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CAREMARK THERAPEUTIC SERVICES v. THOMPSON

January 27, 2003

CAREMARK THERAPEUTIC SERVICES, PLAINTIFF,
V.
TOMMY THOMPSON, SECRETARY OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES, AND THE CENTERS FOR MEDICARE & MEDICAID SERVICES, DEFENDANT.



The opinion of the court was delivered by: Marrero, District Judge.

DECISION AND ORDER

Plaintiff Caremark Therapeutic Services ("Caremark") brings this action against the Secretary of the Department of Health and Human Services and the Centers for Medicare & Medicaid Services*fn1 in response to an overpayment determination made by an insurance carrier, Noridian Mutual Insurance Company ("Noridian") contracted by the Secretary of Health and Human Services (the "Secretary") to administer Medicare Part B claims. Caremark seeks to compel the Secretary to reopen the matter and conduct an administrative hearing, and it asserts jurisdiction under (1) the Medicare Act (the "Act"), Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq.; (2) the common law writ of mandamus now codified at 28 U.S.C. § 1361; and (3) the Administrative Procedure Act (the "APA"), 5 U.S.C. § 701 et seq. The Secretary disputes the existence of subject matter jurisdiction and moves to dismiss on that basis under Rule 12(b)(!) of the Federal Rules of Civil Procedure. For the reasons discussed below, the Secretary's motion is GRANTED.

I. BACKGROUND

Title VXIII of the Social Security Act, 42 U.S.C. § 1395 et seq., incorporates the administrative and judicial review provisions of Title II of the Social Security Act, 42 U.S.C. § 401 et seq. The process provides the following levels of administrative review following an initial adverse determination by the Secretary through an insurance carrier contracted to administer Medicare Part B claims. First, 42 C.F.R. § 405.807 provides for a six month limitations period, commencing with the initial determination by the carrier, in this case Noridian, during which "a party to an initial determination by a carrier, that is dissatisfied with the initial determination and wants to appeal the matter, may request that the carrier review the determination." See 42 C.F.R. § 405.807(a) and (c). Section 405.807(d) explains that "[a]ny clear expression in writing by a party to an initial determination which indicates, in effect, that he is dissatisfied with such determination by the carrier and wants to appeal the matter further constitutes a request for review."

A hearing before an administrative law judge (an "ALJ") is also available but only if the requesting entity is "[a] party to the carrier hearing" provided for by § 405.821(c). The ALJ's decision can then be appealed to a Departmental Appeals Board. See 42 C.F.R. § 405.801(a). Finally, once a final decision from the Secretary is obtained, a party may seek judicial review in accordance with the provisions of 42 U.S.C. § 405(g) provided that such a civil action is commenced within 60 days of the Secretary's final decision. See 42 U.S.C. § 1395ff(b), 1395ii; 42 U.S.C. § 405(g)

Caremark provides health care services.*fn2 Noridian is a carrier contracted by the Secretary to administer Medicare payments. See 42 U.S.C. § 1395u; 42 C.F.R. § 421.5, 421.100, 421.200. Caremark submitted claims under Medicare Part B for payment of services it rendered, including pharmaceutical services and infusion therapy totaling $185,636.04 to Noridian, which initially paid these claims. Thereafter, Noridian determined that Caremark had been overpaid in that the services at issue were not covered by Medicare Part B. Noridian therefore notified Caremark on March 23, 2000 of its conclusion of overpayment and requested that Caremark repay the money it had mistakenly received.

On October 24, 2000, Caremark wrote to the Noridian Medicare Part B Hearings Department seeking a "detailed explanation" of its requested repayment. Noridian treated this letter as a request for a carrier hearing, which Noridian denied because the letter was sent after the six month limitation period prescribed by 42 C.F.R. § 405.807(c) for such hearings. On February 15, 2001, Caremark wrote Noridian to request a "reopening" of Noridian's decision regarding its overpayment determination. In this letter, Caremark admitted that it had missed the six month deadline and attributed the mistake to a discharged employee. (Complaint dated December 4, 2001, at Ex. 6.) In a letter dated February 21, 2001, Noridian denied Caremark's request to reopen the matter, citing Caremark's noncompliance with the six month limitation period. Caremark then wrote Noridian on September 14, 2001 to request a hearing before an administrative law judge, and in a letter dated September 18, 2001, Noridian reiterated that Caremark's noncompliance with the six month deadline foreclosed any further appeal rights and declined Caremark's request. Caremark commenced the present action on December 10, 2001, seeking an order of mandamus directing the Secretary to reopen the matter of Noridian's overpayment determination and provide an administrative hearing.

II. DISCUSSION

A. STANDARD OF REVIEW

The Secretary moves to dismiss under Rule 12(b)(1) of the Federal Rules of Civil Procedure, asserting lack of subject matter jurisdiction. Caremark, as the plaintiff asserting proper jurisdiction, has the burden of establishing this Court's subject matter jurisdiction by a preponderance of the evidence. See Luckett v. Bure, 290 F.3d 493, 497-98 (2nd Cir. 2002); Makarova v. United States, 201 F.3d 110, 113 (2nd Cir. 2000).

B. JURISDICTION UNDER 42 U.S.C. § 1395ff(b)AND 405(g)

Caremark asserts jurisdiction under the Medicare Act. Sections 1395ff(b)(1)(A) and 405(g) together grant the district court jurisdiction to review a "final decision of the [Secretary] made after a hearing. . ." On this question, the United States Supreme Court has explained that "[t]o obtain a `final decision' from the Secretary, a claimant is required to exhaust his administrative remedies by proceeding through all three stages of the administrative appeal process. Only a claimant who proceeds through all three stages receives a final decision from the Secretary." Bowen v. New York, 476 U.S. 467, 483 (1986). This requirement, according to the Supreme Court, is "central to the requisite grant of subject-matter jurisdiction — the statute empowers the district courts to review a particular type of decision by the Secretary, that type being those which are `final' and `made after a hearing.'" Weinburger v. Stalfi, 422 U.S. 749, 764 (1975). In this case, Caremark's passage through the stages of administrative appeal was derailed from the start by its untimely request for a review of Noridian's overpayment determination, which Caremark itself admits was made after the six month limitations period prescribed by § 405.807(c). Having failed to proceed through any stage in the administrative appeals process, let alone all of them, Caremark failed to exhaust its administrative relief options and failed to obtain a final decision from the Secretary; Noridian's initial overpayment determination, occurring prior to the administrative appeals process, does not constitute a final decision.

Caremark argues that the exhaustion requirement is obviated by the substance of its challenge to Noridian's overpayment determination, which Caremark couches in due process terms. Caremark argues that Noridian's determination did not comply with the Secretary's regulations and, accordingly, deprived Caremark of due process. Caremark argues that because constitutional challenges to administrative proceedings can be brought without exhausting the available avenues of administrative relief, the exhaustion requirement is obviated here and the ...


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