Court Opinion

ID: 6350842
Source: CourtListenerOpinion
Date Created: 2022-06-17 16:00:25.108279+00
Date Added: 2024-06-11T09:15:36.675522
License: Public Domain

United States Court of Appeals
                            For the Eighth Circuit
                        ___________________________

                                No. 21-2823
                        ___________________________

   Gurpreet S. Padda, M.D.; Interventional Center for Pain Management, P.C.

                      lllllllllllllllllllllPlaintiffs - Appellants

                                          v.

      Xavier Becerra, in his official capacity as Secretary of the United States
   Department of Health and Human Services; Chiquita Brooks-LaSure,1 in her
   official capacity as Administrator for the Centers for Medicare and Medicaid
  Services; Wisconsin Physician Insurance Corporation, doing business as WPS
                         Government Health Administrators

                      lllllllllllllllllllllDefendants - Appellees
                                       ____________

                    Appeal from United States District Court
                  for the Eastern District of Missouri - St. Louis
                                  ____________

                            Submitted: April 12, 2022
                              Filed: June 17, 2022
                                 ____________

Before COLLOTON, MELLOY, and GRUENDER, Circuit Judges.
                         ____________

MELLOY, Circuit Judge.

      1
      Chiquita Brooks-LaSure has been appointed to serve as Administrator for
the Centers for Medicare and Medicaid Services and is substituted as an appellee
pursuant to Federal Rule of Appellate Procedure 43(c).
       The government alleges that Medicare overpaid Dr. Gurpreet Padda and his
medical practice, Interventional Center for Pain Management (collectively, “Dr.
Padda”), approximately $5.31 million. Reviewing contractors substantially
affirmed the overpayment decision at two levels of administrative review. While the
third level of administrative review, a hearing before an Administrative Law Judge
(“ALJ”), was pending, Medicare began to recover the overpaid funds by withholding
new reimbursements from Dr. Padda.

       Dr. Padda sued, arguing that recovery prior to an ALJ hearing and decision
violates procedural due process. He moved for a preliminary injunction to prevent
Medicare from recovering payments prior to the ALJ decision. The district court2
denied the preliminary injunction and Dr. Padda appealed.

      Dr. Padda has not shown that he satisfies the requirements for a preliminary
injunction. He has not shown that he is likely to prevail on the merits of his
procedural due process claim nor that he is likely to suffer irreparable harm.
Therefore, we affirm the denial of the preliminary injunction.

                                         I.
      This case involves the administrative review process for Medicare appeals and
how a backlog in that process has affected review of Dr. Padda’s alleged
overpayments.

                                        A.
      Medicare provides a health insurance program for the elderly and disabled. See
42 U.S.C. § 1395 et. seq. Medicare regularly pays medical providers for the services
they perform for Medicare beneficiaries. Id. § 1395g. When Medicare pays

      2
       The Honorable Sarah E. Pitlyk, United States District Judge for the Eastern
District of Missouri.

                                        -2-
providers, it usually does not review the claim. Instead, Medicare “generally pays
facially valid claims, and conducts post-payment audits to detect overpayments.”
Sahara Health Care, Inc. v. Azar, 975 F.3d 523, 525 (5th Cir. 2020); see 42 U.S.C.
§ 1395ddd.

       Medicare contractors perform these audits. See 42 U.S.C. § 1395ddd. When
a contractor conducts an audit, it must give written notice of the audit to the provider.
Id. § 1395ddd(f)(7). The contractor collects a sample of past payments and reviews
them for accuracy. See id. §§ 1395ddd(f)(4), (8). If the contractor finds
overpayments in the sample and finds “a sustained or high level of payment error,”
it may use statistical extrapolation to calculate the total amount that the provider was
overpaid. Id. § 1395ddd(f)(3). The contractor must give the provider a full
explanation of the audit’s findings. Id. § 1395ddd(f)(7).

