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Yet Another Court Says: No Recoupment Until After ALJ Hearings

Another U.S. District Court in South Carolina has agreed with courts in Texas by granting a provider's request for a Temporary Restraining Order (TRO) to prevent the Centers for Medicare and Medicaid Services (CMS) from recouping monies until after ALJ hearings have been held (Accident, Injury and Rehabilitation, PC d/b/a Advantage Health and Wellness v. Azar, c/a No. 4:18-cv-02173-DCC, August 21, 2018).

The U.S. District Court for the District of South Carolina, Florence Division, first noted that the process for appealing claims denials includes deadlines that must be met at various stages of the process. According to the Court, the appeals process works as it should through the first two levels of appeal, i.e., requests for redetermination and reconsideration. But, says the Court in its decision: "The statutory scheme does not, however, prescribe consequences for failure to meet several of the deadlines."

So, although providers can escalate their appeals to the next level if deadlines are not met, the recoupment and resulting devastating financial implications for providers are not addressed by this "remedy."

In this case, Advantage Health, a chiropractic practice, was audited by AdvanceMed, the Zone Program Integrity Contractor (ZPIC) for South Carolina. The ZPIC determined that Advantage Health was overpaid by $36,218.31. The ZPIC extrapolated this amount to $6,648,877.92.

A number of the claims denials were reversed as a result of Advantage Health's requests for redetermination and reconsideration. On March 10, 2016, the provider requested ALJ's hearings on the remainder of the denied claims. On April 4, 2016, the MAC began recoupment of the alleged overpayment and has recouped $1.8 million so far. The provider's requests for ALJ hearings are still pending.

In its decision granting the TRO, the Court noted that the provider was likely to prevail in 60% of ALJ hearings.

The Court also concluded that the provider would suffer irreparable harm if recoupment continued. The Court noted that the chiropractor has contributed more than $1,300,000 in capital contributions in order to keep the business operational. The provider has also been forced to terminate twenty-four employees in light of it its dwindling gross revenue. The provider's share of the healthcare market has also "shrunk precipitously." The CFO at Advantage Health testified that Advantage Health would be forced to close its doors and declare bankruptcy imminently if recoupment continued.

According to the Court, the "balance of the equities" also weighed in favor of granting the TRO. CMS will suffer no harm if the TRO is granted because it will have the ability to resume recoupment of any overpayments if the ALJs rule in their favor. If the TRO is not granted, the provider will be out of business.

Based upon all of the above, the Court agreed with the provider and granted the TRO prohibiting recoupment until after ALJ hearings are held.

The Court also ordered the parties to consult with each other about the possibility of settlement negotiations. As a result of their discussions, the parties agreed to engage in direct settlement negotiations and, if necessary, mediation through a neutral third party. It will be interesting to learn the extent of these negotiations and/or the outcome of mediation.

The proverbial handwriting is increasingly on the wall. According to Courts in Texas and now South Carolina, CMS cannot recoup monies prior to hearings before ALJs. Providers facing large recoupments should certainly request TROs to prevent them.


©2018 Elizabeth E. Hogue, Esq.  All rights reserved.

No portion of this material may be reproduced in any form without the advance written permission of the author.


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