SSR 75-7c: Sections 1866(a)(1) Following (C) 1866(b)(2) and 1902(a)(28)(42 U.S.C. 1395cc(a)(1) Following (C), 1395cc(b)(2), and 1396(a)(28)—Health Insurance—Non-Renewal of Provider Agreement
20 CFR 405.1901.405.1908
Olga Nicobatz, et al. v. Weinberger, U.S.D.C., Central District of California, No. CV 74-1778-WPG (7/15/74)
Plaintiff-patients following notification that reimbursement for care will end thirty days thereafter if they remain in the plaintiff-facility past the date that the provider agreement expires, contend that they are entitled to an administrative hearing before payment for care can be terminated. The plaintiff-facility contends that due process requires a prior evidentiary hearing before refusal to enter into new provider agreement. The Secretary had noted numerous deficiencies regarding the Conditions of Participation and provided the facility with written notice. These were not corrected and the Secretary refused to enter into a new agreement. A reconsideration was requested and a follow-up inspection made. The facility was again found out of compliance and the reconsideration affirmed the Secretary's initial determination. Held, plaintiff-facility has no right to continued participation nor was a prior hearing required on the decision not to renew the agreement. This does not violate due process. The patients are not being denied continued coverage in any facility that meets the conditions of participation.
GRAY, Dist. Judge:
The Court having considered the Motion, the memoranda submitted by the parties and the oral arguments at the time of the hearings, and after due deliberation the Court makes the following Findings of Fact and Conclusions of Law:
FINDINGS OF FACT
Plaintiffs are seven Medi-Cal beneficiaries who are patients at Academy Convalescent Center, Inc., and the Convalescent Center which has been participating since August, 1971 as a provider of skilled nursing home services under Title XVIII (Medicare) and Title XIX (Medi-Cal) of the Social Security Act. Plaintiffs brought this action for a preliminary and permanent injunction to compel the defendants to allow Academy Convalescent Center, Inc. to continue to participate in the Medicare and Medi-Cal Programs beyond the time that the provider agreements with defendants expired (June 30, 1974 for Medicare and July 18, 1974 for Medi-Cal). Plaintiff-patients have been notified that payment for their care will not be made if they remain at Academy Convalescent Center past the date the Medi-Cal agreement expires on July 17, 1974.
Plaintiff-patients contend that they are entitled to an administrative hearing before payment for their care at Academy Convalescent Hospital be terminated.
Plaintiff Academy Convalescent Center, Inc. contends that due process requires a prior evidentiary hearing before the defendants can refuse to enter into new provider agreements with it. To the extent that the regulations (20 C.F.R. 405.101, et. seq.) do not provide for a prior hearing, plaintiff contends that they are violative of due process.
On May 30, 1974, Plaintiff Academy Convalescent Center, Inc. was notified that the Secretary of Health, Education and Welfare would not sign a new provider agreement with it as a skilled nursing facility for participation in the Health Insurance for the Aged and Disabled (Medicare) when the then current agreement expired on June 30, 1974. That decision was based upon inspections of February 19-21, 1974, March 11, 1974 and April 3, 1974 which disclose numerous continuing violations of the Conditions of Participation of Skilled Nursing Facilities as contained in 20 C.F.R. 405.1120 through 405.1137 and the statutory requirement set forth in 42 U.S.C. 1861(j).  The violations documented on February 19-21, 1974 and March 11, 1974 were considered by the Secretary to be so severe as to jeopardize the health and safety of the Medicare patients at Academy and to seriously limit Academy's capacity to render the level of care to Medicare patients required by Section 1861(j) of the Social Security Act and implementing federal regulations at 20 C.F.R. 405.1120 through 405.1137. Some of these violations (deficiencies) were noted during previous on-site inspections on June 13-15, 1973 and July 30-31, 1973 and were brought to the attention of Academy through written notices at those times but were not corrected. Plaintiff Academy was advised of its right to request a reconsideration of such determination.
June 14, 1974, the Department of Health, State of California, notified plaintiff Academy Convalescent that in view of the findings and action of the Secretary of Health, Education and Welfare it would not sign a new provider agreement for the facility to participate in the Medi-Cal program after the current agreement expired July 17, 1974 for the same reasons found and stated by the Secretary in his letter of May 30, 1974. This action by the State agency was taken pursuant to Section 246 and 249A. Public Law 92-603 which amended Section 1902(a) (28) and 1910(a) of the Social Security Act in 1972 to standardize the conditions of participation under Medicare (Title XVIII) and Medi-Cal (Title XIX) effective January 1, 1974. 45 C.F.R. 249.(a)(9).
