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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA Cochise Regional Hospital,

Plaintiff, v. Sylvia Mathews Burwell, et al.,

Defendants.

No. CV-15-00305-TUC-CKJ ORDER

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

hospital in Douglas, Arizona. On May 7, 2015, the Centers for Medicare & Medicaid

Services (CMS) notified CRH that it was terminating CRHs provider agreement in the

Medicare Program on July 10, 2015. CRH filed a Complaint on July 16, 2015.1 (Doc.

1.)

The Complaint raises a single Counta claim for a declaratory judgment that

Defendants have violated CRHs procedural due process rights guaranteed by the Fifth

and Fourteenth Amendments of the United States Constitution. (Doc. 1.) CRH also

seeks injunctive relief enjoining Defendants from terminating any Medicare payments to

CRH. (Id.) The day it filed its Complaint, CRH filed an Ex Parte Motion for a

1 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.

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

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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.) The Court heard oral argument from CRH and

Defendants; there are no factual issues in dispute. The Court took the matter under

advisement.

The Court will deny the Motion for a TRO.

I. Background

A. Statutory and Regulatory Framework

Up until July 10, 2015, CRH had a contract to participate in the Medicare

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

scheme, and certain hospitals in rural areas can qualify as critical access hospitals (CAH).

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

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

participation (COP) for the programs under federal law. 42 C.F.R. 485.601-485.647;

see 42 C.F.R. 488.3.

The COP requirements include 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, 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

complaints made by patients and others. Surveys are conducted by state survey agencies

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

2 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

survey agency will then conduct a follow-up or revisit survey to determine whether the

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

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

C.F.R. 489.53(a)(3). The federal Defendants assert that termination does not require a

hospital to close or to discharge its patients; rather, 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. Moreover, Medicare payments for inpatients do

not end on the date the contract terminates; for inpatients admitted to the hospital before

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

review through a hearing as 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). 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 request review of the

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. Factual Background

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.)

1. The Surveys

The federal Defendants summarize the survey findings from four visits to CRH.

(Doc. 12.)

The February 19, 2014 survey showed a failure to ensure that patients with doctor

orders for telemetry monitoring were monitored by competent and trained staff because

the alarms were not functioning and staff was unable to trouble shoot the monitors; and

one patient had numerous skin tears, pressure sores and wounds, but nursing staff did not

obtain physician orders to treat the wounds for over 36 hours until the surveyor observed

the wounds. This constituted immediate jeopardy to patients.

The June 30, 2014 survey showed that CRH admitted a patient with Lou Gehrigs

disease and who was suffering worsening shortness of breath. The nursing staff was

unfamiliar with the ventilator and stated that it was missing a circuit or part necessary for

certain functions. In addition, CRH did not have either risperadol or gentamicin in stock

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

on the formulary used by the hospital. The CRH pharmacist told the surveyors that under

the rules of the state pharmacy board, only he, as the licensed pharmacist could accept

deliveries of medications, but because of restrictions on the number of hours and specific

times he could be at CRH, he was not always available to accept deliveries other than the

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

was admitted with orders for telemetry. CRH does not provide dialysis, so the patient was

to go to a dialysis clinic. Nurses did not obtain an order to discontinue the patients

telemetry monitoring before taking him to the emergency department to await

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

without monitoring, except by the admissions clerk. When he got into the van, he became

unresponsive and was brought back into the emergency department with no pulse;

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

Tucson, and later died. In addition, nurses failed to initiate oxygen for another patient

with low oxygen saturation, which has a high risk of harm; failed to follow a physician

order for yet another patients oxygen administration; failed to follow policies to ensure

that newly hired registered nurses, including new graduates, could provide care in

accordance with the nursing standards of care; 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.

2. CMS Termination and CRH appeal.

On May 8, 2015, CRH received a letter from CMS informing CRH that CMS was

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


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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.

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:

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.

The 7-page attachment is entitled CMS Response Plan06/2015, Tag C000. It states in

the opening paragraph:

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.

CRH alleges that over the next few weeks, it attempted on numerous occasions to

get in touch with CMS to discuss the appeal and to see if CRH could do anything in order

to resolve the situation. CRH was finally able to speak with Rufus Arther on July 2, 2015.

On July 8, 2015, CRHs representatives flew to San Francisco to meet with Mr. Arther in

person to present a plan of correction and discuss the disparity in the level of oversight of

CRH. Mr. Arther advised CRHs representatives that all factors would be taken under

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.

