`
`Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 1 of 33 PageID 1Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 1 of 33 PageID 1
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF TEXAS
`(Wichita Falls Division)
`
` §
` §
` §
` §
` §
` §
` §
` §
` §
` §
` §
` §
`
` CIVIL ACTION NO. 7:22-cv-00076
`
`PRECISE DIAGNOSTICS, LLC,
`
`
`
`
`
`
`
`Plaintiff,
`
`
`
`
`
`
`
`
`
`vs.
`
`
`
`
`
`
`
`
`
`
`
`XAVIER BECERRA, Secretary,
`
`UNITED STATES
`
`
`
`DEPARTMENT OF HEALTH
`
`AND HUMAN SERVICES,
`
`
`
`
`
`
`
`
`Defendant.
`
`
`
`
`
`VERIFIED COMPLAINT
`FOR INJUNCTIVE AND DECLARATORY RELIEF AND ATTORNEY FEES
`
`
`
`
`
`
`COMES NOW, Precise Diagnostics, LLC (the “Plaintiff” or “Precise”), and files this, its
`
`
`
`Verified Complaint for Injunctive and Declaratory Relief and Attorney Fees against Xavier
`
`Becerra, Secretary of the United States Department of Health and Human Services (the
`
`“Defendant” or “HHS”), and alleges and avers as follows:
`
`INTRODUCTION
`
`On May 13, 2022, Defendant issued a Medicare payment suspension to withhold
`
`1.
`
`all earned payments for services rendered by Precise, an Independent Clinical Laboratory
`
`participating in the federal Medicare program. These payments will be applied toward a
`
`Medicare overpayment should one be subsequently determined by HHS. The government
`
`extended to Plaintiff no administrative appeal or right to hearing to dispute or contest the adverse
`
`action. This violates the laboratory’s Due Process rights under the U.S. Constitution amend. V,
`
`§1 as well as the rights of its patients to access to federal Medicare services. It also is an abuse of
`
`discretion to impose the suspension during the pandemic and COVID 19 emergency.
`
`

`

`
`
`Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 2 of 33 PageID 2Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 2 of 33 PageID 2
`
`Accordingly, Plaintiff moves to temporarily enjoin HHS’s “suspension” of its Medicare
`
`payments until the government provides a hearing on the adverse action in conformance with
`
`Due Process of Law. The suspension will irreparably harm Plaintiff by forcing it out of business
`
`and into bankruptcy, and it jeopardizes the health and safety of the laboratory’s patients by
`
`disrupting their services and requiring that they obtain them elsewhere.
`
`2.
`
`Precise is an Independent Clinical Laboratory that delivers laboratory testing
`
`services to Medicare beneficiaries in the greater Dallas area, including Dallas County and
`
`adjacent counties. The laboratory is enrolled in Medicare as an Independent Clinical Laboratory
`
`in accordance with 42 C.F.R. Part 493. As such, the laboratory must meet the Clinical
`
`Laboratory Improvements Act of 1988 (CLIA). Precise performs the ordered laboratory tests at
`
`its enrolled facility under a written order of the beneficiary’s treating physician/practitioner.
`
`3.
`
`On May 13, 2022, Defendant noticed the imposition of a Medicare payment
`
`suspension of Plaintiff’s Medicare payments. The suspension was brought under 42 C.F.R.
`
`§405.371(a)(2) based upon a “credible allegation of fraud.” Qlarant, the government contractor
`
`initiating the action, alleged that Precise had “misrepresented services billed to the Medicare
`
`program.” More specifically, it was alleged that the laboratory “did not submit records that
`
`showed the results were reviewed, considered in the treatment plan, or assisted in the
`
`management/treatment of the beneficiary per Local Coverage Determination (LCD) guidelines.”
`
`Qlarant also asserted that the records were submitted “were inconsistent (i.e., some
`
`documentation referenced right foot great toe while other documentation for the same date of
`
`services referenced left foot second toe).” In addition, the contractor alleged that the record did
`
`not support medical necessity of the services billed.
`
`2
`
`

