MEMORANDUM AND ORDER On November 3, 2017, plaintiff I & R Medical, P.C. commenced this action pursuant to Title XVIII of the Social Security Act, 42 U.S.C. §§1395, et seq., and the Administrative Procedure Act, 5 U.S.C. §§551, et seq., against defendant Eric D. Hargan, then Acting Secretary of the United States Department of Health and Human Services (hereinafter, “the Secretary”),1 in his official capacity, seeking reversal of a final decision issued by the Medicare Appeals Council that had found plaintiff was overpaid by Medicare for physical therapy and chiropractic services furnished between January 2006 and November 2008. Compl.
4, 5, Dkt. 1; see Dec. of Medicare Appeals Council at 2, Dkt. 1-12. Before the Court are the parties’ cross motions for judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure. Dkt. 24, 25. For the reasons set forth below, plaintiff’s motion for judgment on the pleadings is DENIED and the Secretary’s cross motion for judgment on the pleadings is GRANTED. BACKGROUND I. Statutory and Regulatory Framework Medicare is a program governed by Title XVIII of the Social Security Act, 42 U.S.C. §§1395, et seq., commonly known as the Medicare Act (“the Act”), that provides health insurance benefits for aged and disabled individuals. As relevant here, Medicare Part B provides supplemental medical insurance benefits that cover physicians’ services and outpatient care, such as physical therapy and diagnostic tests, for beneficiaries who elect to enroll in the program and pay additional premiums. 42 U.S.C. §§1395j-1395w-4, 1395x(s); see also 42 C.F.R. Parts 407, 408, 410, 414. Part B is administered by the Centers for Medicare & Medicaid Services (“CMS”), a federal agency within the Department of Health and Human Services, in conjunction with private entities known as Medicare Administrative Contractors (“Contractors”). 42 U.S.C. §1395kk-1. Part B provides reimbursement for those items and services that are “reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.” 42 U.S.C. §1395y(a)(1)(A). However, “Congress did not define the items and services that should be considered ‘reasonable and necessary,’ but delegated the making of this decision to the Secretary.” State of N.Y. on Behalf of Stein v. Sec’y of Health & Human Servs., 924 F.2d 431, 433 (2d Cir. 1991); see Heckler v. Ringer, 466 U.S. 602, 605 (1984). Indeed, the Secretary “has wide discretion in selecting the means” for specifying those services that are covered under the Act and “has traditionally acted through formal regulations and (informal) instructional manuals and letters.” Yale-New Haven Hosp. v. Leavitt, 470 F.3d 71, 74 (2d Cir. 2006). Providers and suppliers who participate in the Medicare program have “a duty to familiarize [themselves] with the legal requirements for cost reimbursement.” Heckler v. Cmty. Health Servs. of Crawford Cty., Inc., 467 U.S. 51, 64 (1984).2 The Act provides for National Coverage Determinations (“NCDs”) and Local Coverage Determinations (“LCDs”). 42 U.S.C. §1395ff(f). NCDs are “determination[s] by the Secretary with respect to whether or not a particular item or service is covered nationally.” 42 U.S.C. §1395ff(f)(1)(B); 42 C.F.R §405.1060(a)(1). NCDs are binding on fiscal intermediaries, carriers, Quality Improvement Organizations (“QIOs”), Qualified Independent Contractors (“QICs”), Administrative Law Judges (“ALJs”) and attorney adjudicators, and the Medicare Appeals Council (“the Council”). 42 C.F.R §405.1060(a)(4). When conducting a review, an ALJ or the Council “may review the facts of a particular case to determine whether an NCD applies to a specific claim for benefits and, if so, whether the NCD was applied correctly to the claim.” 42 C.F.R §405.1060(b)(2), (c)(2). Local Coverage Determinations (“LCDs”)3 are “determination[s] by a fiscal intermediary or a carrier under part A or part B, as applicable, respecting whether or not a particular item or service is covered on an intermediary — or carrier-wide basis under such parts, in accordance with section 1395y(a)(1)(A).” 42 U.S.C. §1395ff(f)(2)(B). LCDs, along with CMS program guidance, such as program memoranda and manual instructions, are not binding on ALJs, attorney adjudicators, or the Council. 42 C.F.R §405.1062(a). However, such policies must be given “substantial deference…if they are applicable in a particular case.” Id. If an ALJ, attorney adjudicator, or the Council declines to follow a policy in a particular case, the decision “must explain the reasons why the policy was not followed.” 42 C.F.R §405.1062(b). II. The Medicare Payment System and Appeals Process “The Part B reimbursement system is administered by [Contractors], who ‘typically authorize payment of claims immediately upon receipt of the claims, so long as the claims do not contain glaring irregularities.’” Albert v. Burwell, 118 F. Supp. 3d 505, 508 (E.D.N.Y. 2015) (quoting Gulfcoast Med. Supply, Inc. v. Sec’y, Dep’t of Health & Human Servs., 468 F.3d 1347, 1349 (11th Cir. 2006)). Designated contractors under the Medicare Integrity Program may then conduct post-payment audits to ensure that proper payments have been made. 42 U.S.C. §1395ddd; 42 C.F.R. §421.304. The post-payment audit process typically proceeds as follows: In conducting a post-payment audit,…a probe sample of billings from a physician [is requested], in order to determine whether there is a likelihood of overpayment by Medicare… Following a probe sample,…a statistically valid random sample (“SVRS”) from the physician [is requested]. The SVRS is then extrapolated to the physician’s total billing, in order to provide a reasonable approximation of the total overpayment when the quantity of billing is overly abundant. If, following an audit, [it is] determine[d] that an overpayment has been made,…Medicare payments from the provider [may be offset or recouped]. Art of Healing Med., P.C. v. Burwell, 91 F. Supp. 3d 400, 405 (E.D.N.Y. 2015) (quoting Anghel v. Sebelius, 912 F. Supp. 2d 4, 9 (E.D.N.Y. 2012)). Within 120 days from the date of receipt of an initial determination, a dissatisfied party may file a request for redetermination, regardless of the amount in controversy. 