Sonoma
Prosthetic Eyes' ("Plaintiff") Motion for
Summary Judgment (Pl.'s Mot., Dkt. No. 57) and
Defendants' Cross-Motion for Summary Judgment
(Defs.' Mot., Dkt. No. 63). Having considered the
parties' positions, the relevant legal authority, and the
Administrative Record ("AR") in this case, the
Court GRANTS Defendants' Motion and DENIES
Plaintiff's Motion for the following reasons.
The Medicare Program and DMEPOS Suppliers
Medicare Act, 42 U.S.C. § 1395 et seq., creates a
federal health insurance program for persons over age
sixty-five and certain disabled persons. The Secretary is
responsible for the administration of Medicare and has broad
authority to "make and publish such rules and
regulations . . . as may be necessary to the efficient
administration" of the Medicare program. 42 U.S.C.
§ 1302(a). The Secretary administers Medicare through
CMS, an agency within the U.S. Department of Health and Human
Services. 46 Fed. Reg. 56911 (Nov. 19, 1981); Fox Ins.
Co. v. Ctrs. for Medicare & Medicaid Servs., 715
F.3d 1211, 1214 (9th Cir. 2013). CMS contracts with NSC, a
division of Palmetto GBA. Defs.' Statement of Facts
("Defs.' SOF") ¶ 60.
of the Medicare Act establishes "a voluntary insurance
program to provide medical insurance benefits . . . for aged
and disabled individuals who elect to enroll under such
program, to be financed from premium payments by enrollees
together with contributions from funds appropriated by the
Federal Government." 42 U.S.C. § 1395j. As is
relevant here, Part B provides reimbursement for
Medicare-covered durable medical equipment, prosthetics,
orthotics, and supplies ("DMEPOS"). 42 U.S.C.
§§ 1395k(a)(2)(I), 1395m. To receive Medicare
reimbursement, a DMEPOS supplier must receive a supplier
number issued by the Secretary. 42 U.S.C. § 1395m(j)(1).
"A [DMEPOS] supplier may not obtain a supplier number
unless . . . the supplier meets revised standards prescribed
by the Secretary[.]" 42 U.S.C. § 1395m(j)(1)(B).
The DMEPOS supplier standards are set forth in 42 C.F.R.
§ 424.57(c). NSC subcontracts with Overland Solutions,
Inc. ("Overland Solutions") to perform on-site
inspections of DMEPOS suppliers to ensure compliance with
these requirements. Defs.' SOF ¶ 108.
Revocation of Plaintiff's DMEPOS Supplier Number
is the former sole proprietor of Sonoma Prosthetic Eyes
("Sonoma"). Fifth Am. Compl. ("FAC"),
Dkt. No. 51. On August 30, 2013, NSC approved Plaintiff as a
DMEPOS supplier. AR 116; see AR 111. Plaintiff's
Medicare supplier enrollment application lists Sonoma
Prosthetic Eyes' business hours as "9-5 M-Sat./By
appointment only." AR 119.
10:30 a.m. on October 1 and at 1:00 p.m. October 4, 2013, an
Overland Solutions inspector attempted to conduct onsite
visits of Sonoma Prosthetic Eyes. Defs.' SOF ¶¶
109-10; AR 114 (Site Verification Survey Form). On both
attempts, the inspector went to the door, noted it was
locked, and knocked twice; however, no one answered and the
inspector noted the lights were off. AR 114. The inspector
took six photographs of the building's exterior,
including its entrance and signage. AR 115. The inspector
noted that the business hours were not posted. AR 114.
October 28, 2013, NSC, on behalf of CMS, notified Plaintiff
by letter that it was revoking her DMEPOS supplier number. AR
101-03; see also Defs.' SOF ¶ 1. The letter
noted Plaintiff was not in compliance with the supplier
standards set forth in 42 C.F.R. § 424.57(c)(7) and was
considered to be in violation of 42 C.F.R. §§
424.535(a)(5)(ii) and 424.57(c). AR 101-02. This conclusion
was based solely on the unsuccessful October 1 and 4, 2013
site visits. Id. As a result, Plaintiff was barred
from re-enrolling in the Medicare program for two years. AR
101. The letter further stated Plaintiff could make a written
request for a reconsideration hearing before a hearing
officer ("HO") within 60 days. AR 102.
