Opinion ID: 409063
Heading Depth: 1
Heading Rank: 1

Heading: issues

Text: 42 (1) Did the district courts have subject matter jurisdiction of each of the consolidated cases? 43 (2) Did the district courts properly exercise pendent jurisdiction over the state claims in the Care Inns case? SUBJECT MATTER JURISDICTION
44 In each of the consolidated cases the defendants challenged the courts' subject matter jurisdiction over the action. The district courts in each instance rejected this argument holding that subject matter jurisdiction existed based upon either Federal Question jurisdiction, 28 U.S.C. § 1331, Social Security Act Appeal jurisdiction, 42 U.S.C. § 405(g), Federal Mandamus jurisdiction, 28 U.S.C. § 1361, or Administrative Appeals jurisdiction, 5 U.S.C. § 701 et seq. 15 45 We must begin our analysis by pointing out that the holdings of the district courts in each of these cases predated the decision of this court in Northlake Community Hospital v. United States of America, 654 F.2d 1234 (7th Cir. 1981) in which the question of the district court's subject matter jurisdiction over actions challenging the termination of Medicare and/or Medicaid provider agreements was specifically addressed and the district courts were thus without the benefit of that opinion. 46 Northlake was an appeal from a dismissal of a suit for injunctive relief brought by the Northlake Hospital seeking to prohibit the U. S. Department of Health and Human Services from terminating the hospital's Medicare provider agreement without first affording it a pre-termination administrative hearing. This court began its analysis of the district court's dismissal of the lawsuit for lack of subject matter jurisdiction by recognizing that consistent with the United States Supreme Court's decision in Weinberger v. Salfi, 422 U.S. 749, 95 S.Ct. 2457, 45 L.Ed.2d 522 (1975), 42 U.S.C. § 405(h) precludes the use of 28 U.S.C. § 1331 as a jurisdictional basis for challenging Medicare provider termination decisions. 47 In Trinity Memorial Hospital of Cudahy, Inc. v. Associated Hospital Services, 570 F.2d 660 (7th Cir. 1977), this court agreed that Salfi 'precludes the use of 28 U.S.C. § 1331 as a jurisdiction basis' for Medicare provider reimbursement disputes. Although Northlake's claim in the instant case involves the procedures for terminating a provider agreement rather than the procedures for obtaining reimbursement pursuant to such an agreement, the result with respect to these two procedures should be the same. Under Salfi and Trinity, Northlake's allegation of federal question jurisdiction is defective. 48 Northlake, 654 F.2d at 1240. 49 This holding is applicable to the cases at bar and precludes the district court from establishing subject matter jurisdiction over the cases based upon federal question jurisdiction.
50 The court continued its analysis in Northlake and considered whether subject matter jurisdiction was conferred upon the district courts by 42 U.S.C. § 405(g). It was recognized that Title XVIII of the Social Security Act specifically states that an institution dissatisfied with a final decision of the Secretary of the Department of Health and Human Services to terminate its Medicare provider agreement may obtain judicial review of the decision pursuant to 42 U.S.C. § 405(g). 42 U.S.C. § 1395ff(c). However, the court noted that § 405(g) permits review only where the three requirements set forth therein have been complied with: 51 Under the terms of Section 405(g), review is available only if three requirements have been satisfied: (1) an action was brought 'after any final decision of the Secretary made after a hearing to which (the provider) was a party;' (2) the action was commenced within 60 days after the mailing of the notice of decision by the Secretary or within such time as the Secretary may allow; and (3) the action was filed in an appropriate court. 42 U.S.C. § 405(g) (1979). 52 Northlake, 654 F.2d at 1240. 53 This court then pointed out that the Supreme Court in its Salfi opinion held that the first requirement of § 405(g) jurisdiction is a final decision by the Secretary after a hearing and this first requirement is central to the requisite grant of subject-matter jurisdiction Salfi, 422 U.S. at 764, 95 S.Ct. at 2466. In the cases consolidated in this appeal, as well as in Northlake, the plaintiff Medicare-Medicaid providers did not exhaust their available administrative remedies prior to the filing of these lawsuits and thus have not received the final decision of the Secretary required for 42 U.S.C. § 405(g) jurisdiction. 54 The plaintiffs in the case at bar argue, however, as did Northlake Hospital, that they fall within an exception to the final decision requirement. 55 In Mathews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976) the Supreme Court found that there are two prerequisites to a final decision under § 405(g). The first of these prerequisites is the presentation of a claim for benefits. This element is nonwaivable and absent such a claim there can be no appealable decision of any type. Id. at 329, 96 S.Ct. at 900. In each of the cases at bar the parties challenge the decision to terminate their provider status along with challenging the administrative body's failure to allow them a pre-termination hearing and thus they have satisfied this first element. 