Ridgeview Manor of the Midlands LP et al v. Leavitt et al

Filing 10

ORDER granting 4 Motion for Temporary Restraining Order. Signed by Judge Joseph F Anderson Jr on 3/30/07.(shod, )

Ridgeview Manor of the Midlands LP et al v. Leavitt et al

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IN THE UNITED STATES DISTRICT COURT D IS T R IC T OF SOUTH CAROLINA C O L U M B IA DIVISION R idgeview Manor of the Midlands, L.P., C im m erson Properties, Inc., and Sterling H ea lthca re, Inc., ) ) ) ) P la intiffs, ) ) v. ) ) M icha el O. LEAVITT, Secretary of the ) United States Department of Health and ) H u m a n Services, Leslie V. Norwalk, Esq., ) A ctin g Administrator of the Centers for ) M edica re & Medicaid Services, and ) R ob ert M. Kerr, Director of the ) Sou th Carolina Department of Health and ) H u m a n Services, ) ) D efenda nts. ) ____________________________________) C /A No.: 3:07-cv-861-JFA

T E M P O R A R Y RESTRAINING ORDER

T his matter came before the court for an emergency hearing on March 30, 2007, pursuant to pla intiffs' Motion for a Temporary Restraining Order. The court heard arguments from counsel for both pla intiffs and defendants. Upon considering the contents of the Verified Complaint, the Motion for T em pora ry Restraining Order, and the Memorandum in Support of Motion for Temporary Restraining O rder, with exhibits, and the arguments of counsel at the hearing, the court grants the motion. S pecifica lly, the court finds that plaintiffs will suffer irreparable injury if defendants are not immediately 1 ) restrained from requiring plaintiff Ridgeview Manor of the Midlands, L.P. ("Ridgeview") on this date to issue termination notifications to Medicare residents at its nursing home known as Ridgeview Manor notifying them that they must relocate to another facility by a certain date or waive their right to M edica re reimbursement; and 2) restrained from terminating Ridgeview's Medicare provider agreement on March 30, 2007. 1

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T h e court makes the following findings of fact and conclusions of law: F IN D IN G S OF FACT PAR T IE S 1. R id g e v i e w owns a nursing home known as Ridgeview Manor in Hopkins, South Carolina.

R idgeview participates in the Medicare and Medicaid programs pursuant to a provider agreement with the Department of Health and Human Services' Centers for Medicare and Medicaid Services ("CMS") a nd applicable federal statutes and regulations. Ridgeview also participates in the Medicaid program pu rsu a nt to a provider agreement with the South Carolina Department of Health and Human Services (" S C D H H S " ) and applicable state and federal statutes and regulations. 2. R idgeview provides care under the Medicare and Medicaid programs for twenty-six residents

who are beneficiaries thereof. Ridgeview Manor has thirty beds that are dual-certified under the M edica re and Medicaid programs. According to the Verified Complaint, approximately eighty percent of Ridgeview Manor's residents and seventy percent of its gross revenue come from participation in the M edica re and Medicaid programs. 3. P la intiff Sterling Healthcare, Inc. ("Sterling") owns and operates fifteen skilled nursing facilities

in Florida, Georgia, and North Carolina. Pursuant to a management agreement with Ridgeview dated M a rch 12, 2007, Sterling now operates Ridgeview Manor. Sterling has also entered into a letter of intent with Ridgeview Manor to purchase the Ridgeview Manor Nursing Facility, if certain conditions a re met. 4. D efenda nt Michael O. Leavitt is Secretary of the United States Department of Health and

H u m a n Services ("HHS"), an agency of the United States government. As Secretary, Leavitt is responsible for administering the Medicare and Medicaid programs. CMS is the operating component of HHS charged with the administration of Medicare and Medicaid. 2

