___________

No. 96-1561

___________

Clarinda Home Health, formerly *

known as Nodaway Valley *

Skilled Services, Inc.; Jay *

Eickemeyer, *

*

 Appellants, *

* Appeal from the United States

v. * District Court for the

* Southern District of Iowa.

Donna Shalala, Secretary of *

Health and Human Services; *

Medicare IASD Health Services *

Corporation, *

*

 Appellees. *

___________

 Submitted: June 13, 1996

 Filed: November 18, 1996

___________

Before BEAM, JOHN R. GIBSON, and HANSEN, Circuit Judges.

___________

JOHN R. GIBSON, Circuit Judge.

Clarinda Home Health and Jay Eickemeyer appeal from an order of the

district court denying their motion for a preliminary injunction

restraining Donna Shalala, Secretary of Health and Human Services, and

Medicare IASD Health Services Corporation from suspending Medicare payments

to Clarinda Home Health without a hearing. The district court denied the

claim for injunctive relief because of Clarinda's failure to show a

probability that it would succeed on the merits of either its procedural

due process liberty interest claim or its procedural due process property

interest
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claim. On appeal, Clarinda makes numerous claims of error, and the

Secretary responds that the courts are without jurisdiction to consider

Clarinda's claims. We granted Clarinda's motion for injunctive relief

enjoining the Secretary from suspending past and future Medicare payments

during the pendency of this appeal. We conditioned this grant of

injunctive relief upon Clarinda's posting of a bond in an amount and under

the terms and conditions as set by the district court, with which Clarinda

successfully complied. We dismiss this appeal and vacate the stay pending

appeal for want of subject matter jurisdiction and direct the district

court to dismiss the complaint for want of subject matter jurisdiction.

 

There is little dispute as to the facts. Clarinda Home Health,

formerly known as Nodaway Valley Skilled Services, Inc., provided health

services to elderly and handicapped persons in southern Iowa. In May of

1993 Clarinda Home Health was certified by Medicare to be reimbursed for

health care supplies, products, and services provided to its patients who

qualified for Medicare benefits. On December 21, 1995, Medicare IASD

Health Services Corporation, Clarinda's intermediary, notified Clarinda

that an investigation was being conducted for acts of fraud and/or willful

misrepresentation, and that it was suspending all payments to Clarinda for

services billed to the Medicare program. The notification letter stated

that an investigation by the United States Department of Justice and the

Federal Bureau of Investigation had produced reliable evidence that Nodaway

Valley Skilled Services, Inc. (Clarinda) may have committed acts of fraud

and/or willful misrepresentation regarding claims submitted for Medicare

reimbursement. As a result, Clarinda's intermediary withheld payments

totalling nearly $65,000 for Medicare services already rendered by

Clarinda. 

Clarinda sought injunctive relief to enjoin the Secretary and

Medicare IASD Health Services Corporation from suspending Medicare payments

to Clarinda without a hearing. The district court
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recognized that 42 C.F.R. § 405.371(b) (1995), which authorizes suspension

of payment where authorities have obtained reliable evidence of fraud or

willful misrepresentation, provided the authority for the decision to

suspend payment. 

The district court conducted the four-part inquiry outlined in

Dataphase Systems, Inc. v. C L Systems, Inc., 640 F.2d 109, 114 (8th Cir.

1981) (en banc), and denied relief. It first determined that the

suspension would cause irreparable harm to the plaintiffs. Next, it found

that Clarinda's interest in the potential closing of its business

outweighed the government's interest in prohibiting fraudulent Medicare

payments. The district court then looked to the merits of Clarinda's due

process claims and determined that there was no probability that Clarinda

would succeed on these claims. Finally, because the court found that other

providers could care for Clarinda's patients if Clarinda was no longer able

to provide services, the court rejected Clarinda's argument that the grant

of an injunction would serve the public interest. 

Clarinda makes numerous claims of error with respect to the district

court's order, but in view of our conclusion that the Secretary properly

has raised an issue as to our jurisdiction over the subject matter of

Clarinda's suit, we need not consider those arguments. We review the

question of subject matter jurisdiction de novo. See Drevlow v. Lutheran

Church, Missouri Synod, 991 F.2d 468, 470 (8th Cir. 1993).

