Termination of Skilled Nursing Facility Medicaid Provider Agreements: Procedural Due Process Requirements

Nancy Elizabeth Jones

doi:10.1017/S0098858800005980

Termination of Skilled Nursing Facility Medicaid Provider Agreements: Procedural Due Process Requirements

Published online by Cambridge University Press: 24 February 2021

Nancy Elizabeth Jones

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Nancy Elizabeth Jones*: Affiliation:
Boston University School of Law

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Abstract

When a state Medicaid agency terminates its provider agreement with a skilled nursing facility, federal regulations give the state the option of providing a pretermination evidentiary hearing; they do not, however, require that a state provide such a hearing. If a state chooses not to grant a pretermination hearing, as a number of states have done, federal regulations require: (1) an informal written reconsideration made by the state and submitted to the skilled nursing facility before the effective date of the termination, and (2) a posttermination evidentiary hearing.

This Article argues that a skilled nursing facility has a right under the due process clauses of the fifth and fourteenth amendments of the U. S. Constitution to an evidentiary hearing before termination of its Medicaid provider agreement. The author claims that a skilled nursing facility's interest in continued receipt of Medicaid reimbursement under its provider agreement is a property interest entitled to constitutional due process protections, and not merely an expectation of economic benefit that does not implicate constitutional due process considerations.

The Article concludes that, except in emergency situations, state Medicaid agencies are constitutionally required to grant a provider a pretermination, rather than a posttermination, evidentiary hearing. This procedure would protect the provider and its patients from the severe effects of an erroneous termination, while furthering the governmental interest in ensuring the health and safety of skilled nursing facility patients. The format for such a hearing should allow for the participation, with the assistance of counsel, of both the skilled nursing facility and its patients.

Type: Article
Information: American Journal of Law & Medicine , Volume 6 , Issue 4 , Winter 1981 , pp. 451 - 493

DOI: https://doi.org/10.1017/S0098858800005980 [Opens in a new window]
Copyright: Copyright © American Society of Law, Medicine and Ethics and Boston University 1981

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Footnotes

The author is a former Managing Editor of the student division of the American Journal of Law & Medicine, and is now a practicing member of the Massachusetts bar.

References

1 Both the Medicare and Medicaid programs define a “skilled nursing facility,” or SNF, as a facility “primarily engaged in providing to inpatients (A) skilled nursing care and related services for patients who require medical or nursing care, or (B) rehabilitation services for the rehabilitation of injured, disabled, or sick persons. ” 42 U.S.C. § 1395x(j)(l) (1976) (Medicare); id. § 1396a(a)(28)(1976 & Supp. II 1978) (Medicaid). Intensive 24-hour nursing care is the feature that distinguishes SNFs from other types of long-term care facilities. Id. § 1395x(j)(6)(1976).

For ease of discussion, this Article focuses solely on SNFs. The arguments it presents, however, apply equally well to “intermediate care facilities” (ICFs), which are statelicensed institutions that provide health care services to individuals who do not require either hospitalization or the level of care of an SNF, but who do require institutional care. Id. § 1396d(c) (Supp. II 1978). States must apply the same procedures regarding certification and provider agreements when dealing with either SNFs or ICFs, 42 C.F.R. § 442.1(a)(1979), although the requirements that an SNF must meet to obtain certification as a qualified Medicaid provider of SNF services, 42 C.F.R. §§ 442.200-.202 (1979), differ from those that an ICF must meet. Id. §§ 442.250-.346.

Out of a total of 19,895 certified facilities participating in both the Medicare and Medicaid programs in April, 1980, 8,058 were certified SNFs. (In comparison, 10,883 certified ICFs participated in either Medicare, Medicaid, or both.) HEALTH CARE FINANCING ADMINISTRATION, HEALTH STANDARDS & QUALITY BUREAU, U.S. DEP't OF HEALTH, EDUC. & WELFARE, DRAFT REGULATORY ANALYSIS, PROPOSED CONDITIONS OF PARTICIPATION FOR SKILLED NURSING AND INTERMEDIATE CARE FACILITIES 6 (June 30, 1980) [hereinafter DRAFT REGULATORY ANALYSIS]. Of the SNF total, 373 participated only in the Medicare program, 2,659 participated only in the Medicaid program, and 5,026 participated in both programs. Id. Of SNFs participating in Medicare, Medicaid, or both, about 15% face decertification each year, although the percentage varies in different areas. See Comment, Skilled Nursing Facility Decertification: The Medicare-Medicaid Beneficiary's Entitlement to a Prior Hearing, 74 NW. U.L. REV. 440, 462 n.159 (1979).Google Scholar

2 In 1965, amendments to the Social Security Act established the Medicaid program, Pub. L. No. 89-97, 79 Stat. 343 (1965) (codified at 42 U.S.C. §§ 1396-1396k (1976 & Supp. II 1978)), and the Medicare program, Pub. L. No. 89-97, 79 Stat. 290 (1965) (codified at 42 U.S.C. §§ 1395-1395k (1976 & Supp. II 1978)). Medicaid, designed as a welfare assistance program with limited federal funding, is structured differently from Medicare, which is designed as a health insurance program. District of Columbia Podiatry Soc'y v. District of Columbia, 407 F. Supp. 1259, 1264 (D.D.C. 1975). One aspect of this difference is that the federal and state governments share the burden of funding the Medicaid program's services, including

(1) 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, and (2) rehabilitation and other services to help such families and individuals attain or retain capability for independence or self-care.