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R E L E V A N T STATUTORY AND REGULATORY FRAMEWORK 5. T o participate in the Medicare and Medicaid programs, a nursing facility like Ridgeview Manor

m u st be in "substantial compliance" with federal participation requirements in sections 1819 and 1919 of the Social Security Act ("SSA"). 42 U.S.C. §§ 1396r, 1395i-3; 42 C.F.R. part 483. "Substantial com plia nce means a level of compliance with the requirements of participation such that any identified defi c i e n c i e s pose no greater risk to resident health or safety than the potential for causing minimal ha rm ." 42 C.F.R. § 488.301. 6. F a ilu re to adhere to the federal participation requirements results in "deficiencies." Deficiencies

a r e classified as "Tags" under Appendix P of the State Operations Manual ("SOM"). Tag numbers ra nge from F150 to F522 and are linked to the participation requirements located in 42 C.F.R. part 483. 7. D eficiencies are further characterized by scope and severity ratings. 42 C.F.R. § 488.408.

N u rsing homes with "A," "B," or "C" deficiency severity ratings are still in "substantial compliance." "D ," "E," and "F" deficiencies pose no actual harm with potential for more than minimal harm to residents. "G," "H," and "I" deficiencies constitute actual harm that does not rise to the level of im m edia te jeopardy. And, finally, deficiency severity ratings of "J," "K," or "L" represent immediate jeopa rdy to a resident's health and safety. Deficiency ratings are further classified in terms of scope as "isola ted," "pattern," or "widespread." 8. R em edies are assigned according to the deficiency scope and severity rating. 42 C.F.R. §

4 8 8 .4 0 8 . The choice of remedies includes temporary management, denial of payment, civil monetary pen a lties, state monitoring, transfer of residents, and termination with transfer of residents to other nu rsing homes. 42 C.F.R. § 488.406. 9. Althou gh the Division's regulations state that provider agreements may be terminated when the

nu rsing home is not in substantial compliance with participation requirements, whether or not immediate 3

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jeop a rdy is present, 42 C.F.R. § 488.456, the Medicare Act authorizes termination only in those cases tha t pose "immediate jeopardy" to resident health and safety. 42 U.S.C. § 1395i-3(h)(2). The state must recom m end termination when the nursing home does not achieve substantial compliance within a six m onth period. 42 C.F.R. § 488.412. 10. S ections 1819 and 1919 of the SSA give Leavitt, as HHS Secretary, the authority to impose

rem edies against a facility that is not in substantial compliance with participating requirements. The S ecreta ry has delegated to CMS the authority to impose the remedies. 42 C.F.R. part 488. 11. C M S 's regulations provide that state agencies may conduct inspection surveys to ascertain

com plia nce with the federal participation requirements. 42 C.F.R. §§ 488.10 to 488.28. 12. T he South Carolina Department of Health and Environmental Control's Division of

C ertifica tion, part of the Bureau of Certification, (the "Division") is the state agency specifically responsible for surveying health facilities that participate in the Medicare and Medicaid programs, inclu ding nursing homes. The Division conducts on- site monitoring as necessary when (1) a facility is n ot in substantial compliance with the requirements and is in the process of correcting deficiencies; (2) a facility has corrected deficiencies and verification of continued substantial compliance is needed; or(3) the survey agency has reason to question the substantial compliance of the facility with a requirement of participation: 42 C.F.R. § 488.332. 13. T he findings from the Division's inspection surveys are delivered in written form to the nursing

fa cilities in a report commonly referred to as a 2567. Nursing facilities are given a certain period of time in which to file with the Division a Plan of Correction which is to specifically address deficiencies cited in the 2567 report.

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14.

