Nursing Homes May Challenge Medicare and Medicaid Regulations

A federal appellate recently ruled that nursing homes have standing to challenge Medicare and Medicaid regulations specifying minimum health and safety standards. This decision conflicts with a 1997 decision of another federal appellate court, which held that nursing homes do not have standing to appeal such regulations, but must instead pursue administrative remedies as provided by the Department of Health and Human Services ("HHS"). This conflict raises the possibility that the Supreme Court may eventually resolve this issue. The latest case, however, provides a legal framework for a facility to challenge the constitutionality of Medicare and Medicaid regulations.

An Illinois association of nursing homes sued federal and state officials challenging the federal nursing home survey, certification, and enforcement regulations. Under the statute, federal and state officials can impose a broad range of remedies for health and safety violations found in a survey of a facility. While the regulations provide for administrative appeals to challenge the finding of a problem, the home cannot challenge the choice of enforcement remedy. Moreover, no evidentiary hearing or appeal is available for certain enforcement actions, such revocation of a facility's right to conduct a nurse-aide training program. According to the Illinois association, after the new regulations were adopted, 70% of nursing homes were found to be deficient (vs. 6% previously). Regulators attributed the difference to tougher standards; the homes attributed the difference to vagueness of rules leaving inspection teams with too much discretion.

The homes asked the court to declare that the regulations violate due process because they are too vague and do not provide adequate opportunity to be heard. They also argued that the State Operations Manual has the effect of a regulation and had not been adopted by proper procedures. The court dismissed the case, holding that federal courts had no jurisdiction over cases seeking redress for sanctions imposed for violations of the Medicare Act, the Medicaid Act, the APA, and the United States Constitution.

The appellate court reversed, holding that a Medicaid provider can challenge a Medicaid regulation before enforcement. The court held that the limits on review related only to calculations of reimbursement by fiscal intermediaries. The appellate court ruled that the homes should have the opportunity to specifically show how the regulations affected an individual home.

The appellate court found the contention that the regulations are void for vagueness to be premature. More specific facts were needed to show that the nursing home's substantive constitutional rights were in jeopardy. The Court also deferred ruling claims that the manual and accompanying survey forms are not authorized by the legislation.

For more information, contact Ferrier Stillman at 410-752-9731.