42 U.S.C. § 1396 (1976). For a general discussion of the Medicaid program, see Comment, Panorama of the Judicial Climate for Beneficiaries and Providers of Services Under Medicare and Medicaid, 18 WAYNE L. REV. 707 (1972)Google Scholar.

As a joint effort of state and national governments, the Medicaid program reflects the concept of “cooperative federalism” found in other federal welfare programs such as AFDC. United States v. Aloi, 449 F. Supp. 698, 708 (E.D.N.Y. 1977); District of Columbia Podiatry Soc'y v. District of Columbia, 407 F. Supp. 1259, 1263 (D.D.C. 1975). See also King v. Smith, 392 U.S. 309, 316 (1968) (discussing the AFDC program as constituting cooperative federalism); Lupu, Welfare and Federalism: AFDC Eligibility Policies and the Scope of State Discretion, 57 B.U.L. REV. 1 (1977)Google Scholar(describing the organization of the AFDC program). The specific obligations of this partnership are as follows. First, the federal government contributes between 50% and 83% of a state's Medicaid costs, while the state provides the remainder. Butler, Assuring the Quality of Care and Life in Nursing Homes: The Dilemma of Enforcement, 57 N.C.L. REV. 1317, 1321 n.28 (1979)Google Scholar. See also 42 U.S.C. § 1396d(b) (Supp. II 1978). Although the states remain free to vary their Medicaid programs in a number of ways, they must follow federal statutes and regulations detailing such matters as eligibility and benefit structure. For example, 42 U.S.C. § 1396a(a)(1976 & Supp. II 1978) mandates eligibility criteria for Medicaid recipients, as well as the general types of benefits that a state must provide if it elects to participate in the program.

As a result of these characteristics of the Medicaid program, an SNF, to become certified as a Medicaid provider, must meet state nursing home licensing standards, 42 C.F.R. §§ 442.200-.201 (1980), the federal definition of an SNF, id. § 442.202, and federal certification standards, id. For a more complete discussion of the requirements an SNF must meet to acquire certification, see notes 14-29 infra and accompanying text.

3 Each state's Medicaid program is administered by a “state agency,” 42 U.S.C. § 1396a(a)(5) (1976), usually the public welfare department. Butler, supra note 2, at 1321 n.28. This Article uses the term “state Medicaid agency” to refer to this organization.

4 42 U.S.C. § 1396a(a)(27)(1976); 42 C.F.R. § 431.107 (1979). A provider agreement is a written agreement between the state Medicaid agency and a provider, (1) specifying the terms under which the provider can participate in the Medicaid program, and (2) requiring the state to reimburse an SNF for services to Medicaid patients at stated levels. The agreement's terms also outline whatever recordkeeping is necessary to disclose the extent of services provided by the facility, and mandate the furnishing of such information to the state agency. 42 C.F.R. § 431.107 (1979). The agreement cannot take effect until the date of certification of the SNF by the Secretary of Health and Human Services (HHS), id. § 442.12(b), and may not exceed 12 months in duration. Id. § 442.15(a). While a provider agreement must be executed in compliance with these federal regulations, some negotiation is possible on matters not covered by the regulations.

5 The federal statute and regulations do not use the term “decertification.” Instead, they refer to loss of certification by using the terms “termination” of a provider agreement, 42 U.S.C. § 1395cc(b) (1976 & Supp. II 1978), and “denial, termination, or failure to renew certification or a provider agreement,” 42 C.F.R. § 431.151 (1979). See also id. § 442.20(b). Both courts and commentators, however, refer to all of these actions as decertification. See, e.g., Town Court Nursing Center, Inc. v. Beal, 586 F.2d 280, 282 (3d Cir. 1978), aff'd sub nom. O'Bannon v. Town Court Nursing Center, Inc., 100 S. Ct. 2467, 2471 (1980); Comment, Skilled Nursing Facility Decertification: The Medicare-Medicaid Beneficiary's Entitlement to a Prior Hearing, 74 Nw. U.L. REV. 440, 442 (1979).Google Scholar

6 42 C.F.R. § 442.12(a) (1979) mandates that “[a state] Medicaid agency may not execute a provider agreement with a facility for SNF or ICF services or make Medicaid payments to a facility for those services unless the Secretary or the State survey agency has certified the facility under this part to provide these services.” When an SNF is decertified, this regulation has the following effects: (1) the state must not renew an expired provider agreement; and (2) it must terminate reimbursements for services rendered after decertification, if this sanction occurs while a provider agreement is still in effect.

7 100 S. Ct. 2467 (1980).

