Medicare Provider Gets Another Shot to Prove HHS Owes Millions

Jan. 4, 2022, 3:59 PM

A defunct diagnostic testing laboratory can sue HHS to determine how much the agency owes it for recouping money under an overpayment decision that was reversed on appeal, the Fifth Circuit said.

This is an unusual case that falls outside the normal rule that federal courts don’t have jurisdiction over Medicare-related claims that haven’t been presented to the agency and administratively exhausted, the U.S. Court of Appeals for the Fifth Circuit said.

D&G Holdings LLC, which previously operated as Doctors Lab, raised an issue akin to one considered by the U.S. Supreme Court in Shalala v. Illinois Council on Long Term Care Inc., the court said. The Supreme Court decided there are circumstances in which a question that wasn’t strictly presented or exhausted is reviewable under the Medicare Act’s Section 405(g), it said.

Here, the question was how much money HHS owed D&G after its appeals board determined a contractor botched an overpayment decision but didn’t redetermine the amount.

D&G operated from 1986 to 2014. It provided medical laboratory testing services to nursing homes and homebound people.

In 2014, a Medicare integrity contractor found that the federal program had overpaid D&G by more than $8 million, and it started recouping the money.

D&G challenged the decision through HHS’s five-step review process. The Medicare Appeals Council reversed, but it didn’t address how much money Medicare had wrongfully taken away from D&G while the action was pending.

The company sued HHS, claiming the agency owed it over $4.6 million, including interest, as of August 2017. An HHS contractor repaid it $1.8 million. D&G is seeking to collect the balance.

A federal trial court dismissed the suit after finding it lacked jurisdiction because the repayment claim hadn’t been presented to the agency.

Illinois Council applied here, the appeals court said. There, the Supreme Court authorized federal courts to review “any statutory or constitutional contention that the agency does not, or cannot, decide,” the Fifth Circuit said.

HHS argued this case didn’t fall into the Illinois Council exception because D&G must first ask HHS to redetermine the amount of the overpayment. But the argument doesn’t make sense because only initial decisions are subject to redetermination, the Fifth Circuit said.

Additionally, “it would be unconscionable to require a party to exhaust administrative remedies in order to prove that Medicare erroneously collected recoupment, and then to spend several more years of administrative appeals simply to determine the amount it is owed,” the court said Monday in a decision by Judge Edith H. Jones.

Determining the amount is “inextricably intertwined with the initial exhausted agency action,” the court also said.

Chief Judge Priscilla R. Owen and Judge Cory T. Wilson joined.

Shepard Law Firm LLC and Delise & Hall represent D&G. The U.S. Attorney’s Office represents HHS.

The case is D&G Holdings, LLC v. Becerra, 2022 BL 615, 5th Cir., No. 20-30732, 1/3/22.

To contact the reporter on this story: Mary Anne Pazanowski in Washington at mpazanowski@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Patrick L. Gregory at pgregory@bloomberglaw.com

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