General Medicine, P.C. v. Alex Azar

RECOMMENDED FOR PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 20a0189p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
GENERAL MEDICINE, P.C., ┐
Plaintiff-Appellant, │
│
> No. 19-1365
v. │
│
│
ALEX M. AZAR, II, Secretary of the U.S. Department │
of Health and Human Services, │
Defendant-Appellee. │
┘
Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
No. 2:17-cv-12777—Mark A. Goldsmith, District Judge.
Argued: December 13, 2019
Decided and Filed: June 24, 2020
Before: COLE, Chief Judge; SILER and MURPHY, Circuit Judges.
_________________
COUNSEL
ARGUED: Barry M. Rosenbaum, SEYBURN KAHN, P.C., Southfield, Michigan, for
Appellant. John B. Meixner, Jr., UNITED STATES ATTORNEY’S OFFICE, Detroit,
Michigan, for Appellee. ON BRIEF: Barry M. Rosenbaum, SEYBURN KAHN, P.C.,
Southfield, Michigan, for Appellant. Sarah Karpinen, UNITED STATES ATTORNEY’S
OFFICE, Detroit, Michigan, for Appellee. Joanne Geha Swanson, KERR, RUSSELL &
WEBER, PLC, Detroit, Michigan, for Amici Curiae.
SILER, J., delivered the opinion of the court in which MURPHY, J., joined, and COLE,
C.J., joined in part. MURPHY, J. (pp. 13–14), delivered a separate concurring opinion. COLE,
C.J. (pp. 15–16), delivered a separate opinion concurring in part and dissenting in part.
No. 19-1365 General Medicine, P.C. v. Azar, et al. Page 2
_________________
OPINION
_________________
SILER, Circuit Judge. General Medicine appeals a post-payment audit that began over
fifteen years ago. The audit revealed many of General Medicine’s Medicare claims should not
have been paid or should not have been paid at the level billed. The auditor requested records
from the long-term care facilities where General Medicine provided services but did not request
any records from General Medicine. General Medicine did not find out about the audit until it
was finished and the overpayment was assessed. General Medicine argues that this assessment
should be void or reduced because the auditor failed to give notice of the audit.
Under 42 U.S.C. § 1395ddd(f)(7)(A), Centers for Medicare and Medicaid Services
contractors (“CMS contractors”) are required to give providers, like General Medicine, notice
prior to conducting a post-payment audit. The statute does not provide a remedy if CMS
contractors violate this requirement.
The Medicare Appeals Council determined that no remedy should be granted because the
lack of notice was inconsequential. The Council explained that failure to provide notice did not
prevent General Medicine from ably and thoroughly arguing the principal issues resulting from
the audit, the validity of the sampling methodology, and the coverage of the reviewed claims
over the course of several years. The Council also noted that the addition of more medical
records would not have materially impacted its findings. The district court upheld the Council’s
conclusion. We find that substantial evidence supports the Council’s determination that General
Medicine was not prejudiced by the lack of notice. Therefore, we AFFIRM.
I. FACTUAL BACKGROUND
General Medicine is a medical services provider whose physicians and nurse practitioners
perform services for patients in long-term care facilities. General Medicine bills Medicare for
most services. Medicare is a federally subsidized health insurance for the elderly and those with
disabilities. 42 U.S.C. § 1395 et seq. The Secretary of the U.S. Department of Health and
Human Services (“Secretary”) acts through the Centers for Medicare and Medicaid Services
No. 19-1365 General Medicine, P.C. v. Azar, et al. Page 3
(“CMS”) to administer Medicare. Id. § 1395hh(a)(1). CMS contracts with private entities,
known as Medicare Administrative Contractors (“CMS contractors”), to help administer the
program, including investigating fraud and abuse. Id. §§ 1395kk-1, 1395ddd.
CMS contractors may conduct a post-payment audit of providers to ensure that the
Medicare services that providers are billing are medically necessary and meet the requirements
of the Medicare program. See id. § 1395ddd(b). In a post-payment audit CMS contractors
review a random sample of a provider’s Medicare claims. See id. § 1395ddd(f)(4). CMS
contractors will review the records and then calculate an error rate based on the review. If there
is a sustained or high level of payment error, the CMS contractor will extrapolate that error rate
over the provider’s total Medicare claims to determine a total amount of overpayment. See id.
