Cochise Order

Case 4:15-cv-00305-CKJ Document 16 Filed 07/30/15 Page 1 of 19
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
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Cochise Regional Hospital,

Plaintiff,
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v.
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Sylvia Mathews Burwell, et al.,
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No. CV-15-00305-TUC-CKJ
ORDER
Defendants.
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Plaintiff Cochise Regional Hospital (CRH) operates a twenty-five bed acute-care
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hospital in Douglas, Arizona. On May 7, 2015, the Centers for Medicare & Medicaid
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Services (CMS) notified CRH that it was terminating CRHs provider agreement in the
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Medicare Program on July 10, 2015. CRH filed a Complaint on July 16, 2015.1 (Doc.
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1.)
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The Complaint raises a single Counta claim for a declaratory judgment that
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Defendants have violated CRHs procedural due process rights guaranteed by the Fifth
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and Fourteenth Amendments of the United States Constitution. (Doc. 1.) CRH also
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seeks injunctive relief enjoining Defendants from terminating any Medicare payments to
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CRH.
(Id.) The day it filed its Complaint, CRH filed an Ex Parte Motion for a
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The Complaint names Sylvia Mathews Burwell, Secretary of the United States
Department of Health and Human Services (HHS); Marilyn Tavenner, the Administrator
of CMS, a federal HHS agency responsible for administering Medicare, Medicaid and
other health-related programs; and Cara M. Christ, M.D the Director of the Arizona
Department of Health Services (ADHS). All Defendants are sued in their official
capacity. The Court will refer to Defendants as HHS, CMS (federal Defendants), and
ADHS.
Temporary Restraining Order (TRO) and Order to Show Cause for a Preliminary
Injunction. (Docs. 3, 4.) This Court set a hearing on the TRO for July 22, 2015 and
directed CRH to notify Defendants. (Doc. 11.)
The Court held a hearing on the TRO July 22; counsel for CRH appeared, as well
as counsel for Defendants HHS and CMS, the federal Defendants. In addition, counsel
for ADHS attended.2 (Doc. 15.)
Defendants; there are no factual issues in dispute. The Court took the matter under
advisement.
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The Court heard oral argument from CRH and
The Court will deny the Motion for a TRO.

I.
Background
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A.
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Up until July 10, 2015, CRH had a contract to participate in the Medicare
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program. Participation in Medicare is governed by a complex statutory and regulatory
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scheme, and certain hospitals in rural areas can qualify as critical access hospitals (CAH).
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See 42 U.S.C. 1395i4(c)(2)(B). To qualify to receive payments under the Medicare
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program, a CAH must be certified and in substantial compliance with the conditions of
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participation (COP) for the programs under federal law. 42 C.F.R. 485.601-485.647;
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see 42 C.F.R. 488.3.
Statutory and Regulatory Framework
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The COP requirements include that a CAH provide nursing services to meet the
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needs of its patients, provide care in accordance with its written policies and procedures,
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and provide patients with medications ordered by their physicians. See 42 C.F.R.
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485.635. To determine the compliance of certain hospitals, CMS, a division of HHS,
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arranges for unannounced onsite inspections, known as surveys, to identify instances of
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noncompliance, known as deficiencies. 42 U.S.C 13965i3(h)(2), 42 CFR 488.7(d).
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State survey agencies also conduct limited surveys or investigations in response to
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complaints made by patients and others. Surveys are conducted by state survey agencies
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on behalf of CMS. See 42 C.F.R. 488.10, 11.
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At the time of the hearing, ADHS had not been served.

