Fox Insurance Company, Inc. v. Centers for Medicare and Medic
715 F.3d 1211 (2013)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
The Medicare Act authorizes the Centers for Medicare and Medicaid Services (CMS) to immediately terminate a provider's contract if its conduct poses an "imminent and serious risk" to enrollee health. Under a specific regulation governing such terminations, CMS may also demand immediate repayment of the prorated share of any advance monthly payments for the period following the mid-month termination, which overrides general annual reconciliation procedures.
Facts:
- In 2005, the Centers for Medicare and Medicaid Services (CMS) contracted with Fox Insurance Company, Inc. (Fox) to provide Medicare Part D prescription drug plans.
- In early 2010, CMS received complaints that Fox was improperly denying coverage for critical medications for conditions including HIV, cancer, and seizures.
- Fox's practices included requiring enrollees to undergo unnecessary and invasive medical procedures, such as cardiac catheterizations and PET scans, as a condition of receiving their medications.
- Many of Fox's enrollees were low-income individuals who could not afford to pay cash for the critical medications they were denied.
- On February 11, 2010, CMS contacted Fox about the complaints; Fox responded that it had fixed a system error.
- CMS conducted an on-site audit of Fox from March 2-4, 2010, and discovered Fox had no compliance plan, no internal auditing procedures, and no structure to monitor its operations.
- On March 9, 2010, citing an "imminent and serious risk" to the health of Fox's enrollees, CMS terminated Fox's contract effective immediately.
- Because Fox had already received its advance payment for the entire month of March, CMS subsequently demanded repayment of the prorated amount intended to cover the period after the March 9 termination.
Procedural Posture:
- Fox appealed the termination decision through the CMS administrative process, where a Hearing Officer upheld the termination. The CMS Administrator declined further review, exhausting Fox's administrative remedies.
- Fox filed a complaint in the U.S. District Court for the District of Arizona challenging CMS's demand for repayment.
- Fox filed a second, separate lawsuit in the same court challenging the contract termination decision.
- The district court granted CMS's motion to dismiss the repayment action, holding the demand was authorized by regulation.
- The district court granted summary judgment in favor of CMS on the termination action, holding the termination was valid.
- Fox, as the appellant, appealed both of the district court's judgments to the U.S. Court of Appeals for the Ninth Circuit, where the appeals were consolidated.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does the Centers for Medicare and Medicaid Services (CMS) have the authority under the Medicare Act and its implementing regulations to immediately terminate a Part D provider's contract for conduct creating an 'imminent and serious risk' to enrollee health and to demand immediate repayment of a prorated share of that month's advance capitation payment?
Opinions:
Majority - Schroeder, Senior Circuit Judge
Yes, CMS has the authority to both immediately terminate the contract and demand immediate repayment. The termination was lawful because CMS properly applied the statutory 'imminent and serious risk' standard, and substantial evidence supported its finding that Fox's conduct met this standard. Fox's arguments that the implementing regulation was invalid or that it was in 'substantial compliance' fail; promising to make improvements is not substantial compliance when the risk of harm is not minimal. The demand for repayment was also lawful because a specific regulation, 42 C.F.R. § 423.509(b)(2), expressly grants CMS the right to recover a prorated share of advance payments following a mid-month termination. This specific provision governs the situation and takes precedence over the general regulations for annual, end-of-year financial reconciliation.
Analysis:
This decision solidifies CMS's enforcement authority to act decisively when a Medicare Part D provider's actions endanger patient health. It affirms that the 'imminent and serious risk' standard grants the agency significant discretion to bypass normal termination procedures, such as providing a notice and cure period. The ruling also clarifies the financial repercussions of an immediate termination, establishing that CMS can immediately reclaim funds for services that will not be rendered, rather than waiting for a lengthy year-end reconciliation process. This precedent strongly prioritizes patient safety over a provider's contractual interests and financial convenience in emergency situations.
