Unreported / Non-Citable
Background
Precise Diagnostics, LLC, an independent clinical laboratory participating in Medicare, submitted reimbursement claims through a Medicare administrative contractor. In May 2022, a program-integrity contractor suspended Precise’s Medicare payments based on suspected fraud, including alleged deficiencies and inconsistencies in documentation supporting medical necessity.
Although the contractor issued an October 2022 notice terminating the suspension, Precise alleged that CMS continued withholding payments and improperly retained more than $245,000. HHS subsequently issued two overpayment notices totaling more than $2.3 million. Precise sued, asserting due-process, arbitrary-and-capricious, ultra vires, and mandamus claims and seeking declaratory and injunctive relief, including repayment of the withheld funds. It did not allege that it had exhausted the Medicare administrative-review process.
The Court’s Holding
The court granted the Secretary’s Rule 12(b)(1) motion and dismissed the claims without prejudice for lack of subject-matter jurisdiction. Because Precise’s claims arose under the Medicare Act, they had to be channeled through HHS and reduced to a final agency decision before federal judicial review. The court found that none of Precise’s asserted exceptions excused that requirement.
The claims were not entirely collateral because they sought repayment of withheld Medicare funds and would require the court to examine Medicare regulations and the merits of the suspension. The “no review at all” exception did not apply because the overpayment determinations triggered an administrative appeals process through which Precise could ultimately obtain judicial review. Mandamus jurisdiction was also unavailable because Precise principally sought injunctive relief and failed to identify a clearly established, nondiscretionary duty requiring HHS to return the payments immediately.
Having found no jurisdiction, the court did not reach the Secretary’s Rule 12(b)(6) arguments. It also denied Precise’s motion for leave to file a sur-reply, concluding that the proposed filing merely sought the last word rather than addressing a genuinely new argument or new evidence.
Key Takeaways
- Medicare providers generally must channel claims arising under the Medicare Act through HHS and obtain a final agency decision before filing in federal court.
- Constitutional or ultra vires labels do not make a claim collateral when the requested relief depends on entitlement to Medicare payments and the merits of agency action.
- The availability of administrative review of an overpayment determination defeats the narrow “no review at all” exception, even if the agency does not separately offer a hearing on every challenge to the preceding payment suspension.
- Mandamus requires a clearly established, nondiscretionary duty and cannot be used merely to stop agency conduct or restore the pre-dispute status quo.
Why It Matters
The decision underscores the Medicare Act’s strict jurisdictional channeling rule. Providers challenging payment suspensions or related overpayment determinations ordinarily cannot bypass the administrative appeals process by framing the dispute as a due-process, ultra vires, or mandamus action.
The dismissal was without prejudice, leaving Precise free to pursue administrative relief and seek judicial review after a final decision by the Secretary.