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Choice Care Health Plan, Inc. v. Azar

United States District Court, District of Columbia

July 23, 2018

CHOICE CARE HEALTH PLAN, INC., Plaintiff,
v.
ALEX M. AZAR II, in his official capacity as Secretary of Health and Human Services, Defendant.

          MEMORANDUM OPINION

          TREVOR N. McFADDEN, U.S.D.J.

         Choice Care Health Plan, Inc. sued the Secretary of the Department of Health and Human Services[1] because the Administrator of an agency within the Department found that Choice Care Health Plan claimed several million dollars of Medicare reimbursements to which it was not entitled. Choice Care Health Plan argues that the decision violates the Administrative Procedure Act because it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. The parties' Cross-Motions for Summary Judgment are now before me. Because substantial evidence supports the Administrator's determination, Choice Care Health Plan's Motion for Summary Judgment will be denied and the Defendant's Cross-Motion for Summary Judgment will be granted.

         I. BACKGROUND

         Although he is not a named party, Dr. Subhash Thareja is a ubiquitous and central figure in the case. In 2004 and 2005, Dr. Thareja was the owner and CEO of Choice Care Health Plan, or CCHP. Compl. ¶ 17. He was also the owner and CEO of Quality Medical Care, or QMC. Id.; id. Ex. A at 10. And he worked for QMC as a cardiologist. Pl.'s Mot. Summary J. 5. Dr. Thareja provided clinical services to QMC patients who were members of the CCHP health care prepayment plan. Compl. ¶ 19.

         From 2004 to 2005, CCHP paid Dr. Thareja a salary of over $5.5 million, including bonuses, for his services as a cardiologist and CEO. Id. Ex. A at 10. CCHP included this pay in cost reports that it submitted to Medicare for reimbursement. Id. For 2004, CCHP claimed $2, 420, 063 in Medicare reimbursements for Dr. Thareja's salary-$300, 00 for his work as CEO of CCHP, $300, 000 for his work as CEO of QMC, $300, 000 as a bonus for his work as CEO, and just over $1.5 million for his cardiology services. Id. Ex. A at 10. For 2005, CCHP claimed $3, 128, 208 in Medicare reimbursements-$435, 00 for his work as CEO of CCHP, $300, 000 for his work as CEO of QMC, $300, 000 as a bonus for his work as CEO, and nearly $2.1 million for his cardiology services. Id. Initially, CCHP also sought Medicare reimbursement for other benefits that it provided Dr. Thareja, such as a car, life insurance, travel, entertainment, donations, gifts, meals, and exercise equipment. Id. at 10, 11 n.4; AR 865; see also Pl.'s Mot. Summary J. 22.

         In 2008, an auditor for the Centers for Medicare & Medicaid Services, or CMS, questioned these reimbursement claims. Compl. ¶ 20. The auditor determined that Dr. Thareja's total compensation from CCHP in 2004 and 2005 should have been less than $1 million. Id. It found that it was unreasonable to pay Dr. Thareja multiple full-time salaries based on CCHP's assertion that he worked about 127 hours a week for two years when CCHP had no auditable, contemporaneous documentation of Dr. Thareja's hours. AR 80. Instead, it credited testimony offered by CCHP that Dr. Thareja spent about 55% of his work time performing cardiology services and 45% of his work time working as a CEO. See AR 81. Thus, the auditor recommended that Medicare reimburse Dr. Thareja 55% of the salary of a top-paid, full-time cardiologist and 45% of the salary of a top-paid, full-time CEO. Id. CMS adopted the auditor's recommendation without modification and directed CCHP to return nearly $5.75 million of the Medicare reimbursements that it had received for payments to Dr. Thareja in 2004 and 2005. Id. ¶ 23; AR 79. CCHP filed an administrative appeal, and a CMS hearing officer determined that CCHP could keep nearly $2.5 million-more than the roughly $1 million CMS had recommended. AR 92.

         Both sides requested that the CMS Administrator review the hearing officer's determination. Compl. ¶ 30. The Administrator reversed the hearing officer's determination and reinstated CMS's initial determination that CCHP owed Medicare nearly $5.75 million. Id. ¶ 31. The Administrator determined that CMS had “correctly apportioned Dr. Thareja's salaries between his various roles, using [CCHP's] own estimate of his time spent on his cardiology practice and on his administrative duties.” Id. Ex. A at 15.

         CCHP then took its claims to federal court, arguing that the Administrator's decision violated the Administrative Procedure Act, or APA, by disallowing reimbursement of over $3.1 million paid to Dr. Thareja for his services as a cardiologist. See Compl. ¶ 22-23, 31, 52-54. CCHP has chosen not to contest the disallowance of other claimed reimbursements. Reply ISO Pl.'s Mot. Summary J. 1. The parties filed Cross-Motions for Summary Judgment.

         II. LEGAL STANDARD

         The APA authorizes courts to review agency decisions. 5 U.S.C. § 702. A court's review is limited to the administrative record, and the court must determine if that record supports the agency's decision. Coe v. McHugh, 968 F.Supp.2d 237, 239 (D.D.C. 2013). The court will grant summary judgment to the agency if the agency action is “supported by the administrative record and otherwise consistent with the APA standard of review.” Id. at 240. On the other hand, if the agency decision is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law, ” the court will grant summary judgment to the plaintiff. See 5 U.S.C. § 706. In resolving this question, the court asks whether “the agency acted within the scope of its legal authority, whether the agency has explained its decision, whether the facts on which the agency purports to have relied have some basis in the record, and whether the agency considered the relevant factors.” Fulbright v. McHugh, 67 F.Supp.3d 81, 89 (D.D.C. 2014), aff'd sub nom. Fulbright v. Murphy, 650 Fed.Appx. 3 (D.C. Cir. 2016).

         III. ANALYSIS

         The touchstone for Medicare reimbursements to health care prepayment plans like CCHP is “reasonable cost.” 42 C.F.R. § 417.800(c). Medicare reimbursement for a physician's clinical work should be “commensurate with the compensation paid for similar services performed by similar physicians practicing in the same or a similar locality.” 42 C.F.R. § 417.544(a)(1). A provider claiming Medicare reimbursement “must provide adequate cost data, ” meaning that the provider must provide accurate documentation with enough detail to support its reimbursement claim. 42 C.F.R. 413.24(a), (c). “Adequate data capable of being audited is consistent with good business concepts [and] is a reasonable expectation on the part of any agency paying for services on a cost-reimbursement basis.” 42 C.F.R. 413.24(c).

         A. The Administrator's Treatment of Dr. Thareja as a Part-Time Cardiologist Does Not Violate the Administrative Procedure Act

         The Administrator affirmed CMS's determination that a reasonable cost for Dr. Thareja's cardiology services would be 55% of the pay that a full-time cardiologist in his area would have received. Compl. Ex. A 12-13, 17. CMS based this determination on a statement to the CMS auditor by Janet Cody, QMC's CFO, that she thought Dr. Thareja spent about 55% of his time practicing cardiology and 45% of his time performing managerial and administrative tasks. Id. at 12. Recall that Dr. Thareja was employed as QMC's CEO, presumably as Ms. Cody's boss. See Compl. ΒΆ 17. The ...


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