`

`
`
`Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 3 of 33 PageID 3Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 3 of 33 PageID 3
`
`4.
`
`Like “the Sword of Damocles,” Defendant imposes suspension and threatens
`
`prosecution for fraud, alleging Plaintiff has “misrepresented services to the Medicare program.”
`
`However, Plaintiff has no right to an administrative appeal to challenge this action and dispute
`
`these allegations. CMS consistently asserts that because the suspension is not considered an
`
`“initial determination,” no appeal rights, including right to an ALJ hearing, are extended to a
`
`laboratory to contest the adverse action. Yet, its Medicare payments are “suspended” and may be
`
`interrupted for a year or longer. Indeed, Precise may never have an opportunity to contest this
`
`suspension. 1
`
`5.
`
`While the regulations at 42 C.F.R. §405.372(b) authorize a rebuttal, it is a wholly
`
`inadequate process to address the constitutional violation. 2 Under this process, the laboratory
`
`may “submit any statement (to include any pertinent information) as to why it [the suspension]
`
`should not be put into effect” – or in this case why the suspension should be removed. Id.; see
`
`also 42 C.F.R. §405.374. Indeed, it is nothing more than a unilateral review of the suspension
`
`that clearly is made on an arbitrary basis. 3 Moreover, the rebuttal process is not before an
`
`
`1 According to CMS, a hearing is offered when an overpayment is determined by the
`government. Of course, no such determination has been made to date - and an overpayment may
`never be assessed. Consequently, Precise may never have the opportunity to contest this adverse
`action.
`2 It was noted by Judge Kinkeade in a well-reasoned decision analyzing Due Process rights under
`the Medicare Act in Family Rehabilitation, Inc. v. Azar, Civil Action No. 3:17-CV-3008-K, 2020
`WL 230614, *9, that a hearing “decreases the risk of erroneous deprivation.” None is provided
`here.
`3 Nor does the opportunity for rebuttal satisfy the requirements for “some kind of hearing.” See,
`e.g., Board of Regents of State Colleges v. Roth, 408 U.S. 564, 570 (1972) (When protected
`interests are implicated, the right some kind of prior hearing is paramount). Judge Friendly’s
`influential article “Some Kind of Hearing” created a list of basic due process rights. See Henry J.
`Friendly, Some Kind of Hearing, 123 U. Pa. L. Rev. 1267 (1975). The opportunity for rebuttal
`fails to satisfy almost all of these. The rebuttal process is not before an unbiased tribunal, there is
`no right to know the opposing evidence, there is no right to cross examine, the decision is not
`based only on the evidence presented, and the decision is not reviewable.
`
`
`3
`
`

`

`
`
`Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 4 of 33 PageID 4Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 4 of 33 PageID 4
`
`unbiased tribunal; there is no right to know the opposing evidence; there is no right to cross
`
`examine; the decision is not based only on the evidence presented; and the decision is not
`
`reviewable.
`
`6.
`
`The impact of the Medicare payment suspension threatens to force Plaintiff’s
`
`closure and filing of bankruptcy. Precise derives approximately 90% of its revenues from
`
`providing sick and elderly Medicare patients laboratory services. Obviously, if it is not paid for
`
`these services, it cannot pay its employees, who provide medically necessary laboratory services,
`
`to these very needy patients. Indeed, some 17 contact employees will lose their jobs – and each
`
`year 4,383 patients must look for these services elsewhere.
`
`7.
`
`Further, the suspension action could not have come at a worse time. The national
`
`emergency over the COVID-19 outbreak issued on March 13, 2020 has been continued by
`
`President Biden. The coronavirus has had a substantial impact on our nation’s hospitals and a
`
`cascading effect on ancillary providers and practitioners. It is evident that the healthcare
`
`industry, including laboratory services, in Texas is facing a crisis due to the pandemic. The
`
`suspension only adds to the already challenging circumstances facing the laboratory. If Plaintiff
`
`is forced to close, Plaintiff’s patients will have to obtain their laboratory services elsewhere at a
`
`time when the ability to secure such services is limited due to laboratories experiencing an
`
`already dwindling workforce. 4
`
`8.
`
`Had Defendant acted properly, it would not have imposed the suspension. Federal
`
`regulations provide that CMS may find good cause exists not to suspend Medicare payments
`
`
`
` 4
`
` The impact of COVID 19 on health care businesses has been devasting. Employee burnout and
`job resignation is an evolving problem. David M. Cutler, PhD., Challenges for the Beleaguered
`Health care Work Force During COVID 19, JAMA Health Forum. 2022;3(1):e220143.
`Doi:10.1991/jamahealthforum.2022.0143 (Han,27, 2022).
`
`4
`
`

