United States v. Narco Freedom, Inc.
95 F. Supp. 3d 747
S.D.N.Y.2015Background
- Government sues Narco Freedom, Inc. alleging violation of 42 U.S.C. § 1320a-7b by providing below-market housing in Freedom Houses to Medicaid patients.
- Plaintiffs seek a preliminary injunction barring housing conditioned on treatment enrollment, early move-in requirements, and closing houses without notice, plus recordkeeping and reporting duties.
- Court held a TRO earlier; evidentiary hearing occurred December 2–4, 2014; case held in abeyance pending potential resolution.
- New York OMIG and NY AG actions led to withholds and exclusions of Narco Freedom and executives from Medicaid; ongoing state investigations are noted.
- Evidence shows Freedom Houses are funded by resident housing allowances (HRA) and Narco Freedom funds; residences are leased from third-party landlords; marketing ties housing to Narco Freedom’s treatment programs; resident codes of conduct compel program attendance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether residence in Freedom Houses constitutes remuneration under §1320a-7b(b)(2)(B). | Remuneration includes in-kind benefits; housing below market value qualifies. | Housing is not remuneration under the AKS; no improper inducement argued. | Yes; housing is remuneration in-kind for Medicaid beneficiaries. |
| Whether one or primary purpose of Freedom Houses is to induce Medicaid enrollment in Narco Freedom programs. | Evidence shows quid pro quo: housing conditioned on attending Narco Freedom programs. | Housing serves treatment access; any inducement is incidental. | One purpose test satisfied; housing inducement proven. |
| Whether the Government has shown a sufficient likelihood of success on the merits under §1345 to grant a preliminary injunction. | Ongoing violation of §1320a-7b(b)(2)(B) supports injunctive relief. | Need for irreparable harm or balancing hardships; no financial hardship evidence presented. | Regardless of irreparable harm, the statute violation supports injunction; balance of hardships favors the Government. |
| Whether the §1320a-7a(F) low-risk exception applies to §1320a-7b in this context. | Section 1320a-7a(i)(6)(F) can shield remuneration practices from §1320a-7a but not §1320a-7b. | The OIG rule interpretation could apply the exception broadly. | Exception does not apply to §1320a-7b; remuneration is not exempt. |
Key Cases Cited
- Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7 (U.S. 2008) (irreparable harm not always required where statute authorizes injunction)
- United States v. Sriram, 147 F. Supp. 2d 914 (N.D. Ill. 2001) (injunctions under §1345 to prevent substantial injury)
- William Savran & Assocs., 755 F. Supp. 1165 (E.D.N.Y. 1991) (presumption of irreparable harm or statute-based relief considered)
- United States v. Belden, 714 F. Supp. 42 (N.D.N.Y. 1987) (statutory injunction standards under §1345)
- Fang v. United States, 937 F. Supp. 1186 (D. Md. 1996) (costs to public and ongoing violation considerations for injunctions)
- SEC v. Mgmt. Dynamics, Inc., 515 F.2d 801 (2d Cir. 1975) (equitable considerations in granting injunctions under statutory authority)