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Woodstock/Kenosha Health Center v. Schweiker

decided: July 19, 1983.

WOODSTOCK/KENOSHA HEALTH CENTER, PLAINTIFF-APPELLEE,
v.
RICHARD S. SCHWEIKER, SECRETARY OF THE UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, DEFENDANT-APPELLANT; WOODSTOCK/KENOSHA HEALTH CENTER, PLAINTIFF, V. DONALD E. PERCY, SECRETARY OF THE WISCONSIN DEPARTMENT OF HEALTH AND SOCIAL SERVICES, DEFENDANT-APPELLANT, AND RICHARD S. SCHWEIKER, SECRETARY OF THE UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, DEFENDANT-APPELLEE



On appeal from the United States District Court for the Eastern District of Wisconsin. No. 81-C-550 -- John W. Reynolds, Judge.

Wood, Jr. and Cudahy, Circuit Judges, and Weigel, Senior District Judge.*fn*

Author: Wood

WOOD, Jr., Circuit Judge.

This matter is on appeal from the district court's determination that the government is estopped to decertify the plaintiff, Woodstock/Kenosha Health Center, as a provider under the Medicaid program. Although we find that the district court properly had jurisdiction over both the plaintiff's claim and the state's cross-claim, we hold that the district court erroneously applied the law of equitable estoppel and reverse the grant of summary judgment in favor of the plaintiff.

I.

This case concerns a rather convoluted set of facts relating to the government's effort to decertify the Woodstock/Kenosha Health Center (Woodstock) as a provider under both the Medicare and Medicaid programs.*fn1 Based upon surveys of the health care services and facilities provided by Woodstock/Kenosha, the State of Wisconsin initially recommended against renewal of Woodstock's Medicare provider agreement. Woodstock was notified of this decision by letter on September 25, 1975 by the regional director of what was then the federal Department of Health, Education and Welfare (now the Department of Health and Human Services). The letter informed Woodstock that the standards for participation in the Medicare program were the same as those governing participation in the Medicaid program. The letter further informed Woodstock that the state agency had been notified of the non-renewal decision.

During the reconsideration deliberations several other surveys of Woodstock's premises showed that deficiencies continued to exist. However, during this same period, state officials recommended that a short-term agreement be executed to extend Woodstock's Medicare certification until June 30, 1976. Although documents effectuating this recommendation were drafted, none were ever executed. At the end of July, 1976, after receiving additional survey data, the state survey agency recommended that Woodstock's certification be denied. The state survey agency eventually withdrew that negative recommendation based on a September 26, 1976 survey indicating compliance with the requirements of the Medicare program.

HHS ultimately denied Woodstock's request for reconsideration January 27, 1977. However, based on the recommendations of the state survey agency, HHS stated that Woodstock could be eligible for a new Medicare provider agreement effective December 1, 1976 if another state survey indicated compliance with the eligibility requirements. Ultimately, Woodstock received its new provider agreement. The effect of these proceedings was that Woodstock rendered no service to Medicare beneficiaries and received no Medicare reimbursements during the period of November 1, 1975 through November 30, 1976.

As a result of the decertification for this 13 month period, HHS attempted to retroactively decertify Woodstock under the Medicaid program for the same thirteen month period. When HHS denied Woodstock's request for reconsideration on its Medicare status on January 27, 1977, it simultaneously moved to decertify Woodstock under Medicaid. On February 24, 1977 Woodstock was notified that its certification as a Medicaid provider was retroactively terminated effective November 1, 1975. The amount of reimbursement already paid to Woodstock during the period of ineligibility totaled $683,416.27. The federal government seeks to recover the matching funds it paid to the State for this period which totaled approximately $400,000.

Following the decision of HHS to deny Medicare certification Woodstock sought a hearing before an Administrative Law Judge pursuant to 42 C.F.R. ยง 405.153D. On June 21, 1979 the ALJ held that Woodstock had been erroneously denied certification for the thirteen month period. HHS then sought review of that decision before the Appeals Council, which, on March 18, 1981, reversed the ALJ and held that the thirteen month Medicare decertification was proper.

On May 18, 1981 Woodstock brought suit in federal district court appealing the decision of the Appeals Council concerning their eligibility for the Medicare program, and seeking declaratory and injunctive relief against the threatened disallowance of Medicaid benefits for the same period. The district court rejected challenges to its jurisdiction and granted summary judgment to Woodstock holding that HHS was estopped to decertify Woodstock as a Medicaid provider. This appeal follows.

II. JURISDICTION

HHS first challenges the subject matter jurisdiction of the district court to hear the challenge to the proposed retroactive Medicaid decertification. HHS argues that the district court only has jurisdiction to decide whether the decision of the Appeals Council was supported by substantial evidence. HHS contends that the provisions governing review of Medicare decisions are exclusive, and therefore bar any consideration of the consequences of these decisions on Medicaid benefits by the district court or this Court.

HHS misconstrues the nature of Woodstock's complaint which does seek review of the Medicare decision but also separately challenges the authority of the federal defendants to seek a retroactive disallowance of Medicaid benefits already paid. It is irrelevant that the case law unambiguously states that the Medicare review procedures are exclusive and preclude the application of general federal question jurisdiction. See, e.g., United States v. Erika, 456 U.S. 201, ...


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