Palm Valley Healthcare, Inc. v. Azar, No. 18-41067 (5th Cir. Jan. 15, 2020) (Owen, Haynes, Costa) was a tough case for me to read, not because Judge Costa's opinion is wrong or poorly written (it is neither) but because it involves a challenge to agency action that fails because the appellant failed to raise its best arguments properly at the administrative level. This happens a lot, and it frustrates me every time. This time, though, I launch into a little lecture about it (see below).
After rereading my first draft of this post, I began wondering why I chose to rant about this all-too-common blunder for the first time now. After all, it has certainly occurred in many cases I've discussed in previous posts. I've decided it must have something to do with my subconscious need to practice my "dad voice." I became a dad just a little more than a year ago. Given how unbearably adorable my daughter is, my fatherly communications have thus far focused almost exclusively on how cute she is and how much I love her. The day will undoubtedly come, however, when I'll find myself lecturing her about this or that "principle," the importance of "principle" itself, or whatever, and I'll realize--to my great horror--that I have become my father. I think my subconscious mind is preparing me for that day by forcing me to practice this "dad voice" at various inappropriate times. This post is, I suspect, just the latest example.
So, what I guess I'm trying to say is: I don't like this any more than you do, but it's for your own good ....
Here's how Judge Costa frames the issues:
One thing I really like about this opinion is that it features a fairly detailed overview of the administrative review process that applies to challenges to overpayment decisions:
Judge Costa proceeds to describe how Palm Valley navigated this labyrinth, emphasizing that it "appealed through the entire administrative process," winning a couple of minor victories along the way. Its efforts before the agency succeeded in reducing the number of ineligible claims at stake from 29 to 25, "shaving a meaningful amount off the $12 million that [it] owed." As important as what Palm Valley did at the administrative stage, however, was what it failed to do:
- Although "HHS did not come close to meeting either 90-deadline" for addressing Palm Valley's claims, Palm Valley didn't take advantage of its right under the Medicare statute to escalate its appeal;
- Although 42 U.S.C. 1395pp(a)(2) establishes a "good-faith affirmative defense" for providers that "did not know, and could not reasonably have been expected to know that it was receiving overpayments," Palm Valley "fail[ed] to raise it before the Appeals Council";
- Palm Valley failed at the administrative level to raise its argument that 42 U.S.C. 1395gg absolved it of any liability for the overpayments at issue; and
- Palm Valley also failed at the administrative level to raise its argument that the ALJ and Medicare Appeals Council had applied a definition of "homebound" that was incompatible with section 1395f(a) of the Medicare statute.
Each of these oversights had consequences for Palm Valley once its case made its way to federal court. Its failure to take advantage of its statutory right to escalate its appeal when the agency blew past various statutory deadlines for administrative review undermined Palm Valley's argument that the delays in the multi-stage administrative review deprived it of due process. And its failure to raise various statutory arguments at the administrative level barred the district court and Fifth Circuit from addressing them later in the first instance.
The lesson here is obvious: If you're planning to challenge agency action, figure out what your best arguments are before you start the administrative review process and press them zealously at the agency level. You can't wait until your case is in front of an Article III court to figure this stuff out. Adlaw is not a fake-it-til-you-make-it enterprise. Yet, regulated entities and the lawyers who represent them--even some very experienced and highly skilled lawyers--ignore this reality all the time. On one level, I get it: Scarce resources and tight deadlines make it difficult to get all your ducks lined up perfectly from the start. Seems to me, though, that if your your time and other resources are scarce and precious, you really can't afford to squander them on an expensive adlaw case that was doomed before it started because you couldn't make the investment necessary to do it right.
Harsh? Perhaps. As Justice Scalia once warned, though, "administrative law is not for sissies." And anyway, I think a little harshness is called for here. This is by far the most common blunder I see in adlaw cases, and in most cases, it's totally preventable.