Estate of Smith v. Heckler

• Decision Date: 29 October 1984
• Docket Number: 83-1466,Nos. 83-1442,s. 83-1442
• Citation: 747 F.2d 583
• Parties: , 7 Soc.Sec.Rep.Ser. 198, Medicare&Medicaid Gu 34,198 In re the ESTATE OF Michael Patrick SMITH, et al., Plaintiffs-Appellants, and People of the State of Colorado, et al., Plaintiffs in Intervention-Appellants, v. Margaret HECKLER, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 583

747 F.2d 583

53 USLW 2237, 7 Soc.Sec.Rep.Ser. 198,

Medicare&Medicaid Gu 34,198

In re the ESTATE OF Michael Patrick SMITH, et al Plaintiffs-Appellants and People of the State of Colorado, et al., Plaintiffs in Intervention-Appellants, v. Margaret HECKLER, et al., Defendants-Appellees.

Nos. 83-1442, 83-1466.

United States Court of Appeals Tenth Circuit.

Oct. 29, 1984.

Kathleen Mullens, Legal Aid Society of Metropolitan Denver, Denver, Colo. (and John Robert Holland, Denver, Colo., for Medicaid Nursing Home, appellants, with Kristie A. Hansen, Denver, Colo., for State appellants, on the brief).

Shalom Brilliant, Civil Div., Dept. of Justice, Washington, D.C. (with J. Paul McGrath, Asst. Atty. Gen., Washington, D.C., Robert N. Miller, U.S. Atty., Denver, Colo., and Lewis K. Wise, Civil Div., Dept. of Justice, Washington, D.C., on the brief) for defendants-appellees.

Glenn W. Merrick, Denver, Colo., for amicus Concerned Friends and Relatives of Nursing Home Residents.

Michael C. Parks and Sylvia Drew Ivie, Nat. Health Law Program, Los Angeles, Cal., and Toby S. Edelman and Patricia B. Nemore, Nat. Senior Citizens Law Center, Washington, D.C., for the amicus Nat. Citizens Coalition for Nursing Home Reform and Gray Panthers of Denver.

Before SETH, and McKAY, Circuit Judges, and CAMPOS, District Judge. ^*

McKAY, Circuit Judge.

Plaintiffs, seeking relief under 42 U.S.C. Sec. 1983 (1982), brought this class action on behalf of medicaid recipients residing in nursing homes in Colorado. They alleged that the Secretary of Health and Human Services (Secretary) has a statutory duty under Title XIX of the Social Security Act, 42 U.S.C. Secs. 1396-1396n (1982), commonly known as the Medicaid Act, to develop and implement a system of nursing home review and enforcement designed to ensure that medicaid recipients residing in medicaid certified nursing homes actually receive the optimal medical and psychosocial care that they are entitled to under the Act. The plaintiffs contended that the enforcement system developed by the Secretary is "facility oriented," not "patient oriented" and thereby fails to meet the statutory mandate. The district court found that although a patient care or "patient oriented" management system is feasible, the Secretary does not have a duty to introduce and require the use of such a system. In re Estate of Smith v. O'Halloran, 557 F.Supp. 289, 295 (D.Colo.1983).

The primary issue on appeal is whether the trial court erred in finding that the Secretary does not have a statutory duty to develop and implement a system of nursing home review and enforcement which focuses on and ensures high quality patient care. If the Secretary has such a duty we must determine whether the enforcement mechanism promulgated by the Secretary satisfies that duty.

BACKGROUND

The factual background of this complex lawsuit is fully discussed in the district court's opinion. In re Estate of Smith v. O'Halloran, 557 F.Supp. 289 (D.Colo.1983). Briefly, plaintiffs instituted the lawsuit in an effort to improve the deplorable conditions at many nursing homes. They presented evidence of the lack of adequate medical care and of the widespread knowledge that care is inadequate. Indeed, the district court concluded that care and life in some nursing homes is so bad that the homes "could be characterized as orphanages for the aged." Id. at 293.

When the suit was filed in 1975, plaintiffs named Colorado nursing home operators, and federal and Colorado state governmental agencies and officials as defendants. In 1978, plaintiffs and the Colorado governmental defendants stipulated to dismissal, without prejudice, of the claims against the Colorado governmental defendants. Pursuant to the stipulation, the state defendants filed a complaint in intervention on behalf of the people of Colorado against the federal defendants. After extensive pretrial discovery and preparation, the district court ordered separate trials for the federal defendant and the nursing home operators. In 1980, the plaintiffs, plaintiffs in intervention and federal defendant jointly moved for a stay, based on proposed regulatory revisions, which the plaintiffs and plaintiffs in intervention believed would accomplish the ultimate objective of the litigation. However, the proposed changes in the regulations were never adopted and the lawsuit against the federal defendant proceeded to trial in June 1982. The trial court denied relief. This appeal is from that judgment.

