CATHEDRAL ROCK OF NORTH COLLEGE HILL, INC., d/b/a Beechknoll Convalescent Center, Plaintiff-Appellant, v. Donna E. SHALALA, Secretary of Health and Human Services, Defendant-Appellee.
No. 99-4149
United States Court of Appeals, Sixth Circuit
Sept. 5, 2000
223 F.3d 354
Jan M. Holtzman, Asst. U.S. Attorney, Office of the U.S. Attorney, Cincinnati, OH, Ted Yasuda (briefed), U.S. Department of Health & Human Services, Office of the General Counsel, Region V, Chicago, IL, for Defendants-Appellees.
Before: BATCHELDER, MOORE, and BEEZER,* Circuit Judges.
MOORE, J., delivered the opinion of the court, in which BEEZER, J., joined. BATCHELDER, J. (pp. 367-68), delivered a separate opinion concurring in the judgment.
OPINION
MOORE, Circuit Judge.
Cathedral Rock of North College Hill, Inc. d/b/a Beechknoll Convalescent Center (“Beechknoll“)1 is a nursing facility appealing the dismissal of its complaint for lack of subject matter jurisdiction. In its complaint, Beechknoll challenges a determination of the Secretary of Health and Human Services that it is not in substantial compliance with the Medicare and Medicaid regulations and terminating its participation in the programs. Although Beechknoll did not exhaust its administrative remedies before seeking judicial review as required under the Medicare Act, it contends that it falls under an exception to this requirement established in Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667, 106 S.Ct. 2133, 90 L.Ed.2d 623 (1986), and also under an exception for claims that are “entirely collateral” to a substantive challenge of the Secretary‘s determination. Alternatively, Beechknoll asserts that the district court had jurisdiction under the Medicaid Act. We AFFIRM the dismissal of Beechknoll‘s complaint for lack of subject matter jurisdiction because neither of the alleged exceptions to the Medicare Act‘s exhaustion requirement applies in this case. In addition, Beechknoll cannot avoid this requirement by characterizing its claims as arising under the Medicaid Act when it is a dual provider subject to common certification, termination, and appeals procedures under the Medicare and Medicaid regulations.
I. FACTS AND PROCEDURE
Beechknoll is a 100-bed nursing facility located in Cincinnati, Ohio, that was certified to participate in both Medicare and Medicaid programs. The Ohio Department of Health (ODH) conducted several surveys of Beechknoll, which showed that it was not in substantial compliance with the federal Medicare and Medicaid certification and quality of care requirements. The Secretary of Health and Human Services then adopted the ODH‘s recommendations and imposed the following remedies against Beechknoll: (1) denial of payment for new Medicare admissions effective June 25, 1999; (2) a civil monetary penalty; and (3) termination of Beechknoll‘s participation in the Medicare and Medicaid programs effective July 19, 1999.
On July 19, 1999, Beechknoll filed a complaint for declaratory and injunctive relief in federal district court against the Secretary. Beechknoll alleges that the Secretary‘s remedies violate the Medicare Act,
On the same date, Beechknoll also filed a motion for a temporary restraining order asking the district court to restrain temporarily the Secretary from terminating its Medicare and Medicaid provider agreements and from refusing to make payment to Beechknoll for covered services rendered to its current Medicare and Medicaid patients, pending the outcome of an administrative hearing. The Secretary filed a memorandum in response to Beechknoll‘s motion arguing that Beechknoll failed to show a strong likelihood of success on the merits or any of the other requirements for injunctive relief.
Beechknoll filed a formal request for an administrative hearing on July 20, 1999.
The district court entered an order issuing a temporary restraining order for ten days for the purpose of preserving the status quo pending its decision on whether subject matter jurisdiction exists. Within this period, the court held a hearing on the Secretary‘s motion to dismiss and concluded that it lacked subject matter jurisdiction to review Beechknoll‘s claims because the nursing facility had failed to exhaust its administrative remedies. After the district court entered judgment dismissing Beechknoll‘s complaint without prejudice, Beechknoll filed a timely notice of appeal.
II. ANALYSIS
A. Standard of Review
A district court‘s legal determinations in dismissing a complaint for lack of subject matter jurisdiction are reviewed de novo, while any factual findings are reviewed for clear error. See Michigan Ass‘n of Indep. Clinical Labs. v. Shalala, 52 F.3d 1340, 1346 (6th Cir. 1994).
B. Jurisdiction under the Medicare Act
Under
Any individual, after any final decision of the [Secretary] made after a hearing to which he was a party ... may obtain a review of such decision by a civil action commenced within sixty days after the mailing to him of notice of such decision or within such further time as the [Secretary] may allow.
Under
We have held that in order to obtain judicial review under
1. Application of the Michigan Academy exception
Although Beechknoll acknowledges that a party is required to exhaust its administrative remedies prior to seeking judicial review of a Secretary‘s determination under
The legislative history of both the statute establishing the Medicare program and the 1972 amendments thereto provides specific evidence of Congress’ intent to foreclose review only of “amount determinations” —i.e., those “quite minor matters,” remitted finally and exclusively to adjudication by private insurance carriers in a “fair hearing.” By the same token, matters which Congress did not delegate to private carriers, such as challenges to the validity of the Secretary‘s instructions and regulations, are cognizable in courts of law. In the face of this persuasive evidence of legislative intent, we will not indulge the Government‘s assumption that Congress contemplated review by carriers of “trivial” monetary claims, but intended no review at all of substantial statutory and constitutional challenges to the Secretary‘s administration of Part B of the Medicare program.
Id. at 680 (citations and footnotes omitted). The Court thus allowed the physicians to bring their challenge to the methods used in calculating the amount of benefits under
Although the Seventh Circuit interpreted Michigan Academy as limiting the application of
In light of the Supreme Court‘s holding in Illinois Council, we must reject Beechknoll‘s argument that
In its complaint, Beechknoll seeks declaratory relief challenging the lawfulness of the Secretary‘s termination of Beechknoll‘s Medicare and Medicaid provider agreements and imposition of additional remedies. Beechknoll also requests a “permanent[]” injunction preventing the Secretary from terminating its agreements and from refusing to pay for covered services to its eligible residents “pending the outcome of an administrative hearing.” J.A. at 10 (Complaint). As Beechknoll concedes, where the Secretary terminates a provider‘s agreement to participate in the Medicare program for failure to comply substantially with the agreement or the Medicare regulations, the provider is entitled to a hearing and then judicial review of the Secretary‘s final decision after the hearing. See
2. Application of the “Entirely Collateral” Exception
Beechknoll also argues that because its claims are “entirely collateral” to a substantive claim for benefits, it is not required to exhaust its administrative remedies in order to obtain judicial review. In Mathews v. Eldridge, 424 U.S. 319, 330-32, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976), the Supreme Court held that the Secretary‘s denial of an individual‘s request for benefits constituted a final decision for the purpose of
This “entirely collateral” exception to the exhaustion of administrative remedies requirement is not applicable to the claims in Beechknoll‘s complaint because they directly challenge the Secretary‘s substantive determinations in imposing remedies against it rather than making any “entirely collateral” challenges to the Secretary‘s substantive determinations. Beechknoll, however, also contends that the district court had jurisdiction to rule on its motion for a temporary restraining order. Because this motion requests that the district court prevent the Secretary from imposing its remedies pending the outcome of its administrative hearing, Beechknoll asserts that it does not seek substantive review of the Secretary‘s determination but rather presents an “entirely collateral” claim.4 We note that Beechknoll requests an injunction pending the outcome of its administrative hearing rather than than the 10-day period generally allowed under a temporary restraining order, and therefore it appears that Beechknoll actually seeks a preliminary injunction from the district court. See
It appears that no circuit court of appeals has been presented with the opportunity to review these district court opinions allowing jurisdiction under the “entirely collateral” exception.5 After careful analy-
