447 U.S. 773 (1980), 78-1318, O'Bannon v. Town Court Nursing Center

Docket Nº:No. 78-1318
Citation:447 U.S. 773, 100 S.Ct. 2467, 65 L.Ed.2d 506
Party Name:O'Bannon v. Town Court Nursing Center
Case Date:June 23, 1980
Court:United States Supreme Court
 
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Page 773

447 U.S. 773 (1980)

100 S.Ct. 2467, 65 L.Ed.2d 506

O'Bannon

v.

Town Court Nursing Center

No. 78-1318

United States Supreme Court

June 23, 1980

Argued November 6, 1979

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Syllabus

After the Department of Health, Education, and Welfare (HEW) and the Pennsylvania Department of Public Welfare (DPW) had revoked the authority of Town Court Nursing Center (a nursing home) to provide elderly residents of the home with nursing care at government expense under Medicare and Medicaid provider agreements, the home and several of its patients (respondents) brought suit in Federal District Court, alleging, inter alia, that the patients were entitled to an evidentiary hearing on the merits of the revocation before the Medicaid payments were discontinued. The District Court ultimately rejected this argument. On appeal, the Court of Appeals reversed, holding that the patients had a constitutionally protected property interest in continued residence at the nursing home that gave them a right to a pretermination hearing on whether the home's Medicare and Medicaid provider agreements should be renewed. In so holding, the court relied on three Medicaid provisions: 42 U.S.C. § 1396a(a)(23) (1976 ed., Supp. II), which gives Medicaid recipients the right to obtain services from any qualified facility, a federal regulation prohibiting certified facilities from transferring or discharging a patient except for specified reasons, and a federal regulation prohibiting the reduction or termination of financial assistance without a hearing.

Held: The patients have no interest in receiving benefits for care in a particular facility that entitles them, as a matter of constitutional law, to a hearing before HEW and DPW can decertify that facility. Whatever legal rights the patients may have against the nursing home for failing to maintain its status as a qualified nursing home, the enforcement by HEW and DPW of their valid regulations did not directly affect the patients' legal rights or deprive them of any constitutionally protected interest in life, liberty, or property. Pp. 784-790.

(a) Whether viewed singly or in combination, the Medicaid provisions relied upon by the Court of Appeals do not confer a right to continued residence in the nursing home of one's choice. While 42 U.S.C. § 1396a(a)(23) (1976 ed., Supp. II), by implication, gives recipients the right to be free from government interference with the choice to remain in a

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home that continues to be qualified, it does not confer a right to continue to receive benefits for care in a home that has been decertified. Although the regulations in question protect patients by limiting the circumstances under which a home may transfer or discharge a Medicaid recipient, they do not purport to limit the Government's right to make a transfer necessary by decertifying a facility. And, since decertification does not reduce or terminate a patient's financial assistance, but merely requires him to use it for care at a different facility, regulations granting recipients the right to a hearing prior to a reduction in financial benefits are irrelevant. Pp. 785-786.

(b) This case does not involve the withdrawal of direct benefits. Rather, it involves the Government's attempt to confer an indirect benefit on Medicaid patients by imposing and enforcing minimum standards of care on facilities like Town Court. When enforcement of those standards requires decertification of a facility, there may be an immediate, adverse impact on some residents. But that impact, which is an indirect and incidental result of the Government's enforcement action, does not amount to a deprivation of any interest in life, liberty, or property. Pp. 781-789.

586 F.2d 280, reversed and remanded.

STEVENS, J., delivered the opinion of the Court, in which BURGER, C.J., and STEWART, WHITE, POWELL, and REHNQUIST, JJ., joined. BLACKMUN, J., filed an opinion concurring in the judgment, post, p. 790. BRENNAN, J., filed a dissenting opinion, post, p. 805. MARSHALL, J., took no part in the consideration or decision of the case.

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STEVENS, J., lead opinion

MR. JUSTICE STEVENS delivered the opinion of the Court.

The question presented is whether approximately 180 elderly residents of a nursing home operated by Town Court Nursing Center, Inc., have a constitutional right to a hearing before a state or federal agency may revoke the home's authority to provide them with nursing care at government expense. Although we recognize that such a revocation may be harmful to some patients, we hold that they have no constitutional right to participate in the revocation proceedings.