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Survey agencies certify that a hospital is not in compliance with the applicable
COPs where the deficiencies are of such character as to substantially limit the
[hospitals] capacity to furnish adequate care or which adversely affect the health and
safety of patients. 42 C.F.R. 488.24(b). The determination whether a hospital is in
compliance with a particular COP depends upon the manner and degree to which the
[hospital] satisfies the various standards within each [COP]. 42 C.F.R. 488.26(b).
If, based on the survey results, CMS determines that a hospital is not in
compliance with the COPs, the hospital may be given the opportunity to submit a plan of
correction and a reasonable time to correct its deficiencies. See 42 C.F.R. 488.28. The
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survey agency will then conduct a follow-up or revisit survey to determine whether the
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hospital has corrected the deficiencies and is in compliance with the COPs.
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CMS can terminate a hospitals Medicare provider agreement if it finds the
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hospital no longer meets the applicable COPs. See 42 U.S.C. 1395cc(b)(2)(A); 42
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C.F.R. 489.53(a)(3). The federal Defendants assert that termination does not require a
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hospital to close or to discharge its patients; rather, the hospital cannot receive Medicare
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payments unless it prevails in its administrative appeal or it demonstrates it has corrected
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the health and safety violations and provides CMS with reasonable assurance of its
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future compliance. 42 C.F.R. 489.57. Moreover, Medicare payments for inpatients do
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not end on the date the contract terminates; for inpatients admitted to the hospital before
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the effective termination date, payments continue up to 30 days. 42 C.F.R. 489.55(a).
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When a hospital provider agreement is terminated, the hospital is entitled to
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review through a hearing as provided in 42 U.S.C. 405 and to judicial review of the
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Secretarys final decision after hearing as provided in 42 U.S.C. 405(g). See 42 U.S.C.
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1395cc(h)(1)(A); 42 C.F.R. 488.24(c). The first step in the administrative review
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process is a hearing before an Administrative Law Judge (ALJ), who conducts a de novo
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proceeding to determine whether substantial evidence supports CMS determination that
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the hospital was not in compliance with the COPs. The hospital can request review of the
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ALJs decision by the Departmental Appeals Board (Board). See 42 C.F.R. Part 498. A
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final Board decision upholding CMSs termination decision is subject to judicial review
pursuant to 42 U.S.C. 1395cc(h), incorporating 42 U.S.C. 405(g).
B.
As noted, CRH is a small regional hospital in Douglas, Arizona. It was purchased
from Southwest Arizona Medical Center (SAMC) in January 2014 and changed the name
to CRH. CRH asserts that it has been subjected to unfair treatment; specifically, in 2012,
the ADHS made only 2 site visits to SAMC. In 2013, ADHS made no site visits to
SAMC. Since the renaming of SAMC to CRH, ADHS has made a total of 19 site visits to
the hospital. Most hospitals have only 1 site visit per year. (Doc. 1.)
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Factual Background
1.
The Surveys
The federal Defendants summarize the survey findings from four visits to CRH.
(Doc. 12.)
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The February 19, 2014 survey showed a failure to ensure that patients with doctor
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orders for telemetry monitoring were monitored by competent and trained staff because
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the alarms were not functioning and staff was unable to trouble shoot the monitors; and
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one patient had numerous skin tears, pressure sores and wounds, but nursing staff did not
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obtain physician orders to treat the wounds for over 36 hours until the surveyor observed
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the wounds. This constituted immediate jeopardy to patients.
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The June 30, 2014 survey showed that CRH admitted a patient with Lou Gehrigs
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disease and who was suffering worsening shortness of breath. The nursing staff was
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unfamiliar with the ventilator and stated that it was missing a circuit or part necessary for
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certain functions. In addition, CRH did not have either risperadol or gentamicin in stock
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to administer to patients as ordered by their physicians, although both medications were
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on the formulary used by the hospital. The CRH pharmacist told the surveyors that under
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the rules of the state pharmacy board, only he, as the licensed pharmacist could accept
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deliveries of medications, but because of restrictions on the number of hours and specific
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times he could be at CRH, he was not always available to accept deliveries other than the
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scheduled weekly deliveries.
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The October 16, 2014 survey showed that a nurse failed to administer medications
as ordered by the physician for a patient with a high risk pregnancy who presented to
CRHs emergency department with pre-term labor. The nurse also failed to inform the
physician when the patient reported a pain level of 10 out of 10 and continued
contractions. In addition, because CRHs pharmacy was closed, another patient received
only one of the two tablets ordered by his physician because the medication was out of
stock.
The March 26, 2015 survey revealed that a patient was admitted in February 2015,
with diagnoses including congestive heart failure and renal disease requiring dialysis; he
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was admitted with orders for telemetry. CRH does not provide dialysis, so the patient was
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to go to a dialysis clinic. Nurses did not obtain an order to discontinue the patients
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telemetry monitoring before taking him to the emergency department to await
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transportation. He was left in the emergency department for approximately 1 hours
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without monitoring, except by the admissions clerk. When he got into the van, he became
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unresponsive and was brought back into the emergency department with no pulse;
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cardiopulmonary resuscitation was performed. He was placed on a ventilator, airlifted to
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Tucson, and later died. In addition, nurses failed to initiate oxygen for another patient
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with low oxygen saturation, which has a high risk of harm; failed to follow a physician
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order for yet another patients oxygen administration; failed to follow policies to ensure
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that newly hired registered nurses, including new graduates, could provide care in
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accordance with the nursing standards of care; and failed to ensure that nurses
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administering potentially dangerous drugs (Vencuronium, a skeletal muscle relaxant and
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Etomidate, a hypnotic used for the induction of general anesthesia) and obtaining arterial
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blood gases were competent to do so.
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2.
CMS Termination and CRH appeal.
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On May 8, 2015, CRH received a letter from CMS informing CRH that CMS was
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terminating CRHs Medicare provider agreement due to violation of 42 CFR 485.635
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Condition of participation: Provision of services. (Doc. 12-1.) The letter referred to
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surveys beginning in February 2014 that documented violations of Medicare Conditions
of Participation, the opportunity to correct the cited deficiencies, and the survey
completed on March 26, 2015. The letter included an attachment with descriptions of
deficiencies found during the survey. CRH characterizes these as findings of inadequate
nursing services.
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The termination letter also informed CRH that it had 60 days in which to appeal
CMSs decision. CRH filed an appeal on June 11, 2015. That appeal letter states:
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Per the terms outlined in the termination notice dated 5/7/2015, this letter
and accompanying documentation serve as formal request for a hearing
before and [sic] administrative law judge (ALJ) of the Department Appeals
Board in accordance with 42 CFR 498.40 through 498.78.
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The 7-page attachment is entitled CMS Response Plan06/2015, Tag C000. It states in
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the opening paragraph:
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In regard to Tag C000 and on behalf of the Douglas Community Hospital

