Anderson v. Ghaly

BRUCE ANDERSON, et al., Plaintiffs, v. MARK GHALY, in his official capacity as Secretary of the CALIFORNIA DEPARTMENT OF HEALTH AND HUMAN SERVICES Defendant.

No. 15-cv-05120-HSG

United States District Court, N.D. California

March 10, 2022

ORDER RE CROSS-MOTIONS FOR SUMMARY JUDGMENT

RE: DKT. NOS. 94, 121

HAYWOOD S. GILLIAM, JR. UNITED STATES DISTRICT JUDGE

Three former California nursing home residents and an advocacy group brought this civil rights lawsuit in November 2015 against the California Secretary of Health and Human Services (“the Secretary”).^[1] Dkt. No. 1. They allege that the Secretary violated their federal rights by failing to establish a “fair mechanism” for hearing nursing home residents' transfer and discharge appeals. See Id. Discovery has now closed, and all parties have moved for summary judgment on the question of the Secretary's liability. See Dkt. Nos. 94 (“Sec Mot.”) and 121 (“Pls. Mot.”). Those motions are fully briefed.^[2] The Court held a hearing on the motions on November 18, 2021. Dkt. No. 129. Having carefully considered the parties' arguments, the Court GRANTS the Secretary's motion and DENIES Plaintiffs' motion.

I. BACKGROUND

The individual plaintiffs who brought this case-Bruce Anderson, John Wilson, and Robert Austin-are former residents of certified nursing homes in California.^[3] See Dkt. No. 1 ¶¶ 12-14. Each alleged that he was subject to “dumping, ” which is when nursing homes send a resident to a hospital for medical or mental health treatment but refuse to readmit them after they have been discharged from the hospital. Pls. Mot. at 2-4. Plaintiffs maintain that because Medicaid pays nursing homes less than Medicare or private insurance, nursing homes have a strong incentive to dump residents that participate in Medicaid. Id. “Dumping, ” they allege, is “one of the greatest threats” nursing home residents in California face. Id.

Both federal and California law regulate nursing homes that participate in Medicaid. Through the laws and regulations summarized below, both make it unlawful for a nursing home to dump residents just because they seek to pay with Medicaid.

A. Federal Statutory and Regulatory Scheme

Medicaid is a cooperative federal-state program under which the federal government provides funding to states to allow them to provide medical services to low-income persons. See 42 U.S.C. § 1396-1; see also Grammer v. John J. Kane Reg'l Centers-Glen Hazel, 570 F.3d 520, 523 (3d Cir. 2009). States are not required to participate in Medicaid, but those that do accept federal funding must comply with the Medicaid Act and with regulations promulgated by the Secretary of Health and Human Services. Grammer, 570 F.3d at 523. One of the services that Medicaid funds is treatment at “nursing facilities, ” also known as nursing homes or long-term care facilities. See 42 U.S.C. § 1396d(a).

In 1987, Congress amended the Medicare and Medicaid Acts to provide more oversight of nursing homes that participate in Medicare and Medicaid programs. See H.R. Rep. No. 100-391, pt. 1, at 452; see also Grammer, 570 F.3d at 523. The resulting amendments, the Federal Nursing Home Reform Amendments (“FNHRA”), require nursing homes to meet certain standards before they can be reimbursed under Medicaid. Those requirements are codified at 42 U.S.C. § 1396r.^[4]

FNHRA gave nursing home residents “[t]ransfer and discharge rights, ” which it protects by requiring nursing homes to meet certain conditions before they may lawfully transfer or discharge a nursing home resident. Under FNHRA, a nursing home may only discharge a resident for six reasons. Id. § 1396r(c)(2)(A).^[5] And if a nursing home does seek to transfer or discharge a resident, it must first provide notice. Id. § 1396r(c)(2)(B). That notice must, among other required information, inform the resident of her right to appeal the transfer or discharge. Id. § 1396r(c)(2)(B)(iii)(I).

FNHRA accordingly requires states to provide nursing home residents with a “fair mechanism” for hearing appeals of their transfers and discharges. 42 U.S.C. § 1396(e)(3). A state's mechanism for hearing these appeals must meet “minimum standards” established through regulation by the United States Secretary of Health and Human Services. 42 U.S.C. § 1396(f)(3).

Those regulatory standards, in turn, require states to grant a hearing to any nursing home resident who believes that a nursing home “erroneously determined” that she must be transferred or discharged. 42 C.F.R. § 431.220(a)(2). The regulations also set forth procedural requirements for the hearing itself. See Id. §§ 431.240-.243. Ultimately, if the hearing decision is favorable, the regulations require the relevant state agency to “promptly make corrective payments” and, “if appropriate, provide for admission or readmission of an individual to a facility.” Id. § 431.246.

