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Prime Healthcare Services - Shasta, LLC v. Burwell

United States District Court, E.D. California

May 9, 2017

PRIME HEALTHCARE SERVICES - SHASTA, LLC, Plaintiff,
v.
SYLVIA MATHEWS BURWELL, Defendant. PRIME HEALTHCARE SERVICES - SHASTA, LLC, Plaintiff,
v.
SYLVIA MATHEWS BURWELL, Defendant. PRIME HEALTHCARE SERVICES - SHASTA, LLC, Plaintiff,
v.
SYLVIA MATHEWS BURWELL, Defendant. PRIME HEALTHCARE SERVICES -SHASTA, LLC, Plaintiff,
v.
SYLVIA MATHEWS BURWELL, Defendant. PRIME HEALTHCARE SERVICES -SHASTA, LLC, Plaintiff,
v.
SYLVIA MATHEWS BURWELL, Defendant. PRIME HEALTHCARE SERVICES -SHASTA, LLC, Plaintiff,
v.
SYLVIA MATHEWS BURWELL, Defendant. PRIME HEALTHCARE SERVICES -SHASTA, LLC, Plaintiff,
v.
SYLVIA MATHEWS BURWELL, Defendant. PRIME HEALTHCARE SERVICES -SHASTA, LLC, Plaintiff,
v.
SYLVIA MATHEWS BURWELL, Defendant. PRIME HEALTHCARE SERVICES -SHASTA, LLC, Plaintiff,
v.
SYLVIA MATHEWS BURWELL, Defendant.

          FINDINGS AND RECOMMENDATIONS

          KENDALL J. NEWMAN, UNITED STATES MAGISTRATE JUDGE

         Plaintiff Prime Healthcare, LLC (“plaintiff”) filed these actions against Sylvia Mathew Burwell, in her official capacity as Secretary of the Department of Health and Human Services (“defendant” or “Secretary”). In these actions, plaintiff seeks judicial review of decisions by the Secretary, acting through the Medicare Appeals Council (“MAC”), to dismiss plaintiff's requests for review of unfavorable decisions concerning its claims for reimbursement for emergency medical services it allegedly provided to Medicare beneficiaries prior to the time it had a Medicare provider's agreement in place.

         Presently pending before the court is defendant's motion to dismiss plaintiff's first amended complaint filed in each of these actions pursuant to Federal Rule of Civil Procedure 12(b)(1).[1] Plaintiff filed an opposition to the motion filed in each action, and defendant filed a reply in each action.[2] On the court's own motion, these motions were taken under submission without oral argument. Each motion was subsequently referred to the undersigned for consideration and the issuance of findings and recommendations.[3] The undersigned has fully considered the parties' briefs and appropriate portions of the record. For the reasons that follow, the undersigned recommends that defendant's motion to dismiss filed in each action be granted, and that these actions be dismissed without prejudice for lack of subject matter jurisdiction.

         I. Statutory and Regulatory Background

         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 individuals over the age of 65 and eligible disabled persons. Under the Act, the Secretary of the U.S. Department of Health and Human Services has broad authority to issue regulations relating to the administration of Medicare. See 42 U.S.C. § 1302(a).

         The Medicare program established under the Act reimburses medical providers for services they supply to eligible patients. See generally 42 U.S.C. §§ 1395 et seq. The Medicare program consists of four main parts: Part A (Hospital Insurance Benefits), which generally authorizes payment for covered inpatient hospital care and related services, 42 U.S.C. §§ 1395c to 1395i-5, 42 C.F.R. Part 409; Part B (Supplemental Insurance Benefits), 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 (Medicare Advantage), 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 (Prescription Drugs), which provides prescription drug benefits to beneficiaries, 42 U.S.C. §§ 1395w-101, et seq. Medicare Part A is at issue in the actions currently before the court because plaintiff's requests for review by the MAC involved claims for reimbursement of Hospital Insurance Benefits for the care it allegedly provided to Medicare beneficiaries.

         The Secretary makes reimbursement payments under Part A for services furnished to Medicare beneficiaries directly to “providers of services.” See 42 U.S.C. §§ 1395f(a)-(b), 1395x(u). Under Title XVIII, a “provider of services” is “a hospital, critical access hospital, skilled nursing facility, comprehensive outpatient rehabilitation facility, home health agency, hospice program, or, . . . fund.” 42 U.S.C. § 1395x(u). Generally, in order to obtain reimbursement for services furnished, a provider of services must first enroll in the Medicare program and obtain a provider agreement. 42 U.S.C. §§ 1395f(a) (“[P]ayment for services furnished an individual may be made only to providers of services which are eligible therefor under section 1395cc of this title.”); 1395cc(a) (“Any provider of services . . . shall be qualified to participate under this subchapter and shall be eligible for payments under this subchapter if it files with the Secretary an agreement . . .”). The Secretary's implementing regulations interpret the applicable statutory provisions, defining a “provider” as “a hospital, a CAH, a skilled nursing facility, a comprehensive outpatient rehabilitation facility, a home health agency, or a hospice that has in effect an agreement to participate in Medicare . . . .” 42 C.F.R. § 400.202.

         A reimbursement payment under the Medicare program may be made to a hospital that does not have a participation agreement for inpatient hospital services that are emergency services when Medicare would be required to pay for the services “if the hospital had such [a participation] agreement in effect and otherwise met the conditions of payment, ” and the non-participating hospital has “elected to claim payments” for all inpatient and outpatient emergency services furnished during the calendar year. 42 U.S.C. § 1395f(d)(1); see also 42 C.F.R. § 424.108.

