Preliminary Injunction; Irreparable Harm; Standard of Review
CKHS, Inc. v. Prospect Med. Hldgs, Inc., 2023 WL 3221623 (Pa. Cmwlth.) (unreported), allocatur granted Dec. 13, 2023, appeal dockets 117 & 118 MAP 2023
This case arises from a preliminary injunction issued by the Court of Common Pleas of Delaware County (trial court) that temporarily enjoined Prospect Medical Holdings, Inc. (Appellants) from consummating the transition of a Delaware County Hospital into a behavioral health facility. Commonwealth Court summarized the background leading up to the trial court’s issuance of the preliminary injunction as follows:
The central focus of this matter is Delaware County Memorial Hospital (County Hospital), an acute care facility located in Drexel Hill, Pennsylvania. On January 8, 2016, Crozer-Keystone Health System (as CKHS was known at that point) agreed to sell the vast majority of its holdings, including County Hospital and a multitude of other assets, to Appellants. See Reproduced Record (R.R.) at 719a-820a. This sale was memorialized through an asset purchase agreement (APA), which, of particular import to this case, contains a clause barring Appellants from closing any of the purchased hospitals prior to July 1, 2026, i.e., 10 years after the APA’s “Effective Date,” without the express approval of both a local advisory board and the Foundation. See id. at 753a-54a, 794a-96a.
On September 21, 2022, Appellants announced that they would be converting County Hospital into a “behavioral health hospital” and contemporaneously notified both Delaware County Council and County Hospital’s employees, in writing, that all of those employees would be fired in short order. See id. at 524a-25a, 589a-92a, 883a-91a. Despite taking these steps, and apparently having some manner of pre-announcement communication with Appellees’ counsel, Appellants did not seek or secure the Foundation’s assent before moving forward with its plans. See id. at 643a, 659a, 664a.
In response, Appellees filed a two-count breach of contract suit in Common Pleas on September 28, 2022, through which it sought a permanent injunction that would prevent Appellants from taking any steps to close County Hospital or cease offering acute care services at that location, as well as a Petition for Emergency Preliminary Injunctive Relief. Id. at 14a-230a. On October 3, 2022, Appellees filed their First Amended Complaint, which was substantially similar to the original iteration, as well as the Amended Petition. Shortly thereafter, the Commonwealth of Pennsylvania, Office of the Attorney General (OAG), joined both the First Amended Complaint and Amended Petition in support of Appellees, and Appellants responded in opposition to the Amended Petition. Id. at 461a-91a.
Common Pleas convened a hearing regarding the Amended Petition on October 7, 2022, at which the parties presented several hours’ worth of evidence and oral argument, and then took the matter under advisement at the hearing’s close. See id. at 503a-717a.
Slip op. at 2-4. At the hearing, CKHS offered the testimony of its sole witness, Melissa Lyon, Delaware County Health Department’s (County Health Department) Public Health Director. Ms. Lyons “testified regarding how deleterious it would be to the local community if Appellants ceased offering acute care services at County Hospital,” as summarized by Commonwealth Court:
[Appellees’ Attorney:] Is access and availability to emergency room services one of the things the [County Health] Department is concerned about?
[Lyon:] That is one aspect that we always take into consideration is how access and communities access services, correct.
[Appellees’ Attorney:] There’s been a plan—[Appellants’] plan introduced into evidence. Have you seen that plan? It’s a transformation plan [for County Hospital].
[Lyon:] I have not seen that plan in detail. I am aware of that plan and had access to components of it by reviewing a website.
[Appellees’ Attorney:] If there is a closure of acute care services at [County Hospital], what would be the effect, if any, on public health?
[Lyon:] In my public health experience over the last 22 years, whenever an access is removed from a community, it almost always, if not always, negatively impacts those health outcomes for the community. Accessing care, whether it’s emergency or primary care, communities become very committed to a system that’s near them or that they’re familiar with. They build trust over years. You’ll hear people say, oh, my child was delivered at that hospital and my other — you know, my nephew’s child or so on and so forth. They become very committed to those systems, and when they’re removed, it becomes difficult for them to navigate and — to different systems. They also — if you can imagine if you’re sick, it’s always just hard to navigate a healthcare system when you’re ill in general, so areas just begin to raise themselves over time once an access point is removed from a community.
….
