Dominion Ambulance, L.L.C. v. Alex Azar, Secretary ( 2020 )

Case: 17-50855 Document: 00515511381 Page: 1 Date Filed: 07/31/2020
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 17-50855 July 31, 2020
Lyle W. Cayce
Clerk.
DOMINION AMBULANCE, L.L.C.,
Plaintiff–Appellant,
v.
ALEX M. AZAR, II, SECRETARY, U.S. DEPARTMENT OF HEALTH AND
HUMAN SERVICES,
Defendant–Appellee.
Appeal from the United States District Court
for the Western District of Texas
USDC No. 3:16-CV-146
Before OWEN, Chief Judge, and DENNIS and SOUTHWICK, Circuit Judges.
OWEN, Chief Judge:
The Department of Health and Human Services (HHS) concluded that
Dominion Ambulance, L.L.C. (Dominion) must return approximately $1.3
million in Medicare payments. After appealing to the agency, Dominion
brought suit in district court challenging that determination. The district
court granted HHS’s motion for summary judgment. We affirm.
I
Dominion is an ambulance service provider in southwest Texas.
Qualifying ambulance transportation services are covered by Medicare Part B.
Dominion submitted claims to Medicare and was reimbursed. As Secretary of
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HHS, Alex M. Azar, II (the Secretary) is responsible for administration of the
Medicare program. The Secretary delegates this authority to regional
contractors that process and pay reimbursements to providers.
Zone Program Integrity Contractors (ZPICs) audit the regional
contractors’ payment determinations. ZPICs may reopen otherwise final
determinations and identify instances of overpayment. 1 If the ZPIC
determines from a sample of a provider’s claims that there is a “sustained or
high level of payment error,” the ZPIC may extrapolate the error rate to
determine the total overpayment. 2 The ZPIC then notifies the appropriate
regional contractor, who issues a demand letter to the provider. 3 The provider
may then engage in four levels of administrative appeals. 4 First, it may seek
a redetermination from the regional contractor who initially authorized the
reimbursement determination that resulted in an overpayment. 5 Second, it
may then seek reconsideration from a Qualified Independent Contractor
(QIC). 6 Third, it may request a de novo hearing before an Administrative Law
Judge (ALJ). 7 Fourth, it may appeal to the Medicare Appeals Council (MAC).8
The determination at the conclusion of the administrative appeal process is a
“final decision” of the Secretary subject to judicial review under 42 U.S.C.
§ 405(g). 9
1 42 C.F.R. § 405.980.
2 42 U.S.C. § 1395ddd(f)(3); see Gentiva Healthcare Corp. v. Sebelius, 723 F.3d 292,
295-96 (D.C. Cir. 2013) (holding that the Secretary may authorize a contractor to make the
high-error-level determination).
3 Family Rehab., Inc. v. Azar, 886 F.3d 496, 499 (5th Cir. 2018).
4 Id.
5 Id.
6 Id.
7 Id.
8 Id.
9 Maxmed Healthcare Inc. v. Price, 860 F.3d 335, 338 (5th Cir. 2017).
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On May 11, 2010, a ZPIC notified Dominion that it was reviewing a
random sample of forty claims drawn from a group of over twelve thousand for
which Dominion had been reimbursed. The earliest of these claims was dated
September 1, 2007. On April 25, 2012, the ZPIC found that thirty-eight of the
forty claims were improperly paid (a 95% rate of error). It determined that the
sample contained a “high level of payment error” and extrapolated from that
sample to calculate a total overpayment rate and amount.
Dominion availed itself of the administrative appeal process, during
which several of the ZPIC’s findings were reversed. HHS ultimately concluded
that twenty-six of the forty sampled claims were paid in error (a 65% rate of
error). Each of the rejected claims was for nonemergency, scheduled, repetitive
ambulance services that HHS determined was not medically necessary despite
being supported by a physician certification statement of necessity.
Without making a determination that the revised 65% rate of error
constituted a “high level of payment error,” HHS re-extrapolated the sample,
which reduced the overpayment amount to $1,321,933. Dominion then
initiated suit.
Dominion and the Secretary filed cross-motions for summary judgment.