§ 1395ddd(f)(3).
If a provider objects to the CMS contractor’s overpayment determination, there are four
levels of administrative review that the provider can pursue: (1) redetermination by the Medicare
Administrative Contractor; (2) reconsideration by a Qualified Independent Contractor; (3) a
hearing before an Administrative Law Judge; and (4) review of the Administrative Law Judge’s
decision by the Medicare Appeals Council. See id. § 1395ff; 42 C.F.R. §§ 405.900–405.1140.
After exhausting all four levels of administrative review, the provider can seek judicial review in
a federal district court. 42 U.S.C. § 1395ff(b)(1)(A).
Beginning in 2002, a CMS contractor, AdvanceMed, initiated a series of audits after the
CMS fraud unit received complaints about General Medicine’s billing practices. In July 2004
AdvanceMed initiated an audit of all General Medicine physicians without providing any notice
to General Medicine. To conduct the audit AdvanceMed sent records requests to twelve
facilities where General Medicine’s physicians provided services. Specifically, AdvanceMed
requested the medical records for 382 claims involving 278 General Medicine patients that
received Medicare services between January 1, 2002, and March 24, 2004. Between 2002 and
2004 General Medicine’s clinicians kept their medical records in the patient charts at the
facilities where they worked but did not maintain offices in the facilities. General Medicine was
not notified of these requests, and AdvanceMed did not request any records from General
Medicine.
No. 19-1365 General Medicine, P.C. v. Azar, et al. Page 4
Based on these records AdvanceMed determined that only 35 of the 382 claims were
allowed as billed and 33 of the claims were allowed at different levels than billed. The
remaining 314 claims were denied: 3 because they did not meet policy guidelines; 73 because
there was no documentation to support the services; and 238 were considered medically
unnecessary.
General Medicine first learned of this audit when it received a letter with the results in
January 2007. The letter indicated that AdvanceMed determined that General Medicine had
been overpaid with regard to 337 claims in the amount of $16,778.80. Under 42 U.S.C.
§ 1395ddd(f)(3), the overpayment was extrapolated to a universe of 41,818 claims and the total
amount of overpayment assessed and demanded was $1,836,646.56.
II. PROCEDURAL HISTORY
General Medicine filed for a redetermination of the overpayment assessment and engaged
in the administrative review process for several years. At each level of the process General
Medicine contested individual overpayments and was able to obtain significant reductions in the
overpayment assessment. At one point the total extrapolated overpayment was reduced to
$1,073,183.00. The Medicare Appeals Council further reduced the amount of overpaid claims
and ordered CMS to recalculate the overpayment to conform with its decision.
In addition to challenging individual overpayments, General Medicine sought to
invalidate the entire overpayment assessment due to lack of notice. In the alternative, General
Medicine sought to reduce the assessment to the actual amount of overpayments as opposed to
the extrapolated amount. The Medicare Appeals Council rejected General Medicine’s notice
argument as inconsequential because: (1) the statute does not provide a consequence for the
failure to provide notice; and (2) failure to provide notice did not prevent General Medicine from
“over these many years, ably and thoroughly argu[ing] the principal issues resulting from the
audit, the validity of the sampling methodology, and the coverage of the reviewed claims.”
After completing the four-level administrative review process General Medicine sought
judicial review in federal court. The district court denied General Medicine’s motion for
No. 19-1365 General Medicine, P.C. v. Azar, et al. Page 5
summary judgment and entered judgment in favor of the government, concluding that General
Medicine did not demonstrate it suffered any prejudice as a result of the lack of notice.
III. STANDARD OF REVIEW
Our review “is limited to determining whether the district court erred in finding that the
[administrative] ruling was supported by substantial evidence” and whether proper legal
standards were employed. Heston v. Comm’r of Soc. Sec., 245 F.3d 528, 534 (6th Cir. 2001); see
also Cutlip v. Sec’y of Health & Human Servs., 25 F.3d 284, 286 (6th Cir. 1994); 42 C.F.R.