T he Division and CMS, by regulation, provide nursing facilities with the opportunity to contest

the Division's 2567 findings in an "Informal Dispute Resolution" ("IDR") proceeding. 42 C.F.R. § 4 8 8 .3 3 1 . 15. Under federal law, nursing facilities are entitled to a hearing before an administrative law judge

("A L J ") to contest CMS's determination of noncompliance. 42 U.S.C. § 1320a-7a(c)(2); 42 C.F.R. §§ 4 8 8 .4 0 8 ( g) ; 498.3(b)(12), (13). S U R V E Y FINDINGS AND COMPLIANCE ISSUES 16. T he South Carolina State Survey Agency completed a "Life Safety Code and Health

R ecertifica tion Survey" of the Ridgeview Manor facility on February 14, 2007. By letter of March 5, 2 0 0 7 , the Director of the Bureau of Certification for the South Carolina Department of Health and E nvironm enta l Control ("DHEC") sent a Form 2567 to Ridgeview Manor outlining its findings from the survey. The survey alleged 30 deficiencies, 29 of which posed no actual harm to residents of the fa cility. The findings are summarized as follows: D H E C SURVEY OF RIDGEVIEW MANOR FINDINGS BY DEFICIENCY S E V E R IT Y RATING S u b s t an t ial c om plian c e D ef ic ien c ies pose n o actual harm, w ith potential for m ore than minimal h arm to residents D E F 13 7 5 D ef ic ien c ies c on s titu tes actual h arm that does not ris e to the level of im m ed iate jeopardy G H I 1 0 0 D ef ic ien c ies that th at are an im m ed iate jeopardy to resident's health an d safety J K L 0 0 0

A 0

B 1

C 3

DHEC notified Ridgeview Manor that it had found "the most serious deficiencies (sic1) in your facility to be isolated deficiencies (sic) that constitute actual harm that is not immediate jeopardy, as evidence

1

As noted above, there was actually only one such alleged deficiency. 5

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by the attached CMS-2567 whereby significant corrections are required (G)." As a result of this survey, a nd prior to any ability of Ridgeview Manor to respond to these deficiency allegations, DHEC recom m ended the discretionary termination of the Medicare provider agreement, discretionary denial o f payment for new admissions effective March 22, 2007, and civil monetary penalties effective F ebru a ry 14, 2007. 17. Althou gh DHEC had not determined that there was any immediate jeopardy to the residents of

t h e facility, and prior to any response to the allegations by Ridgeview Manor, CMS sent a notice of involu nta ry termination to Ridgeview Manor on March 8, 2007. CMS noted DHEC's determination tha t Ridgeview Manor was "out of substantial compliance with the requirements specified at sections 1 8 1 9 ( b) , (c), (d) and (e) of the Social Security Act and the implementing regulations at 42 C.F.R, Part 4 8 3 ." Based on the survey findings, CMS imposed the following remedies: (a) involuntary termination of Ridgeview Manner's Medicare and Medicaid provider agreements, effective March 30, 2007, (b) m a nda tory denial of Medicare or Medicaid payments for new admissions, effective as of March 24, 2 0 0 7 , and (c) a civil monetary penalty of $850.00 per day, effective February 14, 2007 and continuing u ntil the facility is terminated. 18. B y letter dated March 9, 2007, SCDHHS notified Ridgeview Manor that it must canvass all

Sou th Carolina Medicare and Medicaid certified nursing facilities for available beds, and must arrange for the transfer of the Medicare and/or Medicaid eligible nursing home residents to other facilities. 19. R idgeview Manor of the Midlands, L.P. decided to sell the assets of the facility to Sterling, and

on March 9, 2007, entered a preliminary letter of intent to that effect. The sale is contingent upon CMS not terminating Ridgeview Manor's Medicare provider agreement, and the acceptance by CMS of the tr a n sfer of the Medicare and Medicaid provider agreements from Ridgeview Manor to Sterling. In a ddition, the letter of intent from Sterling notes that "[w]e are prepared to take control of this facility im m edia tely in order to start the process of getting back into compliance with all State and Federal 6

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regu la tions as soon as possible." Sterling entered a management agreement for the operation of R idg eview Manor on March 12, 2007. 20. A t the direction of management provided by Sterling, Ridgeview Manor submitted to DHEC a