[Appellees’ Attorney:] Ms. Lyon, do you know whether the closure of acute care services would affect a population with Medicaid or socioeconomic disadvantaged or an elderly population? …
[Lyon:] The answer to that question would be that from my previous public health experience, those populations that are served typically would be impacted even more dramatically because of the barriers that are presented to them, meaning transportation barriers could be an issue, having other health systems accept certain insurance plans. Their ability to have free time in their schedules to access care in different locations could be challenging, so, historically, they will just suffer disproportionately.
….
[Appellees’ Attorney:] Ms. Lyon, are you aware as to whether [Appellants] will be closing [County Hospital’s] emergency room?
[Lyon:] I have read that the emergency room will be closing.
[Appellees’ Attorney:] Are you aware that [Appellants have] proposed [to replace the emergency room with] an EMS facility?
[Lyon:] I am not familiar with that level of detail.
[Appellees’ Attorney:] If there were a hospital a few miles away and another hospital in Chester, [Pennsylvania,] would that have any effect from a public health perspective on the care of the immediate community?
….
[Lyon:] The immediate community would likely have access to those facilities, and I fully believe that there’s an opportunity for those individuals in the community to access that care. However, their likelihood of doing so could be varying across the population. For example, there’s a level of trust in navigating. We all know that health systems … can be challenging, especially if your health literacy does not meet your expectations on even understanding what your health condition may be. It becomes challenging. It’s not just like going to the next Walmart, right? So if you go to one Walmart, you go to another Walmart, all Walmarts basically look the same and are designed the same way. You go from one health system to another health system, it’s not necessarily that easy to navigate. So I believe that there would be challenges for those populations that then could impact their access to needing immediate care and potentially can exacerbate individual … health concerns or health afflictions or diagnoses that they may have, whether diabetes or asthma or cardiovascular. The list can go on. So it could result in a delay of care.
[Appellees’ Attorney:] If it results in a delay, would there be any possibility of greater harm to the patient?
[Lyon:] Any[ ]time that the delay of care happens, it’s always a risk of the individual to worsen and have those complications result in needing to have more emergency access — emergency room access. It could also lead them to be incapacitated. It would really depend on the individual, but it almost always results in worsening care, not improved care.
….
[Appellants’ Attorney:] … Did you conduct any studies in advance of coming today of the impacts you’re talking about, the hypothetical impacts you’re talking about?
[Lyon:] No, I have not conducted any studies for Delaware County.
[Appellants’ Attorney:] Did you collect any data from Appellants or Mercy Fitzgerald[, a nearby hospital that Appellants do not own,] in order to sort of play out any of the scenarios that you’ve been talking about to concretize them?
[Lyon:] No, I have not collected any data.
[Appellants’ Attorney:] Do you have a set of written conclusions to provide the Court on any topic?
[Lyon:] I do not have any written conclusions.
[Appellants’ Attorney:] You said that you do not have familiarity with the transition plan, correct? You knew of parts of it?
[Lyon:] That is correct.
….
[Appellants’ Attorney:] There are a number of other hospitals in Delaware County and the surrounding area beyond [those owned by Appellants], am I right?
[Lyon:] There are other hospitals in Delaware County, correct.
[Appellants’ Attorney:] And did you model out what the impact would be if [Appellants] is able to, upon completing its renovation [of County Hospital], offer enhanced services for the population?
[Lyon:] So I appreciate the question about modeling out. It’s not the work that I would be doing, but no, I did not. Thank you.
[Appellants’ Attorney:] Okay. Did you conduct any analysis examining the future state of [County Hospital] or what it will provide?
[Lyon:] So, again, that would not necessarily be the work that would fall into a public health department to model out, but no, I did not.
[Appellants’ Attorney:] So you don’t have any testimony for the Court today one way or the other about the ultimate impact of the renovation [of County Hospital] by [Appellants] on the public health, right?
[Lyon:] That would be correct.
Slip op. at 17-20. CKHS further argued that Section 14.21 of the APA declares irreparable harm to exist in the event contractual terms are breached. The trial court granted CKHS’s request for preliminary injunction, which:
… directed Appellants to “immediately suspend any actions materially altering the present operation of … County … Hospital, including but not limited to the acute care services and other services provided by … County … Hospital as a licensed hospital providing general hospital services to the public, pending further order of [Common Pleas.]” Id. Common Pleas also instructed Appellants to “maintain all services presently offered at … County … Hospital[, in addition to County Hospital’s] present operations[,]” as well as to refrain from “directly or indirectly engag[ing] in any activity that would in any way materially and adversely affect such services or operations[.]” Id. at 917a. Finally, Common Pleas ruled that Appellees were not required to post a bond to secure the preliminary injunction, because Section 14.21 of the APA relieved them of the need to do so under the circumstances. Id.
