Oulton v. Bowen, CIV-87-1238C.

• Decision Date: 18 February 1988
• Docket Number: No. CIV-87-1238C.,CIV-87-1238C.
• Citation: 674 F. Supp. 429
• Parties: Patricia T. OULTON, as Executive Director of the Buffalo Psychiatric Center; Buffalo Psychiatric Center: Bruce E. Feig, as Acting Commissioner of the New York State Office of Mental Health; Office of Mental Health of the State of New York; and the State of New York, Plaintiffs, v. Otis BOWEN, Secretary of Health and Human Services of the United States; United States Department of Health and Human Services; Health Care Financing Administration of the United States Department of Health and Human Services; William Roper, Administrator, Health Care Financing Administration; and Annemarie Schmidt, Director, Survey and Certification Operations Branch, Division of Health Standards and Quality, Health Care Financing Administration, Defendants.
• Court: U.S. District Court — Western District of New York

674 F. Supp. 429

Patricia T. OULTON, as Executive Director of the Buffalo Psychiatric Center; Buffalo Psychiatric Center: Bruce E. Feig, as Acting Commissioner of the New York State Office of Mental Health; Office of Mental Health of the State of New York; and the State of New York, Plaintiffs, v. Otis BOWEN, Secretary of Health and Human Services of the United States; United States Department of Health and Human Services; Health Care Financing Administration of the United States Department of Health and Human Services; William Roper, Administrator, Health Care Financing Administration; and Annemarie Schmidt, Director, Survey and Certification Operations Branch, Division of Health Standards and Quality, Health Care Financing Administration, Defendants.

No. CIV-87-1238C.

United States District Court, W.D. New York.

November 19, 1987.

As Amended February 18, 1988.

Robert Abrams, Atty. Gen. of the State of N.Y. (Douglas S. Cream, and Andrew Lipkind, Asst. Attys. Gen., of counsel), Buffalo, N.Y., for plaintiffs.

Department of Health and Human Services (Robert Wanerman, Asst. Regional Counsel, Office of General Counsel), New York City, and Roger P. Williams, U.S. Atty. (Denise E. O'Donnell, Asst. U.S. Atty., of counsel), Buffalo, N.Y., for defendants.

CURTIN, Chief Judge.

On September 29, 1987, this court granted plaintiffs' motion for a temporary restraining order to prevent defendants from terminating the participation of the Buffalo Psychiatric Center BPC in the federally funded Medicare Program (Item 6). By stipulation, the parties agreed to extend the temporary restraining order until October 20, 1987, to afford the court an opportunity to consider the jurisdictional issues raised by defendants in their filings (Item 10). At oral argument on October 20, this court reserved decision on defendants' motion to dismiss on jurisdictional grounds and directed that the restraining order remain in effect until further order of this court (Item 20). On October 30, 1987, this court heard oral argument on plaintiffs' motion for a preliminary injunction.

Plaintiffs say that a preliminary injunction is necessary to avoid irreparable harm 1) to BPC's ability to hire and retain professional staff; and 2) to BPC's ability to maintain the confidence of its patients and their families necessary for successful treatment. Plaintiffs also state that they are likely to succeed on the merits of the action because of defendants' failure to provide BPC with a reasonable opportunity to cure the alleged deficiencies prior to termination as required by statute and regulation. 42 U.S.C. § 1395cc(b)(2); 42 C.F. R. § 405.1901, et seq.; see especially 42 C.F.R. § 405.1907. They maintain that, because the balance of hardships in this case tips decidedly in their favor, they are entitled to preliminary relief from this court.

Defendants dispute this view. Further, they argue that this court lacks jurisdiction over the subject matter of this case and that plaintiffs' Amended Complaint (Item 11) should therefore be dismissed. Alternatively, they argue that the facts show that plaintiffs are not entitled to preliminary relief.

The relevant procedural and factual history of this dispute may be summarized as follows. BPC became a provider of services in the Medicare program effective March 6, 1967. In 1985, BPC underwent a Health Care Financing Administration HCFA survey which was done by HCFA's authorized agent at that time, the New York State Department of Health. As a result of that survey, BPC was informed by letter on June 3, 1985, that it was out of compliance with the special staff requirements condition because of a finding that it had an insufficient number of nurses and psychologists on staff. See 42 C.F.R. § 482.62. At that time, BPC was invited to formulate a plan of correction with a reasonable timetable. Item 24, attached June 3, 1985, letter of Robert C. Braun. BPC subsequently did so and was informed that it was in compliance with all conditions of participation. At no time during 1985 did HCFA threaten the BPC with termination from the Medicare program as a result of deficiencies.¹

The evidence indicates that in 1986, the BPC was considered by HCFA to be in compliance with the special staffing and medical records conditions of participation in the Medicare program, although some lesser deficiencies were noted.² Again, HCFA did not threaten the BPC with termination.

