cmms response to cochise

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JOHN S. LEONARDO United States Attorney District of Arizona MICHAEL A. AMBRI Assistant U.S. Attorney Arizona Bar No. 021653 405 W. Congress Street, Suite 4800 Tucson, Arizona 85701-5040 Telephone: (520) 620-7449 Fax: (520) 620-7138 [email protected] Attorneys for Defendants Secretary Sylvia Mathews Burwell and Acting Administrator Andy Slavitt

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Cochise Regional Hospital, Plaintiff, vs. Sylvia Mathews Burwell, in her official capacity as U.S. Secretary of Health and Human Services; Marilyn Tavenner, as Administrator of the Centers for Medicare & Medicaid Services; and Cara M. Christ, as Director of the Arizona Department of Health Services, Defendants.

4:15-cv-00305-TUC-CKJ

RESPONSE IN OPPOSITION TO MOTION FOR

TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION

Hearing Set: 2:00 p.m. July 22, 2015

Defendants Sylvia Mathews Burwell, Secretary of Health and Human Services,

and Andy Slavitt, Acting Administrator of the Centers for Medicare & Medicaid Services,

hereby respond in opposition to Plaintiff Cochise Regional Hospitals Ex Parte Motion

for Temporary Restraining Order and Preliminary Injunction. This opposition is

supported by the attached Declarations of Rufus G. Arther and Claire D. de Chazal and

exhibits thereto, and any arguments and evidence presented at the hearing of the

matter scheduled for 2:00 p.m. Wednesday, July 22, 2015.

/////

/////

Case 4:15-cv-00305-CKJ Document 12 Filed 07/21/15 Page 1 of 17

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I. OVERVIEW.

Plaintiff Cochise Regional Hospital (Cochise or Plaintiff) operates a 25-bed

hospital in Douglas, Arizona. Cochise had a Medicare provider agreement until the

Centers for Medicare and Medicaid Services (CMS or Agency) terminated that

agreement effective July 10, 2015, because four surveys conducted between February

19, 2014, and March 26, 2015, at Cochise revealed Cochise was not in compliance with

federal regulations. Those surveys found, among many other issues, that there were

continuing, serious problems with basic nursing care. During the fourth survey,

completed on March 26, 2015, for example, Cochise nurses left a patient with

congestive heart failure unaccompanied and unmonitored while he waited for

transportation to a dialysis center. When the patient was transferred to the van he

became unresponsive and, after having to be airlifted to Tucson, died.

Cochise asks this Court to stay the Agencys termination decision at the same

time Cochise admits the grounds for termination in the pending administrative action.

Pursuant to 42 U.S.C. 405(g) and (h), this action is jurisdictionally barred until

Cochise completes its administrative appeal. Cochise does not establish an exception

to the jurisdictional exhaustion requirement. Indeed, Cochise was offered the

opportunity to present its due process arguments for an expedited hearing in the

administrative action prior to termination but has never done so. However, if the Court

is inclined to consider the claim, Cochise does not meet its burden of demonstrating it is

entitled to injunctive relief. That burden is particularly high because termination went

into effect July 10, 2015, and Cochise seeks to reinstate its Medicare participation.

Cochise is very unlikely to succeed on the merits. The Ninth Circuit holds that a

provider has no property interest in continued participation in the Medicare program,

defeating the due process claim on this basis alone. But assuming a protectable

interest, Cochise received all due process to which it is entitled. Cochise received

multiple site visits after which it had opportunities to take corrective action, was provided

60 days notice prior to termination and met with the deciding official prior to termination.


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Despite the 60 days notice, Cochise waited more than 30 days before initiating its

administrative action and, though offered the option of an expedited hearing in the

administrative proceeding, has never requested such expedited relief. Indeed, Cochise

brings even this action more than 60 days after notice of termination and only after

termination has taken effect. This is not a case of short notice or lack of opportunity.

And, contrary to the Motion, a provider is not entitled to a pre-termination hearing.

Though Plaintiff asks this Court to disturb an agency decision that for substantial policy

reasons is afforded great deference, Cochise admits the violations for which it was

terminated, relegating any injunctive relief to simply delaying the Agencys action.