§ 405.1136(f).
“Substantial evidence is more than a scintilla of evidence but less than a preponderance;
it is such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion.” Cutlip, 25 F.3d at 286. If there is substantial evidence to support the decision,
“it must be affirmed even if the reviewing court would decide the matter differently . . . and even
if substantial evidence also supports the opposite conclusion.” Id. (internal citation omitted).
Whether the Medicare Appeals Council made an error of law in applying a statute, however, is
reviewed de novo. See Perkins v. Chater, 107 F.3d 1290, 1294 (7th Cir. 1997).
IV. DISCUSSION
A. Whether an overpayment assessment should be invalidated when the
government fails to provide notice of a post-payment audit under
42 U.S.C. § 1395ddd(f)(7)(A)
It is an issue of first impression whether an overpayment assessment should be
invalidated when the government fails to provide notice of a post-payment audit under 42 U.S.C.
§ 1395ddd(f)(7)(A). Our analysis must “start, as always, with the language of the statute.”
Williams v. Taylor, 529 U.S. 420, 431 (2000).
In 2003 Congress passed the Medicare Prescription Drug, Improvement, and
Modernization Act (“Medicare Act”). Pub. L. 108-173, 117 Stat. 2066. This Act allows CMS to
recover overpayments to providers and permits the use of extrapolation in cases of sustained or
high level of payment error. See 42 U.S.C. § 1395ddd(b),(f)(3). The Act permits the use of post-
payment audits as a tool to recover overpayments, but it requires CMS contractors to give a
No. 19-1365 General Medicine, P.C. v. Azar, et al. Page 6
provider written notice “of the intent to conduct [a post-payment] audit.” Id.
§ 1395ddd(f)(7)(A). The statute states in relevant part:
(A) Written notice for post-payment audits. Subject to subparagraph (C), if a medicare
contractor decides to conduct a post-payment audit of a provider of services or
supplier under this subchapter, the contractor shall provide the provider of
services or supplier with written notice (which may be in electronic form) of the
intent to conduct such an audit.
Id. The statute provides one exception to the notice requirement: Notice is not required if it
would “compromise pending law enforcement activities . . . or reveal findings of law
enforcement-related audits.” Id. § 1395ddd(f)(7)(C).
Relatedly, subparagraph (B) requires CMS contractors to give a provider the opportunity
to submit additional information on a timely basis and to take that information into account. Id.
§ 1395ddd(f)(7)(B). This provision states in relevant part:
(B) Explanation of findings for all audits. Subject to subparagraph (C), if a
medicare contractor audits a provider of services or supplier under this
subchapter, the contractor shall—
…
(iii) give the provider of services or supplier an opportunity to provide
additional information to the contractor; and
(iv) take into account information provided, on a timely basis, by the
provider of services or supplier under clause (iii).
Id. The statute, however, does not state what, if any, consequence should be imposed if a CMS
contractor fails to give the provider notice of the audit.
“It is well established that ‘when the statute’s language is plain, the sole function of the
courts—at least where the disposition required by the text is not absurd—is to enforce it
according to its terms.’” Lamie v. United States Tr., 540 U.S. 526, 534 (2004) (quoting Hartford
Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 6 (2000)). “A statute should be
construed so that effect is given to all its provisions, so that no part will be inoperative or
superfluous, void or insignificant . . . .” Hibbs v. Winn, 542 U.S. 88, 101 (2004) (quoting 2A N.
Singer, Statutes and Statutory Construction § 46.06, pp 181–86 (rev. 6th ed. 2000)); see also
United States v. Bedford, 914 F.3d 422, 427 (6th Cir. 2019). The presumption against surplusage
No. 19-1365 General Medicine, P.C. v. Azar, et al. Page 7
“is strongest when an interpretation would render superfluous another part of the same statutory
scheme.” Marx v. Gen. Revenue Corp., 568 U.S. 371, 386 (2013) (“[W]e are hesitant to adopt an
interpretation of a congressional enactment which renders superfluous another portion of that
same law.” (quoting United States v. Jicarilla Apache Nation, 564 U.S. 162, 185 (2011))).
