Cathedral Rock Of North College Hill v. Shalala

• Decision Date: 05 May 2000
• Docket Number: No. 99-4149,99-4149
• Citation: 223 F.3d 354
• Parties: (6th Cir. 2000) Cathedral Rock of North College Hill, Inc., d/b/a Beechknoll Convalescent Center, Plaintiff-Appellant, v. Donna E. Shalala, Secretary of Health and Human Services, Defendant-Appellee. Submitted:
• Court: U.S. Court of Appeals — Sixth Circuit

Page 354

223 F.3d 354 (6th Cir. 2000)

Cathedral Rock of North College Hill, Inc., d/b/a Beechknoll Convalescent Center, Plaintiff-Appellant, v. Donna E. Shalala, Secretary of Health and Human Services, Defendant-Appellee.

No. 99-4149

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

Submitted: May 5, 2000

Decided and Filed: September 5, 2000

Appeal from the United States District Court for the Southern District of Ohio at Cincinnati. No. 99-00552--Herman J. Weber, District Judge. [Copyrighted Material Omitted]

[Copyrighted Material Omitted] Geoffrey E. Webster, J. Randall Richards, Columbus, Ohio, for Appellant.

Jan M. Holtzman, Assistant U.S. Attorney, Office of the U.S. Attorney, Cincinnati, OH, Ted Yasuda, UNITED STATES DEPARTMENT OF HEALTH & HUMAN SERVICES, OFFICE OF THE GENERAL COUNSEL, REGION V, Chicago, Illinois, for Appellee.

Before: BATCHELDER, MOORE, and BEEZER,^* Circuit Judges.

MOORE, J., delivered the opinion of the court, in which BEEZER, J., joined. BATCHELDER, J. (pp. 367-68), delivered a separate opinion concurring in the judgment.

OPINION

KAREN NELSON MOORE, Circuit Judge.

Cathedral Rock of North College Hill, Inc. d/b/a Beechknoll Convalescent Center ("Beechknoll")¹ is a nursing facility appealing the dismissal of its complaint for lack of subject matter jurisdiction. In its complaint, Beechknoll challenges a determination of the Secretary of Health and Human Services that it is not in substantial compliance with the Medicare and Medicaid regulations and terminating its participation in the programs. Although Beechknoll did not exhaust its administrative remedies before seeking judicial review as required under the Medicare Act, it contends that it falls under an exception to this requirement established in Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667 (1986), and also under an exception for claims that are "entirely collateral" to a substantive challenge of the Secretary's determination. Alternatively, Beechknoll asserts that the district court had jurisdiction under the Medicaid Act. We AFFIRM the dismissal of Beechknoll's complaint for lack of subject matter jurisdiction because neither of the alleged exceptions to the Medicare Act's exhaustion requirement applies in this case. In addition, Beechknoll cannot avoid this requirement by characterizing its claims as arising under the Medicaid Act when it is a dual provider subject to common certification, termination, and appeals procedures under the Medicare and Medicaid regulations.

I. FACTS AND PROCEDURE

Beechknoll is a 100-bed nursing facility located in Cincinnati, Ohio, that was certified to participate in both Medicare and Medicaid programs. The Ohio Department of Health (ODH) conducted several surveys of Beechknoll, which showed that it was not in substantial compliance with the federal Medicare and Medicaid certification and quality of care requirements. The Secretary of Health and Human Services then adopted the ODH's recommendations and imposed the following remedies against Beechknoll: (1) denial of payment for new Medicare admissions effective June 25, 1999; (2) a civil monetary penalty; and (3) termination of Beechknoll's participation in the Medicare and Medicaid programs effective July 19, 1999.

On July 19, 1999, Beechknoll filed a complaint for declaratory and injunctive relief in federal district court against the Secretary. Beechknoll alleges that the Secretary's remedies violate the Medicare Act, 42 U.S.C. § 1395i-3(h)(2); the Medicaid Act, 42 U.S.C. § 1396(h)(3); the Due Process Clause of the Fifth Amendment; the Administrative Procedure Act, 5 U.S.C. §§ 553 et seq. and 706; and that they are contrary to law, arbitrary, capricious, and an abuse of discretion in violation 5 U.S.C. § 706(2). Beechknoll seeks a declaration that these remedies are in violation of the law and a permanent injunction to prevent the Secretary from "(a) terminating Plaintiff's Medicare and Medicaid provider agreements and certification for and participation in the Medicare and Medicaid Program effective July 19, 1999, and (b) terminating or refusing to make payment to Plaintiff for covered services rendered to Medicare and Medicaid eligible residents who now reside at Beechknoll, pending the outcome of an administrative hearing." J.A. at 10 (Complaint). In response, the Secretary filed a motion to dismiss for lack of subject matter jurisdiction because Beechknoll failed to exhaust its administrative remedies before seeking relief in federal district court.

