Petition — Cole Hospital, Inc. v. Califano
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1) sep
22 1978
Supreme Court “ the the ‘nite Wbdten Ki JR, CLERK _|
Octonia Tham, 1978
No.
@8-495
COLE HOSPITAL INC.,,
Petitioner,
Vs,
SECRETARY OF HEALTH, EDUCATION AND
WELFARE,
Respondent,
JEFFERSON MEMORIAL HOSPITAL ASSOCIATION,
Petitioner,
V4,
JOSEPH A, CALIFANO, JR, Stenitany of HtaLTu,
EDUCATION AND WELPARE,
Respondent,
PETITION FOR WRIT OF CERTIORARI TO THE UNITED
STATES COURT OF APPEALS FOR THE
SEVENTH CIRCUIT,
RONALD Scott MANGUM
Liss & MANGUM
208 South LaSalle Street
Chicago, Ilinois 60604
Attorney for Petitioners
= a a ee te = SRE Ses Soe
Gunthore Warren Printing Gompany, Chicago « Financial 66666
PAGE
EE ba eeOCGMenebsceasedsetesececoccoccenes ii
TU MevGU ane ebebebscdccbcectceccececeeses 1
Opinions Below ..... eceeue ecccccccececcccecccece 2
Questions Presented ......... eccceetccceevcccccens 2
Constitutional and Statutory Provisions and Regulations
Involved occ es ecececcccvccccecccececccces oe
Statement Of the Cas@ cccccscccccccccceceeeeeceens 3
AFBUMENE cece nnns ceeeeeens oceeeeeececeeces 7
COMGIIBION ceccccccccccccccccveccccccccccccecees 22
Appendix A v.cs. TEPTTEREEEETERETESES EERE EEE Al
Appendix B..... beueeens TEPEEREEEEEOEOSEOOR EEE Al2
APPONdlZ Co crcccccccrcccecccecccccreerccececece Al9
ii
CITATIONS
Cases
Abbott Laboratories v. Gardner, 387 U. S. 136 (1967) 21
Arnett v. Kennedy, 416 U. S. 134 (1974) ............ 16
Auxier v. Woodward State Hospital School, 266 N. W. 2d
139 (iowa BCL. 197E) sce sccssoccs Se eae was 35 88
Bishop v. Wood, 426 U. S. 341 (1976) ...........4.. 16
Board of Regents v. Roth, 408 U. S. 564 (1972) ...... 9,18
a a eS eee ere eee eee 6
Case Nursing Home v. Weinberger, 523 F. 2d 602 (2d
RRM PCa eeu e dhe cen Sines hae nico 40:4's 0 0h 9,18
Caswell v. Califano, 435 F. Supp. 127 (D. Me. 1977) .. 17
Elliott v. Weinberger, 564 F. 2d 1219 (9th Cir. 1977). . passim
FTC v. Raladam Co., 283 U. S. 643 (1930) .......... 21
Frost v. Weinberger, 515 F. 2d 57 (2nd Cir. 1975), cert.
ce eR | eee ee eee 10
Goldberg v. Kelly, 397 U. S. 254 (1970) ........ 13, 18, 19
Greeley v. Thompson, et al., 10 Howard 225 (U.S. 1850) 21
Hathaway v. Mathews, 546 F. 2d 227 (7th Cir. 1976)
PakesssNbes oeuubes shee baeserhsrse res eaah 7, 9, 18, 19
Isbrandtsen Co, v. United States, 211 F. 2d 51 (D. C.
Cir.), cert. denied sub nom, Japan-Atiantic & Gulf Conf.
v. United States, 347 U. S. 990 (1954) .......000e. 21
Jones v. N. Y. Guaranty & Indem. Co., 101 U. S. 622
CRETE) ciccccctacdicwsstenencenwanaeceacens« 20
Klein v. Mathews, 430 F. Supp. 1005 (D. C. D. N. J.
nS ee eee ee el ae ee 8
Lucas v. Chapman, 430 F. 2d 945 (Sth Cir. 1970) .... )
Martinez v. Richardson, 472 F, 2d 1121 (10th Cir. 1973) 10
iii
Mathews v. Eldridge, 424 U. S. 319 (1976) .......... passim
Mattern v. Mathews, .... ee pee (3d Cir. 1978). .6, 7, 19
Memphis Light, Gas & Water Div. v. Craft, . U. S.
OR ee ~~ yey & F Fi. | Pe ererrrrreey A | eT
North Penn Convalescent Residence, Inc. v. Califano,
F, Supp. ........ (D. C. E. D. Pa. July 5, 1978) ...... 7
Regional Rail Reorganization Act Cases, 419 U. S. 102
EUPEEe Sk ads sau UOReN a bewh benches cevesbee ce 22
Scheuer v. Rhodes, 416 U. S. 232 (1973) ............ 6
Schwartzberg v. Califano, ......... a fs
ee i en EE Uy SOD ack ce ba wes cso eSs.cvees 7
Weinberger v. Salfi, 422 U. S. 749 (1975) .......... passim
White v. Mathews, 559 F. 2d 852 (2nd Cir. 1977), cert.
denied, 46 U. S. L. W. 3680 (U. S. Feb. 22, 1978) ... 16
Wilwording v. Swenson, 404 U. S. 249 (1971) ........ 6
United States v. Carolene Products Co., 304 U. S. 144
PE abVCOGL Gas a cokes bane Ue ek be peas si eeee 20
United States v. Cooper Corp., 312 U. S. 600 (1941) ... 20
Constitution and Statutes
United States Constitution, Fifth Amendment ........ passim
PU Es as LRGs eeUe PEERS SOC ET CN eeeeeds 5,6
ee ie et RED | 5 0.0.0'0.0'6.0.0:54.5 € 040d 0b 00000026 2
ee 6:0 hav Ue msa'd 0 0-006 09:0 00450-6000 3, 5, 6,8
PR ED “SeGbes 0 08 esos eseees 3, 5, 6, 10, 16, 17
SR EE cabo tte sig sesbedese ee sseeeuresds 8,13
UE. SAE) iicccveccccdecvcvccvicccvves 6, 8, 12
PME UE caveonedicdseesscecdecveess 6, 11,17
CEO Gree ccc devdcctectvevedateseceers 13
4 Lol TPP rrrrererrrrrere errr 14, 16, 20
iV
Miscellaneous
Byse & Fiocca, “Section 1361 of the Mandamus and Venue
Act of 1962 and ‘Nonstatutory’ Judicial Review of Fed-
eral Administrative Action,” 81 Harv. L. R. 308 (1967) 17
3 Davis, Administrative Law Treatise, Sec. 20.01 ...... 21
20 C. F. R. 405.1501 68 86g. 2 ccccccccccccccctecs 4, 18, 21
CCH Medicare and Medicaid Guide § 28.716,......... 4
CCH Medicare and Medicaid Guide 4 28.717 ......... 5
1 United States Congressional and Administrative News
1965 pages 1943, 1991 2... ccc ccccccccccecesecs 20
IN THE
Supreme Court of the Gnited States
OcTOBER TERM, 1978.
No.
COLE HOSPITAL INC.,
Petitioner,
vs.
SECRETARY OF HEALTH, EDUCATION AND
WELFARE,
Respondent.
JEFFERSON MEMORIAL HOSPITAL ASSOCIATION,
Petitioner,
vs.
JOSEPH A. CALIFANO, JR., SECRETARY OF HEALTH,
EDUCATION AND WELFARE,
Respondent.
PETITION FOR WRIT OF CERTIORARI TO THE UNITED
STATES COURT OF APPEALS FOR THE
SEVENTH CiRCUIT.
Petitioners, Cole Hospital Inc. and Jefferson Memorial Hos-
pital Association, petition for a writ of certiorari to review the
decisions of the United States Court of Appeals for the Seventh
Circuit in these cases.
OPINIONS BELOW
The decision of the court of appeals (App. A, pp. A4-Al11)
is not reported. The decisions of the district court (App. B, pp.
A12-A18) are not reported.
JURISDICTION
The decision of the court of appeals (App. A, pp. A4-A11)
was entered on July 13, 1978. A petition for rehearing was
denied on August 11, 1978 (App. A, pp. A2-A3). The order of
the court of appeals granting the petitioners’ motion to stay
mandate was entered on August 24, 1978, staying its mandate
until September 22, 1978 (App. A, p. Al). No application
for an extension of time to file the petition has been made.
The jurisdiction of this Court is invoked pursuant to U. S.
Code, Title 28, § 1254(1).
QUESTIONS PRESENTED
1. Did the district court have jurisdiction to hear a case
involving the question of a denial of due process in connection
with the termination for cause of a hospital provider agreement
under Title XVIII of the Social Security Act (Medicare)?
2. Does the Due Process Clause require a hearing prior to
publication by the Secretary of notice of termination for cause
of a hospital provider from the Medicare program and prior to
the Secretary effecting such termination?
CONSTITUTIONAL AND STATUTORY PROVISIONS AND
REGULATIONS INVOLVED
1. The Fifth Amendment of the Constitution provides in
pertinent part:
No person shall be . . . deprived of . . . property, without
due process of law....
3
2. U.S. Code, Title 28, §§ 1331 and 1361, are set forth in
pertinent part in App. C, p. Al9.
3. Sections 405(g) and (h), of the Social Security Act, 49
Stat. 624, as amended 42 U. S. C. 205, and 42 U. S. C. 1395,
and the regulations of the Department of Health, Education and
Welfare, are set forth in pertinent part in App. C, pp. A19-A21.
The petitioners have requested the clerk of the court of ap-
peals to certify and transmit the record on appeal.
STATEMENT OF THE CASE
This is an appeal from a reversal by the court of appeals of
the district court’s preliminary injunctions preventing the Secre-
tary of Health, Education and Welfare (HEW), from publishing
notice of termination for cause of two community hospital’s
provider agreements under Medicare, and from effecting such
termination for cause, without affording to the hospitals a pre-
termination hearing. This Court has decided cases involving
termination of benefits to beneficiaries under several titles of the
Social Security Act. The instant cases, however, involve termi-
nation for cause of the long term contractual agreement between
HEW and hospitals which are providing services to social security
beneficiaries, and as such, are cases of first impression for the
Court.
