United States: Limitations On Adjudicating Disputes Involving Medicare Provider Agreements

Last Updated: June 22 2017
Article by Leslie Berkoff and Krista L. Kulp

The power of bankruptcy courts to adjudicate Medicare provider agreements has been addressed by several circuit courts in recent years. Given the distressed nature of the health care industry and the continued bankruptcy filings by health care providers, this issue has become more prominent. Insolvent health care providers often have issues with Medicare involving their provider agreements. However, several circuit courts determined that bankruptcy courts lack jurisdiction to adjudicate these issues; and, recently, the First Circuit took an unusual approach.

In order to receive payments from Medicare and/or Medicaid, providers must enter into provider agreements with the federal and state governments. The provider agreements provide reimbursements to providers who provide medical services to Medicare and Medicaid patients. Parkview Adventist Med. Ctr. v. United States, 842 F.3d 757, 761 (1st Cir. 2016). However, in order to qualify, providers must satisfy certain regulatory requirements and, if they do not comply, then the Department of Health and Human Services (DHS) may terminate the provider agreement without a hearing if there is an immediate threat to the health and safety of patients. See 42 U.S.C. §1395(i)-3(h)(2)(A). As Medicare reimbursement is a large or largest source of income, providers may turn to bankruptcy in order to hopefully stave off this loss of income.

However, the power of bankruptcy courts to adjudicate issues involving the Medicare Act is currently unclear. In Fla. Agency for Health Care Admin v Bayou Shores SNF (In re Bayou Shores SNF), the Eleventh Circuit determined the bankruptcy court lacked jurisdiction pursuant to 42 U.S.C. §405(h) and 28 U.S.C. §1334 to resolve claims under the Medicare Act. 828 F.3d at 1304. Bayou Shores SNF was a nursing facility whose income was generated from Medicare or Medicaid. Id. at 1300-01. DHS sent a letter to Bayou stating that it was "not in substantial compliance with the Medicare program requirements, and that the conditions in its facility constituted an immediate jeopardy to residents' health and safety" and that the provider agreements would terminate approximately two weeks later. Id. at 1300. Thereafter, Bayou filed for bankruptcy protection. Id. After the bankruptcy court entered an order assuming the provider agreements, the district court reversed and upheld DHS's jurisdictional challenge; Bayou then appealed. Id. at 1303-04.

The Eleventh Circuit determined that 42 U.S.C. §405(h), which applies to the Medicare Act through 42 U.S.C. §1395ii, barred the bankruptcy court from exercising jurisdiction over Medicare claims. 42 U.S.C. §405(h) provides:

(h) Finality of Commissioner's decision. The findings and decision of the Commissioner of Social Security after a hearing shall be binding upon all individuals who were parties to such hearing. No findings of fact or decision of the Commissioner of Social Security shall be reviewed by any person, tribunal, or governmental agency except as herein provided. No action against the United States, the Commissioner of Social Security, or any officer or employee thereof shall be brought under section 1331 or 1346 of title 28 to recover on any claim arising under this subchapter.

Because §405(h) specifically references only §§1331 and 1346 of title 28, it seemingly does not bar bankruptcy jurisdiction, which falls under Section 1334 of Title 28. Despite a plain reading of the statute, the Eleventh Circuit found that, after reviewing the history of 42 U.S.C. §405(h), the failure to include §§1332 and 1334 was inadvertent and Congress did not intend to vest the bankruptcy courts with jurisdiction over Medicare claims. The Eleventh Circuit joined the Third, Seventh, and Eighth Circuits in so holding. Nichole Medical Equipment & Supply v. TriCenturion, 694 F.3d 340 (3d Cir. 2012); Bodimetric Health Services v. Aetna Life & Casualty, 903 F.2d 480 (7th Cir. 1990); Midland Psychiatric Associates, Inc. v. United States, 145 F.3d 1000 (8th Cir. 1998). Only the Ninth Circuit permits bankruptcy jurisdiction over Medicare claims. See In re Town & Country Home Nursing Servs., 963 F.2d 1146, 1155 (9th Cir. 1991) (holding that "[§]405(h) only bars actions under 28 U.S.C. §§1331 and 1346; it in no way prohibits an assertion of jurisdiction under section 1334").