On the same date, Beechknoll also filed a motion for a temporary restraining order asking the district court to restrain temporarily the Secretary from terminating its Medicare and Medicaid provider agreements and from refusing to make payment to Beechknoll for covered services rendered to its current Medicare and Medicaid patients, pending the outcome of an administrative hearing. The Secretary filed a memorandum in response to Beechknoll's motion arguing that Beechknoll failed to show a strong likelihood of success on the merits or any of the other requirements for injunctive relief.

Beechknoll filed a formal request for an administrative hearing on July 20, 1999.

The district court entered an order issuing a temporary restraining order for ten days for the purpose of preserving the status quo pending its decision on whether subject matter jurisdiction exists. Within this period, the court held a hearing on the Secretary's motion to dismiss and concluded that it lacked subject matter jurisdiction to review Beechknoll's claims because the nursing facility had failed to exhaust its administrative remedies. After the district court entered judgment dismissing Beechknoll's complaint without prejudice, Beechknoll filed a timely notice of appeal.

II. ANALYSIS

A. Standard of Review

A district court's legal determinations in dismissing a complaint for lack of subject matter jurisdiction are reviewed de novo, while any factual findings are reviewed for clear error. See Michigan Ass'n of Indep. Clinical Labs. v. Shalala, 52 F.3d 1340, 1346 (6th Cir. 1994).

B. Jurisdiction under the Medicare Act

Under 42 U.S.C. § 1395cc(h)(1), an institution "dissatisfied with a determination by the Secretary . . . described in subsection (b)(2) of this section shall be entitled to a hearing thereon by the Secretary . . . and to judicial review of the Secretary's final decision after such hearing as is provided in section 405(g) of this title." The referenced subsection (b)(2) sets forth the Secretary's power to terminate an agreement with a provider of services to participate in the Medicare program, including situations in which "the provider fails to comply substantially with the provisions of the agreement, [or] with the provisions of [the Medicare Act] and regulations thereunder." 42 U.S.C. § 1395cc(b)(2)(A). The Secretary's findings and decision to terminate participation in the Medicare program thus are subject to judicial review under § 405(g), which states:

Any individual, after any final decision of the [Secretary] made after a hearing to which he was a party . . . may obtain a review of such decision by a civil action commenced within sixty days after the mailing to him of notice of such decision or within such further time as the [Secretary] may allow.

42 U.S.C. § 405(g).

Under 42 U.S.C. § 1395ii, the Medicare Act incorporates 42 U.S.C. § 405(h), which provides that the Secretary's findings and final decision after a hearing are binding on the parties to the hearing. This provision also limits judicial review as follows: "[n]o findings of fact or decision of the [Secretary] shall be reviewed by any person, tribunal, or governmental agency except as herein provided" and no action against the Secretary "shall be brought under section 1331 or 1346 of Title 28 to recover on any claim arising under" the Medicare Act. 42 U.S.C. § 405(h). This section "channels most, if not all, Medicare claims through [the] special review system" of an administrative hearing and "purports to make exclusive the judicial review method set forth in § 405(g)." Shalala v. Illinois Council on Long Term Care, Inc., 120 S. Ct. 1084, 1091 (2000); see also Michigan Ass'n of Homes & Servs. for the Aging, Inc. v. Shalala, 127 F.3d 496, 499 (6th Cir. 1997); Livingston Care Ctr., Inc. v. United States, 934 F.2d 719, 721 (6th Cir.), cert. denied, 502 U.S. 1003 (1991).

We have held that in order to obtain judicial review under § 405(g), a party must comply with "(1) a nonwaivable requirement of presentation of any claim to the Secretary, and (2) a requirement of exhaustion of administrative review, which the Secretary may waive." Michigan Ass'n of Homes & Servs., 127 F.3d at 499 (citing Heckler v. Ringer, 466 U.S. 602, 617 (1984)). In Ringer, the Supreme Court held that a challenge of a Secretary's decision not to provide reimbursement to individuals who receive a particular medical treatment is a claim that "arises under the Medicare Act," and therefore § 405(h) is applicable and judicial review must be obtained through § 405(g), which requires the exhaustion of administrative remedies. See 466 U.S. at 615-17. The Supreme Court recently examined and reaffirmed the Ringer decision, noting that it held that "all aspects" of a present or future claim for benefits must be "channeled" through the administrative process. See Illinois Council, 120 S. Ct. at 1093 (quoting Ringer, 466 U.S. at 614). "As so interpreted, the bar of § 405(h) reaches beyond ordinary administrative law principles of 'ripeness' and 'exhaustion of administrative remedies'" where exceptions may apply and instead "demands the 'channeling' of virtually all legal attacks through the agency." Id. This system "assures the agency greater opportunity to apply, interpret, or revise policies, regulations, or statutes without possibly premature interference by different individual courts," although "this assurance comes at a price, namely,...