Koerpel v. Heckler

Citation797 F.2d 858
Decision Date23 July 1986
Docket NumberNo. 85-1871,85-1871
Parties, Medicare&Medicaid Gu 35,533 Barry J. KOERPEL, M.D., Plaintiff-Appellant, v. Margaret M. HECKLER, Secretary of Health and Human Services, and Carolyn K. Davis, Administrator, United States Health Care Financing Administration, Defendants-Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)

Ronald E. Nehring, of Prince, Yeates & Geldzahler (David K. Broadbent, with him on brief), Salt Lake City, Utah, for plaintiff-appellant.

Jay A. Swope, Asst. U.S. Atty. (Brent D. Ward, U.S. Atty., and Lawrence J. Leigh, Asst. U.S. Atty., with him on brief), Salt Lake City, Utah, for defendants-appellees.

Before BARRETT, LOGAN and BALDOCK, United States Circuit Judges.

BARRETT, Circuit Judge.

Barry J. Koerpel, M.D., (Appellant) appeals from the Memorandum Decision and Order of the District Court for the District of Utah which denied his request for a preliminary injunction. Dr. Koerpel sought the injunction to prevent the Department of Health and Human Services (HHS) from enforcing its decision to exclude him from eligibility for reimbursements under the Medicare program and from publishing notice of its action. As a nephrologist (renal/kidney specialist), most of the procedures Dr. Koerpel performed were substantially funded through Medicare. Consequently, a large portion of Dr. Koerpel's income was derived from Medicare reimbursements for services rendered.

Dr. Koerpel was notified by the Office of the Inspector General of Health and Human Services (OIG) that it was proposing to exclude him from eligibility for Medicare reimbursements for a period of ten years. The proposed exclusion was based on information furnished by Blue Cross and Blue Shield of Utah (BCBS), Medicare's fiscal intermediary in Utah. As an intermediary, BCBS was authorized to conduct the day-to-day administrative functions of the Medicare program. The medical records of a random sample of Dr. Koerpel's patients were reviewed by various doctors and a panel of experts selected by BCBS. BCBS requested various progress notes from Dr. Koerpel's office files to supplement the records that BCBS had but he provided only admission histories and physical and discharge summaries. OIG reviewed all of the BCBS evidence and conclusions and determined that Dr. Koerpel had furnished substandard care to his patients; he had prescribed excessive kidney dialysis for some and underdialyzed others.

After Dr. Koerpel was notified of his proposed exclusion he was given the opportunity to respond to the allegations against him with written evidence. Dr. Koerpel did respond. The patients whose care was found to be substandard were identified and a copy of the transcript of the panel's review session and notes were provided to Dr. Koerpel. The doctor was also provided the opportunity to respond in person and with an attorney before a Deputy Assistant Inspector General of HHS, which he did. OIG reviewed everything which had been presented and again determined that Dr Koerpel would be terminated from program participation. OIG was then required by law to notify the public of its decision with a statement of the accompanying reasons by publishing such in local newspapers.

Initially, Dr. Koerpel sought a temporary restraining order (TRO) to prevent the federal appellees from publishing a notice of his disqualification in local Utah newspapers and from enforcing their decision to exclude him from reimbursement. Dr. Koerpel objected to the nature and timing of the process that had been afforded him. He argued that notice and an opportunity to respond were constitutionally inadequate in light of the significant liberty and property interests at stake. Dr. Koerpel maintained that nothing short of a full blown evidentiary pre-termination hearing with the right to confront witnesses 1 could safeguard his due process rights. The district court granted Dr. Koerpel's motion for a TRO.

Dr. Koerpel then moved for a preliminary injunction. After hearing oral arguments and considering all of the evidence and memoranda submitted, the district court denied the preliminary injunction, finding that Dr. Koerpel had not established that he had a substantial likelihood of success on the merits. The district court concluded that Dr. Koerpel had been afforded all of the process due him under the circumstances. On appeal, Dr. Koerpel raises the following issues: (1) whether the district court improperly applied the criteria for injunctive relief, and (2) whether the district court misconstrued relevant authority when it concluded that he received all the process that he was due.

