Court Opinion

ID: 2744309
Source: CourtListenerOpinion
Date Created: 2014-10-21 21:01:02.766063+00
Date Added: 2024-06-11T10:07:41.136699
License: Public Domain

In the

    United States Court of Appeals
                For the Seventh Circuit
No. 14-1934

CENTER FOR DERMATOLOGY AND SKIN
CANCER, LTD., et al.,
                                               Plaintiffs-Appellants,

                                 v.

SYLVIA MATHEWS BURWELL, Secretary
of Health and Human Services, et al.,
                                              Defendants-Appellees.

        Appeal from the United States District Court for the
          Northern District of Illinois, Eastern Division.
          No. 13-CV-04926 — Marvin E. Aspen, Judge.

 ARGUED SEPTEMBER 11, 2014 — DECIDED OCTOBER 21, 2014

   Before BAUER, MANION, and KANNE, Circuit Judges.

    MANION, Circuit Judge. Robert V. Kolbusz, M.D., is a
practicing dermatologist who was indicted for Medicare fraud.
After the indictment was returned, the Secretary for the
Department of Health and Human Services ceased automati-
cally processing his claims for Medicare reimbursement.
2                                                         No. 14-1934

During the pretrial preparation of his defense in the criminal
proceeding, Dr. Kolbusz brought this mandamus action on
behalf of himself, his medical corporation, and three patients,
seeking to compel the Secretary to process claims submitted for
reimbursement. In response, the Secretary filed a motion to
dismiss for lack of subject-matter jurisdiction, arguing that Dr.
Kolbusz failed to exhaust his administrative remedies before
proceeding with his mandamus action. The district court
agreed with the Secretary and dismissed this case for lack of
subject-matter jurisdiction. Dr. Kolbusz appealed and we
affirm.
                                I. Facts
    Robert V. Kolbusz, M.D., owns and operates the Center for
Dermatology and Skin Cancer, Ltd., in northern Illinois. He
was a participating provider of Medicare from 1993 until
December 2012. Because he was a participating provider, Dr.
Kolbusz received payment for services rendered to patients
directly from Medicare. On October 3, 2012 he was indicted by
a federal grand jury for Medicare fraud. See United States v.
Kolbusz, No. 12 CR 782 (N.D. Ill.) (Lee, J.).1 As a consequence of
the indictment, the Secretary’s designees imposed fraud
prevention procedures on Dr. Kolbusz’s practice, including

1
 On October 20, 2014, Dr. Kolbusz was convicted of 3 counts of mail fraud
pursuant to 18 U.S.C. § 1341 and 3 counts of wire fraud pursuant to 18
U.S.C. § 1343. These convictions have no bearing on the substance of this
appeal.
No. 14-1934                                                                3

payment suspension, resulting in his ultimate withdrawal from
the Medicare program.2
    In July 2013, Dr. Kolbusz filed suit against the Secretary of
the Department of Health and Human Services (the “Secre-
tary”) and her contractors, asserting three bases for subject-
matter jurisdiction: (1) federal question jurisdiction, § 28 U.S.C.
1331; (2) the Medicare Act, 42 U.S.C. §1395 et seq; and (3)
mandamus, 28 U.S.C. § 1361.3 The suit was directed at the
Secretary’s acts or omissions regarding two distinct batches of
Medicare claims submitted for reimbursement and sought to
compel her to process those claims. Dr. Kolbusz allegedly
sought initial determination of a batch of Medicare reimburse-
ment claims covering October 4, 2012 through December 31,
2012. Of the 783 claims he submitted, 55 were denied. Dr.
Kolbusz timely sought a redetermination of the 55 denied
claims, which was granted, but denied on the merits. Dr.
Kolbusz alleges that he appealed these decisions to the second
level of administrative review (reconsideration), but that he

2
    From January 1, 2013 through the present, Dr. Kolbusz continued to
receive indirect payments from Medicare by serving as his patients’
“appointed representative.” Under this arrangement, his patients receive
reimbursement directly from Medicare and then provide payment to him
for dermatology services rendered. The Secretary contends that this “work-
around” violates the spirit of Dr. Kolbusz’s suspension, but it is unclear
from this record that it was in violation of any statute or regulation. Gov’t
Br. 10.