       If an audit shows that a provider has been overpaid, Medicare may seek to
recover the overpaid funds. One way Medicare recovers overpaid funds is through
recoupment. Recoupment is “[t]he recovery by Medicare of any outstanding
Medicare debt by reducing present or future Medicare payments and applying the
amount withheld to the indebtedness.” 42 C.F.R. § 405.370(a). Thus, under
recoupment, a provider does not directly repay Medicare. Instead, the money the
provider owes is withheld from future payments. If the overpayment is so high that
immediate repayment in full would constitute a “hardship” for the provider, Medicare
may permit the provider to enter into a repayment plan. 42 U.S.C.
§ 1395ddd(f)(1)(A). Under a repayment plan, Medicare only recoups a portion of the
amount owed from each of the provider’s future payments. A repayment plan extends
repayment for at least six months, but no more than three years, or, in cases of
extreme hardship, no more than five years. Id. “Hardship” means that the recouped
payments would be greater than 10% of the amount Medicare paid to the provider in
either the last year, or the last reporting period, depending on the nature of the
provider. Id. § 1395ddd(f)(1)(B)(i).

                                          -3-
       If a Medicare contractor determines a provider has been overpaid, the provider
may challenge that decision through administrative and judicial review. See id.
§ 1395ff. The administrative review process has four steps: (1) redetermination by
the contractor; (2) reconsideration by a Qualified Independent Contractor; (3) a
hearing before an Administrative Law Judge; and (4) review by the Appeals Council.
Id. At the first and second steps, the provider may submit evidence and must provide
a written explanation for its disagreement with the original decision. Sahara Health
Care, 975 F.3d at 526; 42 C.F.R. §§ 405.946(a), 405.966(a). Both steps 1 and 2 are
to result in a written, reasoned decision. 42 U.S.C. §§ 1395ff(a)(5), (c)(3)(E).

       At step 3, the provider is entitled to a hearing before an ALJ. Id.
§ 1395ff(d)(1)(A). At this hearing, the parties may submit new evidence only if
“there is good cause which precluded the introduction of such evidence at” the first
or second steps. Id. § 1395ff(b)(3). This means that generally a provider cannot
introduce new evidence for the first time at an ALJ hearing. The provider may
examine the evidence in the record and may question and cross examine witnesses.
42 C.F.R. § 405.1000(b). The ALJ must issue a decision within 90 days of the
request for hearing. 42 U.S.C. § 1395ff(d)(1)(A). If the ALJ’s decision is adverse to
the provider, the provider may appeal to the Appeals Council. Id. § 1395ff(d)(2)(A);
42 C.F.R. § 405.1100(a). If the ALJ does not issue a decision within the statutory
period, the provider may escalate the case—that is, the provider may choose to skip
review by the ALJ and proceed directly to review by the Appeals Council. 42 U.S.C.
§ 1395ff(d)(3)(A).

      The Appeals Council has 90 days (or 180 days, if the case was escalated), to
review the case and issue a decision. 42 C.F.R. §§ 405.1100(c), (d). If the Appeals
Council issues an adverse ruling, or if the statutory period expires without any
decision, the provider may seek judicial review. 42 U.S.C.
§§ 1395ff(b)(1)(A), 1395ff(d)(3)(B), 405(g). Medicare may not recoup payments
during the first two steps of the administrative process—redetermination and

                                         -4-
reconsideration. Id. § 1395ddd(f)(2)(A). Medicare may, however, recoup payments
while the provider appeals to an ALJ, the Appeals Council, or to federal court. 42
C.F.R. §§ 405.379(d)(4)–(5).

      In recent years, Medicare has been overwhelmed by appeals. Sahara Health
Care, 975 F.3d at 527. “Between 2009 and 2014, the number of ALJ appeals
increased more than 1,200 percent” without a corresponding increase in budget to
resolve those appeals. Id. This resulted in a years-long backlog of pending appeals.
Id. Although Congress and the Centers for Medicare and Medicaid Services have
taken steps to alleviate the backlog, the overwhelming number of appeals resulted in
a significant period during which Medicare was not able to provide ALJ hearings
within the statutory period. Id. Medicare reports that it is on track to eliminate the
backlog by the end of fiscal year 2022.

