Temporary Restraining Orders Issued to Prevent Overpayment Recoupments by U.S. Health & Human Services

By: Allison Shelton, J.D.

Federal courts in Texas issued two temporary restraining orders (TROs) against HHS in the second half of 2018 to prevent HHS from recouping alleged overpayments from certain providers. In each case, the provider claimed that HHS violated the provider’s procedural due process rights because the provider was not allowed a hearing before an Administrative Law Judge (ALJ) within 90 days, as required by federal law. Because of the backlog in ALJ cases, a hearing may take between 3 to 5 years to be scheduled, but HHS may begin recouping overpayments during the time the ALJ hearing is pending. In evaluating the requests for the TROs, the courts analyzed the following four requirements of a TRO: (i) a substantial likelihood that the provider would succeed on the merits of its claim; (ii) a substantial threat of immediate and irreparable harm to the provider; (iii) that greater injury will occur by denying the TRO than if the TRO is granted; and (iv) that the requested TRO is not against the public interest.

In the first case, Family Rehabilitation, Inc. v. Azar, a home health provider in Texas filed suit against the government in the Northern District of Texas. The home health agency was successful in getting the court to issue a TRO preventing HHS from recouping an alleged overpayment of more than $7.5 million. The district court found that the home health provider met the requirements for issuance of a TRO, as it had complied with Medicare’s appeals process up until the ALJ stage; it continued to face irreparable harm as it had laid off almost 90% of its staff as a result of the recoupments and would likely have to file bankruptcy; HHS would be unlikely to suffer injury if the TRO were granted, but the home health provider would face significant harm if the TRO were not granted; and the public interest supported the issuance of a TRO to allow the home health provider to continue operations and service of its patients.

Similarly, in Adams EMS, Inc. v. Azar, the U.S. District Court for the Southern District of Texas issued a TRO against HHS on July 11, 2018. In this case, HHS alleged that Adams EMS, Inc. (Adams) had received an overpayment of $418,035. After completing the first two steps in appealing the alleged overpayment, Adams brought a procedural due process claim against HHS and sought a TRO to suspend the recoupment while the ALJ hearing on the matter was pending. The court cited the Northern District decision discussed above and followed similar reasoning in issuing the TRO to temporarily halt HHS’ recoupment efforts. Based on these cases and other precedent, providers may be able to effectively stall recoupments by HHS while providers are awaiting ALJ hearings.

Allison Shelton is a member of a team at Brown & Fortunato, P.C. that routinely represents hospitals and health systems on a broad spectrum of corporate, regulatory and operational issues. The team is led by Beth Anne Jackson (bjackson@bf-law.com), Elizabeth Jepson (ejepson@bf-law.com), Lisa Smith (lsmith@bf-law.com), and Allison Shelton (ashelton@bf-law.com). You can reach the Hospitals and Health Systems team at Brown & Fortunato at 806-345-6300.