Se. Ark. Hospice, Inc. v. Burwell
| Decision Date | 11 June 2014 |
| Docket Number | Case No. 2:13-cv-00134-KGB |
| Parties | SOUTHEAST ARKANSAS HOSPICE, INC. PLAINTIFF v. SYLVIA BURWELL, SECRETARY, UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES DEFENDANT |
| Court | U.S. District Court — Eastern District of Arkansas |
Plaintiff Southeast Arkansas Hospice, Inc. ("SEARK") brings this action against Sylvia Burwell, the Secretary of the United States Department of Health and Human Services ("HHS"), alleging that the Secretary's regulation purportedly prohibiting SEARK from discharging hospice patients who exhaust their hospice benefits operates as a regulatory taking and that the provider agreement is an unconscionable contract of adhesion, requiring SEARK to continue to serve hospice patients even after their benefit period has ended while making no provision for payment to the hospice after the benefit period ends.
Before the Court is SEARK's second application for a temporary restraining order to stay collection of demands for repayment pending final adjudication (Dkt. No. 27). The Secretary has responded (Dkt. No. 31), and a hearing was conducted on June 6, 2014. After the hearing, the Secretary filed a supplemental response to SEARK's motion (Dkt. No. 32). For the following reasons, SEARK's request for a temporary restraining order is denied (Dkt. No. 27).
This is SEARK's second request for preliminary injunctive relief. The factual and legal background of this case is set forth in more detail in the Court's February 20, 2014, Opinion and Order denying SEARK's previous request for a preliminary injunction (Dkt. No. 17).
SEARK operates hospice-care facilities in Helena, Arkansas, and Pine Bluff, Arkansas, and receives reimbursement for hospice care provided to Medicare beneficiaries pursuant to the hospice benefit included in Medicare Part A. See 42 U.S.C. §§ 1395c, 1395f(a)(7). A Medicare beneficiary may elect hospice care if at least two physicians certify that he or she is terminally ill, with a life expectancy of six months or less. See 42 U.S.C. §§ 1395f(a)(7)(A), 1395x(dd)(3)(A). Medicare generally pays hospice providers a fixed amount for each day the provider provides care to an eligible beneficiary. 42 U.S.C. § 1395f(i)(1); 42 C.F.R. § 418.302. Hospice beneficiaries are generally limited to six months of hospice care, but if a beneficiary lives longer than six months, coverage may be extended for an unlimited number of 60-day periods. See 42 U.S.C. § 1395d(d)(1).
To ensure that hospice care payments do not exceed the costs of treatment in a conventional setting, there is an aggregate "cap" on the total amount paid in reimbursements to hospice providers for all eligible patients in any given fiscal year. 42 U.S.C. § 1395f(i)(2)(A); H.R.Rep. No. 98-333, at 1 (1983), U.S. Code Cong. & Admin. News 1983, p. 1043. As discussed in the Court's prior Opinion and Order, the regulation implementing the cap, 42 C.F.R. § 418.309, was amended in 2011 as a result of litigation in several district and circuit courts challenging the regulation's "streamlined methodology" for calculating the cap amount.
Hospice providers typically receive Medicare payments through a fiscal intermediary. The fiscal intermediary is responsible for calculating the hospice cap for the relevant accounting year. When it is determined that a provider exceeded its aggregate cap for an accounting year, the fiscal intermediary issues a demand for the overage known as a Notice of Program Reimbursement ("NPR"). See 42 C.F.R. § 418.308(d). Under 42 U.S.C. § 1395oo(a), a hospice provider may challenge an NPR and seek a hearing before the Provider Reimbursement ReviewBoard ("PRRB"). If the provider is dissatisfied with the PRRB's ruling, it may obtain judicial review by filing a civil action within 60 days of the PRRB's final determination. Id. § 1395oo(f)(1).
SEARK voluntarily entered into a provider agreement with the Secretary in October 2004. SEARK agreed as the provider of services "to conform to the provisions of section 1866 of the Social Security Act and applicable provisions in 42 CFR" to receive payment under Title XVIII of the Social Security Act (Dkt. No. 8, at 83). SEARK now brings this instant action contending the provider agreement, together with the relevant regulations, violates the Takings Clause of the Fifth Amendment and constitutes an unconscionable contract of adhesion. Specifically, SEARK takes issue with the cap itself and the prohibition on discharging patients who exceed the cap amount.
