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Sherman v. Burwell

United States District Court, D. Connecticut

August 8, 2016

RUTH SHERMAN, executor of the Estate of Bradley Olsen-Ecker, Plaintiff,
SYLVIA MATHEWS BURWELL, Secretary of Health and Human Services, Defendant.


          Jeffrey Alker Meyer United States District Judge.

         This is a case about a Medicare recipient‘s probability of obtaining payment for services. Plaintiff Ruth Sherman, the executor of the estate of Medicare beneficiary Bradley Olsen-Ecker, alleges on behalf of Olsen-Ecker‘s estate as well as many other Medicare beneficiaries that the Department of Health and Human Services (HHS) has routinely and erroneously denied claims at the first levels of review. She claims that HHS has denied claims to the extent that, at times, less than 1% of claims reviewed received payment. Plaintiff alleges that the defendant, Secretary Sylvia Burwell of HHS, had reviewers apply a secret policy in administering and denying claims. Although plaintiff cannot say what secret method was used to deny the claims, she contends that such a low claim-approval rating must violate the right to due process under the Fifth Amendment of the Constitution and rights under the Medicare statute. Defendant has moved to dismiss the case and deny class certification. I will deny the motion to dismiss in large part and grant class certification.


         Bradley Olsen-Ecker was a 69-year-old Medicare beneficiary suffering from debilitating illness who needed home health care services after being released from a long period of hospitalization. Olsen-Ecker has since passed away, and his wife, Ruth Sherman, has continued the litigation as the executrix of his estate. When Olsen-Ecker arrived home in April 2015, he began receiving home health care services from a Medicare-certified home health agency including skilled nursing visits and physical therapy by of his primary care physician. After a few months of receiving services, the home health agency informed Olsen-Ecker that Medicare would no longer cover physical therapy or skilled nursing visits. Olsen-Ecker appealed this decision through Medicare‘s four levels of review and, at the time of the filing of his complaint, had been denied at the first three levels of review and was awaiting decision at the fourth level of review.[1] He continued to receive physical therapy through the home health agency and paid out of pocket.

         The current Medicare appeals process involves four separate levels of review. First, Medicare beneficiaries who wish to appeal a decision receive a paper review redetermination by the original contractor who made the determination. A "paper review" is a review of the documents alone, without an in-person hearing. If that review fails, the beneficiary requests reconsideration by a separate entity that contracts with HHS (known as the Qualified Independent Contractor, or QIC). If a beneficiary does not obtain relief from the QIC‘s review, he may request a hearing before an ALJ. Finally, if the claim is denied by the ALJ, a beneficiary may receive a paper review by the Medicare Appeals Council. There is also an expedited process available, of which Olsen-Ecker took advantage of in his appeals process.

         The current review process went into effect in 2010. Previously, a Medicare beneficiary who wanted to appeal an initial adverse determination first obtained a paper review by the original contractor. If that appeal was denied, then the beneficiary could either receive a de novo hearing in front of an ALJ or a "carrier hearing" before a hearing officer, depending on the type of Medicare benefits the beneficiary received. Either way, the second level of review under the old review system involved a hearing and not just another paper review. Then, if the beneficiary still wanted to appeal, he either received a paper review by the Medicare Appeals Council, or an ALJ hearing if he had not had one before, and then a paper review by the Medicare Appeals Council.

         According to plaintiff, this change in process has resulted in a drastic reduction in the number of appeals that result in a favorable coverage determination for beneficiaries at the first two levels of review-the redetermination by paper review by the original contractor, and the reconsideration by paper review by the QIC. These two levels of reconsideration have success rates for claimants as low as .61% each year, or as high as 2.2%. The total number of redetermination requests has also increased nearly ten-fold from 13, 385 in 2008 to 112, 844 in 2012. The change has also placed a great burden on the ALJs, increasing their workload by 184%. In the meantime, the reversal rate by ALJs-resulting in favorable coverage decisions-is about 70% across all of Medicare, and 62% on home health care and hospice decisions, according to HHS.

         Plaintiff also contends that this new process resulted in Olsen-Ecker being denied coverage for a claim that should have been easily covered. In Olsen-Ecker‘s particular case, plaintiff alleges that Olsen-Ecker at first received necessary home health care by skilled caregivers, for tasks including tracheostomy care, suctioning, supplemental oxygen, tube feedings, medications, and wound care, but then his Medicare-approved provider denied his claims for continued skilled care, stating that Olsen-Ecker‘s health care needs could be met "by patient or unskilled caregivers, " the cost of which was not covered by Medicare. Doc. #1 at 11. He also had been receiving physical therapy that was discontinued because he had reached "maximum potential." Ibid. Olsen-Ecker continued to receive physical therapy, but ceased using skilled home health care.

         Olsen-Ecker appealed both of these denials, citing the need for ongoing skilled care due to his multiple medical issues to avoid readmission to the hospital, and the care provider found that "[a]lthough monitoring for early detection of problems may appear rational, it would not justify continuation of these skilled services." Id. at 12. Olsen-Ecker appealed to the QIC, the second level of review, which affirmed the denial of care. The QIC‘s decision noted that Olsen-Ecker required treatment including assessing body systems, assessing the effectiveness of medications, instructing the caregiver on tube feeding and tracheostomy care and suctioning, and providing early detection and intervention for symptoms, but that these services "d[id] not require the unique skills of a licensed therapist or nurse for safe and effective delivery." Id. at 13.