Dominion argued that (1) a physician certification statement was sufficient
under the applicable regulations to demonstrate medical necessity; (2) the
ZPIC improperly reopened seven of the forty claims because the four-year
regulatory limitations period had expired; (3) the use of extrapolation was
inappropriate given that HHS did not make a high-error-level determination
after revising the error rate in the sample; and (4) the use of extrapolation
violated Dominion’s due process rights because (a) the methodology used was
statistically unsound and should not have been applied when the medical
necessity of claims was at issue, and (b) it rendered Dominion unable to
identify and recoup payment from patients for claims that were disallowed.
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The district court granted the Secretary’s motion for summary judgment.
It agreed with the Secretary that a physician certification statement is not
dispositive of medical necessity, and held that the court lacked jurisdiction to
consider Dominion’s arguments that reopening the claims was barred by
limitations and that HHS could not extrapolate in the absence of a finding that
the 65% rate of error was a high level. The district court refused to consider
Dominion’s constitutional claims, reasoning that they should have first been
presented to HHS. Dominion has appealed.
II
This court reviews a grant of summary judgment de novo, “applying the
same standard to review the agency’s decision that the district court used.” 10
We have not resolved whether we review factual issues in a Medicare case for
substantial evidence or under the Administrative Procedure Act’s (APA)
arbitrary and capricious standard, but any distinction between the standards
“probably makes no difference.” 11 We may affirm on any grounds supported by
the record. 12
III
Ambulance transportation is covered under Medicare “where the use of
other methods of transportation is contraindicated by the individual’s
condition, but . . . only to the extent provided in regulations.” 13 Services “not
reasonable and necessary for the diagnosis or treatment of illness or injury” 14
are not covered by Medicare. Dominion contends that under regulations in
10 Id. at 340 (quoting Baylor Cty. Hosp. Dist. v. Price, 850 F.3d 257, 261 (5th Cir.
2017)).
Id. (quoting Baylor Cty. Hosp., 850 F.3d at 261).
11
See, e.g., Doctor’s Hosp. of Jefferson, Inc. v. Se. Med. All., Inc., 123 F.3d 301, 307
12
(5th Cir. 1997).
13 42 U.S.C. § 1395x(s)(7).
14 Id. § 1395y(a)(1)(A).
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effect at the time, which have since been amended, a physician’s determination
that transportation by ambulance is “reasonable and necessary” is not subject
to challenge in a Medicare review process.
Congress directed the Secretary to “promulgate regulations and make
initial determinations with respect to benefits” under Medicare Part B. 15 The
Secretary is responsible for reviewing claims and recovering overpayments. 16
In fulfilling this role, the Secretary is authorized to enter into contracts with
“eligible entities.” 17 Congress did not, however, authorize the Secretary to
delegate his decision-making responsibility to private physicians who may or
may not have an interest in Medicare integrity. 18 The statutory scheme does
not support Dominion’s argument that a private physician can unilaterally
bind the Secretary.
Under the regulations in effect at the time Dominion provided the
services at issue and as modified in 2012, ambulance transportation is covered
by Medicare if “the service meets the medical necessity . . . requirements of” 42
C.F.R. § 410.40(d). 19 Under § 410.40(d), ambulance services are covered only
if “other means of transportation are contraindicated.” 20 Further,
“[n]onemergency transportation by ambulance” is only “appropriate” if the
beneficiary is “bed-confined” as defined in the regulation or “if his or her
medical condition . . . is such that transportation by ambulance is medically
required.” 21
15 Id. § 1395ff(a)(1).
16 See id. § 1395ddd.
17 Id. § 1395ddd(a).
18 See id. § 1395ddd(c) (describing what constitutes an eligible entity).
19 42 C.F.R. § 410.40(a)(1) (2002).
20 Id. § 410.40(d)(1).
21 Id.
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Section 410.40(d)(2) creates a “[s]pecial rule for nonemergency,
scheduled, repetitive ambulance services.” 22 Such “medically necessary”
services are covered only if “the ambulance . . . supplier . . . obtains a written
order from the beneficiary’s attending physician certifying that the medical
necessity requirements of paragraph (d)(1)” are met. 23 In other words, a
physician must provide a physician certification statement for nonemergency,
scheduled, repetitive ambulance services to be covered by Medicare. The
parties dispute that rule’s effect. Dominion argues that the physician
certification statement conclusively establishes that a service was medically
necessary. The Secretary counters that such a statement is required but does
not irrefutably establish medical necessity. The agency amended § 410.40(d)
in 2012 to clarify the effect of a physician certification statement. 24 The
amended regulation states that such a statement “does not alone demonstrate
that the ambulance transport was medically necessary.” 25 Our task is to
determine the meaning of § 410.40(d) at the time Dominion’s claims were
submitted.