`

`
`
`Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 5 of 33 PageID 5Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 5 of 33 PageID 5
`
`where it is determined that beneficiary access to items or services would be so jeopardized by a
`
`payment suspension in whole or in part as to cause a danger to life or health. 42 C.F.R. §
`
`405.371(b)(1)(ii). It is a clear abuse of discretion for CMS not to find that good cause exists here.
`
`Not only will Plaintiff be forced to shut down, but the government’s suspension action also
`
`places an even greater burden on the already overworked healthcare community.5
`
`9.
`
`Notwithstanding the abuse of discretion, Precise has a constitutional property
`
`interest in payments for services rendered and is now indefinitely suspended during the
`
`investigation into the adequacy of its documentation. Defendant violates Due Process of Law by
`
`imposing the adverse action when it fails to give notice and an opportunity for a hearing to
`
`contest the Medicare payment suspension. Indeed, the provider has no administrative appeal
`
`rights to contest the suspension. Clearly, there is a high risk that Plaintiff will be erroneously
`
`deprived of its property interest in earned Medicare payments withheld by suspension, pursuant
`
`to 42 C.F.R. §405.371(a)(2), because the supplier is not entitled to an administrative appeal to
`
`dispute and contest the adverse action. HHS has abused its discretion and has not found good
`
`cause to impose the adverse action, and there is absolutely no established time frame for
`
`resolving the investigation of its documentation.
`
`
`5 HHS’s Office of Inspector General issued a message on minimizing burdens to providers on
`March 30, 2020. It stated that the OIG places a high priority on providing the health care
`community with the flexibility to provide needed care during this emergency. The delivery of
`patient care during this public health emergency must be the primary focus of the health care
`industry. For any conduct during this emergency that may be subject to OIG administrative
`enforcement, OIG will carefully consider the context and intent of the parties when assessing
`whether to proceed with any enforcement action. In view of the consequences, a review that is
`primarily focused on documentation that allegedly failed to support the complexity of claimed
`services does not warrant suspension of Medicare payments during the COVID-19 pandemic and
`national emergency.
`
`5
`
`

