From Health Law Daily, May 26, 2015

No standing when provider pays for denied Medicare claim

By Mary Damitio, J.D.

A claimant who was denied Medicare coverage of laboratory testing did not have standing to sue because she was not required to pay for the testing and therefore could not allege a concrete injury, a district court ruled in granting a motion to dismiss. The laboratory also had no standing to seek judicial review of a denial of a claim without first exhausting its administrative remedies (California Clinical Laboratory Association v. HHS, May 20, 2015, Brown Jackson, K.).

Background. Jane Doe, is an 82-year-old registered nurse who lives in Virginia and is a Medicare enrollee. She suffers from several chronic health conditions that require her to take a large amount of prescription drugs, some of which caused her to suffer allergic reactions and other severe adverse reactions. In order to determine whether proposed treatments would cause Doe to have adverse reactions, her doctor ordered pharmacogenomics testing, which is a type of molecular testing that examines a patient’s genetic makeup and determines how a medication or treatment will affect that person.

California Clinical Laboratory Association’s (CCLA) members perform pharmacogenomic testing for Medicare enrollees. One of CCLA’s member laboratories GENETWORx performs such testing and submits its claims to Palmetto GBA, a Medicare Administrative Contractor (MAC) that covers Doe’s area. Palmetto issued a Local Coverage Determination (LCD) and subsequently denied Medicare coverage for Doe’s pharmacogenomic testing.

Advance beneficiary notice. Under federal regulations, if a MAC makes a determination that Medicare will not cover a service, the provider will assume the financial responsibility of the service unless it provided the enrollee with an Advance Beneficiary Notice (ABN), that stated that Medicare will likely deny coverage (42 C.F.R. Sec. 411.404). Doe did not allege that she was required to pay for the testing after the claim was denied by Palmetto.

Complaint. Without first going through the administrative appeals process, Doe filed suit challenging the MAC LCDs. She alleged that Congress granting MACs the authority to develop LCDs was unconstitutional; that the clinical testing LCDS must be promulgated under the Administrative Procedure Act’s rulemaking requirements; and that MACs violated section 42 U.S.C. § 1395ff(f)(2) by relying on impermissible criteria in developing the clinical testing LCDs. Finally, Doe claimed that the HHS Secretary failed to perform her statutory duties, such as developing a plan to evaluate LCDs (42 U.S.C. § 1395y(l)(5)), and a mediation process to resolve LCD disputes (42 U.S.C. § 1395ff(i)). HHS filed a motion to dismiss, which the court granted, finding that Doe failed to allege an injury-in-fact and thus lacked standing and that the court lacked subject matter jurisdiction because Doe and CCLA failed to exhaust administrative remedies before filing suit.

Standing. Doe did not have standing because she failed to allege sufficient facts to establish that she has suffered or will suffer an injury-in-fact that was caused by HHS actions because she never alleged that she received an ABN or that she was required to pay for the testing. CCLA also could not bring suit through Doe under 42 U.S.C. § 1395ff(f)(3), because that section did not give Medicare recipients a substantive right that would provide standing to sue without a plaintiff sufficiently alleging an injury-in-fact. Additionally, there is no statutory provision that would allow providers to seek judicial review prior to going through the administrative appeals process.

CCLA’s claims. The court also lacked federal question jurisdiction over CCLA’s claim because federal jurisdiction over Medicare issues are expressly limited (42 U.S.C. § 405(h)). CCLA can appeal clinical testing coverage denials through the claims review process and has not pleaded that the process would be futile. The court also lacked mandamus jurisdiction over CCLA’s claims because it did not demonstrate that it had a clear right to have the HHS Secretary comply with procedural mandates and that the Secretary had a non-discretionary duty to act with regard to LCDs.

The case is No. 14-cv-0673.

Attorneys: James F. Segroves (Hooper, Lundy & Bookman, PC) for California Clinical Laboratory Association. Brad P. Rosenberg, U.S. Department of Justice, for Department of Health and Human Services.

Companies: California Clinical Laboratory Association; GENETWORx

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