PARKVIEW ADVENTIST MEDICAL CENTER v. UNITED STATES OF AMERICA
ORDER ON APPEAL OF BANKRUPTCY COURTS ORDER DENYING DEBTORS MOTION TO COMPEL POST-PETITION PERFORMANCE OF EXECUTORY CONTRACT re 1 Bankruptcy Appeal By JUDGE JON D. LEVY. (lrc)
UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
UNITED STATES OF AMERICA,
ORDER ON APPEAL OF BANKRUPTCY COURT’S ORDER DENYING
DEBTOR’S MOTION TO COMPEL POST-PETITION PERFORMANCE OF
This matter comes before the court on Parkview Adventist Medical Center’s
appeal taken from the Bankruptcy Court’s denial of the Debtor’s motion to compel
the post-petition performance of an executory contract. For the reasons discussed
below, I affirm the decision of the Bankruptcy Court.
Parkview Adventist Medical Center (“Parkview”), a hospital located in
Brunswick, Maine, filed a voluntary petition for relief under Chapter 11 of the United
States Bankruptcy Code (“Bankruptcy Code”), 11 U.S.C.A. § 101 et seq. (2016), on
June 16, 2015. ECF No. 13 at 8, 11.1 In a letter dated June 15, 2015 (“Notification
Letter”), Parkview informed the Centers for Medicare & Medicaid Services (“CMS”),
with which it had a Provider Agreement to provide services and receive payment
under the federal Medicare program, that it would close as an inpatient hospital but
The ECF references, unless otherwise indicated, correspond to the appeal docket before the District
Court in case number 2:15-cv-00320-JDL. References to filings in the Bankruptcy Court specify that
case number along with the ECF number.
would continue to provide outpatient services. Id. at 8, 10-11. Specifically, the letter
stated in part:
This letter serves as notice of termination of participation in the
Medicare Program, as required by 42 C.F.R. § 489.52.
[Parkview] will file a voluntary petition for relief under Chapter 11 of
the United States Bankruptcy Code on June 16, 2015. This letter serves
as notice that Parkview is closing as a hospital effective upon the order
of the Bankruptcy Court and will no longer participate in the Medicare
Program (Title XVIII of the Social Security Act) as an acute care hospital
provider. Parkview expects the Bankruptcy Court to enter its order
within sixty (60) to ninety (90) days of the date of this letter.
Subject to the approval of the Bankruptcy Court, Parkview will begin to
transition acute care services to Mid Coast Hospital beginning June 18,
2015. Parkview will continue to provide outpatient services[.]
Appellant App. at 110.
CMS’ response came in a letter dated June 19, 2015 (“Termination Letter”).
CMS indicated that it found the termination effective as of June 18, 2015, and that
Parkview no longer qualified as a “hospital” for purposes of Medicare:
In a correspondence dated June 15, 2015, [Parkview] notified [CMS] of
its intent to voluntarily terminate its Medicare provider agreement with
the Secretary of Health and Human Services but did not provide a date
for the voluntary termination. Based upon information from your
hospital’s website, your statements to CMS, and your emergency motion
filed in the District of Maine bankruptcy case 15-20442, CMS has
determined that the date of voluntary termination of your Part A
Medicare Provider Agreement is June 18, 2015. See 42 C.F.R. §
According to the information reviewed by CMS, the hospital has closed
its inpatient care services on June 18, 2015, and discharged all
inpatients on or about 4:00pm on June 18, 2015. Additionally, the
hospital is not accepting new inpatients, and does not plan to accept new
inpatients in the future. Therefore, the hospital no longer meets the
definition of “hospital,” as outlined in Section §1861(e) of the Social
Security Act. See also 42 C.F.R. § 482.1. More specifically, a Medicareparticipating hospital must be an institution which is primarily engaged
in providing care to inpatients. Additionally, you have also requested
voluntary termination of your participation in the Medicare program.
Therefore, under the provisions of Federal regulations at 42 C.F.R.
§489.52(b)(1, 3), your Part A Medicare Provider Agreement with the
Secretary of Health and Human Services is terminated, effective June
18, 2015. No payment under this agreement can be made under the
Medicare program for services rendered on or after June 18, 2015.
