IN THE UNITED STATES DISTRICT COURT
`FOR THE WESTERN DISTRICT OF MISSOURI
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`GAMMA HEALTHCARE, INC.,
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`Plaintiff,
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`v.
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`ALEX AZAR, in his official capacity
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`as Secretary, United States Department
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`of Health and Human Services,
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`SEEMA VERMA, in her official
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`capacity as Acting Administrator for the
`Center of Medicare and Medicaid Services,
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`JEFF KAHRS, Deputy Regional Administrator
`for (Region 7) the Center for Medicare
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`and Medicaid Services.
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`Defendants.
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`Case No. 6:20-CV-033337-MDH
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`ORDER ON EMERGENCY MOTION FOR TEMPORARY RESTRAINING ORDER
`AND PRELIMINARY AND PERMANENT INJUNCTIVE RELIEF
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`Before the Court is Plaintiff Gamma Healthcare, Inc.’s Emergency Motion for Temporary
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`Restraining Order. (Doc. 3). Plaintiff requests the Court issue a TRO pursuant to Rule 65(c)
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`prohibiting Defendants from suspending and revoking GHC’s CLIA Certificate until such time as
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`the Court is able to determine whether the preliminary injunction should remain in effect as a
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`permanent injunction pending Plaintiff’s opportunity to exhaust its administrative appeal
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`remedies. On October 26, 2020, the Court held a hearing regarding the pending motions. The Court
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`then granted the parties additional time to submit supplemental briefing on the issues presented at
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`the hearing. The parties have now fully briefed the issues and the matter is ripe for review. For the
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`reasons set forth herein, Plaintiff’s Motion is DENIED.
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`Case 6:20-cv-03337-MDH Document 18 Filed 10/28/20 Page 1 of 9
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`BACKGROUND
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`Plaintiff operates clinical laboratories located in Springfield, Missouri and Poplar Bluff,
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`Missouri, which provide a variety of medical testing services. (Doc. 1). Until the events giving rise
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`to this lawsuit, both labs operated under Clinical Laboratory Improvement Amendments (“CLIA”)
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`certificates. (Doc. 12, 5). Defendants suspended Plaintiff’s federal authority to operate as clinical
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`labs, effective October 26, 2020, pursuant to the Defendants’ authority to suspend Plaintiff’s lab
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`certificates in advance of an administrative hearing. 42 U.S.C. § 263a(i) (Doc. 12, 1). Plaintiff’s
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`Complaint raises the following claims: Injunctive Relief based on allegations of due process
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`violations; Violation of Equal Protection Guarantees of the Fourteenth Amendment; and Violation
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`of Due Process Guarantees of the Fourteenth Amendment.
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`“Labs like [Plaintiff] must meet certain federal standards in order to be certified to conduct
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`diagnostic tests on human specimens (blood, tissue, and the like), and to receive Medicare or
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`Medicaid reimbursement for their services. These standards are embodied in the Clinical
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`Laboratory Improvement Amendments of 1988 (‘CLIA’ or ‘the Act’) and its implementing
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`regulations. See 42 U.S.C. § [263a]; 42 C.F.R. Part 493.” Wade Pediatrics v. Dep’t of Health &
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`Human Servs., 567 F.3d 1202, 1203 (10th Cir. 2009). A lab’s compliance with these standards is
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`memorialized in a “CLIA certificate,” which is subject to periodic reconsideration. Additionally,
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`the Secretary of Health and Human Services’ designee may, on an announced or unannounced
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`basis, enter and inspect any certified lab to determine whether the lab is, in fact, compliance with
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`federal standards. 42 U.S.C. § 263a(g). If the Secretary determines the lab is out of compliance,
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`the Secretary may impose sanctions. 42 U.S.C. §§ 263a(h)–(i). Sanctions may be mild or severe,
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`including suspension or revocation of a lab’s federal certification. Id. Generally, the Secretary
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`cannot suspend a lab’s federal certification before an administrative hearing, assuming the lab
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`Case 6:20-cv-03337-MDH Document 18 Filed 10/28/20 Page 2 of 9
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`wishes to contest the suspension. 42 U.S.C. § 263a(i). However, if the Secretary determines that a
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`lab’s failure to comply with federal standards presents an imminent and serious risk to human
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`health, the Secretary may suspend the lab’s certification prior to a hearing. 42 U.S.C. § 263a(i)(2).
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`Federal regulations govern how the Secretary’s designees go about the important work of
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`assessing which labs meet federal standards and which labs need to be pulled into compliance. 42
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`C.F.R. Part 493. Inevitably, most labs will fail to comply in some material way, but not all failures
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`merit the same response. Federal regulations generally permit two categories of civil sanctions: (1)
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`“principal sanctions,” which are suspension, limitation, or revocation of the lab’s certification; or
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`(2) “alternative sanctions,” which are government-directed plans of correction, state onsite
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`monitoring, or civil money penalties. 42 C.F.R. § 493.1806. The two categories of sanctions get
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`meted out against varying levels and patterns of noncompliance, and federal regulations generally
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`guide the considerations in determining appropriate sanctions. 42 C.F.R. § 493.1804.