I. Subject Matter Jurisdiction

As a matter of first importance, this court must determine if its own jurisdiction and that of the district court have been properly invoked. Mitchell v. Maurer, 293 U.S. 237, 244, 55 S.Ct. 162, 165, 79 L.Ed. 338 (1934); accord, Basso v. Utah Power and Light Co., 495 F.2d 906, 909 (10th Cir.1974). Although the district court's subject matter jurisdiction was challenged by the Government in its response to Dr. Koerpel's motion for a preliminary injunction, the district court found that it had jurisdiction by assuming that Dr. Koerpel had a protected property interest. (R., Vol. 1, pp. 300-301.) The jurisdictional issue was not raised by either party on appeal. Inasmuch as federal courts are courts of limited jurisdiction, the court may and, in fact, has an obligation to inquire into its jurisdiction sua sponte. See generally, Wright and Miller, 5 Federal Practice and Procedure Sec. 1350, 544-46 (1969).

The jurisdictional issue which presents itself in this case concerns a specific provision of 42 U.S.C. Sec. 1395y(d)(3), which authorizes judicial review of decisions of the Secretary of Health and Human Services if certain requirements are met. That section provides:

(3) Any person furnishing services described in paragraph (1) 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.

42 U.S.C. Sec. 1395y(d)(3).

Section 405(b) details the procedures already enjoyed by Dr. Koerpel, including receipt of a statement of the case, a discussion of the evidence, a statement of the Secretary's determination and the reasons for her decision, reasonable notice of the above and an opportunity for a hearing with respect to the Secretary's decision. Section 405(g) authorizes judicial review after a final decision of the Secretary, made after a hearing to which the claimant was a party. The accompanying regulation, 42 C.F.R. Sec. 420.107 "Notice of Exclusion or Termination to Affected Party," section (c) states: "This decision and notice [referring to the process Dr. Koerpel has thus far been afforded] constitutes an 'initial determination' and a 'notice of initial determination' for purposes of the administrative appeals procedure specified in Part 405...." Id.

At this juncture, no final decision has been issued, and Dr. Koerpel cannot satisfy the requirements of section 405(g). Dr. Koerpel acknowledges that he has not exhausted his administrative remedies. (R., Vol. I, pp. 57-60.) "[T]he requirement that there be a final decision by the Secretary after a hearing was regarded as 'central to the requisite grant of subject-matter jurisdiction....' " Mathews v. Eldridge, 424 U.S. 319, 328, 96 S.Ct. 893, 899, 47 L.Ed.2d 18 (1976) quoting Weinberger v. Salfi, 422 U.S. 749, 764, 95 S.Ct. 2457, 2466, 45 L.Ed.2d 522 (1975).

In Salfi, the Court recognized that the "final decision" requirement, i.e., exhaustion of administrative remedies, may be waived by the Secretary. Salfi, supra at 764-7, 95 S.Ct. at 2466-67. One year later, the Mathews court concluded that the exhaustion requirement could also be excused if three requirements were met: if exhaustion would be futile, irreparable harm resulted, and a colorable constitutional claim which was collateral to the substantive claim of entitlement was raised. Mathews, supra.

Courts have liberally construed the Mathews test in order to find jurisdiction in spite of a party's failure to satisfy 405(g). See, e.g., Bowen v. City of New York, --- U.S. ----, 106 S.Ct. 2022, 90 L.Ed.2d 462 (1986) (in spite of failure to exhaust, the Court concluded that the claimants should not be required to challenge a secretive policy of the HHS which they did not know existed in order to assert jurisdiction under 405(g).) Without explicit guidance from the Supreme Court, lower courts have struggled to give meaning to the Mathews test with varying results. See, e.g., Boettcher v. Secretary of Health and Human Services, 759 F.2d 719 (9th Cir.1985), City of New York v. Heckler, 742 F.2d 729 (2d Cir.1984), aff'd, Bowen v. New York, --- U.S. ----, 106 S.Ct. 2022, 90 L.Ed.2d 462 (1986), and Jensen v. Schweiker, 709 F.2d 1227 (8th Cir.1983).

Applying the three-part Mathews test here, if the notice of Dr. Koerpel's ineligibility is published with its accompanying statement of reasons by HHS, we have no doubt that Dr. Koerpel's reputation could be irreparably damaged in a way that could not be remedied by subsequent administrative appeals. Administrative exhaustion of the due process claim would be futile because the Secretary has taken a final position with respect to how much process is due at the pre-termination stage. Additional administrative action, which will be concerned with fact finding and the development of a record, will not aid Dr. Koerpel in his efforts to enlarge the process he has been afforded. But like the Second Circuit in City of New York v. Heckler, 742 F.2d at 736, we hold that the three factors--futility, irreparable harm and collaterality--must be taken together and...

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