Opinion
22-CV-00237-DC-RCG
11-21-2023
ENCOMPASS HEALTH REHABILITATION HOSPITAL OF MIDLAND ODESSA, LLC, Plaintiff, v. XAVIER BECERRA, Secretary of the United States Health and Human Services, Defendant.
REPORT AND RECOMMENDATION OF THE U.S. MAGISTRATE JUDGE
RONALD C. GRIFFIN UNITED STATES MAGISTRATE JUDGE
BEFORE THE COURT are Defendant Xavier Becerra, Secretary of the United States Department of Health and Human Services' Motion to Dismiss (Doc. 13), and Plaintiff Encompass Health Rehabilitation Hospital of Midland Odessa, LLC's Response in Opposition (Doc. 16). This case is before the Court through a Standing Order pursuant to 28 U.S.C. § 636 and Appendix C of the Local Court Rules for the Assignment of Duties to United States Magistrate Judges. After due consideration, the Court RECOMMENDS that Defendant Xavier Becerra's Motion to Dismiss be DENIED. (Doc. 13).
All page number citations are to CM/ECF generated pagination unless otherwise noted.
I. Background
On November 14, 2022 Plaintiff Encompass Health Rehabilitation Hospital of Midland Odessa, LLC (“Encompass Health”) filed its Complaint for Judicial Review. (Doc. 1). According to its Complaint, Encompass Health is an inpatient rehabilitation facility (“IRF”) providing “high quality acute rehabilitation services to the residents of west Texas and the surrounding communities.” Id. at 2. Encompass Rehabilitation is a Medicare-certified provider of inpatient rehabilitation services-Medicare “covers IRF services for beneficiaries whose illnesses or injuries necessitate intensive rehabilitation and can be reasonably expected to require and benefit from an IDT approach to their rehabilitation programs with oversight by a rehabilitation physician.” Id. at 3.
Specifically, Encompass Health appeals 13 Medicare claim denials made by the United States Department of Health and Human Services (“HHS”). The Centers for Medicare and Medicaid Services (“CMS”) administers the Medicare program on behalf of HHS. Id. at 5. CMS contracts private entities to perform “claims processing, claim audits, and adjudication of administrative appeals for unfavorable claim determinations.” Id. In the event a CMS contractor audits and denies a provider's claim, the provider may avail itself of the Medicare administrative appeals process. (Doc. 1 at 3). The administrative appeals process involves five stages: redetermination, reconsideration, a hearing before an Administrative Law Judge (“ALJ”), a request for review by the Medicare Appeals Council (“the Council”), and judicial review in federal district court. Id. at 5. First, requests for redetermination are processed by Medicare Administrative Contractors. Id. Second, the provider may ask for reconsideration from a Qualified Independent Contractor hired by CMS for that purpose. Id.; see also Angelitos Health Care, Inc. v. Becerra, No. 7:20-CV-0035, 2022 WL 981966, at *3 (S.D. Tex. Feb. 1, 2022) (quoting Family Rehab., Inc. v. Azar, 886 F.3d 496, 499-500 (5th Cir. 2018)). “Third, the provider may request de novo review before an ALJ within the Office of Medicare Hearings and Appeals (OMHA), an agency independent of CMS. The ALJ stage presents the opportunity to have a live hearing, present testimony, cross-examine witnesses, and submit written statements of law and fact.” Angelitos Health Care, 2022 WL 981966, at *3 (quoting Family Rehab., 886 F.3d at 499-500). Finally, “A provider dissatisfied with the Secretary's final decision may seek judicial review by commencing a civil action in an appropriate federal district court.” Id. (citing 42 U.S.C. § 1395ff(b)(1)(A)).
Encompass Health appeals the Secretary's final decisions because: (1) they are not supported by substantial evidence; and (2) they did not apply the correct legal standards. (Doc. 1 at 10-11). On July 5, 2023, Becerra filed the instant Motion to Dismiss. (Doc 13). Encompass Health filed its Response in Opposition on August 2, 2023 and Becerra filed his Reply on August 9, 2023. (Docs. 16, 17). Consequently, this matter is ripe for disposition.
II. Standard of Review
Federal Rule of Civil Procedure 12(b)(6) authorizes dismissal of a complaint for “failure to state a claim upon which relief can be granted.” When considering a Rule 12(b)(6) motion to dismiss, a court must “accept the complaint's well-pleaded facts as true and view them in the light most favorable to the plaintiff.” Johnson v. Johnson, 385 F.3d 503, 529 (5th Cir. 2004). Federal Rule of Civil Procedure 8 requires that a pleading contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Thus, to survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A complaint need not include detailed facts to survive a Rule 12(b)(6) motion to dismiss. See Twombly, 550 U.S. at 555-56. However, a plaintiff must do more than recite the formulaic elements of a cause of action. See id. at 556-57. Additionally, the Court is not bound to accept as true a legal conclusion couched as a factual allegation in the complaint. See Iqbal, 556 U.S. at 678. Thus, although all reasonable inferences will be resolved in favor of the plaintiff, the plaintiff must plead “specific facts, not mere conclusory allegations.” Tuchman v. DSC Commc'ns Corp., 14 F.3d 1061, 1067 (5th Cir. 1994).