A. Cole Hospital
Cole Hospital is a 69 bed medical surgical hospital which
has been providing health care services to the citizens of Cham-
paign, Illinois since 1947. It has been a provider of health care
services under Medicare since 1966 and currently, approximately
60 percent cf its revenues come from Medicare reimbursements.
On October 5, 1975, the hospital received a notice from HEW
of the Secretary’s determination to terminate the hospital’s pro-
vider agreement on November 1, 1975, and to publish notice in
the Champaign News-Gazette of the termination no later than
4
October 15, 1975. Representatives of the hospital met on Octo-
ber 10, 1975 in Baltimore, Md. with a Deputy Director of the
Bureau of Health Insurance in a vain attempt to present reasons
why the hospital’s provider agreement should not be terminated.
Having been denied the opportunity to present such reasons, the
hospital sought injunctive relief from the U. S. District Ccurt
for the Eastern District of Illinois. The district court granted a
temporary restraining order on October 15, 1975 (App. B, p.
A16) and a preliminary injunction on November 5, 1975 (App.
B, pp. Al2-A14). The Secretary appealed the preliminary in-
junction to the U. S. Court of Appeals for the Seventh Circuit.
Concurrently with seeking injunctive relief, the hospital pur-
sued the only administrative avenue open to it by requesting
a post-termination hearing by HEW under 20 C. F. R. 405.
1501 (App. C, p. A21). HEW granted the hospital’s request for
a hearing and it was held in September through November of
1976. On July 12, 1977, the Administrative Law Judge issued
a decision finding that the secretary had failed to prove many
of its allegations against the hospital, but that on balance, the
hospital failed to comply with the Conditions of Participation
under Medicare, and its provider agreement should be terminated
(CCH Medicare and Medicaid Guide § 28,716, Jan. 20, 1978).
The hospital requested review of this decision by the Appeals
Council, HEW, which was granted. Oral argument before the
Appeals Council is scheduled for November 1, 1978.
B. Jefferson Memorial Hospital Association
Jefferson Memorial Hospital Association is a 50 bed general
community hospital which has been providing health care
services to the residents of Mount Vernon, Illinois since 1947.
It has been a Medicare provider since 1966, and receives approxi-
mately 65 per cent of its revenues from government reimburse-
ments for health services rendered to Medicare beneficiaries. On
Friday, January 16, 1976, the hospital received a notice from
HEW of the Secretary’s determination to terminate the hospital's
5
provider agreement as of February 8, 1976 and publish notice
of such termination in the local newspapers on Tuesday, January
20, 1976. Without adequate time to formally request adminis-
trative relief prior to the proposed publication, the hospital
turned to the U. S. District Court and obtained injunctive relief
on Monday, January 19, 1976 (App. B, pp. A17-A18). The
Secretary appealed the district court decision, and it was con-
solidated with the Secretary’s appeal in Cole Hospital.
Concurrently with seeking injunctive relief, the hospital re-
quested the Secretary to grant it a hearing to allow the hospital
to present evidence as to why its provider agreement should not
be terminated. That hearing was held in January and February,
1977 and on December 5, 1977 the administrative law judge
found that the hospital substantially complied with the Medicare
Conditions of Participation and that its provider agreement
should not be terminated (CCH Medicare and Medicaid Guide
€{ 28,717, Jan. 20, 1978). The Secretary requested review of
the decision by the Appeals Council, HEW, and review has
just recently been granted.
C. On July 13, 1978, the court of appeals found that the
district court lacked jurisdiction of the case under 28 U. S. C.
§ 1331, and under the Administrative Procedure Act, 5 U. S. C.
701. The court also found that the hospitals failed to show in
their complaints that they had filed a “claim for benefits” as
required by this Court in Mathews v. Eldridge, 424 U. S. 319
(1976). The hospitals filed a petition for rehearing, alleging (a)
that the district court had jurisdiction under 28 U. S. C. § 1331,
(b) that no “claim for benefits” was available or necessary in a
provider termination for cause, and (c) that jurisdiction would
also lie under 28 U. S. C. § 1361. The court of appeals denied
the petition on August 11, 1978 (App. A, pp. A2-A3).
Subsequent to the July 13 order, and prior to the filing of
the Petition for Rehearing, the Secretary notified both hospitals
that since the court of appeals had lifted the injunction against
termination, he was initiating reinspection of the hospitals and
termination of their provider agreements, again, with no oppor-
6
tunity for the hospitals to rebut the Secretary’s allegations of
deficiency. The Secretary took this action despite the favorable
administrative decision with regard to Jefferson, and despite the
pending administrative appeal with respect to Cole. Faced with
continued HEW attempts to terminate their provider agreements
despite drastic changes in factual conditions at the hospitals
over the three years since HEW’s original decisions (App. D, pp.
A22-A28), the hospitals moved for stay of mandate, which was
granted until September 22, 1978 (App. A,’p. Al).
D. The hospitals original complaints alleged jurisdiction
under 28 U. S. C. § 1331 and the Administrative Procedure Act,
5 U. S. C. § 701. The district court made no specific finding as
to jurisdiction in its orders (App. B). The court of appeals addi-
tionally considered jurisdiction under 42 U. S. C. § 405(g) and
(h). In their petition for rehearing, the hospitals pointed out
that jurisdiction could also lie under 28 U. S. C. § 1361. The
court of appeals refused to find jurisdiction under any of these
provisions.*
The Secretary is purporting to terminate for cause long term
contracts with two hospital providers. His action to terminate
threatens to bankrupt the hospitals. The Secretary is further
purporting to publish notice of alleged grounds for the termina-
tion to the hospitals’ communities. Publication will irreparably
harm the hospitals’ reputations in their community, as alleged
in the Complaints, by causing a loss of public and employee
1. Under the Federal Rules of Civil Procedure and the general
principles of modern jurisprudence, the hospitals are not required to
name any jurisdictional basis whatever, and are entitled to relief
under any statute relevant to the issue set out in the Complaint.
Wilwording v. Swenson, 404 U. S. 249 (1971), Scheuer v. Rhodes,
416 U. S. 232, 236 (1973). See e.g., Brown v. Allen, 344 U. S..443,
459 (“ ‘In the review of judicial proceedings the rule is settled that,
if the decision below is correct, it must be affirmed, although the
lower court relied upon a wrong ground or gave a wrong reason,’”’).
Consequently, the court of appeals could have found jurisdiction
under either § 405(g) or 28 U. S. C. § 1331 or under 28 U. S. C.
§ 1361 on the basis of the decision of the Ninth Circuit in Elliott v.
Weinberger, 564 F. 2d 1219 (1977) and the Third Circuit in Mattern
v. Mathews, ........ Ps ae wae (1978).
7
confidence in the hospitals’ ability to deliver medical care.
The result of the Secretary's terminations will culminate in
financial bankruptcy to the hospitals, and loss of health care
services to the communities. Rights under a long term contract
and reputation are both interests which are protected under the
Fifth Amendment to the U. S. Constitution from being taken
away without due process of law. (See Mempnis Light, Gas
& Water Div. Vv. Catt, _. U. & ww, 6. BA 2 30
(1978). The hospitals’ only realistic remedy to prevent an
unconstitutional taking was to turn to the Federal courts. The
court of appeals should have found that the district court had
jurisdiction to grant the injunctions below.
ARGUMENT
I. Reasons for Granting Petition for Certiorari
The pivotal issue at this stage in the proceedings is whether
the district court in the instant cases had jurisdiction to entertain
the hospitals’ claims for injunctive relief in light of the Supreme
Court’s decisions in Weinberger v. Salfi, 422 U. S. 749 (1975)
and Mathews v. Eldridge, 424 U. S. 319 (197&6}. A substantial
question, appropriate for review by this Court, is presented
because the decision of the court of appeais conflicis with the
decision of the courts of appeals for the Third and Ninth
Circuits in Elliott v. Weinberger, 564 F. 2d 1219 (9th Cir.,
1977), Pet. for Cert. filed 4/21/78, 47 L. W. 3060, and
Mattern v. Mathews, ...... F. 2d .... (3rd Cir., June 30,
1978). In addition, numerous courts, including the court of
appeals have found adequate bases of jurisdiction to raise due
process claims in similar and virtually identical circumstances.
See, Schwartzberg v. Califano, _._... F. Supp. —... (D. C. S. C.
N. Y., June 7, 1978); North Penn Convalescent Residence, Inc.
v. Califano, ...... F. Supp. (D. C. E. D. Pa., July 5,
1978); Hathaway v. Mathews, 546 F. 2d 277 (7th Cir.,
1976); Auxier v. Woodward State Hospital School, 266 N. W.
2d 139 (lowa $, Ct., 1978); and, Klein v, Matthews, 430 F.
Supp. 1005 (D, C, D. N. J., 1977).
The decision of the Secretary herein sought to be reviewed
is his outright refusal to grant to the hospitals a pretermination
hearing as is required by the Fifth Amendment to the United
States Constitution. This refusal at a critical stage in the
proceeding threatens to deprive the hospitals of a protected
property right without adequate due process of law. The magni-
tude of the issue of the proper procedure to be followed by the
Secretary in terminating for cause a hospital’s provider agree-
ment under Medicare calls for review and a decision by this
Court of an important question of Federal law.
II. The District Court Had Jurisdiction to Hear a Case Involv-
ing a Question of Denial of Due Process in Connection with
the Termination for Cause of a Hospital Medicare Provider
Agreement.
A. The District Court Had Jurisdiction of These Cases Under
28 U. S. C. § 1331.
The court of appeals erred in holding that the decision of
this court in Weinberger v. Salfi, supra, precludes judicial review
under 28 U. S. C. § 1331 of the constitutional issues raised by
the hospitals in this case. In Salfi this Court held that Congress,
by enacting 42 U. S. C. 405(g), precluded Federal court review
of prospective “claims” arising under the Social Security Act.
The Court, however, distinguished a “claim” such as the claim
for widow's benefits presented by Mrs. Salfi, from contractual
obligations which enjoy protection under the Fifth Amendment
to the U. S. Constitution:
“a noncontractual claim to receive funds from the public
treasury enjoys no constitutionally protected status, Dan-
dridge v. Williams ... .” (p. 772.)
