UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

ELECTRICAL WORKERS INSURANCE

FUND,

Plaintiff(s),

v.

KATHLEEN SEBELIUS, in her official

capacity as SECRETARY, UNITED

STATES DEPARTMENT OF HEALTH AND

HUMAN SERVICES,

Defendant(s).

 /

Case No. 08-14738

Honorable Nancy G. Edmunds

OPINION AND ORDER DENYING PLAINTIFF’S MOTION FOR

SUMMARY JUDGMENT [17] AND GRANTING DEFENDANT’S MOTION

FOR VOLUNTARY REMAND [18]

This matter comes before the Court on Plaintiff’s motion for summary judgment and

Defendant’s motion for voluntary remand. For the reasons set forth below, Plaintiff’s motion

is DENIED without prejudice and Defendant’s motion is GRANTED. This Court STAYS the

case pending the publication and implementation of an Indirect Payment Process (IPP) by

the Secretary of the United States Department of Health and Human Service (HHS).

HHS shall comply with all dictates of 42 U.S.C. § 1395u(b)(6)(B) and 42 C.F.R. §

424.66 in implementing the IPP and developing agency policy and guidance regarding the

process. HHS is also is directed to file status reports within 90 days of the date of this

Order, and at 60-day intervals thereafter. 

I. Facts
 1

 HHS is the governmental agency charged with the administration of the Medicare

program, including the promulgation of regulations for the administration of the Medicare

payment policies and procedures.

 2

 Under 42 U.S.C. § 1395u, HHS is authorized to contract with public or private agencies

or organizations in administering Medicare Part B.

 3

 CMS administers Medicare’s health care program for aged and disabled individuals.

2

In its Amended Complaint, Plaintiff Electrical Workers Insurance Fund (EWIF), a jointly

administered trust fund which provides health benefits to active and retired members of the

Electrical Workers Local Union No. 58, challenges the refusal by HHS1

 to allow EWIF to

submit certain Medicare Part B claims on behalf of its participants and to receive

reimbursement for such claims through the indirect payment provisions of the Social

Security Act. See 42 U.S.C. § 1395u(b)(6)(B); 42 C.F.R. § 424.66.

On December 6, 2007, EWIF filed a claim seeking reimbursement of approximately

$400,000 for prescription drug benefits paid on behalf of its participants under Medicare

Part B. (Madonna Decl., Pl.’s Mot., Ex. 3 ¶ 2; Eggersten Decl., Pl.’s Mot., Ex. 2 ¶ 3.) EWIF

filed its claim under the IPP associated with 42 U.S.C. § 1395u(b)(6)(B), 42 C.F.R. §

424.66, and the Medicare Claims Processing Manual Ch. 1 § 30.2.8.3. (Pl.’s Mot., Ex. 2-A.)

Those claims were filed with Wisconsin Physician Service Insurance Corporation (WPS),

an HHS contractor administering Medicare Part B coverage and claim processing.2

 (Id.) 

Sometime prior to April 30, 2008, WPS referred EWIF’s claim to the Center for

Medicare and Medicaid Services (CMS), a component agency of HHS.3 (Eggersten Decl.

¶¶ 5, 6.) On July 8, 2008, CMS informed EWIF of its decision to reject the claims. 

CMS has reviewed [EWIF’s] request for indirect payments. Based on our

review, we have determined [that] EWIF is not entitled to indirect payments.
 4

 According to EWIF, the former “IPP and its predecessor, the ‘Payment to

Organizations Regulation,’ have been in effect for almost 40 years to give a qualifying

entity, such as [EWIF], the right to receive payments instead of requiring a Medicare

beneficiary to file a claim with Medicare and, upon receipt of Medicare’s check, signing it

over to the qualifying entity that already had paid the bill.” (Compl. ¶ 33.) In the 1990’s,

CMS promulgated Form 1490u (entitled “Request For Medicare Payment By Organizations

Which Qualify To Receive Payment For Paid Bills”) for use by group heath plans, like

EWIF, to facilitate the processing of Medicare Part B third party reimbursement claims.