As will also be discussed, the harm to Cochise is primarily loss of revenue which

is not irreparable the beneficiaries of Medicare being the enrollees not providers

and the equities and public policy favor the governments ability to expeditiously

terminate a facilitys participation for the benefit and protection of Medicares enrollees.

II. LEGAL AND FACTUAL BACKGROUND.

A. The Statutory Framework.

The Medicare program is administered by the Department of Health and Human

Services (HHS) through CMS. The program provides coverage to eligible persons for

services provided by hospitals. Certain hospitals in rural areas may be designated as

critical access hospitals (CAHs). See 42 U.S.C. 1395i4(c)(2)(B). To participate in

the program, a CAH must be certified and be in compliance with the conditions of

participation (COPs) in 42 C.F.R. 485.601-485.647. See 42 C.F.R. 488.3.

The COPs require, among other things, that a CAH provide nursing services to

meet the needs of its patients, provide care in accordance with its written policies and

procedures, and provide patients with medications ordered by their physicians. See 42

C.F.R. 485.635. To determine the compliance of certain hospitals, CMS arranges for

unannounced inspections, known as surveys, to identify instances of noncompliance,


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which are called deficiencies. 42 C.F.R. 488.7(d).1 Those surveys are conducted by

state survey agencies on behalf of CMS. See 42 C.F.R. 488.10 & 11. State survey

agencies also conduct limited surveys or investigations in response to complaints made

by patients and others. Any deficiencies are documented on CMS Form 2567, also

known as the Statement of Deficiencies. See 42 C.F.R. 488.18(a); Declaration of

Rufus Arther, attached hereto as Exhibit 1, and Attachments B-E thereto.

State 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 decision 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 CMS determines that, based on the survey results, 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 survey agency will then conduct a follow-up or revisit survey to determine whether

the hospital has corrected the deficiencies and is compliance with the COPs.

CMS may 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

C.F.R. 489.53(a)(3). Termination does not require the hospital to close or discharge

its patients. It means that the hospital cannot receive Medicare payments unless it

prevails in its administrative appeal or it demonstrates it has corrected the health and

safety violations and provides CMS with reasonable assurance of its future

compliance. 42 C.F.R. 489.57. Medicare payments for inpatients do not end on the

date of termination. Rather, payments for inpatients admitted to the hospital before the

1 Institutions that are accredited as hospitals by an approved accrediting organization

are deemed to meet most Medicare COPs, and are not subject to regular surveys by CMS or the state survey agencies. See 42 C.F.R. 488.5(a).


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terminations effective date continue up to 30 days thereafter. 42 C.F.R. 489.55(a).

A hospital whose provider agreement is terminated is entitled to review of the

decision through a hearing to the extent provided in 42 U.S.C. 405 and to judicial

review of the Secretarys final decision after hearing as provided in 42 U.S.C. 405(g).

See 42 U.S.C. 1395cc(h)(1)(A); 42 C.F.R. 488.24(c), 498.53(a).2 The first step in

the administrative review process is a hearing before an Administrative Law Judge

(ALJ), who conducts a de novo proceeding to determine whether substantial evidence

supports CMS determination that the hospital was not in compliance with the COPs.

The hospital can then request review of the ALJs decision by the Departmental Appeals

Board (the Board). See 42 C.F.R. Part 498. A final Board decision upholding CMS

termination decision is subject to judicial review pursuant to 42 U.S.C. 1395cc(h),

incorporating 42 U.S.C. 405(g).

B. The Surveys, Termination and Administrative Action.

Cochise has an average daily inpatient census of one inpatient. Ex. 1, 11. If

Cochise decides to close, residents of Douglas can obtain hospital care at Copper

Queen Community Hospital, which is 20 miles from Cochise in nearby Bisbee, Arizona,

or at Canyon Vista Regional Hospital, which is 44 miles from Cochise in Sierra Vista,

Arizona. Exhibit 1, 10 & Attach. H thereto. Residents not needing to be admitted to a

hospital may be able to obtain services at a clinic in Douglas run by Copper Queen

Community Hospital. Id. 12.

