ROSEMARY M. COLLYER, United States District Judge.
What happens when the District of Columbia abruptly stops payments for
Under the applicable federal regulation, Department of Health Care Finance (DHCF) determined that it was required to suspend Medicaid payments for home health care providers because there is a "credible allegation of fraud" against each of the Plaintiffs, "for which an investigation is pending under the Medicaid Program." See 42 C.F.R. § 455.23. Nonetheless, Plaintiffs were required to continue to perform all services until their patients were transferred to a new provider. After four weeks of providing services without compensation, Plaintiffs sued to require DHCF to resume payments before each Plaintiff literally ran out of money and was run out of business. After hearing testimony and arguments, the Court determined that DHCF intended to terminate Plaintiffs' contracts and to substitute itself and other providers in their places, not merely to suspend payments temporarily. Thus, the Court concluded that Plaintiffs had shown a likelihood of success on the merits of their due process claim, i.e., because Plaintiffs had a viable property interest, protected by due process, that DHCF could not terminate without prior notice and hearing. The Court issued a TRO requiring the agency to pay Plaintiffs for Medicaid services rendered on and after the dates of their terminations. See TRO [Dkt. 12]; Order Modifying TRO [Dkt. 16].
Plaintiffs then sought a preliminary injunction and the matter went to hearing on April 17, 2014. See PI Hrg. Tr. [Dkt. 40-1]. To accommodate the District's request for time to brief the issues, the Court extended the TRO to May 9, 2014. See id. at 215-20. Having now heard substantially more evidence, the Court holds that Plaintiffs have not demonstrated a likelihood of success on the merits because they have not presented evidence sufficient to demonstrate a property interest that is protected by due process, as they have not shown that DHCF intended to terminate them from the Medicaid program. As explained below, the motion for preliminary injunction will be denied.
Plaintiffs are ABA, Inc.; Premier Health Services, Inc. and its majority owner Chinenye Arungwa; Immaculate Health Care Services, Inc.; T & N Reliable Nursing Care, LLC; Nursing Unlimited Services, Inc.; and Health Management, Inc. (HMI).
"Medicaid is a cooperative federal-state program through which the Federal Government provides financial assistance to States [including the District of Columbia] so that they may furnish medical care to needy individuals." 42 U.S.C. § 1396; see also DHCF Supp. [Dkt. 33] (Majestic Decl.) ¶ 4. Although participation in the program is voluntary, participants must comply with federal requirements. Id. § 1396a; Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498, 502, 110 S.Ct. 2510, 110 L.Ed.2d 455 (1990). The program is regulated
DHCF is the "State" Medicaid agency for the District of Columbia. DHCF is charged with funding "the Medicaid program's provider payments, administrative overhead, and vendor contracts through a combination of federal and local dollars...." Pls. Exs. [Dkt. 8-1],
DHCF's suspension of payments to Plaintiffs is the subject of this lawsuit. On March 7, 2014, the day after Mr. Turnage testified to the Committee of the D.C. Council, DHCF apparently sent notice to all Plaintiffs that it was withholding payments for all claims submitted for Personal Care Aid (PCA) services to the District's Medicaid beneficiaries. Am. Compl. ¶ 21; Pls. Exs., Ex. A (March 7, 21, and 31 Letters to Premier) & Pls. Exs., Ex. B (March 7, 21, and 31 Letters to ABA).
Plaintiffs allege that the March 7 letters were supposedly sent by certified mail, but that Plaintiffs never received them. Am. Compl. ¶ 21. The March 7 letter was sent to Premier at the wrong address. Id. ¶ 23. After complaints from various home health care agencies about not having received any notice, DHCF sent a copy of the March 7 letter to each of the Plaintiffs by email. Id. ¶ 24. On March 21, 2014, DHCF also sent an identical letter to each Plaintiff by regular mail. Id. ¶ 25. The March 7 and 21 letters stated:
Pls. Exs., Ex. A (Letters to Premier) & Ex. B (Letters to ABA). On March 31, 2014, DHCF also sent each Plaintiff a notice of suspension of payments for personal care assistance provided under the Elderly & Persons with Physical Disabilities (EPD) Waiver Program.