Proceedings before the Medicare Hearing Officer
November 8 and 29 and December 23, 2013, Plaintiff made
written requests for a reconsideration hearing. AR 94-95,
110; see Defs.' SOF ¶ 4. In a letter dated
November 29, 2013, Medicare HO Colleen Jais acknowledged
receipt of Plaintiff's request for reconsideration and
stated she would make "a new and independent decision
based on the evidence in the case file and on any additional
evidence that [Plaintiff] would like to submit." AR 104.
HO Jais provided instructions on how Plaintiff could submit
additional documentation. See Id. HO Jais reached an
unfavorable decision on December 24, 2013. AR 105-09.
Specifically, HO Jais found that "Sonoma Prosthetic Eyes
ha[d] not shown compliance with supplier standard
7" and "ha[d] not provided evidence to
show they have complied with the standard for which they were
non-compliant." AR 108. As such, HO Jais concluded
Plaintiff "cannot be granted access to the Medicare
Trust Fund by way of a Medicare supplier number." AR
108. HO Jais informed Plaintiff that Plaintiff could appeal
the decision before an administrative law judge
("ALJ") of the Department of Health and Human
Services Departmental Appeals Board. Id. 108-09.
August 7, 2014, Plaintiff timely requested a review by an
ALJ. AR 18. On August 25, 2014, ALJ Steven T. Kessel issued
an Acknowledgment and Pre-Hearing Order ("Pre-Hearing
Order"). AR 33-38. The Pre-Hearing Order required the
parties to submit pre-hearing briefs addressing the issues of
law and fact. AR 35. It further provided that Plaintiff and
CMS could offer and cross-examine witnesses, written direct
testimony, and exhibits. AR 35-38. Both Plaintiff and CMS
filed briefs and each submitted six exhibits. AR 43-49
(CMS' brief), 55-64 (Pl.'s brief), 91-104 (Pl.'s
exhibits), 105-31 (CMS' exhibits). CMS submitted with its
brief the Site Verification Survey Form and six black and
white reproductions of photographs taken of Sonoma Prosthetic
Eyes. AR 114-15. Plaintiff submitted six documents, and no
photographs. AR 91-104; see AR 54.
November 12, 2014, the ALJ upheld CMS' revocation of
Plaintiff's Medicare enrollment. See AR 1-6. As
neither Plaintiff nor CMS identified any witnesses or offered
written direct testimony, the ALJ elected not to conduct an
in-person hearing. AR 2. The ALJ concluded the "facts
plainly establish[ed] grounds for revoking Petitioner's
enrollment for noncompliance with the requirements of 42
C.F.R. § 424.57(c)(7)." Id. The ALJ found
"[Plaintiff] was obligated to post its hours of
operation and . . . to be accessible during whatever hours it
posted. It failed in both respects based on the facts offered
by CMS." Id. The ALJ also found that the
effective date of revocation was November 12, 2013, fifteen
days after Petitioner was sent notice of the revocation. AR
Proceedings before the Appellate Division of the Departmental
November 27, 2014, Plaintiff requested the Appellate Division
of the Departmental Appeals Board ("DAB") review
the ALJ's decision. AR 67-71. CMS opposed Plaintiff's
request on December 22, 2014. AR 76-82. On December 30, 2014,
Plaintiff filed a reply. AR 83-88.
issued its decision on March 3, 2015. AR 7-17. It affirmed
"the ALJ's conclusion that CMS lawfully revoked
Sonoma's billing privileges." AR 7. The DAB held
"that the record established that Sonoma did not have
its hours of operation posted when the NSC inspector
attempted to visit on October 1 and 4, 2013 and, therefore,
that CMS was authorized to revoke Sonoma's DMEPOS
supplier billing privileges based on its noncompliance with
section 424.57(c)(7)(i)(D)." AR 10. However, the DAB
reversed the ALJ's finding that the effective date of the
revocation was November 12, 2013. AR 15. The DAB instead
determined that the effective date of revocation was November
27, 2013, thirty days after the date of notice of revocation.
The Instant Proceedings
initiated this action on May 1, 2015. See Compl.,
Dkt. No. 1. She filed her First Amended Complaint on August
13, 2015, and her Second Amended Complaint ("SAC")
on October 1, 2015. See First Am. Compl., Dkt. No.
8; SAC, Dkt. No. 18. On December 15, 2015, the Court
dismissed the SAC for lack of subject matter jurisdiction.
SAC Order, Dkt. No. 35. Although Plaintiff asserted
jurisdiction under 42 U.S.C. § 405(g) and 28 U.S.C.
