Parkview Adventist Medical Center v. United States Ex Rel. Department of Health & Human Services
842 F.3d 757
| 1st Cir. | 2016Background
- Parkview Adventist Medical Center, a 55-bed Maine hospital, filed Chapter 11 on June 16, 2015 and sent CMS a June 15 letter saying it would stop participating in Medicare as an acute care hospital and would transition inpatient services to another hospital while continuing outpatient care.
- CMS sent a June 19, 2015 letter terminating Parkview's Medicare Provider Agreement effective June 18, 2015, concluding Parkview no longer met the statutory definition of a "hospital." CMS said no Medicare payments could be made for services on or after that date.
- Parkview sought relief in bankruptcy court requesting (among other things) a declaration the termination was null and void, that the Provider Agreement remained in effect, and that CMS reimburse Part B services provided after June 18, 2015.
- Bankruptcy and district courts denied Parkview's motion, concluding Parkview had to exhaust administrative remedies under the Medicare statute (42 U.S.C. § 405), and that CMS had not violated the automatic stay (§ 362) or the non-discrimination provision (§ 525).
- The First Circuit assumed arguendo it had jurisdiction (bypassing the contested § 405(h) issue) and affirmed on the merits: it held the police-and-regulatory-power exception to the automatic stay applied to CMS’s termination and that CMS did not violate § 525(a).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CMS's termination violated the automatic stay (§ 362(a)(3)) | Termination of the Provider Agreement is an involuntary post-petition termination of an executory contract and thus stayed | Termination enforces Medicare's regulatory scheme and falls within the police-and-regulatory-power exception (§ 362(b)(4)); not a recovery of estate property | Held for defendant: § 362(b)(4) applies, so the automatic stay did not bar termination |
| Whether the termination was an attempt to recover property of the estate (pecuniary purpose) | Termination effectively deprives the estate of contract value and reimbursement rights | CMS acted to enforce public-health/regulatory standards, not to collect money from the estate | Held for defendant: purpose was regulatory (protecting Medicare program/public policy), not pecuniary |
| Whether CMS discriminated in violation of § 525(a) by terminating shortly after bankruptcy filing | Timing and use of bankruptcy filings show termination was motivated by Parkview’s insolvency/bankruptcy | Termination was based on Parkview’s cessation of inpatient services and loss of ‘‘hospital’’ status, not bankruptcy or prepetition debts | Held for defendant: no unlawful discrimination—termination tied to lack of hospital status, not bankruptcy |
| Whether courts had jurisdiction absent exhaustion under 42 U.S.C. § 405(h) | Parkview sought bankruptcy-court relief without completing Medicare administrative appeals | Government argued § 405(h) bars judicial review until administrative exhaustion; majority circuits extend the bar to bankruptcy jurisdiction | Court declined to decide the split; assumed jurisdiction for merits and affirmed on other grounds |
Key Cases Cited
- In re McMullen, 386 F.3d 320 (1st Cir. 2004) (sets two-part inquiry for the § 362(b)(4) police-and-regulatory-power exception)
- In re Corporacion de Servicios Medicos Hospitalarios de Fajardo, 805 F.2d 440 (1st Cir. 1986) (distinguishes regulatory enforcement actions from government contract-enforcement actions for stay exception)
- In re Mirant Corp., 440 F.3d 238 (5th Cir. 2006) (discusses involuntary termination of executory contracts post-petition)
- N.L.R.B. v. Bildisco & Bildisco, 465 U.S. 513 (1984) (provides definition and context for "executory contract" under § 365)
- In re Ludlow Hosp. Soc., 124 F.3d 22 (1st Cir. 1997) (approves bypassing statutory-jurisdictional question when merits clearly fail)