Klein v. Heckler

761 F.2d 1304
CourtCourt of Appeals for the Ninth Circuit
DecidedMay 17, 1985
Docket82-5174
StatusPublished
Cited by4 cases

This text of 761 F.2d 1304 (Klein v. Heckler) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Klein v. Heckler, 761 F.2d 1304 (9th Cir. 1985).

Opinion

761 F.2d 1304

9 Soc.Sec.Rep.Ser. 373, Medicare&Medicaid Gu 34,670
Arvin J. KLEIN, M.D., and Alvarado Internal Medical Group,
Inc., Plaintiffs-Appellants,
v.
Margaret M. HECKLER,* Secretary of Health and
Human Services, Defendant-Appellee.

No. 82-5174.

United States Court of Appeals,
Ninth Circuit.

Argued and Submitted Nov. 4, 1982.
Decided May 17, 1985.

Robert Hoad, San Diego, Cal., for plaintiffs-appellants.

Jerry J. Bassett, Dept. of Health & Human Services, San Francisco, Cal., for defendant-appellee.

Appeal from the United States District Court for the Southern District of California.

Before FLETCHER and NELSON, Circuit Judges, and EAST,** District judge.

FLETCHER, Circuit Judge:

Arvin Klein, a medical doctor, and the Alvarado Internal Medical Group, Inc., of which Klein is an officer, appeal the district court's dismissal of their action for judicial review of a decision of the Secretary of Health and Human Services. Appellants sought review of a determination that they owed the Government some $27,000 because they had fraudulently overstated claims to reimbursement for services rendered under Part B of the Medicare program. The district court granted the Secretary's motion to dismiss for failure to exhaust administrative remedies. We note jurisdiction under 28 U.S.C. Sec. 1291 (1982), and reverse.

FACTS

Appellant Klein operates a diagnostic laboratory, the Alvarado Internal Medical Group, Inc. Klein and the laboratory perform services for individuals enrolled in Part B of the Medicare program.1 42 U.S.C. Secs. 1395j-1395x (1982). In the early 1970's, appellants qualified as medical providers under Part B and for several years submitted claims to various private insurance carriers for reimbursement for medical services provided to Klein's patients and to users of the laboratory services. Apparently, because Klein received payment for the bills submitted, the insurance carriers approved these bills as reasonable and the medical services as necessary. See 42 U.S.C. Sec. 1395u; United States v. Erika, 456 U.S. 201, 203, 102 S.Ct. 1650, 1652, 72 L.Ed.2d 12 (1982).

On July 14, 1976, the Secretary of Health and Human Services, acting through local Part B insurance carriers, initiated an investigation of appellants' Part B Medicare billings from 1972 through August 1976. On December 18, 1976, the Part B insurance carriers notified appellants that they had been instructed by the Secretary to withhold payments on future Part B claims until completion of the investigation. The carriers asserted that they were proceeding under the regulations which authorize them to suspend payments, 42 C.F.R. Secs. 405.370-. 373 (1982) (describing suspension procedure).2 On December 17, 1976, the government secured a federal grand jury indictment against appellants, nine other doctors, and two other medical corporations for numerous violations of sections 287 (making false claims), 371 (conspiracy to defraud the Government), and 1001 (making false statements) of Title 18. See 18 U.S.C. Secs. 287, 371, 1001 (1982). These criminal charges stemmed from appellants' submission of allegedly fraudulent claims for reimbursement under Part B of the Medicare program. In September of 1977, following a jury trial, appellants were acquitted on all eleven of the charges against them. Despite this acquittal, in December, 1978, the Secretary demanded reimbursement from appellant Klein ($10,687.67) and from appellant Alvarado Clinic ($37,277.31) for "overpayments, damages, and costs" in connection with the investigation of appellants' billing practices between 1972 and 1976. The Secretary also threatened a lawsuit by the U.S. Attorney under the False Claims Act, 18 U.S.C. Sec. 231 (1982), to recover interest, double damages and penalties. Appellants resisted these collection efforts.

The Secretary continued the suspension of payments to appellants, instituted in December, 1976, for the next five years, even though appellants were acquitted on the fraud charges, continued to perform services for persons insured under Part B, and continued to submit claims to the carriers based on those services. Indeed, appellants allege that the Secretary notified their patients that appellants' claims were under investigation, and required appellants to continue to accept Medicare claims for payment for services.

As a result of the Secretary's conduct, substantial monies accumulated in appellants' suspended Medicare account. In March, 1981, the Secretary informed appellants that as a result of the investigation of their reimbursement claims, the insurance carriers and the Secretary had determined that appellants had filed false claims between 1972 and 1976 in the amount of $26,737.56. Consequently, in April, 1981, the Secretary ordered the $22,177.95 that had accumulated in appellants' suspended Medicare account transferred to the Federal Supplementary Insurance Trust Fund in partial satisfaction of the $26,737.56 debt owed to the Trust Fund on the allegedly fraudulent claims.

Appellants sought review of the Secretary's determination, with the insurance carriers, of the amount and existence of appellants' debt to the Trust Fund. The Secretary and the insurance carriers informed appellants that the only review available was by an employee of the carrier and that there was no provision for judicial review of that employee's final decision. See 42 U.S.C. Sec. 1395u(b)(3)(C); 42 C.F.R. Sec. 405.820 (1981); United States v. Erika, 456 U.S. at 202-03, 102 S.Ct. at 1651-52. Appellants argued that the decision that they had submitted false claims and owed substantial sums to the Part B Trust Fund was subject, under 42 U.S.C. Sec. 1395y(d)(3), to review by the Secretary in an administrative hearing.3 Appellant sought judicial review of the Secretary's decision under the same section. 42 U.S.C. Sec. 1395y(d)(3). The Regional Director of the Medicare Program insisted that section 1395u governed and that a hearing before the insurance carrier was appellants' only remedy.

Appellants subsequently filed suit in district court pursuant to the provisions for judicial review set forth in 42 U.S.C. Sec. 1395y(d)(3). The Secretary moved for dismissal of the suit on the grounds that the district court had no jurisdiction and, even if it did, appellants had failed to exhaust their administrative remedies by refusing a hearing before the insurance carrier. The district court agreed that appellants had failed to exhaust their administrative remedies and dismissed the complaint. Appellants filed a timely notice of appeal.

ISSUES

We must determine whether the investigation of appellants' Part B Medicare billings was instituted pursuant to the insurance carrier oversight provisions of 42 U.S.C. Sec. 1395u described in United States v. Erika, 456 U.S. at 202, 102 S.Ct. at 1651, or under the Secretary's power to investigate and correct fraud in the Medicare Program, 42 U.S.C. Sec. 1395y(d).

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Bluebook (online)
761 F.2d 1304, Counsel Stack Legal Research, https://law.counselstack.com/opinion/klein-v-heckler-ca9-1985.