Opposition Brief — Livingston Care Centers, Inc. v. United States

No. 91-444 MOV be i523;

Iu the Supreme Court of the United States

OCTOBER TERM, 1991

LIVINGSTON CARE CENTERS, INC., ET AL., PETITIONERS

ve

UNITED STATES OF AMERICA, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITEL STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

BRIEF FOR THE RESPONDENTS IN OPPOSITION

KENNETH W. STARR

Solicitor Genera!

STUART M. GERSON

Assistant Attorney General

ANTHONY J. STEINMEYER

RICHARD A. OLDERMAN

Attorneys

Department of Justice

Washington, D.C. 20520

(202) 514-2217

QUESTION

PRESI

NTED

TABLE OF CONTENTS

Page

CE) EE ee eieeneree TUE 1

Jurisdiction =e St AER TTT Lm EE 1

ESS SRL ae ee ROT Ma paoaaiaa 2

Argument ................... inet sh 2S Fae RO Ck NRE Ee a eE 5

Conclusion _....... Su as a eh OTE 15

TABLE OF AUTHORITIES

Cases:

Bivens Vv. Six Unknown Federal Narcotics Agents,

oR UG ) | a nee 4

Bodimetric Health Services, Inc. v. Aetna Life &

Casualty, 903 F.2d 480 (7th Cir.), cert. denied,

ig Se ae, OL) |) ac 5, 10,14

Bowen V. Massachusetts, 487 U.S. 879 (1988) 9

Bowen V. Michigan Academy of Family Physi-

cians, 476 U.S. 667 (1986) _......................8, 8, 9, 10, 11

First English Evangelical Lutheran Church v.

County of Los Angeles, 482 U.S. 304 (1987)... 13

Heckler Vv. Ringer, 466 U.S. 602 (1984) ........ 3,7, 8, 12

Jarrett vy. United States, 874 F.2d 201 (4th Cir.

1989) ~\ crn enn d Rd fv RE 14

Kuritzky Vv. Blue Shield, 850 F.2d 126 (2d Cir.

1988), cert. denied, 488 U.S. 1006 (1989) 10

Linoz V. Heckler, 800 F.2d 871 (9th Cir. 1986) 10

Marin Vv. HEW, Health Care Financing Agency,

769 F.2d 590 (9th Cir. 1985), cert. denied, 474

U.S. 1061 (1986) in er acme a eere a 14

Mathews v. Eldridge, 424 U.S. 319 (1976) 12,13

MecCuin Vv. Secretary of HHS, 817 F.2d 161 (1st

Cir. 1987) 10

MeNary V. Haitian Refugee Center, Ine., 1115S. Ct.

888 (1991) ee 13

O’Bannon V. Town Court Nursing C ‘enter, 447 USS.

773 (1980) . 12

Schweiker vy. Chilicky, 487 U.S. 412 (1988) 4,6, 8,14

Teras Medical Ass'n Vv. Sullivan, 875 F.2d 1160

(5th Cir.), cert. denied, 493 U.S. 1011 (1989)... 10

(IIT)

Regulations—Continued :

Section 498.5 (b)

section 498.5 (c)

section 498.82

Au the Supreme Court of the United States

OCTOBER TERM, 199]

LIVINGSTON CARE CENTERS, INC., ET AL., PETITIONER

UNITED STATES OF AMERICA, ET AI

BRIEF FOR THE RESPONDENTS IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 21-

28) is reported at 934 F.2d 719. The opinion of the

district court (Pet. App. 17-20) is unreported.

JURISDICTION

The judgment of the court of appeals was entered

on May 31, 1991. The petition for a writ of certiorari

was filed on August 27, 1991. The jurisdiction of

this Court is invoked under 28 U.S.C. 1254(1).

STATEMENT

1. Part A of the Medicare program, which is estab-

lished by Title XVIII of the Social Security Act

2 9

(hereinafter the Medicare Act), provides reimburse-

l

2

ment to hospitals and other health care providers for

certain medical services they furnish to elderly and

disabled individuals. See 42 U.S.C. 1395 et seg. Pro-

vider participation in the Medicare program is vol-

untary. However, once a provider agrees to partici-

pate, it is obligated to follow applicable statutory and

regulatory requirements and the terms of its provider

reimbursement agreement with the Secretary. 42

U.S.C. 1395ee(a) ; 42 C.F.R. 489.20-489.22.