Plaintiff filed this action on July 16, 2015. The Ex Parte Motion for a Temporary

Restraining Order (TRO) and Order to Show Cause for a Preliminary Injunction asks this

Court to issue a TRO enjoining Defendants from terminating CRHs Medicare provider

agreement, denying payment for new Medicare admissions, denying payment for existing

Medicare residents, prohibiting CRH from admitting publicly assisted and private paying

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

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

The federal Defendants oppose the requests on the grounds that (1) the Court lacks

subject matter jurisdiction over the claim, and (2) CRH does not meet the requirements

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

II. Subject Matter Jurisdiction

Subject-matter jurisdiction involves the courts statutory or constitutional power

to adjudicate the case. Steel Co. v. Citizens for a Better Envt, 523 U.S. 83, 89 (1998).

Congress has generally granted district courts jurisdiction to hear cases involving federal

questions, see 28 U.S.C. 1331. But Congress can limit courts subject-matter

jurisdiction for specific types of cases. See, e.g ., Shalala v. Ill. Council on Long Term

Care, Inc., 529 U.S. 1, 59 (2000). The party asserting jurisdiction has the burden to

establish it. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994).


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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

U .S.C. 405(h) into the Medicare statutes). Section 405(h), provides that 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. See Illinois Council, 529 U.S. at 7. The

Medicare Act also 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).

An action arises under the Medicare statutes if it is inextricably intertwined with

a claim for Medicare benefits; this is a broad test. Heckler v. Ringer, 466 U.S. 602,

614-15, (1984); see, e.g., Weinberger v. Salfi, 422 U.S. 749, 760-61 (1975); Puerto Rican

Ass'n of Physical Med. & Rehab., Inc. v. United States, 521 F.3d 46, 48 (1st Cir.2008)

([A] claim arises under the ... Medicare Act if the standing and the substantive basis for

the claim derive from that statute.).

The Court finds that this is an action arising under the Medicare Act because it is

inextricably intertwined with termination of Medicare benefits payable under the

Medicare Act; CRH does not claim otherwise.

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

those few cases where it would not lead to a channeling of review through the agency,

but would mean no review at all. Id. at 17; see also Council for Urological Interests v.

Sebelius, 668 F.3d 704, 709 (D.C. Cir. 2011) (the Supreme Court has understood section

405(h) as having only channeling force, not, as the government would have it, foreclosing

force), citing Bowen v. Michigan Acad. of Family Physicians, 476 U.S. 667, 680 (1986).

This is sometimes referred to as the Michigan Academy exception.

CRH does not argue that it meets this exception to 405(h).3 Instead, CRH argues

that it meets a different exceptionone applying to 405(g)set forth in Mathews v.

Eldridge. 424 U.S. 319 (1976).

3 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 22-23. 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.

Citing Weinberger v. Salfi, 422 U.S. 749 (1975), the Court noted that the

requirement that there be a final decision by the Secretary after a hearing was regarded as

central to the requisite grant of subject-matter jurisdiction. . . . Mathews, 424 U.S. at

328. But the Court reasoned that the requirement has two elements and only one is

jurisdictional.

[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.

Id. at 328; see Johnson v. Shalala, 2 F.3d 918, 921-923 (9th Cir. 1993) (A final judgment

has two elements (1) presentment of a claim to the Secretary, and (2) exhaustion of

administrative remedies. The presentment requirement is jurisdictional. The exhaustion

requirement is not jurisdictional; it can be waived by the defendant or the court.).

The Supreme Court found that the plaintiff had satisfied the non-waivable

jurisdictional requirement. It also found that the denial of his request for benefits

constituted a final decision for purposes of 405(g) jurisdiction over the constitutional


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claim. Mathews, 424 U.S. at 332. The Court noted that cases can arise where a

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.

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

remedies. In determining this issue, courts consider whether (1) the claim advanced is

collateral to a demand for benefits; (2) exhaustion of remedies would be futile, and

(3) whether the plaintiff would suffer irreparable harm if required to exhaust its

administrative remedies. Johnson, 2 F.3d at 921-923.

CRH argues that its claims qualify for the exception to exhaustion of

administrative remedies for cases which are entirely collateral to the substantive claim of

entitlement to benefits. CRH asserts that it has presented its claim to the Secretary and so

satisfies the first criteria. This is not in dispute. Thus, the Court finds that CRH has met

the first criteria for the exception to the exhaustion of remedies and will consider the

remaining criteria.