3
  In October 2013, he filed an amended complaint, alleging essentially the
same claims.
4                                                     No. 14-1934

has yet to receive a response regarding the qualified independ-
ent contractor’s (“QIC”) reconsideration.
    Dr. Kolbusz’s second batch of claims was allegedly submit-
ted after he withdrew as a participating provider in the
Medicare program on January 1, 2013. Dr. Kolbusz alleges that
of the “approximately 2300” claims submitted after January 1,
2013, including those filed by co-plaintiff patients, “most” have
not yet received initial determinations. He alleges that
“approximately 250” of the claims were denied through initial
determinations, and then denied again on appeal through
reconsideration, Dr. Kolbusz alleges that these 250 claims are
currently pending review before an ALJ. In his complaint, he
sought to compel the Secretary to process all of these claims.
   In March 2014, the district court granted the Secretary’s
motion to dismiss for lack of subject-matter jurisdiction. See
Fed. R. Civ. P. 12(b)(1). Dr. Kolbusz appeals.
                           II. Analysis
    A. Standard of review.
    Motions to dismiss under Rule 12(b)(1) are meant to test the
sufficiency of the complaint, not to decide the merits of the
case. See Weiler v. Household Fin. Corp., 101 F.3d 519, 524 n.1 (7th
Cir. 1996).“In the context of a motion to dismiss for lack of
subject matter jurisdiction, we accept as true the well pleaded
factual allegations, drawing all reasonable inferences in favor
of the plaintiff,” Iddir v. INS, 301 F.3d 492, 496 (7th Cir. 2002),
but a plaintiff faced with a 12(b)(1) motion to dismiss bears the
burden of establishing that the jurisdictional requirements
have been met. See Kontos v. U.S. Dep’t Labor, 826 F.2d 573, 576
No. 14-1934                                                      5

(7th Cir. 1987). Although “[w]e review a dismissal for lack of
subject matter jurisdiction de novo,” Doctors Nursing & Rehab.
Ctr. v. Sebelius, 613 F.3d 672, 676 (7th Cir. 2010), “we review the
district court’s resolution of jurisdictional factual issues for
abuse of discretion.” Sapperstein v. Hagar, 188 F.3d 852, 856 (7th
Cir. 1999).
   B. Dr. Kolbusz’s failure to exhaust administrative
      remedies before seeking mandamus.
    The Secretary has implemented a four-step administrative
process to review and adjudicate challenges to determinations
rendered on claims for Medicare reimbursement. 42 C.F.R. §
405.904. First, where a Medicare contractor makes an initial
adverse determination on a claim, the claimant may request
redetermination by the contractor. 42 C.F.R. §§ 405.904,
405.940–958. Second, if the claimant is dissatisfied with the
redetermination decision, he may request a reconsideration of
the claim by a QIC. 42 C.F.R. §§ 405.904, 405.960–966. Third, if
the claimant is dissatisfied with the QIC’s reconsideration, or
if the QIC has surpassed its 60-day deadline to issue its
decision, the claimant may request a hearing before an ALJ, for
which the party must also meet the amount-in-controversy
requirement. 42 C.F.R. §§ 405.904, 405.970, 405.1000. Fourth, if
the claimant is dissatisfied with the decision of the ALJ, or if
the ALJ does not issue a decision within the regulation’s time
frame, the claimant may request that the Medicare Appeals
Council (“MAC”) review the case. 42 C.F.R. §§ 405.1048,
405.1100, 405.1104. Once the MAC issues a decision, or if the
MAC fails to review the ALJ’s decision within the applicable
adjudication period, the claimant may then file suit in federal
district court. 42 C.F.R. §§ 405.1130, 405.1132.
6                                                     No. 14-1934

