United States District Court, District of Columbia
E. BOASBERG United States District Judge
first-year law students learn, where a medical provider
informs others that the infirm are dead when they are
actually alive, it can lead to tort liability for emotional
distress. This case reveals that the opposite type of mix-up
can have consequences as well. Here, Plaintiff Arriva Medical
LLC had a contract with the federal Medicare program to
provide diabetic-testing supplies to individuals nationwide.
In October 2016, however, Defendant Department of Health and
Human Service's Centers for Medicare and Medicaid
Services (CMS) informed Arriva that over a 5-year period the
company had billed for 211 beneficiaries who were in fact
already deceased. CMS then revoked the company's billing
privileges and notified it that its Medicare-supplier
contract would hence be terminated. Plaintiff responded by
filing this suit against HHS and certain officials, asserting
that it was entitled to a hearing before those debarments
went into effect.
now moves for a preliminary injunction, claiming that the
company may not survive absent prompt action from the Court.
The Government opposes such relief, arguing that the company
has neither exhausted Medicare's various administrative
appeals nor demonstrated a likelihood of success on the
merits or irreparable harm. As the Court agrees with the last
two points, it will deny Plaintiff's Motion.
by the Medicare Act, 42 U.S.C. § 1395 et seq.,
federal Medicare funds a broad array of healthcare for
elderly or disabled persons. Functionally, it does so by
reimbursing companies that provide services or supplies to
those individuals. See Ne. Hosp. Corp. v. Sebelius,
657 F.3d 1, 2 (D.C. Cir. 2011). The Centers for Medicare and
Medicaid Services, a component of HHS, administers the
program. See Ark. Dep't of Health & Human Servs.
v. Ahlborn, 547 U.S. 268, 275 (2006).
Medicare landscape, Arriva primarily serves as a supplier of
diabetic-testing equipment, notably strips that patients
insert into a glucometer to determine blood-glucose levels.
See ECF No. 12 (Complaint), ¶¶ 36-38. For
the past seven years, its particular corner has been the
mail-order market, where it has captured roughly half of the
total diabetes-equipment consumer base and serves as the only
supplier of two prevalent models of blood-glucose testing
meters and their associated strips. See Pl. Mot.,
Exh. A (Declaration of Claudio Araujo), ¶ 26. Because of
Plaintiff's niche, many of its customers tend to hail
from rural areas where access to healthcare is relatively
limited. See Compl., ¶ 39. To translate for the
numerically inclined, Arriva serves approximately 500, 000
Medicare beneficiaries, roughly ___ of whom reside in rural
zip codes. See Araujo Decl., Exh. 7 (2016 Zip Code
Mix). The company, in turn, depends on Medicare
reimbursements for over ___ of its business. See
Araujo Decl., ¶ 20.
did not stumble into the Medicare market. In the heavily
regulated Medicare system, would-be suppliers must first
apply with CMS to obtain billing privileges so that they can
charge Medicare for sending supplies. See 42 C.F.R.
§ 424.57(b), (c). CMS then runs a competitive-bidding
program where suppliers bid for the right to sell equipment
to beneficiaries. See, e.g., Araujo Decl., Exh. 5
(2014 National Mail-Order Recompete). For those companies
that win, CMS contracts with them so that beneficiaries must
order equipment from those suppliers. See Compl.,
¶ 26. A condition of these contracts is that companies,
like Arriva, must also maintain their Medicare billing
privileges. See Araujo Decl., Exh. 1 (2013 National
MailOrder Contract) at 6; id., Exh. 2 (2016 National
Mail-Order Contract) at 1-2.
takes us to this case. On October 5, 2016, CMS's Provider
Enrollment & Oversight Group (PEOG) wrote to Arriva that
CMS would be revoking the company's billing privileges in
thirty days (November 4, 2016) and barring it from
reenrolling for a period of three years. See Araujo
Decl., Exh. 10 (October 5, 2016, Revocation Letter from PEOG
to Arriva) at 1. The Group specified that Plaintiff was not
in compliance with a particular federal regulation:
(a) Reasons for revocation. CMS may revoke a currently
enrolled provider or supplier's Medicare billing
privileges and any corresponding provider agreement or
supplier agreement for the following reasons:
. . .