On March 26, 2014, DHCF and the D.C. Department of Health (DOH) met with the immediate Plaintiffs and other suspended providers of home health care services. DOH told Plaintiffs that they are legally obligated to continue to provide Personal Care Aid to all patients, despite payment suspension, until all Medicaid beneficiaries are transferred to alternative providers. Am. Comp. ¶¶ 43, 62. DOH separately made it clear that failure to continue to provide services, without payment, could subject each provider to loss of its license as a Medicaid service provider as well as to civil penalties and other liability.
On March 20, 2014, DOH converted Plaintiffs' home care licenses to provisional status under D.C. Code § 44-506(a)(1). Pls. Exs., Ex. E (Mar. 20, 2014 DOH Letters). Code § 44-506(a)(1) provides that a provisional license may be issued to a facility that has numerous deficiencies, or a single serious deficiency, with respect to the standards under D.C. Code § 44-504(a)(3).
Plaintiffs filed a four count Amended Complaint against the District of Columbia. Counts I and II allege violation of the Due Process Clause of the Fifth Amendment pursuant to 42 U.S.C. § 1983, and seek different forms of relief: Count I seeks declaratory judgment and Count II seeks money damages.
Plaintiffs moved for a TRO and preliminary injunction. Mot. for TRO & Prelim. Inj. [Dkt. 15].
On the record at the April 9 hearing, the Court found that Plaintiffs provided evidence of the imminent and complete collapse of their businesses. TRO Hrg. Tr. at 91-93. While economic loss alone does not constitute irreparable harm, it becomes irreparable if the loss "threatens the very existence of the movant's business." Wisconsin Gas Co. v. FERC, 758 F.2d 669, 674 (D.C.Cir.1985); accord World Duty Free Ams., Inc. v. Summers, 94 F.Supp.2d 61, 67 (D.D.C.2000). DHCF's suspension of payment, together with DOH's insistence that Plaintiffs continue providing uncompensated PCA services, plus DHCF's lack of a plan for alternative providers, put Plaintiffs in a crushing vise that would inevitably drive them out of business. TRO Hrg. Tr. at 80, 88. The suspension of payment for PSA services reduced Plaintiffs' revenue by 82-95%. Plaintiffs provided evidence that they would not be able to fund their payrolls as of April 18 at the latest. Accordingly, the Court found that Plaintiffs had shown irreparable harm. Id. at 91-93.
The Court also determined that Plaintiffs had demonstrated a likelihood of success on the merits based on their property interest, i.e., participation in the Medicaid program, which is protected by due process. See, e.g., Patchogue Nursing Ctr. v. Bowen, 797 F.2d 1137 (2d Cir.1986). As of the TRO hearing, the record showed that DHCF had not merely "temporarily" suspended payment to Plaintiffs, but had "terminated" them from the Medicaid program and intended to replace them with itself, without a prior hearing. These findings were based on the testimony of Mr. Turnage to the D.C. Council Committee and the testimony of Ms. Schlosberg at the TRO hearing.
Mr. Turnage told the D.C. Council Committee that the suspension of payments to fifty-two percent of home care providers would interrupt services to seventy-nine percent of the needy beneficiaries and would cause a shortage of home care providers and that DHCF would contract directly with a staffing agency to provide personal care aides to mitigate the shortage of providers. Testimony of Turnage at 9, 11. Ms. Schlosberg testified at the TRO hearing that the District had received a provisional license from DOH and had contracted with other vendors to provide PCA services. TRO Hrg. Tr. at 46. Ms. Schlosberg definitively predicted that all Medicaid beneficiaries who receive home health care services from Plaintiffs would be transferred to DHCF and/or other non-suspended providers by April 11, 2014. Id. at 48; see also id. at 52 ("[W]e anticipated that those individuals who needed services could be served by other providers."). She also indicated that DHCF intended to provide services itself for a period of about six months, during which time it planned to assess each patient individually to determine which ones are entitled to PCA services because DHCF estimated that forty percent of those receiving PCA services did not really need such services. Id. at 39, 42, 50. However, as of March 7, 2014, when DHCF suspended payments to Plaintiffs, it did not know which patients were ineligible. DHCF needed a plan to accommodate 100% of all patients during the six-month period Ms. Schlosberg anticipated it would take to review each beneficiary's eligibility but such a plan was not in place.
