SEAN F. COX, District Judge.
The plaintiff in this case, Total Toxicology Labs, LLC d/b/a TT Labs, LLC ("TT Labs"), provides clinical laboratory services to patients nationwide and is a participant in the Medicare Payment Process within the Medicare reimbursement system. As a participant in that system, TT Labs is subject to audits of its billings. In 2017, TT Labs learned that government auditors found that it had overcharged for services provided to Medicare beneficiaries. TT Labs challenged the auditors' decisions at two levels of the Medicare administrative appeals process but, after those appeals, TT Labs was still found to have been overpaid for its services. TT Labs pursued an appeal at the third level of review, but has not yet been given a hearing date because the system is backlogged such that instead of receiving a hearing in 90 days, it could take three years or more for that administrative appeal to take place. Meanwhile, the Government has begun to start recouping the money that the audits showed were overpaid to TT Labs, as the regulatory scheme allows. The government recovers the amount due from the money that it would otherwise pay for new reimbursement claims until the service provider's debt is paid in full.
The Government contends that TT Labs currently owes it a significant balance for overpayments, that it intends to recoup going forward. Not wanting to wait three years for the third-level administrative appeal, and not having sought a hardship exception or pursuing other options under the regulatory scheme, such as escalation procedures, TT Labs filed this action asserting a due process claim and seeking a preliminary injunction. It asks this Court to enjoin the Government from any further recoupment until such time as it gets a third-level administrative appeal heard and decided.
At an early status conference, counsel advised the Court that a federal district court in Tennessee had issued a preliminary injunction in a similar case with another Medicare service provider, A1 Diabetes, and that a decision on the appeal in that case would likely decide several of the issues in play here. The United States Court of Appeals for the Sixth Circuit, however, did not rule on the issues and, instead, issued a decision wherein it identified a host of questions and concerns that need to be addressed before a decision on an preliminary injunction in this kind of case could be made. Thus, the Sixth Circuit vacated the district court's preliminary injunction and remanded so that the parties and district court could address the various issues and questions it identified.
The motion in this case has been fully briefed and TT Labs has not requested an evidentiary hearing. This Court heard oral argument on December 17, 2019. As explained below, TT Labs has not answered all of the various questions raised in A1 Diabetes as to the factors to be considered relating to the likelihood of success on the merits of its due process claim. And, even if it had, and the answers weighed in its favor such that it established a substantial likelihood of success on the merits of its due process claim, then this Court would still have to evaluate the other preliminary injunction factors. That includes the critical factor of the risk of irreparable harm to the plaintiff absent the requested injunctive relief. Although TT Labs has a theoretically plausible claim of serious financial injury absent the requested injunction, it has failed to make the requisite evidentiary showing of certain and immediate irreparable financial harm needed to obtain a preliminary injunction. As such, the Court shall DENY the motion.
Plaintiff TT Labs filed this action against Defendant Alex M. Azar, II, Secretary of the United States Department of Health and Human Services and Seema Verma, Administrator for the Centers for Medicare and Medicaid Services ("the Government") asserting the following three counts: 1) "Denial Of Procedural Due Process" (Count I); 2) "Ultra Vires" (Count II); and 3) "Violation Of The Administrative Procedures Act" (Count III). TT Labs's complaint alleges that the Government's "recoupment of the alleged overpayment has already caused Plaintiff devastating financial harm its continuance will cause continued financial harm, and possibly force Plaintiff out of business well before any ALJ could hear and decide the case pursuant to statutory administrative review. Without the temporary relief requested herein, Plaintiff is likely to suffer the fatal consequence of permanent closure." (Compl. at ¶ 41).
Pending before the Court is a motion filed by TT Labs seeking a preliminary injunction. TT Labs asks this Court to enjoin the Government "from any further recoupment or collection of alleged Medicare overpayments, including referral to the U.S. Treasury Department for collection, until such time as an administrative law judge assigned to the Office of Medicare Hearings and Appeals (`OMHA') hears Plaintiff's pending appeal and renders a decision thereon." (ECF No. 3 at PageID.156).
TT Labs's motion does not request an evidentiary hearing. Rather, TT Labs states that its "Motion is based on the facts sworn in the Verified Complaint filed in this action and the exhibits attached thereto, and the Brief in Support filed herewith, and applicable law." (ECF No. 3 at PageID.156) (emphasis added). There are no declarations or affidavits attached as exhibits to the motion.
TT Labs's complaint is titled, "Verified Complaint For Temporary Restraining Order And Preliminary Injunction." (ECF No. 1) (emphasis added). A verified complaint has the same force and effect as a signed and notarized affidavit. Williams v. Browman, 981 F.2d 901, 905 (6th Cir. 1992). Its title notwithstanding, TT Labs's complaint was neither accompanied by a sworn statement nor attested to under oath, and thus it is not a verified complaint. See El Bey v. Roop, 530 F.3d 407, 414 (6th Cir. 2008) (noting that a "verified complaint" is one that is signed under the penalty of perjury pursuant to 28 U.S.C. § 1746); see also Williams, supra; 28 U.S.C. § 1746.
