Blue Valley Hosp., Inc. v. Azar
Opinion
Blue Valley Hospital, Inc., ("BVH") appeals the district court's dismissal of its action for lack of subject matter jurisdiction. On April 11, 2018, the Department of Health and Human Services ("HHS") and the Centers for Medicare and Medicaid Services ("CMS") terminated BVH's Medicare certification. The next day, BVH sought an administrative appeal before the HHS Departmental Appeals Board and brought this action. In this action, BVH seeks an injunction to stay the termination of its Medicare certification and provider contracts pending its administrative appeal. In effect, the injunction would provide BVH a pre-termination hearing. The district court dismissed, holding the Medicare Act requires BVH exhaust its administrative appeals before subject matter jurisdiction vests in the district court.
BVH acknowledges that it did not exhaust administrative appeals with the Secretary of HHS prior to bringing this action, but argues: (1) the district court had federal question jurisdiction arising from BVH's constitutional due process claim; (2) BVH's due process claim presents a colorable
*1282
and collateral constitutional claim for which jurisdictional exhaustion requirements are waived under
Mathews v. Eldridge
,
I
BVH is an acute care hospital in Overland Park, Kansas, that provides a range of medical services, specializing in bariatric surgery and intervention services. CMS certified BVH as a hospital provider under the Medicare and Medicaid programs from 2015 until April 11, 2018. 1
For a treatment facility to retain hospital classification under the Medicare and Medicaid programs the facility must be "primarily engaged" in providing care to "inpatients." 42 U.S.C. § 1395x(e)(1). Hospital classification allows BVH to receive payment through the Medicare and Medicaid programs for treatment it provides.
These surveys identify a facility's failures to meet certain participation requirements under the Medicare Act, termed deficiencies.
Pursuant to this regulatory framework, CMS, through the Kansas Department of Health and Environment, conducted an unannounced onsite survey of BVH on November 13 and 14, 2017. On February 2, 2018, CMS sent BVH a noncompliance notice detailing the deficiencies the onsite survey uncovered. The notice states that BVH did not meet the Conditions of Participation for hospitals because it was not "primarily engaged" in providing "inpatient services." Specifically, CMS analyzed BVH's historical data and determined that the facility did not meet either the two-patient average daily census requirement or the two-night average length of stay requirement. CMS had issued these criteria in an administrative guidance document, "S&C Memo 17-44," on September 6, 2017.
In the notice of noncompliance, CMS indicated it would terminate BVH's provider agreement on May 3, 2018, unless BVH presented a Plan of Correction to resolve the observed deficiencies. BVH timely submitted a Plan of Correction on February 12, 2018. In a termination notice dated *1283 March 27, 2018, CMS rejected the proposal as aspirational and moved forward the termination date of BVH's Medicare and Medicaid provider agreement to April 11, 2018. CMS terminated BVH's provider agreement on that date.
The following day, BVH submitted a request for an expedited appeal to the HHS Departmental Appeals Board. BVH also filed this action against the following defendants: (1) the Secretary of HHS, Alex M. Azar, II; (2) the Administrator for CMS, Seema Verma; and (3) the Regional Administrator for (Region 7) of CMS, Jeff Hinson. BVH sought an injunction to prevent CMS from terminating its provider agreement pending the administrative appeal process. Defendants moved to dismiss the action for lack of subject matter jurisdiction, but agreed to postpone termination to May 3, 2018, allowing BVH to continue to receive payment under the Medicare and Medicaid programs until that date.
CMS conducted a second survey of BVH on April 22 to 25, 2018. On May 10, 2018, CMS issued a second statement of deficiencies summarizing that survey and affirming its decision to terminate BVH's Medicare and Medicaid provider agreement because it was not primarily engaged in providing inpatient services. The district court dismissed BVH's action for lack of subject matter jurisdiction. BVH timely appealed.
II
We review dismissals for lack of subject matter jurisdiction de novo.
Niemi v. Lasshofer
,
A
BVH argues its constitutional procedural due process claim vests the district court with federal question jurisdiction pursuant to
A claim arises under the Medicare Act if the claim derives "both ... standing and ... substantive basis" from the Act, or if the claim is "inextricably intertwined with [plaintiff's] claim for benefits."
Heckler v. Ringer
,
BVH nonetheless contends the administrative exhaustion requirements apply only to challenges to the Secretary's final termination decisions, not to claims for injunctive relief seeking additional process.
3
But the "sweeping and direct" language of § 405(h) refutes BVH's reading of the statute.
Salfi
,
Moreover, the Supreme Court has concluded that the type of relief sought is irrelevant to plaintiffs' efforts to avoid § 405 's administrative channeling requirements.
Ringer
,
B
BVH also asserts jurisdiction pursuant to
Mathews v. Eldridge
,
*1285
Harline v. Drug Enf't Admin.
,
1
"For a claim to be collateral, it must not require the court to immerse itself in the substance of the underlying Medicare claim or demand a factual determination as to the application of the Medicare Act."
