Senior Life York, Inc. v. Azar

Decision Date25 November 2019
Docket NumberCIVIL ACTION NO. 1:19-CV-1737
Parties SENIOR LIFE YORK, INC., Plaintiff v. Alex M. AZAR, II, Secretary, United States Department of Health and Human Services, and Seema Verma, Administrator, Centers for Medicare and Medicaid Services, Defendants
CourtU.S. District Court — Middle District of Pennsylvania

James J. Kutz, Erin R Kawa, Post & Schell, P.C., Harrisburg, PA, for Plaintiff.

Tamara J. Haken, Samuel S. Dalke, US Attorney's Office, Middle District of PA, Harrisburg, PA, for Defendants.


Christopher C. Conner, Chief Judge

Senior Life York, Inc. ("Senior Life") is a healthcare provider. It participates in federally subsidized programs administered by Alex M. Azar, II, the Secretary of the United States Department of Health and Human Services, and Seema Verma, the Administrator of the United States Centers for Medicare and Medicaid ("CMS") (collectively, "defendants"). After an audit, but before an evidentiary hearing, CMS suspended Senior Life's ability to enroll new Medicare patients.

Senior Life filed a complaint and motion for preliminary injunction. It seeks temporary reinstatement of its right to enroll Medicare patients pending an evidentiary hearing and corresponding decision by CMS. Defendants move to dismiss Senior Life's complaint for lack of jurisdiction, and alternatively oppose the preliminary injunction. We will grant in part and deny in part defendants' motion to dismiss. We will deny Senior Life's motion for preliminary injunction.

I. Factual Background & Procedural History

Senior Life is a healthcare provider under the Program of All-Inclusive Care for the Elderly ("PACE"). (Doc. 1 ¶ 1). As part of this program, Senior Life provides medical services to Medicare patients in their communities. (Id. ¶ 9). PACE providers are subject to various statutory and regulatory constraints that ensure they provide adequate and safe healthcare. See, e.g., 42 C.F.R. § 460.40 (PACE regulations). CMS can sanction PACE providers that violate these statutory and regulatory constraints. See 42 C.F.R. § 460.42.


CMS can "suspend enrollment of Medicare beneficiaries after the date CMS notifies the organization of the violation" if a provider does not meet certain regulatory requirements. 42 C.F.R. § 460.42(a). Specifically, CMS can suspend enrollment when it concludes a provider "[f]ails substantially to provide to a participant medically necessary items and services that are covered PACE services, if the failure has adversely affected (or has substantial likelihood of adversely affecting) the participant." Id. § 460.40(a)(1). A suspension remains in effect "until CMS is satisfied" that the provider has "corrected the cause of the violation" and the violation is "not likely to recur." Id. § 460.42(c) ; see also id. §§ 422.750, 756(c)(3).

Before imposing a suspension, CMS must give the provider written notice of the basis for the sanction and inform them of their right to a hearing. Id. § 422.756(a)(1). CMS must also give the provider 10 days after receipt of the notice to respond, id. § 422.756(a)(2), and the provider may request a hearing within 15 days, id. § 422.756(b)(2). A request for a hearing does not delay the sanction's effective date. Id. § 422.756(b)(3).

B. Senior Life Audit & Sanction

CMS and the Pennsylvania Department of Human Services performed joint audits of Senior Life in February and March of 2019. (Doc. 1-3 at 1). After each audit, CMS held exit interviews during which its auditors informed Senior Life of their general concerns regarding its performance. (Doc. 1-6 at 1; Hr'g Tr. 18:10-17).1 After the field audits, Senior Life and CMS engaged in what is called a Root Cause Analysis. (Doc. 1-6 at 1). During that process, "CMS provided Senior LIFE York with the cases and the issue[s] that caused those cases to fail during the audit." (Id. ) Senior Life responded to each Root Cause Analysis and "self-disclosed cases that support the violations cited in the sanction notice and the audit report." (Id. )

On August 22, 2019, CMS issued its Sanction Notice to Senior Life. The Sanction Notice informed Senior Life that its right to enroll new Medicare patients would be suspended as of August 23, 2019. (Doc. 1-3). The Notice further informed Senior Life that its facilities suffered from "severe deficiencies." (Id. ) Specifically, Senior Life had "failed substantially to provide its participants with medically necessary items and services that are covered PACE services, which adversely affected (or had the substantial likelihood of adversely affecting) its participants." (Id. ) The Sanction Notice summarized the alleged violations and identified relevant statutory sections or regulations allegedly violated, but it did not include patient identifiers or file numbers. (Id. at 4-9). The Notice also advised Senior Life of its right to submit a Corrective Action Plan "demonstrating to CMS that the underlying deficiencies have been corrected and are not likely to recur," to submit a written rebuttal, and to request a hearing. (Id. at 9-10).