Id. at 112.
Also on June 19, 2015, the State of Maine, Department of Health and Human
Services issued a Conditional License to Parkview authorizing it to operate a 55-bed
acute care facility through December 19, 2015. ECF No. 13 at 11. On June 24,
Parkview informed CMS that it was not terminating the Provider Agreement and
that CMS’ decision to terminate the agreement would adversely affect Parkview’s
bankruptcy transition plan. Id. at 11, 41; ECF No. 14 at 13. On June 25, CMS
responded that it was willing to rescind the termination if Parkview resumed its
inpatient admissions. ECF No. 13 at 11, 41; ECF No. 14 at 13-14. Parkview later
sought, on July 27, to rescind its June 15 notice of voluntary termination. ECF No.
13 at 41.2
Parkview’s motion to compel the post-petition performance of an executory
contract (“Motion to Compel”) asserted that because the Provider Agreement is an
executory contract, it is property of the debtor’s estate and, therefore, pursuant to 28
U.S.C. § 1334(e),3 the Bankruptcy Court has exclusive jurisdiction over the Provider
I note that some of these facts come from the January 7, 2016, decision of the Administrative Law
Judge (ECF No. 13 at 39-47) in the administrative appeal, discussed infra, and that the July 27, 2015,
communication was subsequent to the July 9, 2015, filing of Parkview’s motion, the denial of which
Parkview appeals in this case.
Subsection 1334(e) states in part:
Agreement as property of the estate. Case No. 15-20442 (Bankr. D. Me.), ECF No.
144; Appellant App. at 41-43, ¶¶ 12-16. Parkview further asserted that the doctrine
of exhaustion of administrative remedies does not apply to its motion because the
motion alleges violations of the Bankruptcy Code, §§ 362, 365, and 525, and not
violations of the Medicare Act. Appellant App. at 43, ¶ 17. The motion requested
that the Bankruptcy Court issue an order determining that CMS’ “Termination
Notice” is null and void and that the Provider Agreement remains in effect. Id. at 56.
In addition, Parkview asked the court to require CMS to honor the terms of the
Provider Agreement, until assumed or rejected by Parkview, and to reimburse
Parkview for Part B Medicare services provided from and after June 18, 2015. Id.
In opposition, CMS contended that 42 U.S.C. §§ 405(g) and (h), made applicable
to the Medicare Act by 42 U.S.C. §§ 1395ff(b)(1)(A) and 1395ii, respectively, allow
judicial review for a claim arising under the Medicare statute only after presentment
of the claim to the Secretary of Health and Human Services and exhaustion of
Case No. 15-20442 (Bankr. D. Me.), ECF No. 166;
Appellant App. at 85-86, ¶¶ 14-15. Therefore, CMS advanced, the Bankruptcy Court
lacked jurisdiction to hear and adjudicate Parkview’s motion and could not reinstate
the Provider Agreement. Appellant App. at 87, ¶ 17.
(e) The district court in which a case under title 11 is commenced or is pending shall
have exclusive jurisdiction-(1) of all the property, wherever located, of the debtor as of the commencement of
such case, and of property of the estate[.]
28 U.S.C.A. § 1334(e)(1) (2016).
CMS also argued that, assuming the Bankruptcy Court had jurisdiction, CMS’
acceptance of Parkview’s request to voluntarily terminate the Provider Agreement
did not violate 11 U.S.C. §§ 362, 365, or 525, and that Parkview rejected the Provider
Agreement with its voluntary termination request. Id. at 83, 96, ¶¶ 6, 37. CMS
asserted that by its June 19 Termination Letter, CMS “accepted Parkview’s June 15,
2015, voluntary termination for its Hospital Medicare Provider Agreement[,]” and
that by discharging all inpatients and ceasing to accept new inpatients, Parkview no
longer met the definition of “hospital” under Section 1861(e) of the Social Security
Act4 and 42 C.F.R. § 482.1, as of June 18, 2015. Id. at 82-83, ¶¶ 4-5. Because
Parkview failed to specify a date of termination in the Notification Letter, CMS
contended, CMS was required to do so. Id. at 82, ¶ 4. CMS chose June 18, 2015,
because as of that date Parkview had closed its inpatient care services, discharged all
inpatients, and stopped accepting new inpatients, and the State of Maine had
prohibited Parkview from admitting inpatients without prior approval. Id. at 82-83,
97, ¶¶ 4, 40.
