D.C. Circuit Court Denies Hospital Provider Challenge to Recovery of Payments

In a recent decision, the U.S. Court of Appeals for the D.C. Circuit upheld a lower court decision, and CMS administrative decisions, holding that the Secretary of the Department of Health and Human Services’ (the “Secretary”) is permitted to delegate the ability to make “sustained or high level of payment error” determinations to Medicare contractors under the Medicare Integrity Program.  See Gentiva Healthcare Corp. v. Sebelius (D.C. Circ., No. 12-5179, July 23, 2013) (citing 42 U.S.C. §1395ddd9(f)(3)).  The statute  at issue also expressly prohibits judicial review of high level payment error determinations.   

In its ruling, the Court relied upon the language of the statute that the Secretary of HHS may “’perform any of [her] functions under’ the Medicare program ‘directly, or by contract . . ., as the Secretary may deem necessary.’” Gentiva, at 2 (citing 42 U.S.C. §1395kk(a)). 

The Gentiva case centers around the following statutory language, quoted by the Court: 

 “[a] medicare contractor may not use extrapolation to determine overpayment amounts to be recovered . . . unless the Secretary determines that. . . there is a sustained or high level of payment error.”

Gentiva, at 3 (quoting 42 U.S.C. § 1395ddd(f)(3)).

The underlying audit was performed by Cahaba Safeguard Administrators, a Medicare Program Integrity contractor.  Cahaba performed a reimbursement review of Gentiva claims submitted from July 2005-November 2006, and concluded that Gentiva received higher than the average payment per beneficiary in its region, and that at least 58% or more of its claims were at least partially denied.  Id.   Based on its review, Cahaba made the determination that the claims submitted by Gentiva showed “sustained or high level of payment error.” Id.  It then drew a sample of 30 claims, and extrapolated its results, for a determination of an alleged overpayment of over $4 million.  While Gentiva successfully challenged Cahaba’s alleged overpayment determination, reducing the overpayment by almost half, it disputed that Cahaba had the authority to make the determination of the high level of payment error, based on the plain language of the statute that the “Secretary” is to determine that there is a sustained or high level of payment error, not a contractor. Id.

Despite a 1999 ruling by a former Health Care Financing Administrator, Nancy-Ann Min DeParle, raising concerns regarding samples smaller than 100 claims, the Court upheld the district court’s reliance on the “Chevron” two-part test.  It found that (1) There was not an explicit exception to the Secretary of HHS’ “broad power” to delegate; and (2) the Secretary’s interpretation was reasonable, and therefore given deference, pursuant to Chevron.  Id. at 5, 7, 9 (citing  Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984)). 

The Court noted that providers like Gentiva can still challenge the final overpayment calculation and extrapolation methodology used at both the agency level and in the courts.  Id. at 8.  However, providers already have a challenge defeating such overpayment determinations, and now, even though the Court noted that Gentiva “may have the better reading” of the statute (Id. at 6), providers cannot even dispute the high level payment error, even upon judicial review.  This certainly raises questions regarding the providers’ due process. 

Our attorneys have successfully handled Medicare Program Integrity audits, including addressing concerns regarding the contractor’s audit methodology.  If you have any questions regarding the Gentiva case, specifically, or the Medicare  audit process, please contact Jaya White at jwhite@kdlegal.com or Charles MacKelvie at cmackelvie@kdlegal.com.