The opinion of the court was delivered by: Urbina, District Judge.
This matter comes before the court on an application by the
plaintiff Vencor Nursing Centers, L.P. ("Vencor") for an order
temporarily restraining the defendant, Secretary of the United
States Department of Health and Human Services Donna E. Shalala
("HHS") from terminating one of Vencor's California facilities
from the Medicare and Medicaid programs, and seeking other
declaratory and injunctive relief. In opposition, HHS contends
that this court lacks subject matter jurisdiction, that venue
does not lie in this District or that the action should be
transferred to California, and that Vencor has not met the
criteria for preliminary injunctive relief. For the reasons which
follow, the court finds that it has jurisdiction and that a
transfer of venue is not warranted. The court also finds that
Vencor has not met the criteria for issuance of a TRO and denies
The next year, however, Mathews v. Eldridge,
S.Ct. 893, 47
, 106 S.Ct.
2022, 90 L.Ed.2d 462 (1986).
3. What Constitutes A Colorable Claim. A claimant cannot
circumvent an exhaustion requirement by asserting specious
"constitutional" claims to "dress up" what is essentially a claim
for benefits. See Bartlett v. Bowen, 816 F.2d 695, 702
(D.C.Cir. 1987) ("This holding will not afford much opportunity
for frivolous claims since aggrieved claimants must find a way to
connect their claims for benefits to a constitutional infirmity.
. . ."). Rather, the constitutional claim must be "colorable,"
i.e., it must not be "wholly insubstantial, immaterial or
frivolous." Boettcher v. HHS, 759 F.2d 719, 722 (9th Cir.
1985); see, e.g., Thorbus v. Bowen, 848 F.2d 901, 903 (8th Cir.
1988) ("Although we deem the facts marginal to support a
colorable claim, we assume without deciding that Dr. Thorbus has
stated a constitutional claim sufficiently colorable for the
purposes of jurisdiction in federal court."). Whether or not
Vencor's claims are meritorious remains to be seen, but they are
not "wholly insubstantial, immaterial or frivolous."
The next inquiry is whether Vencor's claims are "collateral to
[its] substantive claim of entitlement. . . ." Mathews, 424
U.S. at 329-331, 96 S.Ct. 893. The Court of Appeals has not
addressed this issue. Three consecutive decisions of this court,
however, have held that a claim challenging HHS's constitutional
authority to terminate or asserting that HHS failed to adhere to
the requirements of the Medicare Act in terminating benefits is
"entirely collateral" to a claim for benefits. Therefore, these
decisions concluded, the challenges to termination were not
subject to the requirement of exhaustion of administrative
remedies in section 405. See Mediplex v. Shalala, No.
98-CV-2440 (D.D.C. Nov. 11, 1998); Libbie Rehab. Ctr. v.
Shalala, 26 F. Supp.2d 128, 130-31 (D.D.C. 1998); International
Long Term Care v. Shalala, 947 F. Supp. 15, 17-19 (D.D.C. 1996).
No decision in this Circuit has held to the contrary.
Accordingly, it does not appear likely that the court will depart
from the "strong presumption that Congress intends judicial
review of administrative action. . . ." Bowen v. Michigan
Academy of Family Physicians,
, 670, 106 S.Ct. 2133,
90 L.Ed.2d 623 (1986). Vencor was not required to exhaust
federal-question jurisdiction pursuant to 28 U.S.C. § 1331.
HHS also argues that 42 U.S.C. § 405(g) provides only one
appropriate venue for this action — the United States District
Court for the Southern District of California. In the
alternative, HHS moves for transfer of venue pursuant to
28 U.S.C. § 1404(a). For the reasons which follow, the court denies
HHS's request to transfer.
1. 42 U.S.C. § 405(g) does not apply.
Under § 405(g), a lawsuit challenging an administrative denial
of benefits "shall be brought in the district court of the United
States for the judicial district in which the plaintiff resides,
or has his principal place of business. . . ."
42 U.S.C. § 405(g). In this case, however, § 405(g) and (h) do not apply,
because this action is collateral to any claim for benefits.
Accordingly, venue will be determined in accordance with the
A civil action wherein jurisdiction is not founded
solely on diversity of citizenship may, except as
otherwise provided by law, be brought only in . . .
(2) a judicial district in which a substantial part
of the events or omissions giving rise to the claim
occurred, or a substantial part of property that is
the subject of the action is situated. . . .
