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THI of Kansas at Highland Park, LLC v. Sebelius

United States District Court, Tenth Circuit

August 9, 2013

KATHLEEN SEBELIUS, in her official capacity as Secretary, United States Department of Health and Human Services, et al., Defendants.



Plaintiff THI of Kansas at Highland Park, LLC (“THI”), which operates Topeka Community Healthcare Center, seeks injunctive relief to prevent Defendant Kathleen Sebelius, in her official capacity as Secretary of the United States Department of Health and Human Services (the “Secretary”), and Defendant Shawn Sullivan, in his official capacity as Secretary for the Kansas Department for Aging and Disability Services, from terminating THI’s Medicare and Medicaid certification and provider agreements on August 12, 2013, before an administrative hearing on the merits of that termination can be conducted. Plaintiff also seeks to enjoin Defendants from appearing at the Topeka Community Healthcare Center facility for the purpose of meeting with the residents and their families to discuss the termination and to enjoin HHS, the Centers for Medicare and Medicaid Services (“CMS”), and the Kansas Department for Aging and Disability Services (“KDADS”) from publishing any notice about the termination to any governmental body, private entity or the general public. Additionally, Plaintiff seeks to enjoin Defendants Amerigroup Corporation, d/b/a Amerigroup Kansas, Centene Corporation d/b/a Sunflower State Health, and United Healthcare of the Midwest, Inc. from discussing with the residents and/or the residents’ families the need for the residents to move or relocate as a result of CMS and KDADS’s termination of THI’s Medicare and Medicaid certification and provider contracts.

Before the Court is Plaintiff’s Motion for Preliminary Injunction (Doc. 4), the Secretary’s Motion to Dismiss for Lack of Jurisdiction (Doc. 27); and the KDADS’s Motion to Dismiss for Lack of Jurisdiction (Doc. 31). The Court conducted an evidentiary hearing and heard oral argument on the pending motions on July 25, 2013. The Court has considered the briefs, the parties’ arguments, and the evidence adduced at the hearing and is prepared to rule. As described more fully below, the Court grants the Defendants’ motions to dismiss for lack of jurisdiction.

I. Background

The following facts are alleged in the Verified Complaint or presented at the evidentiary hearing.

Plaintiff THI is the operator of a skilled nursing facility known as Topeka Community Healthcare Center located in Topeka, Kansas; it is licensed by KDADS. THI has 82 beds and primarily serves elderly individuals who need skilled nursing services. THI maintains a secured unit of 22 beds to serve individuals with Alzheimer’s disease and related dementia.

THI is certified by CMS as a provider under the Medicare Program. THI has entered into an agreement with CMS to provide skilled nursing services to Medicare Beneficiaries in return for payment for those services under the federal Medicare program. THI is likewise certified to participate in the Kansas Medicaid Program. The Medicaid program is administered by KDADS. Eighty-three percent of Plaintiff’s revenue is derived from Medicare and Medicaid patients.

THI’s participation in the Medicare and Medicaid programs is governed by a complex statutory and regulatory regime. In order to qualify to receive payments under these programs, THI must be certified and in “substantial compliance” with the participation requirements for the programs under federal law.[1] The Secretary of the Department of Health and Human Services (“HHS”) is responsible for conducting periodic onsite inspections, termed “surveys, ” of facilities to determine whether they are in substantial compliance.[2] CMS is a division of HHS and conducts the surveys. HHS also contracts with survey agencies to conduct Medicare and Medicaid surveys on behalf of HHS, including state agency personnel acting as agents of CMS. In Kansas, KDADS is the authorized state agency that surveys skilled nursing facilities on behalf of HHS. The facility is provided with written survey results that include specific instructions for disputing the deficiency findings.

Deficiencies are characterized by scope and severity ratings as follows: (1) deficiencies in substantial compliance (A, B or C); (2) deficiencies that pose no actual harm, with potential for more than minimal harm (D, E or F); (3) deficiencies that constitute actual harm that does not rise to the level of immediate jeopardy (G, H or I); and (4) deficiencies that represent immediate jeopardy to a resident’s health and safety (J, K or L).[3] Deficiencies are further classified by “tags” which range from F150 to F522, each describing a different type of deficiency linked to federal participation requirements.

Where the Secretary determines that a facility’s deficiencies pose “immediate jeopardy” to residents’ health and safety, applicable law authorizes the Secretary to either appoint temporary management over the facility or terminate the facility’s Medicare and Medicaid provider agreement.[4] Where a nursing facility’s participation in Medicare and Medicaid will be terminated, federal law entitles the facility to an appeal process that includes a hearing before an Administrative Law Judge (“ALJ”); review of the ALJ decision by the HHS Departmental Appeals Board (“DAB”); and judicial review of the DAB’s decision.[5]

THI was designated a “Special Focus Facility, ” (“SFF”) by CMS in September 2010, following a May 27, 2010 survey that noted deficiencies at a level of actual harm to a resident. The SFF program focuses on nursing homes that have a track record of substandard quality of care. When a facility is selected as a SFF, CMS’s SFF procedures dictate that the facility receive notice of the designation, which includes notice that

selection in the program is due to persistent pattern of poor quality on its last three standard surveys and complaints (i.e., three years of compliance history); . . . early termination of the provider agreement may result if significant improvements are not evident within the next four standard surveys (or 24 months, whichever is shorter); . . . The Social Security Act requires termination of the Medicare provider agreement no later than six months unless substantial compliance is achieved (as defined by the statute); and . . . [t]ermination may occur more quickly than the six-month statutory date if serious deficiencies that evidence harm continue.[6]

When a facility receives a SFF designation, the KDADS surveyors must conduct standard surveys twice annually and abbreviated surveys after receiving complaints. In order to graduate from the SFF program, the facility must complete two consecutive standard surveys with no deficiencies cited at a scope and severity of “F” or greater and have no intervening complaints with a scope and severity of “F” or greater.

After eighteen months in the SFF program, facilities are subject to one of three possible outcomes: (1) graduation; (2) an extension of time to correct deficiencies and show that they can achieve and maintain substantial compliance with the Medicare and Medicaid requirements for participation; or (3) termination of the provider agreement.

The facility must submit a plan of correction after a receipt of deficiencies. This is followed by revisits by the surveyors to determine whether the facility is in compliance with the Medicare requirements. Also, within ten days, a facility may dispute survey deficiencies through an informal dispute resolution process.[7] The facility may submit documentation to refute the deficiencies, but there is no right to cross examine witnesses during this process and the facility lacks subpoena ...

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