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`In cases of extreme and repetitive noncompliance, the regulations permit the Secretary to
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`suspend a lab’s certification prior to a hearing, on a mere five days’ notice. 42 C.F.R. §§
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`493.1812(b); 493.1840(d)(2). Cf. 42 U.S.C. § 263a(i)(2). If a lab’s deficiencies pose “immediate
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`jeopardy”—imminent and serious risk to human health and significant hazard to the public
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`health—the lab must take immediate action. 42 C.F.R. § 493.1812(a). If the findings of a revisit
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`to the lab indicate that the lab has not eliminated the imminent and serious risk to human health,
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`the Centers for Medicare & Medicaid Services (CMS) suspends or limits the lab’s federal
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`certification. 42 C.F.R. § 493.1812(b). CMS must provide at least five days’ notice, but it need not
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`suspend a lab’s federal certification in advance of a hearing. 42 C.F.R. §§ 493.1812(b),
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`493.1840(d)(2).
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`Case 6:20-cv-03337-MDH Document 18 Filed 10/28/20 Page 3 of 9
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`STANDARD
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`Before the Court can analyze the issues raised in Plaintiff’s Motion for a Preliminary
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`Injunction, the Court must first analyze whether it has jurisdiction over the claims raised in the
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`Complaint. “The burden of establishing that federal jurisdiction exists ‘rests upon the party
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`asserting jurisdiction.’” Midland Psychiatric Assocs., Inc. v. United States, 145 F.3d 1000, 1003
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`(8th Cir. 1998) (internal citations omitted). A court must dismiss an action over which it lacks
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`subject-matter jurisdiction. Degnan v. Sebelius, 959 F. Supp. 2d 1190, 1192 - 93 (D. Minn. 2013),
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`aff'd sub nom. Degnan v. Burwell, 765 F.3d 805 (8th Cir. 2014).
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`DISCUSSION
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`The Court generally does not have federal question jurisdiction over any claim for
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`Medicare or Medicaid payment (or nonpayment). Cf. 42 U.S.C. §§ 405(h), 1395ii (making
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`§ 405(h) applicable). This preclusion also extends beyond Medicare Act. “[C]laims arising under
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`other statutes may be barred by section 405(h) if they are ‘inextricably intertwined’ with benefit
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`determinations under the Medicare Act.” Clarinda Home Health v. Shalala, 100 F.3d 526, 529
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`(8th Cir. 1996) (quoting Heckler v. Ringer, 466 U.S. 602 (1984)).
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`Federal question jurisdiction is barred unless the refusal to exercise such jurisdiction
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`“would mean no review at all.” Shalala v. Ill. Council on Long Term Care, Inc., 529 U.S. 1, 10–
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`20 (2000) (explaining broad preclusion of federal jurisdiction over issues related to payments
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`under the Medicare Act). In the Eighth Circuit, “[t]his exception applies where the litigant: (1)
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`raises a colorable constitutional claim collateral to his substantive claim of entitlement; (2) shows
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`that irreparable harm would result from exhaustion; and (3) shows that the purposes of exhaustion
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`would not be served by requiring further administrative procedures.” Clarinda Home Health, 100
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`F.3d at 530–31.
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`Case 6:20-cv-03337-MDH Document 18 Filed 10/28/20 Page 4 of 9
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`With respect to the second and third elements, Plaintiff argues that irreparable harm would
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`result to it from the exhaustion of administrative remedies here, and the purposes of exhaustion
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`would not be served here by requiring further administrative procedures. Specifically, the
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`suspension would allegedly force Plaintiff’s labs to close, as 65% of Plaintiff’s revenue is
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`dependent upon Medicare certification. (Doc. 17, 5). For their part, Defendants argue that the
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`potential harm to Plaintiff is outweighed by public safety concerns. (Doc. 12, 32). Even if the Court
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`assumes that irreparable harm and purposes of exhaustion elements are met in this case, the Court
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`does not find that Plaintiff has raised a colorable constitutional claim collateral to its substantive
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`claim of entitlement.