Although courts should not read statutory language as surplusage, courts also should not add
language that Congress has not included. However, “[a]n inference drawn from congressional
silence certainly cannot be credited when it is contrary to all other textual and contextual
evidence of congressional intent.” Burns v. United States, 501 U.S. 129, 136 (1991).
Here, the statute is silent as to what, if any, consequence should result from violating the
statute’s notice requirement. An inference could be drawn from the statute’s silence that
Congress did not intend any consequence. However, the language of the statute, which states
“the contactor shall provide the provider of services or supplier with written notice,” suggests
otherwise. 42 U.S.C. § 1395ddd(f)(7)(A) (emphasis added). The use of the term “shall”
indicates that Congress intended nondiscretionary compliance with the notice requirement. See
Cook v. United States, 104 F.3d 886, 889 (6th Cir. 1997) (“The word ‘shall’ is ‘the language of
command’ which usually, although not always, signifies that Congress intended strict and
nondiscretionary application of the statute.”).
If there is no consequence for failing to provide notice of an “intent to conduct” an audit,
not only would the notice section of the statute, subparagraph A, be read as “inoperative or
superfluous,” but other parts of the statute would be as well. For example, subparagraph B
requires a CMS contractor to give the provider an opportunity to submit additional information
to the contractor. See 42 U.S.C. § 1395ddd(f)(7)(B)(iii). A provider can only have the
opportunity to submit additional information if it has notice of the audit. Therefore, if there is no
consequence for failing to give a provider notice, subparagraph B can be read as “inoperative or
superfluous” as well. Thus, despite the statute’s silence as to the consequence for failure to
provide notice, it would be contrary to “textual and contextual evidence of congressional intent”
to find that Congress’s silence means that a court cannot issue a remedy when a CMS contractor
violates the statute’s notice requirement. Burns, 501 U.S. at 136. This reading is further
supported by the purpose of the statute.
No. 19-1365 General Medicine, P.C. v. Azar, et al. Page 8
There is no legislative history available to help explain why Congress enacted the
mandatory notice requirement. However, CMS’s Medicare Program Integrity Manual (“CMS
Manual”) suggests that the intention was to give providers an opportunity to gather and review
their medical records, wherever they may be located, and present their best case to the auditors
before an audit is completed. CMS’s Manual “is the Secretary’s interpretation of Congress’s
statutory language.” Southern Rehab. Grp., P.L.L.C. v. Sec’y of HHS, 732 F.3d 670, 685 (6th
Cir. 2013). In 2004, the year the audit was initiated in this case, CMS’s Manual outlined its
policy for both the content and timing of the notice. Under Section 3.10.6.1.1 CMS contractors:
shall include at least the following in the notification of review:
• an explanation of why the review is being conducted (i.e., why the
provider or supplier was selected),
• the time period under review,
• a list of claims that require medical records or other supporting
documentation,
• a statement of where the review will take place (provider/supplier office or
contractor/PSC site),
• information on appeal rights,
• an explanation of how results will be projected to the universe if claims
are denied upon review and an overpayment is determined to exist, and
• an explanation of the possible methods of monetary recovery if an
overpayment is determined to exist.
CMS, Medicare Program Integrity Manual (Internet-Only Manual, Pub. 100-08), ch. 3,
§ 3.10.6.1.1 (Rev. 71, 04-09-04), available at https://www.cms.gov/Regulations-and-
Guidance/Guidance/Transmittals/downloads/R71PI1.pdf.
As to the timing of the notice, in 2004 CMS’s Manual stated “[w]hen advance
notification is given, providers and suppliers have 30 calendar days to submit . . . or make
available . . . the requested documentation” and “[w]hen advance notification is not given” CMS
contractors must “give the provider or supplier the written notification of review when [they]
arrive at their site.” Id. The Manual also required CMS contractors to get approval from the
Government Task Leader when not giving advance notice to a provider. Id. at § 3.10.6.1.
No. 19-1365 General Medicine, P.C. v. Azar, et al. Page 9
In 2004 the CMS Manual likewise prohibited contractors from soliciting additional
documentation requests from a third party unless the contractor first or simultaneously solicits
the same information from the billing provider. Id. at § 3.4.1.2. It is undisputed that the CMS
contractor in this case, AdvanceMed, violated all of these provisions.