In Salfi, the “claim” was based upon a nou-obiigatory grant
by Congress of financial assistance to widows (42 U. S. C.
9
§ 402), There was no contractual basis for Mrs, Salfi's claim,
Consequently, the Count found that even if Mrs, Salfi raised a
colorable issue of constitutional protection, that issue arose
out of benefits granted by the Social Security Act and as a
prospective claim for entitlements was best reviewed under the
procedures set out in the Act (422 U. S. at 760-761).
Cole and Jefferson are not recipients of financial benefits
doled out by Congress under the Act. They are parties to long-
term contracts with the Federal government to provide health
care services. That such a contract is a protected property right,
has been determined by the courts. (See Case v. Weinberger,
523 F. 2d 602, 606 (2d Cir. 1975); Hathaway v. Mathews,
supra; Board of Regents v. Roth, 408 U. S. 564, 577 (1972);
Lucas vy. Chapman, 430 F. 2d 945 (Sth Cir. 1970)) and has
been conceded by the Secretary in his Reply Brief (p. 17, n. 10).
Such a property right may not be terminated, especially “for
cause”, without due process of law (Memphis, Light, Gas
& Water Div. v. Craft, supra).
It is also well recognized that reputation is a protected right
under the Fifth Amendment. Board of Regents v. Roth, supra.
That the hospitals are entitled to protection of their reputations
cannot be disputed. The publication by the Secretary of notice
of alleged deficiencies prior to termination (and prior to a hear-
ing to determine the truth of the allegations) will cause irrepar-
able harm to the reputation of the hospitals. As is demonstrated
by the decisions of the Administrative Law Judges, the allega-
tions with respect to Jefferson Hospital were found to be untrue,
and two of the three allegations with respect to Cole Hospital
were abandoned by the Secretary. Without intervention by the
district court the Secretary would have published those allega-
tions to the community, thereby irreparably and falsely injuring
the hospitals’ reputation.
Unlike Salfi, the constitutional claim to protection of their
contract rights and their reputations raised by the hospitals are
not “claims for benefits” arising under the Social Security Act.
10
They arise separate and apart from the Act and out of the hos-
pitals’ status as contractors and out of their position in their
communities as health care providers, The Court of Appeals for
the Ninth Circuit clearly enunciated this distinction in Elliott
v. Weinberger, supra. Elliott involved an action under 28 U. S. C.
§ 1361 to compel the Secretary to provide hearings to individual
petitioners prior to taking action to recoup overpayments of sociai
security benefits. The court found that jurisdiction existed in the
district court under 28 U. S. C. § 1361:?
“Thus the trial courts properly found jurisdiction. Here
we are concerned with the duty of the Secretary to provide
certain minimum due process notice and hearing oppor-
tunities to Social Security recipients subject to recoupment.
Frost v. Weinberger, 515 F2d 57, 62 (2d Cir. 1975), cert.
denied, 424 U.S. 958, 96 S. Ct. 1435, 47 L. Ed. 2d 364
(1976); Martinez v. Richardson, 472 F.2d 1121, 1125-26
& n. 12 (10th Cer. 1973). It is a strict fifth amendment
issue and the question of discretion does not arise. The
Secretary has either met his constitutional duty to provide
a certain minimum or he has not. He has no discretion to
provide less than that constitutionally required. (p. 1226.)
“Nor are the present suits precluded by 42 U.S.C.
§ 405(h) which controls judicial actions to recover benefits.
Weinberger v. Salfi, 422 U.S. 749, 95 S.Ct. 2457, 45 L.Ed.
2d 522 (1975) interprets § 405(h) to require that claims
for benefits be asserted only through 42 U.S.C. § 405(g).
The instant suits are quite different. They assert a constitu-
tional right to due process notice and hearing when alleged
overpayments are recouped. They are not claims for bene-
fits. Nor would granting the relief sought result in an
entitlement to benefits. The distinction between due process
questions divorced from a claim for benefits and questions
related to the merits of a benefits claim is a significant one,
requiring considerably different treatment by the courts.
See Eldridge, supra, 424 U.S. at 329-332, 96 S.Ct. 893.”
(564 F. 2d at 1226.)
2. The Court can find jurisdiction of the cases under the Man-
damus statute (28 U. S. C. § 1361) without requiring the plaintiff
hospitals to so allege jurisdiction in their complaints. This action may
be construed as a suit seeking to compel the Secretary to offer a
pre-termination hearing to the Hospitals.
The Secretary's refusal to provide a pre-termination hearing to
Appellees before taking action which would terminate their long
term contracts with the government, and which would perma-
nently and irreparably injure the hospitals’ reputation by publica-
tion of untrue or unsupported alleged deficiencies is a violation
of due process derived not from any statute, but from common-
law principles embodied in the constitutional guaranty of due
process of law (Auxier v. Woodward State Hospital School, 266
N. W. 2d 139 Iowa Ct. 1978). Clearly, an attempt by Congress
to deny the courts the ability to consider claims arising under the
Constitution is not to be brooked unless adequate alternatives
are available. While it may be argued that the procedure set
forth in 28 U. S. C. § 405(h) is adequate to provide review of
constitutional issues, first at the administrative level and then in
the courts, we urge otherwise as did the court in Elliott v. Wein-
berger, supra:
“Unlike benefits cases wherein the purpose of the ad-
ministrative process is served by requiring all actions to
proceed through administrative review before appeal to the
courts, questions of due process benefit little from adminis-
trative exhaustion. There is a need for prompt resolution of
such questions, Eldridge, supra, 424 U.S. at 330, 96 S.Ct.
893, and they are typically beyond the competence of the
Secretary to decide. On the contrary, the development and
fine-tuning of notions of due process is peculiarly the prov-
ince of the courts.
Thus, while the language of § 405(h) precludes “judicial
action to recover on any claim arising under this subsec-
tion,” [emphasis added] it simply does not address the
question of due process. Unless the question sought to be
litigated is within the express language of the limiting
Statute, there is no basis for concluding that Congress
sought to limit or preclude judicial review. Salfi, supra, 422
U.S. at 761-762, 95 S.Ct. 2457. (564 F.2d at 1227.)”
The hospitals action seeking protection of existing property
rights is not controlled by this Court’s decisions in Salfi and
Eldridge where plaintiffs sought review of decisions to deny
12
prospective, non-contractual benefits. The district court, there-
fore, had jurisdiction to consider the hospitals’ constitutional
claims and to grant the injunctions in this case to prevent
irreparable harm* to the hospital's financial viability and to
their reputation.
B. The District Court Had Jurisdiction of These Cases Under
42 U. S. C. § 405(g).
The court of appeals’ order of July 13, 1978 recognized
that the district court had jurisdiction of these cases under
42 U. S. C. 405(g) subject to the conditions for Federal court
review set out in Mathews v. Eldridge, supra. Eldridge holds
3. The court of appeals July 13 order (App. A, pp. A4-Al1)
implies that the danger of irreparable harm to these hospitals may
have passed. This is not so. In the case of Jefferson, an Adminis-
trative Law Judge found that the hospital’s building complies sub-
stantially with the Medicare Conditions of Participation; and that its
provider agreement should be continued until December 5, 1978.
Under the Secretary’s regulations, however, such a decision does not
necessarily prevent a termination of the provider agreement retro-
active to February 6, 1976, and recoupment from Jefferson of all
payments under Medicare for medical services rendered since that
date. The Secretary has requested review of the ALJ decision by the
Appeals Council, HEW, and review has recently been granted.
With respect to Cole, the hospital requested review of the adverse
ALJ decision and review has been granted by the Appeals Council.
One of the issues betore the Appeals Council is whether or not the
ALJ improperly refused to consider Cole’s plan of correction of
physical deficiencies and its actions to implement said plan. Since
the Secretary’s October 3, 1975, notice to the hospital, an automatic
sprinkler system has been installed covering the entire facility, addi-
tional exits have been added to the second and third floors of the
building, and additional interior work has been done. Furthermore,
after specific consideration of these actions, the Illinois Hospital
Licensing Board, at its April 12, 1978, mecting, voted to permit Cole
to continue to use its existing facility as a hospital until its new
facility is constructed. The hospital’s replacement facility is under
construction with anticipated occupancy of April 15, 1979. Any
action by the Secretary to terminate Cole’s provider agreement based
on alleged physical conditions existing in 1975 would be grossly
unfair, particularly if coupled with an attempt to recoup payments
made to the hospital since November 1, 1975. Evidence of the hos-
pital’s corrective action is of record before the Appeals Council,
HEW (See Affidavit, App. D, pp. A22-A23).
13
that the elements of (1) exhaustion of administrative remedies
and (2) statenrent of a “claim” must be satisfied before the
courts can review decisions of the Secretary. The hospitals
have amply argued in the courts below and at pages 21-22, infra,
the reasons tor considering the Secretary’s “initial” decisions to
terminate their provider agreements as final decisions for
purposes of review, and will not repeat those arguments here.
As to the requirement of presenting a “claim for benefits” to
the Secretary, the hospitals contend that such a requirement is
not applicable to provider termination proceedings, or in the
alternative, if it is applicable, a “claim” has been presented.
1. Salfi does not require a “claim for benefits” to be pre-
sented to the Secretary prior to seeking Federal court re-
view in a provider termination case.
Salfi and Eldridge both dealt with issues of prospective en-
titlement to benefits provided to individuals under Title II of
the Social Security Act (42 U.S. C. §§ 402 and 423). A cursory
review of the Act reveals a statutory scheme to provide specific
payments to qualified recipients. These payments, generally
termed “benefits,” are akin to welfare payments in that they
respond to a presumed financial need of the recipient (see
Goldberg v. Kelly, 397 U. S. 254 (1970))}. For cach type of
benefit the Secretary has developed a printed application, or
“claim” form, to be used by individuals to apply for benefits.
This Court in Eldridge relied on Salfi in requiring a “claim for
benefits” to be presented to the Secretary prior to court review.