CMS further posited that because Parkview’s Notification Letter of June 15
preceded the bankruptcy petition of June 16, the termination took place pre-petition.5
Id. at 96-97, ¶ 38.
CMS refers to Social Security Act, § 1861, in a number of places. The Medicare Act is codified at
Title XVIII of the Social Security Act, § 1801 et seq., as amended, 42 U.S.C.A. § 1395 et seq. (2016).
As Parkview stated at the hearing on the appeal and in its brief (ECF No. 13 at 9), CMS stated in
its objection to Parkview’s Motion to Compel that it “agrees with Parkview’s assertion that the provider
agreement is properly treated as an executory contract in bankruptcy.” Appellant App. at 86, ¶ 16.
CMS contends that while provider agreements may be treated as executory contracts in bankruptcy,
here, the Provider Agreement is not an executory contract within the meaning of § 365 and is not
On July 24, 2015, the Bankruptcy Court issued an oral order denying
Parkview’s Motion to Compel. See Case No. 15-20442 (Bankr. D. Me.), ECF No. 200;
Appellant App. at 203; Appellant App. at 197-202 (Transcript of Hr’g, July 24, 2015).
The court explained:
Based on the pre and post-petition actions of the Debtor, CMS has
determined that Parkview is not a hospital under the Medicare Act and
Regulations. And thus is not entitled to receive reimbursements for
certain Medicare services. Parkview asserts that it provided as a
hospital and is entitled to be compensated for pursuant to the provider
agreements. And those are services rendered since June 18, 2015.
Parkview seeks to compel payment for those services. I conclude that I
do not have the authority to compel CMS to make those payments. The
determination to whether or not Parkview is entitled to the payments
under the provider agreement requires a determination, possibly an
adjudication of whether or not Parkview is a hospital. Congress
specifically limited judicial review of such agency decisions, like this
one[,] [i]n situations where the aggrieved party, Parkview here[,] has
exhausted its administrative remedies. Parkview has not exhausted
them. And I conclude, that I must deny its Motion to Compel. I do not
find that . . . CMS violated the automatic stay. As I conclude, initially
the CMS is not exercising any control over property of the estate. But
even if it had done so, [§ 362(b)(4)], possibly [§ 362(b)(28)], provide
Finally, I do not find that [§ 525] was violated.
Appellant App. at 200-01.
On January 7, 2016, an Administrative Law Judge (“ALJ”), acting for the
United States Department of Health and Human Services (“DHHS”), issued a
decision on Parkview’s administrative appeal of CMS’ action with respect to the
termination of the Provider Agreement. ECF No. 13 at 15; see also ECF No. 13 at 3947 (text of ALJ decision). The ALJ concluded that “CMS’ determination [of June 19,
property of the debtor’s estate, because it was terminated by Parkview. See ECF No. 14 at 9, 31-32;
Oral Arg. Hr’g, Apr. 26, 2016; see also Appellant App. at 96-97, ¶ 38.
2015] to impose a retroactive effective date for a voluntary termination based on
Parkview’s decision to cease providing inpatient services” and Parkview’s consequent
failure to meet a statutory requirement to be a hospital in the Medicare program, was
“an involuntary termination of Parkview.” Id. at 43. He stated, “a hospital that does
not primarily engage in providing inpatient care may be involuntarily terminated.”
Id. (citing 42 U.S.C. §§ 1395cc(b)(2), 1395x; 42 C.F.R. § 489.53(a)). The ALJ also
found that Parkview “permanently ceased to provide any inpatient services as of June
18, 2015[,]” and therefore CMS had a legitimate basis for involuntarily terminating
the provider agreement. Id. at 44-45. The ALJ determined that the effective date of
termination was July 4, and not June 18, as CMS had found, because 42 C.F.R. §
489.53(d)(1) requires that CMS give notice of an involuntary termination at least 15
days before the termination goes into effect. Id. at 45. In sum, the ALJ affirmed
what he deemed to be an “involuntary termination” by CMS of Parkview’s Provider
Agreement but modified the effective date of termination to July 4, 2015. Id. at 47.
