Catanzano by Catanzano v. Dowling

• Decision Date: 13 July 1995
• Docket Number: No. 1190,D,1190
• Citation: 60 F.3d 113
• Parties: , Medicare & Medicaid Guide P 43,464 Michelle CATANZANO, by her parent and next friend, Sam CATANZANO, on behalf of herself and all persons similarly situated, Plaintiff-Appellee, v. Michael DOWLING, as Commissioner of the New York State Department of Health, Defendant-Appellant, Richard Schauseil, as Acting Director of the Monroe County Department of Social Services; and Andrew Doniger, M.D., as Director of the Monroe County Department of Health, Defendants-Third-Party-Plaintiffs, Michael Dowling, as Commissioner of the New York State Department of Social Services; and Mark Chassin, as Commissioner of the New York State Department of Health, Third-Party-Defendants. ocket 94-7873.
• Court: U.S. Court of Appeals — Second Circuit

Page 113

60 F.3d 113

48 Soc.Sec.Rep.Ser. 376, Medicare & Medicaid Guide

P 43,464

Michelle CATANZANO, by her parent and next friend, Sam

CATANZANO, on behalf of herself and all persons

similarly situated, Plaintiff-Appellee, v. Michael DOWLING, as Commissioner of the New York State

Department of Health, Defendant-Appellant,

Richard Schauseil, as Acting Director of the Monroe County

Department of Social Services; and Andrew Doniger, M.D., as

Director of the Monroe County Department of Health,

Defendants-Third-Party-Plaintiffs,

Michael Dowling, as Commissioner of the New York State

Department of Social Services; and Mark Chassin,

as Commissioner of the New York State

Department of Health,

Third-Party-Defendants.

No. 1190, Docket 94-7873.

United States Court of Appeals, Second Circuit.

Argued Dec. 19, 1994.

Decided July 13, 1995.

Patrick Barnett-Mulligan, Asst. Atty. Gen., Albany, NY (G. Oliver Koppell, Atty. Gen. of the State of NY, Peter H. Schiff, Deputy Sol. Gen., Nancy A. Spiegel, Asst. Atty. Gen., of counsel) for defendant-appellant.

Bryan D. Hetherington, Rochester, NY (LeAnna Hart Gipson, Kenneth S. Shiotani, Elizabeth L. Schneider, Ellen Yacknin, Monroe County Legal Assistance Corp., of counsel) for plaintiff-appellee.

Before: MINER, ALTIMARI, and CALABRESI, Circuit Judges.

MINER, Circuit Judge:

Defendant-appellant Michael Dowling, in his capacity as Commissioner of the New York State Department of Health, appeals from an order entered on July 28, 1994 in the United States District Court for the Western District of New York (Larimer, J.) denying a motion to amend a preliminary injunction previously granted in favor of plaintiffs-appellees Michelle Catanzano and other applicants for home health care services under the Medicaid program, 42 U.S.C. Secs. 1396 et seq. In its decision and order, the district court determined that decisions made by certified home health agencies to deny or reduce the amount of home health care prescribed for Medicaid recipients are "state actions" that trigger the recipients' federal fair hearing rights. For the following reasons, we affirm the order of the district court.

BACKGROUND

This appeal arises out of a challenge to the system by which New York State ("the State") provides home health care benefits under the Medicaid program. The Medicaid program, through which the federal and state governments provide health care and services to needy individuals, is subsidized by the federal government and is administered by the states. See Caldwell v. Blum, 621 F.2d 491, 494 (2d Cir.1980), cert. denied, 452 U.S. 909, 101 S.Ct. 3039, 69 L.Ed.2d 412 (1981). A state participating in Medicaid must offer home health care services as part of the program. See 42 U.S.C. Sec. 1396d(a)(7). These services can include assistance in dressing, bathing and preparation of meals, as well as the provision of medication and other services. Home health care is prescribed, as are other forms of medical treatment, by the patient's treating physician, and In New York, home health care services under Medicaid must be provided by certified home health agencies ("CHHAs"). See N.Y.Pub.Health Law Secs. 3602(3), 3614(1). CHHAs are home care providers that are licensed and regulated by the State, and, pursuant to federal regulations, CHHAs must comply with state as well as federal law. See 42 C.F.R. Sec. 484.12(a). Although a patient's treating physician prescribes the form or amount of required home health services, CHHAs employ their own professional medical staff of nurses who, pursuant to state law, make their own determinations as to the medical necessity and appropriateness of home health services.

the prescription can range from brief daily visits to around-the-clock monitoring by an aide or nurse.

