Fla. Agency for Health Care Admin. v. Bayou Shores SNF, LLC (In re Bayou Shores SNF, LLC), 15-13731

• Decision Date: 11 July 2016
• Docket Number: No. 15-13731,15-13731
• Citation: 828 F.3d 1297
• Parties: In re: Bayou Shores SNF, LLC, Debtor. Florida Agency for Health Care Administration, United States of America, on behalf of the Secretary of the United States Department of Health and Human Services, Plaintiffs–Appellees, v. Bayou Shores SNF, LLC, Defendant–Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

828 F.3d 1297

In re: Bayou Shores SNF, LLC, Debtor.Florida Agency for Health Care Administration, United States of America, on behalf of the Secretary of the United States Department of Health and Human Services, Plaintiffs–Appellees

v.Bayou Shores SNF, LLC, Defendant–Appellant.

No. 15-13731

United States Court of Appeals, Eleventh Circuit.

July 11, 2016

Jeffrey A. Clair, U.S. Department of Justice, Arthur Lee Bentley, III, U.S. Attorney's Office, Christopher J. Emden, U.S. Department of Justice, Civil Division, Washington, DC, Stuart F. Williams, Andrew Taylor Sheeran, Leslei Gayle Street, Florida Agency for Health Care Administration, Tallahassee, FL, Roberta Josephina Bodnar, U.S. Attorney's Office, Orlando, FL, Arthur Lee Bentley, III, Sean Flynn, Colleen D. Murphy–Davis, U.S. Attorney's Office, Tampa, FL, for Plaintiffs–Appellees.

Elizabeth A. Green, Tiffany D. Payne, Baker & Hostetler, LLP, Orlando, FL, Jeffrey T. Kuntz, Frank Terzo, GrayRobinson, PA, Fort Lauderdale, FL, for Defendant–Appellant.

Before HULL, JULIE CARNES, and CLEVENGER,^* Circuit Judges.

CLEVENGER, Circuit Judge:

Bayou Shores SNF, LLC (“Bayou Shores”) operates a skilled nursing facility in St. Petersburg, Florida. Most of Bayou Shores' patients are on Medicare or Medicaid, and over ninety percent of its revenue is derived from Medicare and Medicaid patients. It receives compensation for Medicare and Medicaid services through provider agreements entered into with the federal and state governments.

Bayou Shores' entitlement to participate in the provider agreements depends on its continued compliance with qualification requirements for such facilities that are established by the Secretary of the Department of Health and Human Services. After an unchallenged exercise of her statutory oversight authority, the Secretary determined that Bayou Shores was not in substantial compliance with the Medicare program participation requirements, and that conditions in its facility constituted an immediate jeopardy to residents' health and safety. By letter dated July 22, 2014, the Secretary notified Bayou Shores that its Medicare provider agreement “will be terminated at 11:59 pm on August 3, 2014.” The termination of Bayou Shores' Medicare provider agreement triggered the termination of its Medicaid provider agreement as well.

To avoid the consequences of termination of its provider agreements, Bayou Shores sought protection in the United States Bankruptcy Court for the Middle District of Florida. Rejecting the jurisdictional challenge from the Secretary, the bankruptcy court assumed authority over the Medicare and Medicaid provider agreements as part of the debtor's estate, enjoined the Secretary from terminating the provider agreements, determined for itself that Bayou Shores was qualified to participate in the provider agreements, required the Secretary to maintain the stream of monetary benefit under the agreements, reorganized the debtor's estate, and finally issued its Confirmation Order on December 31, 2014.

On appeal, in a June 26, 2015, Order, the United States District Court for the Middle District of Florida upheld the Secretary's jurisdictional challenge and reversed the Confirmation Order with respect to the assumption of the debtor's Medicare and Medicaid provider agreements. See In re Bayou Shores SNF, LLC , 533 B.R. 337, 343 (M.D. Fla. 2015)

.

Bayou Shores timely appeals the decision of the district court. The appeal turns on the jurisdictional question. From the Social Security Amendments of 1939 until 1984, it is undisputed that bankruptcy courts lacked jurisdiction over Medicare claims. The statute barring such jurisdiction was finally recodified in 1984 to reflect an earlier recodification of the Judicial Code. In cases involving the interpretation of statutory language changed in a recodification, it has long been established that no change in the previous recodified law is recognized unless Congress's intention to make a substantive change is “clearly expressed.” United States v. Ryder , 110 U.S. 729, 740, 4 S.Ct. 196, 28 L.Ed. 308 (1884)

. Now the central question is whether the statutory revision in this case demonstrated Congress's clear intention to vest the bankruptcy courts with jurisdiction over Medicare claims. We think it is abundantly clear that Congress expressed no such intention.

Therefore, after careful review of the record and the parties' briefs, and with the benefit of oral argument, and for the reasons set forth below, we affirm the district court's Order.

