Illinois Council on Long Term Care Inc. v. Shalala

143 F.3d 1072, 1998 U.S. App. LEXIS 9313, 1998 WL 228063
CourtCourt of Appeals for the Seventh Circuit
DecidedMay 8, 1998
DocketNo. 97-2315
StatusPublished
Cited by16 cases

This text of 143 F.3d 1072 (Illinois Council on Long Term Care Inc. v. Shalala) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Illinois Council on Long Term Care Inc. v. Shalala, 143 F.3d 1072, 1998 U.S. App. LEXIS 9313, 1998 WL 228063 (7th Cir. 1998).

Opinion

EASTERBROOK, Circuit Judge.

Nursing homes that want reimbursement under the Medicare or Medicaid programs must comply with regulations specifying minimum health and safety standards. Statutory criteria were enacted in 1987, see 42 U.S.C. § 1395i — 3(a) to (d) (Medicare), § 1396r(a) to (d) (Medicaid), but implementing regulations were not issued until 1994, and did not take effect until July 1,1995. 59 Fed.Reg. 56,116 (1994). An association of nursing homes, the Illinois Council on Long Term Care, tells us that before these new regulations were adopted about 6% of its members had been directed to change their operations in order to meet applicable standards, while more recent inspections have found 70% of nursing homes to be deficient. Regulators attribute this to tougher substantive rules that nursing homes have yet to satisfy; the nursing homes attribute the jump to vague rules that leave too much discretion in the hands of inspection teams.

The Council filed this suit on behalf of its members and asked the court to declare that the new regulations violate the due process clause of the fifth amendment because they are too vague and do not provide adequate opportunities to be heard before financial penalties take effect. The Council also argued that a manual used by inspection teams has the effect of a regulation and therefore could be adopted only after notice-and-comment rulemaking under § 3 of the Administrative Procedure Act, 5 U.S.C. § 553. The Secretary of Health and Human Services, the principal defendant in the case, asked the district court to distinguish between the Medicare and Medicaid aspects of the suit. According to the Secretary, objections to implementation of the Medicare Act are barred by 42 U.S.C. § 1395Ü, incorporating 42 U.S.C. § 405(h), which makes an application for benefits (and review of the Secretary’s final decision), the sole route to judicial review. None of the Council’s members has obtained a final decision, and § 1395Ü forbids jumping the gun on legal issues that will be relevant to the administrative decision, the Secretary contended. See Heckler v. Ringer, 466 U.S. 602, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984). Although most of the Council’s theories are based on the Constitution and the APA rather than any incompatibility between the regulations and the Medicare Act, Weinberger v. Salfi, 422 U.S. 749, 95 S.Ct. 2457, 45 L.Ed.2d 522 (1975), holds that a claim is subject to the review-channeling provision in § 405(h) when the end in view is receipt of federal payments. Claims under the Medicaid Act should be handled otherwise, the Secretary submitted, because that statute does not incorporate § 405(h) and lacks any comparable restriction. A challenge to Medicaid regulations therefore is proper under 28 U.S.C. § 1331 and 5 U.S.C. § 702 — but, the Secretary added, should be dismissed in large measure as unripe. Only the Medicaid providers’ APA challenge to the handbook is mete for decision, the Secretary concluded. The district judge accepted the first part of this argument — that § 1395Ü postpones review of claims by Medicare providers — but extended it to the entire case, stating: “The issues are the same, the only difference being that the first three counts arise under the Medicaid Act whereas the latter three arise under the Medicare Act. By reaching the merits on the Medicaid claims, this court would effectively resolve the Medicare issues as well. This attempt to back-door the jurisdictional bar of the Medicare Act is impermissible.” 1997 WL 158347 at *3, 1997 U.S. Dist. Lexis 3982 at *9-10. After the Council filed its notice of appeal, the sixth circuit reached the same conclusion in an essentially identical ease. Michigan Association of Homes & Services for the Aging, Inc. v. Shalala, 127 F.3d 496 (6th Cir.1997).

Section 1395Ü makes § 405(h) applicable to Medicare cases “to the same extent as” it applies to Social Security disability cases. Section 405(h) provides in part: “No findings of fact or decision of the [Secretary] shall be reviewed by any person, tribunal, or governmental agency except as herein provided. No action against the United States, the [Secretary], or any officer or employee thereof shall be brought under § 1331 or 1346 of Title 28 to recover on any claim arising under this subchapter.” The word “herein” refers to the rest of § 405, and in [1075]*1075particular to 8 405(g), which permits judicial review only after a final decision by the Secretary. Ringer and Salfi treat this language as channeling all claims to benefits through the administrative forum, no matter what legal theory underlies the claim. But Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667, 678-81, 106 S.Ct. 2133, 2140-41, 90 L.Ed.2d 623 (1986), holds that § 1395Ü does not foreclose Medicare providers’ anticipatory challenge to implementing regulations. Bypassing the question whether § 405(h) would prevent such a challenge to a regulation implementing the Social Security disability program, the Court held that § 1395Ü addresses only “amount determinations” (476 U.S. at 680,106 S.Ct. at 2141) — that is, calculations of reimbursements by the fiscal intermediaries that implement the Medicare program — and that “matters which Congress did not delegate to private carriers, such as challenges to the validity of the Secretary’s instructions and regulations, are cognizable in courts of law.” Ibid, (emphasis in original).

According to the Secretary, Michigan Academy ceased to have any precedential force a few months after it was issued. The Secretary reads Michigan Academy as creating an exception to § 1395Ü for claims that otherwise could not reach the courts. Shortly after the Court decided Michigan Academy, Congress amended the Medicare Act to give providers an avenue to judicial review of amount determinations, 42 U.S.C. § 1395ff(b)(l), thus overturning the result of United States v. Erika, Inc., 456 U.S. 201, 102 S.Ct. 1650, 72 L.Ed.2d 12 (1982). Once that occurred, the argument concludes, the basis of Michigan Academy disappeared, and with it the Court’s holding. The district court, and the sixth circuit in Michigan Association, 127 F.3d at 500-01, accepted this line of argument. But if something important happened in 1986, the point has been lost on the Supreme Court, which in 1991 reiterated its conclusion that § 1395Ü does not affect regulatory challenges that are detached from any request for reimbursement. McNary v. Haitian Refugee Center, Inc., 498 U.S. 479, 497-98, 111 S.Ct. 888, 898-99, 112 L.Ed.2d 1005 (1991).

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Bluebook (online)
143 F.3d 1072, 1998 U.S. App. LEXIS 9313, 1998 WL 228063, Counsel Stack Legal Research, https://law.counselstack.com/opinion/illinois-council-on-long-term-care-inc-v-shalala-ca7-1998.