B. California's Regulation of Nursing Homes

California primarily regulates nursing homes through two different government agencies. The first is the California Department of Public Health (“CDPH”), which is responsible for inspecting and licensing health facilities in California. Cal. Health & Safety Code § 1254(a). With authority provided by the Long Term Care Act, CDPH administers a citation system, an inspection and reporting system, and a provisional licensing mechanism, which are all designed to “protect patients from actual harm and encourage health care facilities to comply with the applicable regulations.” Jarman v. HCR ManorCare, Inc., 10 Cal. 5th 375, 383 (2020); Cal. Health & Safety Code §§ 1417 et seq. If CDPH determines that a nursing home has wrongfully refused to readmit one of its residents, CDPH is authorized to use a variety of enforcement powers against the nursing home, including issuing citations and monetary penalties. See Cal. Health & Safety Code §§ 1423-1425, 1428.

The second agency is the California Department of Health Care Services (“DHCS”), which oversees California's implementation of Medicaid through the California Medical Assistance Program, or Medi-Cal. See Cal. Welf. & Inst. Code §§ 14000.4, 14063. As required by FNHRA, the Medi-Cal program allows nursing home residents who believe they have been erroneously transferred or discharged to appeal the nursing home's decision to DHCS. See Cal. Health & Safety Code § 100171. Similarly, if a nursing home refuses to readmit one of its residents who has been hospitalized and asserts a right to readmission, the resident may appeal the nursing home's refusal in a hearing before DHCS. Id. § 1599.1(h)(1). The Office of Administrative Hearings and Appeals (“OAHA”), a division within DHCS, conducts those hearings and issues an order. See Dkt. No. 56-7 ¶¶ 11-12.^[6] Either party to the OAHA hearing may appeal DHCS's decision by filing a writ of administrative mandamus to a state superior court. See Cal. Civ. Proc. Code § 1094.5. After a successful appeal, the superior court may order DHCS to vacate an adverse hearing decision. See Cal. Civ. Proc. Code § 1094.5(f); see also St. John of God Ret. & Care Ctr. v. State Dep't of Health Care Servs., 2 Cal.App. 5th 638, 647, 206 Cal.Rptr.3d 406 (2016).

For most of the time since this case was filed, nursing home residents had limited opportunities to enforce a favorable DHCS order. DHCS itself took the position that once it “issues its final order, it does not retain jurisdiction in the matter and has no authority to enforce its own orders.” See Dkt. No. 56-11 (August 6, 2015 letter from OAHA Chief Administrative Law Judge Stevenson). In theory, a nursing home resident could appeal DHCS's favorable decision to a state superior court. But in practice, there is no provision allowing the superior court in the mandamus proceeding to order compliance with a DHCS decision. See Anderson, 930 F.3d at 1071. And while CDPH may independently investigate a complaint that resulted in a resident's request for a DHCS hearing, and then may choose to issue a citation or a fine, CDPH's remedial powers are technically independent of the DHCS hearing process. See Dkt. No. 56-14 (CDPH Memorandum dated Oct. 23, 2008). CDPH has taken the position that it is not bound by a DHCS decision because it “is not a party involved in the [OAHA] proceedings, ” which are “between the resident and the facility.” Id. CDPH therefore does not issue citations based upon DHCS decisions alone. Id.

On July 27, 2021, after the close of discovery in this case, California's Governor signed A.B. 133. See A.B. 133 Chap. 143 (2020-21). That law, among other things, expands DHCS's statutory authority to enforce its own readmission orders. It requires nursing homes to demonstrate “timely” compliance with a DHCS readmission order by filing a “certification of compliance” within three calendar days of being served with the order. Cal. Welf & Inst. Code § 14126.029(d). And it also vests DHCS with authority to assess penalties of $750 for each calendar day that the facility fails to comply with a readmission order, up to $75, 000. Id. §§ 14126.029(c)(1)-(3).

California law also allows current or former nursing home residents to bring a civil lawsuit against a facility that violates their federal or state rights. Cal. Health & Safety Code § 1430(b)(1). California recently enacted A.B. 849, which expands that right in two ways. A.B. 849 Chap. 471 (2021-22). First, a current or former resident's legal representative, personal representative, or successor in interest is now also authorized to sue the nursing home. Cal Health & Safety Code § 1430(b)(1). Second, nursing homes may now face steeper monetary penalties. While plaintiffs could previously seek $500 in damages against a nursing home for each cause of action, they may now seek $500 per regulatory violation. See Id. §§...