United States District Court, District of Columbia
ROSEMARY M. COLLYER, District Judge.
The District of Columbia, acting through its Department of Health Care Finance, suspended Medicaid payments to home health care provider Vizion One, Inc., upon finding a "credible allegation of fraud." See 42 C.F.R. § 455.23. The District then terminated its Provider Agreement with Vizion and converted Vizion's license to provisional status. Vizion challenged the suspension of payments and termination of the Agreement in an administrative proceeding, and the Office of Administrative Hearings ruled in favor of the District. Vizion then appealed to the D.C. Court of Appeals while simultaneously filing suit here. The Amended Complaint challenges the payment suspension and contract termination, alleging Fifth Amendment due process violations, i.e. (1) that Vizion suffered a violation of procedural due process, that it was deprivation of its liberty and/or property interests without due process because the applicable federal regulations are unconstitutionally vague and overbroad, both on their face and as applied; and (2) that the deprivation of Vizion's liberty and or property interests was "outrageously un-American" and therefore constituted a violation of substantive due process. As explained below, the claims for injunctive and declaratory relief will be dismissed under the Younger abstention doctrine, see Younger v. Harris, 401 U.S. 37 (1971), and the claims for monetary damages will be stayed, pending final ruling by the D.C. Court of Appeals.
Vizion One, Inc. is a home health care provider who was licensed by the D.C. Department of Health to provide Personal Care Aide servicess to D.C. residents eligible to receive Medicaid benefits. See Am. Compl. [Dkt. 6] ¶ 4. Vizion was a party to a contract with the District of Columbia called a Medicaid Provider Agreement, whereby Vizion agreed to provide Personal Care Aide services to D.C. residents eligible for Medicaid benefits in exchange for payment by the District.
Medicaid is a "cooperative federal-state program through which the Federal Government provides financial assistance to States [including the District of Columbia] so that they may furnish medical care to needy individuals." 42 U.S.C. § 1396. Although participation in the program is voluntary, participants must comply with federal requirements in order to obtain federal funding. Id. § 1396a; Wilder v. Va. Hosp. Ass'n, 496 U.S. 498, 502 (1990). D.C. Department of Health Care Finance (DHCF) is the agency charged with administering the Medicaid program for the District of Columbia. The federal Medicaid regulator is the Centers for Medicare & Medicaid Services (CMS), a constituent agency of the Department of Health and Human Services (HHS).
Historically, federal Medicaid regulations authorized State Medicaid agencies to suspend payments to health care providers where the agencies had discovered "reliable evidence of fraudulent activity." See Am. Compl. ¶ 6 (citing prior version of 42 C.F.R. § 455.23). In 2011, Congress passed the Patient Protection and Affordable Care Act (ACA), Pub. L. 111-148, 124 Stat. 119 (2010), which provides that Medicaid payments shall not be made to an individual or entity when an investigation into a credible allegation of fraud is pending. 42 U.S.C. § 1396b (i)(2)(c). In compliance with the ACA, HHS amended its regulations to implement the statutory language; as amended, § 455.23 provides that State agencies must suspend Medicaid payments when "there is a credible allegation of fraud for which an investigation is pending under the Medicaid program against an individual or entity, " unless the State agency finds good cause not to suspend payments. If a State Medicaid agency receives a complaint of Medicaid fraud and identifies "questionable practices, " it must conduct a preliminary investigation to determine if there is a sufficient basis for a full investigation. Id. § 455.14. If the preliminary investigation leads the agency to believe that fraud has occurred, it must refer the case to its own certified Medicaid fraud control unit,  if it has such a unit, or to another appropriate law enforcement agency. Id. § 455.15; see also id. § 455.21.