Like the statute, the CMS Manual does not list any sanction for these violations.
Although there is no legislative history available, General Medicine is correct that there does not
need to be a statement in the Congressional committee reports to understand that a purpose of the
notice requirement was to give the provider an opportunity to gather and review its records in
order to present its best case to the auditor before the audit begins. The mandatory language of
the notice requirement, coupled with CMS’s Manual, indicates that Congress intended for there
to be a consequence if the government fails to give a provider notice and the lack of notice
substantially prejudices the provider. Cf. United States v. Montalvo-Murillo, 495 U.S. 711, 722
(1990) (“[N]onconstitutional error will be harmless unless the court concludes from the record as
a whole that the error may have had a ‘substantial influence’ on the outcome of the proceeding.
In this case, it is clear that the noncompliance with the timing requirement had no substantial
influence on the outcome of the proceeding.”); French v. Edwards, 80 U.S. 506, 511 (1871)
(“[W]hen the requisitions prescribed are intended for the protection of the citizen, and to prevent
a sacrifice of his property, and by a disregard of which his rights might be and generally would
be injuriously affected, they are not directory but mandatory.”). Therefore, we hold that a court
may excuse a CMS contractor’s failure to give notice of an audit under 42 U.S.C.
§ 1395ddd(f)(7)(A) if, and only if, the provider is not substantially prejudiced by the lack of
notice.
This conclusion is in line with our decision in Cook v. United States. 104 F.3d at 887–
89.1 In Cook, we considered a tax statute that requires advance notice when the IRS requests
records from a third party. Id. at 887. Specifically, 26 U.S.C. § 7609(a) requires notice of a
summons to be given within three days of service of the summons and not later than 23 days
1General Medicine and the Amici Curiae cite other analogous advance notice cases, but these cases are
from outside this circuit. See, e.g., J.B. v. United States, 916 F.3d 1161 (9th Cir. 2019); Jewell v. United States,
749 F.3d 1295 (10th Cir. 2014); N. Metro. Residential Healthcare Facility v. Novello, 777 N.Y.S.2d 277 (N.Y. Sup.
Ct. 2004).
No. 19-1365 General Medicine, P.C. v. Azar, et al. Page 10
before the day that the summons indicates the records are to be examined. Id. at 888. In Cook,
the IRS issued a summons for bank records in furtherance of an investigation of a married
couple’s tax returns. Id. at 887. The individuals argued that the summons should be quashed
because the summons was served one day late. Id. We reasoned that on the one hand, the use of
the word “shall” indicated that “Congress intended strict and nondiscretionary application of the
statute,” but on the other hand “Congress has not evidenced an intention to render void every
third party summons which does not comply with every technical stricture” of the statute. Id. at
889. We concluded that “[g]iven the public interest at stake in effective and efficient
enforcement of the national revenue laws, this court will not impute such an intention to
Congress in the absence of a clear legislative statement.” Id. We determined that “[a] more
equitable resolution would confer discretion upon the trial courts to excuse the Service’s
technical notification default if, and only if, the party (or parties) entitled to statutory notification
was (or were) not substantially prejudiced by the violation – that is, if the error was harmless.”
Id.Here, as in Cook, the statute’s use of the word “shall” indicates that on the one hand
Congress intended for strict application of the notice requirement, but on the other hand the
statute does not indicate that Congress intended for every noncompliance with the requirement to
render the audit void. Also, like the public interest in the national revenue laws in Cook, there is
significant public interest in the effective administration of Medicare. See Palm Valley Health
Care, Inc. v. Azar, 947 F.3d 321, 324 (5th Cir. 2020) (“With annual spending topping half a
trillion dollars, Medicare is the largest recipient of federal funds after Social Security and
defense.”). Therefore, we conclude as the court did in Cook that courts can excuse the
government’s noncompliance with 42 U.S.C. § 1395ddd(f)(7)(A) only if the provider was not
substantially prejudiced by the lack of notice. Cook, 104 F.3d at 889; see also Montalvo-
Murillo, 495 U.S. at 722; Hicks v. Comm’r of Soc. Sec., 909 F.3d 786, 812 (6th Cir. 2018).