(Compl. ¶ 46.) In 2006, HHS issued 42 C.F.R. § 424.500 which created another IPP that

only permitted providers and suppliers, not group health plans, to participate. (Compl. ¶ 32.)

CMS, thereafter, discontinued the use of Form 1490u and replaced it with Form 1500—for

claims submitted by physicians and suppliers—and form 1490S—for claims submitted by

beneficiaries. (Compl. ¶¶ 47-48.) CMS did not, however, create a replacement form for

3

(Pl.’s Mot., Ex. 2-B.)

According to HHS, EWIF’s claims were denied for three reasons. First, the agency

claimed that the statutory authorities upon which EWIF relied, 42 U.S.C. § 1395u(b)(6)(B)

and 42 C.F.R. § 424.66, provided only that Medicare “may” pay group health plans (like

EWIF) pursuant to an IPP, not that Medicare must do so. Section 1395u(b)(6)(B) provides:

payment may be made to an entity (i) which provides coverage of the

services under a health benefits plan, but only to the extent that payment is

not made under this part ...

42 U.S.C. § 1395u(b)(6)(B) (emphasis added). Section 424.66 provides:

Medicare may pay an entity for Part B services furnished by a physician or

other supplier if the entity meets all of the following requirements ...

42 C.F.R. § 424.66 (emphasis added). And, Medicare choose not to allow reimbursement

to group health plans. (Pl.’s Mot., Ex. 2-B.) Second, the agency contended the IPP,

formerly available to group health plans (like EWIF) under 42 C.F.R. § 424.66, was no

longer available following the issuance of 42 C.F.R. § 424.500—as § 424.500 superceded

§ 424.66 and it only permitted providers and suppliers of Medicare benefits, not group

health plans, to enroll with Medicare for third party reimbursement.4

 Since EWIF was not
entities like EWIF. (Compl. ¶ 49.) According to HHS, it decided to discontinue Form 1490u

without creating a replacement form for group health plans, in part, because “a very small

number of suppliers currently use the ... form[] and the agency has determined that there

would be considerable cost in redesigning these forms to accept the National Provider

Identifier.” (Compl. ¶ 47 (quoting CMS Transmittal 1144).) HHS, in ceasing to accept Form

1490u from group health plans, effectively cancelled the administration of the IPP

previously available under C.F.R. § 424.66 thereby foreclosing entities like EWIF from

seeking Medicare Part B reimbursement on behalf of its participants.

4

a provider or supplier, it could not utilized the IPP under § 424.500, thus, EWIF could not

be reimbursed by Medicare. Third, the agency asserted that EWIF had not received the

necessary approval (or approval number) to submit third party reimbursement claims.

As a result of the decision to reject its claims and deny its application for

reimbursement—pursuant to the IPP formerly available to group health plans under 42

U.S.C. § 1395u(b)(6)(B), 42 C.F.R. § 424.66, and the Medicare Claims Processing Manual

Ch. 1 § 30.2.8.3—EWIF alleges that it “has not been reimbursed for approximately

$380,000 which [it] has paid for Medicare Part B Covered Drugs and deprived [its]

participants of over $22,000 in co-pays and deductibles that they paid ... for Medicare Part

B Covered Drugs.” (Pl.’s Mot. at 16.) 
 5

 EWIF filed this action seeking declaratory and injunctive relief under 28 U.S.C. §§

2201, 2202, a petition for writ of mandamus under 28 U.S.C. § 1361 and costs and fees

under 28 U.S.C. § 2412. (Am. Compl. ¶ 10.) 

The Fund seeks a judgment declaring that the Fund is entitled to

reimbursement pursuant to 42 U.S.C. § 1395u(b)(6)(B) and 42 C.F.R. 424.66

(“the Indirect Payment Procedure”), for benefit payments made by the Fund

that were payable under the Medicare Act. The Fund also seeks a writ of

mandamus ordering and directing the HHS and its authorized representatives

to accept the Fund’s claims for reimbursement for Part B drug claims that

were dispensed to Medicare beneficiaries for processing and payment under

the Indirect Payment Procedure and an order enjoining Defendant from

refusing to consider such claims under the Indirect Payment Procedure.

