Farkas v. Blue Cross & Blue Shield of Michigan

24 F.3d 853, 1994 U.S. App. LEXIS 11857, 1994 WL 199317
CourtCourt of Appeals for the Sixth Circuit
DecidedMay 24, 1994
DocketNo. 92-2377
StatusPublished
Cited by8 cases

This text of 24 F.3d 853 (Farkas v. Blue Cross & Blue Shield of Michigan) 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
Farkas v. Blue Cross & Blue Shield of Michigan, 24 F.3d 853, 1994 U.S. App. LEXIS 11857, 1994 WL 199317 (6th Cir. 1994).

Opinion

BAILEY BROWN, Senior Circuit Judge.

Neil J. Farkas, D.O. and Neil J. Farkas, D.O., P.C. (“Dr. Farkas”) appeal the district court’s dismissal of their claim against Blue Cross & Blue Shield of Michigan (“BCBSM”) and the intervenor, the Secretary of Health and Human Services (“the Secretary”), arising from Dr. Farkas’ being placed under Medicare Prepayment Utilization Review (“PPUR”). The district court also vacated the Temporary Restraining Order (“TRO”) that it had previously granted to prevent BCBSM from implementing PPUR for Dr. Farkas’ Medicare claims. We AFFIRM both of the district court’s rulings.

I.

Dr. Farkas filed on 21 December 1991 a two-count complaint in Wayne County (Michigan) Circuit Court against BCBSM, claiming (1) tortious interference with business relationship and business expectancy and (2) intentional infliction of emotional distress, both resulting from various billing and directory-listing errors committed by BCBSM, the Medicare insurance carrier for the State of Michigan. Farkas v. BCBSM, 803 F.Supp. 87, 88 (E.D.Mich.1992). Soon thereafter, Dr. Farkas received from BCBSM a letter, dated 7 January 1992, informing him that he was being placed under PPUR1 due to “numerous problems” relating to five patients’ medical records previously obtained from Dr.

Farkas by BCBSM in connection with a standard postpayment audit that it conducted in July 1990.

Dr. Farkas then applied for and received from Wayne County Circuit Court a TRO to prevent BCBSM from implementing the proposed PPUR. Dr. Farkas alleged in his Motion for TRO — which has been treated by the parties, after removal to district court, as a substitute for an amended complaint — that he was placed under PPUR in retaliation for his having filed suit against BCBSM in state court.2 The Secretary then intervened and removed Dr. Farkas’ case to federal district court. The district court initially granted an extension of the TRO against BCBSM. Upon motion by Dr. Farkas, the state law claims against, BCBSM were remanded to state court, but the “post-Complaint PPUR claim” was severed from those claims and remained in federal court. Farkas, 803 F.Supp. at 89. The Secretary then moved for dismissal of this federal cause of action for lack of subject matter jurisdiction, which the district court granted, at the same time vacating the TRO against BCBSM.

There is but a single issue before us here: Did the district court have jurisdiction over Dr. Farkas’ PPUR claim, when he had neither presented his claim to the Secretary nor exhausted the administrative remedies available to him prior to seeking judicial review?

II.

In reviewing a district court’s dismissal of a plaintiffs complaint for lack of subject mat[855]*855ter jurisdiction, we must assume all material facts alleged by that plaintiff to be true and construe his complaint liberally, giving him “the benefit of any doubt.” Westchester Management Corp. v. HHS, 948 F.2d 279, 279 (6th Cir.1991) (internal quotation marks omitted), cert. denied, — U.S. -, 112 S.Ct. 1936, 118 L.Ed.2d 643 (1992). The “accepted rule” is that dismissal is warranted only if “it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief’ in federal district court. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957).

III.

A The Medicare Act

Medicare claims are divided into two parts by the Medicare Act, 42 U.S.C. §§ 1395-1395cec (1988). “Part A” claims involve hospitalization coverage, while “Part B” claims are for physicians’ services and related medical needs. The Secretary administers both parts; she is authorized to assign to private insurance carriers, such as BCBSM, the task of paying Part B claims from the Federal Supplementary Insurance Trust Fund (“Medicare Trust Fund”). See 42 U.S.C. § 1395u; Isaacs v. Bowen, 865 F.2d 468, 470 (2d Cir.1989). The Secretary has issued regulations pursuant to the Medicare Act, see generally 42 C.F.R. §§ 405.301-405.2472 (1992), that authorize these Medicare carriers to audit provider records to ensure that services for which reimbursement is claimed are “medically necessary,” “reasonable,” and otherwise payable under Part B, Isaacs, 865 F.2d at 470, and to “safeguard[] against unnecessary utilization of services furnished by providers to Medicare beneficiaries.” Farkas, 803 F.Supp. at 90. Most Part B claims are assigned by the ultimate Medicare beneficiaries (e.g., elderly patients) to their service providers (e.g., Dr. Farkas), who are paid by Medicare insurance carriers (e.g., BCBSM) pursuant to an agreement that the provider will accept the Medicare reasonable-charge determination as payment in full. Id. at 90 n. 3.

The Medicare Act has provided, since its effective date, for a “fair hearing” by the insurance carrier for disputes over Part B claims that surpass the amount in controversy threshold, when such claims “are denied or are not acted upon with reasonable promptness” or when the amount due is in dispute. 42 U.S.C. § 1395u(b)(3)(C); see also 42 C.F.R. § 405.801(a). The Medicare Act has also incorporated, since its effective date, via 42 U.S.C. § 1395ii, the exclusive judicial review provision of the Social Security Act, 42 U.S.C. § 405(h) (1988), which prohibits an action in federal court concerning any “claim arising under” that Act when such action is brought against “the United States, the Secretary, or any officer or employee thereof’ under the grant of federal jurisdiction provided in either 28 U.S.C. § 1331 (“Federal question”) or 28 U.S.C. § 1346 (“United States as defendant”). Judicial review of Medicare claims, pursuant to § 405, is only available as “herein provided” — i.e., after a final decision by the Secretary3 on a claim arising under a provision of the Medicare Act itself.

Although the Medicare Act has provided, since its effective date, for judicial review of Part A benefit claims, until 1987 it allowed no review of Part B “amount determination” claims beyond the Medicare carrier’s own fair hearing. The Supreme Court so held in 1982 when it decided that claims concerning amount determinations under Part B were not subject to judicial review in the federal courts.

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24 F.3d 853, 1994 U.S. App. LEXIS 11857, 1994 WL 199317, Counsel Stack Legal Research, https://law.counselstack.com/opinion/farkas-v-blue-cross-blue-shield-of-michigan-ca6-1994.