Update on Recoupments of Alleged Overpayments Before ALJ Hearings

On January 15, 2020, the U.S. District Court for the Northern District of Texas permanently enjoined the Department of Health and Human Services (HHS) from recouping $7.6 million in overpayments from Family Rehabilitation, Inc., until after hearings before an Administrative Law Judge (ALJ) have been held. The basis of the Court’s decision is that such recoupments violate due process [Family Rehabilitation, Inc. v. Azar, No. 3:17-CV-3008-K (N.D. Tex. Jan. 15, 2020)].

HHS argued that providers don’t have property interests in Medicare payments. The Court emphatically rejected this argument calling it “so ludicrous as to be specious.” Without a recognized property interest,” said the Court, “providers would be expected to treat every Medicare patient as a charity case where reimbursement would just be a nice bonus.” The Court also based its decision on:
• The substantial risk of erroneous deprivation without ALJ hearings, since providers win between 38% and 48% of their appeals before ALJs
• The likelihood that Family Rehab, which receives 88% – 94% of its revenue from the Medicare Program, would go out of business if monies are recouped
• The lack of any substantial threat to the Medicare Program if recoupments are delayed until after ALJ hearings
The Court said that:

While Family Rehab would go out of business in mere months were recoupment to begin, the draconian backlog emphasizes the insufficiency of the process for a provider in Family Rehab’s position.

The Court also rejected HHS’ argument that the right to escalate the case to the Medicare Appeals Council mitigated the risk of erroneous deprivation of property. “Because the Council relies on the same record that is being overturned at a substantial rate,” said the Court, “the Court is not persuaded that escalation cures the procedural ill.”

According to the Court, the controlling fact in this case is that Family Rehab would be forced out of business before receiving hearings before ALJs, unlike other providers who have remained in business despite recoupments.

There are now a number of court decisions on this issue that reach very different conclusions. Clarity is certainly needed so that providers subject to recoupments of overpayments without ALJ hearings will be better able to determine how to get relief. Stay tuned for more from the Courts on this issue!

©2020 Elizabeth E. Hogue, Esq. All rights reserved

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