The Health Care Financing Administration

(HCFA) in the Department of Health and Human

Services may terminate a reimbursement agreement

with a provider that fails to comply substantially

with the requirements of the Act, regulations, or

agreement. 42 U.S.C. 1395ee(b) (2); 42 C.F.R.

489.53; 42 C.F.R. 498.3(b). HCFA must notify the

provider and the public of the termination and fur-

nish an opportunity for a hearing before an admin-

istrative law judge (ALJ), in the same manner as

is provided in 42 U.S.C. 405(b) for benefit claims

under Title II of the Social Security Act. 42 U.S.C.

395cee(h) (1); 42 C.F.R. 498.5(b). If the provider

is dissatisfied with the ALJ’s decision, it may seek

review by the Appeals Council. 42 C.F.R. 498.5(c):

42 C.F.R. 498.82. A provider then has a right to

seek judicial review, in the same manner as is _ pro-

vided in 42 U.S.C. 405(g¢) for claims under Title IT.

See 42 U.S.C. 1395ee(h) (1).

Other judicial remedies are barred by 42 U.S.C,

1395n, which incorporates 42 U.S.C. 405(h) into the

Medicare Act. Section 405(h) provides:

The findings and decision of the Secret tary

after a hearing shall be binding upon all individ-

uals who were parties to such hearing. No find-

ings of fact or decision of the Secretary shall be

3

reviewed by any person, tribunal, or govern-

mental agency except as herein provided. No ac-

tion against the United States, the Secretary, or

any officer or employee thereof shall be brought

under section 1331 or 1346 of title 28 to recover

on any claim arising under this subchapter.

See Weinberger yv. Salfi, 422 U.S. 749, 756-762

(1975); Heckler v. Ringer, 466 U.S. 602, 614-617

(1984); Bowen v. Michigan Academy of Family Phy-

sicians, 476 U.S. 667, 678-681 (1986).

2. Petitioner Livingston Care Center, a subsidiary

of petitioner Care Centers of Michigan, Inc., was 2

provider of Medicare services. In the summer of

1986, the Michigan Department of Public Health

recommended that HCFA terminate Livingston’s par-

ticipation in the Medicare program. HCFA found

that Livingston had failed to comply with the pro-

visions of its provider reimbursement agreement.

Accordingly, it terminated the agreement effective

October 2, 1986, which had the effect of terminating

Livingston’s participation in the Medicaid program

as well. Pet. App. 17, 21-22. Livingston pursued the

administrative remedies provided by the Medicare

Act and implementing regulations. On June 30, 1989,

an ALJ reversed HCFA’s decertification determina-

tion, holding that Livingston had complied with its

statutory and contractual responsibilities and that

the Michigan Department of Public Health had erred

in recommending decertification. Jd. at 23.'

3. Petitioners then brought this suit for damages

against the United States under the Federal Tort

Claims Act (FTCA), 28 U.S.C. 1346(b), 2671-2680,

' The Appeals Council subsequently denied HCFA’s request

for review. Pet. App. 23, 29-30.

8

under the Social Security Act to be challenged only

on direct review under the procedures prescribed by

the Act itself, and to foreclose collateral attacks on

those decisions in separate lawsuits against the

United States, the Secretary, or his agents. These

carefully crafted provisions of the Act and imple-

menting regulations would be undermined if the

courts allowed recovery of consequential damages in

collateral attacks on administrative decisions in suits

under the FTCA. See Ringer, 466 U.S. at 621 (plain-

tiffs’ claim ‘‘must be construed as a ‘claim arising

under’ the Medicare Act because any other construc-

tion would allow claimants substantially to undercut

Congress’ carefully crafted scheme”); see also Sa/fi,

422 U.S. at 756-762; Chilicky, 487 U.S. at 424-429;

cf. United States v. Fausto, 484 U.S. 439 (1988).

