Acute Care Ambulance Service, LLC v. Alex M. Azar II

UNITED STATES DISTRICT COURT December 03, 2020

SOUTHERN DISTRICT OF TEXAS David J. Bradley, Clerk

MCALLEN DIVISION

ACUTE CARE AMBULANCE SERVICE, §

L.L.C., §

§

Plaintiff, §

§

VS. §

CIVIL ACTION NO. 7:20-cv-00217

§

ALEX M. AZAR II, Secretary of the United §

States Department of Health and Human §

Services, §

§

Defendant. §

OPINION AND ORDER

The Court now considers “Plaintiff's Motion for Preliminary Injunction,”1 and its

supporting memorandum of law,2 Defendant’s response,3 and Plaintiff’s reply.4 The Court also

considers “Defendant’s Motion to Dismiss for Lack of Subject Matter Jurisdiction,”5 Plaintiff’s

response,6 and Defendant’s reply.7 After considering the briefing, record, and relevant

authorities, the Court GRANTS Defendant’s motion to dismiss, DENIES AS MOOT Plaintiff’s

motion for preliminary injunction, and dismisses this case.

I. BACKGROUND AND PROCEDURAL HISTORY

This is a Medicare payment dispute. Plaintiff Acute Care Ambulance Service, L.L.C.

provides ambulance transportation services “to Medicare beneficiaries when the use of other

methods of transportation is contraindicated,” such as when the patient’s health would be

1 Dkt. No. 8.

2 Dkt. No. 9.

3 Dkt. No. 15.

4 Dkt. No. 16.

5 Dkt. No. 14.

6 Dkt. No. 17.

7 Dkt. No. 18.

jeopardized by another mode of transportation.8 Plaintiff must comply with numerous federal

regulations to receive taxpayer-funded Medicare payments for its services.9 On July 24, 2020,

Defendant Alex M. Azar II, the Secretary of the United States Department of Health and Human

Services, or his designees suspended Plaintiff’s Medicare payments after determining “that a

credible allegation of fraud exists against” Plaintiff.10 Plaintiff alleges Defendant Secretary made

this determination only upon a single incidence of deficient documentation.11 As a result of the

Medicare payment suspension, from which Plaintiff derives over 90% of its revenues, Plaintiff

alleges its business is threatened and its patients cannot access ambulance transport services

during the COVID-19 pandemic, which Plaintiff argues constitutes an abuse of Defendant’s

discretion and a violation of constitutional due process for both Plaintiff and the patients Plaintiff

serves.12 Plaintiff brings claims for a violation of procedural due process for itself and its

patients, a claim that Defendant’s suspension of payments is arbitrary and capricious, an ultra

vires claim, and a request for declaratory relief and attorneys’ fees and costs.13

Plaintiff commenced this action on August 7, 2020,14 and subsequently acquired

summons for the Defendant on August 18th.15 Plaintiff served process, and such service was

acknowledged, on August 21st.16 Plaintiff moved for a preliminary injunction on October 2nd17

and Defendant moved to dismiss on October 20th.18 Both motions are briefed and ripe for

consideration. The Court turns to the analysis.

8 Dkt. No. 1 at 1, ¶ 1.

9 See, e.g., 42 C.F.R. §§ 410.40–.41.

10 Dkt. No. 1 at 2, ¶ 3 (quoting 42 C.F.R. § 405.371(a)(2)).

11 Id.

12 Dkt. No. 1 at 2–6, ¶¶ 4–11.

13 Dkt. No. 1 at 19–22, 25.

14 Dkt. No. 1.

15 Dkt. Nos. 3–4.

16 Dkt. No. 7.

17 Dkt. No. 8.

18 Dkt. No. 14.

II. MOTION TO DISMISS FOR LACK OF SUBJECT-MATTER JURISDICTION

Although Plaintiff’s motion for a preliminary injunction was filed earlier in time,19 the

Court first turns to Defendant’s motion to dismiss because it attacks the Court’s jurisdiction.

Motions under Federal Rule of Civil Procedure 12(b)(1) are to be considered first, before

addressing any attack on the merits,20 because the Court cannot exercise any “judicial action”

other than dismissal when the Court lacks jurisdiction.21

a. Legal Standard

It is a “well-settled principle that litigants can never consent to federal subject matter

jurisdiction, and the lack of subject matter jurisdiction is a defense that cannot be waived.”22

Federal Rule of Civil Procedure 12(b)(1) permits motions to dismiss for “lack of subject-matter

jurisdiction.” “Under Rule 12(b)(1), a claim is ‘properly dismissed for lack of subject-matter

jurisdiction when the court lacks the statutory or constitutional power to adjudicate’ the claim,”23

because federal courts only have jurisdiction to decide controversies as conferred by the United

States Constitution or by statute.24 While the Court has jurisdiction to determine its jurisdiction,25

it cannot exercise any “judicial action” other than dismissal when the Court lacks jurisdiction.26

If any party attacks the Court’s jurisdiction, “the party asserting jurisdiction bears the burden of

proof on a 12(b)(1) motion to dismiss.”27 In assessing the Court’s jurisdiction, “the district court

19 Compare Dkt. No. 8 with Dkt. No. 14.

20 In re FEMA Trailer Formaldehyde Prod. Liab. Litig., 668 F.3d 281, 286 (5th Cir. 2012) (citing Ramming v.

United States, 281 F.3d 158, 161 (5th Cir. 2001)).

21 Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94 (1998).

22 Gonzalez v. Guilbot, 255 F. App’x 770, 771 (5th Cir. 2007) (citing Coury v. Prot, 85 F.3d 244, 248 (5th

Cir.1996)); see 28 U.S.C. § 1447(c).

23 In re FEMA Trailer, 668 F.3d at 286 (quoting Home Builders Ass'n v. City of Madison, 143 F.3d 1006, 1010 (5th

Cir.1998)).

24 Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994).

25 United States v. Ruiz, 536 U.S. 622, 628 (2002) (“[I]t is familiar law that a federal court always has jurisdiction to

determine its own jurisdiction.”).

26 Steel Co., 523 U.S. at 94.

27 Life Partners Inc. v. United States, 650 F.3d 1026, 1029 (5th Cir. 2011).

is to accept as true the allegations and facts set forth in the complaint,”28 and may “dismiss for

lack of subject matter jurisdiction on any one of three separate bases: (1) the complaint alone; (2)

the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint

supplemented by undisputed facts plus the court's resolution of disputed facts.”29 Accordingly,

the Court may consider evidence outside the pleadings to determine subject matter jurisdiction.30

Ultimately, “[a] motion to dismiss for lack of subject matter jurisdiction should be granted only

if it appears certain that the plaintiff cannot prove any set of facts in support of his claim that

would entitle plaintiff to relief.”31

b. Analysis

Defendant Secretary argues that “[t]his Court should dismiss Plaintiff’s action because

Plaintiff cannot establish that this Court has subject-matter jurisdiction, cannot establish standing

for its patients’ actions, and cannot state a claim upon which relief can be granted.”32 Defendant

urges the Court join an evidently growing consensus of district courts in Texas that have

dismissed complaints like this one.33 Plaintiff responds that this Court has jurisdiction under any

one of four statutes: 28 U.S.C. § 1331 or 42 U.S.C. §§ 405(g), 1395ff, or 1395ii.34

Ordinarily, this Court has jurisdiction over “all civil actions arising under the

Constitution, laws, or treaties of the United States.”35 But Medicare is an exception. The United

States Supreme Court held that federal courts lack jurisdiction over any claim “arising under the

28 Choice Inc. of Tex. v. Greenstein, 691 F.3d 710, 714 (5th Cir. 2012).

29 Id. (quoting Williamson v. Tucker, 645 F.2d 404, 413 (5th Cir. 1981)).

30 Williams v. Wynne, 533 F.3d 360, 365 n.2 (5th Cir. 2008); Ramming v. United States, 281 F.3d 158, 161 (5th Cir.

2001).

31 Choice Inc. of Tex., 691 F.3d at 714 (quoting Ramming, 281 F.3d at 161).

32 Dkt. No. 14 at 2.

33 Id. at 1, 3 (citing Abet Life, Inc. v. Azar, No. H-20-1169, 2020 WL 3491966 (S.D. Tex. June 26, 2020) (Miller, J.);

True Health Diagnostics, LLC v. Azar, 392 F. Supp. 3d 656 (E.D. Tex. 2019); and Bridgett Mem’l Healthcare v.