Beginning in February 2014, the Arizona state survey agency conducted four

federal surveys on behalf of CMS. It found serious deficiencies in patient care during

each of these surveys, including deficiencies in the last survey in March 2015 that led to

the death of a patient. See Exhibit 1, 4-8 & Attachments B-E thereto.

The February 19, 2014, survey revealed that, among other things, Cochise failed 2 Any reference to the Commissioner of Social Security or the Social Security Administration in 42 U.S.C. 405(g), incorporated into 42 U.S.C. 1395cc(h)(1)(A), is considered a reference to the Secretary or the Department of Health and Human Services. See 42 U.S.C. 1395cc(h)(1)(A).


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to ensure that patients with physician orders for telemetry monitoring were monitored by

competent and trained staff. Attach. B to Ex. 1, pp. 32-34. The alarms on the monitors

were not functioning and the staff was not able to troubleshoot the monitors. Id. In

addition, Patient #23 had numerous skin tears, pressure sores and other wounds.

Cochises nursing staff did not obtain physician orders to treat those wounds for over 31

hours, until after the surveyor observed the wounds. Id. at 1-2, 34-40. These two

instances resulted in immediate jeopardy to patients. Id. at 2.

The June 30, 2014, survey revealed that Cochise admitted a patient, identified as

Patient #18, who had Lou Gehrigs disease and was suffering worsening shortness of

breath. Attac. C to Ex. 1, p. 3. However, staff, including the former and current

Directors of Nursing, were unfamiliar with Cochises ventilator and stated that it was

missing a circuit or part necessary for certain functions. Attac. C to Ex. 1, pp 6-7. In

addition, Cochise did not have either risperadol4 or gentamicin5 in stock for

administration to residents as ordered by their physicians, although both medications

were on the formulary used by the hospital. Id. at 19, 20. Cochises pharmacist told the

surveyors that under the rules of the state pharmacy board, only he, as the licensed

pharmacist could accept deliveries of medications. Id. at 20. However, because of

restrictions on the number of hours and specific times he could be at Cochise, he was

not always available to accept deliveries other than the scheduled weekly deliveries. Id.

Similarly, the October 16, 2014, survey revealed serious problems with the

provision of care at Cochise. Attach. D to Ex. 1. For example, Patient #12 was a high

risk pregnancy who presented to Cochises emergency department with pre-term labor 3 To protect the patients privacy, patients are referred to by number in the Statements of Deficiencies. 4 Risperdal (risperidone) is used to treat symptoms of schizophrenia and episodes of mania. http://www.nlm.nih.gov/medlineplus/druginfo/meds/a694015.html (last visited July 19, 2015). 5 Gentamicin is an antibiotic. http://www.nlm.nih.gov/medlineplus/druginfo/meds/a682275.html (last visited July 19, 2015).


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and bleeding. Id. at 7, 14. The nurse failed to administer medications as ordered by the

patients physician. Id. at 7-8, 15. In addition, the nurse failed to inform the physician

when the patient reported a pain level of 10 out of 10 and continued contractions. Id. at

8. As another example of deficient care, because Cochises pharmacy was closed,

Patient #2 received only one of the two tablets ordered by his physician because the

medication was out of stock. Id. at 5. A pharmacy technician explained that if the stock

on the unit was depleted and the pharmacy was closed the medication would not be

available for the patient. Id. In addition, if medications were needed on the alternate

weeks that the pharmacist was not present, they could not be ordered because the

pharmacist must be there to receive them. Id. This was a continuation of one of the

deficiencies found 3 months earlier, during the June 30 survey.

State surveyors next returned to Cochise to conduct a complaint investigation,

which concluded on March 26, 2015. Attach. E to Ex. 1. The surveyors found that

Patient #1 was admitted on February 6, 2015, with diagnoses including congestive heart

failure and renal disease requiring dialysis. Id. at 15. Patient #1 was admitted with

orders for telemetry. Id. Because Cochise does not provide dialysis, Patient #1 was to

go to a dialysis clinic. Id. at 16. Nurses did not obtain an order to discontinue Patient

#1s telemetry monitoring before taking him to the emergency department to await

transportation. Id. at 19-20. Patient #1 was left in the emergency department for

approximately 1 hours without monitoring, except by the admissions clerk. Id. at 19.