B. Whether substantial evidence supports the lack of substantial prejudice
Applying this holding we next consider whether the district court erred in finding that
substantial evidence supported the Medicare Appeals Council’s conclusion that General
Medicine was not prejudiced by the lack of notice. See Heston, 245 F.3d at 534.
No. 19-1365 General Medicine, P.C. v. Azar, et al. Page 11
General Medicine argues that the lack of notice prejudiced its ability to document its
billings. It contends that if it was provided the proper notice it would have had 30 days to
retrieve its records from its custodians at the 12 facilities. General Medicine had access to those
records in 2004 when the audit began, but did not have access in 2007, when General Medicine
first received notice of the audit. General Medicine’s physicians would have had the opportunity
to make certain that their own notes and records were both complete and legible. In other words,
General Medicine would have had 30 days to present its best case to CMS by making sure that
all of its services were properly documented and placed into context before the audit.
The Medicare Appeals Council, however, concluded that having additional medical
records would not have made a material difference in the adjudication of the claims. The
Council explained that it looked only at the medical notes for the service dates at issue in
determining medical reasonableness, necessity, and reimbursement level, because the “treatment
or assessment note for each date of service should be expected to stand alone and support
coverage for that date of service.” The Medicare Appeals Council did not deny or downcode any
claims based on the frequency of visits or the condition of any beneficiary that may have been
addressed in other medical records. The Medicare Appeals Council also concluded that General
Medicine was not prejudiced because it had presented its arguments throughout the years of
appeals by “ably and thoroughly argu[ing] the principal issues resulting from the audit, the
validity of the sampling methodology, and the coverage of the reviewed claims.”
Although the Medicare Appeals Council certainly could have provided a more detailed
explanation of its determination that General Medicine was not prejudiced by the lack of notice,
we find that this conclusion is nevertheless supported by substantial evidence in the record.
Even if we would have decided the matter differently in the first instance, the Medicare Appeals
Council’s conclusion as to prejudice must be upheld if “a reasonable mind might accept [such
evidence] as adequate to support a conclusion.” Cutlip, 25 F.3d at 286. We conclude that a
reasonable mind could accept the Medicare Appeals Council’s conclusion that General Medicine
was not prejudiced based on the Council’s reasoning that General Medicine was able to
thoroughly argue the principal issues resulting from the audit over the course of several years
and based on the Council’s finding that additional medical records would not have made a
No. 19-1365 General Medicine, P.C. v. Azar, et al. Page 12
material difference in the adjudication of the claims because the CMS contractor had the medical
notes for the service dates, which are to stand alone and support coverage.2 Therefore, even if
General Medicine had advance notice of the audit and could have gathered additional documents
to support its claims, it would not have changed the overpayment determination because the
medical notes for the service dates that the long-term care facilities held and gave to
AdvanceMed should have been sufficient on their own.
Accordingly, we affirm the district court’s finding that the Medicare Appeals Council’s
decision was supported by substantial evidence.3
CONCLUSION
In sum, a provider may be entitled to a remedy if a CMS contractor fails to give the
provider notice in violation of 42 U.S.C. § 1395ddd(f)(7)(A) and the provider is substantially
prejudiced by the lack of notice. Here, the district court correctly concluded that substantial
evidence supports the Medicare Appeals Council’s conclusion that General Medicine was not
prejudiced by the lack of notice. Accordingly, we AFFIRM.
2The dissent is correct that the Council’s conclusion that additional medical records would not have made a
material difference in the adjudication of the claims is from the section of the Council’s opinion that discusses a
subpoena issue not the notice issue. Although this analysis does not occur in the notice section of the Council’s
decision it is part of the record as a whole and relevant to the overall conclusion that General Medicine was not
prejudiced by the lack of notice because it indicates that if General Medicine had received proper notice and been
able to gather additional medical records it would not have materially impacted the assessment. See Fluor Daniel,
Inc. v. NLRB, 332 F.3d 961, 967 (6th Cir. 2003) (“We review factual findings of the [agency] to determine if they
are ‘supported by substantial evidence on the record considered as a whole.’ ‘Substantial evidence’ is ‘such relevant
evidence as a reasonable mind might accept as adequate to support a conclusion.’” (emphasis added)).
