Home Care Providers, Inc. v. Hemmelgarn
| Decision Date | 27 June 2017 |
| Docket Number | Nos. 16-2054,16-3668,& 16-3669,s. 16-2054 |
| Citation | 861 F.3d 615 |
| Parties | HOME CARE PROVIDERS, INC., et al., Plaintiffs-Appellants, v. Kelly HEMMELGARN, et al., Defendants-Appellees. In re: Nightingale Home Healthcare, Inc., Debtor. Nightingale Home Healthcare, Inc., Plaintiff-Appellant, v. United States of America, et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Arend J. Abel, Attorney, Cohen & Malad, Wendy Diane Brewer, Attorney, Jefferson & Brewer, LLC, Indianapolis, IN, for Plaintiffs–Appellants, Debtor–Appellant.
Aaron T. Craft, Kyle Hunter, Betsy M. Isenberg, Attorneys, Office of the Attorney General, Bob Wood, Attorney, Office of the United States Attorney, Indianapolis, IN, Jeffrey A. Clair, Attorney, Department of Justice, Civil Division, Appellate Staff, Washington, DC, for Defendants–Appellees.
John Anthony Edwards Pottow, Attorney, University of Michigan Law School, Ann Arbor, MI, for Amicus Curiae.
Before Bauer, Flaum, and Kanne, Circuit Judges.
This consolidated appeal was prompted by the federal government's termination of Nightingale Home Healthcare, Inc.'s Medicare provider agreement. Nightingale sought and received a preliminary injunction from the bankruptcy court that prevented the government from terminating Nightingale's agreement. On appeal, the district court concluded that the bankruptcy court had lacked jurisdiction to issue an injunction and reversed the order. We conclude, however, that the issue of whether the bankruptcy court properly granted the injunction was moot, as the bankruptcy court had dissolved the underlying injunction prior to the district court's ruling. Separately, Home Care Providers, Inc., Nightingale's sole shareholder, and its owner, Dr. Dev A. Brar, filed a civil action in the district court, alleging that certain Indiana state surveyors had committed various constitutional violations leading up to Nightingale's Medicare termination.1 The district court dismissed those claims with prejudice. We conclude Nightingale's and Dr. Brar's constitutional claims were also jurisdictionally barred, pursuant to 42 U.S.C. § 405(g), and vacate and remand with instructions to dismiss without prejudice.
Nightingale Home Healthcare, Inc. provides home health care services in a number of states, including Indiana. In the course of this business, Nightingale signed a provider agreement with the United States Secretary of Health and Human Services to receive Medicare reimbursements and agreed to conform to certain statutory and regulatory requirements.
In October and November 2015, the Indiana State Department of Health ("ISDH") conducted a survey at one of Nightingale's facilities and concluded that Nightingale had failed to comply with the applicable requirements.2 The ISDH found that Nightingale's deficiencies placed its patients in "immediate jeopardy,"3 and recommended that the Centers for Medicare & Medicaid Services ("CMS"), which administers Medicare, terminate Nightingale's Medicare agreement. On November 17, CMS notified Nightingale that the agency would terminate Nightingale's agreement on December 10, unless Nightingale corrected its irregularities. Later, on December 8 and 9, the ISDH conducted a revisit survey and concluded that Nightingale had failed to comply, and CMS informed Nightingale that its provider agreement would terminate as scheduled. Nightingale filed an administrative appeal and requested expedited review.
On December 10, before CMS terminated the Medicare agreement, Nightingale filed a voluntary petition to reorganize in bankruptcy. Nightingale then commenced an adversary proceeding in the United States Bankruptcy Court for the Southern District of Indiana against federal and state officials administering the Medicare program, invoking the court's subject-matter jurisdiction under 28 U.S.C. §§ 157(b)(1) & 1334. Nightingale filed a complaint and an emergency motion for a preliminary injunction, seeking (1) to enjoin CMS from terminating its provider agreement during the pendency of the reorganization and completion of administrative appeals, (2) to compel CMS to pay out Medicare receivables purportedly due for services already provided, and (3) to compel CMS to continue to reimburse Nightingale for services rendered after the agreement's termination. The federal government moved to dismiss Nightingale's complaint for lack of jurisdiction.
