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7th Circuit: Nightingale must defend Medicare restitution claims

June 28, 2017

A Carmel-based home health care company stripped of its certification to receive Medicare funding in Indiana will return to the district court in Indianapolis to defend against government claims seeking nearly $5 million in restitution.

Nightingale Home Healthcare also lost its federal discrimination appeal.

The 7th Circuit Court of Appeals on Tuesday ruled on a tangle of litigation, vacating an Indianapolis district court ruling that reversed bankruptcy court injunction orders that had expired. The matter was remanded to the district court, which should have dismissed the appeal as moot, the circuit court wrote.

However, the 7th Circuit explained in a footnote, “Our decision leaves the parties free to dispute the merits of the injunction as it relates to the government’s restitution action — a live issue pending in the district court.”

The government is seeking nearly $5 million in reimbursements it had provided for Nightingale’s post-injunction services.

The Centers for Medicare and Medicaid Services in 2016 terminated Nightingale’s Medicare agreement after finding it was placing patients in “immediate jeopardy.” Nightingale disputed the state’s findings.

Before Nightingale’s Medicare agreement was terminated, however, the company filed a petition to reorganize in bankruptcy. The bankruptcy court granted an injunction temporarily blocking the termination of the agreement. The bankruptcy court later dissolved the injunction. The 7th Circuit ruled the district court errantly reversed the bankruptcy court.
 
The government seeks restitution of payments Nightingale received from Medicare from the time the injunction was issued until Nightingale ceased doing business in the state last August.

Tuesday’s order also found that Nightingale CEO Dr. Dev Brar’s federal lawsuit claiming discrimination and other civil causes of action against the government was jurisdictionally barred. Nightingale’s claims were based in part on allegations that the Indiana State Department of Health conducted more frequent inspections of its facilities and issued harsher reports after those surveys.

The 7th Circuit instructed the district court to dismiss that case without prejudice. The panel concluded that Nightingale and Brar did not exhaust Medicare’s administrative appeals process before filing the civil suit.

“Moreover,” Judge Joel Flaum wrote for the court, “Nightingale’s generalized allegations do not amount to colorable constitutional challenges.”

The opinion in the consolidated cases is Home Care Providers, Inc., et al. v. Kelly Hemmelgarn, et al.; and In RE: Nightingale Home Healthcare, Inc.; and Nightingale Home Healthcare, Inc. v. United States of America, 16-2054, 16-3668 & 16-3669.

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