BRUCE ANDERSON; JOHN WILSON; ROBERT AUSTIN; CALIFORNIA ADVOCATES FOR NURSING HOME REFORM v. MARK GHALY, Secretary of California Department of Health and Human Services
No. 16-16193
United States Court of Appeals for the Ninth Circuit
July 18, 2019
D.C. No. 3:15-cv-05120-HSG
Argued and Submitted September 6, 2018
San Francisco, California
FOR PUBLICATION
OPINION
Appeal from the United States District Court for the Northern District of California
Haywood S. Gilliam, Jr., District Judge, Presiding
Before: Marsha S. Berzon and Michelle T. Friedland, Circuit Judges, and Kathleen Cardone,* District Judge.
Opinion by Judge Berzon;
Concurrence by Judge Friedland
SUMMARY**
Civil Rights
The panel vacated the district court‘s dismissal with prejudice of a complaint in an action brought pursuant to
Using the appeals process established by the State of California, all three residents challenged their respective nursing homes’ refusal to readmit them after their hospitalizations, and all three prevailed. None, however, was readmitted. The residents brought a
Applying the factors set forth in Blessing v. Freestone, 520 U.S. 329, 340 (1997), the panel held that the Federal Nursing Home Reform Amendments’ provisions requiring states to “provide for a fair mechanism ... for hearing appeals on transfers and discharges of residents,”
Concurring in the judgment, Judge Friedland stated that she agreed that the residents’ complaint did not state a claim even assuming that the Federal Nursing Home Reform Amendments created an individual enforceable right to redress of an appeal decision under
COUNSEL
Matthew Borden (argued) and J. Noah Hagey, Braunhagey & Borden LLP, San Francisco, California, for Plaintiffs-Appellants.
Hadara R. Stanton (argued), Deputy Attorney General; Xavier Becerra, Attorney General of California; Julie Weng-Gutierrez, Senior Assistant Attorney General; Susan M. Carson, Supervising Deputy Attorney General; Office of the California Attorney General, San Francisco, California; for Defendant-Appellee.
Mark E. Reagan, Scott J. Kiepen, and Katrina A. Pagonis, Hooper, Lundy & Bookman, P.C., San Francisco, California, for Amicus Curiae California Association of Health Facilities.
BERZON, Circuit Judge:
The Medicaid Act requires that states participating in Medicaid “provide for a fair mechanism ... for hearing appeals on transfers and discharges of residents” of nursing homes covered by Medicaid.
A
Medicaid is a cooperative federal-state program designed to “enabl[e] each State ... to furnish ... medical assistance on behalf of families with dependent children and of aged, blind, or disabled individuals, whose income and resources are insufficient to meet the costs of necessary medical services.”
In 1982, at the urging of Congress, the Health Care Financing Administration, a subdivision of the Department of Health and Human Services and the predecessor to the Centers for Medicare and Medicaid Services (CMS), commissioned a study to review the regulation of nursing homes participating in Medicare and Medicaid. H.R. Rep. No. 100-391, pt. 1, at 451–52 (1987), as reprinted in 1987 U.S.C.C.A.N. 2313-1, 2313-271 to -272. The ensuing study, published in 1986, concluded that “[t]here is broad consensus that government regulation of nursing homes, as it now functions, is not satisfactory because it allows too many marginal or substandard nursing homes to continue in operation.” Comm. on Nursing Home Regulation, Inst. of Med., Improving the Quality of Care in Nursing Homes 2 (1986). To address these issues, the study offered a series of recommendations to strengthen the regulation of nursing homes. See id. at 25.
In response, Congress amended the Medicare and Medicaid Acts “to improve the quality of care for Medicaid-eligible nursing home residents,” adopting many of the study‘s recommendations. H.R. Rep. No. 100-391, pt. 1, at 452. Enacted as part of the Omnibus Budget Reconciliation Act of 1987, Pub L. No. 100-203, 101 Stat. 1330, the resulting amendments, the Federal Nursing Home Reform Amendments (FNHRA), imposed various requirements as a prerequisite for nursing homes to be reimbursed under Medicaid. Those requirements are codified at
Among FNHRA‘s provisions are standards for residents’ “[t]ransfer and discharge rights.”
- the transfer or discharge is necessary to meet the resident‘s welfare and the resident‘s welfare cannot be met in the facility;
- the transfer or discharge is appropriate because the resident‘s health has improved sufficiently so the resident no longer needs the services provided by the facility;
- the safety of individuals in the facility is endangered;
- the health of individuals in the facility would otherwise be endangered;
- the resident has failed, after reasonable and appropriate notice, to pay ... for a stay at the facility; or
-
the facility ceases to operate.
