County of San Diego v. Bowen
| Decision Date | 04 March 1986 |
| Docket Number | Civ. No. 86-0262-E(I). |
| Citation | 631 F. Supp. 947 |
| Parties | COUNTY OF SAN DIEGO, a political subdivision of the State of California; and Richard J. Thompson, Conservator of the Persons of Joseph M. and Norman H., Conservatees, Plaintiffs, v. Otis BOWEN, M.D., Secretary of the United States Department of Health and Human Services; Richard P. Kusserow, Inspector General of the Department of Health and Human Services; and James F. Patton, Defendants. |
| Court | U.S. District Court — Southern District of California |
Lloyd M. Harmon, Jr., County Counsel, San Diego County, Daniel J. Wallace, Chief Deputy by Phillip L. Kossy, Deputy, Thomas E. Montgomery, Deputy, for plaintiffs.
Peter K. Nunez, U.S. Atty., John J. Robinson, Asst. U.S. Atty., for defendants.
The San Diego County Mental Health Facility at Hillcrest ("CMH") is a licensed 92 bed acute psychiatric hospital for adults. CMH has been in operation since 1965. This is the first time that the facility has been sanctioned by the Medicare program; the state has never sanctioned the facility.
As a Medicare hospital, CMH receives reimbursement for treating many of its patients. However, on January 21, 1986, the Secretary of Health and Human Services ("HHS") issued an order excluding CMH from Medicare reimbursement for three years.
To qualify for Medicare reimbursement, a health care provider must deliver services (1) economically and only when medically necessary, (2) that meet professionally recognized standards, and (3) supported by evidence of necessity and quality. Failure to comply may result in sanctions, including temporary or permanent exclusion; however, the health care provider is entitled to a post-exclusion hearing and, ultimately, judicial review.
Several agencies were involved in the decision to exclude CMH from Medicare reimbursement. First, HHS is responsible for administering the Medicare program. Second, the Office of the Inspector General ("OIG") decides if a health care provider should be sanctioned. Third, the Health Care Financing Administration ("HCFC") periodically monitors the performance of health care providers. Fourth, California Medical Review, Inc. ("CMRI") is a private Peer Review Organization ("PRO") that contracted with HHS to conduct peer evaluations of California health care providers. And, fifth, the California Department of Health Services is a state agency that administers health care.
Apparently, HHS' inquiry into the quality of care offered at CMH began in May 1985. On May 3, 1985, Larry Stirling, Assemblyman for the 77th District, wrote to CMRI requesting an investigation by the federal government. Mr. Stirling appended documented charges of medical misconduct.
Approximately May 10, 1985, CMRI began to review patient charts and records. Several days later, CMRI reported finding one deficiency. However, on June 25, 1985, CMRI began to review the patient charts originally surveyed in May.
On July 31, 1985, CMRI informed CMH that there were gross and flagrant violations of quality care found in three patient charts, and substantial violations in twenty-six charts. On August 7, 1985, CMRI reported to CMH that there were three additional substantial violations. CMH requested a meeting with CMRI.
CMRI and CMH met on August 27, 1985. The same day, CMRI informed CMH by letter that it would report the substantial violations in the twenty-six patient charts to the OIG. The letter specified that CMH could submit additional information or request a meeting within thirty days.
On September 12, 1985, CMRI conducted a brief follow-up visit to the CMH facility. On September 18, 1985, CMRI reached an internal decision to report the gross and flagrant violations to OIG as well.
On September 27, 1985, CMRI internally reaffirmed its initial decision that there had been violations, and on September 30, 1985, CMRI internally recommended excluding CMH from further Medicare reimbursement.
CMRI formally submitted its findings of gross and flagrant violations and substantial violations of quality patient care to the OIG on October 18, 1985. CMRI advised CMH of its recommendation on the same date, and informed CMH that it could submit a response within thirty days.
On November 22, 1985, CMH responded to the OIG, listing five objections. CMH complained that (1) CMRI did not consider CMH's willingness and ability to comply with the standards of quality, (2) the recommendation was based solely on past patient charts, (3) CMRI should have considered that CMH did not have any prior record of sanctions, (4) the decision would be harmful to the community because there were no viable alternative facilities, and (5) CMH did not have a meaningful opportunity to respond to the CMRI recommendation during critical decision making processes.