                                          B.
       Based on a post-payment audit, the government alleges that it overpaid Dr.
Padda for services he provided to Medicare patients. The Medicare auditor used
extrapolation to calculate a total overpayment of approximately $5.96 million. Dr.
Padda, through counsel, challenged that decision through the first two levels of
administrative review—redetermination and reconsideration. At both levels, Dr.
Padda exercised his right to submit evidence and written argument. He argued the
services were medically necessary and the Medicare contractor’s statisticians made
errors in performing the extrapolation.

       At the reconsideration stage, Dr. Padda’s case was reviewed by a panel of
experts, including a physician and a statistician. After this review, the Qualified
Independent Contractor issued a partially favorable decision to Dr. Padda. His
overpayment was adjusted down to approximately $5.31 million, plus interest. After
the reconsideration decision, Medicare was entitled by statute to begin recouping the
overpayment. There is no evidence Dr. Padda requested an extended repayment plan.

                                         -5-
See Padda Br. at 19; Reply Br. at 6. If he had requested one, it appears Dr. Padda
would have been eligible for a repayment plan. Dr. Padda stated that he received
approximately $99,000 per month from Medicare, or approximately $1.188 million
per year. The alleged overpayment—$5.31 million—was more than 10% of his
annual Medicare payments. See 42 U.S.C. § 1395ddd(f)(1)(B)(i).

       Dr. Padda requested an ALJ hearing on March 30, 2021. That hearing was not
held within the 90-day time frame permitted by statute. When the time limit expired,
Dr. Padda did not invoke his right to escalate his case to the Appeals Council.
Instead, within one month of requesting the hearing, Dr. Padda sued in federal court.
He alleged that recoupment prior to an ALJ hearing is a violation of procedural due
process. Dr. Padda moved for a preliminary injunction from the district court to
prevent Medicare from recouping until after he received an ALJ hearing. The district
court denied the injunction, finding Dr. Padda was not likely to succeed on the merits
of his procedural due process claim and had not demonstrated he was likely to suffer
irreparable harm. Dr. Padda appealed.

      Dr. Padda’s ALJ hearing was held on April 4, 2022, while this appeal was
pending.3

                                          II.
       We review the denial of a preliminary injunction for abuse of discretion. Turtle
Island Foods, SPC v. Thompson, 992 F.3d 694, 698 (8th Cir. 2021). A district court
abuses its discretion when it “rests its conclusion on clearly erroneous factual
finding[s] or erroneous legal conclusions.” Id. at 698–99 (quoting Minn. Citizens
Concerned for Life, Inc. v. Swanson, 692 F.3d 864, 870 (8th Cir. 2012) (en banc)).

      3
        As of June 14, 2022, no decision had been issued by the ALJ. See ALJ Appeal
Status Information System Inquiry Page, Off. of Medicare Hearings & Appeals,
https://aasis.omha.hhs.gov (search for: Medicare Appeal No. 1-9768094016) (last
visited June 14, 2022).

                                         -6-
We review legal conclusions de novo. Id. at 699. A plaintiff seeking a preliminary
injunction “must establish [1] that he is likely to succeed on the merits, [2] that he is
likely to suffer irreparable harm in the absence of preliminary relief, [3] that the
balance of equities tips in his favor, and [4] that an injunction is in the public
interest.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008); see also
Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109, 114 (8th Cir. 1981) (en banc).

                                          A.
       The first factor in the preliminary injunction analysis is whether the plaintiff
is likely to succeed on the merits. Here, the question is whether Dr. Padda is likely
to succeed on his procedural due process claim.