dba Cochise Regional Hospital (CRH) clinical staff, we would like to
formally convey that we do not dispute the surveys findings and view this
as a critical opportunity to resolve problems and to establish an accurate,
sustainable workflow, which will avert these issues in the future. In
conjunction with our acknowledgement of all deficiencies noted in the
survey, we are appealing the decision to terminate CMS payments based on
tangible, substantial challenges faced by the hospital from January 2014 to
present.
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CRH alleges that over the next few weeks, it attempted on numerous occasions to
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get in touch with CMS to discuss the appeal and to see if CRH could do anything in order
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to resolve the situation. CRH was finally able to speak with Rufus Arther on July 2, 2015.
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On July 8, 2015, CRHs representatives flew to San Francisco to meet with Mr. Arther in
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person to present a plan of correction and discuss the disparity in the level of oversight of
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CRH. Mr. Arther advised CRHs representatives that all factors would be taken under
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advisement. CRH asserts that the next day Mr. Arther notified CRH that CMS would
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continue with its plans to terminate CRHs Medicare provider agreement effective July
10, 2015. CRH asserts that this was despite the progress made by the hospital and the
fact that CRH is the only comprehensive healthcare facility in Douglas, Arizona.
On June 29, 2015, the ALJ issued an Acknowledgment and Prehearing Order
setting deadlines for the parties to make prehearing exchanges of proposed exhibits and
to identify their expected witnesses, among other things. The Order states that a party
may file a motion for expedited hearing, explaining why it would be in the interests of
due process to expedite the hearing. As of the date of the hearing on the TRO, CRH had
not requested an expedited hearing.
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Plaintiff filed this action on July 16, 2015. The Ex Parte Motion for a Temporary
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Restraining Order (TRO) and Order to Show Cause for a Preliminary Injunction asks this
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Court to issue a TRO enjoining Defendants from terminating CRHs Medicare provider
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agreement, denying payment for new Medicare admissions, denying payment for existing
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Medicare residents, prohibiting CRH from admitting publicly assisted and private paying
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residents and readmitting residents on medical leave and to order a preliminary
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injunction hearing within the applicable time frame. (Doc. 4 at 2.)
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The federal Defendants oppose the requests on the grounds that (1) the Court lacks
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subject matter jurisdiction over the claim, and (2) CRH does not meet the requirements
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for either a TRO or a preliminary injunction. (Doc. 12.)
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II.
Subject Matter Jurisdiction
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Subject-matter jurisdiction involves the courts statutory or constitutional power
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to adjudicate the case. Steel Co. v. Citizens for a Better Envt, 523 U.S. 83, 89 (1998).
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Congress has generally granted district courts jurisdiction to hear cases involving federal
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questions, see 28 U.S.C. 1331.
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jurisdiction for specific types of cases. See, e.g ., Shalala v. Ill. Council on Long Term
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Care, Inc., 529 U.S. 1, 59 (2000). The party asserting jurisdiction has the burden to
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establish it. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994).
But Congress can limit courts subject-matter
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When subject-matter jurisdiction is challenged, a court may consider evidence
beyond the allegations in the complaint to resolve the jurisdictional issue. See
Trentacosta v. Frontier Pacific Aircraft, 813 F.2d 1553, 1558-59 (9th Cir. 1987). If the
court determines that it lacks subject-matter jurisdiction, it must dismiss the complaint.
See, e.g., Arbaugh v. Y & H Corp., 546 U.S. 500, 514 (2006). Therefore, the Court
addresses subject matter jurisdiction at the outset.
CRH asserts federal question jurisdiction under 28 U.S.C. 1331. (Docs. 1, 4.)
But two special jurisdictional provisions apply to actions arising under the Medicare
statutes. See 42 U.S.C. 405(h), 405 (g); see also 42 U.S.C. 1395ii (incorporating 42
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U .S.C. 405(h) into the Medicare statutes). Section 405(h), provides that No action
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against the United States, the [Secretary], or any officer or employee thereof shall be
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brought under section 1331 or 1346 of Title 28 to recover on any claim arising under this
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subchapter. 42 U.S.C. 405(h). This means that 1331 jurisdiction is unavailable for
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claims arising under the Medicare Act.
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Medicare Act also provides jurisdiction only after a claimant has pursued its
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administrative proceeding to final decision: Any individual, after any final decision of
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the [Secretary] made after a hearing to which he was a party may obtain a review of
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such decision by a civil action commenced within sixty days. 42 U.S.C. 405(g).
See Illinois Council, 529 U.S. at 7.
The
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An action arises under the Medicare statutes if it is inextricably intertwined with
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a claim for Medicare benefits; this is a broad test. Heckler v. Ringer, 466 U.S. 602,
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614-15, (1984); see, e.g., Weinberger v. Salfi, 422 U.S. 749, 760-61 (1975); Puerto Rican
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Ass'n of Physical Med. & Rehab., Inc. v. United States, 521 F.3d 46, 48 (1st Cir.2008)
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([A] claim arises under the ... Medicare Act if the standing and the substantive basis for
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the claim derive from that statute.).
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The Court finds that this is an action arising under the Medicare Act because it is
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inextricably intertwined with termination of Medicare benefits payable under the
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Medicare Act; CRH does not claim otherwise.
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As the Supreme Court has said [s]ection 405(h) purports to make exclusive the
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judicial review method set forth in 405(g). Illinois Council, 529 U.S. at 10. Therefore,
as to any claim arising under the Medicare Act, the general rule is that ordinary federal-
question jurisdiction is lacking and a claimant must instead proceed by way of a special
review process before raising its claim in court. As descried by the Supreme Court, the
net effect of 405(h) is that it demands the channeling of virtually all legal attacks
through the agency, thereby assuring the Secretary greater opportunity to apply,
interpret or revise policies, regulations, or statutes without possibly premature
interference by different individual courts. Id. at 13.
The Supreme Court has also held, however, that the 405(h) bar does not apply in
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those few cases where it would not lead to a channeling of review through the agency,
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but would mean no review at all. Id. at 17; see also Council for Urological Interests v.
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Sebelius, 668 F.3d 704, 709 (D.C. Cir. 2011) (the Supreme Court has understood section
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405(h) as having only channeling force, not, as the government would have it, foreclosing
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force), citing Bowen v. Michigan Acad. of Family Physicians, 476 U.S. 667, 680 (1986).
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This is sometimes referred to as the Michigan Academy exception.
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CRH does not argue that it meets this exception to 405(h).3 Instead, CRH argues
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that it meets a different exceptionone applying to 405(g)set forth in Mathews v.
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Eldridge. 424 U.S. 319 (1976).
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Therefore, CRH cannot meet the burden to establish jurisdiction pursuant to this
exception. Moreover, it is unlikely that the Michigan Academy exception applies here.
CRH argues that it will close its doors as a result of CMS's decision. But the application
of the exception does not depend on the timing of judicial review; it depends on whether
the plaintiff is entitled to no review at all. It is an exception that does not apply to
isolated delay-related inconvenience; rather, it deals with hardships likely to be found in
many cases because of the way the statute applies generally. Ill. Council, 529 US at 2223. Illinois Council acknowledged that the delay involved in channeling virtually all
claims through the agency comes at a price, namely, occasional delay-related hardship,
but explained that in the context of a massive health and safety program such as
Medicare, this price may seem justified. Id. at 13.
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In Mathews, a social security disability beneficiary had his benefits terminated,
and he filed an action in federal court challenging the constitutionality of the
administrative procedures used; specifically, he sought a pre-termination evidentiary
hearing. Id. at 323-25. The Supreme Court noted that, on its face, 405(g) bars judicial
review of any denial of a claim of disability benefits until after a final decision by the
Secretary following a hearing. Id. at 328. The plaintiff had failed to seek reconsideration
of the initial determination, and the government had not waived the finality requirement;
the government argued that the plaintiff could not invoke 405 (g) for jurisdiction. The
Supreme Court disagreed. Id.
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Citing Weinberger v. Salfi, 422 U.S. 749 (1975), the Court noted that the
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requirement that there be a final decision by the Secretary after a hearing was regarded as
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central to the requisite grant of subject-matter jurisdiction. . . . Mathews, 424 U.S. at
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328. But the Court reasoned that the requirement has two elements and only one is
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jurisdictional.
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[T]his condition consists of two elements, only one of which is purely

jurisdictional in the sense that it cannot be waived by the Secretary in a
particular case. The waivable element is the requirement that the
administrative remedies prescribed by the Secretary be exhausted. The
nonwaivable element is the requirement that a claim for benefits shall have
been presented to the Secretary. Absent such a claim there can be no
decision of any type. And some decision by the Secretary is clearly
required by the statute.
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Id. at 328; see Johnson v. Shalala, 2 F.3d 918, 921-923 (9th Cir. 1993) (A final judgment
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has two elements (1) presentment of a claim to the Secretary, and (2) exhaustion of
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administrative remedies. The presentment requirement is jurisdictional. The exhaustion
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requirement is not jurisdictional; it can be waived by the defendant or the court.).
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The Supreme Court found that the plaintiff had satisfied the non-waivable
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jurisdictional requirement.
It also found that the denial of his request for benefits
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constituted a final decision for purposes of 405(g) jurisdiction over the constitutional
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claim. Mathews, 424 U.S. at 332.
claimants interest in having an issue resolved promptly is so great that deference to the
agency is inappropriate. Id. at 331. The Supreme Court found the plaintiffs claim to be
such a case because his constitutional claim was collateral to his substantive claim for
entitlement and he raised at least a colorable claim that because of his dependency on the
disability benefits, an erroneous determination would damage him in a way not
recompensable through retroactive payments. Id. at 331-32.
The Court noted that cases can arise where a
Thus, if a plaintiff satisfies the requirement that the claim has been presented to
the Secretary, a court considers whether to waive the need to exhaust administrative
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remedies. In determining this issue, courts consider whether (1) the claim advanced is
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collateral to a demand for benefits; (2) exhaustion of remedies would be futile, and
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(3) whether the plaintiff would suffer irreparable harm if required to exhaust its
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administrative remedies. Johnson, 2 F.3d at 921-923.
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CRH argues that its claims qualify for the exception to exhaustion of
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administrative remedies for cases which are entirely collateral to the substantive claim of
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entitlement to benefits. CRH asserts that it has presented its claim to the Secretary and so
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satisfies the first criteria. This is not in dispute. Thus, the Court finds that CRH has met
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the first criteria for the exception to the exhaustion of remedies and will consider the
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remaining criteria.
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CRH argues that its claims in this case are entirely collateral to the claim it is
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pursuing before the CMS and HHS because it is not requesting that this Court in any way
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disturb CMSs determination to terminate its Medicare provider agreement; rather, it
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seeks declaratory judgments that Defendants have violated its procedural due process
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rights, statutory rights under the Medicare Act, and statutory rights under the APA. To
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pursue those claims, CRH seeks temporarily and preliminarily to stay termination of its
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Medicare provider agreement pending termination of those claims and finality of the
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administrative appeal it is expeditiously pursuing.
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CRH asserts that a claim is
collateral if it is not essentially a claim for benefits. Bowen v. City of New York, 476 U.S.
467, 483 (1985).
The federal Defendants argue that the claim here is the same as the claim to be
considered by the ALJ: CRH seeks continued eligibility for benefits. (Doc. 12 at 11.)
Neither party has cited a case where injunctive relief for payment of benefits was sought
in addition to relief that does not involve a claim for benefits.
In Thi of Kansas Highland Park, LLC. v. Sebelius, 2013 WL 4047570, at *8 (D.
Kan. Aug. 2013), the plaintiffs sought declaratory relief regarding termination of a
Medicare provider agreement without due process but also sought injunctive relief to
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preserve the status quo by preventing termination of provider agreements while the
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plaintiff pursued its administrative remedies.
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complaintdenial of procedural due process in the form of a pre-termination hearingto
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be collateral to the substantive challenge to the termination decision. Id. Likewise, this
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Court finds that CRHs Fifth Amendment due process claim is collateral to the claim
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before the ALJ to give CRH additional time to come into compliance with Medicare
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COPs.
The court found the claim in the
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In addition to being a collateral claim, the claim raised in the Complaint must be
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colorable in its showing that the denial of relief will cause irreparable harm and be one
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whose resolution would not serve the purposes of exhaustion; that is, it is futile to exhaust
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the claim. Kildare v. Saenz, 325 F.3d 1078, 1083-85 (9th Cir. 2003).
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[A] colorable showing of irreparable injury is one that is not wholly
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insubstantial, immaterial, or frivolous. Johnson, 2 F.3d at 922. In Kildare, the Ninth
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Circuit held that economic hardship constitutes irreparable harm for purposes of the
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exception. 325 F.3d at 1083. Here, CRH alleges that it would suffer an extreme and
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irreparable harm because it receives 50% of its gross revenues from its participation in
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the Medicare program and without Medicare payments, the hospital cannot operate and
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will be forced to shut down. If the hospital shuts down, it will be difficult, if not
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impossible, for the hospital to reopen. CRH would have trouble opening due to two
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factors: (1) the impact of negative cash flow, and (2) the need for CRH to comply with all
the new hospital standards that the existing hospital is not required to adhere to. Federal
Defendants do not dispute these assertions. The Court finds that CRH sufficiently alleges
irreparable harm.
As to futility, CRH asserts that exhaustion of administrative remedies would
clearly be futile in this case. First the ALJ does not have the authority to adjudicate
constitutional claims, Oak Park Healthcare Center v. Centers for Medicare and Medicaid
Services, 2009 WL 2148143 (H.H.S. Board Mar. 5, 2009), or to decide whether the
Secretary had the power to terminate CRHs Medicare provider agreement, citing
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Mediplex of Massachusetts, Inc. v. Shalala, 93 F. Supp.2d 88, 93 (D. Mass. Jan. 19,
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1999). CRH further argues that because CMS terminated CRHs Medicare provider
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agreement on July 10, 2015, by the time a hearing is conducted and appeals taken,
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including to this Court to review the propriety of the administrative determination, CRH
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will be out of business.
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The federal Defendants argue that CRH was invited by the ALJ to raise its due
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process arguments for expedited relief and did not do so; therefore exhaustion of the
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claim for pre-termination review is not futile. (Doc. 12 at 11-12.)
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The Court finds that the invitation for an expedited appeal related to the claim
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raised in the appeal and that claim can best be characterized as a request for time to come
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into compliance with the Medicare COPs, not a declaration of violation of constitutional
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rights. Although, it is not clear why CRH has not sought an expedited appeal in this
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matter, at the hearing on the TRO, the federal Defendants did not offer any time frame
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within which the agency process would be completed. Moreover, regarding futility, the
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purposes of exhaustion relate to the agencys need to compile a detailed factual record for
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certain kinds of cases and the need for judicial economy. Johnson, 2 F.3d at 922-23. The
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federal Defendants offer no reason why a detailed record at the administrative level
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regarding a right to a pre-termination hearing is required. The Court finds that CRH has
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met the futility requirement.
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Thus, the Court finds that CRH has established that it meets the Mathews
exception to exhaustion.
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The Court now turns to the request for a TRO.

III.
Temporary Restraining Order
A.
The test for a TRO is the same as one for a preliminary injunction. A preliminary
injunction is an extraordinary and drastic remedy, one that should not be granted unless
the movant, by a clear showing, carries the burden of persuasion. Mazurek v. Armstrong,
520 U.S. 968, 972 (1997) (per curiam) (citation omitted) (emphasis in original). The
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Ninth Circuit has adopted two tests a district court must use when deciding whether to
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grant a preliminary injunction. See Alliance for the Wild Rockies v. Cottrell, 632 F.3d
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1127, 1135 (9th Cir. 2011) (finding District Court made an error of law by employing
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only one test when denying preliminary injunction). First, a plaintiff can attempt to
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satisfy the test adopted by the Supreme Court in Winter v. Natural Resources Defense
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Council, Inc., 555 U.S. 7 (2008). Under the Winter test, a plaintiff must establish that he
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is likely to succeed on the merits, that he is likely to suffer irreparable harm in the
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absence of preliminary relief, that the balance of equities tips in his favor, and that an
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injunction is in the public interest. Id. at 20. If a plaintiff cannot meet the Winter test, he
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may attempt to satisfy the second test by showing there are serious questions going to
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the merits, the balance of hardships tips sharply in his favor, there is a likelihood of
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irreparable injury, and the injunction is in the public interest. Cottrell, 632 F.3d at 1135.
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This latter sliding scale approach allows a plaintiff to make a lesser showing of
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likelihood of success provided he will suffer substantial harm in the absence of relief. Id.
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at 1133.
Legal Standard
25
In addition, because the function of a preliminary injunction is to preserve the
26
status quo pending a determination on the merits, Chalk v. U.S. Dist. Court, 840 F.2d
27
701, 704 (9th Cir. 1988), there is heightened scrutiny where the movant seeks to alter
28
rather than maintain the status quo. Dahl v. HEM Pharms. Corp., 7 F.3d 1399, 1403 (9th
- 14 -
Cir. 1993) (holding that mandatory, as opposed to prohibitory, injunctions are Asubject to
a heightened scrutiny and should not be issued unless the facts and law clearly favor the
moving party@). The Ninth Circuit has held that this type of mandatory injunctive relief
is disfavored, and should be denied unless the facts and law clearly favor the movant.
Anderson v. United States, 612 F.2d 1112, 1114 (9th Cir. 1979). There is also heightened
scrutiny where the injunction would provide substantially all the relief the movant may
recover after a full trial on the merits. Kikumura v. Hurley, 242 F.3d 950, 955 (9th Cir.
2001).
9
10
B.
Factors
1.
Success on the Merits
11
CRH argues that [t]he essence of due process is the requirement that a person in
12
jeopardy of serious loss (be given) notice of the case against him and opportunity to meet
13
it. Mathews, 424 U.S. at 348. The inquiry on a due process challenge is whether the
14
government has deprived the claimant of a protected property interest and whether the
15
governments procedures comport with due process. Lujan v. G & G Fire Sprinklers,
16
Inc., 532 U.S. 189, 195 (2001); American Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 59
17
(1999). CRH asserts that it has a property interest in its Medicare provider agreement.
18
The federal Defendants respond that in Erickson v. U.S. ex rel. Dept. of Health &
19
Human Servs., the Ninth Circuit explicitly held that providers do not possess a property
20
interest in continued participation in Medicare, Medicaid, or the federally funded state
21
health care programs. 67 F.3d 858, 862 (9th Cir. 1995); see Northern Montana Care
22
Center v. Leavitt, No. CV 0497, 2006 WL 2700729, at *11 (D. Mont. Sept. 18,
23
2006)(dismissing due process claim of hospital-based nursing facility because the facility
24
did not have a constitutionally-protected property interest in continued participation in
25
Medicare/Medicaid, citing Erickson). It is the enrollees, not the providers, who are the
26
beneficiaries of the Medicare program. Erickson, 67 F3d at 862. Erickson cited the Tenth
27
Circuit decision in Koerpel v. Heckler, 797 F.2d 858, 86365 (10th Cir.1986), holding
28
that a physician was not the intended beneficiary of the Medicare program and therefore
- 15 -
his injury was not of constitutional significance for the establishment of a protectable
property interest.)
In addition to the lack of a property interest protected by due process, as the
federal Defendants point out, CRH has received all due process to which it is entitled. In
Mathews, the Supreme Court held that a fundamental requirement of due process is an
opportunity to be heard at a meaningful time and in a meaningful manner. Mathews
requires courts to balance (1) the private interest that will be affected, (2) the risk of
erroneous deprivation if the procedures are used, and (3) the probable value of additional
procedures. 424 U.S. at 334-35. [T]he overwhelming majority of authorities (including
10