(Id. ¶ 15.)

5

EWIF filed this action seeking, inter alia,

5

 a process (i.e., an IPP like the former IPP

available to group health plans) whereby it is permitted to submit Medicare Part B claims

on behalf of its participants and entitled to receive applicable Medicare Part B

reimbursement payments. HHS has now determined that such a process would be

appropriate under the criteria set forth in 42 U.S.C. § 1395u(b)(6)(B) and 42 C.F.R. §

424.66. HHS, however, contends that it does not currently have an IPP in place to permit

group health plans (like EWIF) to do that which EWIF seeks. Thus, HHS requests a

voluntary remand of this action to implement an IPP that would be available to group health

plans (like EWIF) and also to develop agency policy and guidance regarding such a

process.

This matter is before the Court on Plaintiff’s motion for summary judgment and

Defendant’s motion for voluntary remand, both filed on December 14, 2009. HHS argues

that Plaintiff’s motion for summary judgment should be denied as HHS is seeking voluntary

remand for the purpose of establishing a new IPP—consistent with 42 U.S.C. §
 6

 42 U.S.C. § 1395u(b)(6)(B) provides:

No payment under this part for a service provided to any individual shall

(except as provided in section 1395gg of this title) be made to anyone other

than such individual or ... the physician or other person who provided the

service, except that ... (B) payment may be made to an entity (i) which

provides coverage of the services under a health benefits plan, but only to

the extent that payment is not made under this part, (ii) which has paid the

person who provided the service an amount (including the amount payable

under this part) which that person has accepted as payment in full for the

service, and (iii) to which the individual has agreed in writing that payment

may be made under this part...

 7

 42 C.F.R. § 424.66 provides:

(a) Conditions for payment. Medicare may pay an entity for Part B services

furnished by a physician or other supplier if the entity meets all of the

following requirements: (1) Provides coverage of the service under a

complementary health benefit plan (this is, the coverage that the plan

provides is complementary to Medicare benefits and covers only the amount

by which the Part B payment falls short of the approved charge for the

service under the plan). (2) Has paid the person who provided the service an

amount (including the amount payable under the Medicare program) that the

person accepts as full payment. (3) Has the written authorization of the

beneficiary (or of a person authorized to sign claims on his behalf under §

424.36) to receive the Part B payment for the services for which the entity

pays. (4) Relieves the beneficiary of liability for payment for the service and

will not seek any reimbursement from the beneficiary, his or her survivors or

estate. (5) Submits any information CMS or the carrier may request, including

an itemized physician or supplier bill, in order to apply the requirements

under the Medicare program. (6) Identifies and excludes from its requests for

payment all services for which Medicare is the secondary payer. 

(b) Services paid for by the entity. An entity is not required to pay and claim

reimbursement for all Part B services furnished to members of its plans.

However, if it does not pay and claim reimbursement for all those services,

it must establish in advance precise criteria for identifying the services for

which it will pay and claim reimbursement.

6

1395u(b)(6)(B)6

 and 42 C.F.R. § 424.66;7 —through which EWIF could submit its claims.

(Def.’s Resp. at 5.) Thus, HHS seeks remand so that it may develop and implement the

very process that EWIF seeks.

II. Analysis
7

A. Voluntary Remand is Appropriate

HHS claims that it does not currently have an IPP in place for group health plans (like

EWIF), and that the development and implementation of a new IPP will require: (1) the

development of claims submission guidance and claim eligibility criteria consistent with 42

U.S.C. § 1395u(b)(6)(B) and 42 C.F.R. § 424.66; (2) potential changes to its computer

systems; and (3) the designation of Medicare contractor(s) to process IPP claims submitted

by group health plans. HHS argues, and this Court agrees, that remand is appropriate. 