In March 2010, DHCF received two fraud complaints regarding Vizion: (1) that one of Vizion's Personal Care Aide employees had attempted to "recruit" the complainant (referred to as Recipient #1) to "join Vizion"; and (2) that a health care provider had solicited Medicaid Recipients #4 and #6 and paid them $40 per week in exchange for their signatures on timesheets fraudulently indicating that the recipients were receiving Personal Care Aide services; Vizion billed for Medicaid services to Recipients #4 and #6. Am. Compl., Ex. 1 (Summary of Allegations) [Dkt. 6-1] at 1-2; Am. Compl., Ex. 2 (Report of Investigation) [Dkt. 6-2] at 2. In April 2010, DHCF interviewed Medicaid Recipient #2, who indicated that she was assisted by a Personal Care Aide 3.5 hours or less each day, while records showed that Vizion submitted claims for payment for 8 hours of service each day to Recipient #2. Summary of Allegations at 1; Report of Investigation at 2. DHCF also interviewed Medicaid Recipient #3 who indicated that he originally began receiving Personal Care Aide services from Vizion when a recruiter knocked on his door at the rooming house where he lives. In the interview, Recipient #3 first stated that he received services 7 hours per day, 4 days per week; then, he stated that he received services 2 days per week; at the end of the interview, he became hesitant and stated that in fact he is away from the rooming house most of the time visiting friends and family on the streets, implying that he does not actually receive any Personal Care Aide services from Vizion. Summary of Allegations at 1-2; Report of Investigation at 2. Vizion submitted claims for payment for services to Recipient #3. Summary of Allegations at 1-2. A DHCF investigator further determined that Vizion submitted claims for Medicaid payments for Personal Care Aide services to 7 individuals who are residents at a homeless shelter. Id. at 2.
DHCF referred the allegations regarding Vizion to law enforcement for investigation. On February 20, 2014, the United States Attorney's Office in the District of Columbia announced the arrest of a Vizion employee, Emiline D. Nkemera Besong, on charges relating to healthcare fraud and conspiracy to commit healthcare fraud. Am. Compl. ¶ 30. That same day, DHCF sent Vizion notice that it was withholding payments for all claims submitted for Personal Care Aid services to the District's Medicaid beneficiaries. Id. ¶ 31; id., Ex. 4 (Notice of Suspension) [Dkt. 17-1]. DHCF suspended payments due to finding credible allegations of fraud under 42 C.F.R. § 455.23. Id. at 30, 33. Vizion requested a good cause exception to the suspension of payments, but on March 26, 2014, DHCF denied the request. Id. ¶¶ 33, 40.
On March 25, 2014, DOH converted Vizion's Medicaid license to provisional status under D.C. Code § 44-506(a)(1). Id. ¶ 54. Vizion claims the license conversion to provisional status unfairly stigmatized Vizion, making payers unwilling to do business with Vizion. Id. ¶ 59. Then, on May 23, 2014, DHCF terminated its Medicaid Provider Agreement with Vizion pursuant to a provision in the Agreement allowing termination for convenience upon 90 days' notice. Id. ¶ 76.
Vizion alleges that DHCF suspended payments based on allegations of fraud regarding one or two employees,  without prior notice or disclosure of the factual basis of the fraud allegations and without consideration of reasonable alternatives to suspension, thereby " de facto " terminating Vizion from the Medicaid program and destroying its $46 million business. Am. Compl. at 1-2, ¶¶ 29, 31, 32, 37, 74, 80. Vizion filed this suit against the District of Columbia on May 23, 2014 alleging, via 42 U.S.C. § 1983, violations of Fifth Amendment rights to procedural and substantive due process:
Count I-violation of procedural due process based on the alleged vague and overbroad language of the applicable regulations, on their face and as applied;
Count II-violation of procedural and substantive due process based on the District's suspension of Medicaid payments to Vizion based on regulations that are vague and overbroad, on their face and as applied, depriving Vizion of its constitutional right to liberty and/or property in a manner that was "outrageously un-American"; and
Count III-violation of due process based on the deprivation of Vizion's "liberty interest in following its chosen business profession free from governmental interference, " which arose upon the conversion of Vizion's license to provisional status.
See id. (Count I ¶¶ 81-86, Count II ¶¶ 87-92, Count III ¶¶ 93-98). Vizion seeks money damages, injunctive, and declaratory relief. See id. ¶¶ ...