By acting abruptly over such a large swath of its PCA service providers, DHCF created a situation in which (1) payments to Plaintiffs for PCA services were suspended; (2) Plaintiffs were required to continue to provide PCA services; (3)
Based on the finding that DHCF intended to terminate Plaintiffs, the Court found that Plaintiffs had shown a likelihood of success on the merits. The Court also found that the balance of equities favored the Plaintiffs and that an injunction was in the public interest. Id. at 88, 93.
On April 9, 2014, the Court entered a TRO requiring the District of Columbia to pay Plaintiffs, by April 15, 2014, for Medicaid services rendered on and after March 7, 2014. See TRO [Dkt. 12] at 1. The TRO was modified the next day to extend the date by which DHCF was to make such payment to April 17, due to constraints posed by the complex payment system. See Order Modifying TRO [Dkt. 16] at 1. Bond was not required, as the TRO only required the District to pay Plaintiffs for services rendered after a certain date, and the District could reduce the risk of payment for fraudulently billed services by reviewing Plaintiffs' invoices. See TRO Hrg. Tr. at 94.
After the TRO was entered, Health Management Inc. (HMI) filed an emergency motion to intervene as an additional plaintiff. See HMI Mot. to Intervene [Dkt. 22]. Despite the District's opposition, see Opp'n to HMI Mot. to Intervene [Dkt. 27], the Court granted the motion, see Minute Order filed Apr. 16, 2014. Under Federal Rule of Civil Procedure 24(a), an applicant may intervene as of right when the applicant (1) makes a timely motion; (2) has an interest relating to the property or transaction that is the subject of the action; (3) is so situated that the disposition of the action may as a practical matter impair or impede the applicant's ability to protect that interest; and (4) where the applicant's interests are not adequately represented by the existing parties. Fed. R. Civ. P. 24(a); see also Sierra Club v. Van Antwerp, 523 F.Supp.2d 5, 6 (D.D.C.2007). Under Rule 24(b) a court, in its discretion, also may permit intervention where the applicant (1) makes a timely motion; (2) has a claim or defense; and (3) that claim or defense shares with the main action a common question of law or fact. Fed. R. Civ. P. 24(b); see also EEOC v. Nat'l Children's Ctr., 146 F.3d 1042, 1046 (D.C.Cir.1998). HMI is a PCA services provider in much the same position as the other Plaintiffs in this case, as DHCF also suspended Medicaid payments to HMI for PCA services based on allegations of fraud. Because it seeks to adjudicate claims substantially similar to the other Plaintiffs and the District was not prejudiced, the Court in its discretion permitted intervention. HMI filed its own Complaint and motion for TRO and preliminary injunction. See HMI Compl.;
Plaintiffs (including HMI) sought to convert the TRO to a preliminary injunction, and the District opposed. The PI hearing was held on April 17, 2014. Because the District requested time to prepare and file post-hearing briefs, the Court held the motion for preliminary injunction in abeyance and extended the TRO for all Plaintiffs to May 9, 2014.
A party seeking a temporary restraining order or a preliminary injunction must establish that:
Winter v. NRDC, Inc., 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008); see Hall v. Johnson, 599 F.Supp.2d 1, 3 n. 2 (D.D.C. 2009) (the same standard applies to both temporary restraining orders and preliminary injunctions). The D.C. Circuit has further instructed that "the movant has the burden to show that all four factors... weigh in favor of the injunction." Davis v. Pension Benefit Guar. Corp., 571 F.3d 1288, 1292 (D.C.Cir.2009).
