Calvary Hospital, Inc. v. Becerra

Background

Calvary Hospital, Inc. is a Medicare healthcare provider. A Medicare contractor determined that Calvary had received an overpayment based on statistical sampling and extrapolation of Medicare claims. The overpayment was initially estimated at approximately $3.7 million, later revised to approximately $4.1 million, and then recalculated at approximately $2.7 million after a partially favorable reconsideration decision.

Calvary challenged the decision through the Medicare administrative appeals process. Among other arguments, it asserted that the contractor’s sampling methodology was invalid because the group of claims used for sampling excluded claims on which no payment had been made. The Administrative Law Judge rejected that argument. After the Medicare Appeals Council did not issue a decision within 90 days, Calvary filed this action for judicial review.

Motion to Add Documents to the Administrative Record

Calvary moved to compel completion of the administrative record by adding eight documents. The documents included a claims report, worksheets concerning the contractor’s recalculation and extrapolation, demand and correspondence letters, a provider statistics report, and computer code. Calvary argued that these materials were needed to evaluate the contractors’ sampling and overpayment calculations.

The Secretary argued that the record was complete because none of the eight documents had been submitted to or considered by the Administrative Law Judge. The court agreed. It found that Calvary did not show that any of the documents had been before the Administrative Law Judge. For some documents, the court also found that the Administrative Law Judge’s decision cited different documents that were already in the record.

Legal Analysis

The court held that 42 U.S.C. § 405(g), as applied to Medicare appeals through 42 U.S.C. § 1395ff(b)(1)(A), governs the contents of the record for judicial review. Section 405(g) requires review based on the evidence supporting the Secretary’s findings and provides a procedure for obtaining additional evidence through a remand to the agency when the evidence is material and good cause explains why it was not presented earlier. Calvary sought to expand the existing record for review rather than obtain that type of remand.

The court rejected Calvary’s argument that the Administrative Procedure Act supplied a broader method for completing the record. It distinguished precedent applying the Administrative Procedure Act to a challenge involving an agency rule, explaining that this motion directly concerned the contents of the administrative record in a Medicare adjudication. The court also relied on the principle that judicial review under Section 405(g) is based on a closed administrative record.

The court further rejected Calvary’s argument that documents considered by Medicare contractors automatically belonged in the record. It concluded that the contractors were not the final agency decision-makers for purposes of this case and that Calvary had not identified a statute or regulation treating them as the Secretary in this context. The court also determined that the Medicare regulation describing the administrative record did not require inclusion of every document possessed or used by a Medicare contractor. In the court’s view, the regulation referred to evidence submitted or offered during the hearing, including evidence the Administrative Law Judge excluded, rather than evidence never submitted to the judge.

Alternatively, the court ruled that Calvary would lose under the Administrative Procedure Act as well. Calvary did not show that the documents had been before the agency decision-maker, and it did not show the type of bad faith or improper conduct required to consider extra-record evidence. The court stated that disagreement over which claims were relevant did not establish improper conduct by the Administrative Law Judge.

Disposition and Scope of Ruling

Magistrate Judge Henry J. Ricardo denied Calvary’s motion to compel completion of the administrative record. The court did not decide the merits of Calvary’s challenges to the sampling and extrapolation methodology or its arguments that the agency should have obtained, produced, or reviewed the eight documents. The clerk was directed to close the motion at Docket Number 36.