EDMUND A. SARGUS, JR., District Judge.
This matter is before the Court on Plaintiffs Motion for a Temporary Restraining Order. (ECF No. 3.) For the reasons set forth below, the Court
The following facts are undisputed, unless otherwise indicated. Plaintiff, Autumn Health Care of Zanesville, Inc. d/b/a Autumn Health Care of Zanesville operates a skilled nursing facility in Zanesville, Ohio (the "Facility"). The Facility is a Medicare certified facility under Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq., and is a Medicaid certified facility under Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq. The portion of Medicare involved here, Part A, is a federally administered program that provides payment for inpatient hospital, nursing home and home health services to aged or disabled individuals who are eligible for social security benefits. 42 U.S.C. §§ 426, 1395c. Medicaid is a State-administered program providing payment for a range of medical care to individuals with qualifying income and resources. 42 U.S.C. § 1396d(a). Both programs are administered by the Centers for Medicare and Medicaid Services ("CMS"), a component of the United States Department of Health and Human Services ("HHS").
Payment from the federal government under Medicare and/or Ohio under Medicaid is made directly to a nursing home for services furnished to eligible beneficiaries of both programs. To qualify to receive payments under either program, a nursing home must be periodically "certified" through onsite "surveys," as meeting the health and safety requirements specified in the statute and HHS regulations. 42 U.S.C. §§ 1395i-3(a)(3), (b-d) (Medicare); 42 U.S.C. §§ 1395r(a)(3), (b-d) (Medicaid); 42 C.F.R. § 483.1 et seq. (setting forth identical certification requirements under both programs).
A facility that is certified enters into a provider agreement with the federal government and/or the state. 42 U.S.C. § 1395cc(a) (Medicare); 42 U.S.C. § 1396a(a)(27) (Medicaid). If it is determined, through later surveys, that a previously certified facility no longer meets the participation requirements, a variety of sanctions may be imposed including termination of the provider agreement under either program. 42 U.S.C. §§ 1395i-3(g, h), and 1395cc(b)(2) (Medicare); 42 U.S.C. §§ 1396a(a)(33)(B) and 1396r(g, h) (Medicaid).
Plaintiff alleges in its complaint that currently, approximately eleven percent (11%) of the Facility's residents are Medicare beneficiaries, and approximately twenty-four percent (24%) of the Facility's revenue is derived from Medicare beneficiaries; approximately sixty-six percent (66%) of the Facility's residents are Medicaid beneficiaries, and approximately fifty-three percent (53%) of its revenue is derived from Medicaid beneficiaries. (ECF No. 1, ¶¶ 46, 47. Also, Plaintiff alleges that if its Medicare and Medicaid provider agreements are terminated, the Facility would have to discharge or transfer approximately seventy-seven percent (77%) of its residents, and it would cease receiving approximately seventy-seven percent (77%) of its revenue. Id., ¶ 49. Defendants do not concede the accuracy of these percentage approximations, but agree that the percentage of Medicare/Medicaid funded residents at the Facility is substantial. Plaintiff further contends that the Facility's president and his wife personally guaranteed a debt of over seven million dollars to the Facility's landlord and that, "[i]f the Facility closes, [Plaintiff] will be unable to make lease payments, the landlord will be unable to make loan repayments to the landlord, and [Plaintiff]'s president and his wife will have to fulfill their guarantee, if even possible." (ECF No. 3 at 11.)
CMS first moved to terminate the provider agreements with the Facility in May 2012, after eight (8) standard surveys had been conducted and the nursing home had not graduated from the SFF program. Through negotiations, the parties entered into a Systems Improvement Agreement, which effectively gave the Facility another year to graduate. (ECF No. 10-1.) In consideration of continued Medicare/Medicaid reimbursement during the time Plaintiff attempted to secure compliance, the Facility waived its right to appeal to any federal or state court on any termination imposed as a result of surveys conducted during the extra year. In relevant part, the Agreement provides:
Id., at 2. The Agreement further provides:
Id. at 6.
On June 21, 2013, Plaintiff requested a hearing on the termination imposed by HHS. (ECF No. 3-3.) An Administrative Law Judge ("ALJ") thereafter acknowledged Plaintiffs request for a hearing and issued an order requiring the Secretary to present pre-hearing argument and factual materials by September 24, 2013, and Plaintiff to present its argument and factual materials by October 29, 2013. Id. at 2. Plaintiff subsequently moved for an expedited hearing, with such motion yet to be ruled upon by the ALJ.
