Opinion
1:10-CV-1265 (GLS/DRH).
October 26, 2010
BRIAN A. BLOOM, ESQ., ABRAMS, FENSTERMAN, FENSTERMAN, EISMAN, GREENBERG, FORMATO EINIGER, LLP, Counsel for Plaintiff, New York, NY.
DECISION and ORDER
Currently before the Court in this Medicare benefits action is a motion for a temporary restraining order ("TRO") and preliminary injunction filed by Niskayuna Operating Co., LLC ("Plaintiff") against Kathleen Sebelius, as Secretary of the United States Department of Health and Human Services, Donald Berwick, as Administrator of the Centers for Medicare Medicaid Services, and Richard F. Daines, M.D., as Commissioner of Health of the State of New York ("Defendants"). (Dkt. No. 5.) For the reasons stated below, Plaintiff's motion for a temporary restraining order is granted, decision on Plaintiff's motion for a preliminary injunction is reserved, and the parties are directed to appear before this Court on November 3, 2010, for oral argument on the issue of whether the TRO should be converted to a preliminary injunction and/or revoked.
I. RELEVANT BACKGROUND
On October 25, 2010, Plaintiffs in this action filed a motion for a TRO and preliminary injunction. (Dkt. No. 5.) Generally, Plaintiffs' motion seeks to enjoin Defendants from doing any of the following, pending the conclusion of full review of the decision to terminate Plaintiff's Medicare provider agreement: (a) terminating the Medicare provider agreement of Plaintiff; (b) taking any steps to publish public notice of the termination of Plaintiff's Medicare provider agreement; (c) permitting any public notice to be published of the termination of Plaintiff's Medicare provider agreement; (d) contacting any employees or residents of Plaintiff or their family members, agents, representatives or guardians concerning the termination of Plaintiff's Medicare provider agreement or the closure of Plaintiff's skilled nursing facility; (e) taking any steps to initiate relocation of any residents of Plaintiff or relocate any Plaintiff residents involuntarily; (f) denying payment for new Medicare/Medicaid admissions; or (g) denying payment for existing Medicare/Medicaid residents.
II. ANALYSIS
A. Jurisdiction
The principal motion before the Court is Plaintiff's motion for a temporary restraining order. However, before turning to the merits of that motion, the Court must first consider whether this Court has subject matter jurisdiction over this controversy.
Plaintiff claims this Court has jurisdiction over this action pursuant to 28 U.S.C. § 1331, the Eldridge exception to the requirement of exhaustion of administrative remedies, the due process clause of the United States Constitution, and 28 U.S.C. § 1361 (mandamus). More specifically, Plaintiff argues that it has satisfied the Eldridge criteria for judicial review, i.e., that (1) it has presented to the Secretary of the United States Department of Health and Human Services (the "Secretary") its claim that its provider agreement should not be terminated, and (2) its interest in having its termination promptly resolved is so great that waiver of the exhaustion requirements is appropriate.
Mathews v. Eldridge, 424 U.S. 319 (1976).
In support of its argument that it is entitled to a waiver of the exhaustion requirements, Plaintiff cites a series of cases, including Ridgeview Manor of Midlands, L.P. v. Leavitt, 07-CV-0861, 2007 WL 1110915 (D. S.C. Apr. 9, 2007), which the Court finds to be factually analogous and persuasive.
As a result, and for the reasons explained more fully in Ridgeview Manor of Midlands, L.P., 2007 WL 1110915, at *4-5, the Court finds, at least at this stage of the action and based on the papers submitted to the Court by Plaintiff, that (1) Plaintiff is not directly challenging the decision by the Secretary to terminate Plaintiff's provider agreements, but is merely seeking a stay pending an administrative appeal of the termination decision (i.e., Plaintiff's claims in this Court are entirely collateral to the claim that it is pursuing before the Administrative Law Judge of the United States Department of Health and Human Services, Departmental Appeals Board ("DAB"), and the Secretary), (2) exhaustion would be futile because, by the time a DAB hearing is set and all appeals have been exhausted such that Plaintiff could return to this Court to have it review the propriety of the administrative determination, Plaintiff will almost certainly be out of business, and (3) Plaintiff has shown that it will effectively have no judicial review before irreparable harm ensues.
