Home Care Providers, Inc., et al v. Hemmelgarn

Case Type:
Case Status:
Reversed and Remanded
16-2054, 16-3668, 16-3669 (7th Circuit, Jun 27,2017) Published
A dissolved preliminary injunction issued by a bankruptcy court could still be reviewed by the district court on appeal where the preliminary injunction resulted in Medicare reimbursement payments to the debtor. Thus, the appeal of the preliminary injunction was not moot, Separate district court litigation commenced by the debtor's direct and indirect owner should be dismissed without prejudice because the district court did not have subject matter jurisdiction over the asserted claims.
Procedural context:
The Seventh Circuit considered an appeal from an order of the district court (S.D. Ind.) that concluded that (1) the bankruptcy court lacked subject matter jurisdiction to enjoin the Centers for Medicare & Medicaid Services from terminating the debtor's Medicare agreement and to continue paying the debtor while the injunction was in effect, and (2) nonbankruptcy litigation claims of the debtor's direct and indirect owner against persons acting with respect to the debtor's Medicare agreement were jurisdictionally barred.
The federal government informed Nightingale Home Healthcare, Inc. that it was terminating the company's Medicare provider agreement. Nightingale provides home health care services in a number of states, and was found by the Indiana State Department of Health (ISDH) to fail to comply with applicable requirements. The ISDH recommended that the Medicare administrator terminate Nightingale's Medicare agreement. The administrator then gave Nightingale three weeks notice. Before the end of the notice period, the ISDH reinspected Nightingale and so informed the administrator. The administrator informed Nightingale that its agreement would terminate as scheduled. Nightingale filed an administrative appeal and requested expedited review. Nightingale also filed a voluntary Chapter 11 petition before the agreement terminated. Nightingale commenced an adversary proceeding against federal and state officials administering the Medicare program, and sought a preliminary injunction to enjoin the termination of the Medicare agreement and to compel payment from the Medicare administrator. The bankruptcy court granted the preliminary injunction, following an evidentiary hearing, on January 25, 2016. The bankruptcy court also warned Nightingale that it was still obligated to perform under Medicare requirements. The government appealed the injunction to the district court. In April 2016, the ISDH conducted another investigation and concluded that Nightingale was placing patients in "immediate jeopardy." On the federal government's motion, the bankruptcy court dissolved the preliminary injunction. A federal Medicare Administrative Law Judge then affirmed the termination of Nightingale's provider agreement, concluding that Nightingale's failures to comply with Medicare requirements placed patients in "immediate jeopardy." During June through August 2016, Nightingale wound down its Indiana operations. On September 16, 2016, the district court (S.D. Ind.) addressed the appeal from the bankruptcy court's preliminary injunction, The district court concluded that the bankruptcy court lacked subject matter jurisdiction to enter the preliminary injunction. The district court also rejected Nightingale's argument that the appeal was mooted by the bankruptcy court's prior revocation of the preliminary injunction. Instead, the district court ruled that the government could seek restitution from Nightingale for reimbursements paid during the time when the preliminary injunction was in effect. Separately, the debtor's direct and indirect owner filed separate litigation in the district court against persons acting with respect to the debtor's Medicare agreement. The district court granted summary judgment against the plaintiffs, and the plaintiffs appealed.

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