GOVERNMENT CONTRACTING LAW

Transcription

1 AN A.S. PRATT PUBLICATION NOVEMBER 2015 VOL. 1 NO. 8 PRATT S GOVERNMENT CONTRACTING LAW REPORT EDITOR S NOTE: CONTRACTORS AND HEALTH CARE DEVELOPMENTS Steven A. Meyerowitz IN CLOSELY WATCHED CASE, FEDERAL COURT UPHOLDS THE GOVERNMENT S POSITION ON PROVIDER MANDATE TO REPORT AND RETURN MEDICARE AND MEDICAID OVERPAYMENTS IN 60 DAYS Jared Facher and Brian T. McGovern MEDICARE JURISDICTIONAL BAR LIMITS BANKRUPTCY COURT AUTHORITY IN HEALTH CARE BANKRUPTCY Wendy G. Marcari NEW DEPARTMENT OF DEFENSE CYBER SECURITY REGULATIONS: IS THE CURE WORSE THAN THE DISEASE? Daniel C. Schwartz, Robert Clifton Burns, Jennifer Kies Mammen, and Kristin M. Robinson IN THE COURTS Steven A. Meyerowitz LEGISLATIVE AND REGULATORY DEVELOPMENTS Victoria Prussen Spears ANOTHER POTENTIAL HOOK FOR ENTITIES DOING BUSINESS WITH FEDERAL CONTRACTORS: THE NLRB S BROWNING-FERRIS DECISION Annette Tyman and Meredith C. Bailey

2 PRATT S GOVERNMENT CONTRACTING LAW REPORT VOLUME 1 NUMBER 8 November 2015 Editor s Note: Contractors and Health Care Developments Steven A. Meyerowitz 247 In Closely Watched Case, Federal Court Upholds the Government s Position on Provider Mandate to Report and Return Medicare and Medicaid Overpayments in 60 Days Jared Facher and Brian T. McGovern 249 Medicare Jurisdictional Bar Limits Bankruptcy Court Authority in Health Care Bankruptcy Wendy G. Marcari 255 Another Potential Hook For Entities Doing Business with Federal Contractors: The NLRB s Browning-Ferris Decision Annette Tyman and Meredith C. Bailey 258 New Department of Defense Cyber Security Regulations: Is the Cure Worse than the Disease? Daniel C. Schwartz, Robert Clifton Burns, Jennifer Kies Mammen, and Kristin M. Robinson 261 In the Courts Steven A. Meyerowitz 267 Legislative and Regulatory Developments Victoria Prussen Spears 277

3 QUESTIONS ABOUT THIS PUBLICATION? For questions about the Editorial Content appearing in these volumes or reprint permission, please call: Heidi A. Litman at For assistance with replacement pages, shipments, billing or other customer service matters, please call: Customer Services Department at (800) Outside the United States and Canada, please call (518) Fax Number (518) Customer Service Web site For information on other Matthew Bender publications, please call Your account manager or (800) Outside the United States and Canada, please call (518) Library of Congress Card Number: ISBN: (print) Cite this publication as: [author name], [article title], [vol. no.] PRATT S GOVERNMENT CONTRACTING LAW REPORT [page number] (LexisNexis A.S. Pratt); Michelle E. Litteken, GAO Holds NASA Exceeded Its Discretion in Protest of FSS Task Order, 1 PRATT S GOVERNMENT CONTRACTING LAW REPORT 30 (LexisNexis A.S. Pratt) Because the section you are citing may be revised in a later release, you may wish to photocopy or print out the section for convenient future reference. This publication is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. LexisNexis and the Knowledge Burst logo are registered trademarks of Reed Elsevier Properties Inc., used under license. A.S. Pratt is a registered trademark of Reed Elsevier Properties SA, used under license. Copyright 2015 Reed Elsevier Properties SA, used under license by Matthew Bender & Company, Inc. All Rights Reserved. No copyright is claimed by LexisNexis, Matthew Bender & Company, Inc., or Reed Elsevier Properties SA, in the text of statutes, regulations, and excerpts from court opinions quoted within this work. Permission to copy material may be licensed for a fee from the Copyright Clearance Center, 222 Rosewood Drive, Danvers, Mass , telephone (978) An A.S. Pratt Publication Editorial Offices 630 Central Ave., New Providence, NJ (908) Mission St., San Francisco, CA (415) (2015 Pub.4938)