Azar, No. 4:20-cv-1770 (S.D. Tex. Oct. 15, 2020) (Hoyt, J.)).

34 Dkt. No. 17 at 9–12, ¶¶ 22–28.

35 28 U.S.C. § 1331.

Medicare laws” until the plaintiff proceeds “through the special review channel that the

Medicare statutes create” and becomes entitled to judicial review if dissatisfied with the final

special review results.36 “A claim arises under the Medicare Act if both the standing and the

substantive basis for the presentation of the claim is the Medicare Act, or if the claim is

inextricably intertwined with a claim for Medicare benefits.”37 The requirement to proceed

through the special Medicare review channel is equally applicable to constitutional claims “when

that claim is ‘inextricably intertwined’ with a substantive claim of administrative entitlement.”38

When a plaintiff brings a Medicare claim, one particular statute, 42 U.S.C. § 405(g), “to

the exclusion of 28 U.S.C. § 1331, is the sole avenue for judicial review for all claims arising

under the Medicare Act.”39 Section 405(g) ostensibly applies only to social security

determinations, but 42 U.S.C. § 1395ii makes section 405(g) applicable to Medicare.40 Federal

court “jurisdiction under section 405(g) is determined under a two prong test. First, there must

have been a presentment to the Secretary. This element can never be waived and no decision of

any type can be rendered if this requirement is not satisfied. Second, the claimant must have

exhausted his administrative review.”41 The presentment element is “nonwaivable and

36 Shalala v. Ill. Council on Long Term Care, Inc., 529 U.S. 1, 5 (2000) (citing 42 U.S.C. §§ 405(g)–(h)); see 42

U.S.C. § 1395ii.

37 RenCare, Ltd. v. Humana Health Plan of Tex., Inc., 395 F.3d 555, 557 (5th Cir. 2004) (quotations and citations

omitted).

38 Affiliated Prof'l Home Health Care Agency v. Shalala, 164 F.3d 282, 286 (5th Cir. 1999) (per curiam) (quoting

Heckler v. Ringer, 466 U.S. 602, 611 (1984)); see Shalala, 529 U.S. at 10 (“The statute plainly bars § 1331 review

in such a case, irrespective of whether the individual challenges the agency's denial on evidentiary, rule-related,

statutory, constitutional, or other legal grounds.”); Physician Hosps. of Am. v. Sebelius, 691 F.3d 649, 654 (5th Cir.

2012).

39 Heckler v. Ringer, 466 U.S. 602, 615 (1984) (quotation and alteration omitted); see Walters v. Leavitt, 376 F.

Supp. 2d 746, 752 (E.D. Mich. 2005) (citing Shalala v. Ill. Council on Long Term Care, Inc., 529 U.S. 1 (2000))

(summarizing the complicated statutory relationship between the Social Security Act and the Medicare Act).

40 Heckler, 466 U.S. at 615.

41 Affiliated Prof'l Home Health Care Agency, 164 F.3d at 285 (citing Mathews v. Eldridge, 424 U.S. 319, 328

(1976) (“The nonwaivable element is the requirement that a claim for benefits shall have been presented to the

Secretary. Absent such a claim there can be no ‘decision’ of any type. And some decision by the Secretary is clearly

required by the statute.”)).

nonexcusable”42 and requires the channeling of “virtually all legal attacks” including all claims

through the agency before bringing them in federal court.43 However, the second element of

exhaustion is waivable. “Three narrow exceptions excuse exhaustion: (1) the Eldridge collateral-

claim exception under § 405(g); (2) the preclusion-of-judicial-review exception under 28 U.S.C.

§ 1331; and (3) mandamus jurisdiction under 28 U.S.C. § 1361.”44 Under the collateral claim

exception, “jurisdiction may lie over claims (a) that are ‘entirely collateral’ to a substantive

agency decision and (b) for which ‘full relief cannot be obtained at a postdeprivation hearing.’”45

The Fifth Circuit recently elaborated:

For a claim to be collateral, it must not require the court to immerse itself in the

substance of the underlying Medicare claim or demand a factual determination as

to the application of the Medicare Act. Nor can the claim request relief that would

be administrative, i.e., the substantive, permanent relief that the plaintiff seeks or

should seek through the agency appeals process. Instead, the claim must seek

some form of relief that would be unavailable through the administrative

process.46

The Court finds that Plaintiff met the nonwaivable presentment element under the first

prong of § 405(g) jurisdiction. There is a low bar to find presentment: “The Eldridge court held

that the plaintiff beneficiary met the presentment requirement because he ‘presented’ a claim

simply by answering a questionnaire as to whether his benefits should be terminated, even when

there was no prior decision as to his eligibility.”47 Here, Plaintiff alleged it presented its

constitutional claim on August 3, 2020,48 four days before filing suit. Plaintiff filed documents

42 S. Rehab. Grp. v. Sec'y of HHS, 732 F.3d 670, 679 (6th Cir. 2013).

43 Shalala v. Ill. Council on Long Term Care, Inc., 529 U.S. 1, 13 (2000).

44 Adams EMS, Inc. v. Azar, No. CV H-18-1443, 2018 WL 5264244, at *5 (S.D. Tex. Oct. 23, 2018) (Rosenthal,

C.J.) (citing Family Rehab., Inc. v. Azar, 886 F.3d 496, 501 (5th Cir. 2018)).

45 Family Rehab., Inc. v. Azar, 886 F.3d 496, 501 (5th Cir. 2018) (quoting Mathews v. Eldridge, 424 U.S. 319, 330–

32 (1976)).

46 Id. at 501–02 (citations and quotations omitted).

47 True Health Diagnostics, LLC v. Azar, 392 F. Supp. 3d 656, 662–63 (E.D. Tex. 2019) (quoting Mathews v.

Eldridge, 424 U.S. 319, 329–30 (1976)).

48 Dkt. No. 1 at 18, ¶ 14.

demonstrating that it presented its claims to Defendant’s contractor.49 Defendant’s contractor

responded on September 9, 2020, denying Plaintiff’s claim and declining to stay or terminate the

suspension of Medicare payments.50 Defendant does not challenge Plaintiff’s presentment

argument.51 This Court finds Plaintiff met the presentment requirement under 42 U.S.C. § 405(g)

as interpreted by the Supreme Court.52

The Court also finds that Plaintiff meets the collateral claim exception under the second

prong of § 405(g) jurisdiction. Plaintiff argues its claims fall under the collateral claim exception

to the ordinary requisite of administrative exhaustion.53 Defendant argues that Plaintiff’s claim

cannot avail of this collateral exception because “an action that seeks to stop the Secretary’s

payment suspension is not an action that is collateral to the underlying dispute—it is a direct

challenge to the Secretary’s decision to suspend.”54 As support, Defendant cites to a

nonbinding55 district court case dealing with “Medicare payment suspensions based on ‘credible

allegations of fraud’ pursuant to 42 C.F.R. § 405.371(a)(2),”56 which is the same regulation

implicated here.57 This Court in that case held that “plaintiff’s claims were not wholly collateral

to a substantive agency decision because the claim directly challenged the Government’s

decision to suspend payment pending its fraud investigation,” so the court lacked jurisdiction to

hear the plaintiff’s claim, on the authority of yet another district court case.58 That latter case

49 Dkt. No. 9-1 at 4, ¶ 13 (citing Dkt. No. 9-1 at 29).

50 Dkt. No. 9-1 at 4, ¶ 14 (citing Dkt. No. 9-1 at 36).

51 See Dkt. No. 18.

52 See Mathews v. Eldridge, 424 U.S. 319, 329 (1976).

53 Dkt. No. 17 at 8, ¶ 20.

54 Dkt. No. 14 at 11.

55 Camreta v. Greene, 563 U.S. 692, 709 n.7 (2011) (quoting 18 JAMES WM. MOORE ET AL., MOORE’S FEDERAL

PRACTICE – CIVIL § 134.02[1][d] (3d ed. 2011)) (“A decision of a federal district court judge is not binding

precedent in either a different judicial district, the same judicial district, or even upon the same judge in a different

case.”).