The district court opinions allowing jurisdiction under the “entirely collateral” exception reason that where a party‘s challenge to the Secretary‘s authority to terminate a provider agreement presents a legal question involving general statutory analysis, it is collateral to a claim challenging the Secretary‘s decision to terminate the agreement based on the particular facts of the case. A party‘s characterization of its challenge to the Secretary‘s termination of a provider agreement as a purely legal or statutory question, however, is not sufficient by itself to constitute an “entirely collateral” claim. See Michigan Ass‘n of Homes & Servs., 127 F.3d at 500-01 (concluding that there is no “broad exception for facial constitutional and statutory challenges to agency administration as opposed to individual challenges that are intertwined with claims for benefits“). For example, we have concluded that where an ambulance provider makes the legal argument that the Secretary violated the Medicare regulations and the Due Process Clause in determining that certain vehicles do not qualify as ambulances for the purpose of Medicare reimbursement, this challenge is “inextricably intertwined” with the party‘s claim that it is entitled to benefits for its ambulance service. Manakee Prof‘l Med. Transfer Serv., Inc. v. Shalala, 71 F.3d 574, 579 (6th Cir. 1995) (quoting Ringer, 466 U.S. at 614). Such a claim is “inextricably intertwined” because if the ambulance provider were successful in reversing the Secretary‘s determination, then it would be entitled to increased benefits for its vehicles. See id. To conclude otherwise would allow any party to avoid the Medicare Act‘s administrative procedures for reviewing the Secretary‘s determinations simply by making purely legal constitutional or statutory arguments. Rather, a court must examine whether the allegedly collateral claim involves completely separate issues from the party‘s claim that it is entitled to benefits or continued participation in the Medicare program or whether it is inextricably intertwined with its substantive claim to benefits or participation.
In the present case, Beechknoll‘s motion for injunctive relief challenges the Secretary‘s termination of its provider agreement on two grounds: (1) the absence of a finding of immediate jeopardy and (2) the denial of a pre-termination hearing. Beechknoll characterizes these claims as “question[s] of law regarding the scope of the Secretary‘s power” that are collateral to its substantive challenges to the Secretary‘s determination. See Appellant‘s Final Brief at 16. We conclude, however, that Beechknoll‘s claim that the Secretary erred in terminating its participation in the Medicare program absent a finding of immediate jeopardy is “inextricably intertwined” with Beechknoll‘s substantive challenge to the Secretary‘s termination decision because a favorable resolution of this claim would result in the reinstatement of its Medicare provider agreement. Therefore, it cannot be considered an “entirely collateral” claim. See Manakee Prof‘l Med. Transfer Serv., 71 F.3d at 579.
The Plaintiff is a corporation who is a wholly owned subsidiary of a larger corporation that handles multi or administers a number of nursing homes. There is no evidence that this Court can glean from this record that the corporation would, in any way, be irreparably harmed in this matter other than that their payments that they might be legitimately entitled to, would not be reimbursable to them after the conclusion of the administrative process.... [Plaintiff‘s] injuries, if any, could be remedied by retroactive payment after exhaustion. Plaintiff apparently [is] financially sound. The number of beds involved compared to the total number in the facility and the other facilities that the Plaintiff‘s mother corporation holds, comparing the fifty beds of Medicare and Medicaid patients here is minimal.
J.A. at 696-97 (Hearing Tr.). In response, Beechknoll does not cite to any harm that it would suffer if forced to exhaust its administrative remedies before obtaining judicial review of the Secretary‘s determination. Instead, Beechknoll claims that as a result of losing its right to participate in the Medicare and Medicaid programs, it will have to discharge and transfer its patients receiving care under these programs, and these patients will suffer irreparable harm of “transfer trauma.” In O‘Bannon v. Town Court Nursing Center, 447 U.S. 773, 787-90, 100 S.Ct. 2467, 65 L.Ed.2d 506 (1980), the Supreme Court determined that nursing home patients do not have standing to challenge the Secretary‘s decertification of their facility. Because the Beechknoll patients do not have standing to challenge the Secretary‘s determination, Beechknoll cannot rely solely on the irreparable harm to its patients in this analysis. But see Mediplex, 39 F.Supp.2d at 98-99 (concluding that “while the residents here do not formally have standing to appear before the court ... their interests are still relevant in evaluating irreparable harm for the equitable determination whether or not to grant a preliminary injunction“).