In the past, courts have balanced the four factors on a "sliding scale," i.e., a lesser showing on one factor could be surmounted by a greater showing on another factor. CSX Transp., Inc. v. Williams, 406 F.3d 667, 670 (D.C.Cir.2005). Winter called this approach into question: "[i]ssuing a preliminary injunction based only on a possibility of irreparable harm [despite a strong likelihood of success on the merits]
A district court may grant a temporary restraining order or a preliminary injunction "to preserve the relative positions of the parties until a trial on the merits can be held," Univ. of Tex. v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 68 L.Ed.2d 175 (1981), but it is "an extraordinary remedy that should be granted only when the party seeking the relief, by a clear showing, carries the burden of persuasion," Cobell v. Norton, 391 F.3d 251, 258 (D.C.Cir.2004). Because it is an equitable remedy, the issuance of an injunction lies within the discretion of the district court. See Hecht Co. v. Bowles, 321 U.S. 321, 329, 64 S.Ct. 587, 88 L.Ed. 754 (1944).
Plaintiffs contend that DHCF has deprived them of constitutionally-protected property rights to participation in the Medicaid program as shown by the suspension of Medicaid payments due for services rendered. Due to the deprivation of property rights without a prior hearing, they assert a violation the Fifth Amendment Due Process Clause. See U.S. Const. amend. V ("No person shall ... be deprived of life, liberty, or property, without due process of law...."). However, after considering all of the evidence now before it, including that presented at the PI hearing, the Court finds that Plaintiffs are not likely to succeed on the merits because the suspension of Medicaid payments is temporary and due process is satisfied by a post-suspension hearing.
The Due Process Clause of the Fifth Amendment was intended to secure the individual from arbitrary exercises of governmental power. Daniels v. Williams, 474 U.S. 327, 330, 106 S.Ct. 662, 88 L.Ed.2d 662 (1986). To allege a procedural due process claim,
Courts have held that termination from the Medicare/Medicaid program or debarment from government contract bidding constitutes a deprivation of a property or a liberty interest protected by due process. See Trifax Corp. v. District of Columbia, 314 F.3d 641, 643 (D.C.Cir. 2003) "[F]ormally debarring a corporation from government contract bidding constitutes a deprivation of liberty that triggers the procedural guarantees of the Due Process Clause."); Patchogue Nursing Ctr. v. Bowen, 797 F.2d 1137, 1144-45 (2d Cir. 1986) ("Health care providers have a constitutionally protected property interest in continued participation in the Medicare and Medicaid programs, and thus are entitled to some form of hearing before being finally deprived of that interest." (internal citation omitted)).
Cleanmaster Indus., Inc. v. Shewry, 491 F.Supp.2d 937 (C.D.Cal.2007), exemplifies the concept. There, the California Department of Health debarred a pharmacy from participating in the Medicare program due to unlawful billing practices. The pharmacy, which relied on the program for over eighty percent of its business, alleged that debarment infringed its liberty interest in its reputation for honesty
The right to due process is not implicated when a contractor is not completely cut off from doing business with the government. In such circumstances, the contractor "fail[s] to show anything remotely close" to the preclusion necessary to infringe a constitutionally protected interest. Trifax, 314 F.3d at 644-45; see also Advanced Mgmt. Tech., Inc. v. FAA, 211 F.3d 633, 636 (D.C.Cir.2000) (holding that the "`all is forgiven' message implicit" in the present award of a government contract "suggests the improbability of ... a [reputational] shadow" arising from past criticism by the same government agency).
