Bp Care, Inc. v. Thompson

• Decision Date: 26 September 2003
• Docket Number: No. C-1-01-526.,C-1-01-526.
• Parties: BP CARE, INC. Plaintiff v. Tommy THOMPSON, Secretary of Health and Human Services, et al. Defendants
• Court: U.S. District Court — Southern District of Ohio

337 F.Supp.2d 1021

BP CARE, INC. Plaintiff v. Tommy THOMPSON, Secretary of Health and Human Services, et al. Defendants

No. C-1-01-526.

United States District Court, S.D. Ohio, Western Division.

September 26, 2003.

Stanley Goodman, Goodman & Goodman Co., L.P.A., Ernest Hanlin Bavely, Cincinnati, OH, Eric B. Hershberger, J. Randall Richards, Geoffrey Webster, Attorney at Law, Columbus, OH, for Plaintiff.

Jan Martin Holtzman, Department of Justice, Cincinnati, OH, for Defendants.

ORDER DENYING PLAINTIFF'S MOTION TO STRIKE AND GRANTING DEFENDANTS' MOTION TO DISMISS

DLOTT, District Judge.

This matter comes before the Court on Defendants' Motion to Dismiss Complaint and Cross-Claim, (Doc. # 15) and Plaintiff's Motion to Strike Defendant's Motion to Dismiss (Doc. # 18). Defendants Tommy Thompson and the Department of Health and Human Services ("HHS"), collectively referred to as the Centers for Medicare and Medicaid Services ("CMS")¹ move pursuant to Federal Rule of Civil Procedure 12(b)(1) to dismiss this action on the ground that the Court lacks subject matter jurisdiction. Defendants alternatively move pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss the action on the ground that Plaintiff has failed to state a claim upon which relief can be granted. Plaintiff moves to strike Defendants' Motion to Dismiss on the grounds of violations of Local Rules and conversion of a Motion to Dismiss into a Motion for Summary Judgment. For the reasons set forth below, the Court denies Plaintiff's Motion to Strike and GRANTS the Defendants' Motion to Dismiss.

I. FACTUAL BACKGROUND

Plaintiff BP Care, Inc. ("BP Care") operates a skilled nursing facility formerly operated by West Chester Management Company, Inc., doing business as Barbara Parke Care Center ("Barbara Parke"). (Doc # 1 ¶¶ 2, 5.) BP Care and Barbara Parke are two separately incorporated entities. This action arises out of CMS' attempt to impose successor liability on BP Care for the civil money penalty imposed on the nursing home while operated under Barbara Parke.

The Medicare program is a federally funded and administered health insurance program for elderly and disabled individuals. See 42 U.S.C. § 1395 et seq. ("Medicare Act"). Part A of the Medicare Act provides inpatient hospital insurance, including coverage of post-hospital nursing home stays. To be reimbursed for its services, a nursing home must enter into a provider agreement with the Secretary of HHS, and it must comply with various statutory requirements. See 42 U.S.C. § 1395cc(a). In order to enter a provider agreement, a nursing facility must undergo a comprehensive survey to ensure that it meets the health and safety requirements specified in the Medicare Act and CMS regulations. See 42 U.S.C. § 1395i-3(a)(3), (b)-(d). State and federal entities conduct surveys periodically thereafter to investigate continued compliance. See 42 U.S.C. § 1395i-3(a)(g). If, pursuant to these surveys, the Secretary determines that the nursing home is not in compliance with health and safety requirements, he may impose a variety of remedies, including civil money penalties. See 42 U.S.C. § 1395i-3(h)(2)(B)(ii).

CMS imposed a civil money penalty on Barbara Parke after the Ohio Department of Health conducted a standard survey of the nursing home in February of 1999, prior to the nursing home's sale to BP Care, and determined that the facility was not in substantial compliance with health and safety requirements. (Doc. # 20 exh. 1.) If, as here, CMS decides to impose a civil money penalty on a nursing facility, it must send a written notice of the penalty to the facility stating, inter alia, the nature of the noncompliance, the statutory basis for the penalty, and "[i]nstructions for responding to the notice, including a statement of the facility's right to a hearing, and the implication of waiving a hearing ..." 42 C.F.R. § 488.434(a)(1), (2)(i), (ii), and (viii). A nursing facility may appeal the finding of noncompliance to the Civil Remedies Division of the Departmental Appeals Board of CMS ("DAB"). See 42 C.F.R. § 488.408(g)(1). The nursing home has the right to request an evidentiary hearing before an administrative law judge ("ALJ"). See 42 C.F.R. § 498.40. CMS sent such notice to Barbara Parke, and in May of 1999 Barbara Parke appealed the survey's findings and imposition of the civil money penalty by requesting a hearing before an ALJ. (Doc. # 20, exh. 1.)

