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Parkview Adventist Medical Center v. United States

United States Court of Appeals, First Circuit

November 29, 2016

PARKVIEW ADVENTIST MEDICAL CENTER, Appellant,
v.
UNITED STATES OF AMERICA, on behalf of the Department of Health and Human Services, Centers for Medicare & Medicaid Services, Appellee.

         APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MAINE [Hon. Jon D. Levy, U.S. District Judge]

          George J. Marcus, with whom Jennie L. Clegg, David C. Johnson, Andrew C. Helman, and Marcus Clegg were on brief, for appellant.

          Jeffrey Clair, with whom Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Thomas E. Delahanty II, United States Attorney, and Michael S. Raab were on brief, for appellee.

          John A.E. Pottow and Asher Steinberg on brief as amicus curiae.

          Before Lynch, Stahl, and Barron, Circuit Judges.

          LYNCH, CIRCUIT JUDGE.

         This is an important case resting at the intersection of the Bankruptcy Code and Medicare law. It concerns the efforts of the Parkview Adventist Medical Center ("Parkview") in Brunswick, Maine, which filed for bankruptcy on June 16, 2015, to use the Bankruptcy Code to challenge the actions of appellee United States, through the Centers for Medicare & Medicaid Services ("CMS"), in terminating its "Provider Agreement" with Parkview and declining to reimburse Parkview for certain services provided after the effective date of that termination.

         After receiving a letter from Parkview, CMS concluded that Parkview's Provider Agreement was to be terminated, because CMS found that Parkview was no longer a "hospital" under the Medicare statute. See 42 U.S.C. § 1395x(e)(1). An administrative law judge ("ALJ") has issued a determination upholding the termination but adjusting the effective date.

         Both the bankruptcy court and the reviewing U.S. district court, see Parkview Adventist Med. Ctr. v. United States, No. 2:15-cv-00320-JDL, 2016 WL 3029947 (D. Me. May 25, 2016), denied Parkview's "Motion to Compel Post Petition Performance of Executory Contracts, " which sought, inter alia, a "[d]etermin[ation] that the Termination Notice [from CMS] is null and void and that the Provider Agreement [governing Parkview's eligibility for Medicare reimbursement] remains in full force and effect." It also sought relief "requiring CMS to honor the terms of the Provider Agreement and [to] reimburse [Parkview] for Part B Services provided by [Parkview] from and after June 18, 2015, in accordance with the terms of the Provider Agreement, " as well as "such other and further relief as is just and equitable."[1]

         In this motion, Parkview argued that the Provider Agreement was an "executory contract" under 11 U.S.C. § 365, and accordingly within the bankruptcy court's jurisdiction. As such, Parkview contended, CMS's termination of the Provider Agreement was "a post-petition termination . . . without court authority, and prior to the Debtor having exercised its right to assume or reject the Provider Agreement, " in violation of "[11 U.S.C.] §§ 365, 362 and 525 of the Code." Parkview further argued that CMS's termination of the Provider Agreement violated (1) the "automatic stay" in 11 U.S.C. § 362(a)(3), which stays "any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate, " and (2) the non-discrimination provision in 11 U.S.C. § 525(a), which provides that governmental agencies may not revoke a license or a similar grant solely on account of a party's insolvency or the fact that a party has filed a bankruptcy petition.

         The bankruptcy court concluded that it lacked jurisdiction over the motion until Parkview's claims were administratively exhausted and that CMS had not violated either the automatic stay or the non-discrimination provision. The district court affirmed, reasoning that 42 U.S.C. §§ 405(g) and 405(h) "[t]ogether . . . require the exhaustion of administrative remedies through the agency review process before judicial review takes place." Parkview, 2016 WL 3029947, at *5. Section 405(g)[2] provides in part that:

Any individual, after any final decision of the [Secretary] made after a hearing to which he was a party, irrespective of the amount in controversy, may obtain a review of such decision by a civil action commenced within sixty days after the mailing to him of notice of such decision or within such further time as the [Secretary] may allow.

42 U.S.C. § 405(g). Section 405(h)[3] further provides that:

The findings and decision of the [Secretary] after a hearing shall be binding upon all individuals who were parties to such hearing. No findings of fact or decision of the [Secretary] shall be reviewed by any person, tribunal, or governmental agency except as herein provided. 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). The district court concluded that Parkview's claims arose under the Medicare statute and that the final sentence of § 405(h) bars bankruptcy jurisdiction over such administratively unexhausted claims. Parkview, 2016 WL 3029947, at *6-8. The district court also affirmed the bankruptcy court's holding that CMS had not violated the automatic stay, see 11 U.S.C. § 362(a)(3), nor the non-discrimination provision, see 11 U.S.C. § 525(a). Parkview, 2016 WL 3029947, at *8.

         We acknowledge that there is a circuit split on the lack-of-jurisdiction holding pertaining to § 405(h), as described by the district court.[4] As the district court correctly observed, the majority of circuits have adopted the view -- based on previous versions of the statute and its legislative history -- that even though § 405(h) specifically mentions a bar to jurisdiction under only 28 U.S.C. §§ 1331 (federal question jurisdiction) and 1346 (jurisdiction when the United States is a defendant), its jurisdictional bar "applies to other grants of jurisdiction under Title 28, including bankruptcy jurisdiction under § 1334." [5] Parkview, 2016 WL 3029947, at *5. Only the Ninth Circuit has clearly adopted a contrary position. See Do Sung Uhm v. Humana, Inc., 620 F.3d 1134, 1141 n.11 (9th Cir. 2010) (citing In re Town & Country Home Nursing Servs., Inc., 963 F.2d 1146, 1155 (9th Cir. 1991)); cf. In re Univ. Med. Ctr., 973 F.2d 1065, 1073 (3d Cir. 1992) (holding that § 405(h) did not preclude bankruptcy jurisdiction over an action to bar the offset of reimbursement of post-petition services against pre-petition overpayments because the claim did not "arise under" the Medicare statute). Rather than add our voice to the circuit split on this difficult issue, we choose to resolve this case on narrower grounds evident from the record.[6] We affirm.

         Since only statutory jurisdiction is at stake in the § 405(h) jurisdictional question and not Article III jurisdiction, we assume hypothetical jurisdiction. We have done so before when confronted with the same § 405(h) question, and we do so again here, because of the difficulty of the jurisdictional issue and because Parkview's merits claims under the Bankruptcy Code obviously fail. See In re Ludlow Hosp. Soc., Inc., 124 F.3d 22, 25 n.7 (1st Cir. 1997) ("As the [§ 405(h)] jurisdictional question is problematic, and the merits of the Trustee's appeal are not, we elect to bypass the jurisdictional issue at this time." (citations omitted)).[7]

         Assuming arguendo that this case arises under the Bankruptcy Code, we affirm the denial of relief to Parkview. We do so because the record is clear that CMS did not violate the automatic stay provision. The statutory "police and regulatory power" exception to the automatic stay under 11 U.S.C. § 362(b)(4) plainly applies. It follows, then, for this and other reasons, that the non-discrimination provision of the Code is not offended. As to the arguments Parkview makes on appeal regarding the § 365 executory contract provision of the ...


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