Because HHS is singularly suited—due to its administrative and technical

expertise—to develop an IPP, the Court remands this action to the agency for further

administrative action.

[I]t is an abuse of discretion to prevent an agency from acting to cure the very

legal defects asserted by plaintiffs challenging federal action. 

This court has recognized the inherent authority of an agency to reconsider

a prior decision. Belville Mining Co. v. United States, 999 F.2d 989, 997 (6th

Cir. 1993) (“Even where there is no express reconsideration authority for an

agency, however, the general rule is that an agency has inherent authority

to reconsider its decision, provided that reconsideration occurs within a

reasonable time after the first decision.”); see also Cissell Mfg. Co. v. United

States Dep’t of Labor, 101 F.3d 1132, 1136 (6th Cir. 1996) (holding in a

review of an adjudicative proceeding that “[i]t is well settled that when an

agency makes an error of law in its administrative proceedings, a reviewing

court should remand the case to the agency so that the agency may take

further action consistent with the correct legal standards”). 

Accordingly, when an agency seeks a remand to take further action

consistent with correct legal standards, courts should permit such a remand

in the absence of apparent or clearly articulated countervailing reasons.

Otherwise judicial review is turned into a game in which an agency is

“punished” for procedural omissions by being forced to defend them well after

the agency has decided to reconsider.

Citizens Against Pellissippi Parkway Extension, Inc. v. Mineta, 375 F.3d 412, 416 (6th Cir.

2004). Thus, where an agency requests a remand under the circumstances presented
 8

 Additionally, according to HHS: 

Once the agency develops and implements an IPP, EWIF will be given an

opportunity to demonstrate that it qualifies as an entity described in 42 U.S.C.

§ 1395u(b)(6)(B), 42 C.F.R. § 424.66 under the new process developed by

the agency. If it does qualify, EWIF will be permitted to submit, and

Defendant will accept, for processing any eligible Medicare Part B claims.

EWIF will then receive any Part B payments due. All existing Part B eligibility

and payment provisions will apply. Moreover, Defendant will not deny on

timeliness grounds any Part B IPP claims that were timely when Plaintiff

made its December 6, 2007 request for indirect ... or any subsequent Part B

IPP claims that would have been timely had the agency permitted Plaintiff to

submit such claims for processing and payment. In other words, the time

required for Defendant to implement the IPP will not count against EWIF in

determining the Part B payment due for the claims EWIF submits through the

IPP.

(Def.’s Mot. at 7.)

 9

 EWIF contends that the Court should deny the motion to remand, and instead “declare

HHS’ duties and obligations, reject HHS’ justifications for refusing to process [EWIF’s]

claims in the past, and order HHS to process the claims in accordance with the existing

statutory and regulatory standards. Unless the Court declares HHS’ duties and obligations,

it is virtually certain that HHS will do nothing to process the claims in a timely manner in

accordance with HHS’ existing obligations.” (Pl.’s Resp. at 5.) This Court does not find

EWIF’s argument persuasive. See Shalala, 192 F.3d 1011 (“Whether it is a court of appeals

or a district court, under settled principles of administrative law, when a court reviewing

agency action determines that an agency made an error of law, the court’s inquiry is at an

end: the case must be remanded to the agency for further action consistent with the

corrected legal standards. Once, therefore, the district court held that the [agency] had

misinterpreted [the statute], it should have remanded to the [agency] for further

proceedings consistent with its conception of the statute. Not only was it unnecessary for

the court to retain jurisdiction to devise a specific remedy for the [agency] to follow, but it

was error to do so.”) (internal quotations and citations omitted). Here, both parties agree

that it would be appropriate, under 42 U.S.C. § 1395u(b)(6)(B) and 42 C.F.R. § 424.66, for

HHS to develop and implement an IPP available to group health plans (like EWIF). The

purpose for remand, therefore, is for HHS to devise a process by which EWIF can submit

its Medicare Part B claims for reimbursement consistent with 42 U.S.C. § 1395u(b)(6)(B)

and 42 C.F.R. § 424.66. Thus, while it is proper for this Court to remand for HHS to devise

a process, it is improper for this Court to dictate the specific manner for HHS to devise such

an IPP.