4 Editor-in-Chief, Editor & Board of Editors EDITOR-IN-CHIEF STEVEN A. MEYEROWITZ President, Meyerowitz Communications Inc. EDITOR VICTORIA PRUSSEN SPEARS Senior Vice President, Meyerowitz Communications Inc. BOARD OF EDITORS MARY BETH BOSCO Partner, Holland & Knight LLP DARWIN A. HINDMAN III Shareholder, Baker, Donelson, Bearman, Caldwell & Berkowitz, PC J. ANDREW HOWARD Partner, Alston & Bird LLP KYLE R. JEFCOAT Counsel, Latham & Watkins LLP JOHN E. JENSEN Partner, Pillsbury Winthrop Shaw Pittman LLP DISMAS LOCARIA Partner, Venable LLP MARCIA G. MADSEN Partner, Mayer Brown LLP KEVIN P. MULLEN Partner, Jenner & Block VINCENT J. NAPOLEON Partner, Nixon Peabody LLP STUART W. TURNER Counsel, Arnold & Porter LLP WALTER A.I. WILSON Senior Partner, Polsinelli PC PRATT S GOVERNMENT CONTRACTING LAW REPORT is published twelve times a year by Matthew Bender & Company, Inc. Copyright 2015 Reed Elsevier Properties SA., used under license by Matthew Bender & Company, Inc. All rights reserved. No part of this journal may be reproduced in any form by microfilm, xerography, or otherwise or iii

5 incorporated into any information retrieval system without the written permission of the copyright owner. For permission to photocopy or use material electronically from Pratt s Government Contracting Law Report, please access or contact the Copyright Clearance Center, Inc. (CCC), 222 Rosewood Drive, Danvers, MA 01923, CCC is a not-for-profit organization that provides licenses and registration for a variety of users. For subscription information and customer service, call Direct any editorial inquires and send any material for publication to Steven A. Meyerowitz, Editor-in-Chief, Meyerowitz Communications Inc., Grand Central Parkway Suite 18R, Floral Park, New York 11005, smeyerowitz@meyerowitzcommunications.com, Material for publication is welcomed articles, decisions, or other items of interest to government contractors, attorneys and law firms, in-house counsel, government lawyers, and senior business executives. This publication is designed to be accurate and authoritative, but neither the publisher nor the authors are rendering legal, accounting, or other professional services in this publication. If legal or other expert advice is desired, retain the services of an appropriate professional. The articles and columns reflect only the present considerations and views of the authors and do not necessarily reflect those of the firms or organizations with which they are affiliated, any of the former or present clients of the authors or their firms or organizations, or the editors or publisher. POSTMASTER: Send address changes to Pratt s Government Contracting Law Report, LexisNexis Matthew Bender, 630 Central Avenue, New Providence, NJ iv

6 MEDICARE JURISDICTIONAL BAR LIMITS BANKRUPTCY COURT AUTHORITY IN HEALTH CARE BANKRUPTCY Medicare Jurisdictional Bar Limits Bankruptcy Court Authority in Health Care Bankruptcy By Wendy G. Marcari * The U.S. District Court for the Middle District of Florida recently ruled that the Medicare jurisdictional bar under 42 U.S.C. 405(h) limits the authority of the bankruptcy court to interfere with efforts by the Centers for Medicare & Medicaid Services to terminate the provider agreements except to provide judicial review under Section 405(g) after administrative remedies have been exhausted. The author of this article discusses the decision and its potential impact. The U.S. District Court for the Middle District of Florida recently ruled that the bankruptcy court administering the Bayou Shores SNF, LLC ( Debtor or Bayou Shores ), Chapter 11 proceeding lacked subject matter jurisdiction to enjoin the termination of the Debtor s Medicare and Medicaid provider agreements or to order the assumption of the provider agreements. 1 Specifically, the district court held that the Medicare jurisdictional bar under 42 U.S.C. 405(h) limits the authority of the bankruptcy court to interfere with efforts by the Centers for Medicare & Medicaid Services ( CMS ) to terminate the provider agreements except to provide judicial review under Section 405(g) after administrative remedies have been exhausted. Bayou Shores has expressed its intention to appeal the district court s decision, but if the decision is affirmed, it could have broad implications for health care bankruptcies by limiting the ability of health care businesses in bankruptcy to reorganize or sell their assets on a going-concern basis. BACKGROUND Bayou Shores operates a skilled nursing facility in Florida serving patients with neurological disorders and psychiatric conditions. This skilled nursing facility is one of only a few facilities in the area that serves this population and receives more than 90 percent of its revenue from Medicare and Medicaid. * Wendy G. Marcari is a member of the firm in the Corporate Services and Health Care and Life Sciences practices, in the New York office of Epstein Becker Green. She may be contacted at wmarcari@ebglaw.com. Elena M. Quattrone, a summer associate (not admitted to the practice of law) at the firm, contributed significantly to the preparation of this article. 1 See Fla. Agency for Health Care Admin. v. Bayou Shores SNF, LLC (In re Bayou Shores SNF, LLC), Case No. 8:14-cv (M.D. Fla. June 26, 2015), available at usao-mdfl/file/627661/download. 255