8 In that case, the Supreme Court rejected the plaintiffs’ claim that patients residing in an SNF that participates in both the Medicaid and Medicare programs have a property interest under 42 U.S.C. § 1396a(a)(23)(1976 & Supp. II 1978) in receiving Medicaid benefits for continued care in that particular facility. Id. at 2475. In consequence, the Court ruled, Town Court patients were not entitled to a hearing before both HEW and the Pennsylvania Department of Public Health decertified the facility. The Court also dismissed the plaintiffs’ second argument that transfer from a decertified facility has effects on patients’ physical and emotional health that are severe enough to amount to a deprivation of life or liberty. Id. Noting that the district court had heard no evidence on this issue, id. at 2475 n.16, the Court nevertheless “assumefd] for purposes of this decision that there is a risk that some residents may encounter severe emotional and physical hardship as a result of a transfer.” Id. The Court, however, impliedly rejected the patients’ life and liberty argument by finding that the effects of decertification are only “an indirect and incidental result of the Government's enforcement action.” Id. at 2476. Justice Blackmun, in a concurring opinion, observed a lack of consensus in medical literature that transfer trauma indeed exists. Id. at 2485 & n.13. Thus, he concluded that the Town Court patients had not demonstrated “that transfer trauma is so substantial a danger as to justify the conclusion that transfers deprive them of life or liberty.” Id. at 2485.

9 According to the federal Medicaid regulations, “any SNF or ICF whose certification or provider agreement is denied, terminated, or not renewed must be given an opportunity for a full evidentiary hearing on the denial, termination or nonrenewal.” 42 C.F.R. § 431.153(a) (1979). “If the facility requests a hearing, it must be completed either before the effective date of the denial, termination or nonrenewal or within 120 days after that date.” Id. § 431.153(b) (emphasis added).

For state regulations affording only a posttermination hearing with suspension of funds pending the hearing, see 31 CAL. ADMIN. CODE 22 § 51215(3) (1978 Revision); IV FLA. RULES & REGS. 100-7 §.19 (Supp. No.'71); 105 C.M.R. § 190.007, 106 C.M.R. § 456.030 (Mass. 1979); 18 CODES, RULES & REGS, OF N.Y. § 515.8-.9 (1976 & Supp. 1979); 55 PA. CODE § 1101.81(b)(1980); ADMIN. RULES OF S.D. 67:16 (1974 & Cum. Supp. 1977). For statutes affording only a posttermination hearing, see Mo. ANN. STAT. §§ 161, 161.312, 208.156, 274(1) (Vernon Supp. 1981); WASH. REV. CODE § 74.290(4)(1977). For statutes and regulations affording pretermination hearings under limited circumstances, see ILL. ANN. STAT. ch. 23, § 12-4.25(A) (Smith-Hurd Supp. 1980-81); OHIO REV. CODE ANN. § 5111.06(B)(l) (Page 1980); N.J. ADMIN. CODE § 10:49-1.16.17 (Supp. 1977); 4 WIS. ADMIN. CODE HHS 106.06-.10(7) (1979).

10 Some courts have required a pretermination hearing where termination has occurred during the course of an SNF's Medicaid provider agreement. See Hathaway v. Mathews, 546 F.2d 227 (7th Cir. 1976); Shady Acres Nursing Home v. Canary, 39 Ohio App. 2d 47, 316 N.E.2d 481 (1973); Ivy Nursing Home, Inc. v. Califano, Civ. No. 77-585 (W.D. Pa. May 31, 1977), reprinted in [1977-1978 Transfer Binder] MEDICARE & MEDICAID GUIDE (CCH) ¶ 28,470. For related cases, see Washington Nursing Ctr., Inc. v. Quern, 442 F. Supp. 23 (S.D. 111. 1977); Briarcliff Haven, Inc. v. Department of Human Resources of Georgia, 403 F. Supp. 1355 (N.D. Ga. 1975); Ross v. Wisconsin Dep't of Health & Social Servs., 369 F. Supp. 570 (E.D. Wis. 1973); Bio-Medical Laboratories, Inc. v. Trainor, 68 111. 2d 540, 370 N.E.2d. 223 (1977).

Other courts have required a hearing before nonrenewal of an expired Medicaid provider agreement. See Maxwell v. Wyman, 458 F.2d 1146 (2d Cir. 1972), supplementary opinion, 478 F.2d 1326 (2d Cir. 1973); Rockhill Care Ctr., Inc. v. Harris, No. 80-0985-CVW-6 (W.D. Mo. Dec. 1, 1980), reprinted in [1980 Transfer Binder] MEDICARE & MEDICAID GUIDE (CCH) ¶ 30,794; Novak Enterprises, Inc. v. Califano, No. C-2-77-1018 and Novak Enterprises, Inc. v. Creasey, No. C-2-78-95 (S.D. Ohio Mar. 12, 1979)(copy available from National Health Lawyers’ Association, 522 21st Street, N.W., Suite 708, Washington, D.C. 20006).

11 Some courts have ruled that no prior hearing is necessary when a state terminates an SNF's Medicaid provider agreement before its expiration. See Case v. Weinberger, 523 F.2d 602 (2d Cir. 1975); Crestwood Nursing Home v. White, 52 Ohio App. 2d 274, 369 N.E.2d 804 (1977). For related cases, see Green v. Cashman, 605 F.2d 945 (6th Cir. 1979); Agustin v. Quern, 461 F. Supp. 441 (N.D. 111. 1978), aff'd on other grounds, 611 F.2d 206 (7th Cir. 1979); Kern Enterprises, Inc. v. Aggrey, 450 F. Supp. 137 (N.D. Ohio 1978); Greenspan v. Klein, 442 F. Supp. 860 (D.N.J. 1977), vacated on procedural grounds, 559 F.2d 856 (3d Cir. 1977); Crossroads Academy, Inc. v. Carballo, 432 F. Supp. 620 (E.D. Wis. 1977). Several unreported decisions also are relevant. See, e.g., Monsour Foundation Health Plan v. Pennsylvania Dep't of Pub. Welfare, No. 78-990 (M.D. Pa. Jan. 7, 1980) (available from National Health Lawyers’ Ass'n, note 10 supra); Jefferson Memorial Hosp. Ass'n v. Califano, No. 76-2-006 (E.D. 111. June 28, 1979), reprinted in [1979 Transfer Binder] MEDICARE & MEDICAID GUIDE (CCH) ¶ 29,914.

Furthermore, many courts have not required a hearing before nonrenewal of an SNF's Medicaid provider agreement, ruling instead that a hearing after nonrenewal is sufficient. See Town Court Nursing Center, Inc. v. Beal, 586 F.2d 266 (3d Cir. 1978); Schwartzberg v. Califano, 453 F. Supp. 1042 (S.D.N.Y. 1978); Paramount Convalescent Center, Inc. v. Department of Health Care Servs., 15 Cal. 3d 489, 542 P.2d 1, 125 Cal. Rptr. 265 (1975); Marshall Nursing Homes, Inc. v. Aggrey, 50 Ohio App. 2d 15, 361 N.E.2d 522 (1976), dismissed by Ohio Supreme Court on application of appellant. No. 76-1193 (Jan. 26, 1977); South Dakota Dep't of Social Servs. v. Rodrik, 264 N.W.2d 898 (1978). For unreported cases reaching the same conclusion, see Adobe Nursing Home v. Percy, Nos. 78-CV-481 & 79-CV-2108 (Cir. Ct., Dane Cty., Wis., May 31, 1979), reprinted in [1979 Transfer Binder] MEDICARE & MEDICAID GUIDE (CCH) ¶ 30,039; Nicobatz v. Weinberger, No. 74-1778-WPG (CD. Cal. July 15, 1974), reprinted in [1974-1976 Transfer Binder] MEDICARE & MEDICAID GUIDE (CCH) ¶ 27,427.

12 Decertification and termination do not always lead to closure, since a facility that receives reimbursement from non-Medicaid sources will have some sources of financing remaining after termination of eligibility for Medicaid funding. When Medicaid reimbursements provide the sole or major source of financing, however, a facility will have no alternative to closure. For a full discussion of the effects of decertification and termination, see notes 45-65 infra and accompanying text.

13 The major effect of termination on SNF patients is the necessity of relocation. When Medicaid funding is no longer available for their care at the facility, patients without private resources must find another certified facility to provide care. In some instances, patients have been able to delay transfer by obtaining a preliminary injunction pending the resolution of litigation requesting a pretransfer hearing. See, e.g., Bracco v. Lackner, 462 F. Supp. 436 (N.D. Cal. 1978). For a full discussion of this effect of termination, see notes 66-76 infra and accompanying text.

Relocation of chronically ill patients can result in “transfer trauma,” a condition whose symptoms are physical and mental deterioration and, in some cases, death. For a general discussion of the causes, symptoms, and treatment of transfer trauma, see Hitov, , Transfer Trauma: Its Impact on the Elderly, 8 CLEARINGHOUSE REV. 846 (1975)Google Scholar; Levitan, , Nursing Home Dilemma? Transfer Trauma and the Noninstitutional Option: A Review of the Literature, 13 CLEARINGHOUSE REV. 653 (1980)Google Scholar.

14 This Article limits its discussion to termination from the Medicaid program. Because the Medicare program has many characteristics in common with the Medicaid program, the arguments asserted in this Article may also apply to Medicare termination. A detailed review of the Medicare program, however, is beyond the scope of the Article.

15 42 C.F.R. § 442.101(a)(1979).

16 Id. §§ 442.101(c)-(d). The notice of certification declares that an SNF complies with all federal regulations applicable to SNFs, except for “waivers granted by the Secretary or the survey agency.” Id. § 442.101(d)(l). The notice may also state that the survey agency has certified a noncomplying SNF that has made provisions to correct deficiencies. Id. § 442.101 (d)(2).

17 The state Medicaid agency must obtain a notice of certification from the Secretary of HHS for (1) any facility on an Indian reservation, and (2) an SNF that has been certified for Medicare payments. Id. § 442.101(b). For all other facilities, the Medicaid agency must obtain notice of certification from the survey agency. Id. § 442.101(c).

Each state must designate a “survey agency” that “determines for the Medicaid agency if institutions and agencies meet the requirements for participation in the Medicaid program.” Id. § 431.610(e)(l). The agency designated must be the same agency responsible for monitoring compliance of SNFs with certification standards under the Medicare program. Id. § 43I.610(e)(2). The state agency responsible for licensing health institutions in the state may also make such determinations for the Medicaid agency. Id. § 431.610(e)(l).

18 The Department of Health and Human Services (HHS) was formerly the Department of Health, Education, and Welfare.

19 42 C.F.R. § 442.101(a)-(c)(1979).

