Contract termination ends health care provider’s eligibility for federal funds

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Finding that the status of the grant holder had changed, the 7th Circuit Court of Appeals ruled that Citizens Health Corp. is no longer eligible for Section 330 federal monies.

The 7th Circuit upheld the ruling of the U.S. District Court for the Southern District of Indiana, Indianapolis Division, in Citizens Health Corporation v. Kathleen Sebelius, Sectary of Health and Human Services, et al., 12-3924. The appellate court affirmed the summary judgment in favor of all defendants based on the conclusion that Citizens had no contractual, statutory, or constitutionally perceivable interest in the grant funds.

Citizens Health Corp. had been receiving a Section 330 grant to support its Indianapolis medial center that served the indigent population. When Health and Hospital Corp. decided to end its relationship with Citizens Health Corp., Health and Hospital also relinquished the grant.

Concerned it would loss the federal funds, Citizens filed suit against Health and Hospital, the federal Health Resources and Services Administration, and other defendants seeking to enjoin the defendants from terminating the Section 330 grant.

The health care provider argued that HRSA’s decision to allow Health and Hospital to relinquish the grant was both contrary to law and a violation of Citizens’ procedural due process rights.

The 7th Circuit rejected Citizens’ argument, finding that the health care provider’s grant status had changed. When Citizens partnered with Health and Hospital, the latter organization became the sole grantee with the responsibility to receive, manage and disburse Section 330 grant funds.

Citizens’ entitlement to the grant funds existed only by contract with Health and Hospital. Once that contract ended, Citizens was no longer eligible for the Section 330 grant.



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