II. LEGAL ANALYSIS
On appeal of a Bankruptcy Court decision to the District Court pursuant to 28
U.S.C.A. § 158(a) (2016), the District Court reviews the Bankruptcy Court’s
conclusions of law de novo. Beacon Invs. LLC v. MainePCS, LLC, 468 B.R. 1, 14 (D.
Me. 2012) (citation omitted); see also In re Hill, 562 F.3d 29, 32 (1st Cir. 2009) (citation
“In accordance with Federal Rule of Bankruptcy Procedure 8013, the
Bankruptcy Court’s findings of fact will not be set aside unless clearly erroneous.”
Beacon Invs. LLC, 468 B.R. at 14 (internal quotation marks and citation omitted).
Parkview contends that the Bankruptcy Court erred by treating the question
presented by the Motion to Compel as being whether Parkview is entitled to
payments under the Provider Agreement and whether Parkview complied with the
Provider Agreement and Medicare statutes. ECF No. 13 at 14, 16, 18. Instead,
Parkview asserts, its Motion to Compel sought a determination of whether CMS
violated provisions of the Bankruptcy Code, specifically, whether it unilaterally
terminated an executory contract in violation of § 365(d)(2), and also violated the
automatic stay provision of § 362(a)(3), and § 525(a)’s protection of debtors against
discriminatory treatment. Id. at 12, 14; see 11 U.S.C.A. §§ 362(a)(3), 365(d)(2), 525(a).
For reasons I will explain, the Bankruptcy Court did not err in concluding that
it lacked jurisdiction to decide whether CMS lawfully terminated the Provider
Agreement under the Bankruptcy Code because the Secretary of Health and Human
Services (the “Secretary”) must first make a final determination through the
administrative appeal process.
Exhaustion of Administrative Remedies Prior to Judicial Review
The District Court’s jurisdiction to review the Secretary’s decision of issues
arising under the Medicare program is established in 42 U.S.C.A. § 405(g) (2016),
which is made applicable to the Medicare Act by 42 U.S.C.A. § 1395ff(b)(1)(A). Section
405(g) states in part:
(g) Judicial review
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.A. § 405(g); see 42 U.S.C.A. § 1395ff(b)(1)(A) (“[A]ny individual dissatisfied
with any initial determination under subsection (a)(1) of this section shall be entitled
to . . . judicial review of the Secretary’s final decision after such hearing as is provided
in section 405(g) of this title.”). Section 405(h), incorporated into the Medicare Act by
42 U.S.C.A. § 1395ii, states in part:
(h) Finality of [Secretary’s] decision
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.A. § 405(h); see 42 U.S.C.A. § 1395ii; see also Nichole Med. Equip. & Supply,
Inc. v. TriCenturion, Inc., 694 F.3d 340, 346 (3d Cir. 2012).
Together, §§ 405(g) and (h) require the exhaustion of administrative remedies
through the agency review process before judicial review takes place. See In re House
of Mercy, Inc., 353 B.R. 867, 869 (Bankr. W.D. La. 2006) (“The Medicare statutory
scheme limits judicial review of claims arising under the Act to those which have
exhausted the administrative remedies including presentment of the claim to the
Secretary and an exhaustion of the review/appeal procedures.”) (citations omitted);
see also Heckler v. Ringer, 466 U.S. 602, 605, 622 (1984); In re Home Comp Care, Inc.,
221 B.R. 202, 205 (N.D. Ill. 1998).
The last sentence of § 405(h), barring actions brought “to recover on any claim
arising under” the Medicare Act, explicitly refers only to § 1331 (federal-question
jurisdiction) and § 1346 (jurisdiction of cases with the United States as defendant) of
Title 28. See 42 U.S.C.A. § 405(h). The minority view has interpreted § 405(h) to not
bar separate actions subject to the district courts’ bankruptcy jurisdiction pursuant
to 28 U.S.C.A. § 1334. 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)).