" pla n of correction" providing credible evidence of compliance responsive to every deficiency alleged by the state surveyor. The corrective action plan does not admit any of the alleged deficiencies, but r esp on ds specifically to every allegation noting actions taken in response to the state surveyors a llega tions. On March 23, 2007, DHEC responded to the proposed corrective action plan, noting sim ply that it was "not acceptable and a revisit will not be authorized by CMS. Your provider a greem ent will be terminated on March 30, 2007 as noticed to you in the CMS letter dated March 8, 2 0 0 7 ." 21. O n March 26, 2007, counsel for Sterling emailed counsel for CMS an outline of the terms and

co nd itio ns of Sterling's proposed purchase of Ridgeview Manor. This email outlined Sterling's m a n a gem ent of Ridgeview Manor, its intent to purchase Ridgeview Manor, its willingness to post a bond to ensure compliance with the plan of correction and maintenance of compliance with the certifica tion standards, and requested delay of the termination of provider agreement to allow time to execu te the asset purchase agreement. On March 29, 2007, counsel for CMS informed plaintiffs' cou nsel that CMS would not delay the termination of Ridgeview Manor's provider agreement. 22. A s of March 30, 2007, CMS has refused to delay the termination of Ridgeview Manor's provider

a greem ent and has ordered Ridgeview Manor to notify their residents of their immediate need to be r eloca ted. 23. As soon as residents are notified, the relocations will begin. T h is will result in the loss of

revenu es from the Medicare program. 24. F or a period not to exceed 30 days from the date of termination, the Medicare program will

continu e to reimburse Ridgeview Manor for services provided to those beneficiaries who were residents 7

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in the facility on the date of termination, while arrangements are being made to transfer them to other fa cilities. 25. P la intiffs have requested an expedited administrative hearing under 42 C.F.R. Part 498 to contest

the grounds of termination, but said hearing cannot be held before notice is required to be given to the M edica re residents on March 30, 2007. It is furthermore unlikely that a hearing will be held before the term ina tion and revocations are completed. The decision of the administrative law judge is likely to be issu ed even later. 26. W ith regard to the likelihood of irreparable harm to the plaintiffs, relocation of Medicare and

M edica id residents may require the closure of Ridgeview Manor; further, requiring the relocation of elderly and ill Medicare and Medicaid patients within the next month are likely to cause them and their fa m ilies' irreparable harm. 27. W ith regard to the likelihood of irreparable harm to the defendants, defendants will suffer no

ha rm if a temporary restraining order is issued because the order will result only in the agencies' continu ed payment for covered services furnished to eligible beneficiaries, which are payments the a gen cies would also make if the beneficiaries were transferred to other facilities with Medicare provider a g r e e m e n t s. 28 . If the residents stay within the plaintiffs' facilities, they are unlikely to suffer harm for several

rea sons. First, the survey only found one deficiency that constituted actual harm, but DHEC specifically fo u n d that such deficiency did not rise to the level of immediate jeopardy. Second, the plaintiffs' corrective action plan notes that it has already corrected this deficiency. Third, Ridgeview Manor is now under the management of Sterling, which appears to be highly qualified and experienced in the m a na gem ent of skilled nursing facilities in the southeast, and which has agreed to ensure compliance with the plan of correction and maintenance of compliance with the certification standards. In addition,

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reloca tion of residents to other facilities is an event that causes stress to residents of nursing homes and ca rries a risk of harm to the residents' health and well-being. 29. W ith regard to the likelihood of plaintiffs' success on the merits, the court finds that the factors

presented in paragraphs 26-28 above weigh in favor of the plaintiffs, and further that based on the V erified Complaint, grave and serious questions are presented as to the merits. 30. T her e is no public interest that would be harmed by delaying the revocation of the Ridgeview