Id.
If a nursing home does seek to transfer or discharge a resident, it must first provide notice to the resident. Id.
Subsection (e)(3), in turn, sets forth specific requirements for the state-established appeals process:
The State, for transfers and discharges from nursing facilities effected on or after October 1, 1989, must provide for a fair mechanism, meeting the guidelines established under subsection (f)(3) of this section, for hearing appeals on transfers and discharges of residents of such facilities; but the failure of the Secretary to establish such guidelines under such subsection shall not relieve any State of its responsibility under this paragraph.
Id.
The phrase “guidelines established under subsection (f)(3)” refers to another FNHRA provision instructing the Secretary of Health and Human Services to “establish guidelines for minimum standards which State appeals processes under subsection (e)(3) ... must meet.” Id.
B
California‘s implementation of Medicaid is known as the California Medical Assistance Program, or Medi-Cal. See
C
The individual plaintiffs in this case—Bruce Anderson, John Wilson, and Robert Austin (“the Residents“)—are former residents of certified nursing homes in California. Each alleges that he was subject to “dumping,” the practice of sending a resident to a hospital for medical or mental health treatment but refusing to readmit the resident after discharge from the hospital. The Residents maintain that because Medi-Cal provides less compensation than Medicare or private insurance, nursing homes have a strong financial incentive to engage in dumping if Medi-Cal is paying for the resident‘s stay. “Dumping,” the Residents allege, is “one of the biggest problems” nursing home residents in California face.
Using the appeals process established by the State, all three Residents challenged their respective nursing homes’ refusal to readmit them after their hospitalization, and all three prevailed. None, however, has been readmitted. Each Resident‘s respective nursing home continues to refuse readmission, and, Plaintiffs allege, both DHCS and the California Department of Public Health (CDPH) have taken the position that the agencies are not obligated to enforce decisions resulting from the appeals process.
In October 2015, the California Advocates for Nursing Home Reform (CANHR), a nonprofit advocacy group, sent a letter to DHCS requesting that the agency enforce its decision in resident Bruce Anderson‘s appeal. In response, DHCS reiterated that it “ha[d] no authority to enforce its own orders,” but noted that it was “looking at the issue.” About a month later, CANHR met with Diana Dooley, then Secretary for the California Department of Health and Human Services, and “requested her to make the agencies over which she ha[d] oversight follow the law.” Although “Secretary Dooley represented that the State was ‘doing something’ to fix the problem,” nothing concrete came out of that meeting. CANHR then wrote a letter to Secretary Dooley notifying her that, “absent immediate relief from the State,” it would file suit. The State responded, “listing various enforcement actions it could take,” but none of those actions “involved enforcing DHCS readmission hearing orders.”
Unsatisfied, CANHR, joined by the three individual residents, filed an action under
This appeal followed.
II
Under
Here, the Residents assert that FNHRA‘s provisions requiring states to “provide for a fair mechanism ... for hearing appeals on transfers and discharges of residents,”
A
Under the first prong of the Blessing test, we “must ... determine whether Congress intended to create a federal right.” Gonzaga Univ. v. Doe, 536 U.S. 273, 283 (2002) (emphasis omitted). “[E]vidence of such intent can be found in the statute‘s language as well as in its overarching structure.” Ball, 492 F.3d at 1105. Specifically, a statute‘s “text must be ‘phrased in terms of the persons benefited‘” with “rights-creating terms.” Gonzaga, 536 U.S. at 284 (quoting Cannon v. Univ. of Chi., 441 U.S. 677, 692 n.13 (1979)).
Here, the district court concluded that Congress did not intend to create a statutory right, reasoning that, “[r]ather than phrasing the subsections to focus on the nursing home residents who inevitably benefit from the FNHRA,” the provisions at issue “‘unmistakably focus’ on duties imposed on the subjects of the statutes—the state and the secretary, respectively.” Anderson, 2016 WL 3162167, at *3. The district court effectively held that, because
To begin, the district court‘s conclusion disregards the statutory text. Far from mentioning “residents” only “in passing,” as the district court stated, id. at *4, FNHRA directly focuses on them in discussing the appeals process for transfers and discharges, using “rights-creating terms,” Gonzaga, 536 U.S. at 284. FNHRA‘s notice requirements—listed under a subsection titled “[t]ransfer and discharge rights,”
Moreover, the district court‘s underlying reason for its conclusion—that a statute cannot create rights when phrased as a directive to the state—is wrong. It has never been a requirement that a statute focus solely on individuals, to the exclusion of all others, to demonstrate congressional intent to create a statutory right. To the contrary, cooperative federalism programs like Medicaid, under which “Congress provides funds to the states on the condition that the state spend the funds in accordance with federal priorities,” Roderick M. Hills, Jr., The Political Economy of Cooperative Federalism: Why State Autonomy Makes Sense and “Dual Sovereignty” Doesn‘t, 96 Mich. L. Rev. 813, 859 (1998), are necessarily phrased as a set of directives to states that wish to receive federal funding.
