___________ 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 distri ct court denying their motion for a preliminary injunctio n restra ining Donna Shalala, Secretary of Health and Human Services, an d Medicare IASD Health Services Corporation from suspending Medicare payment s to Clarinda Home Heal th without a hearing. The district court denied the claim for injunctive relief because of Clarinda's failure to show a probabilitythat it would succeed on the merits of either its procedural due process liberty i nterest claim or its procedural due process property interest

### -2-

claim. O n appeal, Clarinda makes numerous claims of error, and th e Secret aryresponds that the courts are without jurisdiction to conside r Clarin da's claims. We granted Clarinda's motion for injunctive relie f enjoining the Secreta ry from suspending past and future Medicare payments during t he pendency of this appeal. We conditioned this grant o f injunctive relief upon Clarinda's posting of a b ond in an amount and under the terms and conditions as set by the district court, with which Clarinda successfully complied. We dismiss this appeal a nd vacate the stay pending appeal for want of subject matter jurisdiction and direct the distric t court to dismiss the complaint for want of subject matter jurisdiction.

There is little dispute as to the facts. Clarinda Home Health , formerlyknown 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 qualifi ed for Medicare benefits. On December 21, 1995, Medicare IAS D Hea lth Services Corporation, Clarinda's intermediary, notified Clarind a that an investigation was being conducted for ac ts of fraud and/or willful misrepresentation, and that it was suspending al l 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 Nodawa y Valley Skilled Servic es, Inc. (Clarinda) may have committed acts of fraud and/or willful misrepresentation regarding claims submitted for Medicare reim bursement. As a result, Clarinda's intermediary withheld payment s totalling nearly $65,000 for Medicare services already rendered b y Clarinda.

Clarinda sought injunctive relief to enjoin the Secretary an d Medicare IASD Health Services Corporation from suspending Medicare payment s to Clarinda without a hearing. The district court

### -3-

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 t o suspend payment.

The di strict court conducted the four-part inquiry outlined i n Dataphase Systems, In c. v. C L Systems, Inc. , 640 F.2d 109, 114 (8th Cir. 1981) (e n banc), and denied relief. It first determined that th e suspension would cause irreparable harm to the p laintiffs. Next, it found that C larinda's interest in the potential closing of its busines s outwe ighed the government's interest in prohibiting fraudulent Medicar e payments. The distri ct court then looked to the merits of Clarinda's due process claims and de termined that there was no probability that Clarinda would succeed on these claims. Finally, because the court found that othe r providers could care for Clarinda's patients if Clarinda was no longer abl e 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 er ror 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 o f Clarinda's suit, we need not consider those arguments. We review th e question of subject m atter jurisdiction de novo. See Drevlow v. Lutheran Church, Missouri Synod , 991 F.2d 468, 470 (8th Cir. 1993).

Before th e 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 thi s motion before proceed ing 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

### -4-

specifically exempts 28 U.S.C. § 1346 (1994) as a jurisdictional basis for actions arising under the Social Security Act, and explains that thi s preclusive section has been incorporated into the Medicare Act by referenc e through 42 U.S.C. § 1 395ii (1994). Next, the Secretary points to Heckler v. Ringer , 466 U.S. 602 (1984), which dealt spec ifically with the Medicare prov isions of the Social Security Act, and argues that the temporar y withholding of Medicare payments is not a final decision subject t o 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 matte r jurisdiction based on 28 U.S.C. § 1291 (1994).

I.

The Medic are 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 ha s authorized the Secret ary 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; auditi ng the records of providers; and receiving and accounting fo r payments made to providers.