However, the weight of authority holds that the
jurisdictional bar of § 405(h) applies to other grants of jurisdiction under Title 28,
including bankruptcy jurisdiction under § 1334.6 As the court in In re Hosp. Staffing
Servs., Inc. explained:
When originally enacted, the third sentence in § 405(h) specifically
prohibited any action under “Section 24 of the Judicial Code of the
United States.” Then Section 24—codified at 28 U.S.C. § 41—contained
nearly all jurisdictional grants, including bankruptcy jurisdiction.
When the judicial code was revised in 1948, jurisdictional grants were
placed in separate sections. In 1984, the Legislature revised § 405(h),
and replaced “Section 24” with “Section 1331 or 1346.” Upon amending,
the Legislature stated “none of such amendments shall be construed as
changing or affecting any right, liability or status or interpretation
6 See Nichole Med. Equip. & Supply, Inc., 694 F.3d at 346-47 (holding that § 405(h) “continues to bar
virtually all grants of jurisdiction under Title 28,” and specifically jurisdiction under § 1332); Midland
Psychiatric Assocs., Inc. v. United States, 145 F.3d 1000, 1004 (8th Cir. 1998) (holding that § 405(h)’s
jurisdictional bar extends to jurisdiction under § 1332); Bodimetric Health Servs., Inc. v. Aetna Life &
Cas., 903 F.2d 480, 488-89 (7th Cir. 1990) (same), cert. denied, 111 S. Ct. 579 (1990); In re Bayou Shores
SNF, LLC, 533 B.R. 337, 342 (M.D. Fla. 2015) (“[T]he majority of courts that have considered the
omission of section 1334 (and other jurisdictional grants) from section 405(h) have examined Congress’
intent when it enacted the jurisdictional bar and concluded that the omission of section 1334 and other
jurisdictional grants (like section 1332) was inconsistent with that intent.”), appeal docketed, No. 1513731 (11th Cir. Aug. 20, 2015); In re Hosp. Staffing Servs., Inc., 258 B.R. 53, 57-58 (S.D. Fla. 2000)
(holding that § 405(h) applies to § 1334); Excel Home Care, Inc. v. DHHS, 316 B.R. 565, 572-74 (D.
Mass. 2004) (same); DHHS v. Noonan, 1996 WL 728352, at *3 (D. Mass. Oct. 15, 1996) (citations
omitted) (stating that “the Bankruptcy Code does not confer subject matter jurisdiction over matters
directly ‘arising under’ the Medicare Act”); In re St. Johns Home Health Agency, Inc., 173 B.R. 238,
244 (S.D. Fla. 1994) (concluding that § 405(h) precludes jurisdiction under § 1334 over a claim arising
under the Medicare program); In re St. Mary Hosp., 123 B.R. 14, 16-18 (E.D. Pa. 1991) (same).
In re Hosp. Staffing Servs., Inc., 258 B.R. at 57 (citations and footnote omitted). “[T]he
omission of 28 U.S.C. § 1334 from the amended version of 42 U.S.C. § 405(h) was not
meant to create bankruptcy jurisdiction where it previously was precluded.” In re St.
Johns Home Health Agency, Inc., 173 B.R. at 244; see also Excel Home Care, Inc., 316
B.R. at 572-73 (adopting the analysis of the legislative history of § 405(h) of In re St.
Johns Home Health Agency, Inc.).
As enacted by Congress, the law that amended § 405(h) was explicit as to its
intended effect: “[N]one of such amendments shall be construed as changing or
affecting any right, liability, status, or interpretation which existed” under the
provision prior to its revision. Deficit Reduction Act of 1984, Pub. L. No. 98-369, §
2664(b), 98 Stat. 494, 1171-72 (1984). The literal reading of § 405(h) adopted by the
minority view is contrary to this stated intent. Accordingly, § 405(h) should not be
construed, as Parkview urges, to cede the Secretary’s exclusive jurisdiction to
determine questions arising under the Medicare Act to the District Court’s
bankruptcy jurisdiction where the claim involves a Medicare provider that is a debtor
in bankruptcy. Thus, even after the 1984 amendments, the exercise of bankruptcy
court jurisdiction under § 1334 for claims arising under the Medicare program is
precluded by § 405(h). In re St. Johns Home Health Agency, Inc., 173 B.R. at 244
Accordingly, pursuant to 42 U.S.C.A. §§ 405(g) and (h), all questions arising
under the Medicare Act are to be adjudicated by the agency and finally decided by
the Secretary prior to any judicial review. See In re St. Mary Hosp., 123 B.R. at 17
(“[A] broad reading of section 405(h) puts its interpretation in accord with Congress’
intent to permit the Secretary in Medicare disputes to develop the record and base
decisions upon his unique expertise in the health care field.”).