When a regulation is unambiguous, courts owe no deference to the
agency’s interpretation of it and simply apply the regulation’s plain meaning.26
But when the regulation is ambiguous, courts generally defer to any agency
interpretation that is not “plainly erroneous or inconsistent with the
regulation.” 27 “It is well established that an agency’s interpretation need not
22 Id. § 410.40(d)(2).
23 Id.
24 42 C.F.R. § 410.40(d)(2)(ii) (2012).
25 Id.
26 Christensen v. Harris Cty., 529 U.S. 576, 588 (2000).
27 Chase Bank USA, N.A. v. McCoy, 562 U.S. 195, 208 (2011) (quoting Auer v. Robbins,
519 U.S. 452, 461 (1997)); La. Dep’t of Health & Hosps. v. CMS, 346 F.3d 571, 576 (5th Cir.
2003) (“[T]he Secretary’s interpretation of Medicare regulations is given ‘controlling weight
unless it is plainly erroneous or inconsistent with the regulation.’” (quoting Harris Cty. Hosp.
Dist. v. Shalala, 64 F.3d 220, 221 (5th Cir. 1995))).
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be the only possible reading of a regulation—or even the best one—to
prevail.” 28 Deference is inappropriate, however, if “there is reason to suspect
that the agency’s interpretation ‘does not reflect the agency’s fair and
considered judgment on the matter in question.’” 29 “This might occur when the
agency’s interpretation conflicts with a prior interpretation or when it appears
that the interpretation is nothing more than a ‘convenient litigating
position’. . . .” 30 However, “novelty alone is not a reason to refuse deference.”31
Section 410.40(d)(2), under the 2002 version and the current version,
provides that a physician’s statement certifying that the medical necessity
criteria were met is necessary for nonemergency, scheduled, repetitive
ambulance transportation. 32 But that provision has never explicitly stated
that a physician certification statement conclusively establishes medical
necessity. This court cannot say that the regulation unambiguously states that
a such a statement establishes medical necessity. And as explained below, the
Secretary’s interpretation is not plainly erroneous. Accordingly, we will apply
the agency’s interpretation. 33
The Secretary argues that a physician certification statement is
necessary but not sufficient to establish that nonemergency, scheduled,
repetitive ambulance transportation is covered by Medicare, as the contrary
interpretation would render the phrase “medically necessary” in § 410.40(d)(2)
superfluous. In the regulation, “medically necessary” modifies “nonemergency,
28 Decker v. Nw. Envtl. Def. Ctr., 568 U.S. 597, 613 (2013).
29 Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 155 (2012) (quoting Auer,
519 U.S. at 462).
30 Id. (internal citation omitted) (quoting Bowen v. Georgetown Univ. Hosp., 488 U.S.
204, 213 (1988)).
31 Talk Am., Inc. v. Mich. Bell Tel. Co., 564 U.S. 50, 64 (2011).
32 42 C.F.R. § 410.40(d)(2).
33 Christensen v. Harris Cty., 529 U.S. 576, 588 (2000) (the court applies the plain
meaning of an unambiguous regulation); Auer, 519 U.S. at 461 (the Secretary’s interpretation
of an ambiguous regulation is controlling unless it is plainly erroneous).
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scheduled, repetitive ambulance services.” 34 That modifier would be
unnecessary if the physician certification statement were dispositive. 35 The
Secretary further submits that deeming a physician certification statement to
be dispositive would allow disinterested, third-party physicians to determine
ambulance services’ coverage status, in violation of the statutory scheme that
requires the Secretary to determine medical necessity.
At least in the criminal fraud context, this court and the Sixth Circuit
have agreed with the Secretary’s interpretation. 36 Other circuits have also
held that a physician certification is not sufficient to establish the medical
necessity of other healthcare services covered by Medicare. 37 The Secretary’s
interpretation is neither plainly erroneous nor inconsistent with the
regulation.