`

`
`
`Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 6 of 33 PageID 6Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 6 of 33 PageID 6
`
`10. Moreover, patients at Precise have a constitutional Due Process right (consistent
`
`with principles of equal protection) to obtain safe and reliable laboratory services under a federal
`
`Medicare program. HHS violates the patients’ right to access such healthcare by imposing the
`
`suspension during the COVID-19 pandemic and national emergency. 6 Due to the COVID-19
`
`outbreak securing such essential healthcare services is uncertain. In fact, during the crisis, these
`
`patients may only be able to obtain medically necessary laboratory services from Plaintiff.
`
`Clearly, good cause exists for Defendant not to suspend Precise’s Medicare payments. See 42
`
`C.F.R. § 405.371(b)(1)(ii).
`
`11.
`
`Plaintiff is entitled to injunctive relief that requires Defendant to temporarily
`
`rescind the Medicare payment suspension until Defendant gives notice and an opportunity for a
`
`hearing on the adverse action in conformance with Due Process of Law. Or at least until the end
`
`of the pandemic and termination of the COVID 19 emergency. Clearly, the government’s
`
`Medicare payment suspension will irreparably harm Plaintiff by destroying its business and
`
`forcing its closure at a time when there is a shortage of healthcare staff. Further, it jeopardizes
`
`the health and safety of the provider’s patients and violates their Due Process right (consistent
`
`with principles of equal protection) to access essential healthcare services under the Medicare
`
`program. Moreover, the government’s action will place a more significant burden on area
`
`laboratories. Defendant’s egregious ultra vires conduct can only be remedied by an order for
`
`injunctive relief otherwise unavailable through the administrative process. Accordingly, Plaintiff
`
`is entitled to injunctive relief that requires Defendant to rescind the Medicare payment
`
`
`6 It has been a longstanding core value of Medicare that the program should provide equal access
`to appropriate and high-quality health services to all beneficiaries. See
`www.medicareadvocacy.org/medicare-info/medicare-and-health-care-reform/
`
`6
`
`

`

`
`
`Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 7 of 33 PageID 7Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 7 of 33 PageID 7
`
`suspension until Defendant can otherwise give notice and a hearing in conformance with Due
`
`Process of law.7
`
`PARTIES
`
`12.
`
`Precise Diagnostics, LLC, is a Texas limited liability company with its principal
`
`place of business at 2695 Villa Creek Drive, Suite B255, Farmers Branch, Texas 75234. It
`
`provides laboratory services to Medicare beneficiaries in Dallas County and the surrounding
`
`area.
`
`13.
`
`Defendant, Xavier Becerra, in his official capacity, is the Secretary of the United
`
`States Department of Health and Human Services (“HHS”), the governmental department which
`
`contains the Centers for Medicare and Medicaid Services (“CMS”), the agency within HHS that
`
`is responsible for the administration of the Medicare and Medicaid programs. He may be served
`
`with process in accordance with Rule 4 of the Federal Rules of Civil Procedure by serving the U.S.
`
`Attorney for the district where the action is brought, serving the Attorney General of the United
`
`States in Washington, D.C., by certified mail, and by serving the United States Department of
`
`Health and Human Services by certified mail.
`
`JURISDICTION
`
`
`
`14.
`
`The Court has jurisdiction pursuant to 28 U.S.C. § 1331 under the
`
`entirely collateral Constitutional claim exception to the Medicare exhaustion requirement
`
`established by Mathews v. Eldridge, 424 U.S. 319 (1976). Defendant’s imposition of the
`
`Medicare payment suspension without giving notice and an opportunity for a hearing to contest
`
`
`7 In Family Rehabilitation, Inc. v. Azar, 886 F.3d 496 (5th Cir. 2018), the Fifth Circuit held the
`trial court had jurisdiction under the collateral-claim exception to the administrative exhaustion
`requirement over a provider’s due process and ultra vires claims. The provider brought an action
`to prevent recoupment until a hearing could be provided in accordance with 42 U.S.C. §
`1395ff(d) and in conformance with Due Process of Law.
`
`7
`
`

