Source: https://www.arnoldporter.com/en/perspectives/publications/2015/07/recent-middle-district-of-florida-case-highlight__
Timestamp: 2018-10-20 17:49:15
Document Index: 723775317

Matched Legal Cases: ['§ 405', '§ 365', '§ 405', '§ 1334', '§ 405', '§ 405', '§ 1331', '§ 1346', '§ 1334', '§ 405', '§ 405', '§ 1334', '§405']

Recent Middle District of Florida Case Highlights the Medicare Jurisdictional Bar and the Implications of Such Bar to Healthcare Bankruptcy Cases | Publications and Presentations | Arnold & Porter
By Rosa J. Evergreen Michael L. Bernstein
On August 1, 2014, two days before the provider agreements were to be terminated, Bayou filed a lawsuit in the District Court for the Middle District of Florida seeking an injunction to prohibit the termination of the provider agreements. On August 1, 2014, the District Court entered a temporary restraining order (TRO) prohibiting the termination of the agreements until August 15, 2014. On August 15, 2014, the District Court denied an extension of the TRO and dissolved it; holding that it lacked subject matter jurisdiction because Bayou had not exhausted its administrative remedies pursuant to 42 U.S.C.§ 405(h) before bringing a claim under the Medicare statute in the District Court.1 Within hours of the District Court dissolving the TRO, Bayou filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court for the Middle District of Florida.2
While the appeal was pending, and given the breathing spell provided to the Debtor by the Injunction Order, the Debtor sought from the Bankruptcy Court confirmation of its plan of reorganization and approval to assume the Medicare and Medicaid provider agreements under § 365 of the Bankruptcy Code.3 Both the Secretary and AHCA objected, arguing, among other things, that the Bankruptcy Court was barred by 42 U.S.C. § 405(h)4 from taking any action related to the provider arguments. The Bankruptcy Court overruled these objections, confirmed the plan of reorganization, and authorized the assumption of the provider agreements.
In its opinion confirming the plan and the assumption of the provider agreements (Confirmation Opinion), the Bankruptcy Court held that it had grounds for exercising jurisdiction over the Medicare dispute under 28 U.S.C. § 1334.5 Section 1334 provides that the "Court has jurisdiction over all civil proceeding arising under title 11 [the Bankruptcy Code], arising in a case under title 11, or related to a proceeding under title 11." The Bankruptcy Court held that its jurisdiction was not barred by § 405(h) because § 405(h) by its terms only refers to 28 U.S.C. § 1331 and § 1346, and the Bankruptcy Court's jurisdiction was based instead on § 1334.6
The Secretary, and ACHA, appealed the Confirmation Opinion. The appeal of the Confirmation Opinion was consolidated with the appeal of the Injunction Order. The appeals raised the same jurisdictional issues—namely, whether 42 U.S.C. § 405(h) precluded the Bankruptcy Court from taking any action related to the provider agreements.
The District Court's Ruling on Appeal: the Medicare Jurisdictional Bar
In the consolidated appeals, the District Court held that "the Bankruptcy Court erred as a matter of law because the jurisdictional bar in § 405(h) precluded the Bankruptcy Court from delaying or preventing the effect of CMS' determination that the provider agreements should be terminated."7 The District Court also held that the Bankruptcy Court's conclusion of law that it had jurisdiction under § 1334 was in error because it ignored the jurisdictional bar provided for in the Medicare Act, and that "[t]he Bankruptcy Court exceeded its subject matter jurisdiction when it interfered with CMS' termination of the provider agreements."8 The District Court further held "[t]here is no jurisdiction for a court to interpose itself in a provider's termination from the Medicare and Medicaid programs except to provide judicial review under §405(g) after administrative remedies have been exhausted and the Secretary has issued a final agency decision."9 Accordingly, the Court held the Bankruptcy Court lacked jurisdiction to issue the Injunction Order and to authorize the assumption of the provider agreements, and thus reversed the Injunction Order, and the Confirmation Opinion with respect to the assumption of the provider agreements, and remanded to the Bankruptcy Court.
The District Court's reversal of the Bankruptcy Court's Injunction Order and Confirmation Opinion related to provider agreements highlights the difficulties a healthcare debtor may face if it attempts to use bankruptcy as a shield to enjoin the termination of its provider agreements. Depending on the outcome of any appeal of the District Court's opinion,10 the case could ultimately shape, at least in some jurisdictions, whether and how healthcare providers facing termination from Medicare and Medicaid programs can use bankruptcy as a tool to preserve their Medicare and Medicaid provider agreements.
See Order, Case No. 14-cv-1849, 2014 WL 4059900, at *6 (M.D. Fla. Aug. 15, 2014) ("federal jurisdiction over any claim 'arising under' the Medicare statute is limited to the instance in which the complainant has first presented its challenge to the Secretary, has exhausted its administrative remedies, and then seeks judicial review of the agency's final decision").
Additional background information about the Nursing Home Facility, the reasons for the bankruptcy filing, and the bankruptcy case, is available on the bankruptcy case docket, Case No. 14-bk-09521, available here or here
Section 365 of the Bankruptcy Code allows, subject to the satisfaction of certain conditions, a debtor to elect to assume, assume and assign, or reject executory contracts.
Section 405(h) provides that, in relevant part, "(n)o findings of fact or decisions of the (Secretary) 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."
See Memorandum Opinion and Order on Confirmation, Case No. 14-bk-09521, 2014 WL 7452363 (Bankr. M.D. Fla. Dec. 31, 2014).
In re Bayou Shores SNF, LLC, 14-cv-02816, 2015 WL 3935491, at *3 (M.D. Fla. June 26, 2015).
On July 10, 2015, Bayou filed a motion for a stay pending appeal. See In re Bayou Shores SNF, LLC, 14-02816, Docket No. 77 (M.D. Fla. July 10, 2015).
Presenter, 15th Annual New Deal for Consumer Bankruptcy, Historic Hyde Park, NY