20 The Social Security Act requires an SNF to execute a provider agreement with the state Medicaid agency, 42 U.S.C. § 1396a(a)(27) (Supp. II 1978), and to comply with financial disclosure procedures. Id. § 1396a(a)(27)(A)-(B) (1976). The facility must also satisfy the statutory definition of “skilled nursing facility” set forth in § 1861(g) of the Act. Id. Finally, an SNF must comply with provisions of the Act governing such matters as fire safety, id. § 1395x(j)(13) (Supp. II 1978), participation in programs providing independent medical evalution of patients in the facility, id. § 1395x(j)(12)(1976), the type of services provided by the facility, id. § 1395x(j)(l)(1976), and staffing,. id. §§ 1395x(j)(3)-(4) (1976), among others. The complete list of statutory requirements appears at id. § 1395x(j) (1976 & Supp. II 1978).

21 For example, an SNF must meet any state licensing standards applicable to nursing homes, as well as regulations promulgated by the state Medicaid agency. 42 C.F.R. § 442.201 (1979). The SNF must also meet the definition of a “skilled nursing facility” given in HHS regulations. Id. § 442.202(b). See also id. § 431.107(b)(l) (specifying a provider's obligation to keep certain types of records); id. § 431.107(b)(2) and (3) (governing certain financial disclosure obligations).

22 See 42 C.F.R. §§ 405.1101-.1137 (1979).

23 Id. §§ 442.101(c)-(d). See note 1G supra.

24 Id §442.101(a).

25 Id. § 442.30(a).

26 The survey agency must “[t]ake necessary action to achieve compliance or to withdraw certification; and [conduct] on-site inspections [a]t least once during each certification period or more frequently if there is a compliance question ….” Id. § 431.610(g)(2)-(3).

27 Id. § 442.110(a).

28 id. §442.111(b).

29 Id. § 442.111 (c).

Cancellation of certification differs from ordinary termination or decertification in that it withdraws a “conditional certification.” Requiring an SNF to take specific actions by a specific date, such an arrangement gives an SNF no basis on which to expect continued certification if it fails to meet the conditions. In contrast, neither a survey agency's ordinary written certification of an SNF nor a provider agreement mandates specific changes in a facility's operations that must occur by a particular date; consequently, decertification and termination cannot result from failure to fulfill a specific condition expressed in the provider agreement. References in this Article to termination, therefore, do not include cancellation of certification pursuant to 42 C.F.R. § 442.111(c).

30 Id. §442.105(b).

31 See note 26 supra. A survey agency must conduct an on-site inspection of a noncomplying facility within six months after approving the facility's initial correction plan, and every six months thereafter, 42 C.F.R. § 431.610(g)(3)(ii) (1979). See also id. §§ 442.112 (e), ,113(d),.115. The inspection process requires that surveyors apply certification standards to particular facets of an SNF's operations, with the result that political and personal factors can enter into the decision. See Rockhill Care Ctr., Inc. v. Harris, No. 80-0985-CV-W-6 (W.D. Mo. Dec. 1, 1980), reprinted in [1980 Transfer Binder] MEDICARE & MEDICAID GUIDE (CCH) ¶ 30,794, at 9439-40 (noting that the survey process was subjective in nature and that “in at least the closing stages of the scenario, impatience and annoyance may well have become factors.“)

32 The Medicaid agency's agreement with an SNF must include the same terms and conditions as does Medicaid certification. 42 C.F.R. § 442.208 (1979). Thus, an SNF that fails to meet certification requirements would also breach the terms of its provider agreement.

33 See note 6 supra.

34 42 C.F.R. § 442.30(a)(1976).

35 Id.

36 See HEALTH CARE FINANCING ADMINISTRATION, U.S. DEP't OF HEALTH, EDUCATION & WELFARE, HFCA REGIONAL OFFICE MANUAL, PART 6, MEDICAID GUIDELINES, TRANSMITTAL No. 43 (June 19, 1979), reprinted in [1980 Transfer Binder] MEDICARE & MEDICAID GUIDE (CCH) ¶ 30,407, at 9603. In practice, the result of decertification is that the state cannot execute a provider agreement authorizing federal Medicaid funding, although it can continue to pay state funds to the SNF under other arrangements.

37 For an excellent example of the processes of decertification with resulting termination, see Town Court Nursing Center, Inc. v. Beal, 586 F.2d 266 (3d Cir. 1978). A variety of procedures are followed by states during termination. The Town Court case demonstrates the procedures followed at the more deliberate end of this spectrum. In 1967, the Town Court facility was certified as an SNF by the Secretary of HEW. Id. at 271. Despite a number of deficiencies, the facility submitted plans of correction and thus remained certified through 1973. When a 1974 inspection revealed “extensive non-compliance with the governing regulations,” however, the facility's provider agreement was terminated by the Pennsylvania Department of Health on October 31, 1974. Moreover, the facility was denied recertification due to continuing deficiencies until April, 1976. At that time the state survey agency recommended that a new provider agreement be executed because the facility was then in compliance. The Secretary certified the facility as an SNF and executed a provider agreement for the period April 14, 1976 to April 30, 1977. In addition, the Secretary's action activated an old provider agreement between the facility and the state that had become effective on September 4, 1975. After reports of abuses resulting from a special investigating grand jury, however, HEW resurveyed the facility in July, 1976 and found further deficiencies. On November 22-24, 1976, a Pennsylvania survey team inspected the facility and again found deficiencies, which the team discussed informally at an “exit interview” with facility administrators. Another survey on December 30, 1976 found some improvement. The facility continued operation, having filed a Plan of Correction. Another survey on March 8-11, 1977, however, again reported severe deficiencies. Another exit interview was held and a written survey of findings sent to the facility. Upon state recommendation, the Secretary decided not to renew the facility's provider agreement; this decision, effective June 18, 1977, was made in a letter dated May 17, 1977. The state then terminated the facility, but offered it a hearing on the issue of whether HEW had terminated the SNF from the Medicare program. Without waiting for the hearing, the facility brought suit in a district court seeking a preliminary injunction. The Town Court case is unusual in that the facility received numerous opportunities to correct deficiencies, as well as discussions with state officials and the opportunity for a hearing.