Before the district court's ruling, the Secretary filed a motion to

dismiss this action, asserting that the district court lacked jurisdiction

to hear Clarinda's suit. The district court, however, did not rule on this

motion before proceeding to the merits. The Secretary raises the lack of

jurisdiction again before this court. 

The Secretary points to 42 U.S.C. § 405(h) (1994) which
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specifically exempts 28 U.S.C. § 1346 (1994) as a jurisdictional basis for

actions arising under the Social Security Act, and explains that this

preclusive section has been incorporated into the Medicare Act by reference

through 42 U.S.C. § 1395ii (1994). Next, the Secretary points to Heckler

v. Ringer, 466 U.S. 602 (1984), which dealt specifically with the Medicare

provisions of the Social Security Act, and argues that the temporary

withholding of Medicare payments is not a final decision subject to

judicial review under 42 U.S.C. § 405(g) (1994). Clarinda responds that

the district court had subject matter jurisdiction pursuant to 28 U.S.C.

§§ 1331 and 1336 (1994) and that this Court now has subject matter

jurisdiction based on 28 U.S.C. § 1291 (1994). 

I.

The Medicare program is divided into two parts. 42 U.S.C. §§ 1395-

1395ccc (1994). Part A of the program deals with hospitalization benefits.

Part B of the program is a supplementary medical insurance program for the

aged and disabled. To administer the Medicare program, Congress has

authorized the Secretary to enter into contracts with companies, known as

"carriers," to perform actions on behalf of the Secretary. 42 U.S.C. §

1395u. Carriers are authorized to complete several tasks including:

determining the rates and proper payment amounts to providers of services;

auditing the records of providers; and receiving and accounting for

payments made to providers. 

The regulation at issue in this lawsuit, 42 C.F.R. § 405.371(b),

allows the carrier to suspend payment to the provider where the carrier has

reliable evidence of willful misrepresentation or fraud. Section

405.371(b) supplied the authority to suspend payments to Clarinda. This

section provides: 

(b) Fraud or misrepresentation. The provisions of paragraph

(a) of this section [allowing for notice
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and an opportunity to respond] shall not apply where the

intermediary or carrier has reliable evidence that the

circumstances giving rise to the need for a suspension of

payments involves fraud or willful misrepresentation.

Instead, the intermediary or carrier may suspend payments

without first notifying the provider or other supplier of

an intention to suspend payments.

Under this provision, authorities are not required to give a provider

prior notice of the suspension of payments and the provider has no right

to the payments or a hearing while the Secretary investigates the

underlying charges. Upon the conclusion of the investigation, the

intermediary transfers the withheld funds to the provider if the

investigation failed to establish evidence of fraud. Notably, the

temporary withholding of payments pursuant to 42 C.F.R. § 405.371(b) is not

a final determination of exclusion from the Medicare program, but instead

is a provision designed to protect the government from suffering greater

losses. If authorities establish evidence of fraud, the Secretary may then

make a final determination to exclude the provider from the Medicare

program. After the Secretary's final determination, authorities must

supply the provider with notice of the proposed action and a hearing. 42

C.F.R. §§ 1001, 1005 (1994). Following this hearing, if the Department

concludes that exclusion is the appropriate sanction, the Secretary is

required to provide "reasonable notice to the public." 42 U.S.C. § 1320a7(c)(1) (1994). The excluded party is then entitled to notice and judicial

review pursuant to 42 U.S.C. § 405(g).

II.

We must determine whether subject matter jurisdiction exists over

Clarinda's claim. We first look to the provisions of 42 U.S.C. § 405(h).

This section is part of the Social Security Act, but is incorporated into

the Medicare Act by 42 U.S.C. § 1395ii. Section 405(h) provides:
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The findings and decision of the Commissioner of Social

Security after a hearing shall be binding upon all individuals

who were parties to such hearing. No findings of fact or

decision of the Commissioner of Social Security shall be

reviewed by any person, tribunal, or governmental agency except

as herein provided. No action against the United States, the

Commissioner of Social Security, or any officer or employee

thereof shall be brought under sections 1331 or 1346 of title

28 to recover on any claim arising under this subchapter.

The scope of section 405(h) has been the subject of much litigation.