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`With respect to whether Plaintiff presents a colorable claim, Plaintiff suggests that its due
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`process rights were violated due to the suspension. The key procedural due process question is the
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`balance of Plaintiff’s private interest, if any, against the process employed and the Government’s
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`interest. There is case law that suggests that procedural due process challenges to the pre-hearing
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`suspension of CLIA certificates are not valid. See, e.g., Collum v. Arkansas Dep’t of Health &
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`Human Servs., No. 4:06CV01496-WRW, 2007 WL 1238726, at *3 (E.D. Ark. Apr. 27, 2007); D
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`& G Holdings, LLC v. Leavitt, No. CIV.A. 08-0373, 2008 WL 782446, at *1 (W.D. La. Mar. 20,
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`2008). Both cases declined to enjoin federal defendants suspending CLIA certificates in advance
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`of a formal, adversarial administrative hearing. Both cases suggested that CLIA certificate holders
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`lack a constitutionally protected property interest in a CLIA certificate, and, in any event, a pre-
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`suspension, adversarial administrative hearing was not required in light of the regulatory notice
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`and “some kind of hearing” procedures provided—referred to in the Supreme Court’s seminal
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`Loudermill decision as merely “an opportunity to respond” prior to deprivation of a protected
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`property interest. Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 546 (1985).
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`Case 6:20-cv-03337-MDH Document 18 Filed 10/28/20 Page 5 of 9
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`Case law from the 8th Circuit suggests that Plaintiff lacks any property or liberty interest
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`in a CLIA certificate. The Eighth Circuit’s decision in Key Medical Supply, Inc. v. Burwell, 764
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`F.3d 955, 965 (8th Cir. 2014), held that Medicare providers have no “property interest that may
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`serve as the basis of a due process violation.” In Minnesota Association of Health Care Facilities,
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`Inc. v. Minnesota Department of Public Welfare, 742 F.2d 442, 446 (8th Cir. 1984), the Eighth
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`Circuit rejected a plaintiff’s attempt to characterize a loss of business associated with a condition
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`on Medicaid participation as a taking. There, the court stated, “[d]espite the strong financial
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`inducement to participate in Medicaid,” the care provider’s choice to participate in Medicaid was
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`“nonetheless voluntary.” Id. The Eighth Circuit concluded, “[t]his voluntariness forecloses the
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`possibility that the statute could result in an imposed taking of private property which would give
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`rise to the constitutional right of just compensation[.]” Id. Minnesota Association of Health Care
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`Facilities controls in the present case. Plaintiff’s procedural due process claim lacks merit due to
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`the absence of a protected property or liberty interest in a CLIA certificate or federal healthcare
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`program payments. Plaintiff’s challenge is not “a substantial constitutional challenge capable of
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`overcoming the bar on review.” Key Med. Supply, Inc., 764 F.3d at 965–66. See also Koerpel v.
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`Heckler, 797 F.2d 858, 863–65 (10th Cir. 1986) (finding physician had no property interest in his
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`eligibility for Medicare reimbursement); Cervoni v. Sec’y of Health, Ed. and Welfare, 581 F.2d
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`1010 (1st Cir. 1978) (finding plaintiff physician had no protectable property interest in his
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`participation in Medicare).
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`Furthermore, the Defendants contend that due process was satisfied here, as Plaintiff was
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`given notice prior to the suspension taking place. The Defendants did exercise their discretion to
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`suspend Plaintiff’s license with only 5 days’ notice due to their determination that Plaintiff’s labs
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`posed “immediate jeopardy” to human health and the public. The 5 days’ notice is provided for by
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`Case 6:20-cv-03337-MDH Document 18 Filed 10/28/20 Page 6 of 9
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`statute, as noted above. 42 C.F.R. § 493.1812(b). Additionally, the evidence suggests that
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`Defendants first made a finding of immediate jeopardy regarding Plaintiff’s labs in June of 2020.
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`(Doc. 12, 13).
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`Moreover, the Court clearly lacks subject matter jurisdiction with respect to Plaintiff’s
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`claims here, because they are not collateral to the Plaintiff’s claims that Defendants wrongfully
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`suspended Plaintiff’s licenses. Thus, Plaintiff’s claims cannot satisfy the requirements that would
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`allow this Court to exercise jurisdiction prior to Plaintiff exhausting its administrative remedies.
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`A claim is collateral if it does not require the Court to “examine the merits of the underlying
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`dispute, delve into the statute and regulations, or make independent judgments as to plaintiffs'
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`eligibility under a statute.” Senior Life York, Inc. v. Azar, 418 F. Supp. 3d 62, 71 (M.D. Pa. 2019)
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`(quoting Family Rehabilitation, Inc. v. Azar, 886 F.3d 496, 503 (5th Cir. 2018)) (citing Heckler v.
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`Ringer, 466 U.S. 602, 614 (1984); Affiliated Prof'l Home Health Care Agency v. Shalala, 164 F.3d
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`282, 284-85 (5th Cir. 1999)). Collateral claims must present constitutional or procedural
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`challenges and request temporary relief until the agency follows required procedures. Family
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`Rehab. 886 F.3d at 503. (citing Bowen, 476 U.S. at 483; Ringer, 466 U.S. at 614; Mathews v.