56 Abet Life, Inc. v. Azar, No. H-20-1169, 2020 WL 3491966, at *2 (S.D. Tex. June 26, 2020) (Miller, J.).

57 Dkt. No. 1 at 2, ¶ 3.

58 Abet Life, Inc., 2020 WL 3491966, at *2 (citing True Health Diagnostics, LLC v. Azar, 392 F. Supp. 3d 656, 663–

64 (E.D. Tex. 2019)).

confusingly held that the Medicare provider plaintiff, True Health Diagnostics, “did not show

that its claims are wholly collateral. Indeed, THD seeks the exact relief courts have identified as

non-collateral. THD requests that the Court lift the 2019 Suspension be lifted [sic] before it even

receives an overpayment determination from CMS. This is the exact substantive, permanent

relief that THD can seek through the agency appeals process.”59 But the True Health Diagnostics

court did not cite any authority for its reasoning. In contrast, the Fifth Circuit held that “if

plaintiffs request relief that is proper under the organic statute—by requesting that benefits or a

provider status be permanently reinstated—the claim is not collateral. But plaintiffs may bring

claims that sound only in constitutional or procedural law . . . and request that benefits be

maintained temporarily until the agency follows the statutorily or constitutionally required

procedures.”60 The latter type of request satisfies the collateral claim exception.61 Because

Plaintiff’s due process claim concerns explicitly temporary relief,62 True Health Diagnostics is

unpersuasive. Furthermore, True Health Diagnostics is inapplicable to this case because the

plaintiff’s due process claim in that case required analyzing the plaintiff’s allegations under the

coverage of the Medicare Act,63 which is not necessarily true in this case because resolution of

what process is due before Defendant Secretary suspends Plaintiff’s Medicare payments does not

necessarily require resolution of whether Defendant properly determined that Plaintiff was not

eligible to receive Medicare payments.

59 True Health Diagnostics, LLC, 392 F. Supp. 3d at 664.

60 Family Rehab., Inc. v. Azar, 886 F.3d 496, 503 (5th Cir. 2018) (citations omitted) (first emphasis in original).

61 Id. at 503–04.

62 Dkt. No. 1 at 19, ¶ 62.

63 See True Health Diagnostics, LLC, 392 F. Supp. 3d at 664 (“THD argues CMS violated its due process rights

because the 2019 Suspension is allegedly based on claims that were part of the 2017 Suspension. To determine

whether such an allegation is true, the Court would need to immerse itself in the substance of the underlying

Medicare claim or demand a factual determination as to the application of the Medicare Act—thus making THD's

claim not collateral.”).

Defendant next argues that Plaintiff’s “singular focus is to stop the payment suspension”

and a “constitutional claim is not a collateral claim for purposes of exhaustion [if] it ‘also seeks

to . . . halt the suspension of its Medicare payments.’”64 However, in the Fifth Circuit case

Defendant quotes for support, the Medicare provider’s claim was that the Secretary of Health &

Human Services “conspired to violate [the provider’s] right to due process and equal protection

under the United States Constitution. Specifically, [the provider APRO] charged the Secretary

with improperly and arbitrarily enforcing various Medicare rules and regulations based solely on

the fact that APRO is an African–American owned enterprise.”65 Specifically on the facts of the

case before it, the Fifth Circuit held that the provider’s claim would necessitate the court

“immerse itself in those [Medicare] regulations and make a factual determination as to whether

APRO was actually in compliance” with the provider regulations, so “[g]iven the administrative

nature of that inquiry, it cannot be reasonably concluded that APRO's claim is collateral to a

claim for administrative entitlement.”66 In other words, because APRO’s claim required

resolving the application of the Medicare Act and its implementing regulations, and because

APRO specifically sought relief which could be obtained through the Medicare special review

channel, APRO’s claim was held not to be collateral.

In contrast, “[t]he question presented in the instant case, whether a [pre-suspension] oral,

evidentiary hearing is required under the Due Process Clause of the Fifth Amendment before the

Secretary [suspends payments], is similar to the procedural due process claim asserted

in Mathews. A ruling on the merits of Plaintiff's procedural due process claim will involve this

Court in no way with a determination of whether” the Secretary properly suspended Medicare

64 Dkt. No. 14 at 12 (quoting Affiliated Prof'l Home Health Care Agency v. Shalala, 164 F.3d 282, 285 (5th Cir.

1999) (per curiam)).

65 Affiliated Prof'l Home Health Care Agency, 164 F.3d at 284.

66 Id. at 285–56.

payments or whether Plaintiff submitted any fraudulent Medicare reimbursement claim.67 This

Court finds the following precedential ratio decidendi controls this case:

[The provider] Family Rehab's procedural due-process and ultra vires claims will

not require the court to wade into the Medicare Act or regulations; those claims

only require the court to determine how much process is required under the

Constitution and federal law before recoupment. Because Family Rehab asks only

that recoupment be suspended until a hearing, and because it raises claims

unrelated to the merits of the recoupment, its claims are collateral. . . . Ultimately,

Family Rehab seeks only the suspension of recoupment before a hearing, which is

plainly collateral to the result of that hearing.68

Plaintiff seeks markedly similar relief in this case: “injunctive relief that requires Defendant to

temporarily rescind the Medicare payment suspension during the pendency of the COVID-19

pandemic and national emergency or until it can provide notice and a hearing in conformance

with constitutionally required procedures.”69 Accordingly, the Court finds that Plaintiff seeks

relief that is “unrelated to the merits of the” suspension and thus entirely collateral to the agency

decision.70

To avail of the collateral exception, Plaintiff must also show that full relief cannot be

obtained at a postdeprivation hearing.71 Plaintiff need only raise a colorable claim with “some

possible validity” to meet the exception.72 “In Family Rehabilitation, the Court found that the

combined threats of going out of business and disruption to Medicare patients was sufficient for

irreparable injury. There, plaintiff provided home healthcare services to patients and Medicare

payments constituted 94% of plaintiff's revenue.”73 Plaintiff’s allegation in this case is again

markedly similar: “The impact of the Medicare payment suspension threatens the very viability

67 D&G Holdings, LLC v. Burwell, 156 F. Supp. 3d 798, 815 (W.D. La. 2016) (citation omitted), aff’d Family

Rehab., Inc. v. Azar, 886 F.3d 496, 503 n.12 (5th Cir. 2018).

68 Family Rehab., Inc., 886 F.3d at 503–04 (5th Cir. 2018).

69 Dkt. No. 1 at 22, ¶ 82 (emphasis added); id. at 19, ¶ 62 (same).

70 Family Rehab., Inc., 886 F.3d at 503.

71 See supra note 45.

72 Family Rehab., Inc., 886 F.3d at 504 n.15 (quotation omitted).

73 True Health Diagnostics, LLC v. Azar, 392 F. Supp. 3d 656, 664 (E.D. Tex. 2019) (citation omitted).

of Acute Care. The ambulance supplier derives in excess of 90% of its revenues from

transporting sick and elderly Medicare patients. . . . Consequently, Acute Care will soon be

forced to shut down and file bankruptcy.”74 The Court holds that Plaintiff raises a colorable

claim that full relief cannot be obtained at a postdeprivation hearing.

The Court finds that Plaintiff has met the presentment element and may avail of the

collateral claim exception to administrative exhaustion under 42 U.S.C. §§ 405(g) and 1395ff75

and 1395ii,76 but only as to Plaintiff’s individual interest. The Court briefly addresses Plaintiff’s

claim that Defendant violated Plaintiff’s patients’ due process right to receive Medicare

services.77 This claim fails for lack of standing. In general, “a litigant may only assert his own

constitutional rights or immunities.”78 Plaintiff asserts two potential exceptions.79 The first

precedent cited was issued on the same day as Brown v. Board of Education and applied Brown

and its school desegregation rationale to the District of Columbia.80 The Court is left to guess as

to how this case is even slightly relevant. The second precedent cited held that certain physicians

are “intimately involved” in a woman’s abortion decision, and are “uniquely qualified to litigate

the constitutionality of the State's interference with, or discrimination against, that decision,” so

the Supreme Court held that physicians may generally assert the rights of its women patients vis-

à-vis abortion.81 However, “[t]he Fifth Circuit has declined to recognize a protected property

interest in favor of a third-party stemming from an agreement between the United States and

74 Dkt. No. 1 at 2–3, ¶ 4.

75 See Cochran v. U.S. Health Care Fin. Admin., 291 F.3d 775, 779 (11th Cir. 2002) (holding that 42 U.S.C.

§ 1395ff(b)(1) of the Medicare Act adopts 42 U.S.C. § 405(g) of the Social Security Act); Family Rehab., Inc., 886

F.3d 496, 500 n.4 (same).

