Michigan Ass'n of Homes & Services for the Aging, Inc. v. Shalala

127 F.3d 496, 1997 U.S. App. LEXIS 27285, 1997 WL 611820
Court of Appeals for the Sixth Circuit·Decided October 7, 1997·No. No. 96-1833·Published·Cited by 13 cases

Opinion

MERRITT, Circuit Judge.

An association of Michigan nursing homes brings a facial challenge to Medicare and Medicaid regulations and the defendants’ policies and practices regarding nursing home examinations, certification, administration and enforcement and appeal. These regulations and policies implement the Omnibus Budget Reconciliation Act of 1987, which sought to reform the nursing home industry in response to class action litigation and studies critical of the industry.

In a comprehensive opinion, District Judge Edmunds dismissed the suit for lack of subject matter jurisdiction, concluding that the Association must exhaust its administrative remedies before pursuing an action in federal court. The Medicare Act, 42 U.S.C. §§ 1395ce(h)(l) and 1395Ü, incorporates by reference the judicial review provisions for old age and disability claims under the Social Security Act. These provisions, 42 U.S.C. §§ 405(g) and (h), allow for judicial review “after any final decision of the Secretary” and disallow judicial review “except as herein provided.” Section 405(h) then expressly disallows judicial review of administrative action under the general provisions supporting federal question jurisdiction found in 28 U.S.C. §§ 1331 and 1346. The courts have read Section 405(g) to require presentment of claims to the Secretary and exhaustion of administrative remedies, as in social security cases. The question before us is whether we should make an exception to the presentment and exhaustion of remedies requirements for this systemic, frontal attack on the regulatory scheme developed under the 1987 Act.

The plaintiff nursing home group argues that its case comes within the exception to the exhaustion requirement that the Supreme Court recognized in Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667, 106 S.Ct. 2133, 90 L.Ed.2d 623 (1986), and asserts that this exception includes general, systemic challenges to administrative rules, procedures, practices and customs used by the agency to evaluate nursing home care. It claims that it may bypass the restrictions on judicial review found in § 405(g) and (h) by attacking such agency policies generally.

We agree with the Court below that the plaintiff nursing homes must comply with the federal statutes requiring exhaustion of administrative remedies before coming to federal court.

I.

The Michigan Association of Homes and Services for the Aging’s members provide nursing home services under both the Medicare and Medicaid programs. The federal government funds the Medicare program, and administers it through the Department of Health and Human Services. The federal and state governments jointly fund the Medicaid program. Providers who participate in each program must comply with statutory [498] requirements and with federal regulations implementing them.

The regulations require regular provider surveys or inspections which are the subject of the current litigation. State teams perform certification surveys for both Medicare and Medicaid. The federal Health Care Financing Administration sets guidelines and trains the state survey teams, and can perform its own “look behind” surveys. Should these surveys reveal deficiencies, either federal or state agencies may seek and implement remedies.

The same set of federal regulations governs certification under both Medicare and Medicaid. There are twelve different outcomes available under the survey regulations. The least serious three represent a finding of “substantial compliance” and result in no sanction. The other nine represent a finding of noncompliance and may result in sanctions. The most serious six outcomes represent a finding of “substandard quality. of care” and carry a more severe mix of remedies. Once regulators determine that a facility is not in substantial compliance, federal and state agencies have some discretion in imposing and choosing remedies.

In carrying out the goal of Congress’ to prevent backsliding nursing homes from continuing to operate within a cycle of noncompliance and then temporary compliance through short term plans of correction, the regulations authorize a broad range of remedies. Agencies may (1) disclose a finding of substandard quality of care to referring phy-. sicians and licensing boards, (2) place a ban on nurse aid training and competency evaluations, (3) direct a plan of correction, (4) initiate state monitoring through frequent inspections, (5) impose temporary agency management, (6) place a ban on payment for new admissions, (7) impose civil money penalties, and (8) terminate a provider from the Medicare and Medicaid programs. See 42 C.F.R. §§ 488.325(g),(h), 483.151, 488.406; see also 42 U.S.C. § 1395i-3(h)(2)(B).

These remedies are not available until a finding of noncompliance is made and they are appealable administratively. The imposition of state monitoring, which is not appeal-able administratively, is an exception. 42 C.F.R. § 498.3(b)(12). The loss of approval for a nurse aide training program would seem to be another exception, but under 42 C.F.R. § 483.151 would apparently only flow from the imposition of other remedies, which may be appealed. The regulations allow an administrative appeal of the initial determination of whether a provider is in substantial compliance; they do not allow an administrative appeal of the regulators’ choice of remedy-

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Michigan Ass'n of Homes & Services for the Aging, Inc. v. Shalala, 127 F.3d 496, 1997 U.S. App. LEXIS 27285, 1997 WL 611820 (6th Cir. 1997).

127 F.3d 496 (Michigan Ass'n of Homes & Services for the Aging, Inc. v. Shalala) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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