56 The second prerequisite to a final decision under § 405(g) set forth in Mathews, 424 U.S. at 329, 96 S.Ct. at 900, requires the exhaustion of administrative remedies and this element is waivable by the Department of Health and Human Services. Id. at 328, 96 S.Ct. at 899. In addition to being waivable by the Department the decision of the United States Supreme Court in Mathews establishes that this exhaustion requirement may also be waived where the plaintiff raises a colorable constitutional challenge which is entirely collateral to his claim of entitlement and the claimant's interest in having this issue resolved is so great as to make deference to the agency's judgment inappropriate. See Mathews, 424 U.S. at 331, 332, 96 S.Ct. at 900-01; Northlake, 654 F.2d at 1243. 57 In the instant cases as in Northlake the plaintiffs argue that the alleged due process violation arising out of the failure to afford a pre-termination hearing constitutes a colorable constitutional claim sufficient to permit a waiver of the exhaustion prerequisite of § 405(g). Similar arguments regarding constitutional entitlement to a pre-termination hearing under the due process clause were specifically rejected by this court in Northlake, 654 F.2d at 1241-1243 and the rationale of that opinion rejecting the constitutional due process claim is equally applicable to the cases consolidated in this appeal. 58 Each of the plaintiffs in the cases consolidated herein was afforded advance notice of the decision to decertify their respective facility as a Medicare and/or Medicaid provider. In addition, each was informed of the deficiencies upon which the decision to decertify the facility was based and was afforded an opportunity for a resurvey to demonstrate any corrections made in the listed deficiencies and each was permitted to submit documentation explaining or refuting the existence of the deficiencies. In the case of Care Inns, Inc. the facility was also permitted to meet with personnel of the Department of Health and Human Services and submit evidence of compliance with applicable conditions of participation prior to termination. Weighing the benefits of these procedural protections, the interest in efficient and not unduly expensive administrative procedures as well as the strong government interest in the protection of Medicare and Medicaid recipients against the risk that a facility will be erroneously terminated as a Medicare or Medicaid provider, we conclude that the plaintiffs have failed to establish a colorable claim of constitutional entitlement to a pre-termination hearing. 59 The plaintiffs have argued that the prior decision of this court in Hathaway v. Mathews, 546 F.2d 227 (7th Cir. 1976) supports the contrary conclusion that the plaintiffs are constitutionally entitled to a pre-termination hearing. 16 The Hathaway decision predated the later Northlake decision and was factually distinguished in a footnote therein. 654 F.2d at 1243 n.10. In Hathaway the Medicaid facility was terminated from the Medicaid program by the U. S. Department of Health and Human Services acting independent of the state Medicaid agency and it did not receive notice of the alleged deficiencies, nor was a post-termination hearing available to it under the applicable regulations. This is contrasted with the fact situations presented here, wherein each of the plaintiffs received written notice of the alleged deficiencies and had post-termination procedural protections available to them. To the extent that Hathaway remains good law within the circuit it is limited to its unique factual situation, including a lack of prior notice of deficiencies from the terminating agency and the absence of post-termination appeal procedures. 60 Laura Hathaway, plaintiff in case No. 81-1507 consolidated in this appeal, specifically argues that the facts of her case more nearly resemble those of the earlier Hathaway decision than those of Northlake. The Hathaway case consolidated in this appeal differs from the earlier Hathaway decision, however, because in the case at bar the facility was decertified initially by the state Medicaid agency acting on its own rather than on behalf of the U. S. Department of Health and Human Services and it had procedures available to it through which it could challenge the state's determination. In addition, the federal Department of Health and Human Services merely deferred reimbursement to the state for services rendered by R. N. Nursing Home pending resolution of the decertification question. The fact that the state Medicaid agency failed to challenge the deferral of repayment does not provide the home with a colorable constitutional claim upon which it could assert jurisdiction in a federal court. 61 In light of our holding that the plaintiffs have not presented a colorable constitutional claim to a due process pre-termination hearing, we conclude that the district courts in the present action did not have subject matter jurisdiction over the consolidated cases pursuant to 42 U.S.C. § 405(g).