Moreover, we hold that Beechknoll has not made a colorable claim that it is entitled to a pre-termination hearing under the Due Process Clause. The Supreme Court has set forth the following factors for determining whether procedural due process requires a pre-termination hearing:
First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government‘s interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.
Eldridge, 424 U.S. at 335; see Gilbert v. Homar, 520 U.S. 924, 931-32, 117 S.Ct. 1807, 138 L.Ed.2d 120 (1997); see also United States v. Brandon, 158 F.3d 947, 953 (6th Cir. 1998) (applying the Eldridge analysis to evaluate the procedural safeguards required under the Due Process Clause).
In Northlake Community Hospital v. United States, 654 F.2d 1234, 1241-43 (7th Cir. 1981), the Seventh Circuit concluded that a Medicare provider is not entitled to hearing before the termination of its provider agreement under this analysis. First, the court noted that the private
In sum, we conclude that the district court did not have jurisdiction to consider the claims presented in Beechknoll‘s complaint or in its motion for preliminary injunctive relief because Beechknoll failed to exhaust its administrative remedies and neither the Michigan Academy nor the “entirely collateral” exception, which both allow federal jurisdiction despite the failure to exhaust all administrative remedies, is applicable in this case.
C. Jurisdiction under the Medicaid Act
In the alternative, Beechknoll argues that its claims also arise under the Medicaid Act because the Secretary terminated its Medicaid provider agreement, and therefore that it is not required to exhaust its administrative remedies through the Medicare procedures before seeking judicial review. The Medicaid Act does not have a provision, such as
The Medicare and Medicaid Acts impose common certification and quality of care requirements on nursing facilities. See
In the present case, the ODH performed several surveys of Beechknoll and found that it was not in substantial compliance with the common Medicare and Medicaid certification and quality of care requirements. The Secretary then adopted the ODH‘s recommendation to deny payment for new Medicare admissions, to impose a civil penalty, and to terminate Beechknoll‘s provider agreements for the Medicare and Medicaid programs. Beechknoll now challenges the Secretary‘s imposition of remedies and the termination of its participation in both the Medicare and Medicaid programs. Under the Medicare and Medicaid statutory and regulato-
Moreover, we have held that where a provider is dually certified and brings a claim that challenges determinations made under both the Medicare and Medicaid Acts, the provider cannot avoid the jurisdictional bar and administrative channeling of the Medicare Act simply by characterizing the claim as arising under the Medicaid Act. In Michigan Ass‘n of Homes & Servs., an association of nursing facilities certified to participate in both the Medicare and Medicaid programs argued that its claims, which challenged the Secretary‘s Medicare and Medicaid regulations, policies, and practices regarding nursing home examinations, certification, administration, enforcement, and appeal, arose under the Medicaid Act rather than the Medicare Act. See 127 F.3d at 502. We concluded, however, that “[e]ven if we were to interpret the Association‘s claim as arising under the Medicaid Act, the Association would still be required to exhaust its administrative remedies.” Id. We reasoned that a contrary conclusion “would ‘allow [the Medicaid Act] to become the back door into the [Medicare Act], which has barred this case from entrance, would result in an automatic circumvention of the [Medicare programs] administrative machinery when its cost limitations have been adopted by the [Medicaid Act] and the provider, as will usually be the case, furnishes services under both Titles.‘” Id. at 503 (quoting Rhode Island Hosp. v. Califano, 585 F.2d 1153, 1162 (1st Cir. 1978)). Accordingly, Beechknoll cannot avoid the Medicare Act‘s administrative channeling requirement simply because as a dual Medicare and Medicaid provider, its claims also fall under Medicaid Act.7
Therefore, we hold that the district court did not have jurisdiction to consider Beechknoll‘s claims under the Medicaid Act.