In 1986, the Department of Justice DOJ, a second federal agency, also became involved with the BPC in order to investigate possible civil rights violations at the institution. See Civil Rights of Institutionalized Persons Act CRIPA, 42 U.S.C. § 1997, et seq. By letter dated February 27, 1987, the DOJ notified the State that its investigation had uncovered conditions at the BPC which allegedly deprived patients of their constitutional rights. Since that time, the DOJ and the State have engaged in discussions regarding the DOJ's findings.

On June 29, 1987, after learning of the DOJ's findings of unconstitutional conditions, a team of HCFA investigators arrived at the BPC to conduct a "surprise survey." See Item 26, Affidavit of Marion Gosnell Gosnell Affidavit. The results of this survey became available to the plaintiffs by letter dated July 30, 1987.³ Based on its review of the information gathered by its investigators, HCFA informed plaintiffs that the BPC no longer met two special conditions required to continue its participation in the Medicare program. See 42 C.F.R. §§ 482.61-62; see also Item 17, Affidavit of Annemarie Schmidt Schmidt Affidavit, ¶ 12.⁴ This letter also noted that BPC's participation as a provider of services would be terminated effective October 1, 1987, and that an administrative hearing to review this decision could be requested. Schmidt Affidavit, ¶ 13, Exh. B. The State subsequently requested such a hearing by letter dated August 31, 1987. Id., Exhs. D and E. Thereafter, the State submitted to HCFA a plan of correction and a request that the scheduled date of termination be postponed. Id., ¶ 17, Exh. F. This request was denied on September 25, 1987, based on HCFA's view that a plan of correction is insufficient to demonstrate compliance. Id., ¶¶ 16-187, Exh. G. Thereafter, plaintiffs commenced this lawsuit.

In her affidavit, government attorney Denise E. O'Donnell alleges that this court does not have subject matter jurisdiction over this action pursuant to the statutory authorities asserted by plaintiffs O'Donnell Affidavit (Item 14). See 28 U.S.C. §§ 1331, 2201, 2202; 42 U.S.C. §§ 1395, et seq.⁵ See also Items 13, 15, 16, 17, 26, and 31.

Given the above, defendants say that the only possible basis for this court's jurisdiction in the instant case is 42 U.S.C. § 1395ff(c), which allows district courts to review final decisions of the Secretary of Health and Human Services as provided in 42 U.S.C. § 405(g). Section 405(g) says in pertinent part:

Any individual, after any final decision of the Secretary made after a hearing to which he was a party, irrespective of the amount in controversy, 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.

(Emphasis added.)

Based on this language, defendants argue that this court lacks subject matter jurisdiction to review the Secretary's termination decision until such time as the BPC has exhausted its administrative remedies. Northlake Community Hospital v. United States, 654 F.2d 1234 (7th Cir.1981). Defendants argue that plaintiffs cannot show that they have exhausted insofar as they admit in paragraph 45 of their Amended Complaint (Item 11) that they have applied for appropriate administrative relief. Accordingly, defendants say that plaintiffs' only available avenue of relief at this time is to pursue their administrative appeal pursuant to 42 C.F.R. § 405.1501, et seq.

In plaintiffs' reply (Item 19), they maintain that this court has jurisdiction over the subject matter of this case at this time, arguing that a decision by the Secretary can be "final" within the meaning of 42 U.S.C. § 405(g) by either 1) completion of the available administrative review procedures; or 2) judicial waiver of the exhaustion requirements in appropriate circumstances. City of New York v. Heckler, 742 F.2d 729 (2d Cir.1984), aff'd sub nom. Bowen v. City of New York, 476 U.S. 467, 106 S.Ct. 2022, 90 L.Ed.2d 462 (1986). Plaintiffs contend that they have satisfied the exhaustion requirement for present purposes because they have presented compelling circumstances for a judicial waiver of exhaustion. Plaintiffs state their position:

A central claim in the action, articulated in the complaint, request for TRO, and on the pending motion for preliminary injunction, is that the defendants failed to provide BPC with an ample and reasonable period in which to cure the alleged deficiencies. The plaintiffs have exhausted this claim, even though they have not completed all of the intermediate steps of review within HHS. The plaintiffs have received what is essentially a final decision from the Secretary on this question.

Item 19 at p. 3.

Plaintiffs assert that this claim constitutes an appropriate subject for a judicial waiver of administrative exhaustion by this court. Relying on City of New York v. Heckler, supra at 746, they say that further administrative review of the question of whether or not they have been provided with an ample and reasonable time in which to cure alleged deficiencies would be "futile" because defendants have already denied plaintiffs' request for such time. Moreover, plaintiffs argue that their central claim is sufficiently "collateral" to the question of whether or not the BPC is entitled to participate in the Medicare program to satisfy the requirements of the City of New York case. Finally, they argue that the requirement of further administrative...