(8) Abuse of billing privileges. Abuse of billing privileges
includes either of the following:
(i) The provider or supplier submits a claim or claims for
services that could not have been furnished to a specific
individual on the date of service. These instances include
but are not limited to the following situations:
(A) Where the beneficiary is deceased.
42 C.F.R. § 424.535. A data review of claims submitted
between April 2011 and April 2016 revealed that the company
had billed Medicare for items provided to 211 beneficiaries
who, according to the Social Security Administration's
rolls, were already deceased. See Revocation Letter
at 1. As evidence, PEOG attached a 47-person sample of the
claims data. Id.; see Compl., ¶ 45.
Plaintiff, for its part, was at least generally aware that
these checks were taking place, especially since it had in
the past refunded Medicare for faulty billing. See
Compl., ¶ 52; see also ECF No. 23 (Transcript
of PI Hearing) at 14:14-17 (“I'm sure that there is
a sense that there are audits that happen, but we were not
aware that there had been any concern raised about the
alleged billing of deceased beneficiaries.”).
letter then informed Arriva that it could “request a
reconsideration before a hearing officer, ” which would
be “an independent review . . . conducted by a person
not involved in the initial determination.” Revocation
Letter at 2. The reconsideration request would need to state
Arriva's basis for disagreeing with the revocation and
attach any additional evidence that the company chose to
provide for the purposes of Medicare's administrative
October 28, 2016, Plaintiff asked PEOG to reconsider,
submitting explanations and medical documentation for the
sample-data individuals - e.g., that the 211 billing
errors constituted only roughly .1% of the total number of
beneficiaries who died in that period. See Compl.,
Exh. 1 (November 2, 2016, Reconsideration Letter from PEOG to
Arriva) at 2-3.
days later, on November 2, the Group wrote back that it would
affirm its original decision. Id. PEOG first
summarized Arriva's arguments. Id. at 3;
see Araujo Decl., Exh. 8 (2012-2016 Deceased
Beneficiaries Chart) (listing over deceased beneficiaries
over five years). The decision then reasoned that: on 9
occasions, Arriva realized that a beneficiary was deceased
but processed the order anyway; for 13 claims, it made no
contact with the beneficiary within 14 days of the shipping
date (as Medicare guidance requires); and for an unspecified
number of claims, PEOG did not find credible the
company's allegations that beneficiaries' caregivers
placed orders inadvertently. See Reconsideration
Letter at 3; see also Medicare Program Integrity
Manual (MPIM), § 4.26.1 (“Contact with the
beneficiary or designee regarding refills shall take place no
sooner than 14 calendar days prior to the delivery/shipping
date.”) (chapters available at
PEOG last found it irrelevant that CMS did not reimburse
Arriva for these mistaken claims or that the company had
already refunded Medicare, as those facts did not bear on
whether or not Plaintiff had billed for deceased
beneficiaries. See Reconsideration Letter at 3-4.
Arriva objected, PEOG wrote, its recourse was to seek a
hearing before an HHS administrative-law judge and then, if
necessary, with the agency's Departmental Appeals Board
(DAB). Id. at 4-5; see 42 C.F.R.
§§ 498.40-.95. Should it ultimately prevail,
Medicare regulations would retroactively reimburse it for any
“unpaid claims for services furnished during the
overturned period.” Id. § 424.545(a)(2).
that adverse decision, the revocation went into effect as
scheduled, and CMS informed affected beneficiaries that
“Medicare won't pay [Arriva] for diabetes testing
supplies that [it] delivers to your home.” Araujo
Decl., Exh. 11 (November 7, 2016, Letter from CMS). In other
words, customers would need to switch mail-order suppliers or
visit their “local pharmacy or storefront
supplier” if Arriva left the program. Id.