On July 22, 2013, Plaintiff filed this action against HHS and Secretary Sebelius, CMS and Administrator Marilyn Tavenner, the Ohio Department of Job and Family Services and Director Michael Colbert, the Ohio Department of Medicaid and Director John McCarthy, the Ohio Department of Aging and Director Bonnie Burman, the Ohio Department of Health and Director Theodore Wymyslo, M.D. Plaintiff requests declaratory and injunctive relief, alleges that Secretary Sebelius's termination of the Medicare and Medicaid provider agreements is beyond the scope of her statutory authority and that the relevant regulations purporting to provide extra-statutory authority are void and unenforceable. (ECF No. 1, Counts I, II.) Plaintiff also alleges that the Secretary's failure to provide a hearing prior to termination of the provider agreements violates state and federal constitutional due process. (Id., Counts III, IV.)
On the same day Plaintiff filed its emergency injunctive relief motion, July 22, 2013, this Court held a conference pursuant to Local Rule 65.1. See S.D. Ohio Civ. R. 65.1. The Court issued a scheduling order reflecting the agreements reached at that conference that permitted briefing on Plaintiff's Motion for a Temporary Restraining Order and scheduled an oral hearing on the motion for August 5, 2013. (ECF No. 5.) Pursuant to that Order, Defendants filed memoranda in opposition to Plaintiffs motion (ECF Nos. 9, 10, 11, 12), and Plaintiff filed a reply in support of its motion (ECF No. 15). On the same day that they filed their memorandum in opposition to Plaintiffs Motion for a Temporary Restraining Order, July 30, 2013, Defendants HHS and Secretary Sebelius filed a motion to dismiss for lack of subject matter jurisdiction. (ECF No. 13.)
On August 5, 2013, the Court held the oral hearing on Plaintiffs motion, at which all parties were represented by well-prepared counsel.
Defendants argue that this Court lacks subject matter jurisdiction over this case because the United States Court of Appeals for the Sixth Circuit held in Cathedral Rock ofN. Coll. Hill v. Shalala, 223 F.3d 354 (6th Cir.2000), that providers such as Plaintiff are required to exhaust administrative remedies before an Administrative Law Judge, before challenging a termination in federal court. Further, Defendants posit that Plaintiff has waived any challenge to termination in the Systems Improvement Agreement, in which Plaintiff waived its right to contest any HHS termination based on a survey during the time of the agreement's term.
Plaintiff concedes that it did not exhaust its administrative remedies, but contends that it is excused from doing so based on its colorable constitutional due process claim.
The Court will address each argument in turn.
Cathedral Rock of North College Hill, Inc. v. Shalala, controls the issue before this Court and requires dismissal of this action for lack of subject matter jurisdiction.
The facts before the Cathedral Rock court are nearly identical in all relevant respects to the facts in the case sub judice. In Cathedral Rock, the Secretary of HHS terminated a nursing home's participation in the Medicare and Medicaid programs for its failure to substantially comply with the regulations. The termination was to take effect on July 19, 1999. On that day, the nursing home, Beechknoll, filed in federal district court a complaint and a motion for a temporary restraining order. Beechknoll asked the district court to enjoin the Secretary from terminating its participation in the Medicare and Medicaid programs until after the administrative hearings, which is the same request Plaintiff here makes.
The Cathedral Rock defendants, like Defendants here, argued that the district court lacked subject matter jurisdiction because Beechknoll failed to exhaust its administrative remedies. The district court entered an order issuing a temporary restraining order for ten (10) days for the purpose of preserving the status quo pending its decision on whether subject matter jurisdiction existed. The Secretary then moved to dismiss for lack of subject matter jurisdiction, which the district court granted. The Sixth Circuit affirmed the district court's decision, stating: "In sum, we conclude that the district court did not have jurisdiction to consider the claims presented in Beechknoll's complaint or in its motion for preliminary injunctive relief because Beechknoll failed to exhaust its administrative remedies." Cathedral Rock, 223 F.3d at 366.