III. Discussion
Becerra argues Plaintiff's Complaint for Judicial Review should be dismissed for two reasons. First, Becerra asserts Encompass Health's request for council review does not comport with 42 C.F.R. § 405.1112(b)'s requirements, and thus Court cannot consider claims Encompass Health failed to raise for council review. (Doc. 13 at 7-8). Second, Becerra states Encompass Health failed to plead sufficient facts showing it is entitled to relief. Id. at 8-11. The Court will address each argument below.
Central to Becerra's argument are the requirements of § 405.1112(b), which states,
[t]he request for review must identify the parts of the ALJ's or attorney adjudicator's action with which the party requesting review disagrees and explain why he or she disagrees with the ALJ's or attorney adjudicator's decision, dismissal, or other determination being appealed. For example, if the party requesting review believes that the ALJ's or attorney adjudicator's action is inconsistent with a statute, regulation, CMS Ruling, or other authority, the request for review should explain why the appellant believes the action is inconsistent with that authority.42 C.F.R. § 405.1112(b). Here, Becerra argues, Encompass Health's “requests for Council review failed to identify the parts of the ALJ decisions with which Encompass disagreed and did not provide any explanation for its disagreement.” (Doc. 13 at 8). Encompass Health counters that its appeal forms properly identified the part of each ALJ decision it intended to appeal, which in each case was the ALJ's entire coverage determination, not the ALJ's liability determination. (Doc. 16 at 9). Specifically, Encompass Health's thirteen petitions for council review stated: “The beneficiary met the criteria for admission to the IRF.” Id. (citation omitted).
Next, Becerra argues Encompass Health's Complaint for Judicial Review does not meet Rule 12(b)(6) muster because it “does not cite to any facts or evidence in any one of the Secretary's final decisions Encompass seeks to challenge. Nor does Encompass allege any facts relating to any specific beneficiary (e.g., the reasons why a beneficiary's condition necessitated IRF services, or how Encompass satisfied the documentation requirements).” (Doc. 13 at 9). Additionally, Becerra asserts the Complaint is deficient because “Encompass fails to offer any facts from which the Court could reasonably infer that the Secretary's decisions lacked substantial evidence or applied the incorrect legal standard.” Id. at 10. Encompass Health counters by pointing out “[a] complaint for judicial review of a final agency decision is a unique type of civil action in the federal court system. (Doc. 16 at 13).
However, both of Becerra's arguments are misplaced because of the nature of the case and its procedural posture. Plaintiff's Complaint is one for judicial review of an agency action. “Pursuant to 42 U.S.C. § 405(g), a district court's review of a final agency decision is limited to (1) whether the agency applied the proper legal standards and (2) whether substantial evidence on the record as a whole supports the agency's decision.” Angelitos Health Care, 2022 WL 981966, at *6 (citing Est. of Morris v. Shalala, 207 F.3d 744, 745 (5th Cir. 2000) (per curiam)).
“Section 405(g) is made applicable in Medicare overpayment cases by statute.” Angelitos Health Care, 2022 WL 981966, at *6 n.9 (citing See 42 U.S.C. § 1395ff(b)(1)(A)).
In its Complaint for Judicial Review, Encompass Health pleads it has obtained the Secretary's final agency decisions as to the thirteen decisions it is appealing and exhausted its administrative remedies. (Doc. 1 at 9). Further, Encompass Health pleads the Secretary's final decisions are not supported by substantial evidence and do not apply the correct legal standards. Id. at 10-11. Additionally, the Court remains unpersuaded that dismissal of Encompass Health's Complaint for judicial review is appropriate at this stage, as Becerra presents no case law where any other court has dismissed a plaintiff's complaint for judicial review of a final agency action at the 12(b)(6) stage. As such, the Court finds Defendant Becerra's arguments better suited for adjudication later in the case, when the Court can conduct a fact-intensive analysis. Assuming this Recommendation is adopted by the District Judge, a briefing schedule more akin to appellate review will be forthcoming.
Based on the above discussion, the Court RECOMMENDS Becerra's Motion to Dismiss be DENIED. (Doc. 13).
IV. Conclusion
For the foregoing reasons, the Court RECOMMENDS Becerra's Motion to Dismiss be DENIED. (Doc. 13).
Instructions for Service and Notice of Right to Appeal/Object
In the event that a party has not been served by the Clerk with this Report and Recommendation electronically, pursuant to the CM/ECF procedures of this District, the Clerk is ORDERED to mail such party a copy of this Report and Recommendation by certified mail. Pursuant to 28 U.S.C. § 636(b)(1), any party who desires to object to this report must serve and file written objections within fourteen (14) days after being served with a copy. A party filing objections must specifically identify those findings, conclusions, or recommendations to which objections are being made; the District Judge need not consider frivolous, conclusive, or general objections. Such party shall file the objections with the Clerk of the Court and serve the objections on all other parties. A party's failure to file such objections to the proposed findings, conclusions, and recommendations contained in this report shall bar the party from a de novo determination by the District Judge. Additionally, a party's failure to file written objections to the proposed findings, conclusions, and recommendations contained in this report within fourteen (14) days after being served with a copy shall bar that party, except upon grounds of plain error, from attacking on appeal the unobjected-to proposed factual findings and legal conclusions accepted by the District Judge. Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415, 1428-29 (5th Cir. 1996).