THE MEDICAID ACT

An understanding of the Medicaid Act (the Act) is essential to understand plaintiffs' contentions. The purpose of the Act is to enable the federal government to assist states in providing medical assistance to "aged, blind or disabled individuals, whose income and resources are insufficient to meet the costs of necessary medical services, and ... rehabilitation and other services to help such ... individuals to attain or retain capabilities for independence or self care." 42 U.S.C. Sec. 1396 (1982). To receive funding, a state must submit to the Secretary and have approved by the Secretary a plan for medical assistance which meets the requirements of 42 U.S.C. Sec. 1396a(a).

The district court detailed the requirements of section 1396a(a). See 557 F.Supp. at 294-95. A state seeking plan approval The state plan must also provide "for a regular program of medical review ... of each patient's need for skilled nursing facility care ..., a written plan of care, and, where applicable, a plan of rehabilitation prior to admission to a skilled nursing facility...." ¹ Id. Sec. 1396a(a)(26)(A). Further, the plan must provide for periodic inspections by medical review teams of:

                must establish or designate a single state agency to administer or supervise administration of the state plan, 42 U.S.C. Sec. 1396a(a)(5), and must provide reports and information as the Secretary may require.  Id. Sec. 1396a(a)(6).  Further, the state agency is responsible for establishing and maintaining health standards for institutions where the recipients of the medical assistance under the plan receive care or services.  Id. Sec. 1396a(a)(9)(A).  The plan must include descriptions of the standards and methods the state will use to assure that medical or remedial care services provided to the recipients "are of high quality."    Id. Sec. 1396a(a)(22)(D)
                

(i) the care being provided in such nursing facilities ... to persons receiving assistance under the State plan; (ii) with respect to each of the patients receiving such care, the adequacy of the services available in particular nursing facilities ... to meet the current health needs and promote the maximum physical well-being of patients receiving care in such facilities ...; (iii) the necessity and desirability of continued placement of such patients in such nursing facilities ...; and (iv) the feasibility of meeting their health care needs through alternative institutional or noninstitutional services.

Id. Sec. 1396a(a)(26)(B). ²

The state plan must provide that any skilled nursing facility receiving payment comply with 42 U.S.C. Sec. 1395x(j), which defines "skilled nursing facility" and sets out standards for approval under a state plan. Id. Sec. 1396a(a)(28). The key requirement for purposes of this lawsuit is that a skilled nursing facility must meet "such other conditions relating to the health and safety of individuals who are furnished services in such institution or relating to the physical facilities thereof as the Secretary may find necessary...." Id. Sec. 1395x(j)(15).

The state plan must provide for the appropriate state agency to establish a plan, consistent with regulations prescribed by the Secretary, for professional health personnel to review the appropriateness and quality of care and services furnished to Medicaid recipients. Id. Sec. 1396a(a)(33)(A). The appropriate state agency must determine on an ongoing basis whether participating institutions meet the requirements for continued participation in the Medicaid program. Id. Sec. 1396a(a)(33)(B). While the state has the initial responsibility for determining whether institutions are meeting the conditions of participation, section 1396a(a)(33)(B) gives the Secretary the authority to "look behind" the state's determination of facility compliance, and make an independent and binding determination of whether institutions meet the requirements for participation in the state Medicaid plan. Thus, the state is responsible for conducting the review of facilities to determine whether they comply with the state plan. In conducting the review, however, the states must use federal standards, forms, methods and procedures. 42 C.F.R. Sec. 431.610(f)(1) (1983). From 1972 through 1980, Congress required the Secretary to reimburse the states for all necessary costs of inspecting long-term care facilities. See 42 U.S.C. Sec. 1396b(a)(4) (1976). In 1980, Congress reduced the rate of reimbursement to seventy-five percent of such costs. 42 U.S.C. Sec. 1396b(a)(2) (1982).

The Secretary "shall approve" any plan which fulfills the requirements of section

1396a(a). Id. Sec. 1396a(b). Once the state plan is approved, the Secretary reimburses the states according to percentages set out in section 1396b. If the state fails to show that it has an effective program of "utilization control" as defined in section 1396b(g)(3), the Secretary must reduce the percentage of reimbursement to the state. If after approving a state plan, the Secretary determines that the plan has been so changed that it no longer complies with section 1396a(a), or that it complies on paper but not in its actual administration, the Secretary is required to terminate payments to the state, effectively disapproving the plan. Id. Sec. 1396c.

IMPLEMENTING REGULATIONS

Congress gave the Secretary a general mandate to promulgate rules and regulations necessary to the efficient administration of the functions with which the...