In contrast to a provider's right to participate in the Medicaid program, there is no constitutional right to receive Medicaid payments. Guzman v. Shewry, 552 F.3d 941, 950 (9th Cir.2009). In Guzman, the Ninth Circuit held that because there is no constitutionally-protected property right to Medicaid payments, there is no right to a pre-suspension hearing before Medicaid payments are temporarily withheld due to allegations of fraud. Dr. Guzman sued the California Department of Health to enjoin his temporary suspension from the California Medi-Cal program due to accusations of fraud. 552 F.3d at 946-47. The Ninth Circuit affirmed the district court's denial of an injunction, finding that Dr. Guzman had not asserted a constitutionally-protected interest. He was not subject to debarment from government contracts, and even though there is "some generalized due process right to choose one's field of private employment," this liberty interest is implicated only when there is a complete prohibition on the right to engage in a calling. Id. at 954 (citing Conn v. Gabbert, 526 U.S. 286, 291-92, 119 S.Ct. 1292, 143 L.Ed.2d 399 (1999)). A complete prohibition may be at issue where a plaintiff challenges the rationality of government regulations on entry into a particular profession, see Schware v. Bd. of Bar Examiners, 353 U.S. 232, 238-39, 77 S.Ct. 752, 1 L.Ed.2d 796 (1957), or where a state seeks to permanently bar an individual from public employment, see Bd. of Regents v. Roth, 408 U.S. 564, 573, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972). Dr. Guzman did not assert such a claim; he challenged only a suspension of payment and not a loss of license to practice medicine. 552 F.3d at 954.
With the same analysis, the Fifth Circuit held in Personal Care Products, Inc. v. Hawkins, 635 F.3d 155, 159 (5th Cir.2011), that a Medicaid provider did not have a constitutionally-protected right to Medicaid reimbursements that were withheld pending a fraud investigation. The court found that payments for future claims could be withheld to offset potential overpayment that might be found, or penalty that might be imposed, when the investigation was complete. Id. All Circuits that have addressed the issue have determined that a temporary suspension of Medicare or Medicaid payments does not implicate due process and that no presuspension hearing is required. See, e.g., Clarinda Home Health v. Shalala, 100 F.3d 526, 528-29 (8th Cir.1996); Yorktown Med. Lab., Inc. v. Perales, 948 F.2d 84, 89 (2d Cir.1991); Karnak Educ. Trust v. Bowen, 821 F.2d 1517, 1520-21 (11th Cir.
Plaintiffs misapprehend the applicable case law, often quoting it out of context, which contributes to their misunderstanding. For example, they quote Border Area Mental Health Services, Inc. v. Squier, Case No. 2:13-cv-00613 (D.N.M.) [Dkt. 29-3], appeal dismissed, 524 Fed.Appx. 387 (10th Cir.2013), as stating that providers "have a property interest in payment for services delivered to Medicaid recipients." HMI Reply at 4 (citing Border, Case No. 2:13-cv-00613, at *8). The quote is divorced from the critical language surrounding it; the full quote makes it clear that there is no protected property interest in the immediate receipt of Medicare payments. Moreover, the district court in Border ruled against plaintiffs who, like Plaintiffs here, claimed that suspension of payments pending a fraud investigation under § 455.23 violated their right to due process. Rather, the Border court stated:
Border, Case No. 2:13-cv-00613, at *8.
Plaintiffs also improperly rely on Chaves County Home Health Service, Inc. v. Sullivan, 931 F.2d 914, 922-23 (D.C.Cir.1991), for the proposition that they have a constitutionally-protected property interest in continuing to receive Medicaid payments. See HMI Reply at 4. In Chaves, HHS sued home health care providers to recoup Medicaid overpayments. The providers asserted the right to retain payments already made, circumstances entirely different than those presented here, and they challenged the HHS sample adjudication procedure for recoupment. Although the providers had a property interest in the monies they had received, the court determined that the HHS procedure was not constitutionally defective. Chaves, 931 F.2d at 922-23.
Plaintiffs further argue that this case is just like Propert v. District of Columbia, 948 F.2d 1327, 1331-32 (D.C.Cir.1991), where the court found an individual had a protected property interest in his car and the District of Columbia violated his due process right by towing and destroying the car without prior notice and hearing. Plaintiffs insist that "[i]f the law in this jurisdiction requires due process prior to the destruction of an individual's car, surely due process is required before a business owner's interest in his company is destroyed by the District." Pls. Reply at 3.
Plaintiffs' claim that their businesses are being destroyed is much more attenuated than in Propert. They allege that: DHCF suspended payments from which more than eighty percent of their income was derived; DOH required them to continue providing PCA services without payment; continued funding of payroll costs without reimbursement has depleted Plaintiffs' resources; and the combination of DHFC's actions and DOH's requirements would inevitably force them out of business.
