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From Health Law Daily, January 7, 2015

Futility trumps exhaustion; ACA’s ‘face to face’ battle soldiers on

By Danielle H. Capilla, J.D.

Despite a trade association’s failure to exhaust administrative remedies regarding their opposition to Medicare coverage documentation requirements imposed by the HHS Secretary, the case will continue because attempts to exhaust administrative remedies would be futile. The National Association for Home Care and Hospice, Inc. (NAHC), representing 6,000 home health service providers, opposes the “narrative requirement” which is the documentation portion of the Patient Protection and Affordable Care Act’s (ACA) “face-to-face encounter” requirement under Medicare for physicians and home health patients. The Secretary unsuccessfully moved to dismiss the case, arguing that NAHC had no standing, failed to exhaust administrative remedies, and failed to state a claim (National Association for Home Care & Hospice, Inc. v. Burwell, January 6, 2015, Cooper, C.).

Narrative requirement. The ACA requires that a provider of home health services must document that the physician ordering the services had a “face-to-face encounter” with the patient in order for the provider to be reimbursed by Medicare. The HHS Secretary issued a regulation that interpreted the requirement to require the physician to explain, in writing, why the encounter supports the conclusion that the patient is homebound and requires home based or hospice services (see CMS rethinks home health face-to-face encounter narrative, hospice requirement unchanged, September 10, 2014). The written explanation is the “narrative requirement.” The NAHC, which represents 6,000 home health service providers, alleges that the Secretary exceeded statutory authority by issuing the narrative requirement. The NAHC alleged that the narrative requirement is a violation of the Fifth Amendment and that compliance is nearly impossible to achieve because it is vague and fails to consider the entire patient record.

Standing. The Secretary moved to dismiss the complaint on three grounds: (1) NAHC has no standing; (2) NAHC and its members failed to exhaust administrative remedies; and (3) failure to state a claim. The court found that at least one member of NAHC was denied Medicare payments based on failure to comply with the narrative requirement, and thus, the organization has standing.

Administrative remedies. In long-standing practice and regulation, unsuccessful Medicare claimants must take a denial of a claim for benefits through the entire administrative appeals process before filing suit in federal court. The administrative remedy process is lengthy and has multiple levels of appeal. However, both the Secretary and courts can waive exhaustion, although courts are to give deference to the Secretary’s refusal to do so. Courts can waive exhaustion only in certain circumstances that “a claimant’s interest in having a particular issue resolve promptly is so great that deference to the agency’s judgment is inappropriate.” In these cases, the court must contemplate (1) whether the claim is collateral to a demand for benefits; (2) whether delay would cause irreparable harm; and (3) whether exhaustion would be futile.

In this case, NAHC unconvincingly alleged that the narrative requirement is so severe it will cause its members to go bankrupt. Despite the inability to show that the financial detriment was too great, the court was swayed by the argument that NAHC’s exhaustion of administrative remedies would be futile. Although the court reasoned its task would be easier by channeling individual denied claims through the administrative appeals process, nothing indicates the administrative appeals process would result in CMS overturning its regulations.

Merits. The Secretary finally asked the court to dismiss the case on all its merits for failing to state a claim, arguing the narrative requirement is a reasonable interpretation of the requirement “document” a face-to-face encounter. In order to give the parties a great opportunity to brief the issue, the court denied the motion to dismiss for failure to state a claim and determined it would hear these arguments in the future under cross-motions for summary judgment.

The case number is 1:14-cv-00950 (CRC).

Attorneys: William Alexander Dombi (Center for Health Care Law) for National Association for Home Care & Hospice, Inc. Justin Michael Sandberg, U.S. Department of Justice, for Sylvia Mathews Burwell, Secretary of the U.S. Department of Health and Human Services.

Companies: National Association for Home Care & Hospice, Inc.; U.S. Department of Health and Human Services

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