959 F. Supp. 2d 1044
S.D. Ohio2013Background
- Autumn Health Care of Zanesville operates a Medicare- and Medicaid-certified nursing facility; a substantial portion of its residents and revenue derive from those programs.
- CMS/HHS determined the facility failed to meet certification requirements after repeated surveys and notified plaintiff of termination of its Medicare provider agreement effective August 2, 2013; parallel Medicaid termination procedures applied.
- Plaintiff previously entered a Systems Improvement Agreement granting the facility extra time to comply and waiving appeal rights for surveys conducted during the agreement’s term.
- Plaintiff requested an ALJ hearing on the termination and also filed this federal suit and a motion for a temporary restraining order seeking to enjoin termination and require continued reimbursement pending administrative and judicial review.
- Defendants moved to dismiss for lack of subject-matter jurisdiction, arguing plaintiff failed to exhaust administrative remedies and waived challenges in the Systems Improvement Agreement.
- The district court denied the TRO and dismissed for lack of subject-matter jurisdiction, holding exhaustion is required and the “entirely collateral” Due Process exception did not apply; the waiver did not alter jurisdictional bar.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal court has jurisdiction before exhaustion of Medicare administrative remedies | Plaintiff: constitutional due process claim (need for pre-termination hearing) is "entirely collateral," so exhaustion is excused | Defendants: Medicare Act (§405(g)/(h)) requires exhaustion and channels review to administrative process; plaintiff failed to exhaust | Court: Dismissed for lack of jurisdiction — exhaustion required; "entirely collateral" exception inapplicable |
| Whether the same exhaustion requirement applies to Medicaid claims | Plaintiff: Medicaid claims are distinct or otherwise excepted | Defendants: Medicare and Medicaid appeals procedures are harmonized for dually certified facilities; exhaustion applies | Court: Medicaid claims likewise lack jurisdiction until administrative exhaustion occurs |
| Whether the Systems Improvement Agreement’s waiver of appeal rights is unenforceable under unconstitutional-conditions doctrine | Plaintiff: waiver coerces surrender of constitutional rights in exchange for continued benefits; void under unconstitutional-conditions doctrine | Defendants: waivers of rights can be knowing, voluntary settlements; the doctrine doesn’t automatically invalidate the parties’ agreement | Court: Agreement waiver not invalidated by doctrine (and jurisdictional dismissal would apply even if waiver were invalid) |
| Whether plaintiff is entitled to a pre-termination hearing under Mathews v. Eldridge balancing | Plaintiff: severe economic harm and patient transfer trauma justify pre-termination hearing | Defendants: government interest in expeditious termination and patient safety outweighs provider’s interest; low risk of erroneous deprivation | Court: Mathews factors favor post-termination hearing; plaintiff made no colorable claim for pre-termination hearing |
Key Cases Cited
- Cathedral Rock of N. Coll. Hill v. Shalala, 223 F.3d 354 (6th Cir. 2000) (exhaustion required; "entirely collateral" exception did not permit immediate federal challenge)
- Mathews v. Eldridge, 424 U.S. 319 (1976) (three-factor balancing test for pre-deprivation procedural protections)
- Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1 (2000) (Medicare review scheme channels claims through administrative process under §405(h))
- Northlake Community Hospital v. United States, 654 F.2d 1234 (7th Cir. 1981) (provider’s financial interest is not the primary focus of Medicare; post-termination review adequate)