3General Medicine also individually challenged twelve of the overpayment claims. However, it did not
raise this argument before the district court. Any argument that is “not raised before the district court is waived on
appeal to this Court.” McDaniel v. Upsher-Smith Labs., Inc., 893 F.3d 941, 948 (6th Cir. 2018) (quoting Scottsdale
Ins. Co. v. Flowers, 513 F.3d 546, 552 (6th Cir. 2008)); see also Thompson v. Parker, 867 F.3d 641, 652 (6th Cir.
2017) (declining to address two arguments not raised below because “[t]he clear rule is that appellate courts do not
consider issues not presented to the district court.”). Therefore, we conclude that General Medicine waived this
argument.
No. 19-1365 General Medicine, P.C. v. Azar, et al. Page 13
_________________
CONCURRENCE
_________________
MURPHY, Circuit Judge, concurring. I concur in the majority opinion and write to
highlight one issue that neither party addresses, but that may be worth considering in future
cases.
If a federal statute imposes a duty (here, a notice requirement) but does not identify the
consequence of a party’s noncompliance, what happens if the party fails to live up to the duty?
May federal courts impose the implied remedy of their choosing? General Medicine thinks so.
It asks us to invalidate the overpayment assessment issued against it because of its lack of notice
of the underlying audit. In my view, the court properly rejects General Medicine’s requested
remedy. The argument that courts have the power to impose implied remedies if a statutory
command would be rendered ineffective without them shares much in common with the outdated
regime of implying causes of action to enforce statutes that do not expressly contain them. After
all, one argument supporting implied causes of action was the need to make the statutory
command more “effective.” Alexander v. Sandoval, 532 U.S. 275, 287 (2001) (quoting J.I. Case
Co. v. Borak, 377 U.S. 426, 433 (1964)). “Having sworn off the habit of venturing beyond
Congress’s intent” in that context, id., we should not pick up the habit in this one. The Supreme
Court has, in fact, told us not to. It has held, for example, “that if a statute does not specify a
consequence for noncompliance with statutory timing provisions, the federal courts will not in
the ordinary course impose their own coercive sanction.” United States v. James Daniel Good
Real Prop., 510 U.S. 43, 63 (1993) (citing United States v. Montalvo-Murillo, 495 U.S. 711,
717–21 (1990)).
Yet General Medicine and the Secretary have both briefed this appeal on the assumption
that courts may invalidate the assessment when a party shows substantial prejudice from the lack
of the statutorily required notice. If, however, courts do not have the power to impose an implied
automatic-invalidation remedy, it is not obvious to me why we have the power to impose an
implied invalidation-if-prejudice remedy. In other cases in which the Supreme Court has
suggested that courts have the power to craft remedies, it has pointed to some source of authority
No. 19-1365 General Medicine, P.C. v. Azar, et al. Page 14
for the judicial power. In State Farm Fire & Casualty Co. v. United States ex rel. Rigsby,
137 S. Ct. 436 (2016), for example, the Court identified the judiciary’s “inherent power” to
impose sanctions for “violations of court orders.” Id. at 444. Here, the parties have not
identified a similar source of authority to craft remedies. The Administrative Procedure Act
might provide one. See 5 U.S.C. § 706. Some decisions have cited § 706’s standards in suits
like this one challenging agency action under 42 U.S.C. § 1395ff(b)(1)(A). See, e.g., Nader v.
Hargan, 721 F. App’x 287, 287–88 (4th Cir. 2018) (per curiam); John Balko & Assocs., Inc. v.
Sec’y U.S. Dep’t of Health and Human Servs., 555 F. App’x 188, 191 (3d Cir. 2014). Section
706 allows courts to “set aside agency action” “not in accordance with law,” 5 U.S.C.
§ 706(2)(A), but also makes clear that “due account shall be taken of the rule of prejudicial
error,” id. § 706. It thus might authorize courts to set aside assessments made in violation of the
statutory notice provision when the violation of that provision prejudices a party. Cf. Shinseki v.