    Title 28 U.S.C. § 1361 provides that “district courts shall
have original jurisdiction of any action in the nature of manda-
mus to compel an officer or employee of the United States or
any agency thereof to perform a duty owed to the plaintiff.”
The Supreme Court has emphasized that “[t]he common-law
writ of mandamus, as codified in 28 U.S.C. § 1361, is intended
to provide a remedy for a plaintiff only if he has exhausted all
other avenues of relief and only if the defendant owes him a
clear nondiscretionary duty.” Heckler v. Ringer, 466 U.S. 602,
616 (1984). If a plaintiff’s allegations survive Ringer’s jurisdic-
tional threshold, three elements must be met in order for the
court to issue a writ: “(1) a clear right in the plaintiff to the
relief sought; (2) a plainly defined and peremptory duty on the
part of the defendant to do the act in question; (3) no other
adequate remedy available.” Burnett v. Bowen, 830 F.2d 731, 739
(7th Cir. 1987).
    Critically, Dr. Kolbusz’s amended complaint concedes that
the furthest step his claims have proceeded to is the third level
of administrative review. Am. Compl. ¶ 46. Thus, he did not
exhaust the administrative appeals process before he sought
mandamus. In support of his decision to forego exhausting the
administrative appeals process, Dr. Kolbusz argues that
mandamus jurisdiction extends over his claims because he
does not seek an adjudication or review of the merits of the
Medicare claims, but rather to challenge the Secretary’s
“procedures” for processing claims. See Appellant Br. 23. In
support of this argument, Dr. Kolbusz relies on Burnett, where,
citing other circuits, we stated that “the mandamus statute
provides jurisdiction in cases challenging the procedures used
in administering Social Security benefits but unrelated to the
No. 14-1934                                                      7

merits.” 830 F.2d at 737, and our subsequent decision in
Michael Reese Hosp. and Med. Ctr. v. Thompson, 427 F.3d 436, 441
(7th Cir. 2005), where we cited Burnett for the proposition “that
mandamus relief is available for Medicare claims that are
procedural rather than substantive in nature.” We now turn to
these contentions.
    We previously applied Ringer’s holding to the precise
question of the availability of mandamus relief in the context
of Medicare reimbursement claims. See Burnett, 830 F.2d at
736–40. On that occasion, we joined a number of other circuits
in concluding that mandamus relief is indeed available for
Medicare claims that are procedural rather than substantive in
nature. Id. at 738. Yet, when subsequently confronted with a
case that posed the “procedural” or “substantive” question in
Michael Reese, we did not decide it because “[t]he Supreme
Court has recognized that mandamus relief is available only if
a plaintiff ‘has exhausted all other avenues of relief and only if
the defendant owes him a clear and nondiscretionary duty,’”
and the plaintiff had not satisfied the exhaustion requirement.
Michael Reese, 427 F.3d at 441 (quoting Ringer, 466 U.S. at 616).
Accordingly, “[b]ecause exhaustion of administrative reme-
dies is a prerequisite of subject matter jurisdiction under …
mandamus theories … and [plaintiff] failed to exhaust the
review process … the district court properly rejected that basis
for subject matter jurisdiction.” Id. at 443. In short, the exhaus-
tion requirement is still applicable to procedural challenges.
   Today this case arrives to us in the same procedural posture
as Michael Reese, so we have no reason to decide the same
question that was not ripe in that instance. 427 F.3d at 441 (“We
need not consider whether this is such a ‘procedural’ claim,
8                                                       No. 14-1934

