Court Opinion

ID: 6347216
Source: CourtListenerOpinion
Date Created: 2022-06-06 15:00:21.33159+00
Date Added: 2024-06-11T13:26:03.908380
License: Public Domain

21-2757-cv
Integrity Social Work Servs. v. Becerra

                            UNITED STATES COURT OF APPEALS
                                FOR THE SECOND CIRCUIT
                                          SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON
ANY PARTY NOT REPRESENTED BY COUNSEL.

        At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the
6th day of June, two thousand twenty-two.
Present:
                DENNIS JACOBS,
                RICHARD C. WESLEY,
                WILLIAM J. NARDINI,
                      Circuit Judges.

_____________________________________
INTEGRITY SOCIAL WORK SERVICES, LCSW,
LLC, a New York professional services limited
liability company,
                        Plaintiff-Appellant,
                v.                                                     No. 21-2757-cv
XAVIER BECERRA, Secretary of the United States
Department of Health and Human Services,
SAFEGUARD SERVICES LLC, a Delaware Limited
Liability Company,
                        Defendants-Appellees,
_____________________________________

 For Plaintiff-Appellant:                      MICHAEL TRAN (Michael J. Khouri, on the brief),
                                               Khouri Law Firm, APC, Irvine, CA.

 For Defendant-Appellee:                       DENNIS FAN (Michael S. Raab, on the brief),
                                               Washington, D.C., for Brian M. Boynton, Acting
                                               Assistant Attorney General, Breon Peace, United
                                               States Attorney for the Eastern District of New York,

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                                              Daniel Barry, Acting General Counsel, Rachel Park,
                                              Chief Counsel, Region II, Bradford Glick, Assistant
                                              Regional Counsel U.S. Dep’t of Health & Human
                                              Servs.

       Appeal from a judgment of the United States District Court for the Eastern District of New
York (Peggy Kuo, Magistrate Judge).

    UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment of the district court is AFFIRMED.

        Plaintiff-Appellant Integrity Social Work Services, LCSW, LLC (“Integrity”) appeals from
the October 1, 2021, judgment of the United States District Court for the Eastern District of New
York dismissing its complaint against the Secretary of the United States Department of Health and
Human Services and Safeguard Services LLC (together, the Defendants). We assume the reader’s
familiarity with the record, including the district court’s thorough summary of the appeals process
and channeling provisions under the Medicare Act. See Integrity Soc. Work Servs., LCSW, LLC.
v. Azar, No. 20-cv-2770, 2021 WL 4502620, at *1–*4 (E.D.N.Y. Oct. 1, 2021).

        “We review the grant of a Rule 12(b)(6) motion to dismiss de novo. We accept the factual
allegations as true and draw all reasonable inferences in favor of the plaintiff.” Estle v. Int’l Bus.
Machines Corp., 23 F.4th 210, 212–13 (2d Cir. 2022) (internal quotation marks omitted).

        Although the district court held that Integrity was required to administratively exhaust
some portions of its claims, it subsequently considered the merits of its complaint and concluded
that Integrity had, in any event, failed to state a claim for relief. On appeal, Integrity challenges
both the procedural and substantive aspects of the district court’s decision. We may affirm on any
ground that finds support in the record. See Wells Fargo Advisors, LLC v. Sappington, 884 F.3d
392, 396 n.2 (2d Cir. 2018). Here, even assuming that Integrity was not required to exhaust its
claims administratively, we conclude that it has not alleged a violation of its right to procedural or
substantive due process.

  I.   Procedural due process

        To state a claim for violation of the right to procedural due process, a plaintiff must
plausibly allege that it was “deprived of property without constitutionally adequate pre- or post-
deprivation process.” J.S. v. T’Kach, 714 F.3d 99, 105 (2d Cir. 2013). Thus, a plaintiff must show
that the government deprived it of a protected property right without adequate process. See id. In
assessing how much process is due, courts balance three factors that the Supreme Court first laid
out in Mathews v. Eldridge, 424 U.S. 319, 335 (1976):

       (1) the private interest that will be affected by the official action; (2) the risk of an erroneous
       deprivation of such interest through the procedures used and the probable value of
       additional or substitute procedural safeguards; and (3) the fiscal and administrative burdens
       that the additional or substantive procedures entail.

Furlong v. Shalala, 238 F.3d 227, 236 (2d Cir. 2001).

