Marsaw v. Trailblazer Health Enters.,

Marsaw v. Trailblazer Health Enters.,
No. CIV.A. G-01-633 (S.D. Tex. March 28, 2002)

The owner of eleven physical rehabilitation centers brought suit against its
Medicare Part B carrier and the Secretary of HHS in federal court after successfully
appealing more than 300 Medicare claims denials and still having more than a
thousand to appeal. The plaintiff sought to enjoin any further administrative
proceedings before the Secretary and alleged causes of action for violations
of its equal protection and due process rights under the U.S. Constitution and
breach of contract. The plaintiff claimed that it had received a document from
a former employee of the Medicare carrier indicating that the carrier was discriminating
against clinics that were owned by minorities, and that the Medicare carrier
denied the plaintiff’s claims in retaliation for the plaintiff refusing to return
that document to the carrier. The carrier’s explanation was that the claims
were denied because the billings were for services that were medically unnecessary
or fraudulent.

The federal district court granted the defendants’ motion to dismiss, concluding
that the plaintiff’s constitutionally-based claims were "‘inextricably
intertwined’ with a "substantive claim of administrative entitlement,"
such that it was required to exhaust its administrative remedies under the Medicare
Act. The court therefore lacked subject matter jurisdiction. The court likewise
dismissed the plaintiff’s §1981 claim for racial profiling, ruling that
the Secretary was immune under the doctrine of sovereign immunity and the Medicare
carrier was acting under color of federal law, not state law, so §1981
did not apply to it. The plaintiff’s Title VII claims were dismissed because
Title VI does not apply to programs administered directly by a federal agency.