76 Heckler v. Ringer, 466 U.S. 602, 615 (1984).

77 See Dkt. No. 1 at 20, ¶¶ 64–65.

78 United States v. Raines, 362 U.S. 17, 22 (1960).

79 Dkt. No. 17 at 19, ¶ 40.

80 Bolling v. Sharpe, 347 U.S. 497 (1954).

81 Singleton v. Wulff, 428 U.S. 106, 117–18 (1976).

another entity.”82 Similarly, the Supreme Court held that elderly patients have no

“constitutionally protected interest in life, liberty, or property” when the government enforces

valid regulations against the patients’ Medicare facility and discontinues Medicare payments to

the provider.83 Plaintiff cites no case extending the physician-abortion standing to the Medicare

provider context.84 The Court finds the on-point precedents controlling over the generality

established in the abortion case. The Court finds Plaintiff does not have standing85 to assert the

constitutional rights of its patients and GRANTS Defendant’s motion to dismiss with respect to

Plaintiff’s count 2 for an alleged violation of patients’ “due process right of access to

healthcare.”86 The Court DENIES Defendant’s motion to dismiss87 to the extent it seeks to

dismiss Plaintiff’s remaining claims under Federal Rule of Civil Procedure 12(b)(1) for lack of

subject-matter jurisdiction. The Court finds it has jurisdiction to address Plaintiff’s due process,

arbitrary and capricious, and ultra vires claims.

III. MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM

Before the Court proceeds to consider Plaintiff’s motion for a preliminary injunction,88

the Court first ascertains whether Plaintiff states a claim upon which relief can be granted and for

which a preliminary injunction may issue.

a. Legal Standard

82 Supreme Home Health Servs., Inc. v. Azar, 380 F. Supp. 3d 533, 556 n.14 (W.D. La. 2019) (citing McCasland v.

City of Castroville, 514 F. App'x 446, 449 (5th Cir. 2013)).

83 O'Bannon v. Town Ct. Nursing Ctr., 447 U.S. 773, 790 (1980).

84 See Dkt. No. 17 at 19 n.5.

85 See Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 542 (1986) (alteration in original) (quotation omitted)

(“[A]t an irreducible minimum, Art. III requires the party who invokes the court's authority to show that he

personally has suffered some actual or threatened injury as a result of the putatively illegal conduct of the

defendant . . . .”).

86 Dkt. No. 1 at 20 (Count 2).

87 Dkt. No. 14.

88 Dkt. No. 8.

The Court uses federal pleading standards to determine the sufficiency of a complaint.89

“A motion to dismiss an action for failure to state a claim admits the facts alleged in the

complaint, but challenges plaintiff's right to relief based upon those facts.”90 Under Federal Rule

of Civil Procedure 12(b)(6), to avoid dismissal, the complaint “must contain sufficient factual

matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”91 The Court reads

the complaint as a whole92 and accepts all well-pleaded facts as true (even if doubtful or

suspect93) and views those facts in the light most favorable to the plaintiff (because a

Rule 12(b)(6) motion is viewed with disfavor94), but will not strain to find inferences favorable

to the plaintiff,95 but also will not indulge competing reasonable inferences that favor the

Defendant.96 A plaintiff need not plead evidence97 or even detailed factual allegations, especially

when certain information is peculiarly within the defendant’s possession,98 but must plead more

than “‘naked assertion[s] devoid of ‘further factual enhancement’” or “[t]hreadbare recitals of the

89 See Genella v. Renaissance Media, 115 F. App'x 650, 652–53 (5th Cir. 2004) (holding that pleadings must

conform to federal pleading requirements).

90 Crowe v. Henry, 43 F.3d 198, 203 (5th Cir. 1995) (quotation omitted); see Chatham Condo. Ass’ns v. Century

Vill., Inc., 597 F.2d 1002, 1011 (5th Cir. 1979) (quoting Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884,

891 (3d Cir. 1977)) (“The decision disposing (of) the case is then purely on the legal sufficiency of plaintiff's case:

even were plaintiff to prove all its allegations, he or she would be unable to prevail.”).

91Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

92 See Gulf Coast Hotel-Motel Ass'n v. Miss. Gulf Coast Golf Course Ass'n, 658 F.3d 500, 506 (5th Cir. 2011)

(“While the allegations in this complaint that the Golf Association's anticompetitive acts ‘substantially affected

interstate commerce’ are not sufficient on their own, the complaint here read as a whole goes beyond the allegations

rejected in Twombly and Iqbal.”).

93 Twombly, 550 U.S. at 555–56.

94 Leal v. McHugh, 731 F.3d 405, 410 (5th Cir. 2013) (quoting Turner v. Pleasant, 663 F.3d 770, 775 (5th Cir. 2011)

(“This court construes facts in the light most favorable to the nonmoving party, ‘as a motion to dismiss under

12(b)(6) “is viewed with disfavor and is rarely granted.”’”)).

95 Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 338 (5th Cir. 2008).

96 See Lormand v. US Unwired, Inc., 565 F.3d 228, 267 (5th Cir. 2009).

97 Copeland v. State Farm Ins. Co., 657 F. App'x 237, 240–41 (5th Cir. 2016).

98 See Innova Hosp. San Antonio, LP v. Blue Cross & Blue Shield of Ga., Inc., 892 F.3d 719, 730 (5th Cir. 2018)

(holding that pleading “on information and belief” is acceptable when the inference of culpability is plausible).

elements of a cause of action, supported by mere conclusory statements” to survive a motion to

dismiss.99

In evaluating a motion to dismiss, Courts first disregard any conclusory allegations or

legal conclusions100 as not entitled to the assumption of truth,101 and then undertake the “context-

specific” task, drawing on judicial experience and common sense, of determining whether the

remaining well-pled allegations give rise to entitlement to relief.102 “A claim has facial

plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable

inference that the defendant is liable for the misconduct alleged.”103 Courts have “jettisoned the

[earlier] minimum notice pleading requirement”104 and the complaint must plead facts that

“nudge” the claims “across the line from conceivable to plausible”105 because discovery is not a

license to fish for a colorable claim.106 The complaint must plead every material point necessary

to sustain recovery; dismissal is proper if the complaint lacks a requisite allegation.107 However,

the standard is only “to determine whether the plaintiff has stated a legally cognizable claim that

is plausible, not to evaluate the plaintiff’s likelihood of success.”108

99 Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557); see also id. at 679 (holding that a complaint that

“do[es] not permit the court to infer more than the mere possibility of misconduct” does not suffice to state a claim).

100 In re Great Lakes Dredge & Dock Co. LLC, 624 F.3d 201, 210 (5th Cir. 2010) (quotation omitted) (“We do not

accept as true conclusory allegations, unwarranted factual inferences, or legal conclusions.”).

101 Mustapha v. HSBC Bank USA, NA, No. 4:11-CV-0428, 2011 WL 5509464, at *2 (S.D. Tex. Nov. 10, 2011)

(Hanks, J.) (“[A] court is not required to accept conclusory legal allegations cast in the form of factual allegations if

those conclusions cannot reasonably be drawn from the facts alleged.”).

102 Iqbal, 556 U.S. at 678–79; see also Fernandez-Montez v. Allied Pilots Ass'n, 987 F.2d 278, 284 (5th Cir. 1993)

(“[C]onclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a

motion to dismiss”).

103 Iqbal, 556 U.S. at 678.

104 St. Germain v. Howard, 556 F.3d 261, 263 n.2 (5th Cir. 2009).

105 Iqbal, 556 U.S. at 680 (quoting Twombly, 550 U.S. at 570).

106 Barnes v. Tumlinson, 597 F. App'x 798, 799 (5th Cir. 2015); see Iqbal, 556 U.S. at 678–79 (“Rule 8 marks a

notable and generous departure from the hypertechnical, code-pleading regime of a prior era, but it does not unlock

the doors of discovery for a plaintiff armed with nothing more than conclusions.”).

107 Rios v. City of Del Rio, 444 F.3d 417, 421 (5th Cir. 2006); accord Campbell v. City of San Antonio, 43 F.3d 973,

975 (5th Cir. 1995).