In Salfi the Court required only the presentation of an “applica-
tion” for payment to the Secretary for the purpose of stating
a claim upon which the Secretary could render a decision:
“As to class members, however, the complaint is deficient
in that it contains no allegations that they have even filed
an application with the Secretary, much less that he has
rendered any decision, final or otherwise, review of which
is sought. The class thus cannot satisfy the requirements
for jurisdiction under 42 USC § 405(g)” (422 U. S. at
764). (Emphasis added.)
14
Thus, the Court merely required any potential recipient to
make known to the Secretary that he was claiming payment
under the Act and to present an issue upon which the Secretary
could render a decision. In the case of a provider termination a
“claim for benefit” in the sense of welfare payments simply
does not exist.
In 1966, both hospitals filed applications with the Secretary
to enter into provider contracts. Their contracts are long-term
and continuing. There is no “claim” form for the hospitals to
file, to continue as providers. In addition, the time available be-
tween notification to a hospital of the Secretary’s decision to
terminate for cause, and publication of the alleged ground for
termination is completely insufficient and, in actual practice, all
too brief for any type of formal claim to be presented. It is the
Secretary, through his regulations, who has determined the
timing of notice to the hospital and of publication of alleged
deficiencies. To allow the Secretary’s timing to control the ability
to file a “claim” and then to insist upon such a filing as an
absolute prerequisite to court review would lead to a mis-
chievous result which cannot have been intended by this Court.
2. In the alternative, the hospitals presented “Claims for Bene-
fits’ to the Secretary prior to seeking court relief.
As discussed above, the requirement for a “claim for bene-
fits’ as enunciated in Salfi, merely requires these hospitals to
have made their claims known to the Secretary so that he
may act upon them. In an involuntary termination for cause
under 42 U. S. C. 1395cc, the Secretary is taking affirmative
action to terminate the hospitals’ provider agreements without
their consent. To the extent that the Secretary has any authority
to act in such situations it must be presumed that a claim has
been presented on which he can act. Therefore, in this con-
nection the Secretary must be presumed to be aware of the
hospitals’ continuing status as providers in the Medicare program
and this status in itself must form the basis of the claim on
15
which the Secretary acts. Further, an examination of the record
discloses that the hospitals specifically notified the Secretary of
their claim (1) to remain in the program, and (2) to a pre-
termination hearing.
In the case of Cole, representatives of the hospital, including
counsel, travelled to Baltimore, Maryland, to meet with a
Deputy Director of the Bureau of Health Insurance. The nature
of the meeting can be variously characterized, but its essence
was to object to the perfunctory termination of the hospital’s
provider agreement. The Secretary cannot assert that he was
unaware of Cole’s claim to remain in the Medicare program
because Cole’s provider contract would have continued unin-
terrupted but for the Secretary’s action to terminate it. Secondly,
the Secretary and the Attorney General were personally served
in Washington, D. C. with copies of the hospital’s Complaint
on October 15, 1975, prior to the hospital's hearing on its
request for a temporary restraining order. The Secretary was
represented at the hearing by the U. S. District Attorney, and
had the opportunity through counsel to grant Cole’s request
before issuance of the preliminary injunction.
With respect to Jefferson, the notice of termination was hand
delivered to the hospital on Friday, January 16, 1976, the same
date that it was signed in Chicago. Public notice was to be
published on Tuesday, January 20, 1976. The hospital had
only one business day before scheduled publication to personally
meet with representatives of the Secretary. That amount of
time was insufficient. Jefferson did, however, personally serve
the Secretary and the Attorney Generai in Washington, D. C.
with copies of its Complaint prior to seeking court relief. The
Secretary was represented by the U. S. District Attorney at
the hearing on the Temporary Restraining Order, and, as with
Cole, took the position that the hospital was unequivocally not
entitled to a pre-termination hearing.
The Secretary was fully aware of both hospitals’ continuing
contractual status as providers in the Medicare program. That
16
> 66
contractual status was the hospitals’ “claim” as required in
Eldridge and Salfi. The Secretary, in acting to terminate for
cause the hospitals’ contractual status as providers, was, in fact,
rendering a decision on the hospitals’ “claims”. No further action
need be required of the hospitals prior to seeking court review
of the Secretary’s decision.
C. The District Court Had Jurisdiction of These Cases Under
28 U. S. C. § 1361.
Section 1361 grants original jurisdiction to the district courts
to compel an officer of the United States to perform a duty
owed to the plaintiff (App. C, p. Al9). The hospitals’ provider
agreements are protected property interests under the Constitu-
tion (See p. 9, supra). The Secretary is authorized to ter-
minate a provider agreement “only after the Secretary has
determined (A) that such provider of services is not complying
substantially with the . . . regulations” 42 U. S. C. § 1395cc(b).
That is, the Secretary may only terminate a provider agreement
“for cause”.
In discussing the quantum of due process to be afforded
by a public utility, this Court recently held: “Because [the
power company] may terminate service only ‘for cause’ respond-
ents assert a ‘legitimate claim of entitlement’ within the pro-
tection of the Due Process Clause [citing Arnett v. Kennedy,
416 U.S. 134 (1974); Bishop v. Wood, 426 U. S. 341 (1976)].
Memphis Light, Gas & Water Div. v. Craft, supra, p. 40.
The Secretary’s procedure of publishing notice of termination,
and then offering only a post-termination hearing to a hospital
provider is constitutionally deficient. The Secretary has a duty
to provide to the hospitals a pre-termination hearing procedure
that affords due process of law. The district courts have jurisdic-
tion under § 1361 to compel the Secretary to perform his duty
towards the hospitals and to grant a hearing prior to publica-
tion of notice and termination. Elliott v. Weinberger, supra;
White v. Mathews, 559 F. 2d 852, 855-856 (2d Cir. 1977),
17
cert denied, 46 U. S. L. W. 3680 (U. S. Feb. 22, 1978);
Caswell v. Califano, 435 F. Supp. 127, 131-33 (D. Me. 1977).
See also Byse & Fiocca, “Section 1361 of the Mandamus and
Venue Act of 1962 and ‘Nonstatutory’ Judicial Review of
Federal Administrative Action” 81 Harvard L. R. 308 (1967).
Section 405(h) does not preclude jurisdiction of these cases
under § 1361. Section 405(h) controls actions brought to
recover benefits under the Social Security Act. Payment to a
hospital provider for services actually rendered are not bene-
fits under the Act. Likewise hospitals are not beneficiaries
under the Act, but rather they provide services to the eligible
individuals who are beneficiaries under the Act. Further, a suit
seeking due process under the Constitution does not arise under
the Act and must be treated differently by the courts from a
“claim for benefits.” “Thus, while the language of § 405(h)
precludes ‘judicial action to recover on any claim arising under
this subsection,’ [emphasis added] it simply does not address
the question of due process.” Elliott v. Weinberger, supra at
1227.
The district court had jurisdiction under § 1361 to hear the
hospitals claims of deprivation of due process, and the court of
appeals erred in failing to recognize such jurisdiction.
III. The Due Process Clause Requires a Hearing Prior to Pub-
lication by the Secretary of Notice of Termination for
Cause of a Hospital’s Medicare Provider Agreement and
Prior to the Secretary Effecting Such Termination.
A. Due Process Requires a Pre-Termination Hearing in These
Cases.
The Secretary’s actions to terminate for cause the Medicare
provider agreements of these hospitals without affording them a
pretermination hearing amounts to an unconstitutional depriva-
tion of property without due process of law.
Both hospitals have been providers of Medicare services under
contract with the Secretary since 1966. This Court has deter-
18
mined that “long term (government) contracts for defense,
space, and education . . .” are property interests protected by
the due process clause of the Fifth Amendment to the U. S.
Constitution (Goldberg v. Kelly, supra, at p. 262). Memphis
Light, Gas & Water Division v. Craft, supra. There is no dif-
ference between those types of contracts and the provider agree-
ments between the hospitals and the Secretary involved in this
case. The courts have further held that long service under an
annually renewable contract between the Secretary and a nursing
home creates an expectation of continued renewal which expec-
tation is a constitutionally protected interest (Hathaway v.
Mathews, supra; Case v. Weinberger, supra), and that reputa-
tion and integrity are likewise protected property interests of
which the government may not deprive an individual without
notice and an opportunity to be heard (Board of Regents v.
Roth, Supra, at p. 573).
Here, the Secretary seeks to terminate for cause these hospi-
tals’ provider agreements by letter with published notice thereuf
to the community two weeks before the effective term‘ aation
date in accordance with his regulations set out at 20 C. F. R.
405.1501 et. seq. Indeed, if the statute and regulations allow the
Secretary to terminate the hospitals’ provider agreements for
cause and publish notice thereof without giving the hospitals the
right—fundamental to due process—to an impartial evidentiary
hearing on the facts and law pertinent to the termination, then
the law and regulations would be clearly unconstitutional.
In Goldberg v. Kelly, supra, this Court held that the Com-
missioner of Social Services of New York City could not termi-
nate welfare payments upon providing simply notice and a seven-
day period to file a written request for further review. Due
process demanded a pre-termination evidentiary heazing. Ap-
preciating that government officials must sometimes take sum-
mary action pending a later hearing, the Goldberg court sought
to delineate the area where due process restricted the govern-
ment’s interest in making unilateral determinations. The extent
19
to which procedural due process must be afforded was found to
turn upon two factors: the “grievous loss” which might be suf-
fered by the individual, and a balancing of interests to determine
whether an individual's interest in avoiding this loss outweighs
the government's interest in summary adjudication.
In the instant cases, both the District Court and the Adminis-
trative Law Judges found that the hospitals would incur “griev-
ous losses”, i.e., bankruptcy, by the Secretary’s termination of
Medicare reimbursements. This Court’s reasoning in Goldberg,
at 397 U. S. 264, is therefore especially appropriate:
“Thus the crucial factor in this context . . . is that termina-
tion of aid pending resolution of a controversy over eligi-
bility may deprive an eligible recipient of the very means
by which to live while he waits. Since he lacks independent
resources, his situation becomes immediately desperate. His
need to concentrate upon finding the means for daily sub-
sistence, in turn, adversely affects his ability to seek redress
from the welfare bureaucracy.” (Emphasis added.)