Th e 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 ha s rel iable evidence of willful misrepresentation or fraud. Sectio n 405.371(b) supplied the authority to suspend payments to Clarinda. This section provides: (b) Fraud or mis representation . The provisions of paragraph (a) of this section [allowing for notice

### -5- and an oppor tunity to respond] shall not apply where the intermediaryor carrier has reliable evidence that th e circumstances giving rise to the need f or a suspension of paym ents involves fraud or willful misrepresentation

. Instead, the intermediary or carrier ma y 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 pr ovider prior notice of the suspension of payments and the provider has no right to th e payments or a hearing while the Secretary investigates th e underl ying charges. Upon the conclusion of the investigation, th e interm ediarytransfers the withheld funds to the provider if th e invest igation failed to establish evidence of fraud. Notably, th e temporary withholding of payments pursuant to 42 C.F.R. § 405.371(b) is no t a final determinationof 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 the n make a final determination to exclude the provider from the Medicar e program . After the Secretary's final determination, authorities mus t supply the provider w ith notice of the proposed action and a hearing. 42 C.F.R. §§ 1001, 1005 (1994). Following this hearing, if the Departmen t conclu des that exclusion is the appropriate sanction, the Secretary i s required to provide "reasonable notice to the pu blic." 42 U.S.C. § 1320a7(c)(1) (1994). The excluded party is then entitled to notice and judicia l review pursuant to 42 U.S.C. § 405(g).

II. We mu st determine whether subject matter jurisdiction exists ove r 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:

### -6- The f indings and decision of the Commissioner of Socia l Security after a hearing shall be binding upon all individuals who were parties to such hearing. No findings of fact o r de cision of the Commissioner of Social Security shall b e reviewed by any person, tribunal, or governmental a gency except as herein provided. No action against the United States, the Commissioner of Social Security, or any officer or employe e 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 beenthe subject of much litigation. The Suprem e Court has held that section 405(h) "extends to any actio n seeking to recover on any Social Security claim." Weinberger v. Salfi , 42 2 U.S. 749, 762 (1975). The considerations behind the Social Security Act that led C ongress to limit judicial review are also applicable to th e 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 Cour t further considered the scope of this section in Heckler v. Ringer , 466 U.S

. 602 (1984), and determined that claims arising u nder other statutes may be barred by section 405(h) if they are "inextricably intertwined" wit h benefit determinations under the Medicare Act. Id. at 622-24. In Ringer , the M edicare claimants challenged the Secretary's final decisio n prohibiting reimbursement for bilateral carotid body claims on the grounds that the Secretary's decision violated the Medicare Act, the Administratio n Procedure Act, and the Due Process Clause. The Court looked behind th e 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. a t 614. The Court concluded, therefore, that the claim was "inextricabl y intertwined" with the claim for benefits, and ac cordingly, was barred from judicial review by section 405(h). Id.
Though s ection 405(h) seems to be a conclusive bar of jurisdictio n over Medicare claims, section 405(g), after requiring

### -7-

exhaust ion of administrative avenues of relief, limits the preclusiv e effect of section 405(h). Section 405(g) states:
Any individual, after any final decision of the Com missioner of Social Security made after a hearing to which he was a party, irrespective of the amou nt in controversy, may obtain a review of such decision by a ci vil action commenced within sixty days after the mailing to him of notice of such decision or within suc h further time as the Commissioner of Social Security ma y allow

. . . . The court shall have power to enter, upon th e pleadings and transcript of the record, a judgment affirming, modifying, or reversing the decision of the Commissioner o f Soc ial Security, with or without remanding the cause for a rehearing.

The scope of section 405(g) has also been the subject of muc h litigation. Ganem v. Heckler , 746 F.2d 844 (D.C. Cir. 1984), provides a good description of t he finality requirement. Ganem brought an action to
reco ver Social Security benefits owed to her because of her decease d hus band's employment record in the United States for the period lastin g fromNovember of 1979 to March of 1984. Id. at 846. During this tim e Ganem, an Iranian citizen, was living in Iran. The Social Security Ac t allows nonresident beneficiaries to receive benefits if they live in a
cou ntrywhich has a social insurance program that does not discriminat e against Americans. See 42 U.S.C. § 402(t)(2) (1994).
Following the Iranian revolution, th e Social Security Administration suspended benefit pay ments to residents of Iran because it claimed it was necessaryto redetermine whether the Iranian social insurance scheme now discri minated against Americans. Ganem , 746 F.2d at 846. Th e Administration arguedthat the lengthy suspension was unavoidable because tense relations between the United States and Iran prohibited the Secretar y from making a final determination regarding Iran's social insurance scheme

.