108 Doe ex rel. Magee v. Covington Cty. Sch. Dist. ex rel. Keys, 675 F.3d 849, 854 (5th Cir. 2012) (quoting Lone Star

Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010))

The Court is limited to assessing only the complaint, its proper attachments, documents

incorporated into the complaint by reference, and matters of which the Court may take judicial

notice.109 Attachments to the complaint become part of the pleadings for all purposes,110 but the

Court is not required to accept any characterization of them because the exhibit controls over

contradictory assertions,111 except in the case of affidavits.112 Because the focus is on the

pleadings, “if, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are

presented to and not excluded by the court, the motion must be treated as one for summary

judgment under Rule 56,”113 but not if the material is a matter of public record114 or a website115

and not if a defendant attaches documents to a motion to dismiss that are “referred to in the

plaintiff’s complaint and are central to her claim.”116

b. Whether Plaintiff States a Property Interest

Defendant first argues that Plaintiff has no cognizable property right to Medicare

payments and thus cannot state a claim for their suspension.117 Plaintiff responds that “Medicare

providers have a legitimate claim of entitlement to payment for services that are covered under

the Medicare Act and actually rendered.”118 Plaintiff argues that jurisprudence has recognized

Plaintiff’s protected property interest.119

109 Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 338 (5th Cir. 2008).

110 Nishimatsu Constr. Co. v. Hous. Nat’l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975) (citing FED. R. CIV. P. 10(c)).

111 Kamps v. Baylor Univ., 592 F. App'x 282, 284 n.1 (5th Cir. 2014)

112 Bosarge v. Miss. Bureau of Narc., 796 F.3d 435, 440–41 (5th Cir. 2015) (“[W]hile the affidavits may be

considered as an aid to evaluating the pleadings, they should not control to the extent that they conflict with

[plaintiff’s] allegations.”).

113 FED. R. CIV. P. 12(d).

114 Joseph v. Bach & Wasserman, L.L.C., 487 F. App'x 173, 178 n.2 (5th Cir. 2012) (per curiam) (citing Funk v.

Stryker Corp., 631 F.3d 777, 783 (5th Cir. 2011)).

115 Hyder v. Quarterman, No. CIV.A. C-07-291, 2007 WL 4300446, at *3 (S.D. Tex. Oct. 10, 2007) (Owsley, J.)

(collecting cases).

116 Causey v. Sewell Cadillac–Chevrolet, 394 F.3d 285, 288 (5th Cir. 2004).

117 Dkt. No. 14 at 14–15.

118 Dkt. No. 17 at 14, ¶ 32.

119 Dkt. No. 16 at 3 n.2 (citing Dkt. No. 9 at 20–21).

The Fifth Amendment to the United States Constitution provides that “No person shall

be . . . deprived of life, liberty, or property, without due process of law.” Accordingly, to state a

claim for violation of due process, Plaintiff must identify a property interest of which it was

deprived.120 “If Plaintiff has no property interest, there can be no due process violation.”121

Plaintiff alleges that “Acute Care has a constitutional property interest in payments for services

rendered.”122

This particular question has divided district courts in the Fifth Circuit but has yet to be

determined by the Fifth Circuit. On one hand, at least three district judges have found a property

interest in Medicare payments.123 On the other, at least two district judges (including this one)

have found no property interest.124 Two of the cases finding a property interest are presently on

appeal.125 Both cases finding no property interest have been affirmed on appeal. In one

affirmance, the property interest in Medicare payments does not appear to have been an issue on

appeal and was not decided by the Fifth Circuit.126 In the other appeal, the Fifth Circuit avoided

the property interest question.127

120 See Mathews v. Eldridge, 424 U.S. 319, 332 (1976); Logan v. Zimmerman Brush Co., 455 U.S. 422, 428 (1982)

(“[W]e must determine whether Logan was deprived of a protected interest, and, if so, what process was his due.”).

121 Sahara Health Care, Inc. v. Azar, 349 F. Supp. 3d 555, 571 (S.D. Tex. 2018) (Alvarez, J.).

122 Dkt. No. 1 at 5, ¶ 9.

123 Med-Cert Home Care, LLC v. Azar, 365 F. Supp. 3d 742, 751 (N.D. Tex. 2019) (Fish, J.) (“Med-Cert has a valid

property interest in receiving Medicare payments for services rendered.”); Adams EMS, Inc. v. Azar, No. CV H-18-

1443, 2018 WL 5264244, at *10 (S.D. Tex. Oct. 23, 2018) (Rosenthal, C.J.) (“Adams has a property interest in

receiving and retaining the Medicare payments it has earned.”); Infinity Healthcare Servs., Inc. v. Azar, 349 F. Supp.

3d 587, 596 (S.D. Tex. 2018) (Rosenthal, C.J.) (quoting Family Rehab., Inc. v. Azar, No. 3:17-CV-3008-K, 2018

WL 3155911, at *4 (N.D. Tex. June 28, 2018) (Kinkeade, J.) (“Plaintiff ‘has a property interest in the Medicare

payments for services rendered.’”).

124 Sahara Health Care, Inc. v. Azar, 349 F. Supp. 3d 555, 572 (S.D. Tex. 2018) (Alvarez, J.); Supreme Home

Health Servs. v. Azar, 380 F. Supp. 3d 533, 555 (W.D. La. 2019); cf. In Touch Home Health Agency, Inc. v. Azar,

414 F. Supp. 3d 1177, 1189–90 (N.D. Ill. 2019) (holding the provider lacked a property interest).

125 See Med-Cert Home Care, L.L.C. v. Azar, No. 20-10443 (5th Cir. appeal filed May 8, 2020); Family Rehab., Inc.

v. Azar, No. 20-10271 (5th Cir. appeal filed Mar. 12, 2020).

126 See Supreme Home Health Servs. v. Azar, 812 F. App'x 229 (5th Cir. 2020).

127 See Sahara Health Care, Inc. v. Azar, 975 F.3d 523, 529 n.6 (5th Cir. 2020).

Nevertheless, the Court draws instructive guidance from the existing jurisprudence. All

three cases determining that a property interest in Medicare payments exists cite no binding

authority, and instead simply find that a property interest exists with little analysis.128 However,

on remand from the Fifth Circuit while revisiting the property interest question, Judge Ed

Kinkeade of the Northern District of Texas conducted further analysis. In January 2020, citing

the Fifth Circuit’s decision in Personal Care Products, Inc. v. Hawkins, Judge Kinkeade held

that a property interest in Medicare payments exists.129 Previously, this Court, analyzing

Personal Care Products and one other Fifth Circuit precedent, found no property interest. The

Fifth Circuit declined to reverse this Court on that point on appeal.130 In September 2020, almost

as if responding to Judge Kinkeade, the Fifth Circuit cited the same Personal Care Products case

and adumbrated that no property interest exists: “[The provider] maintains that it has a property

interest in Medicare payments it has earned for services rendered on properly billed claims. This

court has rejected a similar theory, where providers argued that they had a property interest in

legitimately earned, current Medicaid reimbursements that are not subject to investigation.”131

The writing on the wall seems clear: there is no property interest in Medicare payments.

Additional Fifth Circuit jurisprudence supports this holding. In Ridgely v. FEMA,132 the

Fifth Circuit dealt with plaintiffs’ claims that the federal government, via the Disaster Relief Act,

was improperly administering its rental assistance programs in the aftermath of Hurricanes

128 See supra note 123.

129 Family Rehab., Inc. v. Azar, No. 3:17-CV-3008-K, 2020 WL 230615, at *5 (N.D. Tex. Jan. 15, 2020) (citing

Pers. Care Prods., Inc. v. Hawkins, 635 F.3d 155, 158 (5th Cir. 2011)).

130 Sahara Health Care, Inc. v. Azar, 349 F. Supp. 3d 555, 572 (S.D. Tex. 2018) (Alvarez, J.) (“Most recently,

in Personal Care Products, Inc. v. Hawkins, the Fifth Circuit affirmed a district court's finding that a Medicaid

medical supply provider had no protected property interest in the payment of its Medicaid claims.”), aff'd, 975 F.3d

523 (5th Cir. 2020).

131 Sahara Health Care, Inc., 975 F.3d at 529 (quotations and alteration omitted).

132 512 F.3d 727 (5th Cir. 2008).

