Federal Court Enjoins Medicare Recoupment

Posted by on December 31, 2018

Health insurance application form with money and stethoscopeA Houston federal judge preliminarily enjoined the government from recouping alleged Medicare overpayments made to an ambulance service company facing bankruptcy.  See Adams EMS, Inc. v. Azar, No. H-18-1443, 2018 BL 391263 (S.D. Tex. 2018).

As you may be aware, there is a massive backlog in the Medicare appeals process for alleged overpayments.  The government can begin recouping at step 3 of the arduous 4-step administrative appeal process for overpayment demands.  In a nutshell, the process involves: (1) seeking a redetermination from the Medicare Administrative Contractor (MAC), (2) asking for reconsideration from a Qualified Independent Contractor, (3) requesting a hearing before an administrative law judge (ALJ) of the Office of Medicare Hearings and Appeals, and (4) appealing to the Medicare Appeals Council.  The law requires a decision on Step 3 within 90 days, but there is currently a 3-5 year backlog.

Relying heavily on the decision in Family Rehab. Inc. v. Azar, 2018 WL 3155911 (N.D. Tex. June 28, 2018), the Adams court granted the ambulance company’s motion for preliminary injunction and enjoined the government from withholding Medicare payments (to recoup alleged overpayments) until entry of the final judgment.  The ambulance company met all the factors for obtaining a preliminary injunction.  First, the court held that the provider showed a substantial likelihood of success on the merits because it had a property interest in receiving (and retaining) continued Medicare reimbursements.  Second, the court recognized that the ambulance company had a “risk of an erroneous deprivation” of that interest because an ALJ had not issued a decision within the 90-day window.  Third, the alternative process of escalating the appeal to the MAC would not cure the due process violation because that process would itself deprive the ambulance company of certain procedural rights.

Further, the ambulance company sufficiently demonstrated irreparable injury because it would go out of business should the recoupments continue.  The court was sympathetic and found that the injury to the ambulance greatly outweighed the harm to the government because without relief, the provider would go out of business, causing job loss.  The harm to the government was minimal, because it could eventually recoup claimed overpayments should an ALJ rule in the government’s favor.  Finally, the injunction was in the public interest because it would allow the provider’s patients to continue receiving services.

Providers facing bankruptcy or patient service disruptions because of the Medicare appeals backlog should consider options that might provide some breathing room.

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