### -8- Before reaching the merits, the court considered whether it ha d subject matter jurisdiction over the claim. The court held that section 405(h) precluded it from having subject matter jurisdiction over Ganem's cla ims. In continuing its analysis of subject matter jurisdiction, th e 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 ye t received a final decision on her benefit claims. Id. at 849.
The Secretary has not pe rmanently 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 tha t discriminates against Am ericans, appellant will be entitled to past suspended benefit payments. Under these circumstances, it would strain the meaning of finality past the break ing point to hold that the Secretary has finally decided that Ganem is not entitled to the contested benefits. . . . As a resu lt, there is as of now no final decision on Ganem's benefit clai m that would trigger jurisdiction under 405(g). . . .

Id. at 849-50.

Li kewise, in this case, there has been no final determination o f whether the payments will eventually be made to Clarinda. Instead, th e paymen ts have been only temporarily suspended during an ongoing frau d investig ation. Upon the conclusion of the investigation, if it i s determined that Clari nda did not commit any fraudulent acts, the withheld fund s will be immediately dispersed to Clarinda. The withholding i s 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 the n make
a final determination to exclude Clarinda from the Medicare program. Afte r the Secretary's final determination,

### -9-

Clarinda will be give n notice and a hearing. If the Secretary's decision is uphe ld, Clarinda then will be entitled to notice, a post-exclusio n hearing pursuant to 42 U.S.C. § 405(b), and judi cial 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 th e statutory framework provides no relief to Clarinda, this Circu it previously has recognized a constitutional exception to th e statut oryexhaustion requirement, thus our analysis does not stop here

. This exception applies where the litigant: "(1) raises a colorabl e constitutional claim collateral to his substantive claim of entitlement; (2) shows that irreparable harm would result from exhaustion; and (3) show s that the purposes of exhaustion would not be served by requiring further administrative proced ures." Anderson v. Sullivan , 959 F.2d 690, 693 (8th Cir. 1992) (citing Thorbus v. Bowen , 848 F.2d 901, 903 (8th Cir. 1988), an d Mathews v. Eldridge , 424 U.S. 319, 329-31 (1976)).

In Anders on , a physician, Anderson, brought an action to compel the government to maintain his Medicare reimbursement eligibility while hi s 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 con stitutional claim because the procedures established for excluding a physician from the Medicare program did not violate du e process. 959 F.2d at 693 (citing Thorbus , 848 F.2d at 903-04). Secondly, Anderso n had presented no evidence that exhausting his administrativ e appeals would cause him irreparable injury. Id. Finally, Anderson ha d offere d no evidence that the strong policy interests behind exhaustio n 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

### -10-

Medica re program, but the temporary suspension of Medicare payments t o Clarin da during an ongoing investigation for acts of fraud an d misr epresentation. Nevertheless, the reasoning of Anderson applies t o Cla rinda's claims. If Anderson did not prove that the exclusion of a physici an from the Medicare program without a hearing was a colorabl e consti tutional due process claim, it likewise is not a colorabl e constitutional violation of due process to withhold payments temporarily to a prov ider without a hearing. The private interest that will b e affected by a temporary withholding of Medicare payments is not as serious in nature as an exclusion from the Medicare prog ram. 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 no t
a violation of due process to temporarily withhold Medicare payments durin g an ongoing investigation for acts of fraud.

A Fifth Circuit decision, Peterson v. Weinberger , 508 F.2d 45 (5t h Cir.), cert. denied , 423 U.S. 830 (1975), suppor ts our decision today. In Peterson , authorities investigated Peterson, a physician, for acts of frau d and misrepresentation

. Id. at 48-49. During the investigation, Medicare payme nts to Peterson were temporarily suspended. Id. at 49. Peterso n brought suit alleging, among other things, that his property was take n withou t 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 an d misrepresentation. Id. at 50.

Because Clarinda has failed to establish that the temporar y suspen sion of Medicare payments without a hearing is a colorabl e
con stitutional claim, it has failed the first part of the test for a n exception to the exhaustion requirement. It therefore is unnecessary to consider the second and third parts of the test.

### -11- Accordingly, we have no subject matt er 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 reman d to the district court with direction that it dismiss th e compl aint and make what orders may be appropriate with respect t o termination of the bond.

A true copy.

Attest:

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