TT Labs has not submitted any affidavits or declarations in support of its motion, such as an affidavit attesting to its financial condition or the impact of the recoupment on same.
Soon after this case was filed, this Court held a status conference with counsel. Counsel advised the Court that a district court in Tennessee had granted a preliminary injunction in a similar case against the Government, without holding an evidentiary hearing
The Government filed a brief in opposition to the preliminary injunction motion. It argues that TT Labs is unlikely to succeed on the merits of its due process claim because, among other things, TT Labs has not asserted a protected property interest for purposes of a due process claim, and available procedures amply protect against the risk of an erroneous deprivation here.
The Government further argues that TT Labs has not shown it is likely to suffer irreparable harm in the absence of a preliminary injunction and noted that TT Labs had not presented any evidence as to its alleged financial harm:
(ECF No. 10 at PageID.280).
On August 22, 2019, the Sixth Circuit issued a published opinion in A1 Diabetes, vacating the district court's preliminary injunction and remanding for proceedings consistent with the opinion. A1 Diabetes & Med. Supply v. Azar, 937 F.3d 613 (6th Cir. 2019). In it, the appellate court vacated the preliminary injunction issued by the district court, and spelled out a number of issues that were unclear and required answers.
On September 6, 2019 — and with the benefit of the Sixth Circuit's published opinion in A1 Diabetes — TT Labs filed a Reply Brief in support of its motion. Mindful that the Sixth Circuit has issued its decision in A1 Diabetes prior to the filing of it, this Court granted TT Labs's request to exceed the page limitation under the local rule and allowed it to file a reply brief of 18 pages. A good portion of it is devoted to the issue of whether TT Labs has a protected property interest, something the Sixth Circuit assumed without deciding in A1 Diabetes. TT Labs's reply brief does not identify any evidence to substantiate its allegations regarding its alleged financial injuries, nor does it address various questions posed by the Sixth Circuit in A1 Diabetes.
"A preliminary injunction is an extraordinary measure that has been characterized as `one of the most drastic tools in the arsenal of judicial remedies.'" Bonnell v. Lorenzo, 241 F.3d 800, 808 (6th Cir. 2001) (citation omitted).
In reviewing a request for a preliminary judgment, a district court looks at four factors: 1) the plaintiff's likelihood of success on the merits; 2) the risk of irreparable harm to plaintiffs absent injunctive relief; 3) the risk of harm to others resulting from an injunction; and 4) the broader public interest. A1 Diabetes, 937 F.3d at 618 (citing Mich. State AFL-CIO v. Schuette, 847 F.3d 800, 803 (6th Cir. 2017)).
The movant bears the burden of demonstrating its entitlement to the preliminary injunction sought, and its burden is a heavy one. A preliminary injunction is an extraordinary remedy which should be granted only if the movant carries his or her burden of proving that the circumstances clearly demand it. Leary v. Daeschner, 228 F.3d 729, 739 (6th Cir. 2000).
In A1 Diabetes, the Sixth Circuit reviewed a district court's grant of a preliminary injunction to a Medicare service provider who, like TT Labs, was facing recoupment while awaiting a third-level administrative review. In doing so, it did not proceed past the first factor (the plaintiff's likelihood of success on the merits), finding that "more information" was needed before such an injunction could be sustained.
Like the plaintiff in A1 Diabetes, TT Labs asserts that it has a substantial likelihood of success on the merits of its procedural due process claim. As to that claim:
Id. at 618-19.
In A1 Diabetes, the Sixth Circuit recognized that various courts have disagreed about whether a Medicare service provider has a property interest in getting paid for what it provides. It declined to resolve that question and, instead, assumed without deciding that A1 had such a property interest. Id. at 619.
It then proceeded to consider what process would be owed, under Matthews v. Eldridge, 424 U.S. 319 (1976):
Id. at 619.
The Sixth Circuit found that the first and fourth factors were "relatively straightforward" to apply.
Notably, the plaintiff company in A1 Diabetes receives nearly all of its revenue — 90% — from Medicare reimbursements. A1 Diabetes & Med. Supply v. Azar, 2018 WL 7283329 at * 1 (W.D. Tenn. 2018); A1 Diabetes, 937 F.3d at 616.
The Sixth Circuit found that the first factor weighed in favor of that Medicare service provider, explaining:
Id. at 619.
The amount of the recoupment at issue here is substantially less than the seven million dollars at issue in A1 Diabetes. If this Court is reading TT Labs's Reply Brief correctly, the Government contends that TT Labs currently owes it a balance of approximately $800,000.00 for overpayments, that it wishes to recoup going forward. Moreover, this Court does not know what percentage of TT Labs's total revenue comes from Medicare reimbursements. Nevertheless, for purposes of this first factor of determining what process is owed, this factor weighs in favor of TT Labs, as the A1 Diabetes court instructed to look at the Medicare service provider's private interest, in part through its own eyes.
