UPDATE: Florida district court denies preliminary injunction preventing CMS from recouping overpayments until an ALJ has heard and rendered a decision

We are continuing to follow the case law developments related to providers seeking injunctions to prevent the Centers for Medicare and Medicaid Services (CMS) from recouping overpayments pending an administrative law judge (ALJ) hearing. We previously provided updates regarding a Texas case in which the court granted a preliminary injunction request. However, just this week, the U.S. District Court for the Middle District of Florida denied Alpha Home Health Solutions, LLC’s request for preliminary injunction. The judge found that Alpha Home did not have a constitutionally protected interest in the overpayment of federal funds. 

As a summary of the facts of this case, CMS sent Alpha Home an extrapolated overpayment demand of more than $1.4 million dollars. Alpha Home timely appealed this overpayment up through the third level of appeal, the request for an ALJ hearing. During the first two levels of appeal, CMS was prohibited by regulation from initiating recoupment if a provider appeals within a certain time frame. However, this prohibition does not exist at the start of the third level of appeal and CMS in its discretion can begin recoupment at that point. Alpha Home received a partially favorable decision at the second stage of appeal, reducing the overpayment by half, but still timely appealed to the ALJ. 

As a result of CMS’s recoupment, Alpha Home reduced its staff from 30 to four employees and reduced the number of patients it provided services to from 130 to 22 patients. Additionally, Alpha Home’s owner and manager stopped taking a salary and is using personal resources to cover expenses. On Nov. 27, 2018, the Florida court issued its order denying Alpha Home’s renewed motion for an injunction. 

The order initially focused on whether the court had jurisdiction to decide the motion and found that it agreed with courts in other jurisdictions that a challenge to the extraordinary delay in receiving an ALJ hearing and final review is not precluded by statute and exhaustion of administrative remedies was not required. In addition, it was established that even if Alpha Home’s challenge did require exhaustion of administrative remedies that the relief that Alpha Home sought was beyond the ability of the secretary of the Health and Human Services to provide: “the Secretary is powerless to compel ALJs to hear cases and render decisions more quickly…” Accordingly, the court was found to have jurisdiction to proceed.

Next, the judge reviewed whether Alpha Home had a constitutionally protected property interest in the Medicare payments. The following language of 42 USC §1395g(a): payments shall be made “with necessary adjustments on account of previously made overpayments” was central to the final decision. Interpreting this statute as the payment system is contingent in nature and that providers are aware that payments are made, prior to audit, the finding made was that providers do not have a constitutionally protected property interest in the overpayment of federal funds. Ultimately, it was determined that because Alpha Home did not have this constitutionally protected property interest, it could not meet the first factor of a preliminary injunction analysis  - a substantial likelihood of success on the merits.  

Please feel free to contact the attorneys below for further information and insight on the implications of this decision.

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