When he got into the van, he became unresponsive. Id. at 17. Patient 1 was brought

back into the emergency department with no pulse, and cardiopulmonary resuscitation

(CPR) was performed. Id. He was placed on a ventilator and airlifted to Tuscon. Id.

Patient #1 later died. Id. at 12. The surveyors also documented that nurses failed to

initiate oxygen for Patient #3 with low oxygen saturation, which has a high risk of harm

(id. at 14, 21-22); failed to follow a physician order for Patient 3s oxygen administration

(id. at 14, 22-23); failed to follow policies to ensure that newly hired registered nurses,

including new graduates, could provide care in accordance with the nursing standards


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of care (id. at 14, 23-25); and failed to ensure that nurses administering potentially

dangerous drugs (Vencuronium, a skeletal muscle relaxant and Etomidate, a hypnotic

used for the induction of general anesthesia) and obtaining arterial blood gases were

competent to do so (id. at 14, 25-29).

On May 7, 2015, CMS issued a notice to Cochise notifying it that the deficiencies

identified in the March 26, 2015 survey substantially limited Cochises capacity to render

adequate care to patients or were of such character as to adversely affect patient health

and safety. Attach. A to Ex. 1. CMS notified Cochise that those deficiencies

established a basis for concluding that the COP at 42 C.F.R. 485.635 was not met.

Id. The notice further informed Cochise that it was terminating Cochises Medicare

provider agreement effective July 10, 2015. Id.

The May 7 notice also provided notice of Cochises administrative appeal rights

in accordance with 42 C.F.R. 498.40 498.78. It instructed Cochise that it must file

a request for hearing within 60 days of receipt of the notice. Id., p. 2.

On June 10, 2015, 33 days after it received the May 7, 2015, notice of

termination, Cochise filed a formal request for hearing. Exhibit 2, Declaration of Claire

D. de Chazal (de Chazal Decl.), Attachment A. In its hearing request, Cochise stated: [W]e would like to formally convey that we do not dispute the surveys findings. In conjunction with our acknowledgement of all deficiencies noted in the survey, we are appealing the decision to terminate CMS payments on tangible, substantial challenges faced by the hospital from January 2014 to present.

Id., at 2. The request acknowledges there is more work to be done and requests more

time to implement corrections to attempt to come into compliance. Id.

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. Attach. B to Ex. 2. The

Order further provides 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. Id., at 10. To


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HHS knowledge as a party in that proceeding, Cochise has never requested expedited

relief in that action. Ex. 2 4.

As reflected in Cochises Motion, Cochise representatives met with CMS

decisionmaker on or about July 8, 2015. The parties discussed the matter. The agency

considered the matter and decided to proceed with termination.

III. AN INJUNCTION WOULD ONLY DELAY TERMINATION.

Cochise admits the serious deficiencies leading to termination. Its request for

injunctive relief is a request for more time to try to come into compliance, which is the

basis of Cochises administrative claim. The Agencys decision to terminate after

Cochises failure to cure deficiencies from multiple surveys, culminating in the death of a

patient, is entitled to great deference. Judicial review of agency action is limited, and

the Court is not permitted to substitute its judgment for that of the agency. Siemion v.

Stewart, No. 11-120-BLG-RFC, 2012 WL 1424736, at *13 (D. Mont. April 24, 2012), rep.

and rec. adopted, 2012 WL 1925743 (D. Mont. May 25, 2012) (citing Earth Island

Institute v. Carlton, 626 F.3d 462, 468 (9th Cir. 2010)). Delaying termination would

require Medicare to continue funding treatment of enrollees at a hospital that has been

determined, and that the hospital admits, is not in compliance with patient health and

safety requirements that are a condition of participation, and where the hospital has

been unable to come into compliance in the many months prior to termination.

IV. THE COURT LACKS JURISDICTION.

It is presumed that a claim lies outside the Courts limited jurisdiction and it is the

burden of the party asserting jurisdiction to establish it. Kokkonen v. Guardian Life Ins.