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        On appeal, Integrity argues first that it was deprived of due process because it could not
immediately challenge the decisions of one Medicare contractor, the Unified Program Integrity
Contractor (“UPIC”), which determined that all of Integrity’s claims for payment should have been
denied. But the UPIC’s determination had no practical effect on its own—only another Medicare
contractor (the Medicare Administrative Contractor or “MAC”) could initiate recoupment
proceedings. See 42 U.S.C. § 1395ddd(b)(3); Medicare Program Integrity Manual (“MPIM”)
§§ 8.2.3.2, 8.4.7.1. Therefore, Integrity has not shown why its inability to immediately challenge
the UPIC’s determination would result in any risk of erroneous deprivation.

        Integrity next argues that the district court overlooked the fact that the delay in a hearing
before an Administrative Law Judge (“ALJ”) deprived it of its right to carry on its psychotherapy
business and maintain the associated good will in its business. Integrity cites no authority for the
proposition that a court must consider the downstream economic effects of the deprivation of its
property interest in balancing the factors from Mathews v. Eldridge. The only arguably cognizable
interest underlying Integrity’s procedural due process claim is its interest in payments for services
that it renders to Medicare beneficiaries. The possibility that it might suffer further business
consequences if deprived of that property does not weigh in the balance. And the Medicare Act
provides protection to providers for whom immediate repayment pending appeal “would constitute
a hardship,” allowing them to request a payment plan of up to three years, or up to five years if
repayment would create “extreme hardship.” 42 U.S.C. § 1395ddd(f)(1)(A).

         Finally, Integrity argues that the statutory option to bypass the third and fourth steps of
administrative review (that is, skipping over review by an ALJ and the Medicare Appeals Council
to get to federal district court) is insufficient to protect its interest because an ALJ would conduct
a de novo review while a district court reviewing the contractor record would be more deferential.
Integrity’s argument is unpersuasive. If Integrity believes it would benefit from thorough, de novo
review, that avenue is available to it through the standard administrative procedures. See 42 U.S.C.
§ 1395ff(b)(1)(A); 42 C.F.R. § 405.1000 et seq. If it instead requires swifter recourse to federal
district court, that path is also open. See 42 C.F.R. § 405.1132; id. § 405.1100(d). In sum, we
conclude that the appeals process afforded to Medicare providers is constitutionally sufficient. We
therefore affirm the dismissal of Integrity’s procedural due process claim.

 II.   Substantive due process

        “For state action to be taken in violation of the requirements of substantive due process,
the denial must have occurred under circumstances warranting the labels ‘arbitrary’ and
‘outrageous.’” Natale v. Town of Ridgefield, 170 F.3d 258, 263 (2d Cir. 1999). Integrity has not
identified any conduct that is “outrageous.” It asserts that the UPIC’s decision to “extrapolate[]
an overpayment determination over an 18 year period . . . essentially rendered Integrity’s entire
business ineligible for reimbursement payments without providing [I]ntegrity with a timely post-
deprivation hearing.” Appellant Br. at 27–28. As noted earlier, though, the UPIC’s determination
had no practical effect until it was reviewed and ratified by the MAC. See MPIM §§ 8.2.3.2,
8.4.7.1; 42 U.S.C § 1395ddd(b)(3). And Integrity does not argue that the UPIC’s decision was
incorrect. Rather, it asserts only that the recoupment procedures, particularly the use of contractors
and delay in providing an ALJ hearing, are so fundamentally unfair that they violate the Due
Process Clause even absent error. It cites no authority for that proposition. We affirm the dismissal
of Integrity’s substantive due process claim.

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III.   Leave to amend

          Finally, Integrity argues the district court erred in denying its request for leave to amend.
It states that it was not given an opportunity to amend with “the benefit of knowing the District
Court’s ruling when it requested leave to amend.” Appellant Br. at 29. It suggests that it would
“add facts alleging how it was deprived of procedural and substantive due process based upon the
Medicare regulations precluding review over certain UPIC determinations and the inadequacy of
its procedures in protecting Integrity’s rights.” Id. “A plaintiff need not be given leave to amend
if it fails to specify either to the district court or to the court of appeals how amendment would
cure the pleading deficiencies in its complaint.” TechnoMarine SA v. Giftports, Inc., 758 F.3d
493, 505 (2d Cir. 2014). Here, we conclude that the Medicare recoupment and appeal procedures
are constitutionally sufficient as a matter of law. Integrity’s proposed additions are vague and
conclusory, and it fails to articulate how any facts it might allege would alter our legal conclusions.
We therefore affirm the district court’s denial of leave to amend.

                                            *     *       *

      We have considered the Plaintiffs’ remaining arguments and find them to be without merit.
Accordingly, we AFFIRM the judgment of the district court.

                                                               FOR THE COURT:
                                                               Catherine O’Hagan Wolfe, Clerk

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