Dominion’s arguments to the contrary are unavailing. It first argues
that the Secretary’s interpretation violates the disparate exclusion/inclusion
canon of construction. “[W]here Congress includes particular language in one
section of a statute but omits it in another section of the same Act, it is
generally presumed that Congress acts intentionally and purposely in the
disparate inclusion or exclusion.” 38 Dominion argues that this canon should
apply equally to agencies writing regulations. In 2002, HHS amended the
34 42 C.F.R. § 410.40(d)(2) (2002).
35 See, e.g., Exelon Wind 1, LLC v. Nelson, 766 F.3d 380, 399 (5th Cir. 2014) (“When
presented with two plausible readings of a regulatory text, this court common-
sensically . . . prefers the reading that does not render portions of that text superfluous.”); see
also United States v. Advantage Med. Transp. Inc., 698 F. App’x 680, 692-93 (3d Cir. 2017)
(Jordan, J., dissenting).
36 See United States v. Read, 710 F.3d 219, 222-23 (5th Cir. 2012) (per curiam); United
States v. Medlock, 792 F.3d 700, 709 (6th Cir. 2015).
37 See Maximum Comfort Inc. v. Sec’y of Health & Human Servs., 512 F.3d 1081, 1083
(9th Cir. 2007) (holding that physician certification is not conclusive as to medical necessity
for durable medical equipment); MacKenzie Med. Supply, Inc. v. Leavitt, 506 F.3d 341, 347-
48 (4th Cir. 2007) (same); Gulfcoast Med. Supply, Inc. v. Sec’y, Dep’t of Health & Human
Servs., 468 F.3d 1347, 1351-52 (11th Cir. 2006) (same).
38 United States v. Wong Kim Bo, 472 F.2d 720, 722 (5th Cir. 1972).
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regulations in § 410.40(d)(3) to provide that, for “nonemergency ambulance
services that are either unscheduled or that are scheduled on a nonrepetitive
basis,” supporting documentation from the healthcare provider “does not alone
demonstrate that the ambulance transport was medically necessary.” 39 The
agency’s failure to add a similar disclaimer to § 410.40(d)(2), according to
Dominion, indicates that it did not intend for one to apply. It also argues that
§ 410.40(d)(2) and (d)(3) are special rules whose provisions should not apply to
one another.
Even if Dominion’s interpretation is reasonable, it fails to show that the
Secretary’s interpretation is plainly erroneous. Dominion’s invocation of the
disparate inclusion/exclusion canon does not render its interpretation
unambiguously correct. 40 Nor would Dominion’s interpretation be the only
reasonable interpretation. The mere fact that another plausible reading—or
even a better reading—of the regulation is possible does not render the
agency’s interpretation unreasonable. 41
Deference is appropriate unless there is reason to suspect that the
interpretation proffered by the agency does not represent its considered
judgment on the issue. 42 Such may be the case when the agency’s
interpretation conflicts with a prior interpretation, 43 but there is no indication
that HHS has ever interpreted the regulation differently. Since at least 1993,
HHS’s internal position has been that “no presumptive weight should be
assigned to the treating physician’s medical opinion in determining the
39 42 C.F.R. § 410.40(d)(3)(v) (2002).
40 See U.S. Dep’t of Justice v. FLRA, 727 F.2d 481, 491 (5th Cir. 1984).
41 Decker v. Nw. Envtl. Def. Ctr., 568 U.S. 597, 613 (2013).
42 Auer v. Robbins, 519 U.S. 452, 462 (1997).
43 See Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 155 (2012).
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medical necessity” of services covered under Medicare Part A. 44 The
ambulance services at issue here are covered by Medicare Part B, 45 but the
agency has invoked the Part A rule to broadly assert that “the Secretary is the
final arbiter of whether a service is reasonable and necessary and qualifies for
Medicare coverage.” 46
In promulgating § 410.40(d)(2), the agency stated that it believed “[t]he
physician certification requirement will help to ensure that the claims
submitted for ambulance services are reasonable and necessary.” 47 And in the
context of a bed-confined beneficiary, the agency said that the physician
certification statement requirement does not “relieve the [ambulance] supplier
of his or her responsibility to submit adequate information supporting the
reason for a bed-confinement determination.” 48 These statements suggest that
HHS did not consider a physician certification statement conclusive.