III. CONCLUSION
Based on the foregoing reasons, we AFFIRM the district court‘s dismissal of Beechknoll‘s claim for lack of subject matter jurisdiction.
BATCHELDER, Circuit Judge, concurring in the judgment.
I concur in the majority‘s disposition of this case. I do not concur, however, in the majority‘s discussion of the “entirely collateral” exception. To the extent that this exception survives the Supreme Court‘s recent pronouncements in Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1, 120 S.Ct. 1084, 146 L.Ed.2d 1 (2000), it is clear that it would apply only when a litigant satisfies a “nonwaivable and nonexcusable requirement” of initial presentation of its claim to the appropriate agency. Beechknoll did not satisfy this requirement in this case. That is the end of the matter.
In Illinois Council, the Supreme Court stated that two of its earlier cases, Weinberger v. Salfi, 422 U.S. 749, 95 S.Ct. 2457, 45 L.Ed.2d 522 (1975), and Heckler v. Ringer, 466 U.S. 602, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984), “foreclose distinctions based upon ... the ‘collateral’ versus ‘non-collateral’ nature of the issues....” Illinois Council, 529 U.S. at 13-14, 120 S.Ct. at 1094. When the plaintiff in Illinois Council attempted to distinguish those cases on the basis of Mathews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976), the Court remarked:
Eldridge, however, is a case in which the Court found that the respondent had followed the special review procedures set forth in
§ 405(g) , thereby complyingwith, rather than disregarding, the strictures of § 405(h) . The Court characterized the constitutional issue the respondent raised as “collateral” to his claim for benefits, but it did so as a basis for requiring the agency to excuse, where the agency would not do so on its own, some (but not all) of the procedural steps set forth in§ 405(g) . The Court nonetheless held that§ 405(g) contains the nonwaivable and nonexcusable requirement that an individual present a claim to the agency before raising it in court. The Council has not done so here, and thus cannot establish jurisdiction under§ 405(g) .
Illinois Council, 529 U.S. at 14, 120 S.Ct. at 1094 (citations omitted).
Here, Beechknoll did not request a hearing before HHS until July 20, 1999, see J.A. 356, that is, after it had already filed its motion for a temporary restraining order in the district court, see J.A. 23. Thus, Beechknoll failed to satisfy “the nonwaivable and nonexcusable requirement that an individual present a claim to the agency before raising it in court.” Illinois Council, 529 U.S. at 14, 120 S.Ct. at 1094. This failure deprived the district court of subject matter jurisdiction.
The majority nevertheless asserts that, “Like Eldridge, Beechknoll‘s second argument, that it is entitled to a pre-termination hearing under the Due Process Clause, involves Beechknoll‘s procedural constitutional rights and is ‘entirely collateral’ from its substantive challenge to the Secretary‘s termination decision.” Ante at 364. The majority makes this assertion without considering—as the Eldridge Court did—whether the plaintiff satisfied the nonwaivable jurisdictional element under
Nothing in the Supreme Court‘s cases supports this rather counterintuitive formulation. Indeed, Illinois Council makes clear that the jurisdictional bar is both uncomplicated and encompassing. “... Congress may well have concluded that a universal obligation to present a legal claim first to HHS, though postponing review in some cases, would produce speedier, as well as better review overall. And this Court crossed the relevant bridge long ago when it held that Congress, in both the Social Security Act and the Medicare Act, insisted upon an initial presentation of the matter to the agency.” Illinois Council, 529 U.S. at 20, 120 S.Ct. at 1097. In view of this language, I cannot join in the majority‘s stealthy attempt to carve off a class of cases in which initial presentation of a claim to the agency is not required.