This regime of
administrative review prior to judicial review under the Medicare Act applies
regardless of whether a Medicare provider is in bankruptcy.
The misfortune that a provider is in bankruptcy when he has a
reimbursement dispute with the Secretary [of Health and Human
Services] should not upset the careful balance between administrative
and judicial review. There is no compelling reason to treat the bankrupt
provider differently than any other provider.
Id.; see also In re St. Johns Home Health Agency, Inc., 173 B.R. at 243 (“The filing of
a bankruptcy petition does not and should not create a shortcut to judicial review of
administrative decisions otherwise subject to exhaustion requirements.”); cf. In re
Hodges, 364 B.R. 304, 306 (Bankr. N.D. Ill. 2007) (“the § 405(h) limitation includes
28 U.S.C. § 1334; until the debtor exhausts her administrative remedies this Court
lacks subject matter jurisdiction over the claim regarding the [Social Security
Administration’s] assertion that the debtor has received an overpayment of
Parkview’s Motion to Compel Presents a Claim “Arising Under” the
Contrary to Parkview’s argument, its Motion to Compel presents a claim
“arising under” the Medicare Act, 42 U.S.C.A. §§ 405(h), 1395ii. At issue are the
effectiveness and date of the termination of Parkview’s Provider Agreement.
Although Parkview contends that the question before the Bankruptcy Court was
whether CMS complied with §§ 362, 365, and 525 of the Bankruptcy Code and that it
is not asking for a determination of the underlying reimbursement matter, see ECF
No. 13 at 16, the Motion to Compel squarely presents a Medicare dispute because it
rests on whether the Provider Agreement was terminated voluntarily or involuntarily
under the Medicare statute and regulations.7
As the First Circuit has recognized, “the Supreme Court has interpreted
broadly the section 405(h) bar, holding that a claim ‘arises under’ the Social Security
or Medicare Act if ‘the standing and the substantive basis’ for the claim derive from
that statute.” Puerto Rican Ass’n of Physical Med. and Rehab., Inc. v. United States,
521 F.3d 46, 48 (1st Cir. 2008) (citing Weinberger v. Salfi, 422 U.S. 749, 760-61 (1975);
Ringer, 466 U.S. at 615); see also Shalala v. Ill. Council on Long Term Care, Inc., 529
U.S. 1, 13-14 (2000) (stating that § 405(h) “demands the ‘channeling’ of virtually all
legal attacks through the agency” and recognizing that “claims of program eligibility”
are claims arising under the Medicare Act). In Puerto Rican Ass’n of Physical Med.
and Rehab., Inc., the First Circuit held that a challenge to a regulation restricting
Medicare reimbursement for physical therapy services was a claim requiring
exhaustion of administrative remedies through the agency appeals process prior to
Parkview asserts that with its June 15 Notification Letter, it was only providing notice of intent to
terminate Part A inpatient services as required and that the letter stated that the termination was
effective upon an order of the Bankruptcy Court to be entered within 60-90 days. ECF No. 13 at 1011, 26 n.12; see Appellant App. at 110. Parkview requested in its Motion to Compel that the
Bankruptcy Court issue an order:
(a) Determining that the Termination Notice is null and void and that the Provider
Agreement remains in full force and effect;
(b) Until assumed or rejected, requiring CMS to honor the terms of the Provider
Agreement and reimburse the Debtor for Part B Services provided by the Debtor from
and after June 18, 2015, in accordance with the terms of the Provider Agreement[.]
Appellant App. at 56. CMS argues that with its June 19 Termination Letter, it accepted Parkview’s
voluntary termination of the Provider Agreement. ECF No. 14 at 11-13; see Appellant App. at 112.
judicial review. See Puerto Rican Ass’n of Physical Med. and Rehab., Inc., 521 F.3d
at 47, 48, 50.
