the circumstances surrounding the convictions.
After a review of the convictions, the DOH took the following
action: (a) imposed a $5,000 fine; and, (b) forced Dr. Gellman
to resign the Directorships at both Franklin General and
Sunrise. Dr. Gellman was also placed on three years probation
by the Office of Professional Medical Conduct.
By letter dated January 5, 1990, the defendant notified Dr.
Gellman that as a result of these convictions, he would be
excluded from participation in the Medicare programs and any
similar state health care programs, including Medicaid,
pursuant to 42 U.S.C. § 1320a-7(a), the "mandatory" exclusion
provision. The letter also afforded Dr. Gellman an opportunity
to provide the defendant with any mitigating information that
it should consider. Dr. Gellman ultimately submitted such
information. On July 20, 1990 the defendant gave Dr. Gellman
final notice of the determination to terminate his
participation in Medicare and any similar state programs for a
period of five years, effective twenty days from the date of
the letter. This second notice, however, based the termination
under 42 U.S.C. § 1320a-7(b), rather than subsection 7(a),
which is the "permissive" exclusion provision.
Dr. Gellman commenced this action on August 20, 1990, pursuant
to 42 U.S.C. § 405(g) and 1320a-7(f)(1), seeking to restrain
and enjoin the defendant from excluding him from participating
in the Medicare and related state programs prior to an
administrative hearing and disposition. On August 20, 1990,
Circuit Judge George C. Pratt, sitting by designation, signed
an Order to Show Cause which scheduled the preliminary
injunction hearing before this Court on August 22, 1990. Judge
Pratt also denied Dr. Gellman's request for a Temporary
In opposition, the defendant argues first, that the Court lacks
subject matter jurisdiction over the action and requests
dismissal under Fed.R.Civ.P. 12(h)(3); and second, even
assuming jurisdiction exists, Dr. Gellman has failed to
establish the traditional elements entitling him to a
This Court heard oral argument on the preliminary injunction
application on August 22, 1990, at which time the parties
stipulated that Dr. Gellman could continue as a Medicare
provider and that he would be afforded the opportunity to
submit a response to the defendant's final exhaustion notice
dated July 20, 1990. This was done to ensure that Dr. Gellman
had received the proper notice of the specific statutory
provision under which he was being excluded, namely, 42 U.S.C. § 1320a-7(b).
Thereafter, by letter dated October 30, 1990, the
defendant notified Dr. Gellman that the original determination
of suspension would stand. The parties appeared for a
conference on November 16, 1990 before this Court, at which
time additional briefing was requested on the issue of the
Court's subject matter jurisdiction.
Concurrent with this action, Dr. Gellman is also attempting to
exhaust his administrative remedies. At this time, the parties
have made written submissions to the Secretary and a
pre-hearing conference is scheduled for sometime in the near
future. No final administrative determination has been made.
At the outset, the Court must first determine whether subject
matter jurisdiction exists (see Fed.R.Civ.P. 12[h];
Republic of the Philippines v. Marcos, 806 F.2d 344, 352 [2d
Cir. 1986], cert. dismissed sub nom. Ancor Holdings, N.V. v.
Republic of the Philippines, 480 U.S. 942, 107 S.Ct. 1597, 94
L.Ed.2d 784, cert. denied sub nom. New York Land Co. v.
Republic of the Philippines, 481 U.S. 1048, 107 S.Ct. 2178, 95
L.Ed.2d 835 ).
Dr. Gellman bases subject matter jurisdiction of this action on
42 U.S.C. § 405[g] (see Complaint ¶ 4). Section 405(g)
provides the only basis of jurisdiction to review actions of
the Secretary (see 42 U.S.C. § 405[h]; see also Weinberger
v. Salfi, 422 U.S. 749, 95 S.Ct. 2457, 45 L.Ed.2d 522 ).
However, judicial review of administrative action under the
Act is only available after the plaintiff has finally exhausted
all administrative remedies see also
42 U.S.C. § 1320a-7[b]).
Section 405(g) of the Social Security Act provides the
exclusive method for judicial review of the Secretary's
actions, as follows:
"Any individual, after any final decision of the Secretary
made after a hearing to which he was a party . . . may obtain
a review of such decision by a civil action . . ." (42 U.S.C. § 405[g]
Accordingly, by its express terms, section 405(g) precludes
judicial review until a "final decision" after a "hearing",
both of which Dr. Gellman concededly has pursued, but has not
Dr. Gellman admits that he is only now seeking to exhaust his
administrative remedies under the Social Security Act. However,
Dr. Gellman alleges that this case fits within the Supreme
Court's exception to the "exhaustion" requirement, namely, when
a plaintiff raises a "colorable" constitutional challenge
entirely collateral to the "entitlement" issue, federal
jurisdiction exists despite the plaintiff's failure to exhaust
administratively (see Mathews v. Eldridge, 424 U.S. 319,
329-32, 96 S.Ct. 893, 900-01, 47 L.Ed.2d 18 ). The focus,
therefore, is whether Dr. Gellman raises a colorable
constitutional challenge collateral to his claim of entitlement
to confer subject matter jurisdiction over the action before he
has exhausted his administrative remedies.