The passage aptly describes the hospitals’ predicament in that
their very existence would be jeopardized “while they wait” for
a lengthy post-termination appeals process. Moreover, the Goid-
berg plaintiffs were held to be entitled to a pre-termination hear-
ing even though they could have obtained a full restoration of
wrongfully withheld payments upon a successful appeal. Here
the Medicare Act contains no provision granting the hospitals
such restoration after appeal. The hospitals’ plight in the present
case is patently worse than that of the Goldberg plaintiffs.
A number of post-Goldberg cases have extended procedural
due process protection in social security cases. Elliott v. Wein-
berger, supra; Hathaway v. Mathews, supra; Mattern v. Mathews,
supra. There is no less a need for a pretermination hearing with
respect to these two hospitals. Their very existence depends
upon reimbursements paid by the Secretary under their provider
agreements. Termination for cause of these agreements without
a prior hearing is contrary to due process. This deprivation of
20
due process by the Secretary constitutes an important question
of Federal Law which this court should review.
B. The Social Security Act Requires a Pre-termination Hearing
by the Secretary Prior to His Publication of Notice of
Termination.
Section 1866 (42 U. S. C. § 1395cc) provides that a pro-
vider agreement with the Secretary may be terminated
“by the Secretary at such time and upon such reasonable
notice to the provider of services and the public as may be
specified in regulations, but only after the Secretary has
determined . . . that such provider of services is not com-
plying substantially . . . with the provisions of this sub-
chapter and regulations thereunder. . .. (Emphasis added. )
The intent of Congress that a pre-termination public hearing be
had under § 1866 is clearly reflected in the Senate and House
Committee Reports on the Social Security Act of 1965, which
state:
“The Secretary could terminate an agreement only after
reasonable notice and only if the provider (a) does not
comply with the provisions of the agreement or of the law
and regulations . . . The Secretary would be required to
give reasonable notice and opportunity for hearing to a
provider of services . . . before terminating an agreement
with the provider. The final administrative decision is sub-
ject to judicial review.” (emphasis added) (1 U. S. Con-
gressional and Administrative News 1965 page 1943,
1991.)
It is an axiom of statutory construction that Congress is pre-
sumed not to have enacted an unconstitutional statute (U. S. v.
Carolene Products Co., 304 U. S. 144 (1938)). This Court
must, therefore, look to the legislative history of the statute to
determine if the controlling intent of Congress was to give pro-
viders the right to a hearing prior to termination of their pro-
vider agreements (U. S. v. Cooper Corp., 312 U. S. 600
(1941) ). The legislative history clearly demonstrates such Con-
gressional intent and that intent must control (Jones v. N. Y.
Guaranty & Indem. Co., 101 U. S. 622 (1879)). Since the
21
statute, when read together with the legislative history, requires
a pre-termination hearing, the Secretary must grant a hearing
for his authority cannot exceed or contravene the grant of law
(FTC v. Raladam Co., 283 U. S. 643 (1930)); Greely v.
Thompson, et al., 10 Howard 225 (U.S. 1850).
The requirement of a pre-termination hearing is set out in
the legislative history of the Social Security Act, but the Sec-
retary has chosen to ignore the mandate of Congress and to
proceed to terminate for cause the provider agreements of these
two hospitals without granting an evidentiary hearing allowing
the hospitals to present evidence to determine whether termina-
tion of the agreements is proper. Instead his regulations only
provide for a post-termination hearing (20 C. F. R. 405.1501
et. seq.), which does not defer the termination of the provider
agreement, and which does not restore to the hospital reimburse-
ments denied between the termination and the hearing.
The Secretary contended below that his refusal to grant an
evidentiary hearing is not a “final” agency action for purposes
of the Social Security Act. His contention does not preclude
judicial review. While HEW’s proposed publication of notice
and termination of the hospitals’ provider agreements may not
be “final” agency action for purposes of the Social Security Act,
the finality requirement is interpreted by the courts in a prag-
matic way to determine whether a matter is ripe for judicial
review. Isbrandtsen Co. v. U. S., 211 F. 2d 51, 55 (D. C. Cir.
1954), cert. den. sub nom. Japan-Atlantic & Gulf Conf. v. U. S.,
347 U. S. 990 (1954). Exhaustion of administrative remedies
is not required where agency action threatens a party with ex-
treme hardship or irreparable harm. Abbot Laboratories v.
Gardner, 387 U. S. 136, 149 (1967); 3 Davis Administrative
Law Treatise Sec. 20.01. This Court in Mathews v. Eldridge,
supra, explained its conclusion that the Secretary’s denial of
Eldridge’s claim was final:
Eldridge’s constitutional challenge is entirely collateral to
his substantive claim of entitlement. Moreover, there is a
22
crucial distinction between the nature of the constitutional
claim asserted here and that raised in Salfi. A claim to a
predeprivation hearing as a matter of constitutional right
rests on the proposition that full relief cannot be obtained at
a post-deprivation hearing. See Regional Rail Reorganiza-
tion Act Cases, 419 U. S. 102, 156 (1974). In light of the
Court’s prior decisions, see e.g., Goldberg v. Kelly, supra;
Fuentes v. Shevin, supra, Eldridge has raised at least a
colorable claim that because of his physical condition and
dependency upon the disability benefits, an erroneous ter-
mination would damage him in a way not recompensable
through retroactive payments. Thus, unlike the situation in
Salfi, denying Eldridge’s substantive claim “for other rea-
sons” or upholding it “under other provisions” at the post-
termination stage, 422 U. S., at 762, would not answer his
constitutional challenge.
The district court and the Administrative Law Judges found
that each hospital was faced with irreparable harm and with
financial bankruptcy which would permanently deny medical
services to the citizens of its service area. A post-termination
would not repair the damage to the hospitals caused by publica-
tion of alleged grounds for termination. Moreover, the Secre-
tary’s regulations do not provide for retroactive payments to a
provider if the termination is found to be erroneous. In a practi-
cal sense, the Secretary's decision to terminate the hospitals’
provider agreements is final, and is ripe for judicial review.
CONCLUSION
This Petition for Certiorari should be granted.
Respectfully submitted,
RONALD SCOTT MANGUM
Liss & MANGUM
208 South LaSalle Street
Chicago, Illinois 60604
Attorney for Petitioners
September 21, 1978.
Al
APPENDIX A.
UNITED STATES COURT OF APPEALS
For the Seventh Circuit
Chicago, Illinois 60604
August 24, 1978.
Before
Hon. THOMAS E. FAIRCHILD, Chief Judge
Hon. WALTER J. CUMMINGS, Circuit Judge
Hon. Puitip W. TONE, Circuit Judge
CoLE HospPITAL, INC., a Delaware )
corporation, and JEFFERSON MEMo- | Appeal from the
RIAL HOSPITAL ASSOCIATION, an United States Dis-
Illinois Not-for-Profit organization, trict Court for the
Plaintiffs-A ppellees, Eastern District of
Illinois, Danville
Nos. 76-1134, 76-1135 | Division.
~ Nos. 75-2-119 CV
; 76-2-006 CV
JOSEPH A. CALIFANO, JR., Secretary Henry S. Wise,
of Health, Education and Welfare,
Defendant-A ppellant. )
Judge.
This matter comes before the court on the “Hospitals’ Motion
to Stay Mandate” and affidavit in support thereof filed herein on
August 18, 1978, by counsel for the plaintiffs-appellees. On con-
sideration whereof, the court being fully advised in the premises ;
IT Is ORDERED that the mandate of this court issued on August
21, 1978, be, and the same is hereby, Recalled, and the “Hos-
pitals’ Motion to Stay Mandate” be, and the same is hereby
Granted up to and including September 22, 1978, pending the
filing of a Petition for Writ of Certiorari to the United States
Supreme Court pursuant to Federal Rule of Appellate Pro-
cedure 41(b).
A2
UNITED STATES COURT OF APPEALS
For the Seventh Circuit é
Chicago, Illinois 60604
August 11, 1978.
Before
Hon. THOMAS E. FAIRCHILD, Chief Judge
Hon. WALTER J. CUMMINGS, Circuit Judge
Hon. PHiLip W. Tone, Circuit Judge
CoLeE HosPITAL, INC.,
Plaintiff-A ppellee,
No. 76-1134 VS.
SECRETARY OF HEALTH, EDUCATION
AND WELFARE,
Defendant-A ppellant,
and
JEFFERSON MEMORIAL HOSPITAL
ASSOCIATION,
Plaintiff-A ppellee,
No. 76-1135 VS.
JosEPH A. CALIFANO, JR., Secretary
of Health, Education and Welfare,
Defendant-A ppellant. J
ORDER
+
Appeals from the
United States Dis-
trict Court for the
Eastern District of
Illinois, Danville
Division.
Nos. 75-2-119 CV &
76-2-006 CV
Henry S. Wise,
Judge.
On consideration of the petition for rehearing in banc filed
by counsel for plaintiff-appellees on July 26, 1978,
Treating the petition as a petition for rehearing under Rule
40, F.R.A.P., the members of the original panel having voted
to DENY, or
A3
Treating the petition as a suggestion for rehearing in banc
under Rule 35, F.R.A.P., no judge in regular active service hav-
ing requested a vote thereon, accordingly
IT Is ORDERED that the petition for rehearing in banc is hereby
Denied.
A4
Unpublished Per Curiam Order
UNITED STATES COURT OF APPEALS
For the Seventh Circuit
Chicago, Illinois 60604
July 13, 1978.
Before
Hon. THOMAS E. FAIRCHILD, Chief Judge
Hon. WALTER J. CUMMINGS, Circuit Judge
Hon. PuHitip W. Tone, Circuit Judge
CoLe Hospitat, INc., a Delaware )
corporation,
Plaintiff-A ppellee,
No. 76-1134 VS.
E Appeal from the
SECRETARY OF HEALTH, EDUCATION United States Dis-
AND WELFARE, trict Court for the
Defendant-A ppellant, Eastern District of
illinois, Danville
and : Division.
JEFFERSON MEMORIAL HOSPITAL Nos. 75-2-119 CV &
ASSOCIATION, 76-2-006 CV
Plaintiff-A ppellee, Henry S. Wise,
Judge.
