Medicare reimbursement for hospice care; Recouping overpayment; Coverage determination; Substantial evidence; Safe harbor provision (42 USC § 1395pp(a)(2)); 42 CFR § 411.406(e); Interpretation of a Medicare notice; Reasonableness; Local Coverage Determination (LCD) 33393 (clinical diagnoses, statuses, signs, symptoms, & characteristics showing a patient is terminally ill); Administrative law judge (ALJ)

The court held that substantial evidence supported the ALJ’s determination that Medicare did not cover certain hospice services plaintiff-In Home provided to patients. But it concluded that the ALJ did not use the correct standard in applying the Medicare statute’s safe harbor when he found that In Home was financially liable for the disputed services. Thus, it vacated the district court’s decision affirming the ALJ’s ruling, and remanded “with instructions to return the case to the ALJ to apply the safe harbor to each of the disputed coverage periods using the legal standard set out” by the court. Contractors reviewing Medicare claims rely on LCDs, “which provide notice of how the contractor will determine whether an item or service” meets Medicare’s “reasonable and necessary” standard. The relevant one here, LCD 33393, “sets forth clinical diagnoses, statuses, signs, symptoms, and characteristics that support a terminal prognosis.” The court agreed “with the district court that substantial evidence supported the ALJ’s determination that Medicare did not cover the disputed claims.” It noted that “the ALJ examined the relevant data from the administrative record and provided an explanation of his decision that included a rational connection between the record facts and the coverage determination.” As to application of the safe harbor provision, the court considered how to determine when a provider “neither knew, nor could reasonably have known that Medicare did not cover an item or service.” It held that, “in applying the safe harbor, an ALJ must consider whether a provider could reasonably have interpreted the relevant notices or local standards of practice as covering each denied claim.” It found that, “if a provider reasonably—albeit incorrectly—interpreted the Medicare notices and standards as covering a patient’s claim, then the safe harbor saves them from liability.” As the court had not previously explained the safe harbor’s scope, “the ALJ did not employ this standard” here. It noted that “the ALJ should not have just asked whether In Home knew the LCD existed. Rather, the proper inquiry was whether in good faith, [it] could reasonably have believed that the patients were terminally ill as defined by LCD 33393.”