Town Court Nursing Center, Inc. v. Beal

Decision Date29 September 1978
Docket NumberNos. 77-2221 and 77-2444,No. 77-2444,No. 77-2221,77-2221,77-2444,s. 77-2221 and 77-2444
Citation586 F.2d 266
Parties., Appellant in, and Emma Cooper, Mary Crawford, Hazel Kemp, Arnold L. Phillips, Delphine Taddei, Nancy Truitt, Individually and on behalf of the class of patients eligible for Pennsylvania Medical Assistance Program benefits at Town Court Nursing Center, Inc. v. Frank S. BEAL, Individually and in his capacity as Secretary of Public Welfare of the Commonwealth of Pennsylvania and Joseph A. Califano, Jr., Individually and in his capacity as Secretary of the United States Department of Health, Education, and Welfare. Appeal of Joseph A. CALIFANO, Jr., Secretary of the United States Department of Health, Education, and Welfare, in United States Court of Appeals, Third Circuit
CourtU.S. Court of Appeals — Third Circuit

Before SEITZ, Chief Judge, and GIBBONS and GARTH, Circuit Judges.

Resubmitted In Banc July 10, 1978.

Before SEITZ, Chief Judge, and ALDISERT, ADAMS, GIBBONS, ROSENN, HUNTER, WEIS, GARTH and HIGGINBOTHAM, Circuit Judges.

OPINION OF THE COURT

SEITZ, Chief Judge.

One of the plaintiffs below, Town Court Nursing Center, Inc. ("Town Court") appeals from an order of the district court denying plaintiffs' motion to extend portions of a preliminary injunction entered during an earlier phase of the litigation. The effect of the order from which Town Court appeals was to remove those portions of the injunction that had prevented defendants below, Secretary of Health, Education, and Welfare Joseph A. Califano, Jr., ("Secretary Califano") and Pennsylvania's Secretary of Public Welfare Frank S. Beal ("Secretary Beal"), from removing certain patients from Town Court and from prohibiting The district court did grant certain relief presumably both to Town Court and to its patients. Secretary Califano cross-appealed therefrom (No. 77-2444). To the extent his cross-appeal involved the rights of the patients it is governed by Judge Aldisert's announced judgment in his opinion filed today. To the extent such cross-appeal involves rights of Town Court, it is governed by this opinion.

the placement of new patients at Town Court.

Neither party challenges our jurisdiction over these appeals, though each asserts a different jurisdictional basis. Town Court argues that, since no further proceedings remain before the district court, the order of the district court was a "final decision" within the meaning of 28 U.S.C. § 1291 (1970). Defendants, however, assert that the order below was an interlocutory order modifying an injunction within the meaning of 28 U.S.C. § 1292(a)(1) (1970). Though the order of the district court is ambiguously phrased, we believe it properly is to be characterized as an order modifying a preliminary injunction. Jurisdiction in this court is therefore proper under 28 U.S.C. § 1292(a)(1) (1970).

I.

Town Court is a nursing home that provides in-patient care for chronically ill or infirm patients. It has a capacity of 198 patients, and is located in Philadelphia. During the times relevant to this case, the patients at Town Court averaged 75 years of age. Over 90 percent of the patients were poor enough to be eligible to have Pennsylvania's program of medical assistance to the indigent pay for the costs of staying at Town Court.

Town Court challenged the procedures by which Secretary Califano and Secretary Beal refused to renew, or otherwise terminated, 1 Town Court's eligibility to be reimbursed in accordance with federal and state medical assistance programs for the cost of caring for indigent patients eligible for assistance under those programs. Specifically, Town Court alleges that it was a violation of its procedural due process rights under the fifth and fourteenth amendments to the Constitution for Secretary Califano and Secretary Beal to end its eligibility without providing it a full evidentiary hearing at the administrative level and for the district court to deny full judicial review Prior to such termination.

Central to Town Court's due process argument is its contention that existing administrative procedures governing termination do not adequately protect its interests in continuing participation in the programs at issue. Accordingly, we first examine the statutory and regulatory scheme involved in this case, and then turn to an examination of the events that led to this appeal.

