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Anderson v. Ghaly

United States Court of Appeals, Ninth Circuit

July 18, 2019

Bruce Anderson; John Wilson; Robert Austin; California Advocates for Nursing Home Reform, Plaintiffs-Appellants,
v.
Mark Ghaly, Secretary of California Department of Health and Human Services, Defendant-Appellee.

          Argued and Submitted September 6, 2018 San Francisco, California

          Appeal from the United States District Court No. 3:15-cv-05120-HSG for the Northern District of California Haywood S. Gilliam, Jr., District Judge, Presiding

          Matthew Borden (argued) and J. Noah Hagey, Braunhagey & Borden LLP, for Plaintiffs-Appellants.

          Hadara R. Stanton (argued), Deputy Attorney General; Xavier Becerra, Attorney General of California; Julie Weng-Gutierrez, Senior Assistant Attorney General; Susan M. Carson, Supervising Deputy Attorney General; Office of the California Attorney General, for Defendant-Appellee.

          Mark E. Reagan, Scott J. Kiepen, and Katrina A. Pagonis, Hooper, Lundy & Bookman, P.C., San Francisco, California, for Amicus Curiae California Association of Health Facilities.

          Before: Marsha S. Berzon and Michelle T. Friedland, Circuit Judges, and Kathleen Cardone, [*] District Judge.

         SUMMARY [**]

         Civil Rights

         The panel vacated the district court's dismissal with prejudice of a complaint in an action brought pursuant to 42 U.S.C. § 1983 by three former nursing home residents and a nonprofit advocacy group who alleged that the residents were subjected to unlawful "dumping," the practice of sending a nursing home resident to a hospital for medical or mental health treatment but refusing to readmit the resident after discharge from the hospital.

         Using the appeals process established by the State of California, all three residents challenged their respective nursing homes' refusal to readmit them after their hospitalizations, and all three prevailed. None, however, was readmitted. The residents brought a § 1983 action, asserting that provisions in the Federal Nursing Home Reform Amendments, which imposed various requirements for nursing homes to be reimbursed under Medicaid, created a private statutory right enforceable under § 1983. The district court determined that the residents had no private right enforceable through § 1983 and dismissed the complaint.

         Applying the factors set forth in Blessing v. Freestone, 520 U.S. 329, 340 (1997), the panel held that the Federal Nursing Home Reform Amendments' provisions requiring states to "provide for a fair mechanism . . . for hearing appeals on transfers and discharges of residents," 42 U.S.C. § 1396r(e)(3), created a statutory right enforceable under § 1983. This right includes within it the opportunity for redress after a favorable appeal decision. The panel further concluded, however, that the residents' complaint did not plausibly allege a violation of that right because the complaint did not allege that the State provided no mechanism whatsoever to enforce each administrative appeal order regarding nursing home transfers and discharges. The panel held that the residents' failure to state a claim could perhaps be cured by repleading. The panel therefore vacated the district court's dismissal with prejudice of the complaint and remanded for further proceedings consistent with its opinion.

         Concurring in the judgment, Judge Friedland stated that she agreed that the residents' complaint did not state a claim even assuming that the Federal Nursing Home Reform Amendments created an individual enforceable right to redress of an appeal decision under 42 U.S.C. § 1983. Accordingly, Judge Friedland stated that she would not have reached the more difficult questions addressed in the panel's opinion.

          OPINION

          Berzon, Circuit Judge:

         The Medicaid Act requires that states participating in Medicaid "provide for a fair mechanism . . . for hearing appeals on transfers and discharges of residents" of nursing homes covered by Medicaid. 42 U.S.C. § 1396r(e)(3). The question in this case is whether nursing home residents may challenge a state's violation of this statutory requirement under 42 U.S.C. § 1983. We hold that they may.

         I

         A

         Medicaid is a cooperative federal-state program designed to "enabl[e] each State . . . to furnish . . . medical assistance on behalf of families with dependent children and of aged, blind, or disabled individuals, whose income and resources are insufficient to meet the costs of necessary medical services." 42 U.S.C. § 1396-1; see also Wilder v. Va. Hosp. Ass'n, 496 U.S. 498, 502 (1990). Among those services is treatment at "nursing facilities," also known as nursing homes or long-term care facilities. See 42 U.S.C. § 1396d(a).