Since the defendant has provided Dr. Gellman with additional
notice of the specific statutory provision under which the
Secretary seeks to suspend his Medicare participation, then his
original procedural due process claim, namely, that he was not
given prior notice of the specific provision upon which his
termination was based, no longer exists. The only remaining
constitutional challenge Dr. Gellman raises is whether
terminating his participation in the Medicare and Medicaid
programs under these circumstances without first having a
pre-termination hearing violates his due process rights under
the Fifth and Fourteenth Amendments.
In Patchogue Nursing Center v. Bowen, 797 F.2d 1137 (2d Cir.
1986), cert. denied, 479 U.S. 1030, 107 S.Ct. 873, 93 L.Ed.2d
828 (1987), the Second Circuit noted that there may be a
"property interest" in a medical provider's continued
participation in such programs. However, since Patchogue
Nursing Center, the Second Circuit raised serious doubt about
the validity of that statement three years later in Plaza
Health Laboratories, Inc. v. Perales, 878 F.2d 577, 582 (2d
Cir. 1989). Although the statements in both cases are
considered dicta, the court in Plaza Health, supra, clearly
stated "that a provider does not have a property interest in
continued participation in the program" (878 F.2d at p. 582).
Thus, although the Second Circuit has not been squarely
presented with the issue, the strong suggestion in Plaza
Health indicates, in this Court's view, that no such property
right in fact exists.
This Court also finds it significant that the Second Circuit
affirmed, albeit without an opinion, Medecorp Laboratories,
Inc. v. Perales, 89 Civ. 7320 (JFK), slip op., 1990 WL 55703
(S.D.N.Y. Apr. 24, 1990), which expressly held that there was
no such property interest in light of the Second Circuit's
suggestion in Plaza Health. Furthermore, the district courts
in this Circuit in cases decided subsequent to Plaza Health,
supra, have repeatedly held that a medical provider does not
have a protectible "property interest" in the continued
participation of Medicaid or Medicare programs (see, e.g.,
Senape v. Constantino, 740 F. Supp. 249, 257 [S.D.N.Y. 1990]
[Tenney, J.]; Baker v. Sullivan, No. 90-CV-647, slip op.,
1990 WL 179634 [N.D.N.Y. Nov. 16, 1990] [McCurn, Ch. J.];
Medecorp Laboratories, Inc. v. Perales, 89 Civ. 7320, slip
op., 1990 WL 55703 [S.D.N.Y. Apr. 24, 1990] [Keenan, J.],
aff'd sub nom. Fort Washington Clinical Laboratory v.
Perales, 909 F.2d 1473 [2d Cir. 1990]; Rockland Medilabs,
Inc. v. Perales, 719 F. Supp. 1191 [S.D.N.Y. 1989] [Goettel,
J.]), which is also in accord with New York state decisions on
this issue (see, e.g., Barata v. Perales, 157 A.D.2d 623,
550 N.Y.S.2d 642 [1st Dep't 1990]; Bora v. New York State
Dep't of Soc. Servs., 152 A.D.2d 10, 547 N.Y.S.2d 956 [3d
Dep't 1989]; Bezar v. New York State Dep't of Soc. Servs.,
151 A.D.2d 44, 546 N.Y.S.2d 195 [3d Dep't 1989]; Tobon v. New
York State Dep't of Soc. Servs., 142 Misc.2d 310, 537 N.Y.S.2d
428 [Sup.Ct. Albany County 1989]; cf. Kare, Ltd. v. O'Rourke,
751 F. Supp. 1154 [S.D.N.Y. 1990] [Goettel, J.] [motion to
preliminarily enjoin County of Westchester from terminating
without cause contract with plaintiff to provide personal care
services to Medicaid patients denied, since no "property
interest" in continued participation in such programs];
Schaubman v. Blum, 49 N.Y.2d 375, 380, 402 N.E.2d 1133, 1135,
426 N.Y. So.2d 230, 233  [in action involving permanent
disqualification of a registered pharmacist from participation
in Medicaid program, court stated that there was "no vested
right to continued participation in the program; rather, such
participation is a privilege which may, in proper
circumstances, be revoked"]; Schwartzberg v. Whalen,
66 A.D.2d 881, 881-82, 411 N.Y. So.2d 667, 669 [2d Dep't 1978]
[right to continued participation as Medicaid provider does not
attach to a nursing home, and therefore state may refuse to
renew participation agreement without a hearing]).
In light of the recent clear expression in Plaza Health,
supra, the Second Circuit's affirmance of Medecorp, supra,
as well as the other recent federal and state court decisions
that have addressed this issue, this Court is of the view that
no property interest exists in a medical provider's continued
participation in Medicare and similar state programs to afford
protection under the Fifth and Fourteenth Amendments.
Accordingly, since Dr. Gellman has failed to exhaust his
available administrative remedies and has not raised any
colorable constitutional challenges, the Court lacks subject
matter jurisdiction over this action at this time and,
accordingly, the motion for a preliminary injunction is denied.
Since Dr. Gellman has not yet exhausted his available
administrative remedies and no colorable constitutional claim
is presented, the Court lacks subject matter jurisdiction over
the action at this time. Accordingly, the motion of the
plaintiff for a preliminary injunction is denied and, pursuant
to Fed.R.Civ.P. 12(h)(3), the action is dismissed for lack of
subject matter jurisdiction.
Pursuant to Fed.R.Civ.P. 52(a), this opinion and order
constitutes the Court's findings of fact and conclusions of