On August 27, 2019, CMS issued its Draft Audit Report, outlining the alleged violations in more detail. (Doc. 17-3). On September 3, 2019, Senior Life submitted its written rebuttal to the Sanction Notice and requested a stay of the sanction until a decision on its rebuttal. (Docs. 1-4, 1-5). Senior Life requested an administrative hearing on September 9, 2019. (Doc. 1 at ¶ 25). On September 18, 2019, CMS responded to Senior Life's written rebuttal and its request for a stay. (Doc. 1-6). CMS effectively rejected Senior Life's stay request by reinforcing its sanction decision. (Id. ) It also explained that CMS had notified Senior Life of its findings and the cases used to support its findings verbally during an exit interview. (Id. )

Senior Life submitted its Corrective Action Plan on September 13, 2019. (Doc. 1 ¶ 17). Senior Life and CMS are still participating in the Corrective Action Plan process. (Hr'g Tr. 62:10-63:4). A hearing regarding Senior Life's sanctions took place on November 4-6, 2019. (Doc. 1 ¶ 27).

C. Procedural History

Senior Life filed a complaint and a motion for preliminary injunction. Defendants responded with a motion to dismiss for lack of subject-matter jurisdiction. We ordered expedited briefing on both motions and held an evidentiary hearing and oral argument. The motions are ripe for disposition.

II. Legal Standard
A. Motion to DismissRule 12(b)(1)

Federal Rule of Civil Procedure 12(b)(1) provides that a court may dismiss a claim for lack of subject matter jurisdiction. See FED. R. CIV. P. 12(b)(1). Such jurisdictional challenges take of one two forms: (1) parties may levy a "factual" attack, arguing that one or more of the pleading's factual allegations are untrue, removing the action from the court's jurisdictional ken; or (2) they may assert a "facial" challenge, which assumes the veracity of the complaint's allegations but nonetheless argues that a claim is not within the court's jurisdiction. Lincoln Benefit Life Co. v. AEI Life, LLC, 800 F.3d 99, 105 (3d Cir. 2015) (quoting CNA v. United States, 535 F.3d 132, 139 (3d Cir. 2008) ). In either instance, it is the plaintiff's burden to establish jurisdiction. See Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977).

A factual challenge allows the defendant to present competing evidence to disprove a plaintiff's underlying assertion in its complaint that there is jurisdiction. Constitution Party of Pa. v. Aichele, 757 F.3d 347, 358 (3d Cir. 2014). The plaintiff maintains the burden of proving jurisdiction, but the court "is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case," and "no presumptive truthfulness attaches to [the] plaintiff's allegations ...." Mortensen, 549 F.2d at 891. The court may also "weigh and consider evidence outside the pleadings." Constitution Party, 757 F.3d at 358.

B. Motion for Preliminary InjunctionRule 65

The court applies a four-factor test in determining the propriety of injunctive relief. The movant must, as a threshold matter, establish the two "most critical" factors: likelihood of success on the merits and irreparable harm. Reilly v. City of Harrisburg, 858 F.3d 173, 179 (3d Cir. 2017). Under the first factor, the movant must show that "it can win on the merits." Id. This showing must be "significantly better than negligible but not necessarily more likely than not." Id. The second factor carries a slightly enhanced burden: the movant must establish that it is "more likely than not" to suffer irreparable harm absent the requested relief. Id. Only if these "gateway factors" are satisfied may the court consider the third and fourth factors: the potential for harm to others if relief is granted, and whether the public interest favors injunctive relief. Id. at 176, 179. The court must then balance all four factors to determine, in its discretion, whether the circumstances favor injunctive relief. Id. at 179.

III. Discussion

Ostensibly, this is the first case in which CMS has imposed a sanction on a PACE provider, and the provider has requested a pre-sanction hearing. (Hr'g Tr. 17:6-13). As a threshold matter, Senior Life must establish jurisdiction. We therefore begin with defendants' motion to dismiss before considering whether Senior Life's procedural due process claim survives.2

A. Jurisdiction

Senior Life asserts jurisdiction under both 42 U.S.C. § 1331 and 42 U.S.C. § 405. (Doc. 1 ¶ 5; Hr'g Tr. 30:4-10). Senior Life then argues that it need not exhaust administrative remedies because its claims are "collateral" to the agency's review process. Defendants claim jurisdiction is wanting on exhaustion grounds.

1. Claims "Arising Under" the Medicare Act

Parties typically assert federal-question jurisdiction under 28 U.S.C. § 1331 for claims implicating federal statutes. In the Medicare context, however, the path to jurisdiction is narrowly prescribed. Federal courts lack...

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