`

`
`
`Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 8 of 33 PageID 8Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 8 of 33 PageID 8
`
`the adverse action violates Due Process of Law. There is a high risk that Plaintiff will be
`
`erroneously deprived of its property interest in Medicare payments it has earned for services
`
`rendered and withheld indefinitely by the suspension, pursuant to 42 C.F.R. § 405.371(a)(2)
`
`because the provider is not entitled to notice and opportunity for a hearing to dispute and contest
`
`the suspension, and there is absolutely no established time frame for resolving the investigation.
`
`Thus, Plaintiff is deprived of an administrative appeal, which effectively prevents the provider
`
`from exhausting administrative remedies to challenge the payment suspension. No administrative
`
`or judicial review is otherwise available to contest Defendant’s ultra vires actions. Such failure
`
`violates Plaintiff’s constitutional right of Due Process guaranteed by the U.S. CONST. amend. V,
`
`§ 1. Moreover, the Medicare payment suspension and the request to temporarily rescind the
`
`action is not a benefits determination but an otherwise unreviewable procedural issue.
`
`Jurisdiction is based upon Plaintiff’s constitutional claim that is collateral to a substantive claim
`
`for benefits. Likewise, Defendant violates Plaintiff’s patients’ right to access such healthcare by
`
`imposing the suspension during the COVID-19 pandemic and national emergency when staffing
`
`shortages exist for healthcare providers.
`
`
`
`15.
`
`Additionally, the Court has jurisdiction over the lawsuit pursuant to 42 U.S.C. §§
`
`405(g), 1395ii and 1395ff(b), and on the authority of Shalala v. Illinois Council on Long Term
`
`Care, Inc., 529 U.S. 1 (2000). Defendant’s failure to extend to Plaintiff an administrative appeal
`
`to contest the Medicare payment suspension violates Due Process of Law. Thus, Plaintiff is
`
`deprived of an administrative appeal, which effectively prevents the provider from exhausting
`
`administrative remedies to challenge the payment suspension. No administrative or judicial
`
`review is otherwise available to contest Defendant’s ultra vires actions. Section 405 of the
`
`statute “would not simply channel review through the agency but would mean no review at all.”
`
`8
`
`

`

`
`
`Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 9 of 33 PageID 9Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 9 of 33 PageID 9
`
`Illinois Council, 529 U.S. at 17. Therefore, the exhaustion requirement is excepted under Bowen
`
`v. Michigan Academy of Family Physicians, 476 U.S. 667 (1986). This exception was explicitly
`
`reaffirmed by Illinois Council, 529 U.S. at 19-23. The amount in controversy exceeds the $1,000
`
`jurisdictional limit.
`
`VENUE
`
`
`
`16.
`
`Venue is proper in this Court under 42 U.S.C. §§ 405(g), 1395ii and 1395ff(b),
`
`and 28 U.S.C. §§ 1391(b) and (e), and 5 U.S.C. § 703.
`
`APPLICABLE MEDICARE LAWS
`
`The Medicare Program
`
`
`
`17.
`
`As part of the Social Security Amendments of 1965, Congress established the
`
`Medicare program: a national health insurance plan to cover the cost of medical care for the
`
`elderly and disabled. See 42 U.S.C. § 1395 et seq. Officially known as “Health Insurance Benefits
`
`for the Aged and Disabled,” it provides basic protection against the costs of inpatient hospital
`
`and other institutional provider care. It also covers the costs of physician and other healthcare
`
`practitioner services and items not covered under the basic program. In 1997, beneficiaries were
`
`extended the option of choosing a managed care plan. More recently, in 2006, the program was
`
`expanded further to include a prescription drug benefit.
`
`Medicare Laboratory Services
`
`
`
`18.
`
`A laboratory may enroll in Medicare as an Independent Clinical Laboratory in
`
`accordance with Title 42, Chapter IV, CFR Part 493. As such, the laboratory must meet the
`
`conditions for laboratories and be certified to perform testing on human specimens under the
`
`Clinical Laboratory Improvement Acts of 1988 (CLIA). Medicare covers diagnostic clinical
`
`laboratory services that are ordered by a physician who is treating a beneficiary and who uses the
`
`9
`
`