A. Statutory and Regulatory Background

This case involves two public medical assistance programs. One is Federal Health Insurance for the Aged and Disabled, commonly called "Medicare," set forth in Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395, Et seq. (1970 & Supp. V 1975). In Part A, Medicare provides for hospital insurance benefits for qualified beneficiaries. It is totally federally-funded and administered by the Secretary of Health, Education, and Welfare, though important administrative tasks are performed for the Secretary by designated state agencies.

The other program here at issue is Pennsylvania's Medical Assistance Program, commonly called "Medicaid." This program is administered by Pennsylvania's Secretary Both Medicare and Medicaid are designed to provide assistance to needy persons. Both programs also provide for reimbursement for the type of services provided by in-patient nursing facilities such as Town Court. 42 U.S.C. §§ 1395f, 1395x(j) (Supp. V 1975); Pa.Stat.Ann. tit. 62, § 443.1(3) (Supp. 1978-79) (Purdon). Under the two programs, however, reimbursement is not made to the individual beneficiary. Rather, payment is made directly to the provider of the services as reimbursement for the cost of serving eligible patients. 42 U.S.C. §§ 1395d, 1395f (1970 & Supp. V 1975); Pa.Stat.Ann. tit. 62, § 443.1(3) (Supp. 1978-79) (Purdon).

of Public Welfare, and is set forth at Pa.Stat.Ann. tit. 62, §§ 441.1 Et seq. (Supp. 1978-79) (Purdon). It benefits individuals whose income and other resources fall below prescribed levels by reimbursing providers for a variety of medical services, including in-patient care in a qualified nursing home, rendered beneficiaries. Medicaid is funded jointly by Pennsylvania and the federal government, with the federal government reimbursing Pennsylvania for a certain percentage of the costs of the state program. To be eligible for such reimbursement, Pennsylvania's Medicaid program must comply with the requirements set out in the federal Medicaid statute, Title XIX of the Social Security Act, 42 U.S.C. §§ 1396 Et seq. (1970 & Supp. V 1975), and with the regulations promulgated thereunder.

To qualify for reimbursement under Medicare and Medicaid, nursing homes such as Town Court must execute a provider agreement. Under the Medicare program, this agreement is executed between the nursing home and HEW; under Medicaid, it is between the nursing home and the single state agency responsible for the administration of the Medicaid program, which in Pennsylvania is the Department of Public Welfare.

Before a provider agreement may be executed, however, the nursing home must be certified as a "skilled nursing facility" under the applicable statutes and regulations, and the facility must maintain its certification throughout the life of the agreement. The Medicare and Medicaid programs are set up so that the determination that a nursing home is a "skilled nursing facility" eligible to participate under the Medicare program also controls whether that facility is eligible to participate in the Medicaid program. 42 U.S.C.A. § 1396i(a)(1) (Supp.1978). Thus any state participating in the Medicaid program as does Pennsylvania must provide in its Medicaid plan that any nursing home receiving payments must satisfy the requirements for a "skilled nursing facility" as established under Medicare. 42 U.S.C. § 1396a(a)(28) (Supp. V 1975). Accordingly, Pennsylvania is required to terminate any Medicaid provider agreement with a nursing home upon notification that HEW has not renewed, or has terminated, that nursing home's Medicare provider agreement. 45 C.F.R. § 249.33(a)(9) (1976). 2

Moreover, Pennsylvania's Medicaid statute independently says that reimbursement may be made only to nursing facilities "qualified to participate under Title XIX of the Federal Social Security Act (Medicaid)." Pa.Stat.Ann. tit. 62, § 443.1(3) (Supp. 1978-79) (Purdon). Thus, under both federal and state statutes, participation in Pennsylvania's Medicaid scheme is contingent upon a facility such as Town Court being certified as a "skilled nursing facility" under federal Medicare provisions.

The Secretary of HEW is responsible for determining whether a facility qualifies as a skilled nursing facility. To carry out this certification responsibility, he is required to contract with an appropriate state agency to have that agency survey institutions seeking certification as skilled nursing facilities. 42 U.S.C. § 1395aa(a) (Supp. V 1975). In Pennsylvania, the State Department of Since the law limits the terms of skilled nursing facility provider agreements to twelve months, 42 U.S.C. § 1395cc(a)(1) (Supp. V 1975), surveys to evaluate compliance are conducted at least once a year. Moreover, the Secretary may terminate an agreement...

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