To reach this conclusion, the Sixth Circuit first looked at jurisdiction under the Medicare Act and concluded that the Act required exhaustion. The court then considered whether there was an exception to the exhaustion requirement. And, last, it determined that dismissal of the claims predicated on the Medicare Act necessitated dismissal of the Medicaid Act claims as well. This Court follows that analysis here.
"Under 42 U.S.C. § 1395cc(h)(1), an institution `dissatisfied with a determination by the Secretary ... described in subsection (b)(2) of this section shall be entitled to a hearing thereon by the Secretary ... and to judicial review of the Secretary's final decision after such hearing as is provided in section 405(g) of this title.'" Cathedral Rock, 223 F.3d at 358. The referenced subsection (b)(2) sets forth the Secretary's power to terminate an agreement with a provider of services to participate in the Medicare program, including situations in which "the provider fails to comply substantially with the provisions of the agreement, [or] with the provisions of [the Medicare Act] and regulations thereunder." Id. (quoting 42 U.S.C. § 1395cc(b)(2)(A)). The Secretary's findings and decision to terminate participation in the Medicare program thus are subject to judicial review under § 405(g), which states:
42 U.S.C. § 405(g).
"Under 42 U.S.C. § 1395ii, the Medicare Act incorporates 42 U.S.C. § 405(h), which provides that the Secretary's findings and final decision after a hearing are binding on the parties to the hearing." Cathedral Rock, 223 F.3d at 358. "This provision also limits judicial review as follows: `no findings of fact or decision of the [Secretary] shall be reviewed by any person, tribunal, or governmental agency except as herein provided' and no action against the Secretary `shall be brought under section 1331 or 1346 of Title 28 to recover on any claim arising under' the Medicare Act." Id. (quoting 42 U.S.C. § 405(h)). "This section `channels most, if not all, Medicare claims through [the] special review system' of an administrative hearing and `purports to make exclusive the judicial review method set forth in § 405(g).'" Id. at 358-59 (citing Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1, 120 S.Ct. 1084, 146 L.Ed.2d 1 (2000); Michigan Ass'n of Homes & Servs. for the Aging, Inc. v. Shalala, 127 F.3d 496, 499 (6th Cir.1997); Livingston Care Ctr., Inc. v. United States, 934 F.2d 719, 721 (6th Cir. 1991)).
The Sixth Circuit has "held that in order to obtain judicial review under § 405(g), a party must comply with `(1) a nonwaivable requirement of presentation of any claim to the Secretary, and (2) a requirement of exhaustion of administrative review, which the Secretary may waive.'" Id. (quoting Michigan Ass'n of Homes & Servs., 127 F.3d at 499, which relied on Heckler v. Ringer, 466 U.S. 602, 617, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984)). "As so interpreted, the bar of § 405(h) reaches beyond ordinary administrative law principles of `ripeness' and `exhaustion of administrative remedies'" where exceptions may apply and instead "demands the `channeling' of virtually all legal attacks through the agency." Id. This system "assures the agency greater opportunity to apply, interpret, or revise policies, regulations, or statutes without possibly premature interference by different individual courts," although "this assurance comes at a price, namely, occasional individual, delay-related hardship." Id. (quoting Illinois Council, 120 S.Ct. at 1093.) The Illinois Council Court "concluded, however, that `in the context of a massive, complex health and safety program such as Medicare, embodied in hundreds of pages of statutes and thousands of pages of often interrelated regulations ... paying this price may seem justified.'" Id. at 359.
"Based on this interpretation of § 405(h), virtually all legal challenges to an administrative determination must be channeled through the Secretary's administrative process before judicial review is available as set forth in § 405(g), and any claimed exceptions to this requirement of exhaustion of administrative remedies must be examined critically." Id.
The Cathedral Rock court next examined whether an exception to exhaustion existed. The court first considered an exception that is not relevant to this case, and then reviewed whether the "entirely collateral" exception set forth in Mathews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976), applied.
In Mathews v. Eldridge, "the Supreme Court held that the Secretary's denial of an individual's request for benefits constituted a final decision for the purpose of § 405(g) jurisdiction, even though he had not exhausted fully the Secretary's administrative procedures, because the individual's claim that a pre-deprivation hearing is
The Cathedral Rock court determined that the nursing home's argument that it was entitled to a pre-termination hearing under the Due Process Clause was "entirely collateral" from its substantive challenge to the Secretary's termination decision. Id. (citing Eldridge, 424 U.S. at 330-32, 96 S.Ct. 893.) The court then stated: "Because this particular challenge is `entirely collateral,' we must determine whether Beechknoll has made a colorable claim that full relief would not be possible if it was awarded retroactive relief through a post-deprivation hearing." Id. at 364. To make this determination, the court directed:
Id. (citing Eldridge, 424 U.S. at 335, 96 S.Ct. 893).