SEARK previously sought a preliminary injunction to stay enforcement of seven demands for repayment at issue in SEARK's complaint and now its amended complaint. SEARK also sought to enjoin the application of 42 C.F.R. § 418.26, which it believes prohibits discharge of patients who exceed their annual cap amount, and 42 C.F.R. § 418.309, the regulation implementing the methodology for calculating the cap amount. The Court conducted a preliminary injunction hearing on February 7, 2014, and subsequently denied SEARK's request for a preliminary injunction (Dkt. No. 17). SEARK now requests a temporary restraining order based on what it contends are "new facts" pertaining to the last two of the seven NPRs (Dkt. No. 27, at 2).
By way of background, the first five NPRs at issue in this case were issued by SEARK's fiscal intermediary, Palmetto GBA, to SEARK's respective facilities between January and May 2013 for fiscal years ending October 31, 2009, October 31, 2010, and October 31, 2011.SEARK's Chief Executive Officer, Dr. Clifford Flowers, testified at the first hearing that he had submitted a repayment plan and initial payment for each of these NPRs. SEARK has appealed these five NPRs to the PRRB. According to the record, as to each of these five NPRs, SEARK, in its requests for a hearing and expedited judicial review ("EJR"), requested a recalculation of the cap determination and, citing 42 C.F.R. § 418.26, asserted that its provider agreement with Medicare resulted in a regulatory taking, an unconscionable contract, and illegal subsidization. The PRRB issued its rulings on August 30, 2013, and remanded the cap determinations to the Medicare Administrative Contractor (the "MAC") for recalculation under the requested methodology, except for the NPR to the Helena facility for fiscal year ending October 31, 2009, which had already been appealed and recalculated. The PRRB concluded that it lacks jurisdiction over the challenge to the validity of 42 C.F.R. § 418.26.
SEARK received two additional NPRs on January 10, 2014, for the fiscal year ending October 31, 2012—one NPR for SEARK's Helena facility for $323,104.00, and one NPR for its Pine Bluff facility for $117,580.00. Unlike the first five NPRs, these January 2014 NPRs had not been appealed at the time of the February 7, 2014, preliminary injunction hearing, although SEARK stated it was in the process of appealing these NPRs to the PRRB.
On May 14, 2014, SEARK filed its second application for a temporary restraining order to allege new facts (Dkt. No. 27). Those new facts involve subsequent developments regarding the January 2014 NPRs. By letter dated April 15, 2014, Palmetto informed SEARK that CMS had approved SEARK's request for a 60-month repayment plan for the January 2014 NPR for its Helena facility originally totaling $323,104.00. However, on May 1, 2014, Palmetto sent to SEARK a letter notifying it that CMS denied SEARK's request for a 60-month repayment plan for the January 2014 NPR for its Pine Bluff facility originally totaling $117,580.00. The letterstated that the request was denied due to "habitual Cap exceedance and other pertinent financial information" (Dkt. No. 27-2, at 1). Palmetto demanded full payment of the $111,459.32 in outstanding principle. The letter indicated that all payments to SEARK's facility would be suspended in 15 days if full payment was not received. By letter dated May 2, 2014, CMS informed SEARK that all payments were being withheld and applied against the overpayment for the outstanding $111,459.32 demanded in the January 2014 NPR for $117,580.00 (Dkt. No. 27-3). It appears from the record before the Court that this withholding applies only to SEARK's Pine Bluff facility. SEARK's two facilities are assigned separate Medicare provider numbers and receive separate NPRs addressed to each facility by its provider number.
SEARK maintains that, as to its payment plans in place currently, no payments have been missed or late. SEARK references in its filings a later telephone call and purported "mistake which prevented . . . entering the repayment plan on the $117,000.00 amount," (Dkt. No. 27, at 2). The Court notes SEARK did not develop a mistake theory in any of the proof offered. SEARK protests the Secretary's actions to withhold all payments for services rendered, especially during the pendency of this litigation. SEARK requests that the Court issue a temporary restraining order to stay the withholding of payments due and future payments and to stay further the collection of the repayment demands. It is not clear whether SEARK seeks to stay collection only as to the repayment demand for the January 2014 NPR for which the request for a payment plan was denied or as to all of the repayment demands.
According to the testimony of SEARK's Chief Executive Officer, Dr. Clifford Flowers, SEARK's primary source of income is Medicare hospice benefits for eligible patients. Dr. Flowers is a pharmacist, not a medical doctor. At the preliminary injunction hearing, Dr. Flowers testified that, when SEARK entered into the Medicare program, he understood SEARKwould be paid for services rendered but did not have a clear understanding of what the hospice cap meant to SEARK in terms of payments for services rendered. Dr. Flowers testified that SEARK first opened in 2002 (although the agreement is dated 2004), and SEARK received as a provider its first NPR in 2006. Dr. Flowers said at the June 6, 2014...
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