Slip op. at 4-5. Prospect sought to dissolve the preliminary injunction, which the trial court denied. Prospect appealed, arguing among other issues that Common Pleas improperly found that a preliminary injunction was necessary to prevent irreparable harm, as the clause declaring a breach of the APA’s provisions to ipso facto constitute irreparable harm is unenforceable, and because the record evidence was too speculative to support a finding of irreparable harm.
Commonwealth Court held that CKHS failed to present sufficient evidence of irreparable harm to support the reasonableness of the trial court’s preliminary injunction. Commonwealth Court determined that Section 14.21 of the APA did not, by itself, establish irreparable harm, reasoning that “contractual provisions like Section 14.21 of the APA may, at most, constitute persuasive guidance regarding the existence of irreparable harm, but cannot ultimately strip a court of its discretionary authority to determine whether such harm will actually occur in the absence of a preliminary injunction.” Slip op. at 15. Regarding the testimony of CKHS’s representative, the court concluded that:
This testimony is markedly devoid of the concrete evidence necessary to legally justify Common Pleas’ irreparable harm determination. To the contrary, all of Lyon’s statements, insofar as they relate to how the local community will be affected if acute care services are no longer offered at County Hospital, are couched in terms that are hypothetical, generalized, and speculative, rather than ones buttressed by specific data or information.
Slip. op. at 20. Thus, Commonwealth Court reversed the trial court’s grant of preliminary injunction.
In a concurring and dissenting opinion, Judge McCullough explained that while she otherwise agreed with the Majority’s conclusion, she disagreed that CKHS failed to present sufficient evidence of irreparable harm to support a preliminary injunction based on the Majority’s application of “a standard of review more exacting than our precedents permit.” Slip op. at PAM-2. Judge McCullough characterized the evidence presented in support of irreparable harm as follows:
Although Prospect Medical Holdings, Inc. and Prospect Crozer, LLC (Prospect) will continue certain acute care service lines at Delaware County Memorial Hospital (County Hospital), the emergency room will be shuttered and the remaining service lines will not together constitute an acute care facility. Although individuals could seek emergent care elsewhere in this health system, the trial court reasonably could have concluded that, at the very least, patients will not have access to the same services at the same locations and will have to re-orient to new, unfamiliar facilities.
Ms. Lyon, who has 22 years of public health experience, said at least this much, and her testimony was not so hypothetical or generalized that it could not reasonably have supported the trial court’s limited injunction maintaining County Hospital’s status quo. Ms. Lyon testified to her department’s involvement in conducting community and population healthcare needs assessments, which include the assessment of emergent care needs. She testified that changes like those proposed by Prospect always, or almost always, negatively impact health outcomes in a community because patients must adjust away from familiar, regularly-used facilities to others that are less familiar and less able to provide logistical services for elderly or socioeconomically disadvantaged patients. Further, the lack of familiarity and need for adjustment to another facility or system could result in a delay of care.
Slip op. at PAM-3 – PAM-4 (internal record citations omitted). Judge McCullough concluded:
Although data specific to this community and health system might be helpful and even necessary to obtaining a permanent injunction, the very purpose of preliminary injunctive relief permits harm evidence that is less precise. Indeed, irreparable and irreversible harm is, by its nature, speculative. See Anchel v. Shea, 762 A.2d 346, 351 (Pa. Super. 2000) (“An injury is regarded as ‘irreparable’ if it will cause damage which can be estimated only by conjecture and not by an accurate pecuniary standard.”) (citation and quotations omitted).
I accordingly would proceed to consider the other relevant preliminary injunction factors to determine whether the trial court had “any reasonable grounds” to maintain County Hospital’s status quo pending final decision on Appellees’ claims. To the extent that the Majority prematurely stopped short of conducting that analysis, I respectfully dissent.
Slip op. at PAM-4 – PAM-5.
The Pennsylvania Supreme Court will consider the following issue:
Whether, in an issue of statewide importance, the Commonwealth Court erred when it disregarded this Court’s express direction to apply a “highly deferential” standard of review and, substituting its judgment for that of the trial court, overturned an emergency preliminary injunction-entered on a record not yet fully developed-on the grounds that there was insufficient evidence of irreparable harm, where the harm to the local community when Appellees closed their only local hospital was stipulated in the parties’ contract, proven by the testimony of record, and palpable on the face of the record?
For more information, contact Kevin McKeon or Dennis Whitaker.