b. Petitioners err in relying (Pet. 5-6, 12-13, 15-

16) on Bowen y. Michigan Academy of Family Physi-

cians, 476 U.S. 667 (1986), in support of their claim

for consequential damages under the FTCA. The

plaintiff physicians in that case challenged a regula-

tion issued by the Secretary (through HCFA) that

established the methodology to be followed by Part B

insurance carriers when they determined the amount

of benefits to be paid on particular claims. At the

time, the applicable judicial review section of the

Medicare Act (42 U.S.C. 1395ff (1982) ) did not pro-

vide for review of the amount of benefits payable un-

der Part B; the Court accordingly had held in United

States v. Erika, Inc., 456 U.S. 201 (1982), that judi-

cial review of Part B benefit amounts was precluded,

and that a provider could not circumvent that preclu-

sion by bringing an action for a money judgment

against the United States under the Tucker Act. In

Michigan Academy, the Court held that the implied

preclusion of review based on 42 U.S.C. 1395ff ap-

9

plied only to determinations by carriers concerning the

amount of benefits, not challenges to regulations is-

sued by the Secretary. 476 U.S. at 674-678. The

Court also held that 42 U.S.C. 405(h), as incorpo-

rated into the Medicare program, did not bar a chal-

lenge to the regulation in an Administrative Proce-

dure Act suit in which jurisdiction rested on 28 U.S.C.

1331, especially in view of the strong presumption

under the APA against preclusion of all judicial re-

view of agency action. 476 U.S. at 670-673, 678-681."

Petitioners’ reliance on Michigan Academy is mis-

placed here for a variety of reasons. First, petition-

ers do not seek judicial review of agency action un-

der the APA; they seek money damages from the

United States. Although the APA itself erects a pre-

sumption in favor of judicial review, the Court has

applied quite different principles where a_ plaintiff

seeks money damages from the United States. Cf.

Bowen vy. Massachusetts, 487 U.S. 879, 889-901

(1988) (noting that 5 U.S.C. 702 preserves immu-

nity of the United States from suits seeking “money

damages” and contrasting such suits with ordinary

APA actions). As this Court reiterated in a case de-

cided two days after Michigan Academy, in the latter

situation, an explicit waiver of sovereign immunity is

required. See United States v. Mottaz, 476 U.S. 834,

* After Michigan Academy was decided, 42 U.S.C. 1395

was amended to provide for administrative review as pro-

vided in 42 U.S.C. 405(b) and judicial review as provided in

42 U.S.C. 405(g¢) where the amount in controversy on a Part

B claim exceeds $500 and $1000, respectively. See 42 U.S.C.

1595ff(b) (1) and (2). As a result of that amendment, even

challenges to regulations under Part B must now be brought

under the special judicial review provisions in the Medicare

Act, not in a separate APA suit in which jurisdiction rests

on 28 U.S.C. 1331. See 5 U.S.C. 703.

10

851 (1986). Here, far from waiving the sovereign

immunity of the United States to damage actions,

Congress has expressly barred such suits by providing

in the third sentence of 42 U.S.C. 405(h) that “[n]Jo

action” shall be brought against tne United States

under 28 U.S.C. 1346 (which includes the grant of

jurisdiction over tort suits) to recover on any claim

arising under the Medicare Act.

Second, unlike the plaintiffs in Michigan Academy,

petitioners do not challenge any regulation or instruc-

tion of the Secretary that prescribes the methodology

for making the relevant administrative determina-

tion. Instead, like the plaintiff in Erika, they chal-

lenge the application of governing regulations and

procedures to the facts of this case. Accordingly, even

if this was not a suit for money damages, Vrika, not

Michigan Academy, would govern—and would pre-

clude review. Bodimetric Health Services, Ine. vy.

Aetna Life d& Casualty, supra; Texas Medical Ass’ n

v. Sullivan, 875 F.2d 1160 (5th Cir.), cert. denied,

493 U.S. 1011 (1989); Kuritzky v. Blue Shield, 850

F.2d 126 (2d Cir. 1988), cert. denied, 488 U.S. 1006

(1989); McCuin v. Secretary of HHS, 817 F.2d 161,

164-166 (1st Cir. 1987); Linoz vy. Heckler, 800 F.2d

871, 876 (9th Cir. 1986).