`

`
`
`Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 10 of 33 PageID 10Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 10 of 33 PageID 10
`
`results in the management of the beneficiary's specific medical problem (42 C.F.R. §410.32(a)).
`
`These covered services can be furnished in hospital laboratories (for outpatient or nonhospital
`
`patients), physician office laboratories, independent laboratories, dialysis facility laboratories,
`
`nursing facility laboratories, and other institutions.
`
`Payment and Audit Functions
`
`
`
`19. Medicare’s payment and audit functions are performed by various federal
`
`contractors. For instance, the payment of claims for laboratory services at issue, in this case, was
`
`made by Novitas Solutions. Various other contractors, like Qlarant, a Unified Program Integrity
`
`Contractor (“UPIC”), investigate instances of suspected fraud, waste, and abuse as well as identify
`
`any improper payments that are to be collected by Medicare Administrative Contractors (“MAC”).
`
`Appeal Process
`
`
`
`20.
`
`Laboratories participating in the Medicare program are entitled to appeal the initial
`
`determination. See 42 U.S.C. § 1395ff. Federal regulations establish an elaborate
`
`administrative appeal process to review the adverse action. See 42 C.F.R. Subpart I –
`
`Determinations, Redeterminations, Reconsiderations, and Appeals Under Original Medicare.
`
`A provider dissatisfied with an initial determination may request a Redetermination by a
`
`contractor in accordance with 42 C.F.R. §§ 405.940-405.958. The Redetermination must be
`
`issued within sixty (60) calendar days. If a provider is dissatisfied with a Redetermination
`
`decision, it may request a Reconsideration by a Qualified Independent Contractor (“QIC”) in
`
`accordance with 42 C.F.R. §§ 405.960-405.986. The Reconsideration must be issued within sixty
`
`(60) calendar days. In the event the provider is dissatisfied with the Reconsideration decision, it
`
`may request an ALJ hearing in accordance with 42 C.F.R. §§ 405.1000-405.1054. The ALJ must
`
`issue a decision within ninety (90) calendar days. The provider may request a review of the
`
`10
`
`

`

`
`
`Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 11 of 33 PageID 11Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 11 of 33 PageID 11
`
`ALJ’s decision by the Medicare Appeals Council in accordance with 42 C.F.R. §§ 405.1100-
`
`405.1140. The Council must issue a decision within ninety (90) calendar days. The Council’s
`
`decision is the final agency action, and it is subject to judicial review. See 42 U.S.C. § 1395ff; 42
`
`C.F.R. §§ 405.1130, 405.1132, 405.1134; see also 42 U.S.C. § 405(g).
`
`Suspension of Medicare Payments
`
`21. Medicare payments to providers may be suspended, in whole or in part, by CMS
`
`or its contractors if there is “reliable information that an overpayment exists.” 42 C.F.R.
`
`§ 405.371(a)(1).
`
`
`
`22.
`
`In cases of suspected fraud, CMS or its contractors may suspend Medicare
`
`payments where there is a “credible allegation of fraud” against the provider unless there is good
`
`cause not to suspend payments. 42 C.F.R. § 405.371(a)(2).
`
`
`
`23.
`
`CMS may find that good cause exists not to suspend a provider’s payments
`
`where, among other things, it is determined that beneficiary access to services would be so
`
`“jeopardized by a payment suspension” as to cause a “danger to life or health.” 42 C.F.R.
`
`§ 405.371(b)(ii).
`
`
`
`24.
`
`Every 180 days after the initiation of a suspension of payments based on a
`
`credible allegation of fraud, CMS will evaluate whether there is good cause to extend the
`
`suspension. 42 C.F.R. § 405.371(b)(2). Good cause to not continue a suspension is deemed to
`
`exist if it has been in effect for 18 months and there has not been a resolution of the
`
`investigation. 42 C.F.R. § 405.371(b)(3). However, the suspension can be continued indefinitely
`
`if the case has been referred to OIG for enforcement action or the DOJ requests that it be
`
`continued based on the ongoing investigation and anticipated filing of a criminal or civil action
`
`or both. 42 C.F.R. §§ 405.371(b)(3)(i), (ii).
`
`11
`
`

