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Bryn Mawr Care, Inc. v. Sebelius

United States Court of Appeals, Seventh Circuit

April 8, 2014

BRYN MAWR CARE, INC., Plaintiff-Appellant,
v.
KATHLEEN SEBELIUS, in her official capacity as Secretary of Health and Human Services, et al., Defendants-Appellees

Argued November 7, 2013.

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 11-CV-00734 -- Harry D. Leinenweber, Judge.

For Bryn Mawr Care, Incorporated, Plaintiff - Appellant: Mark J. Silberman, Duane Morris Llp, Chicago, IL.

For KATHLEEN SEBELIUS, in her official capacity as Secretary of Health and Human Services, Defendant - Appellee: Katherine Beaumont, Office of The United States Attorney, Chicago, IL.

For LAMAR HASBROUCK, M.D., in his official capacity as Director of the Illinois Department of Public Health, Defendant - Appellee: Mary Ellen Welsh, Office of The Attorney General, Chicago, IL.

Before BAUER, MANION, and SYKES, Circuit Judges.

OPINION

Page 593

Manion, Circuit Judge.

Bryn Mawr Care, Inc., is a nursing home company that maintains a facility in Chicago, Illinois, occupied exclusively by patients on Medicaid. Without a hearing, state Medicaid regulators noted three deficiencies at Bryn Mawr's facility. Federal regulators publicized the deficiencies, which negatively impacted the facility's reputation. The regulators also maintained the deficiencies on their internal records, which exposes Bryn Mawr to a risk of harsher penalties and less desirable procedural routes should the facility be found deficient in the future. Bryn Mawr contends that it was entitled to a hearing to challenge the deficiencies under state and federal Medicaid regulations, or alternatively, under the Due Process Clauses of the Fifth and Fourteenth Amendments to the United States Constitution. The district court disagreed and granted summary judgment to the defendants. We affirm.

I. Factual Background

Bryn Mawr is a Medicaid provider, but not a Medicare provider. The Department of Health and Human Services (" HHS" or " the Secretary" ) has delegated administration of the Medicare and Medicaid programs to the Centers for Medicare and Medicaid Services (" CMS" or, for convenience, also " the Secretary" ). CMS, in turn, has contracted with the Illinois Department of Public Health (" IDPH" ) to inspect Medicaid providers in Illinois.

Page 594

On February 11, 2010, IDPH surveyed (inspected) Bryn Mawr's facility in response to allegations that a resident had been sexually assaulted. Bryn Mawr was not cited with any deficiencies immediately following that survey, but IDPH surveyed the facility again on March 23, 2010, and that time cited the facility for three deficiencies related to the care and supervision of residents and staff (which IDPH believed to be the cause of the sexual abuse). A deficiency is a " failure to meet a participation requirement specified in the [Social Security] Act or" regulations. 42 C.F.R. § 488.301. Deficiencies are categorized alphabetically from " A" to " L" (minor to major) by scope (isolated, pattern, or widespread) and severity. Severity is broken up into four different categories based on whether there has been any actual harm, whether there is any potential for minimal or more than minimal harm, and whether there is " immediate jeopardy." Immediate jeopardy is a situation where a deficiency " has caused, or is likely to cause, serious injury, harm, impairment, or death to a resident." 42 C.F.R. § 488.301 (emphasis added). This chart summarizes the deficiency categorization system:

Scope of Deficiency

Isolated

Pattern

Widespread

Immediate jeopardy to

J

K

L

health and safety

Actual harm that is not

G

H

I

immediate jeopardy

Severity of Deficiency

No actual

harm with

D

E

F

potential for more than

minimal harm that is not

immediate jeopardy

No actual harm with

A

B

C

potential for minimal

harm

See Center for Medicare and Medicaid Services, State Operations Manual, 7400.5.1 (Rev. 63 2010) (hereinafter, " State Operations Manual" ).[1] The regulations

Page 595

provide for required and optional remedies that are more drastic the further right or up a deficiency is on the chart (with termination from the Medicaid program reserved for the top tier, J--L). See 42 C.F.R. § § 488.406 (listing remedies); 488.408 (categorizing remedies). Bryn Mawr was cited with two " G" deficiencies (" isolated" incident of " actual harm that is not immediate jeopardy" based on violations of the resident's rights to freedom from sexual abuse and to adequate supervision) and one " E" deficiency (a " pattern" of " no actual harm with potential for more than minimal harm that is not immediate jeopardy" based on failure to sufficiently monitor the resident upon her admission to the facility).[2] This deficiency determination meant that the facility was out of compliance with Medicaid program requirements, so IDPH notified Bryn Mawr of the proposed remedies--in-service training and a $200 a day fine--and its opportunities to challenge the deficiency findings through Informal Dispute Resolution or submit a plan of correction to avoid the remedies (or both). Bryn Mawr chose both.

Bryn Mawr thought that the deficiency findings were erroneous, so it challenged them via Informal Dispute Resolution (the " informal process" ). See 42 C.F.R. § 488.331 (requiring state agencies to offer an informal process to challenge deficiency findings). The informal process was just an exchange of written information between Bryn Mawr and IDPH before an outside party, the Michigan Peer Review Organization (" MPRO" ). No live hearing was held and therefore no cross-examination or other credibility determinations were conducted regarding the allegations of sexual assault of a resident. IDPH simultaneously conducted an internal review and, on May 6, 2010, found that two of the deficiencies based on the allegations of sexual abuse were not sufficiently supported by credible evidence as required by Illinois regulations. However, the MPRO upheld the deficiency findings. Faced with an internal review holding the findings unsupported under Illinois regulations and an outside review upholding the findings, IDPH decided to maintain the deficiency findings under federal regulations.[3] Had the process stopped here, Bryn Mawr would have been entitled to a hearing because the proposed remedies were still on the table. See 42 C.F.R. § 431.151 (requiring a hearing when a state imposes " a civil money penalty" ). But the process did not stop here.

Bryn Mawr also took advantage of the parallel process to " correct" the " deficiencies" and submitted a " plan of correction." At the follow-up inspection, IDPH determined that the deficiencies had been corrected, so it notified Bryn Mawr that it was no longer out of compliance and the proposed remedies would not be imposed. But although they had been " corrected," the fact that there had been deficiency findings remained in the record. Bryn Mawr could have opted not to submit a plan of correction and force a hearing to challenge the deficiencies, but that would have been an unnecessary risk . 42 C.F.R. ยง 488.408 provides that " each facility that has a deficiency ... must submit a plan of correction." If a facility does not think it has a deficiency, it may take the risk of not ...


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