Accordingly, it is for the Secretary to decide administratively whether, how,
and when Parkview’s Provider Agreement with CMS was terminated.8 These are not
Bankruptcy Code questions. They require application of the Medicare program laws
and regulations governing how a provider and CMS may terminate a provider
agreement, including the requirements for notice of intent to terminate or of
involuntary termination, the effective date of termination, and the standards that
govern provider eligibility. See 42 U.S.C.A. §§ 1395cc(b)(1)-(2), 1395x(e)(1); 42 C.F.R.
§§ 482.1, 489.52, 489.53.
Finally, I address Parkview’s reliance on In re Slater Health Ctr., Inc. (Slater),
398 F.3d 98 (1st Cir. 2005), as a foundation for its argument that there is no bar to
the Bankruptcy Court’s jurisdiction. ECF No. 13 at 18-19. In Slater, the First Circuit
addressed the issue of whether the Government’s adjustment for prior Medicare
overpayments to a nursing home in Chapter 11 bankruptcy was a setoff, which would
not be permitted under the Bankruptcy Code, 11 U.S.C.A. § 362(a)(7), or a
recoupment, which would not be affected by the bankruptcy. Slater, 398 F.3d at 99-
8 To the extent Parkview argues that the ALJ has already made the necessary agency determinations
under Medicare law and regulations, and the Bankruptcy Court may now proceed with its
consideration of the relevant questions under the Bankruptcy Code, i.e., interpret as a matter of
bankruptcy law whether what the ALJ determined to be an involuntary termination under the
Medicare program was an impermissible unilateral termination of an executory contract of a debtor
without court approval, see ECF No. 15 at 6 n.4, 8, 9; Oral Arg. Hr’g, Apr. 26, 2016, Parkview still
cannot prevail in this appeal because there has not been a final agency determination as the agency
review process has not been exhausted. Parkview stated in a footnote in its brief that it “expects that
it will, again, prophylactically appeal the ALJ Decision” with respect to its conclusion that CMS could
have effected an involuntary termination effective as of July 4, 2015, “because CMS did not have the
right to involuntarily terminate the Provider Agreement at all absent approval of the Bankruptcy
Court.” ECF No. 13 at 15 n.4.
100, 103. The First Circuit affirmed the district court’s decision that the adjustment
was a recoupment. Id. at 105. The First Circuit noted that the district court provided
an alternative analysis—that the overpayments were funds to which the provider had
no claim at all—but stated that it would not address it and affirmed on the basis that
the adjustment was a recoupment and not a setoff. Id. at 102 & n.3, 105. Slater did
not address whether the lawfulness of the termination of a provider agreement is a
question within the exclusive jurisdiction of the Bankruptcy Court, and it is not
analogous to this case because there was no substantive Medicare issue in dispute
and the provider had exhausted its administrative remedies.9
The core question presented by Parkview’s Motion to Compel—whether its
Provider Agreement was lawfully terminated by CMS—requires Parkview to exhaust
its administrative remedies. Until that has occurred, the Bankruptcy Court does not
have jurisdiction to decide whether the Provider Agreement was lawfully terminated
and, therefore, whether the Provider Agreement should be reinstated. Accordingly,
I affirm the Bankruptcy Court’s conclusion that it lacked jurisdiction to adjudicate
those issues and whether CMS violated § 365’s provisions regarding executory
contracts. For the same reasons, I also conclude that the Bankruptcy Court did not
err in finding that CMS’ actions did not violate § 362’s automatic stay or § 525’s
protection of debtors against discriminatory treatment.
9 The district court decision reviewed in Slater noted that “[i]n any event, [the provider] did pursue
the matter administratively” and the agency dismissed the appeal on the ground that it lacked
jurisdiction because the provider “did not question the overpayments” but “rather, disputed Medicare’s
right, under the Bankruptcy Code, to recoup the overpayments.” See In re Slater Health Ctr., Inc., 306
B.R. 20, 24 (D. R.I. 2004).
It is ORDERED that the Bankruptcy Court’s decision denying Parkview’s
Motion to Compel is AFFIRMED.
Dated this 25th day of May, 2016.
/s/ Jon D. Levy
U.S. DISTRICT JUDGE
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