The Supreme Court has held that section 405(h) "extends to any action

seeking to recover on any Social Security claim." Weinberger v. Salfi, 422

U.S. 749, 762 (1975). The considerations behind the Social Security Act

that led Congress to limit judicial review are also applicable to the

Medicare program. St. Louis Univ. v. Blue Cross Hosp. Serv., 537 F.2d 283,

289 (8th Cir.), cert. denied, 429 U.S. 977 (1976). The Supreme Court

further considered the scope of this section in Heckler v. Ringer, 466 U.S.

602 (1984), and determined that claims arising under other statutes may be

barred by section 405(h) if they are "inextricably intertwined" with

benefit determinations under the Medicare Act. Id. at 622-24. In Ringer,

the Medicare claimants challenged the Secretary's final decision

prohibiting reimbursement for bilateral carotid body claims on the grounds

that the Secretary's decision violated the Medicare Act, the Administration

Procedure Act, and the Due Process Clause. The Court looked behind the

face of the claims and found that the plaintiffs' claim was, "at bottom,

a claim that they should be paid for their . . . surgery." 466 U.S. at

614. The Court concluded, therefore, that the claim was "inextricably

intertwined" with the claim for benefits, and accordingly, was barred from

judicial review by section 405(h). Id.

 

Though section 405(h) seems to be a conclusive bar of jurisdiction

over Medicare claims, section 405(g), after requiring
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exhaustion of administrative avenues of relief, limits the preclusive

effect of section 405(h). Section 405(g) states:

Any individual, after any final decision of the Commissioner of

Social Security made after a hearing to which he was a party,

irrespective of the amount in controversy, may obtain a review

of such decision by a civil action commenced within sixty days

after the mailing to him of notice of such decision or within

such further time as the Commissioner of Social Security may

allow. . . . The court shall have power to enter, upon the

pleadings and transcript of the record, a judgment affirming,

modifying, or reversing the decision of the Commissioner of

Social Security, with or without remanding the cause for a

rehearing.

The scope of section 405(g) has also been the subject of much

litigation. Ganem v. Heckler, 746 F.2d 844 (D.C. Cir. 1984), provides a

good description of the finality requirement. Ganem brought an action to

recover Social Security benefits owed to her because of her deceased

husband's employment record in the United States for the period lasting

from November of 1979 to March of 1984. Id. at 846. During this time

Ganem, an Iranian citizen, was living in Iran. The Social Security Act

allows nonresident beneficiaries to receive benefits if they live in a

country which has a social insurance program that does not discriminate

against Americans. See 42 U.S.C. § 402(t)(2) (1994). 

Following the Iranian revolution, the Social Security Administration

suspended benefit payments to residents of Iran because it claimed it was

necessary to redetermine whether the Iranian social insurance scheme now

discriminated against Americans. Ganem, 746 F.2d at 846. The

Administration argued that the lengthy suspension was unavoidable because

tense relations between the United States and Iran prohibited the Secretary

from making a final determination regarding Iran's social insurance scheme.
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Before reaching the merits, the court considered whether it had

subject matter jurisdiction over the claim. The court held that section

405(h) precluded it from having subject matter jurisdiction over Ganem's

claims. In continuing its analysis of subject matter jurisdiction, the

court turned to 405(g) and concluded that section 405(g) did not provide

an avenue around the jurisdictional bar of 405(h) because Ganem had not yet

received a final decision on her benefit claims. Id. at 849.

 

The Secretary has not permanently cancelled benefits to Ganem;

instead, those benefits have been merely suspended pending the

necessary determination regarding Iranian law. . . . [I]f it is

found that Iran does not have a social insurance scheme that

discriminates against Americans, appellant will be entitled to

past suspended benefit payments. Under these circumstances, it

would strain the meaning of finality past the breaking point to

hold that the Secretary has finally decided that Ganem is not

entitled to the contested benefits. . . . As a result, there is

as of now no final decision on Ganem's benefit claim that would

trigger jurisdiction under 405(g). . . . 

Id. at 849-50.