all or virtually all appellate decisions) to have addressed the issue have concluded that
11
Medicare providers enjoy no constitutional right to a pre-termination hearing. GOS
12
Operator, LLC v. Sebelius, 843 F. Supp. 2d 1218, 1233-34 (S.D. Al. 2012)(reviewing the
13
circuits and denying providers motion for injunctive relief); see e.g., Varandani v.
14
Bowen, 824 F.2d 307, 310 (4th Cir.1987); Cathedral Rock of N. College Hill, Inc. v.
15
Shalala, 223 F.3d 354, 364-65 (6th Cir. 2000); Northlake Commy Hosp. v. United States,
16
654 F.2d 1234, 124143 (7th Cir.1981).
17
In this case CRH has received numerous surveys and the opportunity over
18
approximately one year to correct deficiencies. It received a termination notice and
19
opportunity to contest the termination, including a face to face meeting with the CMS
20
decisionmaker. And, it was invited to submit an expedited appeal, which it has not done.
21
Finally, the Court finds little risk of an erroneous termination, especially in view
22
of CRHs decision not to contest the deficiencies noted in the surveys. Moreover, CRH
23
points to no statutory or regulatory language regarding an entitlement to additional time
24
to bring its nursing care into compliance with Medicare COPs.
25
The Court finds that in view of the lack of a property interest in the provider
26
agreement and lack of entitlement to a pre-termination hearing, CRH cannot meet the test
27
for a TRO; specifically, it cannot show a likelihood of success on the merits or even
28
serious questions going to the merits. Moreover, CRH is subject to a heightened TRO
- 16 -
standard because it seeks to enjoin termination of the contract and payment under the
contract after the contract was terminated. Termination was effective July 10, and CRH
did not file its Complaint or Motion until July 16. In other words, CRH does not seek to
maintain the status quo; the TRO sought would alter the status quo. The facts and law do
not clearly favor CRH. See Dahl, 7 F.3d at 1403.
6
7
Because CRH does not meet these TRO factors, the Court need not consider the
remaining factors. Nevertheless, it will do so.
2.
Irreparable Harm
CRH asserts that it will be irreparably harmed if CMSs termination of CRHs
10
Medicare provider agreement and payments to CRH are allowed to continue. Medicare
11
payments are 50% of CRHs gross revenues, and without Medicare payments, the
12
hospital cannot operate and will be forced to shut down. The City of Douglas, CRHs
13
employees, patients and their families, and the community as a whole will be irreparably
14
harmed. If CRH closes, the 20,000 people living in Douglas, Arizona, and Border Patrol
15
personnel and detainees who use the hospital will be without access to top quality
16
medical care.
17
The federal Defendants argue that even substantial monetary loss or financial
18
hardship do not, without more, constitute irreparable harm. Sampson v. Murray, 415 U.S.
19
61, 90 (1974); Elias v. Connett, 908 F.2d 521, 526-27 (9th Cir. 1990). The harm to CRH
20
is loss of revenue. The further hardships described by CRH are not, in fact, hardships to
21
CRH. See Oulton v. Bowen, 674 F. Supp. 429, 437 (W.D.N.Y. 1987).
22
The federal Defendants also dispute that patients will be without medical care;
23
they assert there are options for care. For example, Copper Queen Community Hospital is
24
in Bisbee, Arizona, about 20 miles from CRH, and operates a clinic in Douglas. More
25
importantly, difficulties faced by the community or patients are not the kind of harm
26
needed to enjoin the Agencys decision. See, e.g., OBannon v. Town Court Nursing
27
Center, 447 U.S. 773, 785-90 (1980) (rejecting arguments of harm based on harm to
28
- 17 -
patients of institution that has been determined to be unqualified); Northlake Community
Hospital, 654 F.2d at 1242.
3
4
The Court finds that even if there is significant harm to CRH, it does not carry its
heightened burden to show irreparable harm.
3.
Balance of the Equities and the Public Interest
CRH argues that maintaining the health and safety of the residents of CRH by
preventing an unnecessary transfer is in the public interest. Mediplex of Massachusetts,
Inc., 39 F. Supp. 2d at 101. And where, as here, there is no immediate jeopardy to the
residents, the interests of avoiding a harmful disruption to their lives outweighs the
10
regulatory interests involved.
11
Although CRH asserts there will be no harm to Defendants, Defendants assert that
12
the government has a strong interest in expeditious provider terminations to ensure the
13
wellbeing of elderly and disabled enrollees and that such an interest is much weightier
14
than the private interests involved. See Cathedral Rock of N. College Hill, Inc., 223 F.3d
15
at 365 (6th Cir. 2000) (citing Town Court Nursing Ctr., Inc. v. Beal, 586 F.2d 266, 277
16
(3d Cir. 1978)). They point out that permitting CRH to continue receiving funds while the
17
claim makes its way through the administrative process would be to allow the provider to
18
continue putting Medicare enrollees in harms way.
19
In view of CRHs decision not to dispute the findings of CMS, the Court finds that
20
the governments interest outweighs that of CRH and CRH cannot show that the balance
21
of the equities tips in its favor or that the injunction would be in the public interest.
22
In sum, the Court finds that CRH cannot meet its heightened burden to establish
23
that it is entitled to a TRO. The Court does not find it necessary to set a hearing on a
24
Motion for a Preliminary Injunction.
25
///
26
///
27
///
28
///
- 18 -
IT IS ORDERED that CRHs Ex Parte Motion for a Temporary Restraining
Order (TRO) and Order to Show Cause for a Preliminary Injunction (Docs. 3, 4) are
denied.
Dated this 30th day of July, 2015.
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- 19 -