On June 6, 1974, Academy Convalescent Center, Inc. requested reconsideration of the Secretary's May 30, 1974 determination not to enter into a new provider agreement. A follow-up inspection of Academy was conducted at the directions of the Secretary on June 28, 1974. That inspection showed Academy continued to be deficient with respect to a substantial number of provisions of the Medicare conditions of participation that apply to skilled nursing facilities. Accordingly, by letter dated July 3, 1974 the Secretary notified Academy that upon reconsideration [under 20 C.F.R. 405.154] the initial determination of May 30, 1974 was affirmed. Plaintiff Academy was advised of its right to request a hearing before an Administrative Law Judge [20 C.F.R. 405.1531, et. seq.] followed by review by the Appeals Council of the Social Security Administration's Bureau of Hearings and Appeals [20 C.F.R. 1561, et. seq.] and then judicial review as authorized by Section 1869(c) of the Social Security Act (42 U.S.C. 1395ff).
CONCLUSIONS OF LAW
Plaintiff Academy had time limited contracts for participation in both the Medicare and Medi-Cal programs. It also knew by the various on-site inspections and consultations that the government agencies were dissatisfied with the level of care given to its Medicare and Medi-Cal patients. Under those circumstances, plaintiff Academy had no expectancy of renewal that would constitute a right under the due process clause of the 5th or 14th Amendments. Board of Regents v. Roth, 408 U.S. 564 (1972). Plaintiff Academy has no right to continue participating in the Medicare and Medi-Cal programs so as to require a hearing by defendants prior to their deciding not to renew the provider agreements Arnett v. Kennedy, 42 L.W. 4513 (April 16,1974).
Even if plaintiff Academy had some type of right to continue to participate in the Medicare and Medi-Cal programs, the welfare of the patients is of primary importance. The defendants have determined that the health and safety of Medicare and Medi-Cal patients at Academy can no longer be assured. On balance of the interests involved here, due process does not require a pretermination type hearing. Goldberg v. Kelly,397 U.S. 254 (1970). The post-termination type hearing set forth in 20 C.F.R. 405.1501(b) and 20 C.F.R. 405.1530, et. seq., is sufficient procedural due process. Coral Gables Convalescent Home, Inc. v. Richardson, 340 F. Supp. 646 (S.D.Fla. 1972).
By the numerous inspections and conferences with government officials concerning the deficiencies in the level of care and the repeated opportunities to correct those deficiencies, plaintiff Academy has had considerable due process already. Under the circumstances, it cannot be said that due process also requires a full hearing prior to a refusal to enter into a new provider agreement. Wilson Clinic & Hospital, Inc. v. Blue Cross of South Carolina, 494 F.2d 50 (4th Cir. 1974).
Medi-Cal benefits to the plaintiff-patients are not being suspended, terminated or revoked within the hold of Kelly v. Goldberg, supra. Benefits will continue on behalf of the patients at any nursing facility that has a provider agreement with the California State Department of Health. Due process does not require that the plaintiff-patients be given a hearing prior to the date that the Medi-Cal agreement expires between Academy and the Department of Health.
The action of the defendants in not entering into new provider agreements with plaintiff Academy is based, inter alia, upon the finding that the care given to the Medicare and Medi-Cal beneficiaries is not at the level required by the pertinent federal statues and regulations, 42 U.S.C. 1395x(j); 42 U.S.C. 1396a(a)(28); 20 C.F.R. 405.1120-1137. Defendants are not shutting down Academy Convalescent Center, Inc., they are merely causing the patients that they are responsible for to be removed to a facility that meets the requirements and conditions for participation under the Medicare and Medi-Cal programs.
Plaintiffs have not been denied due process and their Motion for Preliminary Injunction should, therefore, be denied.
Under section 1866(b) (3), reimbursement under Title XVIII continues for thirty days thereafter if the beneficiary was admitted to the facility prior to the effective date of expiration. (Ed)
Reference is to section 1816(j) of the Social Security Act, 42 U.S.C. 1395x(j). (Ed)
The patient must change to a participating facility that meets the conditions of participation if he is to be reimbursed. He has the option to remain in the facility whose provider agreement expired and was not renewed, but, he would not be reimbursed if he chose to remain.(Ed)