Unreported / Non-Citable
Background
Dr. Mansur Lee served as medical director of Passion and Love Hospice while also working as a hospitalist at Providence St. Jude Medical Center. The Centers for Medicare & Medicaid Services revoked the hospice’s billing privileges after concluding that it submitted claims without adequate support for patients’ terminal-illness prognoses. CMS then revoked Lee’s own Medicare billing privileges, barred him from re-enrolling for 10 years, and placed him on the publicly accessible Preclusion List based on what the agency considered an affiliation posing an undue risk of fraud, waste, or abuse.
Lee requested agency reconsideration, but CMS upheld its decision. Before completing the remaining administrative appeal to an administrative law judge and the Departmental Appeals Board, Lee sued the Secretary of Health and Human Services in the Central District of California. He alleged that due process required an evidentiary hearing before the sanctions took effect and that CMS acted beyond its legal authority—an “ultra vires” claim. Lee said the sanctions caused him to lose his hospitalist job.
The district court dismissed the suit for lack of subject-matter jurisdiction because Lee had not exhausted Medicare’s administrative review process. It also denied his preliminary-injunction motion as moot. Lee appealed.
The Court’s Holding
The Ninth Circuit reversed in part. Medicare-related claims ordinarily must move through the agency’s review channel before a federal court may hear them. Courts may waive exhaustion, however, when a claim is collateral to the underlying demand for benefits, the plaintiff makes a colorable showing of harm that later payments cannot repair, and further agency proceedings would not serve exhaustion’s purposes.
Lee’s claim that CMS acted beyond its authority did not qualify. That theory was intertwined with his effort to undo the revocation and re-enrollment bar, so the panel agreed that he had to finish the administrative process before pursuing it in court. His due-process claim was different. It challenged the absence of a hearing before CMS imposed public sanctions, not the substantive merits of whether CMS should ultimately restore his billing privileges.
The panel also found a colorable showing of irreparable injury because Lee allegedly lost his hospitalist position and could no longer bill Medicare. And exhaustion would be futile for this constitutional issue: developing a more detailed agency record or applying agency expertise would not answer how much process the Constitution required before the sanctions took effect. The court remanded the due-process claim and allowed Lee to renew his request for injunctive relief in the district court. The memorandum is unpublished and generally nonprecedential under Ninth Circuit Rule 36-3.
Key Takeaways
- A Medicare plaintiff must at least present a claim to the agency, but a federal court may waive completion of the administrative process when collaterality, irreparable injury, and futility are all shown.
- A challenge to the procedure used before sanctions can be collateral even when a substantive challenge to the sanctions themselves must remain in the agency channel.
- Loss of employment and the inability to bill Medicare can support a colorable claim of injury that retroactive monetary relief may not adequately repair.
- Agency expertise and additional fact development have less value when the disputed issue is the constitutional adequacy of pre-deprivation procedures.
- The ruling revives only Lee’s due-process theory; it does not decide that he was constitutionally entitled to a hearing or invalidate CMS’s sanctions.
Why It Matters
For California healthcare providers facing immediate CMS sanctions, the decision illustrates a narrow route to federal court before the administrative appeal is complete. Framing matters: a claim aimed at reversing the agency’s merits decision will usually require exhaustion, while a genuinely separate challenge to the process provided before professional and economic harm occurred may qualify for waiver.
Practitioners should document consequences that cannot readily be repaired later, such as termination from a hospital position, reputational effects of public listing, and interruption of the ability to treat or bill for Medicare patients. Because the disposition is unpublished, it should be treated as persuasive rather than generally binding authority, but its application of established exhaustion principles offers a useful roadmap.