`

`
`
`Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 12 of 33 PageID 12Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 12 of 33 PageID 12
`
`Opportunity for Rebuttal Statement
`
`
`
`25.
`
`A laboratory whose payments are suspended without notice, as in this case, is
`
`given by the Medicare contractor an opportunity to submit a rebuttal statement as to why the
`
`suspensions should be removed. 42 C.F.R. § 405.372(b)(2). See also 42 C.F.R. § 405.374. When
`
`a rebuttal statement is submitted, CMS, or its contractor, within 15 days from the date of its
`
`receipt, must provide written notice of the determination. The rebuttal determination is not an
`
`appealable decision. 42 C.F.R. §§ 405.375(a)-(c).8
`
`CONDITIONS PRECEDENT
`
`26.
`
`All conditions precedent have been performed or have occurred.
`
`FACTS
`
`Independent Clinical Laboratory
`
`27.
`
`Precise Diagnostics, LLC, is an Independent Clinical Laboratory located in Dallas,
`
`
`
`
`
`Texas, participating in the Medicare program.
`
`
`
`28.
`
`Plaintiff has been in operation for 7 years and it accepts patients from throughout
`
`Texas.
`
`
`
`29.
`
`Precise’s 2021 annual revenues were $1,254,912.00. It has an estimated value of
`
`$1.4 million. The laboratory has 17 contract employees and services 4,383 patients on a yearly
`
`basis.
`
`Medicare Payment Suspension
`
`
`
`30.
`
`On May 13, 2022, Qlarant, a government contractor, issued to a notice of
`
`suspension of Medicare payments. The suspension took effect on May 12th because CMS had
`
`
`8 CMS contends that because the suspension is not considered an “initial determination,” no
`appeal rights, including right to ALJ hearing, are extended to a provider to contest the adverse
`action.
`
`12
`
`

`

`
`
`Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 13 of 33 PageID 13Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 13 of 33 PageID 13
`
`asserted that prior notice was “not appropriate,” citing 42 C.F.R. §§ 405.372(a)(3) and (4). The
`
`suspension action was brought under 42 C.F.R. § 405.371(a)(2) and alleged a “credible
`
`allegation of fraud.”
`
`31.
`
`As a result of the suspension action, all Medicare payments owed to the provider
`
`are being withheld pending resolution of the ongoing investigation.
`
`
`
`32.
`
`According to the Medicare contractor, the decision to suspend Precise’s Medicare
`
`payments was made by CMS, the federal agency that administers the Medicare program.
`
`33.
`
`Qlarant, the government contractor initiating the action, alleged that Precise had
`
`“misrepresented services billed to the Medicare program.” More specifically, it was alleged that
`
`the laboratory “did not submit records that showed the results were reviewed, considered in the
`
`treatment plan, or assisted in the management/treatment of the beneficiary per Local Coverage
`
`Determination (LCD) guidelines.” Qlarant also asserted that the records submitted “were
`
`inconsistent (i.e., some documentation referenced right foot great toe while other documentation
`
`for the same date of services referenced left foot second toe).” In addition, the contractor alleged
`
`that the record did not support medical necessity of the services billed.
`
`34.
`
`In support of these allegations, CMS listed five sample claims that purport to
`
`provide evidence of the government contractor’s findings and serve as a basis for the
`
`determination to suspend Medicare payments. Further, the government contractor stated that its
`
`list “is not exhaustive or complete in any sense, as the investigation into this matter is continuing.
`
`The information is provided by way of example in order to furnish you with adequate notice of
`
`the basis for this payment suspension noticed herein.”
`
`
`
`
`
`13
`
`