Co. of Am., 511 U.S. 375, 377 (1994). Cochise refers to federal question jurisdiction

under 28 U.S.C. 1331, but the Medicare Act, 42 U.S.C. 405(h), provides the

exclusive avenue for jurisdiction: No action against the United States, the [Secretary],

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. 42 U.S.C. 405(h). This

means that 1331 jurisdiction is unavailable for claims arising under the Medicare Act.


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See Shalala v. Illinois Counsel on Long Term Care, 529 U.S. 1, 7 (2000). The Medicare

Act provides jurisdiction only after a claimant has pursued its administrative proceeding

to final decision: Any individual, after any final decision of the [Secretary] made after a

hearing to which he was a party may obtain a review of such decision by a civil

action commenced within sixty days. 42 U.S.C. 405(g) (emphasis added).

In asking the Court to excuse its failure to exhaust, Cochise points to a number of

cases from this circuit that govern whether and when courts will depart from the

ordinary, prudential doctrine of exhaustion of administrative remedies. The exhaustion

requirement in this case is more stringent. Specifically, the Supreme Court has made

clear that the bar of 42 U.S.C. 405(h) reaches beyond ordinary administrative law

principles of ripeness and exhaustion of administrative remedies. Illinois Council,

529 U.S. at 12. These statutes are a sweeping and direct prohibition on federal court

actions that have not first been channeled through the administration appeal process.

Weinberger v. Salfi, 422 U.S. 749, 757 (1975). The requirement is jurisdictional and

applies to virtually all legal attacks. Illinois Council, 529 U.S. at 13. Thus, even

constitutional challenges stemming from Medicare determinations must be channeled

through the administrative process before they can be presented to a district court.

Salfi, 422 U.S. at 760-764; Ill. Council, 529 U.S. at 13-14; see also Heckler v. Ringer,

466 U.S. 602, 614-15 (1984) (requiring all aspects of plaintiffs claim be channeled

through the administrative process before being presented in federal court).

The exhaustion requirement assures the agency the opportunity to apply,

interpret and revise policies, regulations and statutes without the possibility of

premature interference by courts applying case-by-case exceptions. See Illinois

Council, 529 U.S. at 13. The Supreme Court has acknowledged that exhaustion comes

at the price of delay-related hardship in individual cases, but, given the complexity of the

Medicare program, recognizes that this was the judgment of Congress. Id.

Cochise concedes its claim comes within the Medicare Acts exhaustion

requirement but argues it should be excused from the requirement on the basis that it


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has no avenue for relief other than a court action (i.e., that an attempt to exhaust would

be futile because the ALJ does not have authority to adjudicate constitutional claims)

and/or that its claims here are entirely collateral to the matters in issue in the agency

action. However, exhaustion is not excused even if the issues will not be adjudicated by

the agency. As the Supreme Court has held (and the Ninth Circuit has repeated):

The fact that the agency might not provide a hearing for that particular contention, or may lack the power to provide one is beside the point because it is the action arising under the Medicare Act that must be channeled through the agency. After the action has been so channeled, the court will consider the contention when it later reviews the action. And a court reviewing an agency determination under 405(g) has adequate authority to resolve any statutory or constitutional contention that the agency does not, or cannot, decide including, where necessary, the authority to develop an evidentiary record.

Ill. Council, 529 U.S. at 2324 (citations omitted); see also Do Sung Uhm v. Humana,

Inc., 620 F.3d 1134, 1144-45 (9th Cir. 2010) (the mere fact that an administrative

remedy is not available for a particular claim does not mean that the claim does not

arise under the Medicare Act (citing Kaiser v. Blue Cross of California, 347 F.3d

1107, 1115 n.4 (9th Cir. 2003)); Kaiser, 347 F.3d at 1115 n.4 (cases may arise under

Medicare under 405(h) and yet contain issues which are not suitable for resolution

by the [agency]). As the Ninth Circuit explained, this makes sense in the context of

the purposes of exhaustion (Kaiser, 347 F.3d at 1115 n.4) which are to prevent[]

premature interference with agency processes, to afford the parties and the courts

the benefit of [the agencys] experience and expertise, and to compile a record which

is adequate for judicial review. (id. (internal quotation marks omitted)).

Further, Cochise does not meet the elements for waiver of exhaustion. First, it

is not the case that Cochise is foreclosed from seeking this relief in the agency action.

