HLD, v. 32, n. 12 (December 2004)
Holds Dispute Arose Under Medicare Act And Not Bankruptcy Code
In May 2002, Excel Home Care, Inc. (Excel), a home healthcare provider,
filed for Chapter 11 bankruptcy. Excel was a provider under Medicare Part A,
and the Department of Health and Human Services (DHHS) was a creditor in the
bankruptcy proceedings because Excel had been overpaid $438,236.68 for its Medicare
claims. In 2002, Excel filed its reorganization plan (Plan), and the bankruptcy
court confirmed the Plan. The Plan provided Excel would repay DHHS for a period
of seven years with monthly installments of $7,000. In 2003, Excel's fiscal
intermediary determined Excel had been underpaid $127,001 by Medicare in 2000.
DHHS withheld the underpayment amount and deducted that amount from the amount
Excel owed under the Plan. Excel claimed DHHS should have turned over the underpayment
amount and the credit to the amount owed under the Plan violated the Plan. Excel
sued DHHS for allegedly ignoring the terms of the Plan and for violating 11
U.S.C. � 1141(a), and DHHS filed a motion to dismiss for lack of jurisdiction.
The U.S. District Court for the District of Massachusetts granted
DHHS' motion to dismiss. The court noted that the threshold issue was whether
jurisdiction was proper under bankruptcy law or was barred by the Medicare Act.
The court first considered jurisdiction under the Medicare Act and DHHS argued
the dispute arose under the Medicare Act because Excel was challenging DHHS'
method of reimbursement. Under 42 U.S.C. � 405(h) a decision of the Secretary
of DHHS is final and a party can only seek judicial review of the Secretary's
decision after all administrative proceedings have been exhausted. Excel failed
to allege that it had ever presented its claim to the Secretary, said the court.
Excel argued the jurisdictional limits under the Medicare Act did
not apply because its claim was about a bankruptcy reorganization plan. Rejecting
Excel's argument, the court concluded that the dispute was about DHHS' withholding
of Medicare payments, and therefore the claim arose under the Medicare Act,
which is the exclusive means to resolve claims that arise under it. A majority
of courts have held that "bankruptcy jurisdiction under 28 U.S.C. � 1334 fails
to provide an independent basis for jurisdiction that would not be in 'contravention'
of 42 U.S.C. � 405(h)." The court held that the Medicare Act controlled the
jurisdictional issue and granted the motion to dismiss.
Excel Home Care, Inc. v. U.S. Dep't of
Health and Human Servs., No. CIV.A.03-CV-11767-GA, 2004 WL 2441212 (D. Mass. Oct. 29, 2004).