(informing customers how to switch).
by these actions, Plaintiff arranged a meeting with several
CMS officials at HHS's D.C. headquarters on November 23,
2016. See Araujo Decl., ¶ 18. That get-together
included: CMS's Principal Deputy Administrator and Chief
Medical Officer; the Directors of PEOG, the Center for
Program Integrity, the Investigations and Audits Group, the
Chronic Care Policy Group; and several Deputy Directors as
well as a representative from the Division of Compliance and
Appeals. Id. Arriva then “walked through a
prepared slide presentation” regarding its case, after
which the Director of the Center for Program Integrity
“committed to reviewing Arriva's concerns and
getting back to Arriva leadership within 10 days.”
days passed without a word, and on December 6, 2016, a
separate CMS contractor wrote Arriva that the agency was also
terminating (effective January 20, 2017) the company's
National Mail-Order Contract. See Araujo Decl., Exh.
13 (December 6, 2016, Termination Letter from Palmetto GBA to
Arriva). Because Plaintiff no longer maintained billing
privileges - given the prior PEOG actions - it had breached
various provisions of its Medicare contract by not having an
active billing number. Id. at 1-2. The contractor
noted that to challenge this contract termination Arriva
could either submit a corrective-action plan or request a
hearing before an independent hearing officer. Id.
at 2 (citing 42 C.F.R. § 414.423(c), (f)).
December 20, 2016, Arriva received a follow-up from the
in-person meeting with CMS officials: The agency told
Plaintiff by email that it would not modify its decision.
See Compl., ¶ 65; Pl. Mot. at 13. A week later,
on December 27, Arriva sought ALJ review of the PEOG
decision. See Compl., ¶ 65. A day after that,
on December 28, Plaintiff filed the instant suit along with
an Application for a Temporary Restraining Order,
see ECF No. 4, claiming that both the Due Process
Clause and Administrative Procedure Act guaranteed it a
hearing before CMS revoked billing privileges or
terminated contracts. Id., ¶¶ 84-95. Two
days later, Defendant told Arriva that, “upon the
particular facts and circumstances here, CMS is willing to
defer the effectuation of the contract termination until such
date as the [DAB] renders the final agency decision on
Plaintiff's revocation.” Def. Mot. at 10.
subsequent TRO hearing on January 4, 2017, the Court denied
Plaintiff's Application, but allowed it to more fully
brief the issues in a preliminary-injunction motion.
See ECF No. 24 (Transcript of TRO Hearing) at
43:20-44:11. Now ripe are the Government's Motion to
Dismiss on jurisdictional grounds and Arriva's Motion for
a Preliminary Injunction.
defendant brings a Rule 12(b)(1) motion to dismiss, the
plaintiff must establish that the Court indeed has
subject-matter jurisdiction to hear its claims. See Lujan
v. Defenders of Wildlife, 504 U.S. 555, 561 (1992);
U.S. Ecology, Inc. v. Dep't of Interior, 231
F.3d 20, 24 (D.C. Cir. 2000). “Because subject-matter
jurisdiction focuses on the court's power to hear the
plaintiff's claim, a Rule 12(b)(1) motion imposes on the
court an affirmative obligation to ensure that it is acting
within the scope of its jurisdictional authority.”
Grand Lodge of Fraternal Order of Police v.
Ashcroft, 185 F.Supp.2d 9, 13 (D.D.C. 2001). In policing
its jurisdictional borders, the Court must scrutinize the
complaint, treating its factual allegations as true and
granting the plaintiff the benefit of all reasonable
inferences that can be drawn from those facts. See Jerome
Stevens Pharms., Inc. v. FDA, 402 F.3d 1249, 1253 (D.C.
Cir. 2005). The Court need not rely “on the complaint
standing alone, ” however, but may also look to
undisputed facts in the record or resolve disputed ones.
See Herbert v. Nat'l Acad. of Scis., 974 F.2d
192, 197 (D.C. Cir. 1992).
preliminary injunction is an extraordinary remedy never
awarded as of right.” Winter v. NRDC, 555 U.S.
7, 24 (2008). A party seeking preliminary relief must make a
“clear showing that four factors, taken together,
warrant relief: likely success on the merits, likely
irreparable harm in the absence of preliminary relief, a
balance of the equities in its favor, and accord with the
public interest.” League of Women Voters of United
States v. Newby, 838 F.3d 1, 6 (D.C. Cir. 2016) (quoting
Pursuing America's Greatness v. FEC, 831 F.3d
500, 505 (D.C. Cir. 2016)).
the Supreme Court's decision in Winter, 555 U.S.