8

here—to cure the very defect asserted by EWIF8—courts are to remand the case to the

agency.9 See Ethyl Corp. v. Browner, 989 F.2d 522, 524 (D.C. Cir. 1993) (“We commonly
9

grant such motions, preferring to allow agencies to cure their own mistakes rather than

wasting the courts’ and the parties’ resources reviewing a record that both sides

acknowledge to be incorrect or incomplete.”). This is so even where the record is found not

to support the agency’s action. See County of Los Angeles v. Shalala, 192 F.3d 1005, 1023

(D.C. Cir. 1999).

B. Limits on Remand Period

EWIF argues that a deadline on remand is appropriate to ensure that HHS develops

and implements the IPP in a timely manner. EWIF contends that such a constraint is

necessary because HHS has been on notice of EWIF’s claims for a considerable amount

of time and has failed to act. EWIF’s claims for reimbursement were filed in December

2007—more than two years ago—and this action was commenced in November

2008—over one year ago. See Nat’l Fuel Gas Supply Corp. v. FERC, 899 F.2d 1244, 1250

(D.C. Cir. 1990) (recognizing the potential inconvenience of remand on the non-agency

party and that party’s entitlement to a speedy resolution of its action, the court determined

that a time limit on remand was appropriate, in part, because the agency “indicated that it

would have no objection to affording expedited consideration ... on remand”). HHS, on the

other hand, takes the position that, given competing priorities of the agency and the

complexity of designing a new IPP, it cannot state precisely the total amount of time that

will be needed to fully implement a new program. Further, HHS argues that, absent a

finding of unreasonable delay, a time constraint would not be appropriate.

Court imposed deadlines on remand are extraordinary. See Qwest Communications

Intern., Inc. v. F.C.C., 398 F.3d 1222, 1238-39 (10th Cir. 2005) (“[I]t is clear that a

court-imposed deadline for agency action constitutes an extraordinary remedy.”); In re
10

International Chemical Workers Union, 958 F.2d 1144, 1149 (D.C. Cir. 1992) (“[I]n

extraordinary circumstances, this court will review claims of unreasonable agency delay.”).

Under [the Administrative Procedure Act] 5 U.S.C. § 706(1), [a court] may

“compel agency action unlawfully withheld or unreasonably delayed.”

The U.S. Court of Appeals for the District of Columbia Circuit has set forth

the following factors to guide courts in this determination: (1) the extent of the

delay, (2) the reasonableness of the delay in the context of the legislation

authorizing agency action, (3) the consequences of the delay, and (4)

administrative difficulties bearing on the agency’s ability to resolve an issue.

To this we might expressly add consideration of the complexity of the task

envisioned by a court’ remand order.

Qwest Communications Intern., Inc. v. F.C.C., 398 F.3d 1222, 1238-39 (internal quotations

and citations omitted). Here, extraordinary circumstances have not been shown.

Accordingly, this Court declines to set a time limit on HHS’s course of action on

remand. To the extent concern exists about HHS’s diligence on remand, mandamus may

afford a remedy for undue delay. See In re International Chemical Workers Union, 958 F.2d

at 1150 (“There is a point when the court must let the agency know, in no uncertain terms,

that enough is enough.”) (internal quotation and citation omitted); Natural Res. Def. Council

v. EPA, 489 F.3d 1364, 1375 (D.C. Cir. 2007) (“We decline to set a two year limit on EPA’s

proceedings on remand as the NRDC requests; mandamus affords a remedy for undue

delay.”). The Court, therefore, fully expects HHS to proceed on remand in an expeditious

manner, bearing in mind the consequences inherent in further delay.