Importantly, there is now evidence that the District had adequate capacity for the transfer of Plaintiffs' patients to other providers, so that if Plaintiffs did not want to continue to provide PCA services during the term of their suspensions, they could have transferred them. Plaintiffs did not rebut this evidence with evidence of their own, although it was clear that the Plaintiffs in the courtroom doubted it. See PI Hrg. Tr. at 215 (Court: "I do agree there was complete testimony that there was capacity. [I]t was greeted with some skepticism in the crowd."). Nonetheless, uncontested evidence carries the burden of persuasion.
Mr. Turnage described the history of the payment suspensions at issue here. He testified that on February 20, 2014, after the arrest and indictment of twenty-five individuals for Medicaid fraud, DHCF suspended payments to four providers (not Plaintiffs here) who were involved or impacted by the arrests and indictments. PI Hrg. Tr. at 56. DHCF immediately attempted to contact by phone and letter the 3,068 patients served by those providers. Many of the phone numbers and addresses for alleged patients turned out to be fraudulent, including locations such as the baseball stadium and the police department. Id. at 57 (Turnage). Of those contacted, 885 stated that they desired services. DHCF then conducted individual assessments of these persons and found that 335 were eligible for PCA services. Id. After this experience, Mr. Turnage reviewed DHCF's reports of investigation regarding allegations of fraud against other PCA service providers. He discovered that payment had not been suspended to other providers because law enforcement officials requested that payments not be suspended during the period of investigation. Id. at 58; see 42 C.F.R. § 455.23(e)(1) (good cause not to suspend payments exists when law enforcement requests that suspension not be imposed because it may jeopardize an investigation). The Office of Inspector General then rescinded its request to withhold suspensions, and Mr. Turnage proceeded to review all of the reports of investigation of PCA service providers in DHCF files. PI Hrg. Tr. at 59. He determined that each contained one or more credible allegations of fraud. Id.; see id. at 114 (some providers are accused of submitting false claims for home care services for patients who were in the hospital at the time the services were allegedly rendered).
Mr. Turnage testified that the good cause exception relating to capacity did not "trigger" because DHCF had the capacity to serve the Medicaid beneficiaries impacted and that "[c]apacity was not an issue because we only found from the first four agencies that we suspended, only ten percent
DHCF suspended payments to Plaintiffs in two waves: on March 7 and on March 21. See Am. Compl. ¶ 21; HMI Compl. ¶¶ 18, 33; PI Hrg. Tr. at 84 (Turnage). DHCF and DOH held a meeting on March 26 with suspended providers. The purpose of the meeting was to remind providers that they were required to provide PCA services until beneficiaries were transferred, to ask providers whether they would continue to provide PCA services despite payment suspension, and if they would not, to assist them in processing transfers. PI Hrg. Tr. at 176-81 (Iscandari). DHCF also notified patients that because their PCA service providers were under suspension they might lose service and they had the option of choosing another provider. Id. at 82, 100 (Turnage). DHCF asked Plaintiffs for a list of all patients they wished to transfer and expected that the process of transferring all patients would take about forty-five days. Id. at 84, 99 (Turnage). There is no evidence that any of the Plaintiffs responded. Some of the Plaintiffs have refused to transfer their patients. Id. at 148 (Robinson Abraham, CEO of HMI) (HMI plans to provide PCA services until "appeal mechanisms" are exhausted); Def. Supp. Opp'n, Ex. C [Dkt. 40-3] (T & N Reliable Nursing Care Letter) (advising patients not to transfer, stating that "[i]f someone calls from the DHCF ... and tells you that T & N Reliable is closing down and wants you to transfer to a different provider Agency, please tell them to present you the court judgment to that effect."); PI Hrg. Tr. at 185 (Iscandari) ("[A]ide[s] and staff from the exiting agency [have told patients] not to sign anything."). Plaintiffs can continue to submit invoices to DHCF for PCA services rendered during the period while they are in suspended status; if Plaintiffs prevail in defending against the underlying fraud allegations, DHCF will have to pay those claims. Id. at 127 (Turnage).
