2nd Circuit: Federal Courts May Hear Case Over Nursing Home Inspection Rule

The Second Circuit is sending a case challenging a Department of Health and Human Services (HHS) rule governing nursing home inspections back to the Southern District of New York, reversing the district court’s determination that it does not have subject-matter jurisdiction.

A group of nursing homes originally filed suit against former HHS Secretary Alex Azar (who has been replaced as defendant by current Secretary Xavier Becerra), arguing under the Medicare and Medicaid Acts that a final HHS rule allowing nursing home inspection teams not to include a registered nurse was unlawful. The district court dismissed the case, claiming that it did not have jurisdiction due to “claim-channeling” and “jurisdiction-stripping” which govern claims brought under the Medicare Act. All but one plaintiff appealed this decision to the Second Circuit.

In the Tuesday opinion, the three-judge circuit panel explained that the appellants all are nursing homes that participate in both Medicare and Medicaid, rendering them “dually participating facilities.” Both the Medicare and Medicaid Acts require nursing homes to have teams that “maintain procedures” to “investigate complaints of violations” of nursing home standards, pursuant to the acts.

In rulemakings, HHS has construed the acts to mean that states may conduct “complaint surveys” after claims of noncompliance — and in 2017, a final HHS rule allowed these survey teams to omit a registered nurse, despite the Medicare and Medicaid Acts’ provision stipulating that surveys “shall be conducted by a multidisciplinary team of professionals (including a registered professional nurse).” Subsequently, more than 30 nursing facilities filed suit against HHS, hoping to vacate the rule.

The district court did not reach the merits of the plaintiffs’ challenge to whether a registered nurse must be present in all nursing facility inspections, noting that provisions of the Medicare Act automatically strip federal courts of their ability to adjudicate. The plaintiffs argued that because they brought claims under both the Medicare and Medicaid Acts, the fact that there are no claim-channeling nor jurisdiction-stripping provisions in the Medicaid Act should be enough to let the case proceed. The circuit court agreed with the plaintiffs.

“Plaintiffs’ challenge to the Final Rule arises under both the Medicare and Medicaid Acts, and their claim that the Final Rule contravenes the Medicaid Act is not inextricably intertwined with a claim for benefits or a compliance determination under the Medicare Act,” the court said, noting the “general presumption” that favors judicial review by federal courts of rulemakings.

Harter Secrest & Emery LLP represents the plaintiffs.