On January 27, 1986, the OIG determined that there had been gross and flagrant and substantial violations in patient care at CMH. Consequently, CMH was delivering services considered inappropriate, unnecessary, below the recognized professional standards, or inadequately supported by documentation. The OIG based the decision on (1) the CMRI report and (2) CMH's response on November 22, 1985.1
Concurrent with CMRI's peer evaluation, the California Department of Health Services initiated a Medicare survey of CMH. Surveys were conducted on various dates in July, August and September 1985. The state Department of Health Services completed a report noting various deficiencies and sent it to HCFA and HHS. A more complete survey was undertaken in November and December 1985.
Two questions must be addressed in ruling on the County's application for a preliminary injunction. First, the extent of this court's jurisdiction must be delineated. See Heckler v. Ringer, 466 U.S. 602, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984). Second, the court must weigh the likelihood that the County will succeed on the merits, the possibility of irreparable harm resulting from refusing the preliminary injunction, and whether the public interest favors the preliminary injunction. See Regents of the University of California v. ABC, Inc., 747 F.2d 511, 515 (9th Cir.1984).
Section 1156 of the Social Security Act, 42 U.S.C. § 1320c-5 (1982), sets forth the obligations of health care providers to qualify for Medicare reimbursements. The sanctions and penalties for failing to comply with those obligations appear in section 1156(b) of the Act. Section 1156(b)(4), 42 U.S.C. § 1320c-5(b)(4) (1982), states:
Any practitioner or person furnishing services ... who is dissatisfied with a determination made by the Secretary under this subsection shall be entitled to reasonable notice and opportunity for a hearing thereon by the Secretary to the same extent as is provided in section 405(b) of this title, and to judicial review of the Secretary's final decision after such hearing as is provided in section 405(g) of this title.
According to section 405(g), judicial review is limited to "final decisions" of the Secretary, 42 U.S.C. § 405(g) (1982). Thus, a health care provider who is dissatisfied with a penalty or sanction issued pursuant to 42 U.S.C. § 1320c-5(b) may seek judicial review only after the Secretary has reached a final decision on the merits of the sanctions.2
The regulations implementing 42 U.S.C. § 1320c-5 are found at Part 474, Subpart C of Title 42 of the Code of Federal Regulations. 42 C.F.R. § 474.58 describes the right of a health care provider to appeal sanctions or penalties issued pursuant to 42 U.S.C. § 1320c-5(b). The regulation provides:
A practitioner or other person dissatisfied with an OIG determination or an exclusion ... is entitled to a hearing before an Administrative Law Judge and may also request a review of that decision by the Appeals Council....
In short, the statutory and regulatory scheme precludes judicial review of a sanction determination by the OIG until the health care provider has appealed to the Administrative Law Judge and the Appeals Council; the health care provider must exhaust administrative remedies as a predicate to permitting judicial review under 42 U.S.C. § 405(g).3
There are, however, two exceptions to the exhaustion or finality requirement. In Weinberger v. Salfi, 422 U.S. 749, 95 S.Ct. 2457, 45 L.Ed.2d 522 (1975), the Court held that the Secretary could waive the exhaustion requirement by failing to accommodate meaningful review. Then, in Mathews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976), the Court held that a disability benefits claimant challenging a wholly collateral procedural issue, and who would be harmed by the termination of benefits before a final decision by the Secretary, could establish jurisdiction without exhausting administrative remedies. Thus, the requirement of exhaustion or a final decision on the merits is waivable. And, it may be waived either by the Secretary as in Weinberger, supra, or by the courts as in Mathews, supra. Heckler v. Ringer, 466 U.S. 602, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984).
The Court of Appeals for the Seventh Circuit recently summarized the two circumstances in which waiver is proper:
A court may waive the exhaustion requirement when the plaintiff's claims are entirely collateral to his claim of entitlement and when the plaintiff's interest in having the issue resolved promptly is sufficiently great so as to render deference to the agency's judgment inappropriate. Citation omitted. Waiver is also appropriate where the pursuit of administrative remedies would be futile because the Secretary's position on the statutory issues is "final." Citations omitted.
Johnson v. Heckler, 769 F.2d 1202, 1207 (7th Cir.1985). See also Marcus v. Heckler, 620 F.Supp. 1218, 1220-21 (N.D.Ill. 1985).
In Heckler v. Ringer, 466 U.S. 602, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984), the Court held that there was no jurisdiction to review the Secretary's initial determination that certain surgical...
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