       To state a claim for a violation of procedural due process, a plaintiff “must
show a deprivation of life, liberty, or property without sufficient process.” Hughes
v. City of Cedar Rapids, 840 F.3d 987, 994 (8th Cir. 2016). Medicare does not
challenge the assertion that Dr. Padda has a property interest in Medicare payments
he has earned, so we will proceed to the issue of whether Dr. Padda received
sufficient process. See Mickelson v. Cnty. of Ramsey, 823 F.3d 918, 924–25 (8th
Cir. 2016).

       Procedural due process entitles an individual to “notice and an opportunity to
respond.” Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 546 (1985). “The
requirements of due process are not rigid; rather, they ‘call for such procedural
protections as the particular situation demands.’” Mickelson, 823 F.3d at 924
(quoting Greenholtz v. Inmates of Neb. Penal & Corr. Complex, 442 U.S. 1, 12
(1979)) (alteration omitted). To determine if process is sufficient, courts balance
three factors: “first, the private interest that will be affected by the official action;
second, the Government’s interest; and third, the risk of an erroneous deprivation of
the private interest through the procedures used, and the probable value, if any, of
additional or substitute procedural safeguards.” Id. (quoting Wallin v. Minn. Dep’t

                                          -7-
of Corr., 153 F.3d 681, 690 (8th Cir. 1998)) (internal quotations and alterations
omitted); see Matthews v. Eldridge, 424 U.S. 319, 335 (1976) (establishing elements).

       We first conclude that Dr. Padda’s interest in avoiding erroneous recoupment
outweighs the government’s interest in prompt repayment. Dr. Padda declared that
Medicare payments account for approximately 33% of his practice’s total monthly
revenue. He stated that he received approximately $99,000 per month in Medicare
payments. Loss of this income, he stated, would force him to significantly reduce his
workforce and the number of patients he treats, and may cause him to close his
business. Although he would be repaid any wrongly recouped funds with interest, the
money “will be cold comfort if [Dr. Padda’s practice] has already closed its doors.”
Sahara Health Care, 975 F.3d at 530. Dr. Padda has a significant interest in avoiding
erroneous recoupment. The government’s interest in prompt recoupment, however,
is relatively slight. Medicare has an interest in protecting public resources and
preventing fraud. But these interests are not as urgent as Dr. Padda’s interest in his
income. There is no evidence in the record that any delay in recovery against Dr.
Padda will cause long-term harm to Medicare or prevent Medicare from providing
services to other beneficiaries. Any amount that Dr. Padda owes to Medicare will
continue to accrue interest until it is paid. 42 U.S.C. § 1395ddd(f)(2)(B). Dr. Padda’s
interest weighs more heavily than the government’s.

       Because Dr. Padda has a significant property interest, we “must consider ‘the
likelihood of an erroneous deprivation of the private interest involved as a
consequence of the procedures used.’” Mickelson, 823 F.3d at 926 (quoting Mackey
v. Montrym, 443 U.S. 1, 13 (1979)). Thus, we consider whether the administrative
procedures Dr. Padda has already received, or those he chose to forgo, adequately
protect his property interest. We conclude that they do.

      The first two stages of administrative review provided Dr. Padda with notice
and an opportunity to be heard. Loudermill, 470 U.S. at 546. At each stage, Dr.

                                         -8-
Padda was represented by counsel and submitted written arguments and evidence.
Both levels of review resulted in written, reasoned decisions. By the second level,
Dr. Padda presented an expert report on the issue of statistical extrapolation. His case
was reviewed by a panel of experts, including a physician and a statistician. The
second-level reconsideration decision was a 37-page decision that addressed each of
Dr. Padda’s arguments in turn, including the statistical arguments made by his expert.
These procedures were a meaningful opportunity for Dr. Padda to be heard before the
government began recoupment.