Cochise Order

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Case 4:15-cv-00305-CKJ Document 16 Filed 07/30/15 Page 1 of 19

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Cochise Regional Hospital,

Sylvia Mathews Burwell, et al.,

Plaintiff Cochise Regional Hospital (CRH) operates a twenty-five bed acute-care

Case 4:15-cv-00305-CKJ Document 16 Filed 07/30/15 Page 2 of 19

directed CRH to notify Defendants. (Doc. 11.)

for ADHS attended.2 (Doc. 15.)

The Court heard oral argument from CRH and

The Court will deny the Motion for a TRO.

program. Participation in Medicare is governed by a complex statutory and regulatory

See 42 U.S.C. 1395i4(c)(2)(B). To qualify to receive payments under the Medicare

see 42 C.F.R. 488.3.

Statutory and Regulatory Framework

485.635. To determine the compliance of certain hospitals, CMS, a division of HHS,

arranges for unannounced onsite inspections, known as surveys, to identify instances of

noncompliance, known as deficiencies. 42 U.S.C 13965i3(h)(2), 42 CFR 488.7(d).

State survey agencies also conduct limited surveys or investigations in response to

on behalf of CMS. See 42 C.F.R. 488.10, 11.

At the time of the hearing, ADHS had not been served.

Case 4:15-cv-00305-CKJ Document 16 Filed 07/30/15 Page 3 of 19

safety of patients. 42 C.F.R. 488.24(b). The determination whether a hospital is in

CMS can terminate a hospitals Medicare provider agreement if it finds the

hospital no longer meets the applicable COPs. See 42 U.S.C. 1395cc(b)(2)(A); 42

payments unless it prevails in its administrative appeal or it demonstrates it has corrected

future compliance. 42 C.F.R. 489.57. Moreover, Medicare payments for inpatients do

the effective termination date, payments continue up to 30 days. 42 C.F.R. 489.55(a).

When a hospital provider agreement is terminated, the hospital is entitled to

1395cc(h)(1)(A); 42 C.F.R. 488.24(c). The first step in the administrative review

proceeding to determine whether substantial evidence supports CMS determination that

Case 4:15-cv-00305-CKJ Document 16 Filed 07/30/15 Page 4 of 19

pursuant to 42 U.S.C. 1395cc(h), incorporating 42 U.S.C. 405(g).

As noted, CRH is a small regional hospital in Douglas, Arizona. It was purchased

the wounds. This constituted immediate jeopardy to patients.

to administer to patients as ordered by their physicians, although both medications were

scheduled weekly deliveries.

Case 4:15-cv-00305-CKJ Document 16 Filed 07/30/15 Page 5 of 19

telemetry monitoring before taking him to the emergency department to await

transportation. He was left in the emergency department for approximately 1 hours

cardiopulmonary resuscitation was performed. He was placed on a ventilator, airlifted to

administering potentially dangerous drugs (Vencuronium, a skeletal muscle relaxant and

blood gases were competent to do so.

CMS Termination and CRH appeal.

terminating CRHs Medicare provider agreement due to violation of 42 CFR 485.635

Condition of participation: Provision of services. (Doc. 12-1.) The letter referred to

Case 4:15-cv-00305-CKJ Document 16 Filed 07/30/15 Page 6 of 19

surveys beginning in February 2014 that documented violations of Medicare Conditions

the opening paragraph:

In regard to Tag C000 and on behalf of the Douglas Community Hospital

Case 4:15-cv-00305-CKJ Document 16 Filed 07/30/15 Page 7 of 19

not requested an expedited hearing.

residents and readmitting residents on medical leave and to order a preliminary

injunction hearing within the applicable time frame. (Doc. 4 at 2.)

for either a TRO or a preliminary injunction. (Doc. 12.)

Subject Matter Jurisdiction

Subject-matter jurisdiction involves the courts statutory or constitutional power

questions, see 28 U.S.C. 1331.

But Congress can limit courts subject-matter

Case 4:15-cv-00305-CKJ Document 16 Filed 07/30/15 Page 8 of 19

When subject-matter jurisdiction is challenged, a court may consider evidence

addresses subject matter jurisdiction at the outset.

claims arising under the Medicare Act.

See Illinois Council, 529 U.S. at 7.