§§ 1331, 1332, and 1346 (SAC ¶¶ 8, 12,
14), the Court found Plaintiff's claims arise under the
Medicare Act (SAC Order at 10-15). As such, the Court held
that "42 U.S.C. § 405(g) is . . . [her] sole avenue
for judicial review[, ]" and that § 405(g) does not
permit monetary damages. Id. at 8-9, 15. Plaintiff
sought only monetary damages; she did not seek review of the
Secretary's decision. See SAC; SAC Order at 6
(noting "Plaintiff has recast the SAC as a complaint for
damages"). As "Plaintiff ha[d] failed to request
any relief that falls within the limited waiver of sovereign
immunity conferred by § 405(g), the Court reject[ed]
Plaintiff's attempt to rely upon § 405(g) as a basis
for subject matter jurisdiction for her claims that go beyond
the scope of administrative review." SAC Order at 10.
The Court accordingly dismissed the SAC for lack of subject
matter jurisdiction. Id. at 15.
January 5, 2016, Plaintiff filed her Third Amended Complaint
("TAC"). Dkt. No. 36. In her TAC, Plaintiff did not
assert jurisdiction under 42 U.S.C. § 405(g), but rather
invoked 28 U.S.C. § 1331 for the same due process claims
which she previously alleged in the SAC. See TAC at
7. The Court dismissed the TAC, noting that "28 U.S.C.
§ 1331[ ]was explicitly rejected [as a basis for
jurisdiction] in the Court's prior order dismissing
Plaintiff's SAC[.]" TAC Order at 4, Dkt. No. 42;
see Id. at 5 ("[T]he Court previously ruled
§ 1331 cannot confer subject matter jurisdiction over
March 3, 3016, Plaintiff filed her Fourth Amended Complaint
(Dkt. No. 43), which she subsequently sought to amend (Dkt.
No. 46). The Court permitted the amendment (Dkt. No. 50),
and, on April 15, 2016, Plaintiff filed the operative Fifth
Amended Complaint (FAC, Dkt. No. 51). Plaintiff brings the
FAC pursuant to 42 U.S.C. § 405(g) and-despite the
Court's previous Orders-28 U.S.C. § 1331. FAC
¶¶ 2-7. The FAC appears to assert a Fifth Amendment
procedural due process violation and a request for judicial
review of the DAB's decision. See Id. at 2
(section heading "STATEMENT OF FACTS AND CLAIM")
& ¶¶ 17-109. Plaintiff also- again, despite the
Court's prior rulings-requests $900, 000 in economic and
compensatory damages and $1.6 million in punitive damages.
Id. at 19-20.
Court has jurisdiction to review final decisions of the
Secretary pursuant to 42 U.S.C. §§ 1395cc(h)(1)(A)
and 405(g). The ALJ's decision must be affirmed if the
findings are "supported by substantial evidence and if
the [ALJ] applied the correct legal standards."
Holohan v. Massanari, 246 F.3d 1195, 1201 (9th Cir.
2001) (citation omitted). "Substantial evidence means
more than a scintilla but less than a preponderance" of
evidence that "a reasonable person might accept as
adequate to support a conclusion." Thomas v.
Barnhart, 278 F.3d 947, 954 (9th Cir. 2002) (quoting
Flaten v. Sec'y of Health & Human Servs., 44
F.3d 1453, 1457 (9th Cir. 1995)). The court must consider the
administrative record as a whole, weighing the evidence that
both supports and detracts from the ALJ's conclusion.
McAllister v. Sullivan, 888 F.2d 599, 602 (9th Cir.
1989). However, "where the evidence is susceptible to
more than one rational interpretation, " the court must
uphold the ALJ's decision. Magallanes v. Bowen,
881 F.2d 747, 750 (9th Cir. 1989). Determinations of
credibility, resolution of conflicts in medical testimony,
and all other ambiguities are to be resolved by the ALJ.
the harmless error rule applies where substantial evidence
otherwise supports the ALJ's decision. Curry v.
Sullivan, 925 F.2d 1127, 1131 (9th Cir. 1990). A court
may not reverse an ALJ's decision on account of an error
that is harmless. Molina v. Astrue, 674 F.3d 1104,
1111 (9th Cir. 2012) (citing Stout v. Comm'r, Soc.
Sec. Admin., 454 F.3d 1050, 1055-56 (9th Cir. 2006)).
"'[T]he burden of showing that an error is harmful
normally falls ...