HHS’s clearest statement came in 2012 when it amended the regulation
to state that “[t]he presence of the signed physician certification statement
does not alone demonstrate that the ambulance transport was medically
necessary.” 49 The agency asserted that its amendment only “clarif[ied]” the
prior regulation’s proper interpretation. 50 Even if HHS did not announce this
interpretation prior to 2012, it is clear that HHS has never explicitly
44 HCFA Ruling No. 93-1, at 13 (Dep’t of Health and Human Servs. May 18, 1993),
https://www.cms.gov/Medicare/Appeals-and-Grievances/OrgMedFFSAppeals/Downloads/
HCFAR931v508.pdf.
45 See 42 U.S.C. § 1395k.
46 Final Rule, Medicare Program; Revisions to Payment Policies Under the Physician
Fee Schedule, DME Face-to-Face Encounters, Elimination of the Requirement for
Termination of Non-Random Prepayment Complex Medical Review and Other Revisions to
Part B for CY 2013, 77 Fed. Reg. 68,892, 69,161 (Nov. 16, 2012).
47 Final Rule, Medicare Program; Coverage of Ambulance Services and Vehicle and
Staff Requirements, 64 Fed. Reg. 3,637, 3,641 (Jan. 25, 1999) (emphasis added).
48 Id. at 3,640.
49 42 C.F.R. § 410.40(d)(2)(ii) (2012).
50 77 Fed. Reg. at 69,161.
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considered a physician certification statement conclusive. There is no conflict
between the interpretation the Secretary advances now and any prior
interpretation of § 410.40(d)(2).
Nor has Dominion shown that the Secretary is advancing this
interpretation merely as a “convenient litigating position.” 51 The agency
announced its interpretation at least six years ago and codified it into a
regulation. 52 The Secretary has not advanced a new interpretation as a means
of winning this case. Accordingly, the district court properly deferred to the
agency’s reasonable interpretation.
B
Dominion contests the timeliness of the agency’s decision to reopen
Dominion’s claims. Under 42 C.F.R. § 405.980(b), “[a] contractor may reopen
an initial determination or redetermination on its own motion . . . [w]ithin 1
year from the date of the initial determination or redetermination for any
reason,” “[w]ithin 4 years . . . for good cause,” or “[a]t any time if there exists
reliable evidence . . . that the initial determination was procured by fraud or
similar fault.” 53 The “decision on whether to reopen is binding and not subject
to appeal.” 54
Because the “decision on whether to reopen is binding and not subject to
appeal,” the district court held that the regulation “flatly bars review of the
decision to reopen the initial determination on appeal.” The court also held
that even if it had jurisdiction, “the regulations provide for reopening of an
initial determination at any time when evidence of fraud or ‘similar fault’
51 Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 155 (2012) (quoting Bowen
v. Georgetown Univ. Hosp., 488 U.S. 204, 213 (1988)) (noting that interpretation advanced
for litigation convenience may not represent agency’s considered judgment on the matter).
52 77 Fed. Reg. at 69,161.
53 42 C.F.R. § 405.980(b).
54 Id. § 405.980(a)(5).
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exists.” We assume, without deciding, that the district court had jurisdiction
to review the timeliness of the decision to reopen the initial determination, and
we conclude that the decision to reopen was timely.
In the district court, Dominion argued that HHS erred in retroactively
applying the 2010 version of 42 C.F.R. § 405.980(b) to the ZPIC’s decision to
reopen and revise its determinations. It argued that the ALJ and MAC should
have applied the 2005 regulation. The 2005 regulation required the agency to
“reopen and revise” determinations within four years. 55 The 2010 regulation
imposes a four-year time limit on “reopen[ing]” only. 56
On appeal, Dominion changed its approach. It now argues that
regardless of whether the 2005 or 2010 regulation applied to the reopening
decision, the reopening was untimely as to seven claims because they were not
“reopened” until April 25, 2012. As a result, it has abandoned any argument
that the revision of those seven claims was untimely. 57 Because the parties
agree that both the 2005 and 2010 versions of the regulation impose the same
time limits for the reopening of determinations, we need not decide which
version of the regulation applies.
