Florida Agency for Health Care Administration v. Bayou Shores SNF, LLC (In Re Bayou Shores SNF, LLC)
2016 U.S. App. LEXIS 12727
11th Cir.2016Background
- Bayou Shores SNF, LLC operated a skilled‑nursing facility heavily dependent on Medicare/Medicaid; HHS (using Florida AHCA surveys) repeatedly found deficiencies posing "immediate jeopardy."
- HHS notified Bayou Shores it would terminate its Medicare provider agreement; that termination also would trigger Medicaid termination.
- Bayou Shores filed for Chapter 11 and the bankruptcy court enjoined termination, treated the Medicare/Medicaid provider agreements as property of the estate, and confirmed a plan that assumed the agreements. The government repeatedly challenged bankruptcy court jurisdiction.
- The district court reversed, holding 42 U.S.C. § 405(h) bars bankruptcy‑court jurisdiction under 28 U.S.C. § 1334 for claims arising under Medicare because the 1984 recodification did not clearly intend to change the pre‑existing jurisdictional bar.
- The Eleventh Circuit affirmed: it applied the canon that codifications do not effect substantive change absent a clear congressional intent, concluded the 1984 amendments were technical, and held § 405(h) bars § 1334 jurisdiction and requires administrative exhaustion under § 405(g).
Issues
| Issue | Plaintiff's Argument (Bayou Shores) | Defendant's Argument (HHS/AHCA) | Held |
|---|---|---|---|
| Whether § 405(h) bars bankruptcy‑court jurisdiction under 28 U.S.C. § 1334 over claims arising under the Medicare Act | § 405(h) mentions only §§ 1331 and 1346; its plain text does not bar § 1334 jurisdiction | The omission of § 1334 is a codification error; § 405(h) should be read to bar all district‑court jurisdiction over Medicare claims and require exhaustion | § 405(h) bars § 1334 jurisdiction; bankruptcy court lacked subject‑matter jurisdiction (affirmed) |
| Whether the 1984 Deficit Reduction Act substantively changed § 405(h) to omit § 1334 | The DRA’s text controls; because § 1334 is not listed, Congress intended to permit bankruptcy jurisdiction | The DRA enacted a technical codification of an earlier cross‑reference; § 2664(b) shows no substantive change was intended | The 1984 amendment was a codification, not a substantive change; pre‑existing bar continues |
| Whether 28 U.S.C. § 1334 gives bankruptcy courts special authority to adjudicate Medicare disputes against administrative agencies | § 1334(b)’s broad grant gives bankruptcy courts power over matters affecting the estate, including adjudicating provider‑agreement disputes | § 1334 does not displace administrative adjudication of Medicare claims; administrative agencies are not "courts" under § 1334(b) and MCorp forecloses that reading | § 1334 does not override § 405(h); bankruptcy courts cannot substitute for HHS’s administrative role |
| Whether Bayou Shores’ failure to exhaust administrative remedies required dismissal even if § 405(h) did not bar jurisdiction | Bankruptcy filing and need for immediate relief justified bankruptcy adjudication; exhaustion would be futile and produce intolerable delay | § 405(h) and § 405(g) require administrative exhaustion; no demonstrated exception applies | Even if § 1334 were available, Bayou Shores had not exhausted administrative remedies and no exception justified bypassing exhaustion |
Key Cases Cited
- United States v. Ryder, 110 U.S. 729 (establishes canon that codification/revision does not change law absent clear congressional intent)
- Weinberger v. Salfi, 422 U.S. 749 (interpreting § 405(h) as imposing administrative channeling and barriers to § 1331 review)
- Heckler v. Ringer, 466 U.S. 602 (§ 405(g)/(h) makes administrative review the exclusive avenue for claims arising under Medicare)
- Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1 (§ 405(h) channels virtually all legal attacks through the agency; scope extends beyond money claims)
- Fourco Glass Co. v. Transmirra Prod. Corp., 353 U.S. 222 (1948 recodification does not change preexisting law absent clear expression)
- Muniz v. Hoffman, 422 U.S. 454 (reaffirming that recodifications presumptively do not alter substantive law)
- Finley v. United States, 490 U.S. 545 (same canon applied to jurisdictional consequences of recodification)
- Bd. of Governors v. MCorp Fin., Inc., 502 U.S. 32 (§ 1334(b) does not permit bankruptcy courts to adjudicate administrative agency enforcement as if the agency were a court)
- Bodimetric Health Servs., Inc. v. Aetna Life & Cas., 903 F.2d 480 (7th Cir.) (applies codification canon to hold § 405(h) bars other district‑court jurisdictional grants)