from the United States District Court for the Southern
District of Texas
OWEN, Chief Judge, and HAYNES and COSTA, Circuit Judges.
COSTA, CIRCUIT JUDGE
annual spending topping half a trillion dollars, Medicare is
the largest recipient of federal funds after Social Security
and defense. With so many tax dollars at stake,
Congress created an administrative process through which
Medicare can recover overpayments. Because of the massive
number of claims, an audit of each one is not feasible. So
federal law allows Medicare to investigate a select number of
claims from a provider. If the audit of that sample reveals
"a sustained or high level of payment error,"
Medicare can extrapolate that overpayment rate to a larger
number of similar claims. 42 U.S.C. § 1395ddd(f)(3)(A).
audit of Palm Valley Health Care, a home health care
provider, revealed that a significant percentage of the
sampled claims did not meet Medicare coverage requirements.
Extrapolating that overpayment rate to all claims paid over
the relevant time period resulted in a repayment demand of
more than $12 million. Palm Valley brings constitutional,
statutory, and evidentiary challenges to that decision.
Finding no error, we AFFIRM.
Department of Health and Human Services (HHS), acting through
a Medicare contractor, audited claims Palm Valley submitted
between July 1, 2006, and January 31, 2009. Palm Valley was
selected for review because it had submitted an unusually
large number of claims involving five or more consecutive
home health care episodes. An episode is sixty days long and
the typical claim involves two consecutive episodes. During
the audit period, Palm Valley submitted 10, 699 Medicare
those thousands, the contractor sampled 54 and concluded that
29 of them provided services to beneficiaries who were not
eligible for home health care. Medicare will cover home
health services if the beneficiary is homebound, under the
care of a physician, in need of skilled services, and under a
plan of care. 42 C.F.R. § 409.42. Based on interviews of
beneficiaries and their friends and families, as well as a
review of medical records, the contractor concluded that the
29 beneficiaries either were not homebound or did not need
skilled care. As a general matter, an individual is
homebound if she has a condition restricting her ability to
leave home without assistance. 42 U.S.C. § 1395f(a). The
overpayment for those 29 claims was $81, 681.03.
Extrapolation turned that figure into a total repayment
demand of $12, 589, 185.
Valley sought review of the overpayment finding. It argued
that the beneficiaries qualified as homebound and thus were
eligible for home health services. It also challenged the
sample the auditor used and the extrapolation methodology
used to reach the $12 million repayment figure. Notably,
however, Palm Valley did not press a defense Medicare allows
for a provider that "did not know, and could not
reasonably have been expected to know" that it was
receiving overpayments. 42 U.S.C. § 1395pp(a)(2); see
also Caring Hearts Pers. Home Servs. v. Burwell, 824
F.3d 968, 970 (10th Cir. 2016) (Gorsuch, J.) (calling this
"[a] sort of good faith affirmative defense").
arguments Palm Valley was asserting, it had many
opportunities to make them. Administrative review of
overpayment decisions has several stages. The first allows a
provider to seek a redetermination from the auditor. 42
U.S.C. § 1395ff(a)(3)(A). The auditor must complete its
redetermination within 60 days. Id. §
1395ff(a)(3)(C)(ii). If the redetermination is unfavorable,
the provider may then seek reconsideration from a qualified
independent contractor, which likewise has a 60-day deadline.
Id. § 1395ff(c)(3)(B)(i), (c)(3)(C)(i). The
next step is an appeal to an administrative law judge (ALJ),
who holds a hearing and reviews the overpayment finding
de novo. See id. § 1395ff(d)(1)(A).
The ALJ must render a decision within 90 days. Id.
An unfavorable ALJ decision may be appealed to the Medicare
Appeals Council, which also faces a 90-day deadline.
Id. § 1395ff(d)(2)(A). If the provider fails at
this fourth and final stage of administrative review, it may
seek review in federal district court. Id. §
each stage of administrative review has a statutory deadline,
HHS routinely fails to meet those dates. From start to
finish, the average appeal takes about five years, far in
excess of the statute's approximately one year.
Maxmed Healthcare, Inc. v. Price, 860 F.3d 335,
344-45 (5th Cir. 2017). The statute recognizes that the
agency may not meet the deadlines. If HHS fails to meet the
review deadline at any stage, a provider may escalate its
appeal and immediately jump to the next stage of review. 42
U.S.C. §§ 1395ff(c)(3)(C)(ii), (d)(3)(A)-(B).
Valley appealed through the entire administrative process. At
the redetermination stage, the contractor determined that one
partial denial among the 29 was in error. At the
reconsideration stage, the independent contractor found that
Medicare did not cover the claims for 29 beneficiaries. The
ALJ subsequently reviewed the overpayment determinations and
concluded that 27 claims in the sample of 54 should not have
been paid. The Medicare Appeals Council mostly affirmed the
ALJ's decision, but concluded that the claims for two
beneficiaries previously found to be uncovered were eligible
claims. Full administrative review thus reduced the number of
ineligible claims from 29 to 25, shaving a meaningful amount
off the $12 million that Palm Valley originally owed.
with recent practice, the ALJ and Medicare Appeals Council
issued their decisions roughly one-and-a-half years and three
years after Palm Valley sought their review. Although HHS did
not come close to meeting either 90-day deadline, Palm Valley
did not escalate its appeal.
Valley finally sought review in district court. The court
affirmed the ...