As discussed above, an agency’s interpretation of its own regulation is
generally entitled to deference unless it is “plainly erroneous or inconsistent
with the regulation.” 58 Under 42 C.F.R. § 405.980(b), the Secretary may not
reopen a final benefits determination after four years has passed, absent some
indicia of fraud. 59 The regulatory definition of “reopening” is “a remedial action
taken to change a binding determination or decision that resulted in either an
55 42 C.F.R. § 405.980(b) (2005).
56 42 C.F.R. § 405.980(b) (2010).
57 See, e.g., In re Southmark Corp., 163 F.3d 925, 934 n.12 (5th Cir. 1999).
58 Auer v. Robbins, 519 U.S. 452, 461 (1997).
59 42 C.F.R. § 405.980(b) (2010).
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overpayment or underpayment.” 60 Dominion argues that the regulation is
unambiguous and that “reopening” does not occur until the ZPIC issues a
revised determination. The Secretary argues that the reopening must occur
before the revision and that a claim is reopened when the ZPIC’s review begins.
The Secretary proffers a reasonable interpretation, and thus the regulation
cannot unambiguously support Dominion’s interpretation. 61 Even if
Dominion’s interpretation is also reasonable and the regulation is ambiguous,
the Secretary’s interpretation is entitled to deference. 62
Under the Secretary’s interpretation of the regulation, all reopenings
were timely. The ZPIC reviewed claims dating from as early as September 1,
2007, and began its review of Dominion’s claims on May 11, 2010. That is
within the four-year window. Dominion does not argue that the agency lacked
“good cause” to reopen these claims. 63 Accordingly, the agency did not
improperly reopen Dominion’s claims.
C
As an alternate holding, the district court noted that the fraud exception
justified any untimeliness in reopening the determinations. Because the
reopenings were timely, we need not consider whether the record contains
indications of fraud.
60 Id. § 405.980(a)(1); 42 C.F.R. § 405.980(a)(1) (2005) (defining a reopening as “a
remedial action taken to change a final determination or decision that resulted in either an
overpayment or underpayment”) (emphasis added).
61 United States v. Kaluza, 780 F.3d 647, 658 (5th Cir. 2015) (statutory language is
ambiguous if it is “susceptible to more than one reasonable interpretation” (quoting Carrieri
v. Jobs.com Inc., 393 F.3d 508, 518-19 (5th Cir. 2004))).
62 See Auer, 519 U.S. at 461.
63 See 42 C.F.R. § 405.980(b)(2) (providing that claims may only be reopened after one
year for good cause).
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D
By statute, the Secretary must determine that “there is a sustained or
high level of payment error” before using “extrapolation to determine
overpayment amounts.” 64 “There shall be no . . . judicial review” of such a
determination. 65 The ZPIC initially identified thirty-eight improperly paid
claims in the forty-claim sample and determined that there was a high level of
payment error. 66 Because the ZPIC’s decision on twelve of these claims was
reversed during the administrative appeal process, Dominion argues that the
Secretary was required to make a second high-error-level determination in
order to continue using extrapolation. The district court held that it did not
have jurisdiction to consider whether the Secretary should have made a second
finding of a high rate of error.
Dominion argues that the district court erred because it had jurisdiction
and “should have disallowed the extrapolation because the Agency failed to
make a determination that the final error rate was high enough to justify
extrapolation.” The Secretary argues that a high-error-rate determination is
“insulated . . . from administrative as well as judicial review,” and even if the
agency made a subsequent determination, extrapolation would still be
appropriate. According to the Secretary, twenty-six out of forty claims—a 65%
error rate—is still a high error rate that justifies extrapolation. 67
Because the Secretary would find that a 65% error rate constitutes a
“high level of payment error,” we need not decide if a second determination is
required. The record makes clear that the QIC, ALJ, and MAC approved the
continued use of extrapolation, even after several of the claims were reversed.
64 42 U.S.C. § 1395ddd(f)(3).
65 Id.
66 See Gentiva Healthcare Corp. v. Sebelius, 723 F.3d 292, 296 (D.C. Cir. 2013) (holding
that the Secretary may authorize a contractor to make the high-error-level determination).
67 Id.
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The Secretary’s position is that “[w]hether the error rate is 65% or
95%, . . . extrapolation remains valid.” Dominion does not challenge that
point. At oral argument, Dominion did not contest that the Secretary would
find a 65% error rate high. Instead, it argued, without any relevant authority,
that the court should simply reverse the decision without giving the Secretary
the opportunity to make that finding.