28 U.S.C. § 1391(b). Under § 1391(b), venue is proper in this
District, as the Secretary is deemed to reside here when she is
sued in her official capacity. See Archuleta v. Sullivan,
725 F. Supp. 602, 605 (D.D.C. 1989). Venue would also lie, however, in
California, where most of the "events and omissions giving rise
to the claim . . . occurred."
2. Transfer of Venue under 28 U.S.C. § 1404(a) is Not
HHS contends that this action should be transferred to
California pursuant to 28 U.S.C. § 1404(a). That section provides
that "[f]or the convenience of parties and witnesses, in the
interest of justice, a district court may transfer any civil
action to any other district or division where it might have been
brought." 28 U.S.C. § 1404(a). The court has broad discretion to
determine whether to transfer an action under § 1404(a). See
Rhee Bros., Inc. v. Seoul Shik Poom, Inc., 869 F. Supp. 31, 33-34
(D.D.C. 1994) (citation omitted). The factors to consider in
exercising that discretion include the preference given to
plaintiff's choice of forum; the convenience of the parties and
witnesses; the location of the record; and the interest of
justice. See Hawksbill Sea Turtle v. FEMA, 939 F. Supp. 1, 3
(D.D.C. 1996). The interest-of-justice factor encompasses the
desire to avoid multiple litigation from a single transaction, to
try related litigation together and to consider the regional
nature of the dispute. See id.
"The most critical factor to examine under 28 U.S.C. § 1404(a)
is the convenience of the witnesses," as well as the availability
of compulsory process to compel the attendance of potential
witnesses. See Chung v. Chrysler Corp., 903 F. Supp. 160, 164
(D.D.C. 1995). In this case the potential witnesses — Village
Square's staff and residents and the SA survey teams — reside
beyond this court's subpoena power, see Fed.R.Civ.P. 45(b)(2),
and they have no apparent connection to the District of
Columbia.*fn4 This nexus with California, however, is not
sufficient to warrant transfer of an action which is also
properly venued here.
Under the proper circumstances, this court has transferred
actions even though one of the parties was a federal agency
located in the District. The court has generally done so,
however, when the transferee forum was home to witnesses whose
testimony was necessary to resolve the matter. See, e.g., SEC v.
Ernst & Young, 775 F. Supp. 411 (D.D.C. 1991). Here, by contrast,
the court does not foresee any need for testimony, nor have the
parties indicated that they intend to request an evidentiary
hearing or trial at which they would call witnesses.
Consequently, the "convenience of the witnesses" does not favor
transfer. See Concerned Rosebud Area Citizens v. Babbitt,
34 F. Supp.2d 775, 776 (D.D.C. 1999) (declining to transfer, because
issues could be decided solely on basis of administrative
record). This renders inapposite the cases cited by HHS where
this court granted transfer to the state where the nursing home
and SA were located.
Likewise, the "location of the record" does not favor transfer.
The parties' submissions have supplied a sufficient record for
the court to decide their claims. Lastly, neither the convenience
of the parties nor the interest of justice favor transfer. The
parties have not notified the court of any litigation in another
federal court concerning this dispute, nor is this dispute
"regional" in nature. The statutes, regulations and guidelines
involved are of national scope, and Vencor's challenges to their
application are of concern to HHS and to skilled nursing
facilities nationwide. For these reasons, HHS's request for a
transfer will be denied.
C. The Standard for Preliminary Injunctive Relief
A preliminary injunction may be granted only when the movant
(1) a substantial likelihood of success on the
merits;*fn6 (2) that irreparable harm will result in
the absence of the relief requested; (3) that no
other party will be harmed if the motion is granted;
and (4) that the public interest supports granting
the requested relief.
ANADAC, Inc. v. INS, 44 F. Supp.2d 306, 308 (D.D.C. 1999). These
four factors are not considered in isolation from one another,
and no one factor is necessarily dispositive. Rather, the factors
"interrelate on a sliding scale and must be balanced against each
other." Davenport v. International Brotherhood of Teamsters,
166 F.3d 356, 361 (D.C.Cir. 1999). A particularly strong showing
on one factor may compensate for a weak showing on another
factor. See Serono Labs. v. Shalala, 158 F.3d 1313, 1318
(D.C.Cir. 1998). If the plaintiff makes a particularly weak
showing on one factor, however, the other factors may not be
enough to "compensate." See Taylor v. RTC, 56 F.3d 1497, 1506
(D.C.Cir.), amended on reh'g, 66 F.3d 1226 (D.C.Cir. 1995). For
the reasons which follow, this court concludes that Vencor is not
entitled to a TRO.
D. No Strong Showing of Likely Success on the Merits on Claim
That Secretary Lacked Authority to Terminate Absent Immediate
The gravamen of Vencor's dispute with HHS is its contention
that a nursing home may be terminated from Medicare and Medicaid
participation only where conditions at the facility place
residents' health or safety in "immediate jeopardy." Therefore,
Vencor argues, by terminating Village Square in the absence of a
finding of "immediate jeopardy" HHS violated the Medicare Act,
the Medicaid Act and the
Due Process Clause. See Compl., Counts I and II. Conversely,
HHS relies on 42 C.F.R. § 488.412 and 488.456, which provide
that HHS may terminate a facility which is not in "substantial
compliance," even if there is no immediate jeopardy.
In deciding whether this court is likely to adopt Vencor's
interpretation of the remedy provisions, the court accords
substantial deference to HHS's regulations. See Chevron v.
Natural Resources Defense Council, 467 U.S. 837, 844-45, 104
S.Ct. 2778, 81 L.Ed.2d 694 (1984). Broad deference is
particularly warranted where the regulation "concerns a complex
and highly technical regulatory program", like Medicare, "in
which the identification and classification of relevant criteria
necessarily require significant expertise and entail the exercise
of judgment grounded in policy concerns." Thomas Jefferson Univ.
v. Shalala, 512 U.S. 504, 114 S.Ct. 2381, 2383, 129 L.Ed.2d 405
(1994) (citation omitted).
The Medicare and Medicaid acts authorize HHS to impose a
variety of remedies and/or sanctions against noncompliant nursing
homes. Prior to 1987 the only available remedies were outright
termination or a blanket ban on reimbursement for care of newly
admitted residents. See 57 Fed.Reg. 39,278-39,279 (1992). While
the Medicare Act formerly permitted termination without a finding
of "immediate jeopardy," 42 U.S.C. § 1395cc(f), that provision is
no longer in force. In 1987 Congress enacted the Federal Nursing
Home Reform Act, which added a greater variety of remedies to the
Medicare and Medicaid Acts. These new remedies include, inter
alia, civil money penalties, imposition of independent temporary
managers and orders to adopt plans of correction (POC's). The
1987 legislation establishes categories of non-compliance and
provides a number of possible remedies for HHS to choose from
based on the severity of the alleged noncompliance. As amended,
the Medicare Act now provides, in pertinent part,
(2) SECRETARIAL AUTHORITY.
(A) IN GENERAL. — . . . if . . . pursuant to a
recommendation of the State under paragraph (1)
finds, that a skilled nursing facility no longer
meets [the required operating procedures], and
further finds that the facility's deficiencies —
(ii) do not immediately jeopardize the health or
safety of its residents, the Secretary may impose
any of the remedies described in subparagraph (B).
(B) Specified Remedies. — The Secretary may take the
following actions with respect to a finding that a
facility has not met an applicable requirement:
(i) Denial of Payment — . . . with respect to such
individuals admitted to the facility after the
effective date of the finding.
(ii) Authority with Respect to Civil Money Penalties.
(iii) Appointment of Temporary Management. . . .
42 U.S.C. § 1395i-3(h)(2) (emphasis added). The Medicaid Act
contains a parallel provision providing, in pertinent part,
(3)(b) Other nursing facilities
[I]f the Secretary finds that a nursing facility no
longer meets a requirement of subsection (b), (c),
(d), or (e) of this section, and further finds that
the facility's deficiencies —
(B) do not immediately jeopardize the health or
safety of its residents, the Secretary may impose
any of the remedies described in subparagraph
Nothing in this paragraph shall be construed as
restricting the remedies available to the Secretary
to remedy a nursing facility's deficiencies.
See 42 U.S.C. § 1396r(h)(3) (West Supp. 1999) (emphasis added).
Defendants contend that under these provisions, HHS has
authority to terminate regardless of the presence of immediate
jeopardy. There are two provisions in the Medicare Act which tend
to support HHS's position. First, Congress explicitly states,
"Nothing in this subparagraph shall be construed as restricting
the remedies available to HHS to remedy a skilled nursing
facility's deficiencies." 42 U.S.C. § 1395i-3(h)(2)(B). Second,
the Act authorizes HHS to terminate the Medicare agreement of any
provider which "fails to comply substantially with the provisions
of the agreement, with the provisions of this subchapter and
regulations thereunder. . . ." 42 U.S.C. § 1395cc(b)(2). As the
compliance provisions are "provisions of this subchapter" and §
1395cc(b)(2) does not require a finding of immediate jeopardy
prior to termination, the court could infer that HHS is entitled
to terminate without immediate jeopardy.
Several courts which have addressed the issue have held that
HHS does not have the authority to order termination in the
absence of immediate jeopardy. In Claridge House v. HHS,
795 F. Supp. 1393 (S.D.Ohio 1991), for instance, a U.S. District Court
determined that the "notwithstanding" clause of section
1396r(h)(3) did not preserve an implicit power to terminate
absent immediate jeopardy. Id. at 1404. The court reasoned that
if HHS could terminate with or without immediate jeopardy, there
would be little point in the statute's distinction between the
two situations. Id.
Vencor has not shown that this court is likely to follow
Claridge House. This Circuit has yet to decide whether or not
HHS may terminate absent a finding of immediate jeopardy. See
Libbie Rehab Center, 26 F. Supp.2d at 132 (because temporary
manager of facility indicated facility was back in substantial
compliance and ready to be resurveyed, there was a strong
likelihood facility would be reinstated, and no need to decide
scope HHS's power to terminate). Moreover, as evinced by the
decisions of other district courts, there is a solid rationale
for finding that HHS has authority to terminate absent immediate
jeopardy. First, this court disagrees that allowing HHS to
terminate a facility absent immediate jeopardy would render
meaningless the distinction between jeopardy and non-jeopardy
situations. In enacting the enforcement provisions to the
Medicare and Medicaid Acts, Congress expressly wished to expand
the panoply of remedies available to HHS. See H.R.Rep. No.
391(I), 100th Cong., 1st Sess., 475, reprinted in
1987 U.S.C.C.A.N. 2313-1, 2313-295. Committee reports noted with
concern the "yo-yo" phenomenon in which noncomplying facilities
temporarily correct their deficiencies before an on-site survey
and then quickly lapse into noncompliance until the next review.
Id. at 2313-291. Presumably, the new version of the statute
ameliorates this problem by giving HHS a set of intermediate
sanctions to choose from rather than the extreme choices of
termination or no sanction. There is no indication in the
legislative history that Congress wished to limit HHS's ability
to terminate a persistently noncompliant facility. See Lake
County Rehab. Ctr. v. Shalala, 854 F. Supp. 1329, 1340 (N.D.Ind.
1994). In fact, the recurring theme emerging from the legislative
history is that the new provisions would grant HHS remedial
powers in addition to those already available. See
1987 U.S.C.C.A.N. at 2313-291 through 2313-296; see also
42 C.F.R. § 1395i-3(h)(5) ("[T]he remedies provided . . . are in addition to
those otherwise available under State or Federal law and shall
not be construed as limiting such other remedies.").
Against this backdrop, the court could well conclude that the
statute should be read as a guidepost for HHS rather than a
limitation on its power.*fn7 The immediatejeopardy
provision mandates that HHS must terminate or appoint temporary
management when a facility's deficiencies are found to put
residents' health or safety in immediate jeopardy. By contrast,
the non-jeopardy provision affords HHS discretion, allowing (but
not requiring) HHS to impose intermediate sanctions on facilities
whose deficiencies do not immediately jeopardize health or
safety. In light of the foregoing, Vencor has not shown that this
court is likely to hold that 14HS lacked authority to terminate
Village Square absent a finding of immediate jeopardy.
E. No Strong Showing of Likely Success on the Merits on Claim
That Survey Process Violated APA and Due Process
Vencor alleges that the HHS's survey procedure violated
Vencor's due process rights. A "procedural due process claim
necessitates a property deprivation of constitutional magnitude
and, of course, one effected without due process." Sherwin Manor
v. McAuliffe, 37 F.3d 1216, 1220 (7th Cir. 1994), cert. den.,
516 U.S. 862, 116 S.Ct. 172, 133 L.Ed.2d 113 (1995). "Health care
providers have a constitutionally protected property interest in
continued participation in the Medicare and Medicaid programs. .
. ." Patchogue Nursing Ctr. v. Bowen, 797 F.2d 1137, 1144-45
(2d Cir. 1986), cert. den., 479 U.S. 1030, 107 S.Ct. 873, 93
L.Ed.2d 828 (1987). Accordingly, due process encompasses Vencor's
claim that improper survey procedures contributed to the
deprivation of its property interest.
1. Failure to Re-Survey
Village Square complains that HHS "refused to revisit the
facility to determine whether Village Square has corrected the
deficiencies cited during the latest survey, notwithstanding the
fact that [HHS's] own State Operations Manual (`SOM')
specifically calls for such a revisit." Mot. for TRO at 19-20.
After HHS notified Village Square of its termination on May 12,
1999, the SA conducted a follow-up survey on May 28, 1999. Thus,
the issue is whether HHS was required to re-survey Village Square
a second time following the decision to terminate.
Vencor has not shown that it is likely to prevail on this
claim. Vencor does not point to any section of the SOM which
obligates HHS to conduct a re-survey. The court has identified
two SOM provisions which address re-survey, but neither states
that a facility "must" or "shall" be re-surveyed following a
finding of deficiencies. Section 2732 provides, in pertinent
A. Post-survey Revisit. The SA follows up on all
deficiencies cited in the POC. . . . an onsite visit
is generally required for deficiencies concerning
quality of care. Because the LTC [long-term care]
Survey process focuses on the care of the resident,
revisits are almost always necessary to ascertain
whether the deficiencies have indeed been corrected.
. . . If documentary or onsite verification is
warranted, the [SA] obtains appropriate verification
before reporting a deficiency as corrected. The
revisit (or mail or telephone contact) requires that
the [SA] complete a Post-Certification Revisit Report
Emphasis added. Appendix P of the SOM, which elaborates on the
survey procedures for long-term care facilities in greater
detail, also addresses follow-up surveys:
The purpose of the post-survey revisit (follow-up) is
to re-evaluate the specific care and services that
were cited as noncompliant during the original
standard, abbreviated standard, extended or partial
extended survey(s). Ascertain the status of
corrective actions being taken
on all requirements not in substantial compliance.
Because this survey process focuses on the care of
the resident, revisits are almost always necessary
to ascertain whether the deficient practices have
indeed been corrected.
Emphasis added. See 42 C.F.R. § 488.110(1). The highlighted
portions of these SOM provisions clearly reserve HHS discretion
as to whether or not to authorize a re-survey.
2. Use of Survey Forms and Procedures not Published for Public
Notice and Comment
Vencor also complains that HHS used survey forms and procedures
which it has never subjected to public notice and comment. In so
doing, Vencor alleges, HHS violated the Medicare Act, the APA and
the Due Process Clause. See Compl., Counts III - V; Opp. to
Mot. to Dis. at 21-23. For purposes of this TRO application, the
court assumes arguendo that HHS did use forms and procedures
which it has not subjected to notice and comment. Nonetheless,
for the reasons which follow, the court concludes that Vencor is
not substantially likely to prevail on this claim.
Vencor alleges that the use of unpublished survey guidelines
violated the Medicare Act. The Act provides, in pertinent part,
No rule, requirement or other statement of policy
(other than a national [benefits] coverage
determination) that establishes or changes a
substantive legal standard governing the scope of
benefits, the payment for services, or the
eligibility of individuals, entities or organizations
to furnish or receive services or benefits under [the
Medicare Act] shall take effect unless it is
promulgated by the Secretary by regulation.
42 U.S.C. § 1395hh. Vencor also alleges that HHS's use of
unpublished survey guidelines violated the APA's procedural
rule-making requirements. The APA provides, in pertinent part,
General notice of proposed rule making shall be
published in the Federal Register, unless persons
subject thereto are named and either personally
served or otherwise have actual notice thereof in
accordance with law.
5 U.S.C. § 553(b). Substantive rules not promulgated in
accordance with these requirements are invalid and will not be
enforced. See, e.g., Linoz v. Heckler,
(9th Cir. 1986). Conversely, an agency is not bound by the APA
when announcing so-called "interpretive rules." The APA provides,
"Except when notice or hearing is required by statute, this
subsection does not apply — (A) to interpretive rules, general
statements of policy, or rules of agency organization, procedure,
or practice. . . ." 5 U.S.C. § 553(b)(3)(A).
The Medicare Act expressly incorporates the APA's exemption for
interpretive rules. See 42 U.S.C. § 1395hh(b)(2)(C). The court
treats the Medicare Act's exemption for interpretive rules as
identical to the APA's. See Medics, Inc. v. Sullivan,
766 F. Supp. 47, 51 (D.P.R. 1991), aff'd sub nom. La Casa Del
Convaleciente v. Sullivan, 965 F.2d 1175 (1st Cir. 1992).