Third, the Court’s allowance of APA review of the

regulation at issue in Michigan Academy, notwith-

standing 42 U.S.C. 405(h), rested on the premises

that judicial review would otherwise have been com-

pletely barred and that Section 405(h) should be ap-

plied under the Part B Medicare program with that

consequence in mind. See 476 U.S. at 678, 680-681.

Here, by contrast, the Medicare Act expressly author-

izes judicial review of HCFA decisions terminating

a provider reimbursement agreement. See 42 U.S.C.

1395cc(h)(1). There accordingly is no occasion to

11

construe 42 U.S.C. 405(h) to allow a suit under the

general jurisdictional grants in 28 U.S.C. 1331 and

1346.

Nothing in Michigan Academy suggests otherwise.

Indeed, as the Court observed in Michigan Academy,

the government argued that 42 U.S.C. 405(h), as

construed in Salfi and Ringer, bars any resort to the

grant of general federal-question jurisdiction in 28

U.S.C. 1331, while the plaintiff physicians argued

only that Salfi and Ringer were “consistent with the

view that Congress’ purpose [in enacting 42 U.S.C.

405(h)] was to make clear that whatever specific

procedures it provided for judicial review of final

action by the Secretary were exclusive, and could not

be circumvented by resort to the general jurisdiction

of the federal courts.” 476 U.S. at 679. The Court

found it unnecessary to choose between those twu

readings of Salfi and Ringer, because it decided

that Section 405(h) should not in any event be read

to preclude a challenge to a regulation where (unlike

in Salfi and Ringer) judicial review is not otherwise

available. 476 U.S. at 680. But since even the plain-

tiff physicians in Michigan Academy conceded that

the provision for judicial review under 42 U.S.C.

405(g) is “exclusive” where it is available—and

that it cannot be “circumvented” by resort to the ven-

eral jurisdiction of the federal courts—the Court's

decision cannot be read to hold that 42 U.S.C. 405(¢)

is not exclusive and that it can be circumvented by

resort to the general jurisdiction of the federal courts

under 28 U.S.C. 1346.

c. In addition to alleging common law negligence,

petitioners allege (Pet. 14-15) that the decision ter-

minating Livingston's certification as a Medicare pro-

vider violated due process, apparently because it was

12

not afforded an opportunity for a prior hearing. As

an initial matter, a prior hearing is not required by

the Constitution in circumstances such as these. See,

e.g., Mathews vy. Eldridge, 424 U.S. 319 (1976)

(parallel Title II provisions not constitutionally in-

firm for want of a pre-denial hearing); O’Bannon vy.

Town Court Nursing Center, 4147 U.S. 773 (1980)

(Medicaid patients not entitled to a hearing prior to

transfer from an institution whose provider agree-

ment had been terminated).

In any event, and contrary to petitioners’ repeated

contention (Pet. 7, 8, 13-15), they cannot avoid the

preclusion of review in 42 U.S.C. 405(h) by casting

their claim in constitutional terms. In Salfi itself, the

plaintiffs challenged a provision of the Act on due

process grounds, yet the Court held that such a chal-

lenge “arises under” the Social Security Act within

the meaning of 42 U.S.C. 405(h) and that it there-

fore must be brought under 42 U.S.C. 405(g@), not

in an independent action in which jurisdiction rests

on 28 U.S.C. 1331. 422 U.S. at 760-761. The Court

reiterated this point in Ringer, 466 U.S. at 615, ob-

serving that it had recognized in Mathews vy. Eldridge,

424 U.S. at 327, that federal-question jurisdiction is

barred by 42 U.S.C. 405(h) even where the plaintiff

raises a constitutional challenge to the administrative

procedures used to terminate benefits.

Petitioners believe, however, that the special re-

view procedures in 42 U.S.C. 405(b) and (2) are

inadequate, because a provider cannot recover conse-

quential damages for lost profits if HCFA’s initial

decision terminating its participation in the provram

is reversed on constitutional or other grounds. See Pet.

