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Blue Valley Hospital, Inc. v. Azar

United States District Court, D. Kansas

June 14, 2018

ALEX M. AZAR II, in his official capacity as Secretary, United States Department of Health and Human Services, SEEMA VERMA, Administrator for the Center of Medicare and Medicaid Services, and JEFF HINSON, Regional Administrator for Region 7 the Center for Medicare and Medicaid Services, Defendants.



         On June 7, 2018, this Court dismissed this case for lack of subject matter jurisdiction.[1]The next day, Plaintiff Blue Valley Hospital, Inc. (“BVH”) filed a notice of appeal with the Tenth Circuit Court of Appeals.[2] Before the Court is Plaintiff's Emergency Motion for an Injunction Pending Appeal (Doc. 34) pursuant to Fed.R.Civ.P. 62(c), filed June 12, 2018.[3]Defendants have responded and oppose the motion.[4] The Court set the matter for a telephone hearing, but upon review of the parties' submissions determines oral argument will not assist in the determination of the motion and is thus prepared to rule. For the reasons explained in detail below, Plaintiff's motion is denied.

         I. Standards

         When a notice of appeal is filed, jurisdiction over the matters being appealed normally transfers from the district court to the appeals court.[5] An exception exists under the Federal Rules of Civil Procedure, however, that allows the district court to retain jurisdiction to issue an order to preserve the status quo while a case is pending appeal.[6] This right is codified by Rule 62(c), which states in relevant part,

When an appeal is taken from an interlocutory or final judgment granting, dissolving, or denying an injunction, the court in its discretion may suspend, modify, restore, or grant an injunction during the pendency of the appeal upon such terms as to bond or otherwise as it considers proper for the security of the rights of the adverse party.[7]

         Defendants have issued a public notice of termination of BVH's Medicare provider agreement effective after the close of business on June 15, 2018. BVH seeks an injunction issued on or before June 15, in order to preserve the status quo pending its appeal to the Tenth Circuit.

         In determining whether to issue an injunction pending appeal pursuant to Rule 62(c), a court should consider the following factors: (1) whether the movant is likely to succeed on the merits of its appeal; (2) whether the movant will be irreparably injured absent an injunction; (3) whether the issuance of the injunction will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.[8]

         II. Discussion

         A. Jurisdiction

         As a threshold issue, the Court addresses Defendants' argument that relief under Rule 62(c) is inappropriate because this Court has determined it lacks jurisdiction and dismissed the case under Fed.R.Civ.P. 12(b)(1), without considering BVH's motion for preliminary injunction.[9] In support of its request, BVH cites Peak Medical Oklahoma No. 5 v. Sebelius, where the Northern District of Oklahoma granted an injunction pending appeal following dismissal for lack of subject matter jurisdiction of plaintiff medical provider's action to enjoin HHS and CMS from terminating its Medicare and Medicaid rights.[10] In that case, a TRO was entered and the final order dismissing the matter dissolved it.[11] In analyzing the request for injunction pending appeal, the court “observe[d] the inconsistent nature of considering the merits of this motion after finding an absence of subject matter jurisdiction, ” but because defendants did not argue that, and there seemed to be conflicting opinions on whether it was permitted, the court allowed it.[12] The matter was not resolved by the Tenth Circuit, however, because the parties voluntarily dismissed the appeal.[13]

         By contrast, Defendants in this case strongly oppose the issuance of an injunction where the Court has determined no jurisdiction exists. Defendants argue that, having already determined that it lacks subject matter jurisdiction over BVH's motion for preliminary injunction in the underlying proceedings, it follows that this Court also lacks the authority to provide injunctive relief to BVH pending appeal. The Court finds Defendants' argument persuasive and shares the Peak Medical court's reservation about whether relief is appropriate. Granting an injunction pending appeal under the circumstances of this case goes beyond maintaining the status quo. Indeed, it effectively grants BVH the relief it sought in the underlying proceedings, which this Court determined it did not have jurisdiction to consider, thus effectively divesting the Tenth Circuit of jurisdiction. The Court therefore denies the motion for injunction pending appeal for lack of jurisdiction.

         B. Rule 62(c) Factors

         Even assuming it has jurisdiction, however, after applying the four factors cited above, the Court finds that BVH has not met its burden of demonstrating that an injunction pending appeal is warranted.

         Irreparable Harm/Public Interest

         A movant satisfies the irreparable harm requirement by demonstrating “a significant risk that [it] will experience harm that cannot be compensated after the fact by monetary damages.”[14]This factor is satisfied where “[a] plaintiff who can show a significant risk of irreparable harm has demonstrated that the harm is not speculative.”[15]

         BVH argues the irreparable harm that will result to BVH, its employees, patients, and the community absent an injunction pending appeal is “irreparable and devastating.” There is no serious dispute that if BVH's provider certification is terminated, BVH will also lose its Medicare and related Medicaid revenue. Even if retroactive payments could be made, BVH contends the lack of revenue would force the hospital to close. In the Medicare context, however, Congress factored in the possibility that the administrative appeals process preceding retroactive payments would result in “individual, delay-related hardship.”[16] The Supreme Court explained, “Congress must have felt that cases of individual hardship resulting from delays in the administrative process had to be balanced against the potential for overly casual or premature judicial intervention in an administrative system that processes literally millions of claims every year.”[17] Courts have recognized that “participation in the Medicare program is a voluntary undertaking” and “involves a degree of risk.”[18]

         BVH's claim of harm to patients is substantively the same as its claim that an injunction is in the public interest. BVH argues that it provides “unique and vital” medical and surgical services to patients who are “grossly underserved” in the surrounding community. BVH focuses on the low number of facilities in the region that provide bariatric surgery to Medicare patients. Third-party customers, however, have no “substantive right” to the provider of their choice.[19]Further, BVH's claim that there are no concerns about patient care surrounding the termination decision ignores the deficiency findings from the re-survey conducted in April 2018, which directly implicate patient care.[20] The Court finds the irreparable harm factor weighs partially in favor of BVH, and the public interest factor is neutral.

         Harm to Defendants

         After determining the harm that would be suffered by the moving party if the preliminary injunction is not granted, the court must then weigh that harm against the harm to the defendant if the injunction is granted.[21] BVH suggests that there is no harm to CMS if BVH is allowed to continue operating as a Medicare-certified hospital because CMS will merely be paying for services rendered to patients, which serves a valuable public interest. As Defendants point out, however, BVH receives Medicare reimbursement as a certified hospital at nearly double the reimbursement rate than it would receive as an outpatient facility, given the higher operating costs generally incurred by acute care hospitals. BVH argues, in effect, that CMS will not be harmed by continuing to pay BVH at the higher rate because it is going to have to pay another facility for providing services to Medicare beneficiaries, so it might as well be BVH. Defendants argue BVH's argument goes to the heart of program integrity and weighs against the issuance of an injunction. While a supersedeas bond may alleviate some financial risk to CMS, Defendants maintain that it cannot protect patients or the integrity of the ...

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