The record evidence indicates that 81.5% of the Plaintiff's gross revenue comes from participation in the Medicaid or Medicare programs. (Dkt. No. 4, at ¶ 58.)
As in Ridgeview Manor of Midlands, L.P., "[t]he record is replete with evidence of the harm that [Plaintiff] would suffer if it is forced to wait until the administrative procedures are exhausted before it can obtain review of the Secretary's decision to terminate." 2007 WL 1110915, at *4.
For the foregoing reasons, the Court preliminarily concludes that it has jurisdiction over Plaintiff's claims such that it may consider Plaintiff's motion for a TRO and preliminary injunction enjoining Defendants from terminating its Medicare and Medicaid provider agreements at its facility in Niskayuna, New York, prior to a decision on the merits of that termination.
B. Plaintiff's Motion
Pursuant to the well-known legal standard governing motions for temporary restraining orders, a party seeking such relief must establish two things. First, the party must establish a likelihood of irreparable harm if the requested relief is denied. Second, the party must establish either (a) a likelihood of success on the merits of its case, or (b) sufficiently serious questions going to the merits to make them a fair ground for litigation, and a balance of hardships tipping decidedly in its favor.
"The legal standards for granting a temporary restraining order and a preliminary injunction are the same." Young-Flynn v. Wright, 05-CV-1488, 2007 WL 241332, at *7 (S.D.N.Y. Jan. 26, 2007) (quoting Gund, Inc. v. SKM Enters., Inc., 01-CV-0882, 2001 WL 125366, at *1 [S.D.N.Y. Feb. 14, 2001]).
1. First Requirement-Likelihood of Irreparable Harm
a. Findings of Fact
Based on the affidavit testimony of Mathew Varghese, Bent Philipson, and Betsy Malik, and exhibits thereto, the Court finds as follows: (1) Plaintiff purchased the Pathways Nursing and Rehabilitation Center ("the Facility") on August 30, 2010, with the approval of the New York State Department of Health ("DOH"); (2) between September 20, 2010 and October 1, 2010, DOH visited the Facility and, on October 5, 2010, issued a Statement of Deficiencies; (3) on October 6, 2010, Plaintiff submitted a Plan of Correction, which was accepted by DOH on October 7, 2010; (4) on October 15, 2010, DOH began its third revisit of the Facility since July 19, 2010 (its second since Plaintiff become owner and operator); (5) on October 19, 2010, pursuant to a recommendation from DOH, the Centers for Medicare Medicaid Services ("CMS") sent Plaintiff a Notice of Termination of its Medicare provider agreement; (6) pursuant to the termination process, on October 27, 2010, CMS will publicize the impending termination of Plaintiff's provider agreement in The Daily Gazette; (7) once this notice is published in the local community, (a) Plaintiff will stop receiving admissions, (b) staff will start seeking alternative employment and leaving, and (c) individuals responsible for the care and treatment of those housed at the Facility will make arrangements to have them removed; (8) Plaintiff employs specially trained nursing staff who care for the Facility's pediatric ventilator residents and traumatic brain injury residents, who would be difficult to replace; (9) Plaintiff has filed a request for an expedited hearing before an Administrative Law Judge of the DAB; and (10) a hearing will not occur before November 11, 2010, the date that termination of Plaintiff's Medicare provider agreement becomes effective.
b. Conclusion of Law
As a result, the Court concludes that Plaintiff has established a likelihood of irreparable harm if the requested relief is denied.
