Heritage Manor, Inc. v. Department of Social Services, Docket No. 186619

• Decision Date: 06 September 1996
• Docket Number: Docket No. 186619
• Parties: HERITAGE MANOR, INC., Plaintiff-Appellant, v. DEPARTMENT OF SOCIAL SERVICES, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 388

554 N.W.2d 388

218 Mich.App. 608

HERITAGE MANOR, INC., Plaintiff-Appellant, v. DEPARTMENT OF SOCIAL SERVICES, Defendant-Appellee.

Docket No. 186619.

Court of Appeals of Michigan.

Submitted July 9, 1996, at Lansing.

Decided Sept. 6, 1996, at 9:05 a.m.

Released for Publication Oct. 25, 1996.

David Lebenbom, P.C. by Andrew R. Rothman, Troy, for plaintiff.

Frank J. Kelley, Attorney General, Thomas L. Casey, Solicitor General, and Richard T. O'Neill, Assistant Attorney General, for defendant.

Before NEFF, P.J., and FITZGERALD and C.A. NELSON, ^* JJ.

NEFF, Presiding Judge.

Plaintiff appeals as of right from the order dismissing its action for superintending control and declaratory relief. Plaintiff, a corporation operating a state licensed nursing home that participates in Medicaid, sought to avoid a civil fine, asserting that the penalty was invalid because it was not supported by state legislation or a properly promulgated administrative rule. The fine was based on a bulletin that defendant published in compliance with a federal court order in another case. We reverse and remand for entry of judgment in favor of plaintiff.

I

For a proper understanding of this case, certain underlying facts must be explained. In 1987, Congress enacted the Nursing Home Reform Law as part of the Omnibus Budget Reconciliation Act of 1987, which revised the regulation of nursing homes that receive Medicaid. 42 U.S.C. § 1396r(h)(2)(A).

Defendant failed to promulgate rules prescribed by the federal law, and a federal lawsuit was instituted to force it to do so. Ultimately, Federal District Court Judge Benjamin Gibson determined that the defendant was not diligently attempting to comply with the federal law and ordered it to propose a schedule demonstrating when full compliance would occur. He further ordered the implementation of the sanctions required by the federal law, directing a binding time line in initiating and implementing the required changes. In paragraph four of the order the following time line is provided:

a. Not later than March 15, 1994, [the state defendants] shall disseminate to affected providers and client groups a Notice of Proposed Policy accompanied by a draft policy bulletin which incorporates the state defendants' intended procedures for implementing the sanctions required by [the federal law].

* * * * * * c. [The state defendants] shall issue a final policy bulletin providing for the sanctions required by [the federal law] not later than June 1, 1994.

d. The effective date of the policy shall be not later than July 1, 1994.

The final paragraph of the order provides:

6. At such time as the United States Department of Health and Human Services publishes final regulations pertaining to nursing home enforcement, the state defendants shall pursue the implementation of nursing home enforcement provisions through enactment of state statute or through the promulgation of rules.

Pursuant to the federal court order, defendant promulgated the policy. On July 1, 1994, after the policy became effective, defendant examined plaintiff's nursing home, found violations and imposed a $10,800 fine. Plaintiff initially appealed pursuant to the appeals process in the bulletin issued by defendant, but ultimately ceased that process, claiming that defendant had no jurisdiction to hear the appeal because the bulletin was not properly promulgated. Plaintiff then filed this action in the circuit court for superintending control and for a judgment declaring the bulletin illegal and the penalties contained therein unenforceable. The circuit court ultimately dismissed plaintiff's complaint, holding that defendant was not required to follow state law in promulgating the enforcement rules in question because Judge Gibson's order excused them from that duty, and if the order did not so excuse them, the exact intent of the order was a question that should have been appealed in the federal court action. It is from this order that plaintiff appeals as of right.

II

We first examine whether this case is properly before us. We conclude that it is. Contrary to defendant's argument, a declaratory action in the circuit court was permissible pursuant to MCR 2.605. See, e.g., BCS Life Ins. Co. v. Comm'r of Ins. 152 Mich.App. 360, 367-368, 393 N.W.2d 636 (1986).

III

We find that the trial court erred in its ruling. We conclude that Judge Gibson's order provides that once defendant issues a formal policy, and after the Department of Health and Human Services publishes final regulations, defendant is to "pursue the implementation of nursing home enforcement provisions through enactment of state statute or through the promulgation of rules." (Emphasis added.) Such a holding is in keeping with the federal law that requires such penalties to be established "by law (whether statute or regulation)." 42 U.S.C. § 1396r(h)(2)(A).

Accordingly, we agree with plaintiff that this case does not...