In sum, Plaintiffs have not persuaded the Court that they are likely to succeed on the merits of their claim that they were terminated from the Medicaid program in violation of their right to due process. The District did not terminate Plaintiffs' licenses improperly
Plaintiffs also claim that the DOH conversion of their licenses to provisional status deprives them of a constitutionally-protected liberty interest in maintaining their licenses in full. However, the provisional status of the licenses does not affect Plaintiffs' ability to provide Medicaid services. There is no authority for the proposition that a license conversion to provisional status gives rise to a due process claim.
It is also unlikely that Plaintiffs will succeed on their claim for breach of contract. Under the General Provisions of the Medicaid Provider Agreement, providers agreed "[t]o satisfy all requirements of the Social Security Act, as amended, and [to] be in full compliance with the standards prescribed by Federal and State [authorities]" and "[t]o accept such amendments, modifications or changes in the program made necessary by amendments, modifications or changes in the Federal or State standards for participation." Pls. Exs., Ex. F (Form Medicaid Provider Agreement), Art. I C & D. If DHCF determines that a provider has failed to comply with Federal or District law, DHCF may do all of the following:
Id., Art. VI A-C.
Plaintiffs erroneously allege that DHCF was required to provide thirty days' notice prior to suspending payment. Am. Compl. ¶ 112; HMI Compl. ¶ 176. The terms of the Medicaid Provider Agreements, however, require thirty days' notice for termination, see Form Medicaid Provider Agreement, Art. VI B, not for suspension of payments, see id., Art. VI A. Moreover, the Medicaid Provider Agreements were subject to Federal law, including 42 C.F.R. § 455.23. As amended pursuant to the Affordable Care Act, § 455.23 now requires State Medicaid agencies, such as DHCF, to suspend payments to a provider upon determining (1) that there are credible allegations of fraud and (2) no good cause exception applies. Section
Nor are Plaintiffs likely to succeed on the merits of their claim for unjust enrichment. A claim for "unjust enrichment" may be asserted when one party receives a benefit from another under circumstances that make it inequitable for the defendant to retain the benefit without the payment of its value. Kramer Assoc., Inc. v. Ikam, Ltd., 888 A.2d 247, 254 (D.C. 2005). However, there can be no recovery for unjust enrichment when there is an express contract between the parties, see Schiff v. Am. Ass'n of Retired Persons, 697 A.2d 1193, 1197 n. 2 (D.C.1997), unless the express contract does not fully address the subject matter, see Ver Brycke v. Ver Brycke, 843 A.2d 758, 772 n.9 (Md.2004).
Plaintiffs also cannot demonstrate likelihood of success on the merits because they have not exhausted administrative remedies. "Where a failure to exhaust administrative remedies would likely preclude an award of relief at the end of the litigation, the party seeking relief has not made a sufficient showing of probability of ultimate success to obtain a preliminary injunction." Wallace v. Lynn, 507 F.2d 1186, 1189 (D.C.Cir.1974). The purpose of exhaustion is to give notice of the claim, to narrow the issues for prompt adjudication, see Laffey v. Northwest Airlines, Inc., 567 F.2d 429, 472 n. 325 (D.C.Cir.1976), to afford the agency an opportunity to resolve the matter internally, and to avoid unnecessarily burdening the courts, see Wilson v. Pena, 79 F.3d 154, 165 (D.C.Cir.1996); Wallace, 507 F.2d at 1190 (citing McGee v. United States, 402 U.S. 479, 484, 91 S.Ct. 1565, 29 L.Ed.2d 47 (1971)). The assertion of a constitutional right does not excuse exhaustion. Wallace, 507 F.2d at 1190; Marine Mammal Conservancy v. Dep't of Agriculture, 134 F.3d 409, 413 (D.C.Cir.1998) (administrative appeals may not be bypassed merely because the litigant asserts a constitutional claim). Exhaustion is excused, however, when the relief available through the administrative process is inadequate, see Randolph-Sheppard Vendors of Am. v. Weinberger, 795 F.2d 90, 107 (D.C.Cir. 1986), or exhaustion would be futile, see Humana of S.C., Inc. v. Califano, 590 F.2d 1070, 1081 (D.C.Cir.1978).