Thus, this Court must engage in the same analysis to determine whether Plaintiff here has set forth a colorable procedural due process claim.
First, "the private interest at stake is not particularly strong because the [Facility, which is a] Medicare provider[,] is not the intended beneficiary of the Medicare program." Id. at 364-65 (citing Northlake Cmty. Hosp. v. United States, 654 F.2d 1234, 1241-43 (7th Cir.1981)). Plaintiff argues, however, that it will suffer irreparable harm because of the economic impact the termination will have on the Facility when it loses 77% of its revenue. Plaintiff suggests that is may be required to shutdown the Facility. "Although termination of its agreement may have a severe economic impact on [Plaintiff], `a provider's financial need to be subsidized for the care of its Medicare patients is only incidental to the purpose and design of the [Medicare] program.'" Id. at 365 (quoting Northlake Cmty. Hosp., 654 F.2d at 1242; and citing to Green v. Cashman, 605 F.2d 945, 946 (6th Cir.1979) (commenting that the Medicare and Medicaid statutes were not designed "to provide financial assistance to providers of care for their own benefit" but rather "to aid the patients and clients of such facilities")).
Plaintiff furthers suggests that losing its right to participate in the Medicare and Medicaid programs, will cause it to discharge and transfer its patients receiving care under these programs, causing these patients to suffer irreparable harm of "transfer trauma." Cathedral Rock addressed transfer trauma by citing to O'Bannon v. Town Court Nursing Center, 447 U.S. 773, 787-90, 100 S.Ct. 2467, 65 L.Ed.2d 506 (1980), for the proposition that "nursing home patients do not have
"Second, the `the risk of erroneous deprivation of provider status is also quite manageable.'" Id. at 365 (quoting Northlake Cmty. Hosp., 654 F.2d at 1242.). "A termination decision is well-documented and typically is based on survey reports from unbiased health professionals who apply well-defined criteria developed through the administrative process; the provider has the opportunity to submit written material in response to the survey findings so that a hearing likely is not necessary for the provider to present its position." See id. (relying on Town Court Nursing Ctr., Inc. v. Beal, 586 F.2d 266, 277 (3d Cir.1978)). The evidence before the Court shows that the termination decision here was indeed well documented, based on survey reports that applied well-defined criteria, and that Plaintiff was provided the opportunity to submit written material in response to the survey findings. The survey findings reflect numerous compliance issues for the previous four years. And, there is nothing that suggests that the multiple surveys were completed by biased health care professionals. Thus, the Court finds that the risk of an erroneous deprivation is low.
Finally, "the government has a strong interest in expeditious provider-termination procedures for two reasons: first, `the Secretary's responsibility for insuring the safety and care of elderly and disabled Medicare patients is of primary importance,' and second, `the government has a strong interest in minimizing the expenses of administering the Medicare program.'" Id. (quoting Northlake Cmty. Hosp., 654 F.2d at 1242.).
In "[b]alancing the government's strong interest in an expeditious procedure [and insuring the safety and care of the elderly and disabled] against the provider's less significant interest and the relatively small risk of erroneous termination," this Court concludes, as did the Cathedral Rock court, that Plaintiffs "procedural due process rights are adequately protected by a post-termination hearing." Id. (citing Northlake Cmty. Hosp., 654 F.2d at 1242; Varandani v. Bowen, 824 F.2d 307, 310-11 (4th Cir.1987) (holding that a physician is not entitled to a formal hearing before being suspended from the Medicare program under Eldridge), 484 U.S. 1052, 108 S.Ct. 1000, 98 L.Ed.2d 968 (1988); Ritter v. Cohen, 797 F.2d 119, 123 (3d Cir.1986) (concluding that a physician faced with termination of participation in the Medicaid program is not entitled to a pre-termination hearing under Eldridge); Geriatrics, Inc. v. Harris, 640 F.2d 262, 265 (10th Cir.1981) (holding that a nursing home participating in the Medicaid program is not entitled to a pre-termination hearing)). Consequently, Plaintiff has not made a colorable claim that it is entitled to a pre-termination hearing under the Due Process Clause.