Cochise was actually invited to raise its due process arguments for expedited relief in

the agency action but has simply chosen not to do so. It could have presented the

claim to the ALJ but failed to do so. Second, the claim here is the same claim under

consideration in the administrative action: continued eligibility to receive Medicare

funds while it attempts to come into compliance. Third, exhaustion of the claim for pre-


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termination review is not futile the ALJ specifically invited the claim. Last, assuming

there is irreparable harm, it is not due to the exhaustion requirement because Plaintiff

could have brought the claim to the ALJ and either obtained expedited review or, if not,

thereby have exhausted the request prior to termination. See, e.g., Ringer, 466 U.S.

614-15 (finding claims for continued Medicare payments pending administrative action

to not be collateral); Illinois Council, 529 U.S. at 23-24 (even constitutional claims

must be channeled through the agency).

Cochise also requests mandamus relief under 28 U.S.C. 1361. However, both

the Supreme Court and the Ninth Circuit have made clear that mandamus is not

available unless the plaintiff has exhausted available administrative remedies. See

Ringer, 466 U.S. at 616-17 (finding that mandamus applies only where a plaintiff has

exhausted all possible remedies and is owed a clear, nondiscretionary duty by a

defendant); Hironymous v. Bowen, 800 F.2d 888, 891 (9th Cir. 1986) (holding that

exhaustion of all administrative remedies is a prerequisite for mandamus jurisdiction).

The Ringer Court also held that 405(g) provides an adequate if not instant remedy

and rejected an attempt to invoke the Administrative Procedure Act (APA), reiterating

the principle established in Salfi that claims under the Medicare Act require exhaustion

even if couched as arising under the APA or the Constitution. Id.

Cochises resort to the Courts equitable powers or the All Writs Act also fails.

Neither confers jurisdiction where it does not otherwise exist. See, e.g., Doe v. INS,

120 F.3d 200, 204-05 (9th Cir. 1997).

V. STANDARD FOR TRO AND PRELIMINARY INJUNCTION.

Temporary restraining orders and preliminary injunctions are governed by the

same general standard. White v. Lindermen, No. CV 11-8152-PCT-RCB, 2012 WL

5040850, at *1 (D. Ariz. Oct. 18, 2012) (citations omitted). Either type of injunctive relief

is an extraordinary remedy that may be granted only where the movant shows that he

is likely to succeed on the merits, that he is likely to suffer irreparable harm in the

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. (citing Winter v. Natural Res. Defense Council,

555 U.S. 7, 22 (2008), Am. Trucking Assocs., Inc. v. Los Angeles, 559 F.3d 1046, 1052

(9th Cir. 2009)) (internal quotes omitted); see also Mazurek v. Armstrong, 520 U.S. 968,

972 (1997) (temporary or preliminary injunction is a drastic remedy that should not

be granted unless the movant, by a clear showing, carries the burden of persuasion)

(emphasis in the original). A likelihood of irreparable harm is required the

possibility standard on which Cochise relies has been overruled. See Winter, 555

U.S. at 22; Am. Trucking, 559 F.3d at 1052 (stating that cases contrary to Winter are

no longer controlling, or even viable).

Further, the purpose of a temporary restraining order or preliminary injunction is

merely to preserve the relative position of the parties until a trial on the merits can be

held. Univ. of Texas v. Camenisch, 451 U.S. 390, 395 (1981). Thus, there is a

heightened burden where a plaintiff seeks a mandatory preliminary injunction (one that

would alter the status quo), which should not be granted unless the facts and law

clearly favor the plaintiff. White, 2012 WL 5040850, at *1 (quoting Comm. of Cent.

Am. Refugees v. INS, 795 F.2d 1434, 1441 (9th Cir. 1986)).

