Nicholson & Eastin, LLP Obtains Preliminary Injunction Prohibiting CMS From Recouping Alleged Medicare Overpayments from DME Supplier

Posted on Firm News by Parker Eastin

The Firm and its Tennessee co-counsel secured a preliminary injunction in federal district court in Tennessee that precludes CMS (and its contractors) from initiating recoupment with respect to approximately $7 million in alleged Medicare overpayments against the Firm’s DME supplier client.  In 2017, the firm’s client – a national DME supplier based in Memphis – was subjected to a series of post-payment audits by Medicare audit contractors (ZPICs).  The audits resulted in alleged overpayments.   Each audit employed unreliable statistical sampling methodologies to unjustifiably and improperly inflate the actual overpayment amount to a combined total of approximately $7 million.

The client appealed the alleged overpayments through the first two levels of appeal (i.e., redetermination and reconsideration).  Once the client received an unfavorable decision at the reconsideration level, the Firm assisted the client in requesting an evidentiary hearing before an Administrative Law Judge or ALJ (i.e., the third level of appeal).    Generally speaking, once a reconsideration decision is issued, CMS can initiate recoupment even if the aggrieved provider intends to avail itself of an ALJ hearing.

Under federal law, ALJ hearings are supposed to be completed within 90 days of a hearing request.  Despite this statutory requirement for a timely ALJ hearing, due to the current and overwhelming backlog of Medicare appeals, Medicare providers are currently forced to wait between three to five years to have their overpayment appeals heard by an ALJ.  The Firm argued that during this violative and unconscionable period of delay, it was fundamentally unfair for CMS to be allowed to exercise its recoupment authority and force providers and suppliers into bankruptcy irrespective of whether the provider or supplier would have prevailed on appeal.  At its core, this is a plain violation of procedural due process clause of the 5th Amendment of United States Constitution.

After conducting a preliminary injunction hearing, the Court agreed with the Firm’s argument and issued a preliminary injunction.  CMS is challenging the injunction, and further proceedings are expected in the case.

The injunction obtained by the Firm is one of only a couple such injunctions that have been imposed against CMS ordering CMS to delay recoupment.  This is a cutting-edge and evolving area of the law, and all affected Medicare providers should keep a close eye on this case.  If you or your entity are facing recoupment of alleged overpayments, particularly if the overpayments will lead to severe financial concerns for your practice, please contact us to discuss the possibility of obtaining an injunction in your matter.