No. 76-1135 VS.
JosepH A. CALIFANO, Jr., Secretary
of Health, Education and Welfare,
Defendant-A ppellant. 7
These causes came on to be heard on the transcript of the
record from the United States District Court for the Eastern
District of Illinois, Danville Division, and were argued by
counsel,
AS
On consideration whereof, it is ordered and adjudged by this
court that the orders of the said District Court in these causes
appealed from be, and the same are hereby, Vacated, with costs,
and the causes Remanded with instructions, in accordance with
the order of this court entered this date.
Unpublished order not to be cited per circuit Rule 35.
A6
Unpublished Per Curiam Order
UNITED STATES COURT OF APPEALS
For the Seventh Circuit
Chicago, Illinois 60604
(Argued April 29, 1976)
July 12, 1978.
Before
Hon. THOMAS E. FAIRCHILD, Chief Judge
Hon. WALTER J. CUMMINGS, Circuit Judge
Hon. Puitip W. TONE, Circuit Judge
CoLe HOsPITAL, INC., "
Plaintiff-A ppellee,
No. 76-1134 vs,
Appeals from the
United States Dis-
trict Court for the
SECRETARY OF HEALTH, EDUCATION
AND WELFARE,
Defendant-A ppellant, Eastern District of
4 Illinois, Danville
= . Division.
JEFFERSON MEMORIAL HOSPITAL Nos. 75-2-119 CV &
ASSOCIATION, 76-2-006 CV
Plaintiff-A ppellee, Henry S. Wise,
No. 76-1135 VS. Judge.
JosEPH A. CALIFANO, JR., Secretary
of Health, Education and Welfare,
Defendant-A ppellant. J
ORDER
The Secretary of Health, Education and Weifare (HEW)
appealed from preliminary injunctions’ enjoining HEW from
1. In the action brought by Jefferson, the order took the form of
a temporary restraining order. It extended beyond the time limits
permitted by Rule 65(b), F. R. Civ. P., and is therefore treated as
a preliminary injunction.
A7
terminating the Medicare provider agreements with Cole Hos-
pital and Jefferson Hospital. Plaintiffs commenced these actioris
contending that their status as “providers” of Medicare services
had been unfairly terminated by HEW and that this action
threatened their survival as community hospitals. The district
court found in both cases that the termination would cause plain-
tiffs irreparable harm. HEW argues on appeal that the district
court lacked jurisdiction of these actions and, in the alternative,
that the terminations without pre-termination hearings were
proper.
Title XVIII (Medicare) of the Social Security Act provides
an insurance program for the “costs of hospital and related post-
hospital services” for senior and disabled individuals who qualify
for such benefits. 42 U. S. C. § 1395(c). This program antici-
pates that payment for such services will be made directly to
the hospitals that provide them. 42 U. S. C. §§ 1354d, 1395g.
A hospital is eligible for reimbursement by the Medicare pro-
gram after it files an agreement with the Secretary evidencing
its intention to comply with various provisions regarding the
quality and cost of covered services. 42 U. S. C. § 1395cc.
HEW may terminate this agreement, thereby discontinuing pay-
ment for services rendered to those eligible for Medicare bene-
fits, if the provider (hospital) fails to abide by the terms of the
agreement or Medicare statutes and accompanying regulations.
42 U.S. C. § 1395cc(6).
I.
Cole Hospital and Jefferson Memorial Hospital have been
providers of services under the Medicare program since 1966.
On October 3, 1975, HEW notified Cole that it was terminating
its provider agreement because it no longer fulfilled the require-
ments for participation as a provider of services in the Medicare
program. Cole had allegedly failed to meet the fire safety stand-
ards promulgated by HEW under the authority of § 1861(e) of
the Act, 42 U. S. C. § 1395. These standards had been incorpo-
rated by regulation into the Medicare program and hospitals
A8
had been required to meet them in order to maintain their status
as providers under Medicare. 20 C. F. R. §§ 405.1020,
405.1022, 405.1028. There were listed numerous violations of
these fire safety regulations and the maintenance of inaGequate
laboratory facilities, HEW further informed Cole that it would
publish the notice of this termination in local newspapers. HEW
also explained that Cole could request a hearing in which it
could challenge the decision to terminate the agreement.
On January 16, 1976, HEW notified Jefferson Memorial
Hospital that it was terminating Jefferson’s Medicare provider
agreement. HEW claimed that Jefferson failed to meet the fire
safety standards required of providers in the Medicare program.
20 C. F. R. § 405.1022. The agreement was to be terminated
on February 6 and a notice of this action was to appear in a
local newspaper on January 20. Shortly after the receipt of the
notice of termination, Jefferson commenced this action.
II.
Cole’s complaint set forth two counts. Count I claimed juris-
diction under 28 U. S. C. § 1331, and alleged that termination
without an opportunity for a prior hearing is a denial of due
process. Acknowledging that this count sought an injunction
against enforcement of an Act of Congress for repugnance to
the Constitution, plaintiff requested that a three-judge court be
convened. Count II claimed jurisdiction additionally under the
Administrative Procedure Act, 5 U. S. C. §§ 702, 704. Although
it did not allege that the deficiencies claimed by HEW did not
physically exist, it claimed that because of a suspension of state
regulations plaintiffs hospital conformed to state requirements
and that federal regulations required no more.
Jefferson’s complaint set forth three counts. Count I was
similar to Cole’s Count I, but did not request convening of a
three-judge court. Count II claimed jurisdiction under the Ad-
ministrative Procedure Act as well as § 1331. It alleged that the
hospital is not in violation as claimed. Count III alleged that
A9
termination without prior hearing violates the controlling statute,
asserting jurisdiction as in Count II.
Ill.
In granting the preliminary injunctions, the court found that
termination as providers would cause plaintiffs to cease opera-
tions and cause them irreparable harm. In Jefferson, the court
said nothing about probable success, and in Cole, only that
plaintiff had “created . . . an impression that it is likely to
succeed in a trial on the merits.” The court made no comment
as to any theory of the cases on which it acted, and did not
notify the chief judge of the circuit so that a three-judge court
would be designated. Appellant HEW noted in its brief that the
“matter [of the three-judge court] is not in issue on this appeal.”
The plaintiffs are silent on this point.
Although the individual district judge would have authority,
in a case requiring a three-judge court, to grant a temporary
restraining order pending determination by the full court, he
did not have power in such a case to grant an interlocutory
injunction, 28 U. S. C. § 2284 (U. S. C. 1975).
Accordingly, we treat the case in the posture of an attempt
to review the administrative decisions in these cases, albeit one
of the claims is a denial of due process.
IV.
HEW argues that the district court had no jurisdiction of
these actions. We think that for the purpose of jurisdiction, a
determination of HEW to terminate a provider agreement under
Medicare is equivalent to a determination to terminate benefits,
considered in Weinberger v. Salfi, 422 U. S. 749 (1975) and
Mathews v. Eldridge, 424 U. S. 319 (1976).
42 U.S. C. § 1395ff(c) specifies that anyone dissatisfied with
adetermination of noncompliance by a provider shall be entitled
to a hearing as provided in § 405(b) of the Act and to a iudicial
Al0
review of the “final decision after such hearing” as is provided
by § 405(g). Plaintiff claims as a matter of statutory interpreta-
tion or constitutional right that a hearing must precede any
effective termination. HEW’s position is that the provider agree-
ment may properly be terminated (particularly where HEW is
satisfied after investigation that a hospital is unsafe) without
prior hearing, but subject to a hearing at the option of the
provider, after termination.
As already noted, the only sources of jurisdiction alleged in
the complaint were 28 U. S. C. § 1331 (federal question): and
the Administrative Procedure Act. Salfi established that § 1331
does not confer jurisdiction of these actions. Califano v. Sanders,
430 U. S. 99, 107 (1977) held that the Administrative Pro-
cedure Act granted no jurisdiction.
Although the complaints did not allege jurisdiction under
42 U.S. C. § 405(g), we have considered whether there could
be jurisdiction under that section on the theory of Eldridge that
an agency decision without a hearing may be final as to a
collateral claim of a constitutional right to a hearing before
deprivation of a benefit. Plaintiffs’ dependence here on their
income as providers may put them, like Eldridge, in a position
where “an erroneous termination would damage [them] in a way
not recompensable through retroactive payments.” 424 U. S.
at 331.
In Eldridge, however, the Supreme Court held that it was
essential to jurisdiction that a claim for continuation of benefits
shall have been presented. The Court found such claim in an-
swers made by Eldridge to a state agency and a letter of Eld-
ridge responding to a tentative determination, It may well be
that something amounting to an adequate claim for continua-
tion of provider status was presented by plaintiffs here. The
complaints do not reflect anything of that nature, and, as noted,
§ 405(g) was not pleaded as a source of jurisdiction. Support-
ing affidavits in the Cole case refer to a meeting on October 10,
1975 (after notice of termination, but before the effective date,
All
November 1) at which Cole requested that the termination be
“suspended” until a state agency had time to act on a building
permit. We do not view this request as a claim of entitlement
under Eldridge.
Accordingly, based on the present record, the district court
had no jurisdiction of the actions, and the injunctions appealed
from must be vacated for that reason.
We note, additionally, two developments of which appellant
has informed us during the overlong pendency of this appeal.
Administrative hearings have been held as to the termination
of each plaintiff.
In Cole, the ALJ made numerous findings, deciding that the
hospital has been in serious and “deplorable” violation of ap-
plicable construction and fire safety standards, and that when
the injunction is no longer in effect, the Secretary should proceed
instantly with termination. Cole has appealed within the agency.
Although no final administrative decision has been reached, the
findings themselves could arguably be the showing of emergency
which this court indicated in a “Medicaid” case might justify a
pre-hearing termination. Hai/iaway v. Mathews, 546 F. 2d 227,
232 (7th Cir. 1976).
In Jefferson, the ALJ decided favorably to Jefferson and
recommended extension of the provider agreement for one year.
The Secretary has taken an administrative appeal. Although
there is no final administrative decision, the outcome at the
ALJ level means there is no immediate threat of irreparable
injury.