       In determining whether Dr. Padda received sufficient process, we also consider
the procedures he chose not to pursue. When Dr. Padda did not receive an ALJ
decision within the statutory period, he had the right to escalate the case to the
Appeals Council and, ultimately, to seek judicial review. 42 U.S.C. § 1395ff(d)(3).
Dr. Padda “cannot complain about lacking due process when the privation (forgoing
escalation and judicial review) was [his] own choice.” Sahara Health Care, 975 F.3d
at 533. It is particularly significant that Dr. Padda chose to forgo judicial review
because “the ‘right to a judicial hearing is the classic protection provided by the Due
Process Clause against arbitrary deprivations of life, liberty, or property.’” Mo.
Roundtable for Life v. Carnahan, 676 F.3d 665, 677 (8th Cir. 2012) (quoting Larson
v. City of Fergus Falls, 229 F.3d 692, 697 (8th Cir. 2000)).

       Given the procedures Dr. Padda has already received, he has not demonstrated
that an ALJ hearing and decision will afford him such significant additional
protections that they are constitutionally required prior to recoupment. Dr. Padda
particularly focuses on the ability to present additional evidence and availability of
cross-examination. See Padda Br. at 13; Reply Br. at 3 (“Plaintiffs must be able to
cross-examine Defendants’ witnesses on this issue. . . . Under the unique
circumstances of this case, cross-examination related to the sampling and
extrapolation process is vital.”). Dr. Padda received an ALJ hearing on April 4, 2022.
He has not identified any evidence that he sought to admit for the first time at the ALJ

                                          -9-
hearing. Furthermore, Dr. Padda’s counsel conceded at oral argument that he was not
able to cross-examine any government witnesses because Medicare did not participate
in the hearing. Because the protections he sought were not available at the ALJ
hearing, Dr. Padda has not demonstrated that the hearing added sufficient protections
as to be constitutionally required.

       We recognize that the presentation of live testimony and oral argument may
help the ALJ ensure an accurate resolution of the case. But when the provider has
already had two opportunities to present evidence and written arguments, these
benefits are not so significant that they are required by due process prior to
recoupment. Given the procedural safeguards present at the first two levels of review,
due process does not require live testimony before the government may begin
recoupment.

      We agree with the two other Courts of Appeals that have concluded Medicare’s
recoupment of overpayments prior to an ALJ decision does not violate procedural due
process. See Sahara Health Care, 975 F.3d at 530; Accident, Inj. & Rehab., PC v.
Azar, 943 F.3d 195, 204–05 (4th Cir. 2019). In considering the risk of an erroneous
deprivation of property and the value of additional procedures, the additional
procedures of an ALJ hearing do not so substantially reduce the risk of an erroneous
deprivation as to be constitutionally required prior to recoupment. Sahara Health
Care, 975 F.3d at 532. And when we view the process of administrative review as a
whole, a provider’s ability to escalate its claims ensures that the provider receives a
timely disposition of its claims, even when there are delays at the ALJ stage.
Accident, Inj. & Rehab, 943 F.3d at 204. By providing a timely alternative, the
administrative review system does not violate procedural due process.

      Dr. Padda has received a meaningful opportunity to be heard at the first two
stages of administrative review. He has chosen to forgo additional procedures

                                         -10-
available to him. It does not violate due process for the government to begin
recoupment before Dr. Padda has received a decision from an ALJ.

      Dr. Padda has failed to show that he is likely to succeed on the merits of his
procedural due process claim. This factor weighs against granting him a preliminary
injunction.

                                            B.
        A second factor courts consider in issuing a preliminary injunction is the
likelihood of irreparable harm. A party seeking a preliminary injunction “must show
he is ‘likely to suffer irreparable harm in the absence of preliminary relief.’” Sessler
v. City of Davenport, 990 F.3d 1150, 1156 (8th Cir. 2021) (quoting Winter, 555 U.S.
at 20). To meet this requirement, “the movant must show more than the mere
possibility that irreparable harm will occur.” Id. Furthermore, the harm shown must
be more than mere speculation. MPAY Inc. v. Erie Custom Comput. Applications,
Inc. 970 F.3d 1010, 1020 (8th Cir. 2020). “[F]ailure of a movant to show irreparable
harm is an ‘independently sufficient basis upon which to deny a preliminary
injunction.’” Sessler, 990 F.3d at 1156 (quoting Watkins Inc. v. Lewis, 346 F.3d 841,
844 (8th Cir. 2003)). Generally, “[e]conomic loss, on its own, is not an irreparable
injury so long as the losses can be recovered.” Wildhawk Invs., LLC v. Brava I.P.,
LLC, 27 F.4th 587, 597 (8th Cir. 2022).