At the opposite extreme are procedures that result in rapid termination, with little opportunity for an SNF to correct its deficiencies or even to know what they are. See Rockhill Care Ctr., Inc. v. Harris, No. 80-0985-CV-W-6 (W.D. Mo. Dec. 1, 1980), reprinted in [1980 Transfer Binder] MEDICARE fc MEDICAID GUIDE (CCH) ¶ 30,794. In that case, the nursing home had concluded a six-month Medicaid provider agreement with the state. Id. at 9435. Based on the findings of a July, 1980 survey by the state survey agency, the agreement was terminated by nonrenewal on September 30, 1980. In addition, the federal Health Care Financing Administration concurrently notified the facility that its pending Medicare application was to be denied. When a second survey conducted in September, 1980 reached the same conclusions as the first, both the state and federal agencies refused the home's request for a 60-day extension of the provider agreement. Despite the fact that nearly all of the facility's financing came from Medicaid, and that it had made such improvements in its few nursing services deficiencies that its patients were in no immediate danger, the facility had no opportunity for a pretermination hearing, other than an informal exit interview.

The procedures in Rockhill differ markedly in their simplicity and speed from those followed in Town Court, although decertification and termination apparently occurred at the same time in both cases. For other examples of SNF termination, see the cases cited in notes 10-11 supra.

38 42 C.F.R. §§ 431.151-.154 (1979).

39 Id.

40 Id. § 431.152.

41 Id. § 431.153(b). The pre-or posttermination evidentiary hearing must include both notice of the basis for the state's decision and disclosure of the evidence supporting it. Id. § 431.153(c)(l). An opportunity to appear with counsel before an impartial decision maker to present the SNF's position must be offered. Id. §§ 431.153(c)(2)-(4). The SNF is entitled to present documentary evidence, to present witnesses, and to cross-examine witnesses. Id. § 431.153(c)(4), (5). The state agency's decision maker is required to provide a written decision stating the reasons for the decision and the evidence supporting it. Id. § 431.153 (c)(6).

42 Id.§ 431.154(a). The informal reconsideration need include only (1) written notice of the state action and the findings supporting it, (2) a reasonable opportunity for the facility to refute those findings in writing, and (3) a written affirmation or reversal of the denial, termination, or nonrenewal. Id. § 431.154(b).

43 For example, see 105 C.M.R. §§ 190.001-.009 (Mass. 1979). The Massachusetts regulations permit an SNF to seek administrative review of a denial of certification for noncompliance with SNF standards; such review, however, is available only after the denial has taken effect. Id. § 190.007. For other examples, see note 9 supra.

44 Certain aspects of the appeals process remain unspecified. For instance, no regulation requires Medicaid reimbursement pending a posttermination evidentiary hearing, even though this step can occur as late as four months after the termination decision. The regulations also do not indicate whether funding will recommence if a court orders extension of the provider agreement, the state extends the agreement, or a determination to terminate a provider agreement is reversed. Gerst, Provider Agreements, in LONG TERM CARE AND THE LAW 3 (J.W. Skiba ed. 1979). Federal financial participation can now continue for a period up to 30 days after a provider agreement expires or terminates. 42 C.F.R. § 442.15 (1979). In addition, a provider agreement may continue for up to two months beyond its expiration in certain circumstances, or at the discretion of the state Medicaid agency, id. § 442.16; in either case, however, guaranteed funding ceases before the end of the 120-day period during which a state must hold a posttermination hearing. Finally, the regulations do not explicitly require a hearing “on the record,” thus reducing the efficacy of judicial review of the evidentiary hearing. Gerst, supra, at 7.

45 See notes 6 & 36 supra.

46 For examples of state statutes and regulations achieving this result, see 106 C.M.R. § 456.402 (Mass. 1979) (prohibiting any long-term care facility in Massachusetts from admitting any new Medicaid patients after it has notified the state of its withdrawal from the Medicaid program); CAL. HEALTH & SAFETY CODE § 1434 (West Supp. 1977-78) (prohibiting state referrals to facilities with certain types of uncorrected deficiencies); Wis. STAT. ANN. § 50.04(4)(d) (West Cum. Supp. 1980-81)(prohibiting referrals to, or admissions by, nursing homes with certain deficiencies). See also Crestwood Nursing Home v. White, 52 Ohio App. 2d 274, 369 N.E.2d 804 (1977)(state agencies can remove patients from unlicensed nursing home at will; a provider agreement thus gives a facility no right to continued referrals from the state).