Katrina and Rita.133 The Fifth Circuit examined whether plaintiffs could claim a property interest

in the rental assistance payments and held as follows:

According to plaintiffs, section 408 [of the Disaster Relief Act] and the

regulations create an entitlement because they set out criteria that make an award

of benefits “mandatory and not discretionary” for all eligible applicants. In

determining whether statutes and regulations limit official discretion, the Supreme

Court has explained that we are to look for “explicitly mandatory language, i.e.,

specific directives to the decisionmaker that if the regulations' substantive

predicates are present, a particular outcome must follow.” Unfortunately for

plaintiffs, such mandatory language is wholly absent from section 408 and the

regulations.134

The Fifth Circuit found that the statute and its implementing regulations used “entirely

permissive terms” like “may.”135 Because the statute and regulation did not use mandatory

language, the court held they did not create any property interest for the putative beneficiaries.136

Critically, the court held that, under the statute, “an individual has no right to receive rental

assistance, even if assistance is being offered and he meets the eligibility criteria.”137 Similarly

here, the Medicare statute and its implementing regulations do not create or vest any right to

receive payments in Medicare providers. The only regulations Plaintiff cites to show a

mandatory directive to pay concern suspension of payments.138 One such regulation provides,

“[p]ayments suspended under the authority of § 405.371(a) are first applied to reduce or

eliminate any overpayments.”139 Nothing in the regulation concerns or provides a specific

directive to pay or explicitly mandatory language giving Plaintiff a right to receive payment.

Plaintiff’s argument that a property interest exists is unpersuasive.

133 512 F.3d 727, 729 (5th Cir. 2008).

134 Id. at 735–36 (quoting Ky. Dep't of Corr. v. Thompson, 490 U.S. 454, 463 (1989)).

135 Id. at 736.

136 Id.

137 Id. (emphasis added).

138 Dkt. No. 17 at 16, ¶ 35 (citing 42 C.F.R. §§ 405.370(a), 405.372(e)).

139 42 C.F.R. § 405.372(e).

However, the Court need not decide this issue. In a recent appeal, the Fifth Circuit

“decline[d] to decide the property interest question” in favor of addressing whether the

government provided adequate process under the Mathews v. Eldridge test.140 This Court will

now do the same.

c. Whether Plaintiff States a Claim for Violation of Due Process

Defendant argues that “the Court should dismiss Plaintiff’s claims under Fed. R. Civ. P.

12(b)(6) because it cannot state a claim for which relief may be granted. Plaintiff cannot state a

due process claim in Count I of its Complaint . . . .”.141 Plaintiff responds that its “procedural

Due Process claim provides a basis for finding a likelihood of success on the merits.”142

The Court examines the sufficiency of the process and looks to the “familiar procedural

due process inspection instructed by Mathews v. Eldridge.”143 The parties agree that this is the

governing standard.144 Under the totality of the circumstances, the Court:

balances the private interest, the governmental interest, and the costs and benefits

of additional procedures. Specifically, one looks to: First, the private interest that

will be affected by the official action; second, the risk of an erroneous deprivation

of such interest through the procedures used, and the probable value, if any, of

additional or substitute procedural safeguards; and finally, the Government's

interest, including the function involved and the fiscal and administrative burdens

that the additional or substitute procedural requirement would entail.145

This is the test even if a plaintiff is deprived of their property and provided with postdeprivation

review.146

140 Sahara Health Care, Inc. v. Azar, 975 F.3d 523, 529 (5th Cir. 2020).

141 Dkt. No. 14 at 8; accord Dkt. No. 15 at 12 (“As discussed below, Plaintiff has also failed to satisfy the due

process elements established by the Supreme Court.”).

142 Dkt. No. 17 at 13, ¶ 30.

143 Sahara Health Care, Inc. v. Azar, 975 F.3d 523, 529 (5th Cir. 2020) (quoting Nelson v. Colorado, 137 S. Ct.

1249, 1255 (2017)).

144 Dkt. No. 17 at 13, ¶ 30; Dkt. No. 15 at 12.

145 Sahara Health Care, Inc., 975 F.3d at 529 (quoting Mathews v. Eldridge, 424 U.S. 319, 335 (1976)).

146 See Thibodeaux v. Bordelon, 740 F.2d 329, 336 (5th Cir. 1984) (“The balancing process usually dictates that the

state provide some kind of predeprivation hearing, for such a procedure can be both minimally intrusive and

effective in preventing arbitrary deprivations. This is not always the case, however.”).

The Court pauses here to note that it is analyzing, at this stage of judicial review,

Plaintiff’s challenge to Defendant Secretary’s suspension of Medicare payments as violative of

the Due Process Clause on their face, as opposed to as applied to Plaintiff’s specific context—

otherwise, the analysis would not be collateral as the Court would need to “‘immerse itself’ in

the substance of the underlying Medicare claim or [make] a ‘factual determination’ as to the

application of the Medicare Act.”147

When an act of Congress is appropriately challenged in the courts as not

conforming to the constitutional mandate, the judicial branch of the government

has only one duty; to lay the article of the Constitution which is invoked beside

the statute which is challenged and to decide whether the latter squares with the

former. All the court does, or can do, is to announce its considered judgment upon

the question.148

The Court describes the parties’ factual circumstances as follows only in order to analyze the

Secretary’s suspension against the Due Process Clause.

The Court first identifies what process is provided. Congress specifically gave the

Secretary of the United States Department of Health and Human Services the power to suspend

payments pending an investigation into a “credible allegation of fraud.”149 The Secretary has

delegated this power. In this case, Plaintiff’s Medicare payments were suspended by Qlarant

(presumably a Medicare contractor) on July 24, 2020, pursuant to 42 C.F.R. § 405.371(a)(2),150

which permits Medicare payments to be “[i]n cases of suspected fraud, suspended . . . by CMS or

a Medicare contractor if CMS or the Medicare contractor has consulted with the OIG, and, as

appropriate, the Department of Justice, and determined that a credible allegation of fraud exists

against a provider or supplier, unless there is good cause not to suspend payments.” Under the

147 True Health Diagnostics, LLC v. Azar, 392 F. Supp. 3d 656, 663 (E.D. Tex. 2019) (quoting Affiliated Prof'l

Home Health Care Agency v. Shalala, 164 F.3d 282, 285 (5th Cir. 1999)).

148 United States v. Butler, 297 U.S. 1, 62 (1936).

149 42 U.S.C. § 1395y(o).

150 Dkt. No. 1 at 2, ¶ 3; Dkt. No. 9-1 at 19.

governing regulatory scheme, the provider may submit a rebuttal letter, generally within 15 days,

including “any pertinent information” as to why the provider’s Medicare payments should not be

suspended.151 Within 15 days, CMS or the Medicare contractor must consider the rebuttal letter

and decide whether to continue or terminate the suspension.152 However, even if all steps are

followed, CMS’s or the contractor’s final decision “is not an initial determination and is not

appealable.”153 This Court labels this before-initial-determination administrative scheme “track

1” for ease of reference.

An initial determination is simply the “determination when a claim for Medicare benefits

under Part A or Part B is submitted,” including the determination that such a claim is fraudulent

or improper.154 No time period is set forth in the regulations for CMS or the Medicare contractor

to actually issue an initial determination if the initial determination is not on a “clean claim,”155

that is, a claim “submitted by or on behalf of the beneficiary who received the items and/or

services.”156 CMS or the contractor must reexamine whether good cause exists to continue the

Medicare payment suspension every 180 days, and “[g]ood cause not to continue to suspend

payments to an individual or entity against which there are credible allegations of fraud must be

deemed to exist if a payment suspension has been in effect for 18 months and there has not been

a resolution of the investigation,” unless the case is referred to the Office of the Inspector

General for administrative action or the Department of Justice requests that the suspension

continue.157 However, the Medicare payment suspension can technically continue indefinitely

151 42 C.F.R. § 405.374.

152 42 C.F.R. § 405.375(a).

153 Id. § 405.375(c); accord 42 C.F.R. § 405.924 (actions that are initial determinations).

154 42 C.F.R. § 405.904(a)(2).

155 See 42 C.F.R. §§ 405.904, 405.922.

156 42 C.F.R. § 405.922.

157 42 C.F.R. § 405.371(b)(2)–(3) (emphasis added).

“because there is no established time frame for resolving the investigation.”158 Until CMS or the

contractor issue their initial determination, the provider is locked out of the administrative review

scheme,159 which is a four-step administrative review process involving (1) a redetermination by

a contractor, (2) a reconsideration by an independent contractor, (3) a hearing and de novo

review before an administrative law judge, and (4) a review by the Medicare Appeals Council,

followed by judicial review.160 The provider may submit evidence at steps one and two, but not

generally at steps three or four.161 This after-initial-determination scheme is “track 2.”

