Unreported / Non-Citable
Background
Five vascular clinics that treated Medicare beneficiaries sued Qlarant Integrity Solutions, LLC, a Unified Program Integrity Contractor responsible for reviewing Medicare claims in the Southwest. In February 2023, Qlarant notified the clinics that CMS had suspended all Medicare payments to them based on credible allegations of fraud. The notices allowed the clinics to submit rebuttal statements concerning the suspensions.
The clinics timely submitted a consolidated rebuttal statement but alleged that Qlarant did not respond within the 15-day period referenced in the notices and 42 C.F.R. § 405.375. Claiming that the delay forced them to curtail operations, lose business opportunities, and reduce patients’ access to procedures, the clinics sued in state court for negligence and negligence per se. Qlarant removed the case under the federal-officer removal statute and moved to dismiss under Rules 12(b)(1) and 12(b)(6).
The Court’s Holding
The court held that the negligence claims arose under the Medicare Act because the clinics asserted them as Medicare providers and their substance depended on the meaning and application of § 405.375. Unlike claims only incidentally affecting reimbursement, these claims originated directly from the suspension of Medicare payments and the regulation governing the rebuttal process.
Because the claims arose under the Medicare Act, the clinics had to channel them through HHS and obtain a final agency decision before seeking judicial review. Although the suspension decision itself was not appealable, the clinics could pursue administrative review if the suspension later resulted in a denial, overpayment determination, or exclusion from Medicare. The court also found that no exception to the channeling requirement applied because judicial review was postponed rather than foreclosed.
The court therefore granted Qlarant’s Rule 12(b)(1) motion and dismissed the claims without prejudice for lack of subject-matter jurisdiction. It did not reach Qlarant’s Rule 12(b)(6) arguments. Dismissal rather than remand was appropriate because the federal-officer removal statute independently supported removal jurisdiction.
Key Takeaways
- State-law negligence labels do not avoid Medicare’s administrative-channeling requirement when the claims derive from a provider’s Medicare status and require interpretation of Medicare regulations.
- A nonappealable Medicare payment suspension does not permit immediate judicial review when a later denial, overpayment demand, or program exclusion could create an appealable agency determination.
- Failure to obtain a final HHS decision deprived the court of subject-matter jurisdiction, requiring dismissal without prejudice.
Why It Matters
The decision underscores that Medicare providers generally cannot bypass the agency process by recasting disputes over payment suspensions or rebuttal procedures as tort claims. When both the right asserted and the alleged breach depend on Medicare law, providers must ordinarily await and exhaust an appealable agency determination.
It also illustrates the procedural distinction between removal jurisdiction and jurisdiction to adjudicate the merits: a case may be properly removed under the federal-officer statute yet still be dismissed because Medicare’s channeling requirements have not been satisfied.