Beechwood Restorative Care Center v. Thompson

• Decision Date: 06 July 2007
• Docket Number: No. 05-CV-6299L.,05-CV-6299L.
• Citation: 494 F.Supp.2d 181
• Parties: BEECHWOOD RESTORATIVE CARE CENTER, Plaintiff, v. Tommy G. THOMPSON, Secretary of the Department of Health and Human Services, Mark B. McClellan, Administrator of the Centers for Medicare and Medicaid Services, Defendants.
• Court: U.S. District Court — Western District of New York

494 F.Supp.2d 181

BEECHWOOD RESTORATIVE CARE CENTER, Plaintiff, v. Tommy G. THOMPSON, Secretary of the Department of Health and Human Services, Mark B. McClellan, Administrator of the Centers for Medicare and Medicaid Services, Defendants.

No. 05-CV-6299L.

United States District Court, W.D. New York.

July 6, 2007.

COPYRIGHT MATERIAL OMITTED

Kevin S. Cooman, Peter J. Weishaar, Mcconville Considine Cooman & Morin, PC, Rochester, NY, for Plaintiff.

Christopher V. Taffe, U.S. Attorney's Office, Rochester, NY, for Defendants.

DECISION AND ORDER

LARIMER, District Judge.

This is another chapter in the contentious relationship between a nursing home and the governmental agencies charged with monitoring its care of patients. This action is brought by the nursing home. Beechwood Restorative Care Center ("Beechwood"), seeks review of a final decision of the Departmental Appeals Board ("DAB")¹ of the Department of Health and Human Services ("HHS"), upholding penalties imposed on Beechwood, including the termination of Beechwood's participation in the Medicare and Medicaid programs, as a result of federally-mandated surveys conducted by the New York State Department of Health ("State DOH"), which found various deficiencies at Beechwood. Plaintiff has moved for summary judgment on five of its twelve claims. Defendants, the Secretary of the Department of Health and Human Services ("HHS") and the Administrator of the Centers for Medicare and Medicaid Services ("CMS"), a federal agency and a part of HHS, have cross-moved for judgment on the pleadings as to the entire complaint, and to strike evidence outside the administrative record that plaintiff has submitted in support of its summary judgment motion.

BACKGROUND

Much of the relevant factual background is set forth in prior decisions of this Court and of the Court of Appeals for the Second Circuit in a related action, in which Beechwood sued various state and federal officials pursuant to 42 U.S.C. § 1983 and (with respect to the federal defendants) Bivens v. Six Unknown Named Agents the Federal Bureau of Narcotics, 403 U.S 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971), alleging a number of constitutional violations in connection with the investigation and eventual shutting down of Beechwood See Beechwood Restorative Care Center v Leeds, 317 F.Supp.2d 248 (W.D.N.Y.2004), aff'd in part, and vacated and remanded in part, 436 F.3d 147(2d Cir.2006). The gist of Beechwood's allegations in that action was that the defendants had targeted Beechwood not because of any actual deficiencies at Beechwood, but to retaliate against Beechwood's owners, Brook Chambery ("Chambery") and his mother Olive Chambery, and to ruin their business, as punishment for Chambery's exercise of his First Amendment rights by challenging defendants in administrative proceedings, and criticizing their requirements and procedures. Familiarity with those decisions is assumed, and only a brief summary will be provided here, with additional facts set forth as necessary to resolve the parties' pending motions.

During its years of operation, Beechwood was a skilled nursing facility operated by a partnership between Olive and Brook Chambery. As a requirement of its operating certificate issued by New York State, Beechwood was certified as a participant in the Medicare and Medicaid programs. As such, Beechwood was regulated jointly by the State DOH and the Federal CMS, and was subject to inspections by the State DOH to monitor its compliance with federal and state regulations.²

In 1994, Chambery and the State DOH began clashing over certain regulatory matters, the details of which are unimportant here. In 1995, following an inspection, the State DOH identified two deficiencies at Beechwood.³ Although Chambery successfully challenged those deficiencies in an informal dispute resolution process afforded by federal regulation, this was the start of what Chambery alleged was an escalating pattern of deficiency findings by DOH, allegedly motivated by retaliation, which culminated in CMS's termination of Beechwood's Medicare and Medicaid provider status, and the State DOH's revocation of Beechwood's operating certificate, which effectively put Beechwood out of business. The facility closed on July 16, 1999. The Beechwood property eventually entered foreclosure proceedings and was sold at public auction in March 2002.

Beechwood filed the complaint in this action on July 15, 2004, in the United States District Court for the District of Columbia. By order entered April 20, 2005, that court granted defendants' unopposed motion to transfer the case to this district.

