Woodruff v. Mason

542 F.3d 545, 2008 U.S. App. LEXIS 19132, 2008 WL 4095025
Court of Appeals for the Seventh Circuit·Decided September 5, 2008·No. 07-2240·Published·Cited by 227 cases

Opinions

CUDAHY, Circuit Judge.

Legacy Healthcare, Inc. (Legacy) and its predecessor, Community Care Centers, Inc. (Community), operated a number of long-term care facilities in Indiana. On February 18, 2000, Legacy brought this action under 42 U.S.C. § 1983, alleging that employees of the Indiana Family and Social Services Administration (FSSA) and the Indiana State Department of Health (ISDH) violated its rights under the First Amendment and Fourteenth Amendment.1 The FSSA administers Indiana’s Medicaid program through its Office of Medicaid Policy and Planning (OMPP); the ISDH is the state agency authorized to inspect care facilities and determine their compliance with federal Medicaid regulations. Legacy believes that FSSA employees developed an antipathy toward Legacy and Community after years of contentious litigation between the parties. It claims that the FSSA convinced the ISDH to use its regulatory authority to launch a predatory enforcement campaign aimed at driving Legacy out of business. According to Legacy, this predatory enforcement constituted First Amendment retaliation and violated the Equal Protection Clause. The district court granted summary judgment in favor of Defendants on all counts. We now affirm.

I.

The record in this case is voluminous. Any reader interested in a complete exposition of the facts is referred to the district court’s lengthy background discussion. See Woodruff v. Wilson, 484 F.Supp.2d 876, 880-925 (S.D.Ind.2007). We recite only the facts that are necessary to our decision, and we read these facts, wherever possible, in the light most favorable to Legacy.

Legacy and Community have been locked in litigation with the FSSA for years. In 1988, Community brought a challenge to state Medicaid reimbursement rules in Indiana state court. Community convinced the Delaware County Superior Court to issue an injunction requiring the Indiana Department of Public Welfare (IDPW)2 to pay Community a higher reimbursement rate during the pendency of the litigation. The case was then moved to Blackford County Superior Court, which ruled in favor of Community on the merits. The IDPW appealed, and the case was consolidated with a large class action suit that challenged the same reimbursement rules. See Indiana State Bd. of Pub. Welfare v. Tioga Pines Living Center, Inc., 622 N.E.2d 935 (Ind.1993). The cases were transferred directly to the Indiana Supreme Court, which reversed the lower [548] courts and upheld the regulations. Id. Karen Davis, an attorney for the FSSA who had been involved in the litigation since 1990, went back to Blackford County court to recoup the millions of dollars paid to Community under the erroneous injunction. The FSSA argued that Community had been unjustly enriched by the injunction and had been misusing Medicaid funds. Community argued that it had not been unjustly enriched because it spent all of the money on patient care. In the end, the FSSA’s recoupment attempts were unsuccessful.

Community also sued the IDPW in federal court over Medicaid reimbursement for its Hamilton Heights facility (later known as New Horizon). Hamilton Heights was a skilled nursing facility (SNF) that was in the process of being converted into an intermediate care facility for the mentally retarded (ICF/MR). An ICF/MR is required to provide a higher level of care than an SNF and is therefore reimbursed at a higher rate. Community sued the IDPW, arguing that it should be paid the higher ICF/MR reimbursement rate while it underwent its conversion. Community again obtained a preliminary injunction and the IDPW again paid a substantial amount of additional reimbursement ($1,783,480.20). The district court also ruled for Community on the merits, but we reversed. See Lett v. Magnant, 965 F.2d 251 (7th Cir.1992). The FSSA attempted to recoup some of excess reimbursement paid to Hamilton Heights by withholding payment for current services. Community was able to avoid the recoupment attempts, in part by arguing that the recoupment would cause imminent business failure. Family and Social Servs. Admin, v. Cmty. Care Centers, Inc., 641 N.E.2d 1012 (Ind.Ct.App.1994). The FSSA’s subsequent attempts to recoup the money also failed. See Cmty. Care Centers, Inc. v. Sullivan, 701 N.E.2d 1234 (Ind.Ct.App.1998).

Legacy also litigated with state agencies over whether the FSSA was required to recognize Legacy as the owner of Community facilities after Douglas Bradburn, Legacy’s President, acquired all of his parents’ business assets in October 1993. The FSSA eventually entered into a joint stipulation with Legacy, settling the issue. Davis allegedly became “visibly angry” when she learned of this result, presumably because the transfer of the business operations to Legacy prevented the ISDH from recouping funds by automatically deducting them from payments for current services.

In 1996, ISDH initiated proceedings against Legacy’s North Vernon facility for decertification. During administrative proceedings seeking the decertification of North Vernon, Legacy discovered that on November 6, 1996, Beverly Craig of the ISDH had called a meeting, which included officials from the FSSA and the Attorney General’s office, regarding the state of health care at Legacy facilities. The attendees included Davis, Jo Anne Mason, Suzanne Hornstein, Gerald Coleman and others.3 Craig later testified that she called the meeting because she was concerned that Legacy was failing to provide adequate care at a number of different facilities.

[549] Legacy claims that it had a perfect record of compliance with state regulations over the first thirty-two years of its operation, easily passing inspections and enjoying a good reputation with the public. Following the November 6, 1996 meeting, however, there was a “deluge” of allegedly predatory enforcement actions: 12 jeopardy charges, 14 licensure actions and 14 decertifications over the next three years.4 Legacy believes that the subsequent enforcement campaign, which allegedly included the manipulation of survey findings, was designed to drive Legacy out of business. Legacy points to three specific examples: (1) the withholding of North Vernon’s copy of its license; (2) the manipulation of 180-day cycles; and (3) the decertification of New Horizon on the basis of a single standard. We will explain these actions briefly.

Free access — add to your briefcase to read the full text and ask questions with AI

Woodruff v. Mason, 542 F.3d 545, 2008 U.S. App. LEXIS 19132, 2008 WL 4095025 (7th Cir. 2008).

542 F.3d 545 (Woodruff v. Mason) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

Related