Sanders, 556 U.S. 396, 406–07 (2009). If applicable, it could provide further textual support for
the approach the court suggests today. Since neither party raised the Administrative Procedure
Act, I merely flag it for future consideration.
No. 19-1365 General Medicine, P.C. v. Azar, et al. Page 15
___________________________________________________
CONCURRING IN PART AND DISSENTING IN PART
___________________________________________________
COLE, Chief Judge, concurring in part and dissenting in part. I concur in Part IV.A of
the majority opinion, which explains that “courts can excuse the government’s noncompliance
with 42 U.S.C. § 1395ddd(f)(7)(A) only if the provider was not substantially prejudiced by the
lack of notice.” (Maj. Op. 10.) Where I depart is in the application of this standard to the facts
of this particular case.
Substantial evidence does not support the Medicare Appeals Council’s conclusion that
General Medicine was not prejudiced by the lack of notice. An agency’s conclusory statements
are not sufficient to support a finding of substantial evidence. See Dir., Office of Workers’
Comp. Programs, U.S. Dep’t of Labor v. Congleton, 743 F.2d 428, 430 (6th Cir. 1984) (“[W]e
remain steadfast in our conviction that an [ALJ’s] conclusory opinion, which does not
encompass a discussion of the evidence contrary to his findings, does not warrant affirmance . . .
even in applying the deferential standard of “substantial evidence[.]”); see also, e.g., Elec.
Consumers Res. Council v. F.E.R.C., 747 F.2d 1511, 1515 (D.C. Cir. 1984) (per curiam) (finding
a lack of substantial evidence where the agency’s “stated reasons . . . . [were] almost wholly
conclusory”).
On the specific issue of prejudice, the Medicare Appeals Council made the following
cursory findings: 1) “Having examined the record as a whole, we do not see that the appellant
was irreparably harmed by the lack of formal notice of the pending audit”; and 2)
“[T]he appellant has, over these many years, ably and thoroughly argued the principal issues
resulting from the audit, the validity of the sampling methodology, and the coverage of the
reviewed claims. We see no area where the form of notice which the appellant received
compromised its ability to present its case.” (MAC Decision, R. 1-4, PageID 42–43.) This
explanation is inadequate, “necessitat[ing] a remand with directions for more specific findings of
fact.” See Congleton, 743 F.2d at 430.
No. 19-1365 General Medicine, P.C. v. Azar, et al. Page 16
The majority opinion relies on another section of the Medicare Appeals Council’s
decision to find substantial evidence. Specifically, it points to a section of the Council’s opinion
that determined the Administrative Law Judge had not erred by failing to issue subpoenas to
third-party facilities for “the complete medical records for each beneficiary that was part of the
sample,” as the entire medical records for each beneficiary would not have made “a material
difference in the claims’ adjudication here.” (MAC Decision, R. 1-4, PageID 37, 40.) The
Council explained that it only looked to the “medical notes for the date(s) of service at issue in
determining medical reasonableness and necessity and reimbursement level,” and “[t]he
treatment or assessment note for each date of service should be expected to stand alone and
support coverage for that date[.]” (Id. at PageID 40–41.) Thus, the Council concluded that there
was no need to subpoena third parties for the beneficiaries’ complete medical records. General
Medicine does not challenge this determination on appeal.
General Medicine’s lack-of-notice argument is distinct from its now-abandoned subpoena
claim. General Medicine argues that if it had received notice of the audit, its physicians could
have ensured that their medical notes and records for the relevant dates of service were complete,
legible, and properly documented before the audit began. The fact that the Council concluded it
did not need to receive additional medical records from other dates of service for the same
Medicare beneficiaries via subpoenas to third parties does not speak to General Medicine’s
argument that it could have ensured it had proper, complete records for the relevant dates of
service that were audited if it had been given notice. The Council’s findings on the subpoena
claim thus do not provide substantial evidence for the Council’s separate finding of no prejudice
on the notice issue.
I would therefore reverse and remand for the Medicare Appeals Council to reassess and
explain whether General Medicine was substantially prejudiced by the lack of notice.