Florida Agency for Health Care Administration v. Bayou Shores SNF, LLC (In re Bayou Shores SNF, LLC), 533 B.R. 337

Background

Bayou Shores SNF, LLC operates a skilled nursing facility that relied on Medicare and Medicaid for over 90% of revenue and whose patients required specialized psychiatric care.
Florida Agency for Health Care Administration (AHCA) surveys in 2014 found substantial deficiencies; CMS notified the Debtor that its Medicare provider agreement would be terminated and payments would end shortly thereafter.
Debtor sued in federal district court and obtained a TRO enjoining termination; the district court dissolved the TRO and dismissed for lack of jurisdiction under 42 U.S.C. § 405(h) because administrative remedies were unexhausted.
Within an hour of that dismissal, the Debtor filed a Chapter 11 petition and sought emergency relief in bankruptcy court to enjoin termination of its Medicare/Medicaid provider agreements as property of the estate.
The Bankruptcy Court entered a provisional injunction (Sept. 5, 2014) preventing termination and later issued a Confirmation Order authorizing assumption of the provider agreements; AHCA and the Secretary appealed.
The district court held the Bankruptcy Court lacked subject-matter jurisdiction under the Medicare jurisdictional bar (42 U.S.C. § 405(h)) and reversed the Orders insofar as they affected the provider agreements, remanding for further proceedings.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Bankruptcy Court could enjoin CMS/AHCA from terminating Medicare/Medicaid provider agreements pre-exhaustion	Bayou Shores: its provider agreements were estate property and bankruptcy jurisdiction (28 U.S.C. § 1334) allowed injunctive relief and assumption	AHCA/Secretary: § 405(h) bars judicial interference until administrative remedies are exhausted; only § 405(g) review after final agency decision is permitted	The court held § 405(h) barred the Bankruptcy Court from enjoining termination prior to exhaustion; injunction reversed
Whether § 405(h) permits bankruptcy jurisdiction despite omission of § 1334 in the statute	Bayou Shores: § 405(h) text does not list § 1334, so bankruptcy jurisdiction remains available	AHCA/Secretary: legislative history and precedent show Congress intended the bar to preclude bankruptcy courts from adjudicating Medicare termination disputes	The court agreed with the majority view that § 405(h) precludes bankruptcy jurisdiction over such disputes
Whether the Confirmation Order could require assumption of the provider agreements	Bayou Shores: if agreements were executory contracts, bankruptcy could authorize assumption as estate relief	AHCA/Secretary: assuming agreements would interfere with CMS’s termination determination and circumvent administrative process	The court held the Confirmation Order’s assumption of provider agreements exceeded jurisdiction and reversed that portion
Whether the timing of actual termination matters to the jurisdictional analysis	Bayou Shores: disputes over whether termination pre-dated bankruptcy affect whether agreements were executory	AHCA/Secretary: timing does not cure lack of jurisdiction to delay or prevent effect of Secretary’s termination determination	The court held timing irrelevant: any action delaying/preventing the Secretary’s determination violated § 405(h)

Key Cases Cited

Jackson v. Astrue, 506 F.3d 1349 (11th Cir. 2007) (section 405(g) is the exclusive source of federal-court jurisdiction for Medicare disputes)
Cathedral Rock of N. Coll. Hill v. Shalala, 223 F.3d 354 (6th Cir. 2000) (district courts lack jurisdiction to enjoin Medicare terminations pre-exhaustion)
Affiliated Prof’l Home Health Care v. Shalala, 164 F.3d 282 (5th Cir. 1999) (administrative exhaustion required before judicial review of Medicare actions)
Bodimetric Health Servs., Inc. v. Aetna Life & Cas., 903 F.2d 480 (7th Cir. 1990) (textual amendments to § 405(h) do not permit evasion of the jurisdictional bar)
Livingston Care Ctr., Inc. v. United States, 934 F.2d 719 (6th Cir. 1991) (courts cannot enjoin Secretary’s termination decisions absent exhaustion)
Americana Healthcare Corp. v. Schweiker, 688 F.2d 1072 (7th Cir. 1982) (same)
In re Hosp. Staffing Servs., Inc., 258 B.R. 53 (S.D. Fla. 2000) (bankruptcy courts lack jurisdiction over Medicare termination disputes under § 405(h))