         In 1982, at the urging of Congress, the Health Care Financing Administration, a subdivision of the Department of Health and Human Services and the predecessor to the Centers for Medicare and Medicaid Services (CMS), commissioned a study to review the regulation of nursing homes participating in Medicare and Medicaid. H.R. Rep. No. 100-391, pt. 1, at 451-52 (1987), as reprinted in 1987 U.S.C.C.A.N. 2313-1, 2313-271 to -272. The ensuing study, published in 1986, concluded that "[t]here is broad consensus that government regulation of nursing homes, as it now functions, is not satisfactory because it allows too many marginal or substandard nursing homes to continue in operation." Comm. on Nursing Home Regulation, Inst. of Med., Improving the Quality of Care in Nursing Homes 2 (1986). To address these issues, the study offered a series of recommendations to strengthen the regulation of nursing homes. See id. at 25.

         In response, Congress amended the Medicare and Medicaid Acts "to improve the quality of care for Medicaid-eligible nursing home residents," adopting many of the study's recommendations. H.R. Rep. No. 100-391, pt. 1, at 452. Enacted as part of the Omnibus Budget Reconciliation Act of 1987, Pub L. No. 100-203, 101 Stat. 1330, the resulting amendments, the Federal Nursing Home Reform Amendments (FNHRA), imposed various requirements as a prerequisite for nursing homes to be reimbursed under Medicaid. Those requirements are codified at 42 U.S.C. § 1396r. See Grammer v. John J. Kane Reg'l Ctrs.-Glen Hazel, 570 F.3d 520, 523 n.1 (3d Cir. 2009).[1]

         Among FNHRA's provisions are standards for residents' "[t]ransfer and discharge rights." 42 U.S.C. § 1396r(c)(2). Those standards require that "[a] nursing facility must permit each resident to remain in the facility and must not transfer or discharge the resident from the facility unless" one of six circumstances applies:

(i) the transfer or discharge is necessary to meet the resident's welfare and the resident's welfare cannot be met in the facility;
(ii) the transfer or discharge is appropriate because the resident's health has improved sufficiently so the resident no longer needs the services provided by the facility;
(iii) the safety of individuals in the facility is endangered;
(iv) the health of individuals in the facility would otherwise be endangered;
(v) the resident has failed, after reasonable and appropriate notice, to pay . . . for a stay at the facility; or
(vi) the facility ceases to operate.

Id. § 1396r(c)(2)(A).

         If a nursing home does seek to transfer or discharge a resident, it must first provide notice to the resident. Id. § 1396r(c)(2)(B). That notice must, among other required information, inform the resident of her "right to appeal the transfer or discharge under the State process established under subsection (e)(3) of this section." Id. § 1396r(c)(2)(B)(iii)(I).

         Subsection (e)(3), in turn, sets forth specific requirements for the state-established appeals process:

The State, for transfers and discharges from nursing facilities effected on or after October 1, 1989, must provide for a fair mechanism, meeting the guidelines established under subsection (f)(3) of this section, for hearing appeals on transfers and discharges of residents of such facilities; but the failure of the Secretary to establish such guidelines under such subsection shall not relieve any State of its responsibility under this paragraph.

Id. § 1396r(e)(3).

         The phrase "guidelines established under subsection (f)(3)" refers to another FNHRA provision instructing the Secretary of Health and Human Services to "establish guidelines for minimum standards which State appeals processes under subsection (e)(3) . . . must meet." Id. § 1396r(f)(3). In accordance with that instruction, CMS has promulgated a series of regulations fleshing out the requirements for the state-established appeals process. See 42 C.F.R. §§ 431.200-.246. Those regulations provide that the state "must grant an opportunity for a hearing to . . . [a]ny resident who requests it because he or she believes a skilled nursing facility or nursing facility has erroneously determined that he or she must be transferred or discharged." Id. § 431.220(a). The regulations also set forth procedural requirements for the hearing itself. See id. ยงยง 431.240-.243. And, ultimately, if "[t]he hearing decision is ...


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