7,14. This argument is flawed in two respects. First,

the Due Process Clause does not require payment of

13

money damages for a violation. United States v. Hop-

kins, 427 U.S. 123, 130 (1976); compare First En-

glish Evangelical Lutheran Church y. County of Los

Angeles, 482 U.S. 304 (1987) (Just Compensation

Clause requires payment of compensation for a tak-

ing). Second, if petitioners believed that termina-

tion of Livingston’s participation without a prior

hearing violated due process, they could have sought

immediate judicial review under 42 U.S.C. 405(¢)

by arguing that their procedural due process claim

was entirely collateral to the merits of the termina-

tion and that they would suffer irreparable injury if

judicial review of the due process issue was postponed

until after completion of administrative proceedings.

The Court entertained an immediate constitutional

challenge to the absence of a pre-termination hearing

in Mathews v. Eldridge on precisely those grounds.

See 424 U.S. at 326-332. There accordingly is no

basis for petitioners’ argument that they should be

permitted to present their due process claim in a

suit for damages under the FTCA because they could

not have raised it in an action under 42 U.S.C.

ANS (g).!

d. Finally, the decision below is consistent with

the decisions of other courts of appeals holding that

Section 405(h) bars an action under the FTCA that

‘Petitioners’ reliance (Pet. 7-12) on McNary Vv. Haitian

Refugee Center, Inc., 111 S.Ct. 888 (1991), also is misplaced.

McNary was not a suit for damages under the FTCA. More-

over, as petitioners acknowledge, McNary involved an entirely

different statutory scheme, the Immigration Reform and Con-

trol Act of 1986, which did not contain an explicit preclusion

of judicial review such as that in 42 U.S.C. 405(h). Finally,

as explained in the text, the special provision for judicial

review under the Medicare Act, unlike that in the immigra-

tion laws, permits immediate constitutional challenges.

14

arises out of the administration of the Social Security

Act. See Marin v. HEW, Health Care Financing

Agency, 769 F.2d 590, 592 (9th Cir. 1985), cert.

denied, 474 U.S. 1061 (1986); Jarrett v. United

States, 874 F.2d 201 (4th Cir. 1989). Similarly, in

Bodimetric Health Services, Inc. v. Aetna Life &

Casualty, 903 F.2d 480 (1990), the Seventh Circuit

held that Section 405(h) bars federal court jurisdic-

tion over the state law claims of a Medicare provider.

The Court denied certiorari in Bodimetric, 111 S. Ct.

579 (1990), and the same disposition is appropriate

here, in light of the uniform holdings by the courts

of appeals on the question.

2. Petitioners also contend (Pet. 12-13) that their

Bivens action against respondent Spain should be

permitted to go forward, noting that the Court found

it unnecessary to decide in Chilicky whether Section

405(h) precludes a Bivens action. See 487 U.S. at

429 n.3. In our view, however, petitioners’ Bivens

claim “arises under” the Medicare Act in the same

manner as their FTCA claim, since both are based on

the decision by HCFA to terminate Livingston’s par-

ticipation as a provider under the Medicare program.

But whatever the preclusive effect of Section 405(h),

an implied cause of action under the rationale of

Bivens would be flatly inconsistent with Chilicky.

There, the Court held that the comprehensive scheme

for review of decisions denying disability benefits

under 42 U.S.C. 405(b) and (g) constituted a special

factor precluding implication of a Bivens remedy.

487 U.S. at 424-429. Those same statutory provisions

for administrative and judicial review govern deci-

sions terminating participation in the Medicare pro-

gram, and therefore likewise preclude implication of

a Bivens remedy here. Petitioners cite no precedent

15

Supporting implication of a Bivens cause of action in

this setting in light of Chilicky, and we are aware of

none. Accordingly, the Bivens issue does not warrant

review.

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

STUART M. GERSON

Assistant Attorney General

ANTHONY J. STEINMEYER

RICHARD A. OLDERMAN

Attorneys

NOVEMBER 1991

YoU. S. BOVERNMENT PRINTING OFFICE, 1991 312324 45161