7, courts weighed these factors on a “sliding scale,
” allowing “an unusually strong showing on one of
the factors” to overcome a weaker showing on another
factor. Davis v. PGBC, 571 F.3d 1288, 1291-92 (D.C.
Cir. 2009); see Davenport v. Int'l Bhd. of
Teamsters, 166 F.3d 356, 360-61 (D.C. Cir. 1999). This
Circuit has hinted, though not held, that Winter -
which overturned the Ninth Circuit's “possibility
of irreparable harm” standard - establishes that
“likelihood of irreparable harm” and
“likelihood of success” are
requirement[s].'” Sherley v. Sebelius, 644
F.3d 388, 392-93 (D.C. Cir. 2011) (quoting Davis,
571 F.3d at 1296 (Kavanaugh, J., concurring)). Unresolved,
too, is the related question of “whether, in cases
where the other three factors strongly favor issuing an
injunction, a plaintiff need only raise a ‘serious
legal question' on the merits.” Aamer v.
Obama, 742 F.3d 1023, 1043 (D.C. Cir. 2014); see
Wash. Metro. Area Transit Comm'n v. Holiday Tours,
Inc., 559 F.2d 841, 844 (D.C. Cir. 1977). Courts have
also observed possible “tension in the case law
regarding the showing required on the merits.”
Pursuing America's Greatness, 831 F.3d at 505
n.1 (comparing Winter's “likely”
success with the D.C. Circuit's “substantial
likelihood” standard); see, e.g.,
Sherley, 644 F.3d at 398 (using “more likely
than not to succeed”); Davis, 571 F.3d at 1295
(suggesting “high likelihood of success”);
Del. & Hudson Ry. v. United Transp. Union, 450
F.2d 603, 619 (D.C. Cir. 1971) (equating “substantial
likelihood” with “reasonable probability”);
Wheelabrator Corp. v. Chafee, 455 F.2d 1306, 1317
(D.C. Cir. 1971) (requiring “considered judgment of a
probability of success”).
of the extent to which showings of irreparable harm and
success on the merits can be diminished, some fundamentals of
the four-factor test bear reiterating. Because “the
basis of injunctive relief has always been irreparable harm,
” Chaplaincy of Full Gospel Churches v.
England, 454 F.3d 290, 297 (D.C. Cir. 2006), a plaintiff
must, at minimum, “demonstrate that irreparable injury
is likely in the absence of an injunction, ”
not just that injury is a “possibility.”
Winter, 555 U.S. at 21; see Davis, 571 F.3d
at 1292. Before and after Winter, similarly, this
Circuit has maintained its standard that a plaintiff may
obtain relief after demonstrating a “substantial
likelihood” of success. Pursuing America's
Greatness, 831 F.3d at 505. Where the plaintiff can show
neither harm nor success, it is plain that no relief
is warranted. See Standing Rock Sioux Tribe v. U.S. Army
Corps of Eng'rs, No. 16-1534, 2016 WL 4734356, at
*17 (D.D.C. Sept. 9, 2016); see also Ark. Dairy Co-op
Ass'n, Inc. v. USDA, 573 F.3d 815, 832 (D.C. Cir.
2009) (denying injunction when plaintiff shows “no
likelihood of success”).
focal dispute is whether Arriva should be able to bypass
Medicare's appeals pipeline, both to bring suit without
exhausting that process and then to preemptively halt the
revocation of its billing privileges so that it can obtain
additional pre-deprivation process first. These two issues -
one involving jurisdiction and the other injunctive relief -
are at the heart of the competing Motions here. More
specifically, Defendant argues that Plaintiff must first
exhaust Medicare's serpentine appeals process before
entering federal court, while Arriva invokes an exception to
that jurisdictional bar and next contends that the Court
should enjoin CMS from acting without certain additional
pre-revocation procedural safeguards. The Court walks through
these dual issues separately.
Government's opening salvo is that the Court may not yet
even hear Arriva's claims, as the company has not
finished its ALJ review, let alone the DAB appeal that
follows. While the regulatory scheme indeed restricts