Town Court Nursing Center, Inc. (Town Court), operates a 198-bed nursing home in Philadelphia, Pa. In April, 1976, it was certified by the Department of Health, Education, and Welfare (HEW) as a "skilled nursing facility," thereby becoming eligible to receive payments from HEW and from the Pennsylvania Department of Public Welfare (DPW), for providing nursing care services to aged, disabled, and poor persons in need of medical care. After receiving its certification,1 Town Court entered into formal "provider agreements" with both HEW and DPW. In those agreements, HEW and DPW agreed to reimburse Town Court for a period of one year for care provided to persons eligible for Medicare or Medicaid benefits under the Social Security Act,2 on the condition that Town Court continue to qualify as a skilled nursing facility.

On May 17, 1977, HEW notified Town Court that it

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no longer met the statutory and regulatory standards for skilled nursing facilities and that, consequently, its Medicare provider agreement would not be renewed.3 The HEW notice stated that no payments would be made for services rendered after July 17, 1977, explained how [100 S.Ct. 2471] Town Court might request reconsideration of the decertification decision, and directed it to notify Medicare beneficiaries that payments were being discontinued. Three days later, DPW notified Town Court that its Medicaid provider agreement would also not be renewed.4

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Town Court requested HEW to reconsider its termination decision. While the request was pending, Town Court and six of its Medicaid patients5 filed a complaint in the United States District Court for the Eastern District of Pennsylvania alleging that both the nursing home and the patients were entitled to an evidentiary hearing on the merits of the decertification decision before the Medicaid payments were discontinued. The complaint alleged that termination of the payments would require Town Court to close, and would cause the individual plaintiffs to suffer both a loss of benefits and "immediate and irreparable psychological and physical harm." App. 11a.

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The District Court granted a preliminary injunction against DPW and HEW, requiring payments to be continued for new patients as well as for patients already in the home and prohibiting any patient transfers until HEW acted on Town Court's petition for reconsideration. After HEW denied that petition, the District Court dissolved the injunction and denied the plaintiffs any further relief, except that it required HEW and DPW to pay for services actually provided to patients.

Town Court and the six patients filed separate appeals from the denial of the preliminary injunction, as well as a motion, which was subsequently granted, for reinstatement of the injunction pending appeal. The Secretary of HEW cross-appealed from the portion of the District Court's order requiring payment for services rendered after the effective date of the termination. The Secretary of DPW took no appeal and, though named as an appellee, took no position on the merits.

The United States Court of Appeals for the Third Circuit, sitting en banc, unanimously [100 S.Ct. 2472] held that there was no constitutional defect in the HEW procedures that denied Town Court an evidentiary hearing until after the termination had become effective and the agency had ceased paying benefits.6 The

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Court of Appeals came to a different conclusion, however, with respect to the patients' claim to a constitutional right to a pretermination hearing. Town Court Nursing Center, Inc. v. Beal, 586 F.2d 280 (1978).7

Relying on the reasoning of Klein v. Califano, 586 F.2d 250 (CA3 1978) (en banc), decided the same day, a majority of the court concluded that the patients had a constitutionally protected property interest in continued residence at Town Court that gave them a right to a pretermination hearing. In Klein, the court identified three Medicaid provisions -- a statute giving Medicaid recipients the right to obtain services from any qualified facility,8 a regulation prohibiting certified

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facilities from transferring or discharging a patient except for certain specified reasons,9 and a regulation prohibiting the reduction or termination of [100 S.Ct. 2473] financial assistance without a hearing10 -- which, in its view, created a "legitimate entitlement to continued residency at the home of one's choice absent specific cause for transfer." Id. at 258. It then cited the general due process maxim that whenever a governmental benefit may be withdrawn only for cause, the recipient is entitled to a hearing as to the existence of such cause. See Memphis Light, Gas & Water Division v. Craft, 436 U.S. 1, 11. Finally, it held that, since the inevitable consequence of decertifying a facility is the transfer of all its residents receiving Medicaid benefits, a decision to decertify should be treated as a decision to transfer, thus triggering the patients' right to a hearing on the issue of whether there is adequate cause for the...

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