C. Attorney Fees
 10 HHS contends that its position was and remains substantially justified. 

Indeed, the Secretary still believes it would be reasonable to deny EWIF’s

claims. It would also be reasonable not to devise an Indirect Payment

Procedure for entities like EWIF, based on HHS’s understanding the number

of such entities—i.e., non-providers and non-suppliers of Medicare-eligible

drugs—is relatively small, and because EWIF could have sought

reimbursement under Medicare Part D rather than Part B for virtually all of

the benefits in question here. HHS’s willingness to devise a new Indirect

Payment Procedure tailored for entities like the plaintiff, notwithstanding the

availability of other approaches, does not make the Secretary’s

administrative position unreasonable or arbitrary and capricious.

(Def.’s Resp. at 7.)

11

EWIF argues that the purported justifications provided by HHS for refusing to process

EWIF’s claims are arbitrary and capricious pretexts10 which ignore the applicable statutory

and regulatory mandates. See 42 U.S.C. § 1395u(b)(6)(B) and 42 C.F.R. § 424.66.

According to EWIF,

once this lawsuit was filed, HHS did not admit the errors of HHS’ ways.

Instead, it filed an answer which again denied that [EWIF] had any rights.

HHS maintained that position through this litigation, until—after the close of

discovery—HHS now concedes that 42 C.F.R. § 424.66 controls but—for

reasons HHS still refuses to acknowledge—HHS has no mechanism for

processing [EWIF]’s claims at this time.

That conduct is itself an abuse of process, arbitrary, capricious and contrary

to law. And that conduct has caused [EWIF] to incur substantial attorneys’

fees which [it] would not have incurred if HHS had conceded, in early 2008,

what it now concedes.

As a result, [EWIF] should recover its attorneys’ fees.

(Pl.’s Resp. at 11.)

The statute under which EWIF seeks fees, the Equal Access to Justice Act (EAJA),

28 U.S.C. § 2412, requires that applications for fees may be made by a “prevailing party”

within thirty days of a “final judgment” based on the full record of the case. See 28 U.S.C.
 11 The Court finds unpersuasive EWIF’s contention that “where HHS asks the court for

a remand, the Court should determine now that [EWIF] will be entitled to its fees, in an

amount to be determined after when [sic] [EWIF] makes its formal application for fees.”

(Pl.’s Resp. at 11.) EWIF, however, cites no authority for its proposition that a voluntary

remand is a “final judgment” under the EAJA. EWIF’s request for attorney fees is, thus,

premature.

The Court also finds unpersuasive EWIF’s contention that “[f]ees should also be

awarded as a condition of remand by analogy with Rule 41(b) ... because HHS in effect

seeks involuntary dismissal.” (Pl.’s Resp. at 12.) EWIF, itself, acknowledges that “Rule

41(b) does not directly apply because it is HHS, not the plaintiff ..., which seeks what is, in

effect, a voluntary dismissal. But justice requires that HHS compensate [EWIF] for the

attorneys’ fees which HHS has necessitated by its dilatory conduct in this litigation as well

as its original arbitrary, capricious and unlawful behavior which made it necessary for

[EWIF] to commence this litigation.” (Id.)

12

§ 2412(d)(1)(B). This case is still pending,11 and until such time as the case becomes

“final,” EWIF is not a “prevailing party.” Accordingly, this Court denies EWIF’s request for

attorney fees.

III. Conclusion

For the foregoing reasons, Plaintiff’s motion is DENIED without prejudice and

Defendant’s motion is GRANTED. This Court STAYS the case pending the publication and

implementation of an Indirect Payment Process (IPP) by the Secretary of the United States

Department of Health and Human Service (HHS).

HHS shall comply with all dictates of 42 U.S.C. § 1395u(b)(6)(B) and 42 C.F.R. §

424.66 in implementing the IPP and developing agency policy and guidance regarding the

process. HHS is also is directed to file status reports within 90 days of the date of this

Order, and at 60-day intervals thereafter.

s/Nancy G. Edmunds 

Nancy G. Edmunds

United States District Judge

Dated: February 25, 2010
13

I hereby certify that a copy of the foregoing document was served upon the parties and/or

counsel of record on February 25, 2010, by electronic and/or ordinary mail.

s/Carol A. Hemeyer 

Case Manager