62 In the alternative, the plaintiffs have asserted that the district courts had mandamus jurisdiction over the cases consolidated in this appeal pursuant to the provisions of 28 U.S.C. § 1361. Plaintiffs contend that § 916 of the Omnibus Reconciliation Act of 1980, P.L. 96-499 creates a clear right to a pre-termination hearing and thus the exercise of mandamus jurisdiction on the part of the district courts was proper. 63 The defendants respond to these arguments by contending that 42 U.S.C. § 405(h) 17 is intended to preclude the exercise of mandamus jurisdiction in the same manner as it precludes the exercise of federal question jurisdiction over decisions appealable under the provisions of the Social Security Act. They argue that consistent with principles of statutory construction § 405(h) should be read as encompassing the statutory addition of mandamus jurisdiction within the jurisdictional exclusions of § 405(h). 64 The defendants further argue that § 916 of the Omnibus Reconciliation Act does not create a clear right to a pre-termination hearing under the facts of these cases even if the district courts are entitled to exercise mandamus jurisdiction over the decisions made under the Social Security Act and thus the exercise of mandamus jurisdiction in these consolidated cases was inappropriate. 65 Independent of the question of whether § 405(h) bars mandamus jurisdiction in cases brought under the provisions of the Social Security Act, it is well established in case law that mandamus jurisdiction may be invoked only where the following three elements are present: 66 Mandamus may properly issue only when three elements are present: 67 (1) a clear right in the plaintiff to the relief sought; 68 (2) a plainly defined and peremptory duty on the part of the defendant to do the act in question; 69 (3) no other adequate remedy available. 70 Lovallo v. Froehlke, 468 F.2d 340, 343 (2nd Cir. 1972). Cervoni v. Secretary of Health, Education and Welfare, 581 F.2d 1010, 1019 (1st Cir. 1978). 71 Regarding the first of these elements it is also established that the mandamus remedy is only available under exceptional circumstances of clear illegality. Id. at 1019. 72 When the performance of official duty calls for a construction of governing law, the (federal) officer's interpretation will not be disturbed by a writ of mandamus unless it is clearly wrong and his official action is arbitrary and capricious. 73 Association of American Medical Colleges v. Califano, 569 F.2d 101, 110 n.80 (D.C.Cir.1980). 74 The plaintiffs in the cases consolidated in this appeal assert that recent changes made in the Social Security Act by § 916 of the Omnibus Reconciliation Act of 1980, P.L. 96-499 established their clear right to a pre-termination hearing. Specifically the plaintiffs contend that subpart (a) of § 916 is applicable to the case at bar. That section provides: 75 ALTERNATIVE TO DECERTIFICATION OF LONG-TERM CARE FACILITIES OUT OF COMPLIANCE WITH CONDITIONS OF PARTICIPATION; LOOK BEHIND AUTHORITY 76 SEC. 916. (a) Section 1866 of the Social Security Act is amended by adding at the end thereof the following new subsection: 77 (f)(1) Where the Secretary determines that a skilled nursing facility which has filed an agreement pursuant to subsection (a)(1) or which has been certified for participation in a plan approved under title XIX no longer substantially meets the provisions of section 1861(j), and further determines that the facility's deficiencies(A) immediately jeopardize the health and safety of its patients, the Secretary shall provide for the termination of the agreement or of the certification of the facility and shall provide, or 78 (B) do not immediately jeopardize the health and safety of its patients, the Secretary may, in lieu of terminating the agreement or certification of the facility, provide 79 that no payment shall be made under this title (and order a State agency established or designated pursuant to section 1902(a)(5) of this Act to administer or supervise the administration of the State plan under title XIX of this Act to deny payment under such title XIX) with respect to any individual admitted to such facility after a date specified by him. 80 (2) The Secretary shall not make such a decision with respect to a facility until such facility has had a reasonable opportunity, following the initial determination that it no longer substantially meets the provisions of section 1861(j), to correct its deficiencies, and, following this period, has been given reasonable notice and opportunity for a hearing. 