2. Second Requirement-Probability of Success on Merits
a. Findings of Fact
Based on the affidavit testimony of Mathew Varghese, Bent Philipson, and Betsy Malik, and exhibits thereto, the Court finds as follows: (1) skilled nursing facilities electing to provide services to Medicare and Medicaid beneficiaries must enter into a provider agreement with the United States Department of Health and Human Services ("HHS") whereby they agree to comply with the terms and conditions of participation; (2) CMS, a federal agency, has been appointed by HHS to administer the program requirements, which include compliance with federal and state laws governing nursing home care and operations; (3) Medicare has contracted with state agencies to evaluate nursing facility compliance with Medicare's regulatory requirements; (4) the DOH is a state survey agency assigned to verify and validate compliance with the federal and state regulatory requirements; (5) among the various types of surveys that DOH may conduct is the standard survey that must be conducted unannounced within twelve months of the previous standard survey but no later than fifteen months; (6) facilities that have a poor performance record are considered special focus facilities; (7) DOH conducts two certification surveys per year of facilities with the special focus designation; (8) a facility must show significant improvements while under this designation in order to be removed from this category (i.e., must show that no harm has occurred to residents according to the survey history during this time frame); (9) CMS may terminate a special focus facility's participation in the Medicare program at any time if the deficiencies are not corrected; (10) prior to Plaintiff's purchase of the Facility, DOH had cited the Facility on multiple occasions for various deficiencies; (11) most recently, on May 25, 2010, after a visit to the Facility, DOH issued a Statement of Deficiencies, which included multiple D, E and F deficiencies (meaning DOH found no actual harm to residents, but with potential for more than minimal harm) and one G level deficiency (actual harm that did not rise to the level of immediate jeopardy); (12) on August 9, 2010, after a separate visit to the Facility, DOH issued a Statement of Deficiencies, which included D and G deficiencies; (13) on October 5, 2010, DOH issued a Statement of Deficiencies after visiting the Facility for the first time under new ownership, which included only three D or E deficiencies (and no harm level); (14) on October 6, 2010, Plaintiff submitted a Plan of Correction, which was accepted by DOH on October 7, 2010; (15) on October 15, 2010, DOH began its third revisit of the Facility since July 19, 2010 (its second since Plaintiff become owner and operator); (16) on October 19, 2010, pursuant to a recommendation from DOH, CMS sent Plaintiff a Notice of Termination of its Medicare provider agreement; and (17) CMS terminated Plaintiff's provider agreement prior to DOH (a) completing its revisit of the Facility, (b) providing Plaintiff with any feedback about the Facility's compliance, or (c) providing Plaintiff with a Statement of Deficiencies.
2. Conclusion of Law
The Court concludes that, at a minimum, Plaintiff has presented grave and serious questions to the merits to make them a fair ground for litigation, and a balance of hardships tipping decidedly in its favor questions because (1) the Facility was a special focus facility prior to Plaintiff purchasing it, (2) DOH approved the purchase, (3) the October 5, 2010 Statement of Deficiencies involve no actual harm, and constitute an improvement from the August 9, 2010 Statement of Deficiencies, (4) Plaintiff's provider agreement was terminated prior to DOH (a) completing its revisit of the Facility, (b) providing Plaintiff with any feedback about the Facility's compliance, or (c) providing Plaintiff with a Statement of Deficiencies, (5) pursuant to the Medicare Act, 42 U.S.C. § 1395i-3(h)(2), it is not clear whether the Secretary has the authority to terminate a facility's participation in cases where there is no finding that the deficiencies immediately jeopardize the health and safety of its residents, and (6) Plaintiff will suffer an irreparable hardship if the TRO is not granted.
The Medicare Act provides that if the Secretary finds that a nursing facility is noncompliant, and further finds that the deficiencies "immediately jeopardize the health or safety of its residents, the Secretary shall take immediate action to remove the jeopardy and correct the deficiencies through the [appointment of temporary management], or terminate the facility's participation." 1395i-3(h)(2)(A)(i). However, if the Secretary finds that the deficiencies "do not immediately jeopardize the health or safety of its residents, the Secretary" may deny payment, impose civil money penalties, and appoint temporary management. 1395i-3(h)(2)(A)(i).
As a result, the Court concludes that Plaintiff has demonstrated a likelihood of success on the merits of its claims
III. NATURE OF TEMPORARY RELIEF GRANTED
A. Bond Required
Plaintiff shall file a bond with, or give other security to, the Clerk of the Court in the amount of fifty thousand dollars ($50,000) no later than 5:00 p.m. on Wednesday, October 27, 2010, to secure payment of costs for damages sustained by any Defendant who is found to have been wrongfully enjoined or restrained.However, this Decision and Order is effectively immediately.