I. Plaintiff's Claims

The gist of plaintiff's claims is that, contrary to the State DOH's findings, there were no deficiencies at Beechwood serious enough to justify CMS's termination of Beechwood's Medicare/Medicaid status in June 1999, or the other sanctions and remedies imposed by CMS, such as denial of payment for new admissions ("DPNA") and a directed plan of correction, see 42 U.S.C. § 1395i-3(h)(2). Plaintiff also alleges that although some of the alleged deficiencies were eventually overturned on appeal to the HHS's Departmental Appeals Board ("DAB"), the DAB wrongfully sustained Beechwood's termination. Plaintiff alleges that CMS's actions were arbitrary and capricious and were not in accordance with law, and that CMS thereby denied Beechwood due process and equal protection.

Based on these allegations, plaintiff has pleaded twelve causes of action, based on the following allegations: (1) CMS improperly imposed certain remedies on Beechwood based on the State DOH's findings, without making its own independent determinations as to Beechwood's compliance with the relevant regulations, and without requiring proper certifications from the State DOH, Complaint ¶¶ 153-60; (2) CMS, and its "agent" the State DOH, failed to follow HHS protocols and procedures in conducting the survey and enforcement process with respect to Beechwood in a number of respects, Complaint ¶¶ 161-95; (3) CMS's termination of Beechwood did not follow federally-mandated notice requirements; (4) CMS's termination of Beechwood violated Beechwood's right to equal protection because CMS has imposed only civil money penalties ("CMPs"), or other remedies short of termination, against similarly-situated facilities elsewhere; (5) there were due process and other violations in connection with the imposition of. CMPs by the State DOH;⁴ (6) CMS imposed a DPNA in May 1999 without the fifteen-day notice period required by 42 C.F.R. § 488.408(f); (7) the hearing procedures and adjudication standards used by the administrative law judge ("ALP) during Beechwood's federal administrative proceedings were deficient in a number of respects, such as the ALJ's reliance on the testimony of an uncertified surveyor and unpublished or unrecognized professional standards of care, and his failure to adjudicate the scope and severity of each alleged deficiency; (8) the directed plan of correction and termination were improper because they were based on an April 1999 statement of deficiencies ("SOD") prepared by the State DOH, which alleged only past noncompliance, not existing noncompliance;⁵ (9)-(11) the DAB's final determinations sustaining certain deficiency findings contained in the May, June and April 1999 SODs, respectively, were not supported by substantial evidence; and (12) even if CMS properly sustained those deficiencies, the remedies imposed on Beechwood by CMS were not justified by the underlying factual findings.

Based on these claims and allegations, Beechwood requests that the Court declare unlawful and set aside CMS's actions which sustained the various deficiency findings, and which upheld or imposed penalties and remedies against Beechwood, including the termination of Beechwood's Medicare/Medicaid provider status. Plaintiff also seeks attorney's fees pursuant to 28 U.S.C. § 2412.

II. The Parties' Motions

Beechwood moves for summary judgment on its first, fourth, fifth, sixth and eighth claims. Specifically, Beechwood seeks an order: (1) on its first and sixth claims, declaring that CMS's actions in imposing a DPNA and other remedies against Beechwood in 1999 were unlawful, and ordering CMS to reimburse Beechwood for services that Beechwood provided to Medicare- and Medicaid-eligible residents admitted on or `after May 21, 1999; (2) on its .fourth claim, declaring that CMS's termination of Beechwood without first imposing less severe penalties, such as civil money penalties, was unlawful; (3) on its fifth claim, declaring that CMS's actions in permitting the State DOH to impose civil money penalties was unlawful; and (4) on its eighth claim, declaring that CMS's termination of Beechwood following the April 1999 SOD was unlawful, because Beechwood was in compliance with federal requirements on the date of the April 1999 State DOH survey.

Defendants move for judgment on the pleadings dismissing the entire complaint pursuant to Rule 12(c) of the Federal Rules of Civil Procedure. Defendants also move to strike an affidavit of Brook Chambery, and the exhibits attached to it, that plaintiff has submitted in support of its summary judgment motion. Defendants contend that the Court's review should be limited to the administrative record, and that these documents improperly seek to supplement that record.

DISCUSSION

I. Mootness

The first matter that should be addressed before dealing with the merits of plaintiffs claims is the issue of mootness. Defendants contend that Beechwood's contentions with respect to its terminations from Medicare and Medicaid programs are moot because even if the Court were to find that Beechwood had been improperly terminated, the Court could order no effective relief, since: Beechwood no longer has an operating license from New York State; it could not currently participate in the Medicare and Medicaid programs in any event; it ceased operations eight years...