       Dr. Padda’s alleged harms are insufficient to support a preliminary injunction.
Dr. Padda declared that he received approximately $99,000 per month in Medicare
payments. This accounted for approximately 33% of his practice’s monthly gross
revenue. He stated that offsets “would cause . . . a significant reduction in workforce
and capacity to see patients, reduction in practice operations, reduction in patients
treated, as well as the potential for practice closure.”

                                         -11-
       Dr. Padda’s statements are vague and speculative. As to vagueness, Dr. Padda
does not explain what constitutes “a significant reduction” in his workforce or his
capacity to see patients. He does not explain how many employees will be fired, or
even how many employees he currently has. Although Dr. Padda’s first declaration
states that “approximately 19,000 patients would be impacted,” he does not identify
how many total patients he has, or what it means for them to be “impacted.” He does
not explain if they will be “impacted” because they will have to wait longer at their
appointments, or if they will be “impacted” because they will totally lose access to
life-saving treatments. Without these details, Dr. Padda has not specifically identified
what harm he will suffer or how that harm is more than reparable, economic damage.

       Regarding the speculative nature of his statements, Dr. Padda has not submitted
supporting evidence with his conclusory declaration to explain how recoupment will
force him to reduce his staff and patients. He did not present any documentation
demonstrating the business’s monthly revenues, expenses, or profits. In his first
declaration, he asserted that the practice had already lost “a significant portion of its
Medicare patients as a direct result of actions taken by Medicare related to this billing
dispute.” But he did not present any evidence as to what “a significant portion”
means or how that loss affected the practice. Furthermore, although Dr. Padda asserts
that recoupment may cause “the potential for practice closure,” he does not elaborate
on that claim. He does not identify what factors would cause that “potential” to
become a reality. The only evidence available indicates that recoupment would not
cause practice closure. Medicare began recoupment in May 2021. Dr. Padda’s
counsel conceded at oral arguments that the practice is still open.

       Finally, Dr. Padda’s claims of irreparable harm are undercut by his apparent
failure to try to ease the burdens of recoupment. Dr. Padda states that he earns
approximately $99,000 from Medicare per month. That would result in
approximately $1.188 million annually from Medicare. His alleged overpayment,
$5.31 million plus interest, is well over 10% of his annual Medicare payments. Thus,

                                          -12-
it appears Dr. Padda would be eligible for a repayment plan. He has not shown,
however, that he ever sought such a plan. A repayment plan would reduce the
amount of money that Dr. Padda was required to repay before he received an ALJ
decision. It would also reduce the harm that Dr. Padda suffers by allowing him to
distribute the losses over a greater period of time. Dr. Padda’s failure to seek a
repayment plan indicates that there are alternative methods available to him to reduce
his harm without resorting to a preliminary injunction.

      Dr. Padda has failed to show that he will be irreparably harmed without a
preliminary injunction. The second factor weighs against granting the injunction.

                                            C.
      Dr. Padda’s counsel requested that we remand this case for the district court to
consider the final two factors in the preliminary injunction analysis. Because we have
found that Dr. Padda failed to establish the first two factors, a remand is not
necessary. Dr. Padda has not shown that he is entitled to a preliminary injunction.

                                           III.
      Dr. Padda has not shown that he is likely to prevail on the merits of his
procedural due process claim. He also has not shown that he will be irreparably
harmed without a preliminary injunction. Because he has not met these factors, we
affirm the district court’s denial of the preliminary injunction.
                        ______________________________

                                        -13-