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From Health Law Daily, August 7, 2013

Court denies temporary restraining order to skilled nursing facility that waived right to appeal termination of Medicare provider agreement

By Sarah E. Baumann, JD

A federal district court denied a temporary restraining order (TRO) to a skilled nursing facility (SNF) that waived its right to appeal the termination of its Medicare and Medicaid agreements in a systems improvement agreement (Autumn Health Care of Zanesville, Inc. v HHS, August 6, 2013, Sargus, E). The court determined that it lacked subject matter jurisdiction because the SNF failed to exhaust its administrative remedies and did not qualify for a waiver of the requirement. In addition to denying the TRO, the court dismissed the case.

Termination. In December 2008, HHS designated Autumn Health Care of Zanesville, Inc., doing business as Autumn Health Care of Zanesville (Autumn), as a special focus facility (SFF) based on its poor compliance history. SFFs undergo two standard surveys each year instead of one. CMS typically terminates a facility’s Medicare certification if it fails to “graduate” from the SFF program after four standard surveys, or within 24 months. (This timeline was shortened to 18 months after April 5, 2013.) CMS moved to terminate the facility’s provider agreement after eight surveys, but instead entered into a systems improvement agreement with Autumn, which gave Autumn one additional year to comply. In exchange for continued Medicare and Medicaid reimbursement, Autumn waived its right to appeal any resulting termination to federal or state court. In June 2013, HHS notified Autumn that it was terminating its provider agreement on August 2, 2013.

Lawsuit. Autumn filed suit against HHS, CMS, the Ohio Department of Job and Family Services, the Ohio Department of Medicaid, the Ohio Department of Aging, the Ohio Department of Health, and their respective Secretaries and Directors. The complaint requested declaratory and injunctive relief, alleged both that HHS’ termination of the provider agreement is beyond the scope of its authority and that the regulations it relied upon are void and unenforceable, and that HHS’ failure to allow a hearing prior to termination violated Autumn’s constitutional due process. Autumn also filed a motion for a TRO seeking to prohibit termination of its Medicare and Medicaid provider agreements and require continued reimbursement until the completion of any hearings or appeals. HHS and Secretary Sebelius filed a motion to dismiss for lack of subject matter jurisdiction, arguing that Autumn failed to exhaust its administrative remedies.

Exhaustion of remedies. The district court determined that the section 405(g) of the Medicare Act requires a plaintiff to exhaust its administrative remedies prior to obtaining judicial review of a decision to terminate a provider agreement, unless the Secretary waives the requirement. An exception to this requirement exists where a claim is “entirely collateral” to a claim for entitlement and full relief would not be possible if awarded after a post-termination hearing. The court found Autumn’s claim that HHS failed to provide a pre-termination hearing, thereby violating constitutional due process, was entirely collateral to its claim challenging the agency’s determination.

To determine whether a post-termination hearing would adequately protect Autumn’s rights, the court weighed Autumn’s private interest, the risk of an erroneous deprivation of its interest, and the government’s interest. The court found Autumn’s private interest to be limited. Autumn argued that termination of its agreements would cause it to lose 77 percent of its revenue and transfer or discharge 77 percent of its residents. However, the court determined that Autumn was not the intended beneficiary of the Medicare program and that its financial need was not paramount. The residents did not have standing to challenge the decertification; more importantly, the provider agreement was terminated to protect the patients from harm resulting from noncompliance. The court also determined that there was limited risk of erroneous deprivation of Autumn’s status. The termination, which was well-documented and based on defined criteria, was the culmination of years of contact and Autumn had been provided with numerous opportunities to respond. Finally, the government had a strong interest in the termination in order to protect the safety of Autumn’s residents and to minimize Medicare expenses. As a result, the court determined that Autumn’s rights would be protected by a post-termination hearing and that it lacked subject matter jurisdiction to hear the claims regarding the Medicare provider termination case. It also lacked subject matter jurisdiction to hear claims regarding the termination of Medicaid privileges, since the appeals process was the same.

The court also rejected Autumn’s argument that the government did not have the right to condition the receipt of a benefit on an agreement to refrain from exercising constitutional rights, noting, for example, that criminal defendants may waive their right to trial by entering a guilty plea or their right to trial by jury by signing a waiver. Regardless, the court would still lack subject matter jurisdiction.

The court denied Autumn’s motion for a TRO and dismissed the complaint.

The case number is 2:13-cv-720.

Attorneys: D. Michael Crites (Dinsmore & Shohl, LLP) for Autumn Health Care of Zanesville, Inc. John J. Stark, U.S. Attorney’s Office, for U.S. Department of Health and Human Services and Centers for Medicare and Medicaid Services. Ara Mekhjian, Ohio Attorney General’s Office, for Ohio Department of Job and Family Services and Ohio Department of Medicaid. Cheryl R. Hawkinson, Ohio Attorney General’s Office, for Ohio Department of Aging and Ohio Department of Health.

Companies: Autumn Health Care of Zanesville, Inc.; U.S. Department of Health and Human Services; Centers for Medicare and Medicaid Services; Ohio Department of Job and Family Services; Ohio Department of Medicaid; Ohio Department of Aging; Ohio Department of Health

MainStory: TopStory CaseDecisions ProviderNews CMSNews CoPNews MedicaidNews PartANews QualityNews SNFNews OhioNews

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