Around August of 1999, BP Care assumed operation of the nursing home and assumed Barbara Parke's Medicare provider agreement. (Doc. # 1 ¶¶ 22-23.) In September of 1999 Barbara Parke filed for bankruptcy and notified the government of its filing. (Doc. # 20 exh. 5.) CMS requested a stay of the administrative proceedings related to the civil money penalty while the nursing home considered whether to continue the proceedings in light of its bankruptcy. (Id. exh. 6.) The ALJ dismissed the case and remanded it to CMS in November of 1999 to consider new issues raised by the bankruptcy. (Id. exh. 7.) In January of 2001, finding no new issues raised by Barbara Parke's bankruptcy, the ALJ vacated his earlier Order to Dismiss and Remand (Id. exh. 11.) The bankruptcy trustee for Barbara Parke informed CMS that the attorney for BP Care would be in contact with CMS about the administrative hearing. (Id. exh. 12.) The parties provided no information indicating further correspondence between BP Care's representative and CMS or the ALJ. Barbara Parke's bankruptcy trustee withdrew its request for a hearing in May of 2001. With the request for hearing withdrawn, the ALJ dismissed the nursing home's appeal from CMS' survey findings. (Id. exh. 13). This dismissal constituted an end to the administrative proceedings, since an initial determination by CMS is binding unless it is reconsidered, revised, or reversed or modified by a hearing. See 42 C.F.R. § 498.20(b). Since no hearing took place, CMS' initial determination of noncompliance and imposition of a civil money penalty became binding.

CMS notified BP Care, the nursing home's new operator, that it would seek to recover from BP Care the civil money penalty incurred by the nursing home under Barbara Parke. (Doc. # 1 ¶¶ 34-35.) On August 3, 2001, Plaintiff BP Care filed this action seeking declaratory and injunctive relief. The parent company of BP Care filed a cross-claim in Barbara Parke's bankruptcy proceeding,² arguing that any claim CMS might have for offset, overpayment or recoupment for services rendered prior to the change of ownership be restricted to the bankruptcy estate of Barbara Parke. (Cross-Claim, p. 11, attached to Doc. # 5.) On May 1, 2002, this Court consolidated the King cross-claim with the instant action.

Defendants move to dismiss on the grounds that this Court lacks subject matter jurisdiction to hear the case and that Plaintiff fails to state a claim upon which relief can be granted. Plaintiff moves to strike on the grounds that (1) Defendants violated local procedural rules, and (2) Defendants attached exhibits to their Motion to Dismiss, thereby converting the Motion to Dismiss into a Motion for Summary Judgment.

II. STANDARDS OF REVIEW

The Defendants have moved to dismiss pursuant to Rules 12(b)(1) and 12(b)(6). "A motion to dismiss an action under Rule 12(b)(1) raises the question of the federal court's subject matter jurisdiction over the action." 5A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1350, at 194 (2d ed.1990). On a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), the plaintiff bears the burden of proving that the court does in fact have jurisdiction. See generally RMI Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1134-35 (6th Cir.1996); see also Rogers v. Stratton Indus., 798 F.2d 913, 915 (6th Cir.1986). "When considering a motion to dismiss for lack of subject matter jurisdiction, this Court may look beyond jurisdictional allegations in the complaint and the Court may consider whatever evidence the parties submit." Fairport Int'l. Exploration, Inc. v. Shipwrecked Vessel Known as THE CAPTAIN LAWRENCE, 105 F.3d 1078, 1081 (6th Cir.1997), vacated on other grounds. 523 U.S. 1091, 118 S.Ct. 1558, 140 L.Ed.2d 790 (1998).

Federal Rule of Civil Procedure 12(b)(6) authorizes dismissal of a complaint for "failure to state a claim upon which relief can be granted." In assessing the sufficiency of a complaint, courts must follow "the accepted rule that a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). This rule accords with the purpose of Rule 12(b)(6), which the Sixth Circuit has explained "is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the complaint is true." Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir.1993). Therefore, "[o]n a Fed.R.Civ.P. 12(b)(6) motion, all of the allegations contained in the plaintiff's complaint are accepted as true, and the complaint is construed liberally in favor of the party opposing the motion." Miller v. Currie, 50 F.3d 373, 377 (6th Cir.1995). At the same time, however, the Court "need not accept as true legal conclusions or unwarranted factual inferences." Gregory v. Shelby County, 220 F.3d 433, 446 (6th Cir.2000).

A court generally cannot consider material beyond thepleadings in ruling on a Rule 12(b)(6) motion, but it may consider material that is properly submitted as part of the complaint. In re Royal Appliance Mfg. Co., No. 94-3284, 64 F.3d 663, 1995 WL 490131, *2 (6th Cir.1995) (materials integral to the complaint were considered on a Rule 12(b)(6) motion without converting the motion into one for summary judgment). Finally, "[d]ocuments that a defendant...