Given the conditional nature of these programs, the statutes enacting them will nearly always be phrased with a partial focus on the state. Although some of these provisions are broadly structural, see, e.g., Blessing, 520 U.S. at 343, others specify that, to qualify for funding, the state must accord enunciated rights to the program‘s beneficiaries, see, e.g., Wilder, 496 U.S. at 510. Insofar as the federal statute contains “rights-creating” language “phrased in terms of the persons benefited,” Gonzaga, 536 U.S. at 284 (quoting Cannon, 441 U.S. at 692 n.13), it falls into the latter category—a statute for which recognizing and enforcing individual beneficiaries’ rights is a condition for federal funding of the state program. And where a right so created is at stake, the right is enforceable under
Two cases in which we concluded that certain provisions of the Medicaid Act created rights enforceable under
The first, Watson v. Weeks, 436 F.3d 1152 (9th Cir. 2006), involved a provision of the Medicaid Act requiring that certain types of care and services be available under state Medicaid plans. Id. at 1159. Notably, the provision was phrased as a directive to the state, requiring that “[a] State plan for medical assistance ... provide ... for making medical assistance available” to eligible individuals.
The second case, Ball v. Rodgers, considered Medicaid‘s waiver program for home- and community-based services, under which states could “be reimbursed for providing beneficiaries with noninstitutional care, so long as the cost of providing this care is less than or equal to the cost of caring for the same beneficiaries in more traditional long-term institutions.” 492 F.3d at 1107. The statute establishing the waiver program included “free choice provisions,” requiring that, as a prerequisite to approval of a waiver program, a state provide “assurances” that beneficiaries of the waiver program be “informed of the feasible alternatives.” Id. (emphasis omitted) (quoting
Here, the provisions establishing the appeals process,
B
California does not defend the district court‘s conclusion that FNHRA created no individual right to appeal a nursing home transfer or discharge. Instead, the State maintains that any such right does not include any state implementation of the decision reached on appeal. At bottom, the State‘s position is that the FNHRA provides only the right to the hearing decision itself. That decision, according to the State, need not have any real-world effect. The statute‘s text, structure, implementing regulations, and overall purpose lead us to conclude otherwise. The right to an appeal under FNHRA, we hold, includes within it provision for some state-provided process capable of providing relief.
1
First, the text: Again, FNHRA requires states to “provide for a fair mechanism ... for hearing appeals on transfers and discharges of residents.”
An “appeal” in legal parlance ordinarily refers to a process by which an earlier action—here, the transfer or discharge of a resident—can be challenged and, if the facts establish that the decision to take that action was invalid, overturned. See Appeal, Black‘s Law Dictionary (10th ed. 2014) (“A proceeding undertaken to have a decision reconsidered by a higher authority.” (emphasis added)); Appeal, Oxford English Dictionary (2d ed. 1989) (“The transference of a case from an inferior
That conclusion is bolstered by the structure of FNHRA. FNHRA prohibits nursing homes from transferring or discharging residents except in six narrow circumstances, setting forth specific grounds for invalidating a nursing home‘s transfer or discharge decision on appeal. Id.
Moreover, FNHRA expressly equips states with tools for enforcing the nursing home standards imposed by the statute. FNHRA provides that a state may terminate a nursing home‘s participation in Medicaid if the state finds that the nursing home fails to comply with FNHRA‘s standards. Id.
Our conclusion that the right to appeal includes the ability to obtain relief accords with the overall purpose of FNHRA. FNHRA was enacted to address a “broad consensus that government regulation of nursing homes, as it now functions, is not satisfactory because it allows too many marginal or substandard nursing homes to continue in operation.” Comm. on Nursing Home Regulation, supra, at 2. Congress was “deeply troubled that the Federal government, through the Medicaid program, continues to pay nursing facilities for providing poor quality care to vulnerable elderly and disabled beneficiaries.” H.R. Rep. No. 100-391, pt. 1, at 452. In light of this focus on inadequate nursing homes, Congress could not have intended FNHRA to create meaningless show trials that allow nursing homes to persist in improper transfers and discharges.
2
FNHRA directs states to “establish guidelines for minimum standards which State appeals processes ... must meet,”
The Secretary did, however, follow FNHRA‘s directive to “establish guidelines for minimum standards which State appeals processes ... must meet.” Id.