Plaintiffs allege, but have not shown, inadequacy or futility. All Plaintiffs are pursuing their administrative remedies and hearings are proceeding in the OAH. See, e.g., Pls. Mot. for TRO [Dkt. 15] at 8; TRO Hrg. Tr. at 18-19 (Premier), at 29(T & N), at 23 (Immaculate); PI Hrg. Tr. at 41(ABA); HMI Compl. ¶ 52 ("HMI filed an appeal to the OAH seeking expedited review."). Mr. Turnage has met individually with the executives of some of the
There is no indication that OAH will refuse to hear Plaintiffs' claims or that OAH cannot grant the relief Plaintiffs seek. In fact, OAH recently reversed payment suspension and ordered back payments to a Medicaid provider who, like Plaintiffs, objected to DHCF's March 7 suspension of Medicaid payments due to allegations of fraud. See KBC Nursing Agency & HHC, Inc. v. D.C. Dep't of Health Care Finance, Case No. 2014-DHCF-00084, at *18 (OAH May 5, 2014). That case involved thirteen alleged incidents of fraud that occurred over five years ago. Id. at *2. There were no allegations of ongoing fraud, and the provider had demonstrated a record of policing and reporting suspected fraud, and terminating contracts with subcontractors suspected of fraud. Id. After suspension, the provider had encountered "extreme difficulties in transferring patients" to non-suspended providers due to a system-wide shortage. Id. DHCF had determined it had no discretion but to suspend all Medicaid payments temporarily whenever there is a credible allegation of fraud and it did not consider the availability of other remedies that could more fully protect Medicaid funds. Id. at *2, *6. Because an agency vested with discretion to choose among alternatives abuses that discretion when it fails to recognize and exercise it, see Teachey v. Carver, 736 A.2d 998, 1004 (D.C. 1999), the Administrative Law Judge (ALJ) found that DHCF erred. The ALJ reversed the suspension of payment without prejudice, leaving DHCF free to review the matter and issue another suspension notice in the future. KBC Nursing, Case No.2014-DHCF-00084, at *18.
In sum, the KBC Nursing case reveals that administrative exhaustion is not inadequate or futile. Plaintiffs' failure to exhaust administrative remedies is yet another reason why they have not shown a likelihood of success here. The failure to show likelihood of success on the merits precludes a preliminary injunction, as Plaintiffs must make a positive showing on every prong. Davis, 571 F.3d at 1292 ("[M]ovant has the burden to show that all four factors ... weigh in favor of the injunction."). Accordingly, the motion for preliminary injunction will be denied and this case will be dismissed without prejudice to allow Plaintiffs to exhaust administrative remedies.
As explained above, Plaintiffs' motion for preliminary injunction [Dkt. 15 & 30] will be denied. Further, this case will be dismissed without prejudice to allow Plaintiffs to exhaust administrative remedies. The TRO [Dkt. 12], as modified [Dkt. 16], will be lifted immediately upon the posting of this Opinion and accompanying Order. Further, the following motions will be denied as moot: the District's motion for bond [Dkt. 35]; motions to intervene as plaintiffs filed by Nursing Enterprises, Inc. [Dkt. 37] and Vizion One, Inc. [Dkt. 47]; Plaintiffs' motions [Dkt. 49 & 52] for an order to show cause why the District of Columbia should not be held in contempt for failure to comply with the Court's April 9, 2014 temporary restraining order; and [60] motion for leave to file supplement to
42 C.F.R. § 455.23 (emphasis added). The current version of 42 C.F.R. § 455.23 was amended by HHS to conform to § 6402 of the Patient Protection and Affordable Care Act, P.L. 111-148 § 6402, 124 Stat. 119 (2010), which changed the nature of evidence required before suspension and mandates payment suspension when there are "credible allegations of fraud." Section 455.23 previously permitted suspension of Medicaid payments where an agency had discovered "reliable evidence of fraudulent activity." Plaintiffs do not challenge the new regulation.