Plaintiff and Defendant disagree about whether track 1 can surmount the Mathews due

process review factors. “The requirement for some kind of a hearing [before the final deprivation

of property interests] applies to the taking of private property . . . .”162 Plaintiff strongly urges the

Court to interpret “some kind of a hearing” as requiring numerous due process guarantees: an

unbiased tribunal, notification of the evidence on which the adverse determination is based, a

right to cross-examine, a decision based only on the evidence presented, and an appealable

decision.163 But Plaintiff’s authority for this proposition is merely a law review article, and

however well-reasoned the article or luminary its author, this Court is bound by Fifth Circuit

precedent holding that the type of hearing necessary or process due “is a function of the context

of the individual case,”164 not a hard and fast rule, and the “constitutional minimum of due

158 Dkt. No. 9 at 27.

159 See 42 C.F.R. § 405.928.

160 See True Health Diagnostics, LLC v. Azar, 392 F. Supp. 3d 656, 661 (E.D. Tex. 2019) (summarizing the

administrative review channel).

161 See Sahara Health Care, Inc. v. Azar, 975 F.3d 523, 526 (5th Cir. 2020) (citing 42 C.F.R. §§ 405.946(a),

405.966(a)).

162 Wolff v. McDonnell, 418 U.S. 539, 558 (1974).

163 Dkt. No. 17 at 16–17, ¶¶ 36–37 (citing Henry J. Friendly, “Some Kind of Hearing”, 123 U. PA. L. REV. 1267

(1975)); accord Dkt. No. 9 at 28.

164 Sahara Health Care, Inc. v. Azar, 975 F.3d 523, 530 (5th Cir. 2020) (quoting Jones v. La Bd. of Sup’rs of Univ.

of La. Sys., 809 F.3d 231, 236 (5th Cir. 2015)).

process guarantees [only] that ‘notice and an opportunity to be heard be granted at a meaningful

time and in a meaningful manner.’”165

The Court finds the amount of process due to be governed by the Fifth Circuit’s

September 2020 decision in Sahara Health Care, Inc. v. Azar.166 In Sahara, the plaintiff Sahara

was a home health agency that derived about 75% of its revenue from Medicare reimbursements,

but the Secretary of the U.S. Department of Health and Human Services sought to collect on $3.6

million of Medicare overpayments to the provider.167 Sahara proceeded through two of the

administrative review steps under track 2, then filed in federal court before completing the

remainder of administrative review.168 The Fifth Circuit affirmed this Court’s dismissal of the

plaintiff’s due process and ultra vires claims because the “government provided Sahara adequate

process and complied with the statute.”169 The Fifth Circuit addressed Sahara’s objections to

track 2 administrative review by holding that “Sahara fails to demonstrate what value [additional

process] would add to the process Sahara has already received or is otherwise entitled to receive”

under the first two steps of track 2 review.170 Accordingly, the Court understands Sahara to

sanction the Secretary’s postdeprivation process.171 Indeed, the Fifth Circuit explained its

agreement with the Fourth Circuit that judicial review must analyze the Medicare

postdeprivation process as a whole against the Due Process Clause and found that the

postdeprivation process did not violate Sahara’s constitutional right to due process.172

Because of the marked similarities between Sahara and this case, the Court holds that

Sahara governs the outcome. As the Fifth Circuit stated in Sahara, “the provider [is] myopically

165 Id. (quoting Gibson v. Tex. Dep't of Ins., 700 F.3d 227, 239 (5th Cir. 2012)).

166 Id.

167 Id. at 526.

168 Id. at 526, 528.

169 Id. at 526.

170 Id. at 531.

171 See id. at 532.

172 Id. at 532–33.

focused on the tree of the [initial suspension] while it ignore[s] the forest of the full

comprehensive five-step scheme of procedural protections.”173 As in Sahara, Plaintiff in this

case sought to sue in federal court before even awaiting a response to its rebuttal letter and

“cannot complain about lacking due process when the privation (foregoing escalation and

judicial review) was its own choice.”174 Even if the first and third Mathews factors concerning

the governmental interest and private interest weigh in Plaintiff’s favor, “the sufficiency of the

current procedures and the minimal benefit of the live hearing weighs so strongly against

[Plaintiff] that [the Court] reject[s] its due process claim.”175

Plaintiff attempts to distinguish Sahara by arguing that it “has no application where HHS

imposes a suspension that forces the healthcare supplier’s closure, but denies it any appeal or

right to a hearing to challenge the sanction.”176 Plaintiff is addressing the distinction between

track 1 administrative review, under which no hearing is available, and track 2 administrative

review, under which a hearing is available before an administrative law judge at step three.177

But again, Plaintiff’s argument is flawed in that it myopically challenges only one aspect of the

whole administrative review scheme. Plaintiff tries to make much of the fact that track 2 review

is closed off until the Centers for Medicare and Medicaid Services or a contractor issues an

initial determination, which may not happen for an indefinite amount of time,178 but the

plaintiff’s argument in Sahara that it could not receive a hearing before an administrative law

judge for multiple years was markedly similar. The Fifth Circuit rejected the latter argument and

held “Sahara received some procedure, chose to forego additional protections, and cannot

173 Id. at 533.

174 Id.

175 Id. at 529–30.

176 Dkt. No. 9 at 8 n.1.

177 See 42 U.S.C. § 1395ff(d); 42 C.F.R. § 405.1002(a).

178 Dkt. No. 17 at 16–17, ¶ 36.

demonstrate the additional value of the hearing it requests. The procedure it received was

constitutionally adequate . . . .”179 Similarly here, track 1 review does provide some procedure to

provide “an initial check against mistaken decisions,” which may be a constitutional

minimum.180 As in Sahara, Plaintiff here rushed to file in federal court two weeks after receiving

the notice of suspension and is not entitled to judicial relief holding that due process is lacking

when foregoing the remainder of the existing due process scheme “was [Plaintiff’s] own

choice.”181 The Court cannot examine only whether one particular administrative step afforded

adequate due process, because courts are bound to respect Congress’s and the Secretary’s

scheme even if the court would disagree as a policy matter with the existing process.182 This

initial review under track 1 is “just a part of the ‘comprehensive whole that ends with an

opportunity for timely judicial review’” that the Fifth Circuit countenanced in Sahara.183

Plaintiff also attempts to discount Sahara by arguing that it “is not a final judgment

because the mandate has yet to issue, and thus not properly relied upon as precedent.”184

However, the Fifth Circuit’s “judgment is entered when it is noted on the docket.”185 Sahara has

179 Sahara Health Care, Inc. v. Azar, 975 F.3d 523, 533 (5th Cir. 2020).

180 See Michalowicz v. Vill. of Bedford Park, 528 F.3d 530, 536 (7th Cir. 2008) (quoting Cleveland Bd. of Educ. v.

Loudermill, 470 U.S. 532, 545 (1985)).

181 Sahara Health Care, Inc., 975 F.3d at 533. Although the following discussion is obiter dictum because it

analyzes Plaintiff’s claim as applied, the Court discusses Plaintiff’s factual context because it illuminates the

procedural sufficiency of the initial check against mistaken decisions. Plaintiff availed of track 1 review within two

weeks of the initial suspension letter, but did not use the opportunity to argue that Plaintiff’s Medicare payment

suspension was mistaken. Plaintiff instead argued in its rebuttal letter that the Secretary abused his discretion and

took an unconstitutional action. Dkt. No. 9-1 at 29–31. Plaintiff called the suspension “essentially a documentation

issue.” Id. at 30. Qlarant, the “Unified Program Integrity Contractor” for CMS, responded to Plaintiff’s rebuttal

letter on September 9, 2020, in a detailed 4-page letter and explained that what Plaintiff minimized as a

“documentation issue” is the substantive predicate upon which Medicare pays reimbursements and that requests for

payment cannot be honored when they are deficient under the governing regulations. Id. at 36–40. Qlarant explained

both in its initial letter and rebuttal response letter why Plaintiff’s payments were suspended for deficient

documentation and Plaintiff did not directly challenge that determination, instead relying on due process and

arbitrary and capricious arguments. Compare Dkt. No. 9-1 at 30, with Dkt. No. 9-1 at 32, 38–39.

182 Sahara Health Care, Inc., 975 F.3d at 532–33.

183 Sahara Health Care, Inc. v. Azar, 975 F.3d 523, 530–31 (5th Cir. 2020) (quoting Accident, Injury & Rehab., PC

v. Azar, 943 F.3d 195, 204 (4th Cir. 2019)).