The Al Diabetes Court found that the fourth factor, the government's interest, weighed in favor of the Government explaining:
Id.
In this case, this fourth factor weighs in favor of the Government for these same reasons.
The second factor is the risk of an erroneous deprivation and the third factor is the probable value, if any, of additional or substitute procedural safeguards. As to those factors, in A1 Diabetes, the Sixth Circuit concluded that both of those "considerations remain clouded by a few questions and the need for a few more answers. Even after the district court's thoughtful decision, admirable appellate briefing, and helpful oral arguments in our court, some details about the administrative scheme and A1's choices under it remain unclear." Id. at 619-20.
The Sixth Circuit was hesitant to affirm the district court's grant of a preliminary injunction "in this setting" (ie., an injunction sought by a Medicare service provider facing recoupment while waiting for a third-level review) stating "[i]n view of the centrality of the likelihood-of-success factor to this appeal, and in view of the significance of giving a green light to federal due process claims in this setting, we think it prudent to obtain more information before resolving the point." Id. at 620.
The rest of the decision then spells out a host of unanswered questions and concerns that prevented the Sixth Circuit from determining whether the second and third factors weighed in favor of, or against, the issuance of a preliminary injunction:
Id. at 619-20 (italics in original). Because the record left those questions unanswered, the Sixth Circuit vacated the district court's order granting the Medicare service provider a preliminary injunction:
Id. at 621.
The list of issues and questions raised by the Sixth Circuit in A1 Diabetes have not been answered by TT Labs, the party seeking the extraordinary relief of a preliminary injunction in this case.
Moreover, the Government's brief adds what appear to be additional issues that the A1 Diabetes court would want addressed. The Government states that "[a]lso potentially available to a provider who is subject to the ALJ backlog is the OMHA Settlement Conference Facilitation Program (SCF), which is an alternative dispute resolution option that mediates the dispute, (Exhibit A, Griswold Affidavit at ¶ 11), and the OMHA Statistical Sampling Initiative (SSI), which uses a statistical sampling to adjudicate a subset of an appellant's pending appeals and extrapolate the results to the universe of their pending appeals, resulting in a faster adjudication time. (Id.). Plaintiff has not submitted a request to participate in either the SCF or the SSI. (Id. at ¶ 13)." (ECF No. 10 at PageID.267).
Even if TT Labs had answered all of the various questions posed by the Sixth Circuit's decision in A1 Diabetes (which it has not), and the answers weighed in its favor such that it established a substantial likelihood of success on the merits of its due process claim, then this Court would still have to evaluate the other preliminary injunction factors.
That includes the risk of irreparable harm to the plaintiff absent the requested injunctive relief. As explained in Contech Casting, LLC, that is a critical factor:
Contech Casting, LLC v. ZF Steering Sys., LLC, 931 F.Supp.2d 809, 823 (E.D. Mich. 2013). As further explained in that case:
Id. at 817-18.
Here, TT Labs has not made the requisite showing. TT Labs's complaint alleges, in a conclusory fashion, that it will experience financial harm if the requested injunction is not issued. It alleges that it may "possibly" be forced out of business before it receives the third-level administrative decision it seeks. (Compl. at 9). Contrary to its title, the complaint is not a verified complaint, as explained supra. In addition, TT Labs has not requested an evidentiary hearing or submitted any declarations or affidavits to establish facts that would support its conclusory allegations regarding possible financial harm.
In A1 Diabetes, the plaintiff presented the district court with an actual verified complaint, and it included specific sworn factual statements to support its alleged financial harm absent the injunction. For example, the plaintiff established that it receives nearly all of its revenue — 90% — from Medicare reimbursements, in addition to being under already existing financial pressure due to declining reimbursement rates and razor thin profit margins. A1 Diabetes & Med. Supply v. Azar, 2018 WL 7283329 at * 1 (W.D. Tenn. 2018); (see also Verified Complaint in that case). The plaintiff company in A1 Diabetes included the sworn factual statement that it "will initiate bankruptcy proceedings" "[o]nce CMS initiates recoupment." Id. It also showed that it had already been required to lay off twenty five of its employees. A1 Diabetes & Med. Supply v. Azar, 937 F.3d at 619.
Here, all TT Labs has offered are unsupported, conclusory allegations. Thus, while TT Labs may have a theoretically plausible claim of irreparable financial injury, it has failed to make the requisite showing needed to obtain the extraordinary remedy of a preliminary injunction.
For the reasons set forth above, IT IS ORDERED that Plaintiff's Motion for Preliminary Injunction is DENIED.
IT IS SO ORDERED.
