MacKenzie Medical Supply, Inc. v. Leavitt
419 F. Supp. 2d 766, 2006 U.S. Dist. LEXIS 10095, 2006 WL 626157 (2006)
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Rule of Law:
The Medicare Act does not unambiguously mandate that a Certificate of Medical Necessity (CMN) is the sole documentation required to establish medical necessity for durable medical equipment; therefore, the Secretary of Health and Human Services may permissibly require additional supporting medical documentation.
Facts:
- MacKenzie Medical Supply, Inc. supplied power-operated wheelchairs, a type of durable medical equipment (DME), to aged and disabled individuals.
- Between September 1, 1998, and February 28, 1999, MacKenzie sold 135 power wheelchairs.
- Palmetto Government Benefits Administration, the Medicare carrier, initially approved and made payments for these claims.
- Due to the high volume of claims submitted by MacKenzie, Palmetto conducted an audit.
- The audit randomly selected 30 beneficiary claims and requested all relevant medical records for those claims.
- The audit found that 29 of the 30 sampled claims failed to satisfy medical necessity requirements; 21 lacked sufficiently specific information, and 8 lacked requested physicians' surveys and progress notes.
- Based on the audit sample, Palmetto determined that MacKenzie was overpaid $508,747.57 for the 135 claims submitted during the audit period.
Procedural Posture:
- MacKenzie Medical Supply, Inc. submitted claims for Medicare reimbursement for power-operated wheelchairs.
- Palmetto Government Benefits Administration (carrier) initially approved and made payments, but later conducted an audit due to a high volume of claims from MacKenzie.
- The carrier, Palmetto, determined that MacKenzie was overpaid and assessed a recoupment.
- MacKenzie requested that the carrier reconsider its findings, but the carrier upheld its decision.
- MacKenzie appealed the carrier's decision to an Administrative Law Judge (ALJ), who ruled against MacKenzie.
- MacKenzie appealed the ALJ’s decision to the Medicare Appeals Council, which upheld the ALJ’s ruling by denying the request for review.
- MacKenzie, as plaintiff, then filed a complaint seeking judicial review of the Secretary's determination in the United States District Court for the District of Maryland.
- Cross-motions for summary judgment were filed in the district court.
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Issue:
Does the Medicare Act unambiguously require that a Certificate of Medical Necessity (CMN) is the only documentation a supplier must submit to demonstrate medical necessity for durable medical equipment, thereby precluding the Secretary of Health and Human Services from requesting additional medical records?
Opinions:
Majority - DAVIS, District Judge
No, the Medicare Act does not unambiguously mandate that the CMN is the only document that can be required of a supplier to show medical necessity, and the Secretary's interpretation is permissible. The court applied the two-step Chevron deference framework. First, it found that 42 U.S.C. § 1395m(j)(2)(B), which defines a CMN, does not explicitly state that a CMN is the exclusive documentation for medical necessity. The court reasoned that a definition section is unlikely to serve as an exclusive mandate and that other provisions, such as 42 U.S.C. § 1395u(p)(4) (allowing carriers to request additional information) and § 1395u(a)(1)(C) (authorizing audits), contradict an exclusivity argument, rendering the statute ambiguous. The court also noted that an interpretation making CMNs the sole documentation would undermine the Secretary's role in ensuring medical necessity. Second, finding the statute ambiguous, the court determined that the Secretary's interpretation — that additional documentation may be required beyond a CMN — was a permissible and reasonable construction of the statute. Regarding MacKenzie’s claim for waiver of liability under 42 U.S.C. § 1395pp(a) (supplier did not know payment would not be made), the court upheld the ALJ's finding that MacKenzie was not entitled to a waiver. Reviewing under the substantial evidence standard, the court found ample evidence that MacKenzie ignored agency guidelines advising that payments could be denied if clinical records did not support CMNs, and that as a Medicare supplier, MacKenzie had imputed notice of such publications. Testimony from MacKenzie's billing clerk also indicated familiarity with these guidelines. Finally, the court rejected MacKenzie’s argument that the Secretary's request for additional medical records violated the Paperwork Reduction Act (PRA). The court determined that the request fell under the PRA's exemption for administrative actions or investigations against specific individuals or entities (44 U.S.C. § 2518(c)(1)(B)). An audit, particularly one targeting a specific supplier due to an unusually high rate of requests for power wheelchairs, was deemed a subset of an "investigation" and not a request "to an entire class of individuals," thus falling within the exemption.
Analysis:
This case significantly clarifies the scope of the Secretary of Health and Human Services’ authority in administering the Medicare program, particularly concerning documentation requirements for Durable Medical Equipment (DME). By applying Chevron deference, the court affirmed the agency's broad discretion to interpret ambiguous statutory provisions and require additional medical records beyond a Certificate of Medical Necessity. The ruling also solidifies the agency's ability to conduct targeted audits without being constrained by the general requirements of the Paperwork Reduction Act, impacting future cases by bolstering the Secretary's power to combat Medicare fraud and overpayment. For suppliers, the case underscores the critical need for comprehensive record-keeping beyond initial certifications.