CRH argues that its claims in this case are entirely collateral to the claim it is

pursuing before the CMS and HHS because it is not requesting that this Court in any way

disturb CMSs determination to terminate its Medicare provider agreement; rather, it

seeks declaratory judgments that Defendants have violated its procedural due process

rights, statutory rights under the Medicare Act, and statutory rights under the APA. To

pursue those claims, CRH seeks temporarily and preliminarily to stay termination of its

Medicare provider agreement pending termination of those claims and finality of the

administrative appeal it is expeditiously pursuing. CRH asserts that a claim is


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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

preserve the status quo by preventing termination of provider agreements while the

plaintiff pursued its administrative remedies. The court found the claim in the

complaintdenial of procedural due process in the form of a pre-termination hearingto

be collateral to the substantive challenge to the termination decision. Id. Likewise, this

Court finds that CRHs Fifth Amendment due process claim is collateral to the claim

before the ALJ to give CRH additional time to come into compliance with Medicare

COPs.

In addition to being a collateral claim, the claim raised in the Complaint must be

colorable in its showing that the denial of relief will cause irreparable harm and be one

whose resolution would not serve the purposes of exhaustion; that is, it is futile to exhaust

the claim. Kildare v. Saenz, 325 F.3d 1078, 1083-85 (9th Cir. 2003).

[A] colorable showing of irreparable injury is one that is not wholly

insubstantial, immaterial, or frivolous. Johnson, 2 F.3d at 922. In Kildare, the Ninth

Circuit held that economic hardship constitutes irreparable harm for purposes of the

exception. 325 F.3d at 1083. Here, CRH alleges that it would suffer an extreme and

irreparable harm because it receives 50% of its gross revenues from its participation in

the Medicare program and without Medicare payments, the hospital cannot operate and

will be forced to shut down. If the hospital shuts down, it will be difficult, if not

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

Mediplex of Massachusetts, Inc. v. Shalala, 93 F. Supp.2d 88, 93 (D. Mass. Jan. 19,

1999). CRH further argues that because CMS terminated CRHs Medicare provider

agreement on July 10, 2015, by the time a hearing is conducted and appeals taken,

including to this Court to review the propriety of the administrative determination, CRH

will be out of business.

The federal Defendants argue that CRH was invited by the ALJ to raise its due

process arguments for expedited relief and did not do so; therefore exhaustion of the

claim for pre-termination review is not futile. (Doc. 12 at 11-12.)

The Court finds that the invitation for an expedited appeal related to the claim

raised in the appeal and that claim can best be characterized as a request for time to come

into compliance with the Medicare COPs, not a declaration of violation of constitutional

rights. Although, it is not clear why CRH has not sought an expedited appeal in this

matter, at the hearing on the TRO, the federal Defendants did not offer any time frame

within which the agency process would be completed. Moreover, regarding futility, the

purposes of exhaustion relate to the agencys need to compile a detailed factual record for

certain kinds of cases and the need for judicial economy. Johnson, 2 F.3d at 922-23. The

federal Defendants offer no reason why a detailed record at the administrative level

regarding a right to a pre-termination hearing is required. The Court finds that CRH has

met the futility requirement.


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Thus, the Court finds that CRH has established that it meets the Mathews

exception to exhaustion.

The Court now turns to the request for a TRO.

III. Temporary Restraining Order

A. Legal Standard

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

Ninth Circuit has adopted two tests a district court must use when deciding whether to

grant a preliminary injunction. See Alliance for the Wild Rockies v. Cottrell, 632 F.3d

1127, 1135 (9th Cir. 2011) (finding District Court made an error of law by employing

only one test when denying preliminary injunction). First, a plaintiff can attempt to

satisfy the test adopted by the Supreme Court in Winter v. Natural Resources Defense

Council, Inc., 555 U.S. 7 (2008). Under the Winter test, a plaintiff must establish 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

injunction is in the public interest. Id. at 20. If a plaintiff cannot meet the Winter test, he

may attempt to satisfy the second test by showing there are serious questions going to

the merits, the balance of hardships tips sharply in his favor, there is a likelihood of

irreparable injury, and the injunction is in the public interest. Cottrell, 632 F.3d at 1135.

This latter sliding scale approach allows a plaintiff to make a lesser showing of

likelihood of success provided he will suffer substantial harm in the absence of relief. Id.

at 1133.

In addition, because the function of a preliminary injunction is to preserve the

status quo pending a determination on the merits, Chalk v. U.S. Dist. Court, 840 F.2d

701, 704 (9th Cir. 1988), there is heightened scrutiny where the movant seeks to alter

rather than maintain the status quo. Dahl v. HEM Pharms. Corp., 7 F.3d 1399, 1403 (9th


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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).

B. Factors

1. Success on the Merits

CRH argues that [t]he essence of due process is the requirement that a person in

jeopardy of serious loss (be given) notice of the case against him and opportunity to meet

it. Mathews, 424 U.S. at 348. The inquiry on a due process challenge is whether the

government has deprived the claimant of a protected property interest and whether the

governments procedures comport with due process. Lujan v. G & G Fire Sprinklers,

Inc., 532 U.S. 189, 195 (2001); American Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 59

(1999). CRH asserts that it has a property interest in its Medicare provider agreement.