47 See 42 C.F.R. § 442.20 (1979)(requiring that a state Medicaid agency “deny, terminate, or refuse to renew’ an SNF's Medicaid agreement if the SNF's Medicare agreement is denied, terminated, or refused renewal); and id. § 405.1902(b)(governing Medicare certification of an SNF that has participated in the Medicaid program). Usually, termination of an SNF's Medicaid and Medicare provider agreements will occur at the same time. For an illustration of the effect of such dual termination of reimbursement, see Town Court Nursing Center, Inc. v. Beal, 586 F.2d 266 (3d Cir. 1978).

48 is See, e.g., Town Court Nursing Center, Inc. v. Beal, 586 F.2d 266, 268 (3d Cir. 1978) (90% of the facility's patients were Medicaid-eligible, supporting the inference that termination of Medicaid reimbursements could force the facility to close); Hathaway v. Mathews, 546 F.2d 227, 229 (7th Cir. 1976) (recognizing that the facility would go out of business if even a temporary interruption of Medicaid payments occurred); Rockhill Care Ctr., Inc. v. Harris, No. 80-0985-CV-W-6 (W.D. Mo. Dec. 1, 1980), reprinted in [1980 Transfer Binder] MEDICARE & MEDICAID GUIDE (CCH) ¶ 30,794, at 9435 (95% of the patients served were Medicaid-sponsored patients).

49 In 1977, 47.8% of nursing home residents were receiving Medicaid assistance. NAT'L CENTER FOR HEALTH STATISTICS, U.S. DEP't OF HEALTH, EDUC. & WELFARE, THE NATIONAL NURSING HOME SURVEY: 1977 SUMMARY FOR THE U.S., SERIES 13, No. 43, 99 (DHEW PUB. NO. (PHS) 79-1794) (1979).

50 See Town Court Nursing Center, Inc. v. Beal, 586 F.2d 266, 268 (3d Cir. 1978) (90% of patients in the facility were eligible for Medicaid assistance); Hathaway v. Mathews, 546 F.2d 227, 229 (7th Cir. 1976) (all 36 patients at the facility were Medicaid recipients); Bracco v. Lackner, 462 F. Supp. 436, 442 (D. Cal. 1978) (virtually all of the center's patients were Medicaid beneficiaries).

51 A “private-paying patient” is one whose family or personal income pays for his or her care. In addition to such private arrangements, other alternatives to Medicare and Medicaid include foundations, Veterans Administration programs, life care contracts, and volunteer agencies. These resources, however, account for only a small percentage of nursing care payments. DRAFT REGULATORY ANALYSIS, supra note 1, at app. IV.

52 Edelman, , Access to Nursing Home Care for Medicaid Recipients, in LONG TERM CARE AND THE LAW 191, 192 (J.W. Skiba ed. 1979).Google Scholar

53 This problem was recognized as an important factor by a court that required a pretermination hearing before retroactive termination of a hospital's Medicare provider agreement. Jefferson Memorial Hosp. Ass'n, Inc. v. Califano, No. 76-2-006 (E.D. 111. Jan. 19, 1976), reprinted in [1979 Transfer Binder] MEDICARE & MEDICAID GUIDE (CCH) ¶ 29,914, at 9104.

54 No cases have held that a nursing home is liable for transfer trauma on the ground that transfer constitutes negligence or abandonment of the patient. Hospitals, however, have been sued on both of these theories for improper discharge of a patient. Modla v. Parker, 17 Ariz. App. 54, 495 P.2d 494, cert, denied, 409 U.S. 1038 (1972); La Juene Rd. Hosp., Inc. v. Watson, 171 So. 2d 202 (Fla. App. 1965); Meiselman v. Crown Hts. Hosp., Inc., 285 N.Y. 389, 34 N.E.2d 367 (1941). By analogy, an SNF patient might allege that a transfer under circumstances suggesting the likelihood of transfer trauma amounts to a failure to use reasonable care to treat that patient.

55 42 C.F.R. § 442.15(c)(1979).

56 State regulations and statutes may require a nursing home to continue providing medical care until patients can be relocated, despite the expiration of its provider agreement or of its participation in the Medicaid program. See, e.g.. MASS. GEN. LAWS ANN. ch. 118E, § 4 (West Supp. 1980-81).

57 See Pennsylvania Dep't of Pub. Welfare v. Temple Univ., 21 Pa. Commw. Ct. 162, 343 A.2d 701 (1975). Other courts also have noted the shortage of Medicaid SNF beds that exists in some states. See Klein v. Mathews, 430 F. Supp. 1005, 1006 n.2 (D.N.J. 1977), aff'd sub nom. Klein v. Califano, 586 F.2d 250 (3d Cir. 1978); Bracco v. Lackner, 462 F. Supp. 436, 442-44 (N.D. Cal. 1978); Monmouth Medical Center v. New Jersey, 158 N.J. Super. 241, 252, 385 A.2d 1244, 1250 (1978).

58 Levitan, supra note 13. See notes 69-70 infra for other references to articles discussing transfer trauma.

59 42 C.F.R. §442.16(1979).