         In order to obtain payment under the Medicare program, the claimant must first submit a claim to the appropriate Medicare contractor. 42 U.S.C. § 1395ff(a)(1); 42 C.F.R. § 405.920. Upon receipt of a claim for payment, the Medicare contractor issues an “initial determination” addressing whether the item or service is covered and meets all other payment requirements, and, if so, the amount deemed owing. Id. If the claimant is dissatisfied with the initial determination, a “redetermination” may be requested by the same Medicare contractor. 42 U.S.C. § 1395ff(a)(3); 42 C.F.R. § 405.940. Next, if the claimant is not satisfied with the contractor's redetermination, “reconsideration” may be requested by a “qualified independent contractor” (“QIC”). 42 U.S.C. § 1395ff(c); 42 C.F.R. § 405.960. A still dissatisfied claimant may then request a hearing, “as provided in [42 U.S.C. §] 405(b), ” before an administrative law judge (“ALJ”). 42 U.S.C. § 1395ff(d)(1); 42 C.F.R. § 405.1002. The ALJ's decision may then be reviewed by the MAC. 42 U.S.C. § 1395ff(d)(2); 42 C.F.R. § 405.1100. Any party to the ALJ's decision may request the MAC to review that decision de novo. Id.

         Generally, once the administrative process discussed above is exhausted, judicial review of the Secretary's “final decision” is available as provided in 42 U.S.C. § 405(g) (incorporated by reference in 42 U.S.C. § 1395ff(b)(1)(A)). See Heckler v. Ringer, 466 U.S. 602, 605 (1984) (“Judicial review of claims arising under the Medicare Act is available only after the Secretary renders a ‘final decision' on the claim, in the same manner as is provided in 42 U.S.C. § 405(g) for old age and disability claims arising under Title II of the Social Security Act.”). “Pursuant to her rulemaking authority, . . . the Secretary has provided that a ‘final decision' is rendered on a Medicare claim only after the individual claimant has pressed his claim through all designated levels of administrative review.” Id. at 606 (citations omitted).

         III. Relevant Allegations of Plaintiff's First Amended Complaints

         Plaintiff alleges in its operative amended complaint in each action that on October 23, 2008, it purchased a hospital located in Redding, California as part of a limited asset sale. Due to the nature of the sale, plaintiff had to apply for a new Medicare National Provider Identifier (“NPI”) in order to obtain a Medicare provider agreement and receive reimbursement from that program for the care it provided to Medicare beneficiaries. Plaintiff applied for an NPI through Palmetto, a Medicare contractor, on November 10, 2008, but Palmetto delayed its approval of that application for several months, resulting in plaintiff's Medicare provider agreement becoming effective on February 18, 2009.

         Plaintiff alleges that between November 1, 2008, and February 18, 2009, a period during which its application for a provider agreement was still pending before Palmetto, it had provided medically necessary emergency services to 1, 967 Medicare beneficiaries at the hospital it had purchased. Plaintiff had provided such services based on its belief that a grant of its application to become a Medicare provider would be retroactive, which would have allowed it seek reimbursement for the care it provided to those beneficiaries. However, plaintiff was told that its approved provider status would not take retroactive effect prior to February 18, 2009. Accordingly, plaintiff submitted Medicare reimbursement claims to Palmetto as a non-participating provider for the emergency services it had provided to each of the 1, 967 Medicare beneficiaries to whom it had provided such care between November 1, 2008, and February 18, 2009. Plaintiff alleges that, after some delay, Palmetto ultimately denied 1, 094 of the 1, 967 claims it submitted on the basis that that the documentation plaintiff submitted did not support a finding that the claims were for emergency services and that plaintiff could have diverted the patients to another nearby hospital for care. Plaintiff alleges that it requested reconsideration for each of its denied claims, but that Palmetto upheld its denial in each instance.

         Plaintiff alleges that it then appealed each of Palmetto's denials to the QIC, which upheld Palmetto's denial in each instance and determined that the services plaintiff rendered to the Medicare beneficiaries could not be reimbursed. After these denials, plaintiff submitted a request for hearing before an ALJ to review each of the QIC's adverse determinations. With regard to each request for hearing, the ALJ held that plaintiff's claims were meritorious and plaintiff was entitled to reimbursement for each of its claims because the services it had rendered to the Medicare beneficiaries were emergency medical services and the nearby hospital was not a viable option for the transfer of those beneficiaries.

         Defendant, acting through the Centers for Medicare and Medicaid Services, then referred the ALJ's decision to the MAC for review. After deciding on its own motion to review each of the ALJ's decisions finding plaintiff's claims meritorious, the MAC dismissed plaintiff's request for hearing for each claim at issue in these actions based on a finding that plaintiff lacked standing to assert its claims under the applicable statutory and regulatory framework. In support of that finding in each decision, the MAC determined that plaintiff did not have a participation agreement in effect during the dates on which it provided its services to the Medicare beneficiaries underlying its claims, therefore meaning it did not meet the definition of a “provider” under the applicable regulations. The MAC determined further that plaintiff's lack of status as a “provider” meant that the applicable regulations precluded it from appealing the Medicare contractor's initial determination. The MAC also found that plaintiff did not obtain an assignment of beneficiary appeal rights and was not seeking to appeal an initial determination because a beneficiary is deceased with regard to any of its reimbursement claims. Accordingly, the MAC concluded in each appeal that plaintiff had no right to request a hearing under the applicable regulations.

         IV. Legal Standards for Defendant's Motion to Dismiss ...


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