`

`
`
`Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 14 of 33 PageID 14Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 14 of 33 PageID 14
`
`Qlarant’s Records Request
`
`
`
`35.
`
`On November 30, 2021, Qlarant issued a medical review records request for
`
`identified Medicare beneficiaries. The records requested included “any and all documentation
`
`that support the medical necessity of services” billed on specified dates.
`
`36.
`
`Before the record request deadline, Precise produced to Qlarant extensive
`
`documentation pursuant to the medical review records request.
`
`37.
`
`Based on the records requested and the documents produced to Qlarant, the UPIC,
`
`has had sufficient and adequate information to determine an overpayment, if one exists, and the
`
`suspension simply is a punitive action against the Plaintiff.
`
`COVID-19 Pandemic and National Emergency
`
`
`
`38.
`
`On March 13, 2020, President Donald Trump declared a national emergency
`
`because of the COVID-19 pandemic.9
`
`
`
`39.
`
`Because the COVID-19 pandemic continues to cause significant risk to the public
`
`health and safety of the nation, the national emergency continues in effect. 10
`
`40. When the national emergency was declared, the U.S. Government COVID-19
`
`Response Plan was issued outlining the coordinated federal response activities for COVID-19.11
`
`Indeed, the pandemic has had a substantial impact on America’s hospitals and physicians. And it
`
`is having a cascading effect on ancillary Medicare providers and suppliers, including laboratories.
`
`It is evident that the healthcare industry, including laboratories, in Texas is facing a crisis due to
`
`the pandemic especially when staffing shortages exist.
`
`
`9 The emergency has been extended multiple times since first announced.
`10 The national emergency declared in Proclamation 9994 concerning the COVID-19 pandemic
`was continued by President Biden on February 18, 2022.
`11 https://int.nvt.com/data/documenthelper/6819-covid-l 9-responseplan/d367f758bec47cad361
`f/optimized/full.pdf#page=l
`
`14
`
`

`

`
`
`Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 15 of 33 PageID 15Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 15 of 33 PageID 15
`
`Suspension Will Force Plaintiff to Shut Down and File Bankruptcy
`
`41.
`
`Impact of the Medicare payment suspension threatens to force Plaintiff’s closure
`
`and filing of bankruptcy.
`
`42.
`
`Precise derives approximately 90% of its revenues from providing sick and
`
`elderly Medicare patients laboratory services. Obviously, if the laboratory is not paid for its
`
`Medicare laboratory services, it cannot pay its employees, who provide medically necessary
`
`services to very needy patients. Indeed, some 17 contract employees will lose their jobs – and
`
`each year 4,383 patients must look elsewhere for their laboratory services.
`
`43.
`
`A prolonged and sustained suspension of all Medicare payments will eventually
`
`result in Precise’s loss of operating funds and its ability to continue business. The process is
`
`prolonged by notices that are not followed by immediate action, such as the Medical Review
`
`Records Request made on November 30, 2021.
`
`CMS Abused its Discretion in Not Exercising Good Cause Exception to Suspension
`
`44.
`
`Had Defendant acted properly, it would not have imposed the suspension. CMS
`
`may find good cause exists not to suspend a provider’s Medicare payments where it is
`
`determined that beneficiary access to items or services would be so jeopardized by a payment
`
`suspension as to cause a danger to life or health. 42 C.F.R. § 405.371(b)(1)(ii). It is a clear abuse
`
`of discretion for CMS not to find that good cause exists here when the COVID-19 pandemic and
`
`the surge of confirmed coronavirus cases will soon overwhelm America’s healthcare system,
`
`including laboratories. Not only will Plaintiff be forced to shut down, but the government’s
`
`suspension action also places a greater burden on a healthcare community that is already
`
`suffering due to COVID-19.
`
`
`
`15
`
`

`

`
`
`Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 16 of 33 PageID 16Case 7:22-cv-00076-O Document 1 Filed 08/12/22 Page 16 of 33 PageID 16
`
`Violation of Plaintiff’s Due Process Rights
`
`45.
`
`Plaintiff has a constitutional property interest in payments for services rendered
`
`and is now indefinitely suspended during the investigation into the adequacy of its
`
`documentation. 12
`
`46.
`
` Defendant violates Due Process of Law by imposing the adverse action during
`
`the COVID-19 pandemic and national emergency without extending to the provider notice and
`
`an opportunity for a hearing to contest the Medicare payment suspension.
`
`47.
`
`Indeed, there is a high risk that Plaintiff will be erroneously deprived of its
`
`property interest in Medicare p