184 Dkt. No. 16 at 2 n.1.

185 FED. R. APP. P. 36(a).

been published in the Federal Reporter.186 Furthermore, the Fifth Circuit’s ruling in Sahara

originated from this Court, and even if the Fifth Circuit had not yet decided the case, the Court

would find its decision in Sahara persuasive in this case.187 Plaintiff cites no rule to show why

the Court cannot rely on Sahara and the Court rejects this argument.

In sum, the Court holds that Plaintiff “fails to demonstrate what value [additional

process] would add to the process [Plaintiff] has already received or is otherwise entitled to

receive.”188 Plaintiff does not even address what value additional process would give, only that

additional process is more likely to reduce erroneous deprivations.189 “[T]he adequate process

that [Plaintiff] has received and the procedural protections it has chosen to forego weigh

strongly, and decisively, against it.”190 The Court holds that Defendant has provided Plaintiff

“notice and an opportunity to be heard . . . at a meaningful time and in a meaningful manner”191

via its Medicare administrative review scheme. Accordingly, the Court GRANTS Defendant’s

motion to dismiss with respect to Plaintiff’s count 1 for alleged violation of procedural due

process.

d. Whether Plaintiff States a Claim for Arbitrary and Capricious or Ultra Vires

Agency Action

Plaintiff claims that Defendant acted arbitrarily and capriciously in failing to “find that

good cause exists here where the COVID-19 pandemic and the surge of confirmed coronavirus

cases will soon overwhelm south-Texas' Rio Grande Valley healthcare system, including

ambulance suppliers like Acute Care.”192 Plaintiff also claims Defendant acted ultra vires, that is,

186 See 5th Cir. R. 47.5 (governing the publication of opinions).

187 See Sahara Health Care, Inc. v. Azar, 349 F. Supp. 3d 555, 576 (S.D. Tex. 2018) (Alvarez, J.).

188 Sahara Health Care, Inc., 975 F.3d at 531.

189 See Dkt. No. 17 at 16–18, ¶¶ 36–38.

190 Id. at 530.

191 Id. (quoting Gibson v. Tex. Dep't of Ins., 700 F.3d 227, 239 (5th Cir. 2012)).

192 Dkt. No. 1 at 21, ¶ 75.

“beyond the scope of power allowed or granted by a corporate charter or by law”193 “in failing to

give notice and an opportunity for a hearing to dispute and contest the adverse action in

conformance with Due Process of law yet imposing Medicare payment suspension during the

COVID-19 pandemic and national emergency.”194 In its motion to dismiss, Defendant points out

that a Medicare statute specifically confers the power on Defendant to suspend Medicare

payments in light of a credible allegation of fraud.195 Defendant also argues that Plaintiff’s

allegations are conclusory and provide “no explanation as to how the Secretary relied on factors

which Congress has not intended it to consider, offered an explanation that runs counter to the

evidence before the agency, or is so implausible that it could not be ascribed to a difference in

view or the product of agency expertise.”196 Plaintiff responds only that the Secretary abused his

discretion in not finding that “good cause exists where the COVID-19 pandemic and the surge of

confirmed coronavirus cases will soon overwhelm America’s healthcare system.”197

The Administrative Procedure Act “requires agencies to engage in reasoned

decisionmaking and directs that agency actions be set aside if they are arbitrary or

capricious . . . . [The Court] is not to substitute its judgment for that of the agency, but instead

[assesses] only whether the decision was based on a consideration of the relevant factors and

whether there has been a clear error of judgment.”198 This is a narrow review.199

An agency action will be overturned only if it is contrary to statute or “if the

agency has relied on factors which Congress has not intended it to consider,

entirely failed to consider an important aspect of the problem, offered an

explanation for its decision that runs counter to the evidence before the agency, or

193 Ultra Vires, BLACK’S LAW DICTIONARY (11th ed. 2019).

194 Id. at 22, ¶ 79.

195 Dkt. No. 14 at 17 (citing 42 U.S.C. § 1395y(o)).

196 Id. (citing El Dorado Chem. Co. v. EPA, 763 F.3d. 950, 955–56 (8th Cir. 2014)).

197 Dkt. No. 17 at 19, ¶ 42.

198 Dep't of Homeland Sec. v. Regents of the Univ. of Cal., 140 S. Ct. 1891, 1905 (2020) (internal quotation marks

and citations omitted).

199 Id.

is so implausible that it could not be ascribed to a difference in view or the

product of agency expertise.”200

Plaintiff appears to disagree with Defendant’s judgment concerning good cause to not suspend

Medicare payments to Plaintiff under 42 C.F.R. § 405.371(b)(1)(ii),201 but Plaintiff does not

allege that Defendant acted contrary to statute or regulation or relied on illicit factors, entirely

failed to consider an important aspect of the problem, decided against the evidence, or that the

decision is so implausible that it could not be ascribed to a different view.202 It is “necessary to

go beyond general conclusory statements and plead facts which would support the conclusion

that the action in question was arbitrary and capricious.”203 Plaintiff fails to allege that Defendant

acted in an arbitrary or capricious manner because Defendant fails to allege any improprieties

beyond disagreement with Defendant’s judgment.204

“[A]n ultra vires claim rests on ‘the officer's lack of delegated power. A claim of error in

the exercise of that power is therefore not sufficient.’”205 Defendant is specifically granted the

power by statute to suspend Medicare payments “pending investigation of credible allegations of

fraud.”206 Defendant determined a credible allegation of fraud existed because it had “indicia of

reliability,” and no more is required.207 No more need be said. The Court GRANTS Defendant’s

motion to dismiss with respect to Plaintiff’s count 3 arbitrary and capricious claim and count 4

ultra vires claim.

IV. CONCLUSION AND HOLDING

200 Envtl. Integrity Project v. U.S. EPA, 969 F.3d 529, 539 (5th Cir. 2020) (quoting Motor Vehicle Mfrs. Ass'n of

U.S. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)).

201 Dkt. No. 17 at 19, ¶ 42.

202 See Dkt. No. 1 at 21, ¶ 75.

203 McCall v. Dall. Indep. Sch. Dist., 169 F. Supp. 2d 627, 636 (N.D. Tex. 2001) (citing Vulcan Materials Co. v. City

of Tehuacana, 238 F.3d 382, 387–88 (5th Cir. 2001)).

204 See Sahara Health Care, Inc. v. Azar, 349 F. Supp. 3d 555, 567 (S.D. Tex. 2018).

205 Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 101 n.11 (1984) (quoting Larson v. Domestic &

Foreign Commerce Corp., 337 U.S. 682, 690 (1949)).

206 42 U.S.C. § 1395y(o).

207 Dkt. No. 14 at 4 (quoting 42 C.F.R. § 405.370(a)).

For the foregoing reasons, the Court GRANTS Defendant’s motion to dismiss.”°° The

Court lacks jurisdiction to consider Plaintiff's count 2 claim because Plaintiff lacks standing to

assert its patients’ interests. The Court holds that Plaintiff fails to state a claim for its count 1,

count 3, and count 4 claims.

In its response brief, Plaintiff makes a one-paragraph motion for leave to amend if the

Court grants Defendant’s motion to dismiss.°” “This is improper. First, requests to the Court

must be made by motion, not in a response brief. Furthermore, the Court recently dealt with a

near-identical request and held that cursory requests for leave to amend would be denied.”*'° The

Court has no obligation to permit leave to amend.*”’ Plaintiff's motion for leave to amend is

DENIED.

Plaintiff is not entitled to relief and Plaintiff's claims are dismissed. The Court DENIES

AS MOOT Plaintiff's motion for preliminary injunction.!” Plaintiffs claims and this case are

DISMISSED WITH PREJUDICE. Each party is to bear its own costs. This case is terminated

and the Clerk of the Court is instructed to close the case.

IT IS SO ORDERED.

DONE at McAllen, Texas, this 3rd day of December 2020.

WK Woors

Micae varez

United States District Judge

*8 Dkt. No. 14.

* Dkt. No. 17 at 20, 43.

*1° Curtis v. Cerner Corp., No. 7:19-cv-00417, 2020 WL 4934950, at *3 (S.D. Tex. Aug. 24, 2020) (Alvarez, J.)

(citing FED. R. CIv. P. 7(b)(1), then citing Commc'ns, LLC v. AT&T Inc., No. 7:19-cv-269, 2020 WL 918670, at

*5—6 (S.D. Tex. Feb. 26, 2020) (Alvarez, J.)).

Edionwe v. Bailey, 860 F.3d 287, 294 (5th Cir. 2017).

Dkt. No. 8.

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