81 The plaintiffs argue that subpart 2 of the new subsection requires a hearing prior to the date of any termination or decertification of a Medicare skilled nursing facility. 82 The plaintiffs' interpretation of subpart 2 is based upon their conclusion that the phrase such a decision refers to the Secretary's determination of whether the facility's deficiencies immediately jeopardize the health and safety of the patients. This construction of subpart 2 is essential to the plaintiffs' interpretation of the statutory provision because a construction of the phrase such a decision as applying solely to the Secretary's decision in subpart (1)(B) of whether to impose an alternative sanction would require a pre-termination hearing only in those situations where the Secretary determines that the facility's deficiencies do not immediately jeopardize the health and safety of the patients. In each of the cases consolidated in this appeal in which the Secretary determines that a facility did not substantially meet the Medicare conditions of participation the Secretary concluded that a situation of immediate jeopardy existed. 18 83 To construe the phrase such a decision in the manner in which the plaintiff asserts is appropriate leads one to the anomalous situation of permitting a skilled nursing facility to continue treating patients under conditions which the Secretary has concluded place the patients' very health and safety in immediate jeopardy while the facilities are afforded a time consuming pre-termination hearing. It is ludicrous to believe that the legislature intended to permit the appeal procedures to act as a roadblock to the prompt removal of patients for their own protection and safety from substandard facilities. 84 The plaintiffs argue that the need for haste in terminating a skilled nursing facility is not a purpose of the new provision because considerable delay occurs under the present procedure during the resurvey and notice period. The existence of this time-lag does not justify further delay in termination or nonrenewal but merely supports our earlier conclusion that the current procedures already afford the plaintiffs more than adequate due process. 85 The plaintiffs' construction of the phrase such a decision is also inconsistent with the use of the mandatory term shall in subsection (1)(A) of the provision. The use of the mandatory term shall requires the termination sanction in cases where the conditions of immediate jeopardy to health and safety are found to exist. 86 Thus we conclude that a common sense reading of the statutory provision leads to the conclusion that a pre-termination hearing is not required where the Secretary determines that a situation of immediate jeopardy exists. 87 The limited legislative history available concerning the code provisions added by § 916 of the Omnibus Reconciliation Act supports our interpretation of the legislation. The House Report on Public Law 96-499 explains that the purpose of the new Code provisions was to provide an alternative sanction to termination in cases where immediate jeopardy to patients' health and safety did not exist: 88 At present, the only sanction available in many jurisdictions to penalize a skilled nursing facility which is out of compliance with the conditions of participation in the Medicare and Medical (sic) programs is to terminate that facility's participation in the program. Frequently, this sanction involves an overriding hardship to program beneficiaries which makes its use desirable (sic), if not impossible 89 In the case of facilities that are substantially out of compliance but do not have deficiencies that immediately jeopardize the health and safety of their patients, the section gives the Secretary authority to impose an intermediate sanction, short of the more drastic step of program termination. 90 Under the provision, a facility would have an opportunity to develop and implement a plan for correcting its deficiencies, in accordance with existing Medicare policies on the correction of provider deficiencies. Following the facility's failure to satisfactorily meet this requirement, the Secretary could apply intermediate sanctions, but only after the Secretary has provided the facility with an opportunity to present its case at an informal hearing consistent with current practices. If the facility seeks further administrative or judicial appeals, the sanction would remain in effect while the appeals were pending. 91 House Report No. 96-1167, reported in (1980), U.S.Code Cong. & Ad.News, 96th Congress 2d Sess. 5526, 5569. 