The federal Defendants respond that in Erickson v. U.S. ex rel. Dept. of Health &

Human Servs., the Ninth Circuit explicitly held that providers do not possess a property

interest in continued participation in Medicare, Medicaid, or the federally funded state

health care programs. 67 F.3d 858, 862 (9th Cir. 1995); see Northern Montana Care

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

2006)(dismissing due process claim of hospital-based nursing facility because the facility

did not have a constitutionally-protected property interest in continued participation in

Medicare/Medicaid, citing Erickson). It is the enrollees, not the providers, who are the

beneficiaries of the Medicare program. Erickson, 67 F3d at 862. Erickson cited the Tenth

Circuit decision in Koerpel v. Heckler, 797 F.2d 858, 86365 (10th Cir.1986), holding

that a physician was not the intended beneficiary of the Medicare program and therefore


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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

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); see e.g., Varandani v.

Bowen, 824 F.2d 307, 310 (4th Cir.1987); Cathedral Rock of N. College Hill, Inc. v.

Shalala, 223 F.3d 354, 364-65 (6th Cir. 2000); Northlake Commy Hosp. v. United States,

654 F.2d 1234, 124143 (7th Cir.1981).

In this case CRH has received numerous surveys and the opportunity over

approximately one year to correct deficiencies. It received a termination notice and

opportunity to contest the termination, including a face to face meeting with the CMS

decisionmaker. And, it was invited to submit an expedited appeal, which it has not done.

Finally, the Court finds little risk of an erroneous termination, especially in view

of CRHs decision not to contest the deficiencies noted in the surveys. Moreover, CRH

points to no statutory or regulatory language regarding an entitlement to additional time

to bring its nursing care into compliance with Medicare COPs.

The Court finds that in view of the lack of a property interest in the provider

agreement and lack of entitlement to a pre-termination hearing, CRH cannot meet the test

for a TRO; specifically, it cannot show a likelihood of success on the merits or even

serious questions going to the merits. Moreover, CRH is subject to a heightened TRO


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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.

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

Medicare provider agreement and payments to CRH are allowed to continue. Medicare

payments are 50% of CRHs gross revenues, and without Medicare payments, the

hospital cannot operate and will be forced to shut down. The City of Douglas, CRHs

employees, patients and their families, and the community as a whole will be irreparably

harmed. If CRH closes, the 20,000 people living in Douglas, Arizona, and Border Patrol

personnel and detainees who use the hospital will be without access to top quality

medical care.

The federal Defendants argue that even substantial monetary loss or financial

hardship do not, without more, 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 CRH

is loss of revenue. The further hardships described by CRH are not, in fact, hardships to

CRH. See Oulton v. Bowen, 674 F. Supp. 429, 437 (W.D.N.Y. 1987).

The federal Defendants also dispute that patients will be without medical care;

they assert there are options for care. For example, Copper Queen Community Hospital is

in Bisbee, Arizona, about 20 miles from CRH, and operates a clinic in Douglas. More

importantly, difficulties faced by the community or patients are not the kind of harm

needed to enjoin the Agencys decision. See, e.g., OBannon v. Town Court Nursing

Center, 447 U.S. 773, 785-90 (1980) (rejecting arguments of harm based on harm to


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patients of institution that has been determined to be unqualified); Northlake Community

Hospital, 654 F.2d at 1242.

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

regulatory interests involved.

Although CRH asserts there will be no harm to Defendants, Defendants assert that

the government has a strong interest in expeditious provider terminations to ensure the

wellbeing of elderly and disabled enrollees and that such an interest is much weightier

than the private interests involved. See Cathedral Rock of N. College Hill, Inc., 223 F.3d

at 365 (6th Cir. 2000) (citing Town Court Nursing Ctr., Inc. v. Beal, 586 F.2d 266, 277

(3d Cir. 1978)). They point out that permitting CRH to continue receiving funds while the

claim makes its way through the administrative process would be to allow the provider to

continue putting Medicare enrollees in harms way.

In view of CRHs decision not to dispute the findings of CMS, the Court finds that

the governments interest outweighs that of CRH and CRH cannot show that the balance

of the equities tips in its favor or that the injunction would be in the public interest.

In sum, the Court finds that CRH cannot meet its heightened burden to establish

that it is entitled to a TRO. The Court does not find it necessary to set a hearing on a

Motion for a Preliminary Injunction.

///

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///

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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.


cochise order

Documents