however, because Michael Reese cannot meet the standards for
mandamus relief.”). Despite Dr. Kolbusz’s attempts to distin-
guish this case from Michael Reese and its predecessors,
controlling authority from the Supreme Court and this Circuit
is airtight that a litigant may not circumvent the administrative
appeals process by seeking mandamus. See Ringer, 466 U.S. at
616 (dismissing plaintiff’s mandamus claim against HHS
concerning the denial of Medicare reimbursement, where
plaintiffs failed to exhaust their administrative remedies before
bringing suit in federal court); Michael Reese, 427 F.3d at 441,
443 (applying Ringer and holding that the exhaustion require-
ment applies to the request for relief under the federal manda-
mus statute); Ancillary Affiliated Health Servs., Inc. v. Shalala, 165
F.3d 1069, 1070 (7th Cir. 1998) (relying on Ringer to reject the
substantive-procedural distinction and holding that “even
characterizing [plaintiff] Ancillary’s claim as a due process
claim does not relieve it of its obligation to exhaust its adminis-
trative remedies”). Although we issued a writ of mandamus in
Burnett, there “a writ of mandamus [wa]s his only available
remedy” because he had “pursued all of his possible appeals
within the Social Security Administration.” 830 F.2d at 740.
Similar exhaustion has not occurred here.
    Dr. Kolbusz argues that “whether Plaintiffs have exhausted
their administrative remedies is an issue to be determined as
to whether he is entitled to mandamus relief, not as to whether
the District Court has jurisdiction to adjudicate the Amended
Complaint.” Appellant Br. 14. But as we have just explained,
that characterization of the law is incorrect. Dr. Kolbusz is
actually arguing that he has effectively exhausted the adminis-
trative appeals process, so he should be excused from complet-
No. 14-1934                                                     9

ing it. In support, he cites 42 U.S.C. 1395ff(a)(2)(A), and argues
that it requires the government to process all claims within 45
days. If Dr. Kolbusz were reading the statute correctly, he
might have an argument that this case is distinguishable from
precedent. However, that is simply not the case here. The text
of the statute does not say what Dr. Kolbusz argues. Title 42
U.S.C. § 1395ff(a)(2)(A) states that when “promulgating regula-
tions,” the Secretary must issue an “initial determination”
regarding the claim in 45 days or less. 42 U.S.C. §
1395ff(a)(2)(A) (emphasis added). The Secretary has complied
with this statutory obligation by setting the time period for
“initial determinations” at 30 days. See 42 C.F.R. 405.922.
    A “clean claim” is one “that has no defect or impropriety
(including any lack of any required substantiating documenta-
tion) or particular circumstance requiring special treatment
that prevents timely payment[.]” 42 U.S.C. § 1395u(c)(2)(B)(1).
By the plain text of § 1395ff(a)(2)(B), claims requiring “special
treatment that prevents timely payment from being made”
under § 1395u(c)(2) are exempt from compliance with this
deadline. Because claims subject to fraud review are not clean
claims, they are not subject to any mandatory time frame for
payment. 42 U.S.C. § 1395u(c)(2); see 42 C.F.R. § 405.902.
Unfortunately for Dr. Kolbusz, he is not entitled to reap the
benefits of 42 C.F.R. 405.922 while he labors under indictment
for Medicare fraud because the Medicare Act and the Secre-
tary’s regulations provide time frames only for processing
“clean claims.” In this instance, the proper avenue for pursuing
disputes with claims designated by the Secretary as “unclean”
is the administrative appeals process that Dr. Kolbusz elected
not to follow by filing this suit. Moreover, even if Dr. Kolbusz’s
10                                                No. 14-1934

interpretation of 42 U.S.C. 1395ff(a)(2)(A) were correct, the
proper remedy would not be mandamus, but interest that
accrues on the unpaid amount. §1395u(c)(2)(c); see also 42
C.F.R. § 405.922.
    At some point the inaction of Congress or the Secretary
may result in a due process violation where the extraordinary
remedy of mandamus is required to compel governmental
action. But that is not this case. Dr. Kolbusz may wish to
petition Congress or the Secretary to enact a claims-payment
deadline. However, in the absence of such a statute or regula-
tion imposing a claims-payment deadline, Dr. Kolbusz cannot
successfully secure jurisdiction for us to hear his mandamus
action until he has first exhausted the administrative appeals
process.
                       III. Conclusion
   Dr. Kolbusz’s failure to exhaust Medicare’s administrative
appeals process precludes subject-matter jurisdiction of his
mandamus action. For the foregoing reasons, the judgment of
the district court is AFFIRMED.