92 Later in that same report, however, it is made clear that the prompt termination sanction was intended to remain applicable in cases of immediate jeopardy. 93 (T)he committee believes that this sanction should not be used as an alternative in situations where a noncomplying facility's deficiencies place the health and safety of its patients in immediate jeopardy; instead, the response for the Secretary in such cases must be to deny all reimbursement of additional patients and to make appropriate arrangements for the orderly, planned transfer of existing patients. 94 Id. at 5570. 95 The legislative history and plain language of § 916(a) of the Omnibus Reconciliation Act mandate the conclusion that the Code provision does not create a clear right on the part of the plaintiffs to a pre-termination hearing in situations where the Secretary determines that the facility's deficiencies placed the patients' health and safety in immediate jeopardy. 96 The plaintiffs argue that several of the district courts found that, in fact, no situation of immediate jeopardy or emergency existed. This factual conclusion is more appropriately deferred to the expertise of the licensing agency and it is not a proper consideration for a court under mandamus jurisdiction where a clear right to a pre-termination hearing is required and a federal officer's interpretation will not be disturbed unless it is clearly wrong. Association of American Medical Colleges v. Califano, 569 F.2d at 110 n.80. 97 Deference to the expertise of professionals who are trained and experienced in evaluating the compliance of Medicare or Medicaid facilities with federal regulations is consistent with recent decisions of the United States Supreme Court cautioning against a substitution of a judge's opinion for that of a professional. Most recently in Youngberg v. Romeo, --- U.S. ----, 102 S.Ct. 2452, 73 L.Ed.2d 28 (1982) the Court made the following comments regarding deference to a professional's opinion as to appropriate patient care: 98 In determining what is reasonable-in this and in any case presenting a claim for training by a state-we emphasize that courts must show deference to the judgment exercised by a qualified professional. By so limiting judicial review of challenges to conditions in state institutions, interference by the federal judiciary with the internal operations of these institutions should be minimized. Moreover, there certainly is no reason to think judges or juries are better qualified than appropriate professionals in making such decisions. See Parham v. J. R., 442 U.S. 584, 607 (99 S.Ct. 2493, 2506-2507, 61 L.Ed.2d 101) (1979); Bell v. Wolfish, supra, 441 U.S. (520) at 544 (99 S.Ct. 1861 at 1877, 60 L.Ed.2d 447) (Courts should not  'second-guess the expert administrators on matters on which they are better informed.' ). 99 --- U.S. at ----, 102 S.Ct. at 2460. 100 Absent a clear right to a pre-termination hearing, mandamus jurisdiction is not appropriate in the consolidated cases in this appeal and thus we hold that the district courts were without jurisdiction over these cases. 19 101 Because we determine that no clear right existed entitling the plaintiffs to a pre-termination hearing, it is not necessary to determine whether 42 U.S.C. § 405(h) precludes mandamus jurisdiction as well as federal question jurisdiction in these cases. PENDENT JURISDICTION 102 The sole issue remaining for our consideration is whether the district court in the Care Inns case properly exercised pendent jurisdiction when it determined that the Indiana Administrative Adjudication Act requires a hearing prior to the Indiana Department of Public Welfare's termination of a provider of skilled and intermediate nursing services from participating in the Medicaid program. It is axiomatic that pendent jurisdiction is a doctrine of discretion, not of plaintiff's right. United Mineworkers of America v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966). Further it is established that a federal court may exercise pendent jurisdiction only where there exists a federal claim of substance sufficient to confer subject matter jurisdiction on the court. Id. at 725, 86 S.Ct. at 1138. 103 In light of our holding that the district courts were without subject matter jurisdiction over the cases consolidated in this appeal, it is equally clear that the district court could not exercise pendent jurisdiction over the state claim concerning entitlement to a pre-termination hearing under the relevant Indiana Code provisions. Thus the orders of the district court entered in these consolidated cases are REVERSED.