It is clear from the record and briefing that if the court remanded the
case for the Secretary to make a second determination—the act which
Dominion argues the Secretary was required to do—the result would not
change. Dominion has provided no authority or support that extrapolation is
inappropriate when a 65% error rate exists, and the Secretary makes clear that
his position is that such a rate is high. Assuming Dominion is correct that the
Secretary had to make a second determination, we will not vacate and remand
because Dominion fails to show that a 65% error rate is not high and that
extrapolation is inappropriate in this case.
E
Dominion raises two Fifth Amendment challenges to the overpayment
determination. The district court did not consider Dominion’s constitutional
claims. The court ruled that Dominion waived its arguments by failing to raise
them during the administrative appeal proceedings. In its opening brief,
Dominion argues that it was not required to exhaust its constitutional claims
in the administrative appeal process and asked the court to remand the case
to the district court. In response, the Secretary argues that Dominion failed to
exhaust its claims and that the claims fail on the merits regardless. We
assume, without deciding, that Dominion did not waive its constitutional
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arguments by failing to raise them during the administrative appeal. Both
claims fail on the merits. 68
The Fifth Amendment provides that “[n]o person shall . . . be deprived
of . . . property, without due process of law.” 69 In evaluating property-based
procedural due process claims like Dominion’s, we first determine whether the
plaintiff “has been deprived of a protected interest in property.” 70 If so, we
balance (1) “the private interest that will be affected;” (2) “the risk of an
erroneous deprivation of such interest through the procedures used, and the
probable value, if any, of additional or substitute procedural safeguards;” and
(3) “the Government’s interest, including the function involved and the fiscal
and administrative burdens that the additional or substitute procedural
requirement would entail.” 71
1
The nature of Dominion’s first claim is unclear. In its complaint,
Dominion alleged that despite “properly raised concerns over the use of
stratification,” the ALJ ruled that “the sampling methodology was sufficient.”
Dominion then alleged that the “calculation does not have a constitutionally
valid level of certainty.” In its summary judgment briefing to the district court,
Dominion argued that “there are medical judgments that must be made on an
individual patient basis, and therefore the extrapolation should be dismissed”
and indicated that it was challenging “the appropriateness of statistical
sampling in medical necessity cases.”
68 See Doctor’s Hosp. of Jefferson, Inc. v. Se. Med. All., Inc., 123 F.3d 301, 307 (5th Cir.
1997) (“A district court’s grant of summary judgment may be affirmed on grounds supported
by the record other than those relied on by the court.”).
69 U.S. CONST. amend. V.
70 Edionwe v. Bailey, 860 F.3d 287, 292 (5th Cir. 2017).
71 Bowlby v. City of Aberdeen, 681 F.3d 215, 221 (5th Cir. 2012) (quoting Meza v.
Livingston, 607 F.3d 392, 402 (5th Cir. 2010)).
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To the extent that Dominion raises a constitutional objection to the
ZPIC’s sampling and extrapolation methodology in this case, it has provided
neither facts nor argument, even in the district court, as to why this method is
constitutionally infirm. This bare allegation of a due process violation does not
provide this court with any basis to grant relief. 72
To the extent that Dominion raises a broader claim that extrapolation is
inappropriate where medical necessity is at issue, that claim also fails. As
numerous courts have held, extrapolating from a randomly selected sample of
paid claims presents a “fairly low risk of error” in calculating the ultimate
overpayment amount. 73 Other courts have concluded that “statistical
sampling is the only feasible method available” for HHS to effectively audit
waste and fraud in the Medicare and Medicaid programs. 74 Dominion’s
proposed alternative—that HHS individually audit over twelve thousand
claims—would likely make it impossible for HHS to audit the program in a
meaningful way, especially when applied to all Medicare providers nationwide.
Dominion cited several class action cases to the district court in support
of its position. These cases all emphasize that “a defendant in a class action
has a due process right to raise individual challenges and defenses to claims.” 75
But those decisions are inapposite here; Dominion was afforded four layers of
administrative review to raise specific defenses regarding the medical
72 See N.W. Enters., Inc. v. City of Hous., 352 F.3d 162, 183 n.24 (5th Cir. 2003) (holding
that failure to adequately brief an issue constitutes its waiver); cf. Ashcroft v. Iqbal, 556 U.S.