Family Rehab., Inc. v. Azar
,
BVH argues its claims are collateral because, like the claim at issue in
Eldridge
, they "sound only in constitutional or procedural law and request that benefits be maintained temporarily until the agency follows the statutorily or constitutionally required procedures."
Family Rehab.
,
Instead, BVH's due process claim is based on its disagreement with the factual determinations made by CMS and the manner in which CMS promulgated administrative guidance governing compliance determinations. The arguments supporting BVH's due process claim are thus identical to the arguments BVH raises in its administrative appeal to reverse the termination decision. The complaint specifically challenges as "[m]ost noteworthy" the fact that "CMS'[ ] decision relies primarily upon newly-issued criteria for determining whether a medical facility is 'primarily engaged' in providing inpatient services in order to qualify as a 'hospital' for Medicare purposes." BVH's constitutional claim requires
*1286
that we assess in the first instance whether the agency violated the process due to BVH through the retroactive application of criteria promulgated as administrative guidance. Such an assessment necessarily "require[s] the court to immerse itself in the substance of the underlying Medicare claim" and make a factual determination about whether BVH was in substantial compliance.
Family Rehab.
,
Other circuits have expressly rejected BVH's assertion that constitutional challenges requiring courts to assess the application of Medicare regulations to a plaintiff are collateral.
See
Affiliated Prof'l Home Health Care Agency v. Shalala
,
2
Even if BVH's constitutional claims were entirely collateral, they are not colorable. "A constitutional claim in this context is not colorable if it is immaterial and made solely for the purpose of obtaining jurisdiction or ... is wholly insubstantial or frivolous."
Harline
,
Our decision in
Geriatrics
,
Our holding in
Geriatrics
is consistent with those of our sibling circuits.
See
Cathedral Rock of N. Coll. Hill, Inc. v. Shalala
,
Geriatrics
is also consistent with Supreme Court dicta suggesting that providers losing their certification are not entitled to a pre-termination hearing.
See
O'Bannon v. Town Court Nursing Ctr.
,
C
Finally, BVH argues the federal courts have subject matter jurisdiction pursuant to the exception to jurisdictional administrative exhaustion requirements outlined in
Michigan Academy
. The Supreme Court has clarified that this exception to the administrative channeling requirement in § 405(h) applies only if exhaustion requirements "would not simply channel review through the agency, but would mean no review all."
Ill. Council
,
But the Supreme Court has declined to extend the
Michigan Academy
exception to cases in which parties allege financial hardship forecloses further review.
See
Ill. Council
,
Moreover, this circuit has recognized a denial of review sufficiently absolute to trigger the
Michigan Academy
exception only if there exist "no conceivable set of circumstances that could have permitted Plaintiffs to challenge the validity of the [administrative action] within the procedures provided by the agency."
Bartlett Mem'l Med. Ctr., Inc. v. Thompson
,
III
For the foregoing reasons, we AFFIRM the district court's dismissal of BVH's action for lack of subject matter jurisdiction.
The termination of BVH's provider agreement precludes BVH from receiving payment under both the Medicare and Medicaid programs.
See
The language of § 405 applies to claims arising under the Social Security Act, but another statutory provision applies § 405 to cases arising under the Medicare Act "to the same extent" that it applies in cases arising under the Social Security Act, "except that, in applying such provisions with respect to this subchapter, any reference therein to the Commissioner of Social Security or the Social Security Administration shall be considered a reference to the Secretary or Department of Health and Human Services, respectively."42 U.S.C. § 1395ii.
To this end, BVH misquotes § 405(g), incorrectly asserting that it allows for judicial review " of any final decision," rather than " after any final decision." (emphases added). The implication that only challenges to final decisions need be administratively channeled is plainly incorrect. The statute makes clear that a final decision is a condition precedent to judicial review of any claim arising under the Act.
BVH argues it need make only a colorable showing that full relief cannot be granted at a post-deprivation hearing. But it is the constitutional claim that must be colorable.
See
The fact that BVH's due process challenge does not dispute the sufficiency of the process
generally
afforded to Medicare providers prior to termination distinguishes this case from
Family Rehabilitation
.
The Supreme Court granted certiorari in
Azar v. Allina Health Services
, --- U.S. ----,
Moreover, to the extent that
Allina
is relevant, BVH's reliance upon
Allina
only further demonstrates that its constitutional claim is not collateral to the underlying administrative action. BVH's
Allina
argument-that CMS denied BVH due process by terminating its provider agreement pursuant to criteria issued through administrative guidance rather than notice-and-comment rulemaking-is identical to the argument it presumably will present in the post-termination hearing. And that argument "require[s] the court to immerse itself in the substance of the underlying Medicare claim."
Family Rehab.
,
Reference
- Full Case Name
- BLUE VALLEY HOSPITAL, INC., Plaintiff-Appellant, v. Alex M. AZAR, II, in His Official Capacity as Secretary, United States Department of Health and Human Services; Seema Verma, Administrator for the Center of Medicare and Medicaid Services; Jeff Hinson, Regional Administrator for (Region 7) the Center for Medicare and Medicaid Services, Defendants-Appellees.
- Cited By
- 12 cases
- Status
- Published