On January 19, 2016, the bankruptcy court held an evidentiary hearing on Nightingale's request for injunctive relief. It granted the motion on January 25, directing the federal government to abide by the Medicare provider agreement. The court cautioned Nightingale that it was still obligated to comply with the applicable Medicare requirements. Finally, the court concluded that 28 U.S.C. § 1334 provided a basis for exercising jurisdiction over Nightingale's property, including, in relevant part, its provider agreement to participate in Medicare, and could thus preserve the status quo pending exhaustion of Nightingale's administrative appeals. Thus, the court explained, the terms of the provider agreement would remain in place. The court later repeated this holding in denying the government's motion to dismiss for lack of subject-matter jurisdiction. The federal government timely sought review of the bankruptcy court's decisions in the district court.
On April 22, while the government's appeal was pending, the ISDH investigated several complaints concerning Nightingale's post-petition services. The agency again found that Nightingale was placing patients in "immediate jeopardy." The federal government subsequently sought relief from the bankruptcy court's preliminary injunction, and the court dissolved the injunction on July 15. CMS notified Nightingale that CMS would terminate the provider agreement on July 16.
On May 9, a Medicare Administrative Law Judge ("ALJ") affirmed the termination of Nightingale's provider agreement. The ALJ concluded that the evidence overwhelmingly proved that Nightingale had violated regulatory and statutory requirements, and that those deficiencies placed patients in "immediate jeopardy." Nightingale appealed the ALJ's decision to the Departmental Appeals Board in June. (Recently, on April 14, 2017, the Board affirmed the ALJ's decision, constituting a final administrative decision on Nightingale's claims).
On June 2, 2016, Nightingale sought the bankruptcy court's authority to sell all of its assets. After failing to complete a sale by July, however, Nightingale began discharging its patients and winding down Indiana business operations. As of August 17, 2016, Nightingale had completely halted its business in Indiana.
Finally, on September 16, 2016, the district court addressed the federal government's bankruptcy appeal. The court concluded that the bankruptcy court had lacked subject-matter jurisdiction to issue the preliminary injunction, pursuant to 42 U.S.C. § 405(h) of the Social Security Act.4 Although the bankruptcy court had already dissolved the injunction, the court rejected Nightingale's argument that the government's appeal was moot, explaining that the government could still seek restitution for the nearly $5 million in reimbursements it had provided for Nightingale's post-injunction services. After the district court issued its opinion, CMS filed a claim for restitution that is currently pending,5 and Nightingale timely filed this appeal.
Separately, on February 4, 2016, Nightingale initiated a civil proceeding in federal court against Sylvia Matthews Bur-well, then-Secretary of the United States Department of Health and Human Services; Jerome Adams, Commissioner of the Indiana State Department of Health; and Kelly Hemmelgarn, Randall Snyder, and Ingrid Miller, three Indiana state surveyors. According to the complaint, the defendants had collectively abused the Medicare survey process, violating Nightingale's (1) equal-protection, (2) First Amendment, (3) due-process, and (4) Fourth Amendment rights. Nightingale requested an order directing the state defendants to withdraw all of the survey reports issued against Nightingale since January 1, 2015, including those underlying the termination of Nightingale's Medicare agreement. Nightingale also sought an injunction preventing CMS from using the Indiana State Department of Health to conduct further surveys of Nightingale, or an order directing Indiana to conduct surveys against Nightingale only upon the filing of a bona fide, third-party complaint alleging facts likely to constitute an immediate threat to the health and well-being of patients. Finally, Nightingale requested money damages from the state surveyors.
Defendants moved to dismiss Nightingale's complaint, arguing that the district court lacked subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), and that the complaint failed to state a claim for which relief could be granted under Rule 12(b)(6). The district court granted both motions and dismissed the case with prejudice. This appeal followed.
On May 1, 2017, while this appeal was pending, Nightingale moved to dismiss its case against the Secretary and the Commissioner, and all claims for equitable relief, as Nightingale had ceased its operations in Indiana. All that remains are Nightingale's constitutional claims against the state surveyors and its request for damages.
As a threshold matter, Nightingale asserts that the bankruptcy case was moot prior to the district court's decision, because the bankruptcy court had already dissolved the injunction at issue. The government does not dispute that the bankruptcy court had dissolved the injunction, but argues that its separate restitution action (now pending before the district court) presented a live and equitably redressable controversy. "Whether a case has been rendered...
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