Government fails to show suit is moot

Where the government removed a healthcare provider from a program because it was not complying with government guidelines, but then reinstated the provider after it filed suit, the provider’s suit was not moot. The provider still sought a declaratory judgment that the government’s interpretation was wrong, and its continued participation in the program made it subject to audit.

Background

Genesis Healthcare Inc. is a healthcare provider participating in the federal “340B Program,” which is designed to provide drugs to qualified persons at discounted prices. After the Health Resources and Services Administration or HRSA, conducted an audit of Genesis Healthcare, it removed Genesis Healthcare from the 340B program.

Genesis Healthcare then filed this suit, seeking a declaratory judgment that it did not violate the requirements of the program and injunctive relief requiring HRSA to reinstate it into the program and to retract any notifications that HRSA had provided to manufacturers stating that Genesis Healthcare was ineligible under the program.

HRSA then vacated its order removing Genesis Healthcare from the 340B program, but it continued to insist that Genesis Healthcare comply with its requirement of serving only eligible “patients,” as it had defined that term. Genesis Healthcare then filed an amended complaint to take into account HRSA’s action.

In response to the amended complaint, HRSA (1) notified Genesis Healthcare by letter that it “ha[d] voided” all audit findings and that Genesis Healthcare “ha[d] no further obligations or responsibilities in regard to the audit” and (2) filed a motion to dismiss Genesis Healthcare’s action as moot based on the letter. The district court granted HRSA’s motion, finding that the action was moot.

Mootness

The letter voiding its audit findings said nothing about how Genesis Healthcare was to continue to conduct itself under the 340B program, nor did it vacate or even address its 1996 guidelines definition of “patient” that formed the basis for its enforcement action and Genesis Healthcare’s lawsuit. Yet, Genesis Healthcare remains subject to audit and, as the record stands, would still have to comply with HRSA’s 1996 guidelines.

Moreover, Genesis Healthcare has alleged that to comply with HRSA’s definition of “patient,” it would have to “dismantle and reconfigure” itself, to its severe disadvantage. The real issue thus remains, even after HRSA’s final letter, whether the 1996 guidelines are inconsistent with the statute, as Genesis Healthcare has alleged and with respect to which Genesis Healthcare sought a declaratory judgment.

The court concludes that the ongoing disagreement over how “patient” is to be defined in the context of the 340B program is a definite and concrete controversy touching the ongoing legal relations between HRSA, as regulator of the 340B program, and Genesis Healthcare, as a participant in the program. This is not a case where Genesis Healthcare is asking the federal courts for an advisory opinion on what the law is based on hypothetical facts, nor is it simply an effort to satisfy a curiosity on who is right in a now defunct controversy. HRSA has taken action against Genesis Healthcare based, in part, on its definition of “patient,” and it can easily do so again in connection with its ongoing duty to audit Genesis Healthcare’s compliance with the requirements of the 340B program, as

Genesis Healthcare remains a program participant.

Thus, even though HRSA did void its audit findings, it has failed to carry its “heavy burden” of establishing “that the allegedly wrongful behavior could not reasonably be expected to recur.” The district court thus erred in dismissing this action as moot.

APA

The district court stated that “because there is no final agency action, there is no case or controversy,” leaving it only with the option to give “an impermissible advisory opinion.” The discussion confusingly mixes mootness and final agency action, proceeding from the assumption that the presence of a final agency action is necessary to maintain a live controversy. This assumption, however, is mistaken.

Genesis Healthcare satisfied the requirements of the Administrative Procedure Act or APA, when it commenced this action against HRSA. The disposition of this appeal — which concerns the consequences of HRSA’s voluntary withdrawal of its order during the course of the litigation — is governed by principles of mootness, not by the APA’s final agency action requirement.

Reversed and remanded.

Genesis Healthcare Inc. v. Becerra, Case No. 20-1701, July 1, 2022. 4th Cir. (Niemeyer), from DSC at Florence (Harwell). James Mixon Griffin for Appellant. Brian James Springer for Appellees. VLW 022-2-162. 18 pp.