M a nor 's Medicare and Medicaid billing privileges or the termination of their provider agreements until a fter the Ridgeview Manor has been able to challenge the grounds of the revocations and terminations a nd a decision is given after an administrative hearing. C O N C L U S I O N S OF LAW 31. T his court finds it has jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1361 of plaintiffs' claim

t h a t the procedures utilized by defendants to effectuate a termination of plaintiffs' Medicare and M edica id billing privileges and provider agreements are constitutionally inadequate because they force su ch providers to incur a devastating loss before the nursing home can access the appeals process. These procedu ra l due process issues appear to be matters that are wholly collateral to the determination of benefits, and the plaintiffs' interest in having a determination on these matters prior to exhausting their a dm inistra tive remedies is so great that deference to a decision by the Secretary whether to waive the rem a ining administrative procedures to accomplish the exhaustion requirements is inappropriate. 32. 33. T he court finds that immediate and irreparable injury, loss, or damage will result to the plaintiffs. U nd er the four-part hardship balancing test for evaluating a request for injunctive relief, required

by Blackwelder Furniture Co. v. Seilig Mfg. Co., Inc., 550 F.2d 189 (4 th Cir. 1977), and Virginia C a rolina Tools, Inc. v. International T ool Supply, Inc., 984 F.2d 113 (4 th Cir. 1993), issuance of a T em po ra ry Restraining Order here is appropriate:

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(a )

T here is a likelihood of irreparable harm to plaintiffs through the loss of their revenues,

the relocation of their Medicare and Medicaid residents, and the likelihood of closure of Ridgeview M a nor if a restraining order is not issued; (b) N o harm will be suffered by defendants in the court's issuing a restraining order because

the defendants will likely be paying the same fees for the affected Medicare and Medicaid residents, rega rdless of what facility the residents are located; (c) T her e is not a likelihood of harm to plaintiffs' residents if a restraining order is issued

beca u se the most recent DHEC survey did not find any immediate harm to the residents and because the plaintiffs have adopted a corrective action plan to which CMS has not substantively responded; (d) A balance of the irreparable harm to the parties weighs heavily in favor of the plaintiffs.

F u r ther, based on the Verified Complaint, the plaintiffs have presented grave and serious questions as to the merits. Thus, the plaintiffs need not demonstrate a likelihood of success on the merits. See B la ck welder, 550 F.2d at 196. (e) T h e consideration of public interest factors weighs heavily in favor of granting the

tem po ra ry restraining order to the extent that the elderly and poor nursing home patients may be forced to relocated if the temporary restraining order is not granted, causing a substantial burden to the elderly a n d poor patients. No public interest will be served by displacing and relocating these patients. Further, no public interest will be served by denying plaintiffs an administrative hearing prior to the revocation of their Medicare and Medicaid billing privileges and termination of their Medicare and Medicaid provider agreements. W herea s, plaintiffs have posted bond in the amount of $100,000 this day, IT IS ORDERED: 1. from : D efend a nts, their agents and all those acting in privity with them, are hereby enjoined

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A.

R equ iring plaintiffs to send out any Notice of Termination to affected Medicare or M edica id residents notifying them of the requirement that they be relocated on or after M a rch 30, 2007;

B.

R ev o k i ng plaintiffs' Medicare and Medicaid billing privileges or terminating their M edica re and Medicaid provider agreements until the plaintiffs have been afforded a h ea r in g and the revocation and termination actions are upheld by the hearing officer, w hile this Temporary Retraining Order is in effect;

C.

I nv olu n ta r ily relocating the plaintiffs' residents prior to the hearing on the preliminary inju nctiv e relief sought in the Verified Complaint; and,

D.

M a k in g efforts to relocate plaintiffs' residents prior to the hearing on the preliminary inju n ctive relief sought by the complaint, except that defendants may ( i) identify reasonably appropriate alternative placement in the event the d ecer tifica tio n and termination actions are upheld by the hearing officer; develop a plan to minimize any transfer trauma or stress to the residents in the event the decertification and termination actions are upheld by the hea ring officer; and, cou nsel the residents or their guardians or representative as to available com m u nity resources.

(ii)

(iii)

2. o r d er . 3.

T h is restraining order shall remain in effect until April 5, 2007, unless extended by court

T he court shall conduct a hearing on the preliminary injunctive relief sought in the

V erified Complaint on April 5, 2007 at 10 a.m.

IT IS SO ORDERED.

March 30, 2007 C o lum bia , South Carolina
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s / Joseph F. Anderson, Jr. Unite d States District Judge