7 GOVERNMENT CONTRACTING LAW REPORT Pursuant to 42 C.F.R. Part 482, Subpart B, payment under Medicare and Medicaid programs is contingent on compliance with the requirements set forth in the regulations governing those programs. Based on surveys of the Debtor over the course of five months in 2014, the Debtor was found to no longer be in compliance with these requirements, and, as such, CMS notified the Debtor that its Medicare provider agreement would terminate on August 3, PROCEDURAL HISTORY To thwart the upcoming termination of its provider agreements, the Debtor sought and obtained from the district court a temporary restraining order ( TRO ) enjoining the termination of the provider agreements until August 15, On that date, the Debtor s motion to extend the TRO was denied and subsequently dissolved by the district court on the ground that 42 U.S.C. 405(h) precluded the district court from exercising jurisdiction over the controversy prior to the Debtor exhausting its administrative remedies. Within an hour, the Debtor filed a voluntary Chapter 11 petition and obtained an interim order of the bankruptcy court enjoining CMS from terminating the provider agreements or denying payments of claims. The bankruptcy court stated that it had jurisdiction over the matter pursuant to 28 U.S.C (the statute that provides bankruptcy jurisdiction) and found the Medicare and Medicaid provider agreements to be property of the estate, warranting the entry of an order precluding the termination of the provider agreements. In a subsequent evidentiary hearing, the bankruptcy court noted that jurisdiction over this matter was appropriate pursuant to 28 U.S.C and concluded that since the provider agreements were not terminated prior to the Debtor s bankruptcy filing, the provider agreements constituted executory contracts that could be assumed in bankruptcy. The bankruptcy court noted that the Debtor s patients were not in any danger, the Debtor had cured the asserted deficiencies, and CMS had notified the Debtor that it was in substantial compliance with the regulations. Accordingly, the bankruptcy court prohibited the termination of the provider agreements. In addition, the bankruptcy court approved the Debtor s assumption of the provider agreements pursuant to the Debtor s plan of reorganization. The United States, on behalf of the Secretary of the Department of Health and Human Services ( Secretary ) and the Florida agency that administers the Medicaid program, appealed. THE MEDICARE JURISDICTIONAL BAR The Medicare jurisdictional bar promulgated in 42 U.S.C. 405(h) states that no findings of fact or decision... shall be reviewed by any person, 256

8 MEDICARE JURISDICTIONAL BAR LIMITS BANKRUPTCY COURT AUTHORITY IN HEALTH CARE BANKRUPTCY tribunal, or governmental agency except as herein provided, and no action against the Secretary shall be brought under section 1131 or 1346 of Title 28 to recover on any claim arising under the Medicare Act. The government argued that Section 405(h) precludes the bankruptcy court from taking any action related to the provider agreements until the Debtor exhausts its administrative remedies. In response, the Debtor argued that the bankruptcy court s jurisdiction was not barred by Section 405(h) because that Section does not expressly proscribe the bankruptcy court s jurisdiction under 28 U.S.C Having examined congressional intent in enacting the Medicare jurisdictional bar to broadly apply to all cases in which administrative remedies have not been exhausted, the district court concluded that Section 405(h) precluded the bankruptcy court s exercise of jurisdiction over the provider agreements before the Debtor s administrative remedies had been exhausted. The district court therefore reversed the bankruptcy court orders. POSSIBLE IMPACT ON HEALTH CARE BANKRUPTCY CASES Bankruptcy can be a strategic tool for a debtor at risk of losing a valuable contract. The Bankruptcy Code s automatic stay and a bankruptcy court s equitable powers are often utilized to prevent a counterparty from terminating a contract, which can be critical to a debtor s ability to reorganize or sell its assets as a going concern. A health care provider relying on Medicare and Medicaid, however, may be limited in its ability to use the bankruptcy process to prevent the termination of, or to obtain the assumption and assignment of, a provider agreement if CMS seeks to terminate the provider agreement or exercise other remedies. This can fundamentally affect the value and survival of a distressed health care business. An appeal of the district court s decision is expected. 257