42 U.S.C. §1395ff(a)(3); see 42 C.F.R. §§405.940, 405.942(a). “An individual [employed by the Contractor] who was not involved in making the initial determination must make a redetermination.” 42 C.F.R. §405.948. Following redetermination, a dissatisfied party may then request reconsideration by a QIC within 180 days, regardless of the amount in controversy. 42 U.S.C. §1395ff(b)(1); see 42 C.F.R. §§405.960, 405.962(a). Following reconsideration by a QIC, a dissatisfied party may then request a hearing before an ALJ within 60 days, if the amount remaining in controversy is at least $100. 42 U.S.C. §1395ff(b)(1); see 42 C.F.R. §§405.1000, 405.1002(a), 405.1006(b). “CMS or any of its contractors may refer a case to the Council if, in their view, the decision or dismissal contains an error of law material to the outcome of the claim or presents a broad policy or procedural issue that may affect the public interest.” 42 C.F.R. §405.1110(b)(1). CMS may also request that the Council take its own motion review of a case if “CMS or its contractor participated in the appeal at the [Office of Medicare Hearings and Appeals ("OMHA")] level” and “[i]n CMS’ view, the ALJ’s or attorney adjudicator’s decision or dismissal is not supported by the preponderance of evidence in the record or the ALJ or attorney adjudicator abused his or her discretion.” 42 C.F.R. §405.1110 (b)(1)(i), (ii). In a case where CMS or its contractor participated in an appeal at the OMHA level, the Council will exercise its own motion authority if there is “an error of law material to the outcome of the case, an abuse of discretion by the ALJ…, the decision is not consistent with the preponderance of the evidence of record, or there is a broad policy or procedural issue that may affect the general public interest.” 42 C.F.R. §405.1110(c)(1); see Dec. of Medicare Appeals Council at 21. “In deciding whether to accept review under this standard, the Council will limit its consideration of the ALJ’s…action to those exceptions raised by CMS.” 42 C.F.R. §405.1110(c)(1). The Council may adopt, modify, or reverse the ALJ’s decision. 42 C.F.R. §405.1128(b). A dissatisfied party may then seek review in federal court within 60 days, if the amount in controversy is at least $1,000. 42 C.F.R. §§405.1006(c), 405.1130, 405.1136. III. Facts and Procedural History Plaintiff is a medical practice located at 112-41 Queens Blvd., Suite LLB, Forest Hills, New York 11375. Compl. 1. Isabella Bangy, M.D., a physician duly licensed by the State of New York to practice medicine, is plaintiff’s sole owner. Id. Yakov Zilberman, D.C., a chiropractor duly licensed by the State of New York, was employed by plaintiff at all times relevant to this action. Id. 2. After receiving complaints that plaintiff was improperly billing and documenting services billed to Medicare, SafeGuard Services, LLC (“SGS”), through its Eastern Benefit Integrity Support Center,4 performed a post-payment audit of plaintiff. Compl. 10; see Ltr. dated Aug. 7, 2012, Dkt. 1-4; Ltr. dated Aug 14, 2012, Dkt. 1-5 (correcting an administrative error). Specifically, SGS conducted two reviews, the first of which was of records of 31 patients for claims paid from February 13, 2006, through November 25, 2008, and the second of which was of records of 29 patients for claims paid from August 31, 2007, through November 24, 2008. Compl. 11. The reviews resulted in the downcoding or denial of most of the claims for services, including “physical therapy, nerve conduction, injections, chiropractic services, and Evaluation and Management services.” Ltr. dated Aug. 14, 2012 at 3, 4. SGS assessed a total extrapolated overpayment of $747,574.30. Compl. 16. On August 28, 2012, National Government Services (“NGS”), a Medicare Contractor, sent a notice that plaintiff had been overpaid a total amount of $747,574.30. Compl. 9; see Ltr. dated Aug. 28, 2012, Dkt. 1-3. Plaintiff timely requested a redetermination. Compl. 17. On December 7, 2012, upon a new and independent review of the disputed claims, NGS rendered an unfavorable decision affirming the underlying overpayment determination. Id.; see Redetermination dated Dec. 7, 2012, Dkt. 1-6. Plaintiff timely submitted a request for reconsideration to a QIC. Compl. 19. On July 19, 2013, the QIC issued an unfavorable decision, finding that “the services did not meet the requirements to be considered reasonable and necessary in the treatment of the patients” based on, among other things, inadequate or missing documentation and erroneous coding. QIC Ltr. dated July 19, 2013 at 15, Dkt. 1-7; see Compl. 19. On August 22, 2013, plaintiff timely requested a hearing before an ALJ. Compl. 20. This ALJ request was submitted by plaintiff’s prior attorney, Mathew Levy, Esq. Id. 21. When current counsel took over the case in 2016, they discovered that the request was never docketed, so they asked for an extension to file another request for an ALJ hearing. Id.
