Opinion ID: 2709451
Heading Depth: 2
Heading Rank: 2

Heading: Citizens and Health and Hospital

Text: Plaintiff Citizens is an Indiana not-for-profit corporation. Since 1974, Citizens has operated a health center that provides primary health care services to the medically underserved population in Indianapolis. In 1994, Citizens began receiving 4 No. 12-3924 section 330 grant funds as a federally qualified health center. In 2001, however, Citizens ran into managerial and financial difficulties. These difficulties threatened Citizens’ eligibility for the section 330 grant. To continue operating the health center with federal funding, Citizens partnered with Health and Hospital, which is again a public entity. Health and Hospital’s health centers were all controlled by a central board. This meant that Health and Hospital was not eligible to operate a federally qualified health center on its own because it did not satisfy the section 330 requirement of having the center controlled by a board composed of a majority of health center patients. Health and Hospital and Citizens were therefore natural complements for each other. Citizens was able to provide the necessary patientcontrolled governing board and Health and Hospital the financial management responsibility. As required by HRSA, Health and Hospital and Citizens formalized this relationship in a written co-applicant agreement. Under the terms of the agreement, Citizens was responsible for the general governance of the health center, providing primary care medical services, and achieving several specified performance improvement goals. Health and Hospital was to provide financial management, approve the health center’s budget, develop sound management procedures, assist the Citizens’ board, and “Receive, manage, and disburse” the section 330 grant funds, for which Health and Hospital had “ultimate fiscal accountability … .” HRSA approved the arrangement and awarded the section 330 grant to Health and Hospital as grantee. The parties later renewed both the grant and the co-applicant agreement. No. 12-3924 5 In February 2011, the fourth of these co-applicant agreements expired. Unlike in the past, Citizens and Health and Hospital did not immediately enter into a new agreement. Health and Hospital maintains that it was reluctant to enter into a new agreement because, among other reservations, it was concerned about Citizens’ financial health and stability, and Citizens had failed to provide it with the financial statements necessary to alleviate its concerns. Because HRSA requires the public entity and the co-applicant to operate the center under a co-applicant agreement, HRSA sent both Citizens and Health and Hospital notice that the health center was no longer in compliance with the grant program requirements and would lose eligibility for the grant funds unless they entered into a new co-applicant agreement. On September 23, 2011, Citizens and Health and Hospital entered into a new co-applicant agreement. Unlike the previous multi-year agreements, though, the new agreement was to be in effect only through February 28, 2012. The agreement provided options for renewal for up to four successive oneyear terms, through the end of the current grant period. The new co-applicant agreement, however, imposed no obligation on either party to renew the agreement. The new agreement explicitly provided that the agreement could be renewed only by “written notice sent by either Party and written acceptance by the other.” After Health and Hospital and Citizens signed the new agreement, their relationship did not improve. Health and Hospital remained troubled by Citizens’ accounting and management practices, and proposed restructuring the relationship to give Health and Hospital greater control over 6 No. 12-3924 the health center staff and the provision of medical services. Citizens was not receptive to the proposed changes. HRSA visited the center during November 2011 and attempted to resolve the disagreements, but the attempt at mediating the dispute proved unsuccessful. Health and Hospital then concluded that the current arrangement was unsatisfactory. Health and Hospital told Citizens that it would not be renewing the co-applicant agreement and that it would accordingly relinquish the section 330 grant to HRSA when the agreement expired. Health and Hospital also notified HRSA on February 14, 2012 that it intended to relinquish the grant on November 30, 2012. (The lag between expiration of the agreement and termination of the grant was to prevent disruption of medical services.) Citizens, fearing loss of the grant funds and invoking federal question and supplemental jurisdiction, filed this suit on June 1, 2012 seeking to enjoin the defendants from terminating the section 330 grant.1 Citizens asserted constitutional and contractual claims. Citizens alleged that HRSA’s decision to permit Health and Hospital to relinquish the grant was both contrary to law and a violation of Citizens’ procedural due process rights. Citizens also alleged that Health and Hospital’s 1 In addition to Health and Hospital and HRSA, Citizens sued the Department of Health and Human Services and its Secretary. The claims against these defendants are indistinguishable from the claims against HRSA, so for simplicity we refer only to HRSA. Citizens also sued James Minor and Matthew Gutwein, the board chair and executive director, respectively, of Health and Hospital. Citizens has not appealed the grant of summary judgment in favor Minor and Gutwein. No. 12-3924 7 release of the grant breached the co-applicant agreement. The district court granted summary judgment in favor of all defendants, finding that Citizens had no right to the grant under federal law and that the co-applicant agreement did not prevent Health and Hospital from relinquishing the grant after the contract expired. Citizens Health Corp. v. Sebelius, No. 1:12cv-00748, 2012 WL 5985592 (S.D. Ind. Nov. 29, 2012). Citizens appeals. We have jurisdiction under 28 U.S.C. § 1291.