662, 678 (2007) (holding that a “‘naked assertion[]’ devoid of ‘further factual enhancement’”
does not adequately state a claim on which relief can be granted (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 557 (2007))).
73 Chaves Cty. Home Health Serv., Inc. v. Sullivan, 931 F.2d 914, 922 (D.C. Cir. 1991);
Yorktown Med. Lab., Inc. v. Perales, 948 F.2d 84, 90 (2d Cir. 1991).
74 Ill. Physicians Union v. Miller, 675 F.2d 151, 157 (7th Cir. 1982); see Ratanasen v.
State of Cal., Dep’t of Health Servs., 11 F.3d 1467, 1471 (9th Cir. 1993); Chaves, 931 F.2d at
922; Yorktown, 948 F.2d at 90.
75 Carrera v. Bayer Corp., 727 F.3d 300, 307 (3d Cir. 2013).
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necessity of the claims included in the sample. Dominion provides no
argument in support of its attempt to import class action certification doctrine
into an administrative adjudication. Dominion’s first constitutional claim fails
on the merits.
2
Dominion argues that the use of extrapolation, as opposed to a case-by-
case determination, deprived it of the right to identify and collect payment
from patients whose claims were disallowed, in violation of the Fifth
Amendment. The use of extrapolation deprives Dominion of a protected
property interest in collecting from the unnamed beneficiaries whose claims
were disallowed. The Supreme Court has held that the Fifth Amendment Due
Process Clause protects even disputed interests in property. 76 Dominion
presumably has a remedy under state law to collect payment from these
beneficiaries. 77 Indeed, the Secretary argues that Dominion has not been
deprived of a property right because “it remains free to seek reimbursement
from patients.” Its interest in those payments is therefore a protected property
interest under the Due Process Clause. 78
The Secretary argues that the agency has not interfered with Dominion’s
ability to collect payment from the Medicare beneficiaries who used its
ambulance services. In response, Dominion argues it cannot pursue payment
from those beneficiaries because the agency has failed, with the exception of
those in the sample, to identify whose claims were disallowed. Dominion then
76 Fuentes v. Shevin, 407 U.S. 67, 86-87 (1972) (holding that disputed possessory
interest in personal property is a protected property interest).
77 See Purselley v. Lockheed Martin Corp., 322 F. App’x 399, 403 (5th Cir. 2009) (per
curiam) (unpublished) (describing the intersection of contract law, unjust enrichment, and
quantum meruit under Texas law).
78 See Bryan v. City of Madison, 213 F.3d 267, 274-75 (5th Cir. 2000) (showing of
“constitutionally protected property right” “must be made by reference to state law”).
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argues it lacks any meaningful way to exercise its right to collect and has been
deprived of a protected interest in repayment from the beneficiaries who were
not included in the sample. We need not decide whether Dominion is prevented
from recouping any meaningful portion of the disallowed payments from the
individuals themselves. Certainly, though, pursuing such collections would be
fraught with problems.
Nonetheless, weighing the private and public interest factors,
extrapolation withstands scrutiny under the Due Process Clause. On the one
hand, Dominion’s interest affected here is substantial. It argues that it has no
way to collect approximately $1.3 million in service charges from its patients.
Second, although the risk of deprivation is considerable, Dominion has not
articulated feasible alternative procedures, barring case-by-case review, that
the Secretary could implement to avoid the deprivation. However, Dominion
is in a position to determine, in many if not most cases, whether the patient it
is transporting meets the Medicare criteria. Finally, the government’s interest
in functional audits to protect Medicare funds is compelling. The ultimate
question here is whether the cost of erroneously paid-out Medicare funds
should be borne by Medicare service providers or the taxpayers. Because
Dominion was never entitled to such funds in the first place 79 and “statistical
sampling is the only feasible method available” for HHS to effectively audit
waste and fraud, 80 the due process balance weighs heavily in favor of
protecting the public even if Dominion may bear the costs.
* * *
For these reasons, we AFFIRM the judgment of the district court.
79 Cf. Chaves, 931 F.2d at 922-23 (“HHS emphasizes that providers have no legitimate
expectation of retaining payments for services they knew or should have known were not
covered . . . .”).
80 Ill. Physicians Union v. Miller, 675 F.2d 151, 157 (7th Cir. 1982).
19