Likewise, in this case, there has been no final determination of

whether the payments will eventually be made to Clarinda. Instead, the

payments have been only temporarily suspended during an ongoing fraud

investigation. Upon the conclusion of the investigation, if it is

determined that Clarinda did not commit any fraudulent acts, the withheld

funds will be immediately dispersed to Clarinda. The withholding is

nothing more than a temporary measure necessary to maintain the status quo

while the necessary facts are gathered and evaluated. 

 

If the Secretary finds evidence of fraud, the Secretary may then make

a final determination to exclude Clarinda from the Medicare program. After

the Secretary's final determination,
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Clarinda will be given notice and a hearing. If the Secretary's decision

is upheld, Clarinda then will be entitled to notice, a post-exclusion

hearing pursuant to 42 U.S.C. § 405(b), and judicial review pursuant to 42

U.S.C. § 405(g). Therefore, Clarinda will have its day in court after the

Secretary has rendered her final decision. 

Though the statutory framework provides no relief to Clarinda, this

Circuit previously has recognized a constitutional exception to the

statutory exhaustion requirement, thus our analysis does not stop here.

This exception applies where the litigant: "(1) raises a colorable

constitutional claim collateral to his substantive claim of entitlement;

(2) shows that irreparable harm would result from exhaustion; and (3) shows

that the purposes of exhaustion would not be served by requiring further

administrative procedures." Anderson v. Sullivan, 959 F.2d 690, 693 (8th

Cir. 1992) (citing Thorbus v. Bowen, 848 F.2d 901, 903 (8th Cir. 1988), and

Mathews v. Eldridge, 424 U.S. 319, 329-31 (1976)).

In Anderson, a physician, Anderson, brought an action to compel the

government to maintain his Medicare reimbursement eligibility while his

appeals from exclusion from the Medicare program were pending. Anderson

argued that he satisfied the three-part test for the exhaustion exception.

This court rejected his argument, however, holding that Anderson had not

shown a colorable constitutional claim because the procedures established

for excluding a physician from the Medicare program did not violate due

process. 959 F.2d at 693 (citing Thorbus, 848 F.2d at 903-04). Secondly,

Anderson had presented no evidence that exhausting his administrative

appeals would cause him irreparable injury. Id. Finally, Anderson had

offered no evidence that the strong policy interests behind exhaustion

would not be advanced in his case. Id.

The factual situation in this case differs somewhat from Anderson.

At issue here is not the exclusion of Clarinda from the
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Medicare program, but the temporary suspension of Medicare payments to

Clarinda during an ongoing investigation for acts of fraud and

misrepresentation. Nevertheless, the reasoning of Anderson applies to

Clarinda's claims. If Anderson did not prove that the exclusion of a

physician from the Medicare program without a hearing was a colorable

constitutional due process claim, it likewise is not a colorable

constitutional violation of due process to withhold payments temporarily

to a provider without a hearing. The private interest that will be

affected by a temporary withholding of Medicare payments is not as serious

in nature as an exclusion from the Medicare program. Because Clarinda has

less of an interest in having its claim resolved than a provider who had

been suspended from the program entirely would have, we hold that it is not

a violation of due process to temporarily withhold Medicare payments during

an ongoing investigation for acts of fraud.

 A Fifth Circuit decision, Peterson v. Weinberger, 508 F.2d 45 (5th

Cir.), cert. denied, 423 U.S. 830 (1975), supports our decision today. In

Peterson, authorities investigated Peterson, a physician, for acts of fraud

and misrepresentation. Id. at 48-49. During the investigation, Medicare

payments to Peterson were temporarily suspended. Id. at 49. Peterson

brought suit alleging, among other things, that his property was taken

without due process. The Fifth Circuit rejected Peterson's argument,

determining that a Medicare provider has no due process right to a hearing

during the course of an investigation for acts of fraud and

misrepresentation. Id. at 50. 

Because Clarinda has failed to establish that the temporary

suspension of Medicare payments without a hearing is a colorable

constitutional claim, it has failed the first part of the test for an

exception to the exhaustion requirement. It therefore is unnecessary to

consider the second and third parts of the test. 
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Accordingly, we have no subject matter jurisdiction over this appeal

and the district court had no jurisdiction to consider Clarinda's motion

for an injunction. We dismiss this appeal, vacate the stay pending appeal,

and remand to the district court with direction that it dismiss the

complaint and make what orders may be appropriate with respect to

termination of the bond.

A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT