The opinion of the court was delivered by: DITTER
Plaintiffs are Medicare equipment suppliers. Payments to them were suspended on the grounds that they had presented false claims. Presently before the court is the question of whether plaintiffs are entitled to an administrative hearing on these charges. I conclude that they are and will grant the relief they seek.
This suit was brought by Martin Eisenberg, a pharmacist licensed by the Commonwealth of Pennsylvania, and Charlar, Inc.
(hereafter Martin's), which are engaged in the business of selling and renting durable medical equipment.
The defendants are the Secretary and officials of the Department of Health, Education and Welfare (HEW), federal defendants; the Commissioner for Medical Programs of the Pennsylvania Department of Public Welfare, state defendant; and the manager of Pennsylvania Blue Shield's Government Programs, Utilization Department, which is the Federal Medicare intermediary for payment of pharmacist's claims in Pennsylvania.
The present controversy was brought before the court on cross-motions for summary judgment on the issue of liability, filed by the plaintiffs and the state defendant, Roger Cutt.
Up to the time of their suspension, the plaintiffs provided durable medical equipment to Medicare beneficiaries enrolled under Part B of the Medicare Act, 42 U.S.C. § 1395 et seq. These beneficiaries assigned to plaintiffs their claims for reimbursement for the purchase or rental of this equipment; subsequently, plaintiffs presented these claims to Pennsylvania Blue Shield for payment.
In October, 1972, an investigation conducted by Blue Shield and the Regional Office of the Bureau of Health Insurance, Social Security Administration, disclosed deficiencies in some of the claims presented by plaintiffs, irregularities which could have subjected plaintiffs to criminal prosecution under 18 U.S.C. § 1001 and the False Claims Act, 31 U.S.C. § 231.
On January 29, 1974, some fifteen months after commencement of the investigation, plaintiff Eisenberg was notified that claims totalling $1890.32 had been deemed improper. Ten days later Medicare reimbursement to plaintiffs was "suspended"
pending completion of the investigation. A hearing was held on February 21, 1974, at which time Mr. Eisenberg and representatives of Blue Shield and HEW's Regional Office met to discuss the investigation. Mr. Eisenberg was afforded the opportunity to explain why the alleged discrepancies existed, but his explanations were "not satisfactory"
and the suspension remained in effect. In addition, the Secretary withheld reimbursement on all of the outstanding claims which had been submitted by plaintiffs.
Following repeated requests for a hearing in regard to these other claims, plaintiffs filed the instant complaint alleging violations of their Fifth Amendment due process rights and damages in excess of $10,000.
I. The Federal Defendants
The federal defendants first challenge this court's jurisdiction and assert that, even assuming jurisdiction, no cause of action has been advanced by plaintiffs. They contend that under the rationale of Bivens v. Six Unknown Named Agents,10 403 U.S. 388, 91 S. Ct. 1999, 29 L. Ed. 2d 619 (1971), jurisdiction under 28 U.S.C. § 1331 would require the existence of an implied cause of action for the alleged Fifth Amendment violations. They argue that no case has applied the Bivens reasoning to Fifth Amendment circumstances. Quite to the contrary, several courts have considered this question, and the majority have held that Fifth Amendment claims are cognizable as causes of action under the rationale of Bivens. In U.S. ex rel. Moore v. Koelzer, 457 F.2d 892, 894 (3d Cir. 1972), Judge Green, sitting by designation, held that Bivens "recognizes a cause of action for damages for violation of constitutionally protected interests, and is not limited to Fourth Amendment violations." These cases reason that the rights protected by both the First and the Fifth Amendments
". . . are no less important than the rights protected by the Fourth Amendment, and in fact, are interrelated. Stanford v. Texas, 379 U.S. 476, 484-485, 85 S. Ct. 506, 13 L. Ed. 2d 431 (1965).
Revis v. Laird, 391 F. Supp. 1133, 1139 (E.D. Cal. 1975).
Since a cause of action is recognized for Fifth Amendment due process violations and damages in excess of $10,000 have been alleged, jurisdiction lies in this court under 28 U.S.C. § 1331.
The question remains, however, as to whether the merits of the case entitle the plaintiffs to the relief they seek.
Plaintiffs first contend that the federal defendants violated the provisions of the Social Security Act, 42 U.S.C. § 301 et seq., by failing to follow properly the notice and hearing procedures outlined in 42 U.S.C. § 1395y(d)(3) and 20 C.F.R. § 405.371(a). These sections provide that any claimant who is denied reimbursement when the Secretary, acting through the carrier, determines that the claimant has been overpaid
shall be entitled to reasonable notice, a hearing, and judicial review. However, the defendants correctly point out that the Secretary may dispense with the notice and hearing requirements when the "intermediary or carrier has reliable evidence that the circumstances giving rise to the need for a suspension of payments involves fraud or willful misrepresentation." 20 C.F.R. § 405.371(b). Since alleged reliable evidence of fraud was uncovered by Blue Shield as to those claims totalling $1890.32, it was perfectly proper for the Secretary to suspend plaintiffs from participation in the program without a prior hearing. Nevertheless, plaintiffs were afforded a hearing, although it may have been informal, before Blue Shield and HEW Regional Office representatives to discuss the alleged discrepancies discovered in the claims and were given an opportunity to respond to each irregularity.
It is interesting to note that suspensions other than for fraud or willful misrepresentation remain in effect until the carrier makes a determination as to whether overpayments exist and if so, in what amount. Such a determination is to be expedited. When this calculation is made, the suspension is either to be rescinded or remain in effect until the overpayments have been liquidated. 20 C.F.R. § 405.373(b). However, the provisions of this section do not apply to suspensions where, as in this case, there is alleged reliable evidence of fraud or wilful misrepresentation on the claimant's part. 20 C.F.R. § 405.373(c). Thus, the federal defendants can not be held liable in damages for properly following the rules and regulations promulgated under the Act.
Plaintiffs next argue that depriving them of their earned right to reimbursement for the services they have already provided under the program is a denial of their due process rights. Of course, procedural due process protections apply when there has been interference with a property right. As Goldberg v. Kelly, 397 U.S. 254, 263, 90 S. Ct. 1011, 1018, 25 L. Ed. 2d 287 (1970) and Cafeteria & Restaurant Workers Union, etc. v. McElroy, 367 U.S. 886, 895, 81 S. Ct. 1743, 1748-49, 6 L. Ed. 2d 1230 (1961), make clear, the conflicting values between the private interest affected by the agency action and the governmental interest in a summary determination affecting that private interest must be weighed in each case. Langhorne Gardens, Inc. v. Weinberger, 371 F. Supp. 1216, 1219 (E.D. Pa. 1974). These decisions, even if not precisely on point with the instant matter, point to the recent expansion in Fifth Amendment protections. See Coral Gables Convalescent Home, Inc. v. Richardson, 340 F. Supp. 646, 649 n. 1 (S.D. Fla. 1972).
Plaintiffs' interest in securing a hearing is substantial. The recovery of the amount claimed, whether it be from the Government or from individual beneficiaries, is of paramount importance to the plaintiffs. Even though, as the Government has pointed out, see note 7 supra, plaintiffs may look to the individual beneficiaries for recovery of the claims, it "is not inconceivable that the demise, unavailability, or poverty of the beneficiaries of the services represented by those claims will present substantial obstacles to the actual collection of any monies due." [footnote omitted]. Langhorne Gardens, Inc. v. Weinberger, supra, 371 F. Supp. at 1220. In addition, plaintiffs have an interest in removing the stigma of fraud and impropriety placed upon them by the suspension and in clearing their names to permit further Medicare business. Finally, this ...