I. BACKGROUND

The relevant facts of this case are generally undisputed and ably set out by the district court in the opinion below. See In re Bayou Shores SNF, LLC , 533 B.R. 337, 338–40 (M.D. Fla. 2015)

. A brief summary follows.

A. Bayou Shores' “Skilled Nursing Facility”

As noted above, Bayou Shores operates a “skilled nursing facility”¹ in St. Petersburg, Florida, and approximately ninety percent of Bayou Shores' revenue is derived from caring for Medicare and Medicaid patients. To be eligible for the Medicare/Medicaid program, Bayou Shores entered into so-called “provider agreements” with the federal and Florida state governments, respectively, which provide reimbursement to Bayou Shores for the provision of medical services to Bayou Shores' Medicare/Medicaid patients. As a condition of payment under these agreements Bayou Shores must comply with certain regulatory requirements pertaining to skilled nursing facilities.² The Plaintiffs in this case are the government agencies primarily tasked with monitoring Bayou Shores' compliance with these regulations: the Florida Agency for Health Care Administration (“AHCA”) and the United States Department of Health and Human Services (“HHS”) (collectively, “the Government”). AHCA is responsible for conducting surveys of skilled nursing facilities in Florida and administering the state's Medicaid program. HHS administers Medicare nationally, and uses AHCA's surveys to decide whether skilled nursing facilities in Florida are compliant with the regulations, and if not, what remedial action to take. When conditions at a skilled nursing facility pose immediate jeopardy to the health or safety of the facility's patients, the law requires the Secretary to select and execute an appropriate remedy.³

On February 10, 2014, AHCA conducted such a survey at Bayou Shores' skilled nursing facility. As a result of the survey, AHCA reported to HHS that Bayou Shores was not compliant with the relevant regulations. The survey noted a number of problems including failing to correctly track residents' “Do Not Resuscitate” orders, poor patient hygiene, and unsecured expired medications. AHCA determined that at least some of these deficiencies posed a threat of immediate jeopardy to Bayou Shores' patients.⁴ Bayou Shores was given an opportunity to remedy these deficiencies. In a follow-up survey on March 20, 2014, AHCA again found a number of deficiencies. These included Bayou Shores placing a “known sexual offender” in a room with a disabled patient without informing that patient, and subsequently failing to appropriately handle an alleged sexual assault by the “known sexual offender” reported by the disabled patient. As with the previous survey, AHCA found that at least some of these deficiencies posed a threat of immediate jeopardy to Bayou Shores' patients. Bayou Shores was again given the opportunity to remedy the deficiencies.

The proverbial “last straw” was a final survey on July 11, 2014, in which further deficiencies were identified, including allowing a mentally impaired resident to leave the facility unaccompanied on a hot Florida day (he was later found at a bus station). AHCA again determined that at least some of these deficiencies placed Bayou Shores' residents in immediate jeopardy. After the third finding of non-compliance, HHS sent Bayou Shores a letter on July 22, 2014 notifying Bayou Shores that its non-compliance posed an “immediate jeopardy to [Bayou Shores'] residents' health and safety,” and that HHS was exercising its regulatory discretion to terminate Bayou Shores' Medicare provider agreement. HHS's letter stated that the “Medicare provider agreement will be terminated at 11:59 pm on August 3, 2014.”⁵ The termination of Bayou Shores' Medicare provider agreement triggered the termination of Bayou Shores' Medicaid provider agreement.⁶

B. Bankruptcy Court Proceedings

Two days before this looming deadline, on August 1, 2014, Bayou Shores sought emergency injunctive relief from the U.S. District Court for the Middle District of Florida to prevent the termination of the provider agreements. The district court initially granted Bayou Shores' request for a temporary restraining order. However, on motion of HHS, the district court dismissed Bayou Shores' complaint for lack of subject matter jurisdiction. On August 15, 2014, the court found that Bayou Shores had not exhausted its administrative remedies, and thus Medicare's jurisdictional bar (42 U.S.C. § 405(h)

) prevented the district court from exercising jurisdiction over the termination of the provider agreements. See

Bayou Shores SNF, LLC v. Burwell , No. 8:14–CV–1849–T–33MAP, 2014 WL 4059900,*6–8 (M.D. Fla. Aug. 15, 2014). Approximately an hour after issuance of the district court's order, Bayou Shores filed a Voluntary Petition for Chapter 11 bankruptcy, and sought an emergency injunction from the bankruptcy court preventing HHS and AHCA from terminating the provider agreements. The Government, at each opportunity, challenged the bankruptcy court's jurisdiction to order assumption of the provider agreements.

On August 25, 2014, the bankruptcy court issued the preliminary injunction sought by Bayou Shores. The bankruptcy court reasoned that it had jurisdiction pursuant to 28 U.S.C. § 1334

,⁷ the provider agreements were property of the estate, and an automatic stay preventing HHS and AHCA from terminating the agreements was thus proper. At a subsequent evidentiary hearing on ...