The orders appealed from are vacated and the causes re-
manded. Unless piaintiffs amend their complaints in a manner
which shows jurisdiction, consistent with this order, the district
court is directed to dismiss the actions for want of jurisdiction.
Al2
APPENDIX B
IN THE UNITED STATES DISTRICT COURT
For the Eastern District of Illinois
CoLe Hospitar, INc., a Delaware
Corporation,
Plaintiff,
vs.
No. 75-2-119
SECRETARY OF HEALTH, EDUCATION
AND WELFARE, an Agency of the
Federal Government,
Defendant. }
PRELIMINARY INJUNCTION
This matter coming before this Court on the Court’s Order
for Defendant to show cause why he should not be enjoined
and restrained as prayed in Plaintiff's Complaint, and this Court
having temporarily enjoined and restrained Defendant from
terminating Plaintiff's Agreement to provide services under the
Health Insurance for the Aged and Disabled Program (Medi-
care) established under Title XVIII of the Social Security Act,
and from publishing notice of said termination in a newspaper
of general circulation in Champaign-Urbana, Illinois, and the
Defendants being represented by the United States Attorney for
the Eastern District of Illinois, and Plaintiff being represented
by John P. O’Rourke, Dukes, O’Rourke, Stewart & Martin, Ltd.,
of Danville, Illinois, and Ronald Scott Mangum, Lord, Bissell
& Brook, of Chicago, Illinois. The Court having heard and con-
sidered the evidence, pleadings, affidavits and oral argument
submitted and presented by the parties, Finds That:
Al3
1. Cole Hospital is a hospital of long standing medical
service to the Champaign community and surrounding areas,
and approximately 60% of Cole Hospital’s patients are Medicare
patients.
2. Piaintiff has not been afforded the opportunity for an
evidentiary hearing before an impartial hearing officer ap-
pointed by Defendant prior to Defendant’s termination of Plain-
tiff's provider agreement under Medicare.
3. The termination by Defendant of Plaintiffs agreement to
provide services under the Health Insurance for the Aged and
Disabled Program (Medicare) established under Title XVIII
of the Social Security Act, 42 U. S. C. §§ 1395 et seq., and the
publication of notice of that termination in a newspaper of
general circulation in Champaign-Urbana, Illinois, more particu-
larly the Champaign News Gazette, will cause Plaintiff to cease
operating as a hospital and will cause Plaintiff irreparable harm
unless restrained and enjoined by this Court.
4. The restraint and enjoining of said termination and pub-
lication by Defendant will cause Defendant little, if any, harm.
5. Plaintiff has created with the Court an impression that it
is likeiy to succeed in a triai on the merits.
IT IS THEREFORE ORDERED that a Preliminary Injunction issue
against the Secretary of Health, Education and Welfare, De-
fendant herein, and his officers, agents, servants, employees and
attorneys, and upon those persons in active concert or partici-
pation with them, preliminarily enjoining them from publishing
notice and from terminating Plaintiffs provider agreement under
the Health Insurance for the Aged and Disabled Program
(Medicare) until further order of this Court, and against De-
fendants agents, namely the Champaign News-Gazette, enjoining
Al4
it from publishing notice of termination of Plaintiff's provider
agreement until further order of Court.
Entered this 5th day of November, A. D. 1975; at 2:00 P. M.
/s/ Henry S. WISE
Judge
Certified true copy.
JOHN P. OVALL
‘ Clerk
(SEAL) By /s/ DALE STANTON
Deputy Clerk
Al5
IN THE UNITED STATES District CouRT
For the Eastern District of Illinois
CoLe Hospira., INc., a Delaware >
Corporation,
Plaintiff,
vs.
No. 75-2-119
SECRETARY OF HEALTH, EDUCATION
AND WELFARE, an Agency of the
Federal Government,
Defendant. |
ORDER
This cause having come on for hearing this date on defend-
ant’s Motion for Reconsideration and both parties appearing
by and through their respective counsel and the Court having
heard arguments thereon, the Court finds: (1) That plaintiff,
Cole Hospital, has served the Champaign County community for
a number of years rendering hospital care which is valuable;
(2) That plaintiff has informed the Court that on June 30, 1975,
thg State of Illinois extended its licensing of plaintiff, Cole Hos-
pital, for another year until June 30, 1976; and (3) That plain-
tiff has informed the Court that the Illinois Health Facilities
Planning Board, an Agency of the State of Illinois, is to hold
a hearing on January 9, 1976, on Cole Hospital’s application
for a permit to build a new hospital.
WHEREFORE, it is hereby ordered that the preliminary in-
junction previously entered in this case be extended for another
sixty (60) days and plaintiff is instructed during the interim to
inform this Court what steps it is taking to resolve the alleged
deficiencies which have given rise to the proposed termination of
plaintiff's “provider” contract. The defendant is ordered during
the interim to see what revenues it may take to allow plaintiff,
Cole Hospital, to continue to operate in the community.
Dated this 22nd day of December, 1975.
/s/ Henry S. WISE
U.S. District Judge
Al6
IN THE UNITED STATES DISTRICT COURT
For the Eastern District of Illinois
Cote HospiTat, INc., a Delaware »
Corporation,
Plaintiff,
vs.
> No. 75-2-119
SECRETARY OF HEALTH, EDUCATION
AND WELFARE, an Agency of the
Federal Government,
Defendant. |
ORDER
This cause having come on for hearing this date on the motion
of plaintiff, Cole Hospital, Inc., to have the preliminary injunc-
tion heretofore entered in this cause continued until further
order of Court and both parties appearing by and through their
respective counsel.
WHEREFORE, it is hereby ordered, pursuant to Rule 62(c)
F. R. C. P., that the preliminary injunction entered against
defendant by this Court on November 5, 1975 and continued by
order of this Court on December 22, 1975, is continued in full
force and effect until further order of this Court.
Dated this 30th day of March, 1976.
/s/ HENRY S. WISE
U.S. District Judge
Certified true copy.
JOHN P. OVALL
Clerk
(SEAL) By /s/ DALE STANTON
Deputy Clerk
Al7
IN THE UNITED STATES District CouRT
For the Eastern District of [linois
JEFFERSON MEMORIAL HospPITAL As-
SOCIATION, an Illinois notfor-prlt |
organization,
Piainig, |
vs. |
No. 76-2-006
F, DAviD MATHEWS, SECRETARY OF
HEALTH, EDUCATION AND WEL-
FARE, an Agency of the Federal
Government,
Defendant. }
TEMPORARY RESTRAINING ORDER
This matter comes before the Court on Plaintiff's Motions
for a Temporary Restraining Order and preliminary injunction
dated January 19, 1976. Pursuant to notice personally served
on the Attorney General of the United States, The Secretary,
Health, Education and Welfare, and the United States Attorney
for the Eastern District of Illinois, Defendants being represented
by the United States Attorney for the Eastern District of Illinois,
and Plaintiff being represented by Ronald Scott Mangum, Lord,
Bissell & Brook, of Chicago, Illinois. The Court having heard
and considered the evidence, pleadings, affidavits and oral argu-
ment submitted and presented by the parties, hereby finds that:
1, The termination by Defendant of Plaintiff's agreement to
provide services under the Health Insurance for the Aged and
Disabled Program (Medicare) established under Title XVIII
of the Social Security Act, 42 U.S. C. §§ 1395 et seq., and the
publication of notice of that termination in a newspaper of
general circulation in Mt. Vernon, Illinois, more particularly the
Mt. Vernon Register News, will cause Plaintiff irreparable harm
unless restrained and enjoined by this court.
Als
2. The restraint and enjoining of said termination and pub-
lication by Defendant will cause Defendant little, if any, harm.
IT IS THEREFORE ORDERED, that a Temporary Restraining
Order be issued against F. David Matthews, Secretary, Health,
Education and Welfare, Defendant herein, temporarily restrain-
ing him from publishing notice and from terminating Plaintiff's
provider agreement under the Health Insurance for the Aged
and Disabled Program (Medicare) until further order of this
Court, and against Defendant's agents, namely the Mt. Vernon
Register News restraining it from publishing notice of termina-
tion of Plaintiff's provider agreement until further notice of
Court.
IT IS FURTHER ORDERED that the Defendant show cause, if
any he has, in the United States District Court for the Eastern
District of Illinois in the city of Danville, Illinois on the 25th
day of February, 1976, at 2:00 P. M. or as soon thereafter as
counsel may be heard, why they should not be enjoined and
restrained as prayed in the Plaintiff's Complaint, a copy of which
is attached hereto dated the 19th of January, 1976. Defendant
shall answer or otherwise plead by February 20, 1976.
Entered this 19th day of January, A. D., 1976, at 4:00 P. M.
/s/ Henry S. WISE
Henry S. Wise
Judge
Certified true copy.
JOHN P. OVALL
Clerk
By /s/ DorotHy WATSON
(SEAL) Deputy Clerk
Al9
APPENDIX C
STATUTES AND REGULATIONS
28 U. S. C. § 1331(a)(1970), as amended, Act of Oct. 21,
1976, Pub. L. No. 94-574, § 2, 90 Stat. 2721, provides:
The district courts shall have original jurisdiction of all
civil actions wherein the matter ‘in controversy exceeds the
sum or value of $10,000, exclusive of interest and costs,
and arises under the Constitution, laws, or treaties of the
United States, except that no such sum or value shall be
required in any such action brought against the United
States, any agency thereof, or any officer or employee
thereof in his official capacity.
28 U. S.C. § 1361 (1970) provides:
The district courts shall have original jurisdiction of any
action in the nature of mandamus to compel an officer or
employee of the United States or any agency thereof to
perform a duty owed to the plaintiff.
42 U.S. C. § 405(g) (1970), pertinently provides:
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(h) (1970) provides:
The findings and decisions of the Secretary after a hear-
ing 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 41 of Title
28 to recover on any claim arising under this subchapter.
A20 A2l
42 U.S. C. 1395cc(b) (accreditation of hospitals as Medicare (1) Is not complying substantially with the provisions of
providers) pertinently provides: Title XVIII and this Part 405, or with the provisions of
the agreement entered into . . .; or
An agreement with the Secretary . . . may be terminated
(2) by the Secretary at such time and upon such
reasonable notice to the provider of services and the
public as may be specified in regulations, but only
after the Secretary has determined (A) that such
provider of services is not complying substantially
with the provisions of such agreement, or with the
provisions of this subchapter and regulations there-
under, or (B) that such provider of services no longer
substantially meets the applicable provisions of sec-
tion 1395x of this title. . . . [Section 1866, Social
Security Act, 42 U. S. C., Ch. 7, Supp. as amended]
42 U. S. C. 1395ff(c) (administrative and judicial review)
provides:
(c) Any institution or agency dissatisfied with any de-
termination by the Secretary that it is not a provider of
services, or with any determination described in section
1395cc(b)(2) of this title, shall be entitled to a hearing
thereon by the Secretary (after reasonable notice and op-
portunity for hearing) to the same extent as is provided in
section 405(b) of this title, and to judicial review of
the Secretary's final decision after such hearing as is pro-
vided in section 405(g) of this title. [Section 1869, Social
Security Act].
42 U. S. C. 1395ii provides:
The provisions of sections 406 and 416(j) of this title,
and of subsections (a), (d), (e), (f), (h), (j), (k), and
(1) of section 405 of this title, shall also apply with
respect to this subchapter to the same extent as they are
applicable with respect to subchapter II of this chapter.
[Section 1872, Social Security Act].
(2) No longer meets the appropriate conditions of partici-
pation necessary to qualify as a hospital . . .”
20 CFR 405.614(b) provides:
(b) Notice of termination. The Secretary shall give no-
tice of termination to the provider of services at least 15
days before the effective date of termination of the pro-
vider’s agreement. In addition to giving notice to the
provider, the Secretary shall also give notice of such
termination to the public. Each notice of termination by
the Secretary shall state the reasons for the termination of
the provider agreement, the effective date of the termina-
tion, and the applicability of termination . . . as it re-
lates to the services of the provider.
20 CFR 405.614(c) pertinently provides:
(c) Appeal by Agency or Institution. Any provider dis-
satisfied with a determination terminating the Section 1866
agreement with such provider, shall be entitled to a hear-
ing with respect to such determination (see Subpart O of
this part)....
20 CFR 405.1501 pertinently provides:
(a) The provisions contained in this Subpart O shall
govern the procedure for making and reviewing determina-
tions with respect to... :
(3) The termination of the Secretary's agreement
with a provider of services for cause. ...
(b) Any institution . . . dissatisfied . . . with an
initial determination terminating the Secretary’s agreement
with it for cause * * * is entitled to a hearing thereon and,
if dissatisfied with the Secretary’s final decision after such
hearing, to Appeals Council Review and then judicial
review. ...
20 CFR 405.614(a) pertinently provides that the Secretary may 20 CFR 405.1531 pertinently provides:
terminate an agreement with a provider of services if he (a) The request for a hearing . . . must be filed within 60
determines that it: days after the date notice of an initial determination [of
provider termination] . . . is received by the institution . . .
A22
APPENDIX D
STATE OF ILLINOIS }
COUNTY OF COOK
AFFIDAVIT IN SUPPORT OF
APPELLEES MOTION TO STAY MANDATE
Ronald Scott Mangum, being first duly sworn, hereby de-
poses and states as follows:
1. He is the attorney for Cole Hospital Inc. and Jefferson
Memorial Hospital Association, Appellees, and is personally
knowledgeable of the truth of the facts stated herein.
2. On December 5, 1977, administrative Law Judge George
A. Bowman issued a decision stating that Jefferson Memorial
Hospital Association’s existing facility substantially complied
with the Medicare Conditions of Participation relating to fire
safety and that the hospital’s provider agreement should be con-
tinued until December 5, 1978. (A copy of this decision has
been furnished to this Court).
3. On July 12, 1977, Administrative Law Judge Ed White
issued a decision that Cole Hospital’s existing facility failed to
comply with certain portions of the Medicare Conditions of
Participation relating to fire safety. (A copy of this decision has
been furnished to this Court.) During Aprii, May and June,
1978, an automatic sprinkler system was installed in all parts
of the existing facility at a cost exceeding $50,000. In April,
1978, two exterior stairways were added to each end of the
existing facility to provide two remote exits each to the second
and third floors of the existing building, at a cost exceeding
$35,000.00. On April 11, 1978, Cole Hospital commenced con-
struction of a replacement facility scheduled to be completed by
April 15, 1979. Construction is currently proceeding on the
third floor (top floor) of the new hospital building.
A23
4. On August 4, 1978, Edward A. Stec, Regional Director of
Health Standards and Quality, H. E. W., wrote to Cole and
Jefferson hospitals that the injunction which had prevented
termination of the hospital’s provider agreements had been lifted
and that H. E. W. was proceeding to reinspect and, if it deemed
appropriate, terminate the provider agreements (copies of let-
ters attached).
5. On August 9, 1978, affiant, as counsel for the hospitals
wrote to H. E. W. informing them that the mandate of this court
had not issued and that the injunctions were still in effect.
(copies of letters attached).
6. On August 17, 1978, Mr. Stec again informed the hos-
pitals that the injunctions were lifted and that H. E. W. would
proceed as indicated in this August 4, 1978 letter (copies of
letters attached).
7. H.E. W. proposes to act in accordance with its regulations
to reinspect the hospitals, and if it deems appropriate, publish
notice and terminate the hospital’s provider agreements without
affording the hospitals the opportunity to respond before such’
publication and termination. :
RONALD SCOTT MANGUM
Subscribed and sworn to before me this 18th day of August,
1978.
Notary Public
.
A24
DEPARTMENT OF HEALTH, EDUCATION AND WELFARE
Region V
175 W. Jackson Boulevard
Chicago, Illinois 60604 \
August4, 1978
Refer to: HI:S14 :
Mr. Robert D. Clark
Administrator
Jefferson Memorial Hospital
909 Shawnee Street
Mount Vernon, Illinois 62864
Dear Mr. Clark:
As you are aware, the United States Court of Appeals for
the Seventh Circuit has lifted the injunction which prevented
us from effecting the termination of your hospital. Therefore, we
have scheduled a direct federal survey of your facility during
the month of August. If the results of that survey indicate that
your hospital remains out of the compliance with the Medicare
Conditions of Participation, we will terminate your participation
in the Medicare program.
Sincerely yours,
/s/ RicHarp A. NouLt for
Edward C. Stec
Regional Director
Health Standards and Quality Office
A25
August 9, 1978
Mr. Edward C. Stec
Regional Director, Region V
Health Standards and Quality Office
Department of Health, Education, and Welfare
175 W. Jackson Blvd.
Chicago, Illinois 60604
Subject: Jefferson Memorial Hospital Association
Re: Your letter of August 4, 1978
Dear Mr. Stec:
Mr. Jerry Neal, Administrator of Jefferson Memorial Hos-
pital has forwarded to me your letter of August 4, 1978. In your
letter you stated that the United States Court of Appeals for the
Seventh Circuit has “lifted the injunction which prevented us
from affecting the termination of your hospital.” As I have ad-
vised your attorney, Mr. John P. Martin, the mandate of the
Court has been stayed by our filing a petition for rehearing. I'm
enclosing a copy of our petition for your review.
Should you have any questions, please feel free to call me.
Sincerely,
RONALD SCoTT MANGUM
RSM: bg
cc: John P. Martin
Allan Dulaney
A26
August 9, 1978
Mr. Edward C. Stec
Regional Director, Region V
Health Standards and Quality Office
Department of Health, Education, and Welfare
175 W. Jackson Blvd.
Chicago, Illinois 60604
Subject: Cole Hospital Inc.
HI:S14
Dear Mr. Stec:
Mr. Stephen Hess, administrator of Cole Hospital has for-
warded to me your letter of August 4, 1978. In your letter you
stated that the United States Court of Appeals for the Seventh
Circuit has “lifted the injunction which prevented us from af-
fecting the termination of your hospital.” As I have advised your
attorney, Mr. John P. Martin, the mandate of the Court has
been stayed by our filing a petition for rehearing. I’m enclosing
a copy of our petition for your review.
Should you have any questions, please feel free to call me.
Sincerely,
RONALD SCoTT MANGUM
RSM: blg
cc: Stephen Hess
John P. Martin
A27
August 17, 1978
Refer to: $14
Mr. Jerry Neal
Administrator
Jefferson Memorial Hospital
909 Shawnee Street
_ Mount Vernon, Illinois 62864
Dear Mr. Neal:
Upon receipt of your attorney's August 9, 1978 letter, we
contacted our attorney to determine if any court order existed
which would prevent us from surveying your facility. We have
been advised by Ms. Eloise Davies from the Department of
Justice and our attorney that we are free to survey your facility.
Therefore, we have scheduled a direct federal survey of your
facility during the month of August. If the results of that survey
indicate that your hospital remains out of compliance with the
Medicare Conditions of Participation, we will terminate your
participation in the Medicare program.
We have furnished your attorney with a copy of this letter.
Sincerely yours,
Edward C. Stec
Regional Director
Health Standards and Quality Office
ce: S/A
KLeak
EStec
DHall
JSalla
RSMangum-Bliss and Mangum
RKordek-Regional Attorney’s Office
GHolland
KLeak/ly
A28
August 17, 1978
Refer to: $14
Mr. Stephen Hess
Administrator
Cole Hospital
809 West Church Street
Champaign, Illinois 61820
Dear Mr. Hess:
Upon receipt of your attorney’s August 9, 1978 letter, we
contacted our attorney to determine if any court order existed
which would prevent us from surveying your facility. We have
been advised by Ms. Eloise Davies from the Department of
Justice and our attorney that we are free to survey your facility.
Therefore, we have scheduled a direct federal survey of your
facility during the month of August. If the results of that survey
indicate that your hospital remains out of compliance with the
Medicare Conditions of Participation, we will terminate your
participation in the Medicare program.
We have furnished your attorney with a copy of this letter.
Sincerely yours,
Edward C. Stec
Regional Director
Health Standards and Quality Office
ce: S/A
KLeak
EStec
DHall
JSalla
RSMangum-Bliss and Mangum
RKordek-Regional Attorney’s Office
GHolland
KLeak/ly
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.