In the summer of 1989, the named plaintiff, Michelle Catanzano, who was disabled at the time and receiving prescribed twenty-four-hour-a-day home health care, was hospitalized. Upon her discharge from the hospital, the CHHA responsible for her care unilaterally decided to reduce her home health care services from twenty-four-hour-a-day to twelve-hour-a-day care. At that time, state law required that if a determination of a CHHA conflicted with that of a patient's treating physician, the local Department of Social Services ("local DSS") referred the matter to an independent physician (or "local professional director"), who made the final determination as to the necessary amount of care. In the case of a referral to a local professional director, the patient was entitled to receive notice that a determination was to be made, a hearing on the matter, and aid-continuing rights as required by federal and state law ("fair hearing rights"). These rights, which have their roots in Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970), are mandated by federal regulation whenever the state agency responsible for the administration of Medicaid decides to reduce, deny, or suspend benefits. See 42 C.F.R. Secs. 431.200, 431.205.

Although Ms. Catanzano's treating physician disagreed with the CHHA's determination, the determination was implemented without being referred to a local professional director, and Ms. Catanzano was not accorded her fair hearing rights. As a result, she filed this action in 1989 to enjoin the Monroe County DSS, the agency with responsibility for Ms. Catanzano's Medicaid services, from making any reductions in home health care without according her a fair hearing. The district court granted the injunction in part, finding that, under state law, every dispute between a CHHA and a treating physician was to be resolved by a local professional director, and that state law required the provision of fair hearing rights in all such cases. The district court also held that the denial of services without fair hearing rights deprived Ms. Catanzano of her federal constitutional right to due process. The district court's order was affirmed by this court in March of 1990.

In 1991 and 1992, the State amended its laws governing home health care and created a four-step system that a CHHA must use to determine whether and how much home health care should be provided to Medicaid applicants and recipients. The new law, known generally as the "fiscal assessment amendments," was implemented through a statute, Sec. 367-j of the Social Services Law, a regulation, 18 N.Y.C.R.R. Sec. 505.23, and an administrative directive, 92-ADM-50. Under the new scheme, a CHHA may not provide home health services unless such services are prescribed by the applicant's physician and a "fiscal assessment" is made by the CHHA staff. While some form of assessment by the CHHA is to be performed in every case where home health care is prescribed, the assessments differ, depending upon the length of the prescribed period of home care.

If the prescribed period of care is expected to last for no more than 60 days, the CHHA's determination consists of only two steps. First, the CHHA determines whether and how much home health care is medically necessary and whether that care, if any, can be provided safely in the home. See N.Y.Soc.Serv.Law Sec. 367-j(2)(a)(i) (the "Medical Necessity and Safety" step). Second, the CHHA determines whether there are ways to deliver the care that are less expensive than home care, taking into account Where it is expected that prescribed home care will exceed 60 days, the amendments require the CHHA to make two additional determinations. In these cases, a third step requires the CHHA to determine whether the cost of home health care will exceed 90 percent of the cost of institutionalization. See id. Sec. 367-j(1)(a) (the "Excess Cost Step"). If so, the patient will be referred to an institutional health care provider unless the CHHA determines--in step four--that the patient meets one of the exceptions to mandatory institutionalization. See id. at Sec. 367-j(1)(e) (the "Exceptions" step). If the local DSS disagrees with a determination made by a CHHA pursuant to steps three or four, the matter is referred to a local professional director, who makes a final determination. This four-step process applies to all applicants for home health care services, as well as to individuals already receiving Medicaid, whose entitlement to benefits is reassessed periodically. Significantly, under the present scheme, fair hearing rights are accorded only where the DSS disagrees with the determination made by a CHHA, the matter is referred to a local professional director, and the local professional director decides to deny or reduce the amount of care prescribed by the treating physician.

various alternatives identified in the statute. See id. Sec. 367-j(2)(a)(ii)-(vii) (the "Economies" step). If the CHHA determines, as a result of its inquiries under steps one or two, that the patient should receive no home health care, that decision is final and is implemented without administrative review or a hearing.

In April of 1993, after the amendments were enacted, the district court granted a motion made by plaintiff to amend her complaint to bring a class action. The class consisted of "recipients of and applicants for home health care in New York State who have been or will in the future be deprived of their federal constitutional rights through the operation of the 1991 and 1992 Amendments to the laws and regulations governing Medicaid-funded home health care in New York State." The plaintiffs later moved for a statewide temporary restraining order and preliminary injunction to enjoin the State from enforcing section 367-j until fair hearing rights were provided to all Medicaid applicants or recipients whose care was adversely affected under the new laws. The district court granted the preliminary injunction on February 16, 1994. The court enjoined all home health care suspensions, reductions, or discontinuances "as a result of conducting a fiscal assessment or otherwise, without first providing for notice,...