DMC-Memphis, Inc. v. Mutual of Omaha Insurance

105 F. App'x 671
CourtCourt of Appeals for the Sixth Circuit
DecidedJune 29, 2004
DocketNo. 03-5272
StatusPublished
Cited by2 cases

This text of 105 F. App'x 671 (DMC-Memphis, Inc. v. Mutual of Omaha Insurance) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
DMC-Memphis, Inc. v. Mutual of Omaha Insurance, 105 F. App'x 671 (6th Cir. 2004).

Opinion

OPINION

COLE, Circuit Judge.

Plaintiff seeks to reinstate a suit alleging harm from the tort of being paid too much money. Although many would gladly fall victim to such a wrong, Plaintiff-Appellant DMC Memphis, Inc. (“DMC”) thinks otherwise. After the Department of Health and Human Services (“HHS”)— through its intermediary, Mutual of Omaha Insurance Co. (“Mutual”) — overpaid DMC $1.8 million for medical care that it provided under the Medicare program, DMC was defrauded into turning the money over to its prior owner, New American. By the time HHS asked for its money back, New American had gone bankrupt, and DMC was left holding the bag. DMC then sued Mutual and HHS under the Federal Tort Claims Act, 28 U.S.C. § 1346, asserting that the overpayment resulted from Mutual’s negligence and caused DMC’s fiscal predicament. The district court held that it lacked subject matter jurisdiction to adjudicate the suit, and we AFFIRM.

I. BACKGROUND

The facts, as alleged by DMC, are as follows. DMC provides medical care through the federal Medicare program, established and regulated by the Medicare Act, 42 U.S.C. § 1395. The program is administered by HHS, which hires private contractors to process and pay the providers’ claims. Mutual was the company responsible for keeping track of DMC’s claims for reimbursement. Although the process for billing and reimbursement is [673]*673complicated, for the purpose of this appeal we need explain only that DMC prepared a cost report for 1997 that inadvertently overstated the amount it was owed by $1.8 million. When Mutual subsequently audited this report (as required by the Medicare Act), it erroneously relied on DMC’s estimates, rather than the accurate data by then available.

At the time, DMC was still owned by New American. In August 1999, New American told Mutual that it had used the wrong data, and Mutual told New American that the problem would be fixed. On August 31,1999, New American sold DMC to its current owners. On September 9, 1999, Mutual prepared a 1997 Final Settlement (the final accounting of the money owed) — still based on the inaccurate estimated data that had been flagged by New American — that showed an additional $1.8 million owed to DMC. When DMC received the money in late September, it notified New American, who knew but fraudulently failed to tell DMC that the money was an overpayment. Instead, New American told DMC to send it the money, and DMC obliged.

In November 1999, New American told Mutual about the mistaken audit, knowing that under the Medicare Act’s regulations — which do not concern themselves with providers’ changes in ownership— Mutual would seek reimbursement from DMC. In April 2000, New American filed for bankruptcy, and despite knowing that it had received $1.8 million in erroneous reimbursements that DMC would have to answer for, New American listed neither Mutual, HHS, or DMC as creditors. In March 2001, Mutual finally caught on to its mistake, and asked DMC for its $1.8 million back. DMC requested that HHS excuse it from its repayment obligations, and in the alternative, that it offer a more favorable repayment plan. In November 2001, HHS agreed that DMC could repay the money over sixty months, along with interest to the tune of 14.125%. In February 2002, DMC filed an FTCA suit against Mutual and HHS, seeking compensatory damages of $2 million, along with fees and costs. On December 10, 2002, the district court dismissed the suit for lack of subject matter jurisdiction.

II. ANALYSIS

HHS argues, and the district court agreed, that we lack subject matter jurisdiction over DMC’s suit because the Medicare Act precludes this type of claim from being brought under the FTCA. The Medicare Act establishes an administrative process, which for claims over $10,000, allows providers to appeal to the Provider Reimbursement Review Board (“the Board”) within 180 days of the intermediary’s final determination. See 42 U.S.C. § 1395oo(a). To ensure that providers will resort to this administrative process, the Medicare Act, in 42 U.S.C. § 1395Ü, incorporates by reference 42 U.S.C. § 405(h), which provides that “[n]o action against the United States, the Commissioner of Social Security, or any officer or employee thereof shall be brought under section 1331 [federal question jurisdiction] or 1346 [federal defendant jurisdiction] of Title 28 to recover on any claim arising under this subchapter.” At bottom, DMC argues that Mutual’s negligence should excuse DMC from its statutory obligations under the Act to reimburse HHS for money that it overpaid.

At first glance, this claim seems unambiguously to arise under the Medicare Act. Yet DMC attempts to restyle this claim— as one for consequential damages for the amount that it coneededly owes HHS. Whatever the formal difference in phrasing, in substance DMC’s claim is still one for an exemption from the Medicare Act’s reimbursement requirements. There is no meaningful difference between claiming [674]*674that “I shouldn’t have to pay the money that I owe you,” and claiming that “I will pay you the money that I owe you, so long as you pay me consequential damages to cover the amount that I paid you.”

DMC argues, however, that its claims do not arise under the Medicare Act because it accepts HHS’s ultimate cost determination — that is, DMC acknowledges that the $1.8 million it received was an overpayment to which it was not entitled. Instead, it posits that Mutual’s negligence in making that overpayment should let DMC off the hook for the repayment. But “arising under” means more than just challenges to the intermediary’s monetary calculations. In the leading case on this matter, Heckler v. Ringer, 466 U.S. 602, 614, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984), the Supreme Court defined “arising under” to cover claims that are “inextricably intertwined” with actual claims for payments. Although the plaintiffs in Ringer challenged the legality of underlying Medicare Act regulations, rather than the application of those requirements to their claims, the Court held that they must channel their claims through the Medicare Act’s administrative processes. Similarly, although DMC does not quibble with Mutual’s math, its action still falls within the Medicare Act: DMC argues that the manner in which Mutual calculated its reimbursement was negligent, and as a result DMC seeks an exemption from otherwise applicable Medicare Act obligations. In short, both the basis for relief and the relief itself revolve around the Medicare Act.

In any event, DMC contends that because the administrative remedies provided for by the Medicare Act provide for no exemptions from the normal reimbursement requirements, to interpret its claim as “arising under” the Medicare Act would deprive DMC of any and all review of HHS’s decision. But the Medicare Act provides that the Board’s processes are open to any provider that “is dissatisfied with a final determination of the organization serving as its fiscal intermediary ...

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Bluebook (online)
105 F. App'x 671, Counsel Stack Legal Research, https://law.counselstack.com/opinion/dmc-memphis-inc-v-mutual-of-omaha-insurance-ca6-2004.