“As an agency interpretation of a statute, a regulation may be relevant in determining the scope of the right conferred by Congress.” Save Our Valley v. Sound Transit, 335 F.3d 932, 943 (9th Cir. 2003) (emphasis added). That principle has particular force here, as FNHRA expressly prescribes compliance with the CMS guidelines regarding the appeal process. See
CMS‘s determination that states “must ... , if appropriate, provide for admission or readmission to a facility if ... the hearing decision is favorable to the applicant or beneficiary,”
3
The Second Circuit has reached the same conclusion regarding the scope of a similar statutory right under the Medicaid Act based on the same regulation here applicable,
*
C
The second prong of the Blessing test requires that “the plaintiff ... demonstrate that the right assertedly protected by the statute is not so ‘vague and amorphous’ that its enforcement would strain judicial competence.” 520 U.S. at 340-41 (quoting Wright, 479 U.S. at 431). The right to an appeal provided by FNHRA, including the opportunity for state enforcement of the order issued by the appellate body, meets that requirement.
“[A] federal right to a fair hearing” is “an objective individual and judicially reviewable right.” ASW v. Oregon, 424 F.3d 970, 978 (9th Cir. 2005). FNHRA provides six specific criteria for which a transfer or a discharge is permissible, see
The opportunity for potential redress contained within the right to an appeal is also well within the judicial enforcement competence. As CMS‘s regulation indicates, enforcement of the appeal begins with an order to the nursing home to admit or readmit transferred or discharged residents. See
That the CMS regulation implementing the appeals process,
Finally, under the third prong of the Blessing test, we ask whether “the statute ... unambiguously impose[s] a binding obligation on the States.” 520 U.S. at 341. Here, the statute could not be clearer: “The State ... must provide for a fair mechanism ... for hearing appeals on transfers and discharges . . . .”
III
“Even if a plaintiff demonstrates that a federal statute creates an individual right, there is only a rebuttable presumption that the right is enforceable under
We “do not lightly conclude that Congress intended to preclude reliance on
Here, California contends that we should conclude that Congress has impliedly foreclosed enforcement FNHRA‘s right to an appeal under
First, implied foreclosure is a question of congressional intent. See Sea Clammers, 453 U.S. at 20. State law remedies therefore cannot, as a general matter, imply the unavailability of a
The federal law remedies on which California relies fare no better. The State notes that FNHRA itself requires that “each State establish by law” certain remedies against noncompliant nursing homes. See
The only remedy on which California relies directed at the State‘s appeals process is the federal government‘s approval process for state Medicaid plans, and its concomitant ability to withhold federal funds. This type of remedy alone is insufficient to foreclose impliedly a
In sum, we have not been presented with any indication, express or implied, that Congress intended to foreclose a
IV
Although we conclude that FNHRA provides the Residents with a statutory right to an appeal—a right that includes state implementation of the decision on appeal—we do not believe that the Residents’ present complaint plausibly alleges a violation of that right. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
Here, the Residents’ complaint alleges only that state agencies—namely, DHCS and CDPH—refuse to enforce favorable hearing decisions. The complaint specifically states that FNHRA‘s right to an appeal is violated because “there is no agency in California that enforces DHCS readmission orders” and that “the State has not provided residents with their right to an administrative procedure that provides for prompt readmission” after a favorable hearing decision.
But we do not find in
California could, for example, provide that state courts will enforce DHCS hearing decisions through the private cause of action provided by section 1430 of the California Health and Safety Code. See
In short, the complaint as it currently exists does not allege that the State provides no mechanism whatsoever to enforce each administrative appeal order regarding nursing home transfers and discharges. Because the Residents have not so alleged, their complaint does not provide “enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570.
V
Here, the district court dismissed the Residents’ complaint with prejudice, concluding that FNHRA does not provide a statutory right enforceable under
As noted, the present complaint does not allege a plausible violation of the FNHRA appeals provision as we have construed it. But “[d]ismissal with prejudice and without leave to amend is not appropriate unless it is clear on de novo review that the complaint could not be saved by amendment.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (per curiam). The Residents’ failure to state a claim can perhaps be cured by repleading. We therefore vacate the district court‘s dismissal of the Residents’ complaint and remand for further proceedings consistent with this opinion.
VACATED and REMANDED.
FRIEDLAND, Circuit Judge, concurring in the judgment:
I concur in the judgment. For the reasons in Part IV of the majority opinion, I agree that the Residents’ Complaint does not state a claim. Because that is true even assuming that FNHRA creates an individual right to redress of an appeal decision and that such a right is enforceable under