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`Eldridge, 424 U.S. 319, 330-32 (1976); Affiliated Prof'l, 164 F.3d at 284-85).
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`The “collateral” exception to the exhaustion of administrative remedies is not applicable
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`to the claims in Plaintiff’s complaint because they directly challenge Defendants’ substantive
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`determinations in imposing remedies against it. See Cathedral Rock of North College Hill, Inc. v.
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`Shalala, 223 F.3d 354, 362 (6th Cir. 2000). As Defendants note, Plaintiff at no point alleges that
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`Defendants did not follow their own procedural and statutory requirements in their decision to
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`suspend Plaintiff’s licenses. Additionally, Plaintiff does not identify a challenge to any particular
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`regulation or statute. (Doc. 16, 2). Still, “governmental policies implemented through legislation
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`Case 6:20-cv-03337-MDH Document 18 Filed 10/28/20 Page 7 of 9
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`or regulations developed through presumptively reasoned democratic processes . . . should not be
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`enjoined lightly.” Planned Parenthood Minnesota, N. Dakota, S. Dakota v. Rounds, 530 F.3d 724,
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`732 (8th Cir. 2008) (en banc).
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`Plaintiff’s Complaint invokes the merits of Defendants’ decision often. For example, the
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`Verified Complaint reads under its Injunctive Relief Count:
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`98. [Plaintiff] disputes that the deficiencies identified in the October 7 and October
`8 Surveys placed [Plaintiff’s] patients in Immediate Jeopardy. Nonetheless,
`[Plaintiff] resolved the deficiencies and has not yet been able to submit credible
`Allegations of Compliance demonstrating that both [Plaintiff’s] Springfield and
`Poplar Bluff laboratories removed the alleged Immediate Jeopardy and returned to
`substantial compliance with regulatory requirements before the suspension date.
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`(Doc. 1, 21).
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`Ultimately, Plaintiff requests the Court to second-guess Defendants’ statutorily authorized
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`exercise of discretion in determining whether Plaintiff’s labs present a threat to public safety.
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`Additionally, the law affords substantial deference to Defendants’ exercise of discretion in how
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`Defendants go about achieving the statutory and regulatory objectives of certifying clinical labs.
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`See, e.g., S. Dakota v. U.S. Dep’t of Interior, 423 F.3d 790, 799–800 (8th Cir. 2005) (describing
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`the limits of APA review to agency action).
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`Plaintiff primarily relies on two cases to support its argument that it would be appropriate
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`for the Court to intervene in this case prior to Plaintiff exhausting its administrative remedies:
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`Rockhill Care Ctr., Inc. v. Harris, 502 F. Supp. 1227, 1229 (W.D. Mo. 1980) and Lexington Mgmt.
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`Co. v. Misouri Dep’t of Soc. Servs., 656 F. Supp. 36, 39 (W.D. Mo. 1986). First, Rockhill was
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`implicitly overruled by both Minnesota Association of Health Care Facilities, 742 F.2d at 446 four
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`years after it was decided and in 1985 by Cleveland Bd. Of Educ. V. Loudermill, 470 U.S. 532
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`(1985). Second, Lexington is distinguishable from the case at hand. The court in Lexington found
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`that the action did not invoke § 405(g) or § 405(h), and importantly that the claims were wholly
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`Case 6:20-cv-03337-MDH Document 18 Filed 10/28/20 Page 8 of 9
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`collateral. Lexington Mgmt. Co., 656 F. Supp. 36, 29. In that case, the plaintiff requested the court
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`to enforce compliance with a provision of the Medicaid program. Id. Here, Plaintiff is not seeking
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`to make Defendants comply with statutes or regulations—Defendants apparently followed them
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`correctly—but rather Plaintiff seeks to challenge the merits of Defendants’ exercise of discretion
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`pursuant to valid statutory authority. This is beyond the Court’s jurisdiction.
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`Because Plaintiff has failed to allege a colorable constitutional claim that is collateral to its
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`claim of entitlement, Plaintiff has failed to establish that it should be entitled a waiver of the
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`administrative exhaustion requirements.
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`CONCLUSION
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`Wherefore, for the reasons set forth herein, the Court DENIES Plaintiff’s Motion for
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`Temporary Restraining Order and Preliminary and Permanent Injunctive Relief. The Court finds
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`it does not have jurisdiction to review Plaintiff’s claims at this time. If, after exhausting any
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`available administrative remedies, Plaintiff continues to seek review of its claims judicial review
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`may then be appropriate.
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`IT IS SO ORDERED.
`DATED: October 28, 2020
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` /s/ Douglas Harpool_______________
`DOUGLAS HARPOOL
`UNITED STATES DISTRICT JUDGE
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`Case 6:20-cv-03337-MDH Document 18 Filed 10/28/20 Page 9 of 9
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