VI. PLAINTIFF IS UNLIKELY TO SUCCEED ON THE MERITS.

A. Providers Do Not Have A Property Interest In Medicare.

As Cochise acknowledges, [a] due process claim is cognizable only if there is a

recognized liberty or property interest at stake. Schroeder v. McDonald, 55 F.3d 454,

462 (9th Cir. 1995) (citing Board of Regents v. Roth, 408 U.S. 564, 569 (1972)). Citing

selected district court cases outside this circuit that do not address the issue, Cochise

argues that a property interest in continued participation in Medicare is implicit in those

rulings. However, the Ninth Circuit explicitly holds that providers do not possess a

property interest in continued participation in Medicare, Medicaid, or the federally-

funded state health care programs. Erickson v. U.S. ex rel. Dept. of Health & Human

Servs., 67 F.3d 858, 862 (9th Cir. 1995); see also Northern Montana Care Center v.

Leavitt, No. CV 0497, 2006 WL 2700729, at *11 (D. Mont. Sept. 18, 2006) (granting


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summary judgment dismissing due process claim of hospital-based nursing facility

because, under Erickson, the facility did not have a constitutionally protected property

interest in continued participation in Medicare/Medicaid); Geriatrics, Inc. v. Harris, 640

F.2d 262, 265 (10th Cir. 1981) (for the same reason, holding that nursing home was not

entitled to pre-termination hearing). As expressed by the Ninth Circuit, enrollees, not

providers, are the beneficiaries of the Medicare program and are the real parties in

interest. Erickson, 67 F.3d at 862 (quoting Cervoni v. Sec'y of Health, Ed. & Welfare,

581 F.2d 1010, 1018 (1st Cir.1978)). Because under Ninth Circuit law Cochise has no

protected interest in continued participation in Medicare an essential element of its

sole alleged basis for relief Cochise is very unlikely to succeed on the merits.6

B. Cochise Has Received Due Process.

Cochises claim fails for the additional reason that Cochise has received all due

process to which it is entitled. [T]he overwhelming majority of authorities (including all

or virtually all appellate decisions) to have addressed the issue have concluded that

Medicare providers enjoy no constitutional right to a pre-termination hearing. GOS

Operator, LLC v. Sebelius, 843 F. Supp. 2d 1218, 1233-34 (S.D. Al. 2012) (reviewing

the circuits and denying providers motion for injunctive relief). The Supreme Court

rejected the notion of a right to a pre-termination hearing in Mathews. v. Eldridge, 424

U.S. 319, 349 (1976), holding that existing administrative procedures are adequate.7

Here, Cochise has been afforded substantial pre-termination notice and 6 The due process claim is brought under the Fifth and Fourteenth Amendments. The Fourteenth Amendment claim fails for the additional reason that it arises from federal action, not state action. See U.S. Const. Amend. XIV (prohibiting deprivations by State); Lugar v. Edmondson Oil Co. Inc., 457 U.S. 922, 923-24 (1982) (state action required). Dezell v. Day Island Yacht Club, 796 F.2d 324, 326 (9th Cir. 1986) (dismissing for lack of state action). Forbes v. Reno, 893 F. Supp. 476, 483 (W.D. Pa. 1995), aff'd, 91 F.3d 123 (3d Cir. 1996) (dismissing Fourteenth Amendment claim against federal officials). 7 See also Cathedral Rock v. Shalala, 223 F.3d 354, 366 (6th Cir. 2000), Northlake Comm. Hosp. v. United States, 654 F.2d 1234, 1242 (7th Cir. 1981), Geriatrics, Inc. v. Harris, 640 F.2d 262, 265 (10th Cir. 1981), THI of Kansas at Highland Park, LLC v. Sebelius, No. 2013 WL 4047570 at *8 (D. Kan. August 9, 2013), GOS Operator, 843 F. Supp.2d at 1233 (citing cases).


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opportunity to contest the grounds for termination. Cochise received numerous site

visits, had time to address the deficiencies over a course of months, participated in a

face-to-face interview with the CMS decisionmaker and, in the pending agency action,

has been afforded the opportunity to present its due process arguments for expedited

review, though it has not taken advantage of the opportunity. More than in Mathews

and the overwhelming majority of authorities that have found sufficient due process in

the existing statutory framework, Cochise has received all the notice and opportunity to

which it could be entitled. See also GOS Operator, 843 F. Supp. 2d at 1233-34 (finding

due process satisfied in similar circumstances). Additionally, there is little or no risk of

an erroneous termination Cochise does not contest the grounds for termination in the

agency action but merely requests more time to comply. Thus, even if Cochise were to

have the required property interest (it does not), it is still unlikely to succeed on its claim.