Accordingly, this Court lacks subject matter jurisdiction to consider the claims presented in Plaintiffs complaint or in its motion for preliminary injunctive relief because it failed to exhaust its administrative remedies and the "entirely collateral" exception fails to remedy the jurisdictional ban. See Cathedral Rock, 223 F.3d at 366 ("In sum, we conclude that the district court did not have jurisdiction to consider the claims presented in Beechknoll's complaint or in its motion for preliminary injunctive relief because Beechknoll failed to exhaust its administrative remedies and
Plaintiff brings its claims under the Medicare and Medicaid Acts, which "impose common certification and quality of care requirements on nursing facilities." Cathedral Rock, 223 F.3d at 366 (citing 42 U.S.C. § 1395i-3(a)(3), (b-d) (Medicare); 42 U.S.C. § 1396r(a)(3), (b-d) (Medicaid); 42 C.F.R. § 483.1 (facilities must comply with the same requirements in order to participate in the Medicare and Medicaid programs)). "Where the Secretary finds that a dually certified nursing facility is not in compliance with these requirements, it has authority to impose remedies on the facility, including termination, under both the Medicare and Medicaid Acts." Id. (citing 42 U.S.C. § 1395i-3(h)(2-4) (Medicare); 42 U.S.C. § 1396r(h)(3-5) (Medicaid)). "The regulations provide that the appeals procedures set forth for reviewing the Secretary's determinations affecting participation in the Medicare program also apply to the Secretary's determination to terminate a nursing facility's Medicaid provider agreement." Id. (citing 42 C.F.R. § 498.3(2)(I); see also 42 C.F.R. § 498.4 (stating that a Medicaid nursing facility is treated as a Medicare provider subject to the Medicare administrative appeals procedures when it has agreed to participate in both Medicaid and Medicare and is the subject of a compliance action following review of a state's survey findings)). "The Medicare and Medicaid statutory and regulatory provisions thus provide that when a dually certified facility challenges a determination that it is not in substantial compliance with the common Medicaid and Medicare regulations and a termination of its participation in both programs, the facility must seek review of this determination through the Medicare administrative appeals procedure." Id.
Therefore, this Court also lacks subject matter jurisdiction to consider Plaintiffs claims under the Medicaid Act. Id. at 367.
Plaintiff argues that the doctrine of unconstitutional conditions prohibits the government from conditioning participation in the Medicare program on waiver of constitutional rights. "Under the unconstitutional conditions doctrine, `a state actor cannot constitutionally condition the receipt of a benefit, such as a liquor license or an entertainment permit, on an agreement to refrain from exercising one's constitutional rights....'" R.S.W.W., Inc. v. City of Keego Harbor, 397 F.3d 427, 434 (6th Cir.2005) (citing G & V Lounge, Inc. v. Mich. Liquor Control Comm'n, 23 F.3d 1071, 1077 (6th Cir.1994)). Plaintiff suggests that this doctrine comes into play here because "[i]n the Systems Improvement Agreement, the Centers for Medicare and Medicaid Services and the Ohio Department of Health required [Plaintiff] to waive its rights to judicial review and to sue — constitutional rights — in exchange for continued Medicare and Medicaid participation — government benefits." (ECF No. 15 at 1.) Plaintiffs argument is not well taken.
While Plaintiff is correct that an agency may not condition benefits or compensation upon unconstitutional conditions, it is also true that many constitutional rights may be knowingly and voluntarily waived as part of the settlement of disputes. See e.g., Town of Newton v. Rumery, 480 U.S. 386, 107 S.Ct. 1187, 94 L.Ed.2d 405 (1987) (upholding contract waiving right to bring civil claims for alleged violations of constitutional rights by state actors); K.M.C. Co. v. Irving Trust Co., 757 F.2d 752, 758 (6th Cir.1985) (concluding that when a party
In this case, the parties had an ongoing dispute which culminated in a lengthy agreement that included a waiver of the right to judicial review. The unconstitutional conditions doctrine does not invalidate this agreement. However, as discussed supra, even if this waiver were not binding, this Court still could not grant Plaintiff the relief it requests because of a lack of subject matter jurisdiction over this matter.
For the reasons set forth above, the Court