B. Scope of Temporary Restraining Order
Upon the Complaint, dated October 24, 2010, the annexed Affidavit in Support of Temporary Restraining Order and Motion for Preliminary Injunction of Mathew Varghese, sworn to on October 25, 2010, the annexed Affirmation in Support of Temporary Restraining Order and Motion for Preliminary Injunction of Bent Philipson, affirmed to on October 25, 2010 and the Affidavit of Betsy Malik, sworn to on October 24, 2010, it is
ORDERED that Defendants show cause before this Court at the James Hanley Federal Building, 100 South Clinton Street, Syracuse, NY 13261 at 2:00 p.m. on NOVEMBER 3, 2010, why an order should not be entered pursuant to Fed.R.Civ.P. 65 granting Plaintiff a preliminary injunction, pending the conclusion of review of the decision to terminate Plaintiff's Medicare provider agreement including all hearings, administrative appeals, final decisions of the Secretary of the United States Department of Health and Human Services and either expiration of the time to appeal a final administrative decision to the United States District Court or a final decision by the United States courts, including all appeals or the expiration of the time to appeal, whichever is later (the "Review Period"), enjoining and restraining Defendants, their agents, servants, employees and all others acting in concert or privity with them, from doing the following: (a) terminating the Medicare provider agreement of Plaintiff; (b) taking any steps to publish public notice of the termination of Plaintiff's Medicare provider agreement; (c) permitting any public notice to be published of the termination of Plaintiff's Medicare provider agreement; (d) contacting any employees or residents of Plaintiff or their family members, agents, representatives or guardians concerning the termination of Plaintiff's Medicare provider agreement or the closure of Plaintiff's skilled nursing facility; (e) taking any steps to initiate relocation of any residents of Plaintiff or relocate any Plaintiff residents involuntarily; (f) denying payment for new Medicare/Medicaid admissions; and (g) denying payment for existing Medicare/Medicaid residents; and it is further
ORDERED that, pending hearing and determination of this motion, Defendants, their agents, servants, employees and all others acting in concert or privity with them, are enjoined and restrained from (a) terminating the Medicare provider agreement of Plaintiff; (b) taking any steps to publish public notice of the termination of Plaintiff's Medicare provider agreement; (c) permitting any public notice to be published of the termination of Plaintiff's Medicare provider agreement; (d) contacting any employees or residents of Plaintiff or their family members, agents, representatives or guardians concerning the termination of Plaintiff's Medicare provider agreement or the closure of Plaintiff's skilled nursing facility; (e) taking any steps to initiate relocation of any residents of Plaintiff or relocate any Plaintiff residents involuntarily; (f) denying payment for new Medicare/Medicaid admissions and (g) denying payment for existing Medicare/Medicaid residents; and it is further
ORDERED that Plaintiff shall file a bond with, or give other security to, the Clerk of the Court in the amount of fifty thousand dollars ($50,000) no later than 5:00 p.m. on Wednesday, October 27, 2010, to secure payment of costs for damages sustained by any Defendant who is found to have been wrongfully enjoined or restrained. However, this Decision and Order is effectively immediately. ORDERED that sufficient cause appearing therefor, service of a copy of the Summons and Complaint and this Decision Order, together with the papers upon which it was granted upon Defendants by overnight mail or overnight delivery service such as Federal Express or the equivalent on or before 5:00 p.m. on OCTOBER 27, 2010, shall be good and sufficient service. Plaintiff shall file its affidavit of service by October 28, 2010; and it is further
ORDERED that answering papers, if any, are to be served and electronically filed by 5:00 p.m. on NOVEMBER 1, 2010; and it is further
ORDERED that no reply shall be permitted; and it is further
ORDERED that oral argument shall occur at 2:00 p.m. on NOVEMBER 3, 2010, at the Federal Building in Syracuse, New York.
Dated: October 26, 2010 Syracuse, New York