         Olsen-Ecker appealed this decision to the ALJ level, where he was again denied. He appealed this decision to the Medicare Appeals Council, the final level of review. At the time of the filing of the complaint, Olsen-Ecker was still waiting for the Council to rule. While he was waiting, Olsen-Ecker passed away. During the pendency of Olsen-Ecker‘s appeals, plaintiff‘s counsel asked the physical therapy care provider to request a "demand bill" from Medicare. Through the demand bill procedure, the care provider has now been reimbursed by Medicare for the physical therapy sessions not originally covered.

         Defendant now brings a motion to dismiss plaintiff‘s lawsuit for lack of jurisdiction, on the grounds that plaintiff has failed to exhaust administrative remedies, that plaintiff‘s claim is now mooted as the estate has been paid, or alternatively, for failure of plaintiff to state a claim upon which relief can be granted. See Doc. #31. Defendant has also opposed plaintiff‘s motion for class certification. See Docs. #13 (motion for class certification), #21 (opposition to class certification).


         A. Jurisdiction

         As a threshold matter, I must determine whether this Court has jurisdiction and if plaintiff has standing to pursue her claim. The Medicare statute provides exclusive judicial review of agency determinations under 42 U.S.C. § 405(g):

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 . . . .

Id. Further, the statute expressly limits judicial review under general federal question jurisdiction in § 405(h):

No action against the United States, the Commissioner of Social Security, or any officer or employee thereof shall be brought under section 1331 or 1346 of Title 28 to recover on any claim arising under this subchapter.

42 U.S.C. § 405(h) (emphasis added). A claim "arises under" the Medicare statute not only when the claim challenges a direct denial of benefits, but also when a claim challenges "agency policy determinations . . . or . . . the application, interpretation, or constitutionality of interrelated regulations or statutory provisions." Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1, 14 (2000).

         1. Exhaustion of Administrative Remedies

         Exhaustion of the administrative review process is required for a court to exercise jurisdiction. See Mathews v. Eldridge, 424 U.S. 319, 323, 327 (1976). A final decision consists of two elements: a jurisdictional, non-waivable requirement that the claim for benefits has been presented for decision to the agency, and a waivable requirement of exhaustion of the agency‘s administrative review process. Mathews, 424 U.S. at 328-30; Weinberger v. Salfi, 422 U.S. 749, 764-65 (1975).[2]

         While exhaustion is the general rule, the agency may waive the exhaustion requirement, or a court may deem the exhaustion requirement waived when "a claimant's interest in having a particular issue resolved promptly is so great that deference to the agency‘s judgment is inappropriate" as to whether to forego the entirety of the administrative review process. Bowen v. City of New York, 476 U.S. 467, 483 (1986). A court may excuse a plaintiff‘s failure to exhaust the agency‘s administrative review process if (1) the claim is collateral to a demand for benefits, (2) exhaustion would be futile, or (3) irreparable harm would occur if exhaustion were required. See, e.g., Skubel v. Fuoroli, 113 F.3d 330, 335 (2d Cir. 1997); Pavano v. Shalala, 95 F.3d 147, 150 (2d Cir. 1996).

         I find that plaintiff has satisfied this test and deem exhaustion waived. Plaintiff‘s claim is collateral to a demand for benefits because she challenges the underlying validity of the agency‘s policies, not how those policies were applied to Olsen-Ecker‘s situation in particular. See City of New York v. Heckler, 742 F.2d 729, 736-37 (2d Cir. 1984), aff’d sub nom. Bowen v. City of New York, 476 U.S. 467 (1986). Exhaustion here would be futile; the "procedural right that claimants sought to obtain . . . could not have been vindicated by individual eligibility decisions." State of N.Y. v. Sullivan, 906 F.2d 910, 918 (2d Cir. 1990); see also Landers v. Leavitt, 232 F.R.D. 42, 46 (D. Conn. 2005). Even though Olsen-Ecker‘s denied Medicare claims were ultimately paid in this case, the procedural right claimed here (to proper early-level review) has not been remedied by later payment of the underlying benefit.

         Plaintiff further presents a colorable claim of irreparable harm that would result from being forced to complete the administrative process in order to waive exhaustion. See Heckler v. Ringer, 466 U.S. 602, 640-41 & n.32 (1984). Not only are constitutional deprivations such as the due process deprivation alleged here generally considered per se irreparable harm, but courts should be "especially sensitive to . . . harm where the Government seeks to require claimants to exhaust administrative remedies merely to enable them to receive the procedure they should have been afforded in the first place." Sullivan, 906 F.2d at 918; see also St. Francis Hosp. v. Sebelius, 874 F.Supp.2d 127, 134 (E.D.N.Y. 2012) ("Generally, in this Circuit, a constitutional deprivation constitutes per se ...

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