VII. PLAINTIFF DOES NOT ESTABLISH IRREPARABLE HARM.

Monetary loss or financial hardship however substantial do not alone constitute

irreparable harm. Sampson v. Murray, 415 U.S. 61, 90 (1974); Elias v. Connett, 908

F.2d 521, 526-27 (9th Cir. 1990). The harm to Cochise is loss of revenue. The further

difficulties Cochise cites are not to Cochise. See Oulton v. Bowen, 674 F. Supp. 429,

437 (W.D.N.Y. 1987) (finding provider who had the responsibility to meet patient care

conditions was not the individuals who would be harmed in its failure to meet those

conditions and thus provider cannot show the kind of irreparable harm which would

justify this courts involvement at this time). The harm to nonparties is the result of

Cochises failure to meet patient-care conditions of Medicare participation.

And it is not the case that patients will be without medical care there are

options for care. See Attach. H to Ex. 1 at 10. But even difficulties faced by the

community or patients is not the type of harm needed to disrupt the Agencys decision.

See, e.g., O'Bannon v. Town Court Nursing Center, 447 U.S. 773, 785-90 (1980)

(rejecting argument based on harm to patients of institution that has been determined to

be unqualified); Northlake Community Hospital v. United States, 654 F.2d 1234, 1242


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(7th Cir. 1981) (in holding that a Medicare provider is not entitled to a pre-termination

hearing, noting that the private interest is not particularly strong because a Medicare

provider is not the intended beneficiary of the program, and the provider's financial

need to be subsidized for the care of its Medicare patients is only incidental to the

purpose and design of the [Medicare] program) (citations omitted); Green v. Cashman,

605 F.2d 945, 946 (6th Cir. 1979) (noting that the Medicare and Medicaid statutes were

not designed to provide financial assistance to providers of care for their own benefit

but rather to aid the patients and clients of such facilities).

VIII. THE EQUITIES AND PUBLIC POLICY FAVOR THE UNITED STATES.

Even if Cochise were to have a property interest in continued participation, the

governments strong interest in expeditious provider terminations to ensure the well-

being of elderly and disabled enrollees is much weightier than the private interests

involved. Cathedral Rock of N. College Hill, Inc. v. Shalala, 223 F.3d 354, 365 (6th Cir.

2000) (citing Town Court Nursing Ctr., Inc. v. Beal, 586 F.2d 266, 277 (3d Cir. 1978);

see also Mathews v. Eldridge, 424 U.S. 319 (1976). The alternative Cochise proposes

would be to allow a provider to continue putting Medicare enrollees in harms way

during the pendency of the providers administrative action. Not only would this put the

health of Medicare beneficiaries at risk contrary to the purposes of the program and

the Agencys responsibility to enforce the standards and procedures meant to safeguard

Medicare patients but it would also give providers the ability to appeal any termination,

no matter how justified, and to draw the appeals process out for as long as possible.

See, e.g., GOS Operator, 843 F. Supp. 2d at 1240 (finding it 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) (citation omitted). In this case especially, where Cochise has demonstrated

significant patient-care deficiencies that have gotten worse, not better, where Cochise

has failed to take advantage of available expedited relief in the pending agency action,

and where the deficiencies are not in dispute, the public policy found in the Medicare


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statutes and procedures favoring expeditious termination outweigh any private interests.

IX. CONCLUSION.

For all the foregoing reasons, Defendants HHS and CMS request that the Court

deny the motion for temporary restraining order and preliminary injunction.

RESPECTFULLY SUBMITTED this 21st day of July, 2015.

JOHN S. LEONARDO United States Attorney District of Arizona /s/Michael A. Ambri MICHAEL A. AMBRI Assistant U.S. Attorney Copy served by ECF and email this 21st day of July, 2015, to: Mr. Thomas Murphy Mr. William S. Sowders GUST ROSENFELD P.L.C. One South Church Avenue, Suite 1900 Tucson, Arizona 85701-7070 /s/ Terry Whatley


cmms response to cochise

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