Courts have recognized that administrative agencies are best equipped to make these decisions, rather than bankruptcy courts, because Medicare is highly regulated and the issues frequently involve the health and safety of patients.

In a case involving similar issues, the First Circuit chose instead to decide the matter "on narrower grounds" rather than address the jurisdiction issue. In Parkview Adventist Med. Ctr. v. United States, 842 F.3d 757 (1st Cir. 2016), the First Circuit held that the government's termination of the provider agreement was not a violation of the automatic stay based solely upon the police and regulatory exception, and thus there was no need for it to decide whether the bankruptcy court had jurisdiction to compel the assumption of the provider agreement. Id. at 760.

Parkview Adventist Medical Center was a hospital that provided emergency, inpatient, and outpatient services. Parkview Adventist Med. Ctr., 842 F.3d at 761. After advising a division of DHS (CMS) on June 15, 2015 that it would be filing for Chapter 11 the following day, it would be closing the hospital, it would no longer participate in the Medicare program and it was ending its participation in Medicare, Parkview filed for bankruptcy. Id. CMS responded that it would terminate the provider agreement as of June 18, 2015 because Parkview failed to satisfy the conditions of the provider agreement. Id. at 762. However, on June 19, 2015, Parkview advised CMS that if CMS terminated the provider agreement, it would hinder Parkview's bankruptcy. Id. CMS stated that it would only rescind the termination if Parkview began providing inpatient services again. Id.

Parkview filed a "Motion to Compel Post Petition Performance of Executory Contracts" on the grounds that the post-petition termination of the provider agreement was a violation of §§362, 365 and 525 of the Bankruptcy Code. Id. The bankruptcy and district courts found that 42 U.S.C. §405(h) barred the court from exercising jurisdiction over the motion to compel and CMS did not violate the automatic stay or non-discrimination provisions of the Bankruptcy Code by terminating the provider agreement. Id. at 757.

On appeal, the First Circuit chose not address the bankruptcy jurisdiction issue; rather, it assumed that it had "hypothetical jurisdiction" and based its decision solely upon finding no violation of the automatic stay existed. Id. at 760. The First Circuit found that the "police and regulatory power" exception to the automatic stay applied and, therefore, CMS did not violate the non-discrimination provisions of the Bankruptcy Code.

CMS had argued, among other things, that even if the automatic stay applied, the "police and regulatory power" exception to the automatic stay would apply (Id. at 763), which provides that the automatic stay does not apply to "an action or proceeding by a governmental unit ... to enforce such governmental unit's ... police and regulatory power." 11 U.S.C. 362(b)(4). To determine whether it applied, the First Circuit made two inquiries: whether the action was "designed to protect the public safety and welfare" or "if the action [was an] attempt to recover property from the estate." Parkview Adventist Med. Ctr., 842 F.3d at 763. If the action had a "pecuniary purpose", then it would still be subject to the automatic stay. Id.

The First Circuit stated that the question was "whether CMS's termination enforces a generally applicable regulatory law or furthers a public policy interest beyond the contractual rights in the provider agreement and found it was irrelevant whether the termination was based on "a finding of a threat to the health or safety of patients in order to justify the application of the police and regulatory power exception. Id. at 764. The court noted that Parkview actively disqualified itself as a hospital and failed to meet the required conditions under the provider agreement, thus, it would have been a waste of public resources to not terminate the provider agreement. Id.

It appears that even if they have jurisdiction over Medicare issues, bankruptcy courts are mindful of the precarious issues that are raised in health care and hospital cases. Courts seem to be more sensitive to balancing the needs of the patients than the need for providers to reorganize under the Bankruptcy Code.

Bayou filed a petition for writ of certiorari to the Supreme Court on the question of whether §405(h) of the Medicare Act bars bankruptcy and district court jurisdiction over Medicare claims. Petition for Writ of Certiorari, Bayou Shores SNF v. Fla. Agency for Health Care Admin, No. 16-697 (2016). Thus, it seems that there may ultimately be a resolution to this issue if the Supreme Court grants certiorari.

Previously published in the New York Law Journal

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Leslie Berkoff
Similar Articles
Relevancy Powered by MondaqAI
Moritt, Hock & Hamroff LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Moritt, Hock & Hamroff LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions