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Parkview Adventist Medical Center v. United States

United States District Court, D. Maine

May 25, 2016

PARKVIEW ADVENTIST MEDICAL CENTER, Appellant,
v.
UNITED STATES OF AMERICA, Appellee.

          ORDER ON APPEAL OF BANKRUPTCY COURT’S ORDER DENYING DEBTOR’S MOTION TO COMPEL POST-PETITION PERFORMANCE OF EXECUTORY CONTRACT

          JON D. LEVY U.S. DISTRICT JUDGE

         This matter comes before the court on Parkview Adventist Medical Center’s appeal taken from the Bankruptcy Court’s denial of the Debtor’s motion to compel the post-petition performance of an executory contract. For the reasons discussed below, I affirm the decision of the Bankruptcy Court.

         I. BACKGROUND

         Parkview Adventist Medical Center (“Parkview”), a hospital located in Brunswick, Maine, filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code (“Bankruptcy Code”), 11 U.S.C.A. § 101 et seq. (2016), on June 16, 2015. ECF No. 13 at 8, 11.[1] In a letter dated June 15, 2015 (“Notification Letter”), Parkview informed the Centers for Medicare & Medicaid Services (“CMS”), with which it had a Provider Agreement to provide services and receive payment under the federal Medicare program, that it would close as an inpatient hospital but would continue to provide outpatient services. Id. at 8, 10-11. Specifically, the letter stated in part:

This letter serves as notice of termination of participation in the Medicare Program, as required by 42 C.F.R. § 489.52.
[Parkview] will file a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code on June 16, 2015. This letter serves as notice that Parkview is closing as a hospital effective upon the order of the Bankruptcy Court and will no longer participate in the Medicare Program (Title XVIII of the Social Security Act) as an acute care hospital provider. Parkview expects the Bankruptcy Court to enter its order within sixty (60) to ninety (90) days of the date of this letter.
Subject to the approval of the Bankruptcy Court, Parkview will begin to transition acute care services to Mid Coast Hospital beginning June 18, 2015. Parkview will continue to provide outpatient services[.]

Appellant App. at 110.

         CMS’ response came in a letter dated June 19, 2015 (“Termination Letter”). CMS indicated that it found the termination effective as of June 18, 2015, and that Parkview no longer qualified as a “hospital” for purposes of Medicare:

In a correspondence dated June 15, 2015, [Parkview] notified [CMS] of its intent to voluntarily terminate its Medicare provider agreement with the Secretary of Health and Human Services but did not provide a date for the voluntary termination. Based upon information from your hospital’s website, your statements to CMS, and your emergency motion filed in the District of Maine bankruptcy case 15-20442, CMS has determined that the date of voluntary termination of your Part A Medicare Provider Agreement is June 18, 2015. See 42 C.F.R. § 489.52(b)(1).
According to the information reviewed by CMS, the hospital has closed its inpatient care services on June 18, 2015, and discharged all inpatients on or about 4:00pm on June 18, 2015. Additionally, the hospital is not accepting new inpatients, and does not plan to accept new inpatients in the future. Therefore, the hospital no longer meets the definition of “hospital, ” as outlined in Section §1861(e) of the Social Security Act. See also 42 C.F.R. § 482.1. More specifically, a Medicare-participating hospital must be an institution which is primarily engaged in providing care to inpatients. Additionally, you have also requested voluntary termination of your participation in the Medicare program.
Therefore, under the provisions of Federal regulations at 42 C.F.R. §489.52(b)(1, 3), your Part A Medicare Provider Agreement with the Secretary of Health and Human Services is terminated, effective June 18, 2015. No payment under this agreement can be made under the Medicare program for services rendered on or after June 18, 2015.

Id. at 112.

         Also on June 19, 2015, the State of Maine, Department of Health and Human Services issued a Conditional License to Parkview authorizing it to operate a 55-bed acute care facility through December 19, 2015. ECF No. 13 at 11. On June 24, Parkview informed CMS that it was not terminating the Provider Agreement and that CMS’ decision to terminate the agreement would adversely affect Parkview’s bankruptcy transition plan. Id. at 11, 41; ECF No. 14 at 13. On June 25, CMS responded that it was willing to rescind the termination if Parkview resumed its inpatient admissions. ECF No. 13 at 11, 41; ECF No. 14 at 13-14. Parkview later sought, on July 27, to rescind its June 15 notice of voluntary termination. ECF No. 13 at 41.[2]

         Parkview’s motion to compel the post-petition performance of an executory contract (“Motion to Compel”) asserted that because the Provider Agreement is an executory contract, it is property of the debtor’s estate and, therefore, pursuant to 28 U.S.C. § 1334(e), [3] the Bankruptcy Court has exclusive jurisdiction over the Provider Agreement as property of the estate. Case No. 15-20442 (Bankr. D. Me.), ECF No. 144; Appellant App. at 41-43, ¶¶ 12-16. Parkview further asserted that the doctrine of exhaustion of administrative remedies does not apply to its motion because the motion alleges violations of the Bankruptcy Code, §§ 362, 365, and 525, and not violations of the Medicare Act. Appellant App. at 43, ¶ 17. The motion requested that the Bankruptcy Court issue an order determining that CMS’ “Termination Notice” is null and void and that the Provider Agreement remains in effect. Id. at 56. In addition, Parkview asked the court to require CMS to honor the terms of the Provider Agreement, until assumed or rejected by Parkview, and to reimburse Parkview for Part B Medicare services provided from and after June 18, 2015. Id.

         In opposition, CMS contended that 42 U.S.C. §§ 405(g) and (h), made applicable to the Medicare Act by 42 U.S.C. §§ 1395ff(b)(1)(A) and 1395ii, respectively, allow judicial review for a claim arising under the Medicare statute only after presentment of the claim to the Secretary of Health and Human Services and exhaustion of administrative remedies. Case No. 15-20442 (Bankr. D. Me.), ECF No. 166; Appellant App. at 85-86, ¶¶ 14-15. Therefore, CMS advanced, the Bankruptcy Court lacked jurisdiction to hear and adjudicate Parkview’s motion and could not reinstate the Provider Agreement. Appellant App. at 87, ¶ 17.

         CMS also argued that, assuming the Bankruptcy Court had jurisdiction, CMS’ acceptance of Parkview’s request to voluntarily terminate the Provider Agreement did not violate 11 U.S.C. §§ 362, 365, or 525, and that Parkview rejected the Provider Agreement with its voluntary termination request. Id. at 83, 96, ¶¶ 6, 37. CMS asserted that by its June 19 Termination Letter, CMS “accepted Parkview’s June 15, 2015, voluntary termination for its Hospital Medicare Provider Agreement[, ]” and that by discharging all inpatients and ceasing to accept new inpatients, Parkview no longer met the definition of “hospital” under Section 1861(e) of the Social Security Act[4] and 42 C.F.R. § 482.1, as of June 18, 2015. Id. at 82-83, ¶¶ 4-5. Because Parkview failed to specify a date of termination in the Notification Letter, CMS contended, CMS was required to do so. Id. at 82, ¶ 4. CMS chose June 18, 2015, because as of that date Parkview had closed its inpatient care services, discharged all inpatients, and stopped accepting new inpatients, and the State of Maine had prohibited Parkview from admitting inpatients without prior approval. Id. at 82-83, 97, ¶¶ 4, 40.

         CMS further posited that because Parkview’s Notification Letter of June 15 preceded the bankruptcy petition of June 16, the termination took place pre-petition.[5]Id. at 96-97, ¶ 38.

         On July 24, 2015, the Bankruptcy Court issued an oral order denying Parkview’s Motion to Compel. See Case No. 15-20442 (Bankr. D. Me.), ECF No. 200; Appellant App. at 203; Appellant App. at 197-202 ...


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