60 See, e.g., Pennsylvania Dep't of Pub. Welfare v. Temple Univ., 21 Pa. Commw. Ct. 162, 343 A.2d 701 (1975)(concluding that no taking of property occurred when the state denied reimbursement for unnecessary hospital care rendered to a patient for whom no less intensive care facilities were available). Cf. Pennsylvania Dep't of Pub. Welfare v. Frankford Hosp., 26 Pa. Commw. Ct. 484, 364 A.2d 957 (1976)(concluding that a taking did occur under circumstances similar to those in Temple Univ.).

61 E.g., 42 U.S.C. § 1395x(j)(13)(1976 & Supp. II 1978)(requiring compliance with fire safety requirements); 42 C.F.R. §§ 405.1101-.1137 (1979) (establishing “Conditions of Participation” assuring quality of care in SNFs). Fraud is among the violations that serve as a ground both for suspension from the Medicare program and for termination of the offender's provider agreement. A further consequence of such Medicare sanctions is that Medicaid reimbursement is not available for providers excluded from the Medicare program. Id. § 455.202(a). Accordingly, each state participating in the Medicaid program must establish a Medicaid fraud control unit, which will refer providers engaging in fraudulent activity to state prosecutorial authorities. Id. § 455.300. For an example of nonrenewal of an SNF's license because of the facility's fraudulent activities, see Colonial Gardens Nursing Home, Inc. v. Pennsylvania Dep't of Health, 34 Pa. Commw. Ct. 131, 382 A.2d 1273 (1978).

62 Some states require publication of SNF violations in order to deter noncompliance with certification standards. See, e.g., CAL. HEALTH & SAFETY CODE § 1426 (West Supp. 1979); N.Y. PUB. HEALTH LAW § 2803(c) (McKinney 1977).

63 Ross v. Wisconsin Dep't of Health & Social Servs., 369 F. Supp. 570, 573 (E.D. Wis. 1973) (Reynolds, C.J., concurring).

64 42 C.F.R. § 442.15(c)(1979).

65 Id. § 442.16.

66 Once an SNF's participation in Medicaid is terminated, a Medicaid recipient cannot receive reimbursement for the SNF's services. Consequently, these recipients, their families, and the state are compelled to find alternative care for which Medicaid reimbursement is available. Although an SNF patient theoretically can continue to reside at the facility if it remains open after its decertification, Medicaid recipients, by definition, cannot afford the cost of care without Medicaid assistance. In such a situation, therefore, these patients have little choice but to accept relocation. Although no federal regulations or statutes explicitly require this result, relocation is thus a probable effect of termination procedures. Klein v. Mathews, 430 F. Supp. 1005, 1007 n.5 (D.N.J. 1977). That such relocations are often involuntary is demonstrated by SNF patients’ frequent challenges to them in court. See, e.g., O'Bannon v. Town Court Nursing Center, Inc., 100 S. Ct. 2467 (1980). See also Levitan, supra note 13, at nn.3 & 4.

In addition to the coercive effect of loss of Medicaid benefits, such transfers also are involuntary in the sense that they may be required by state regulations. See, e.g., MICH. COMP. LAWS ANN. § 333.21799c(l)(c)(1980)(allowing the state to transfer patients from a nursing home that is not in compliance with certain federal or state laws).

67 MICH. COMP. LAWS ANN. § 333.21799c(l)(c)(1980). Massachusetts mandates that an SNF withdrawing from the Medicaid program for such reasons as inability to meet Medicaid certification requirements must continue to provide care to its patients until it has made plans to relocate them. 106 C.M.R. § 456.404 (Mass. 1979).

68 The regulations provide, as one condition of participation for SNFs, that a patient be “transferred or discharged only for medical reasons, or for his welfare or that of other patients, or for nonpayment of his stay (except as prohibited by titles XVIII or XIX of the Social Security Act).” 42 C.F.R. § 405.1121(k)(4)(1979). No other regulation, however, imposes on an SNF an affirmative obligation to transfer patients upon termination.

69 Hitov, supra note 13, at 846; Killian, , Effect of Geriatric Transfer on Mortality Rates, 15 SOCIAL WORK 19 (1970)Google Scholar; Levitan, supra note 13, at 653; Lieberman, , Relocation Research and Social Policy, 14 GERONTOLOGIST 494 (1974)Google Scholar; Markus, , Blenkner, , Bloom, & Downs, , Relocation Stress and the Aged, 7 INTERDISCIPLINARY TOPICS IN GERONTOLOGY 60 (1970)CrossRef Google Scholar. But see Borup, , Gallego, & Heffernan, , Relocation and Its Effect on Mortality, 19 GERONTOLOGIST 135 (1979)Google Scholar(arguing no such condition exists, and finding no increased mortality rate among patients transferred upon closing of 30 nursing homes in Utah); Ogren, & Linn, , Male Nursing Home Patients: Relocation and Mortality, 10 J. OF AMER. GERIATRICS 229 (1971)Google Scholar(finding no increased mortality rate among both young and old residents transferred from certain nursing homes run by the Veterans Administration).

Despite the existence of numerous studies describing transfer trauma, however, at least one Supreme Court Justice holds the opinion that the existence of such a disorder has not been proven. O'Bannon v. Town Court Nursing Center, Inc., 100 S. Ct. 2467, 2485 (1980) (Blackmun, J., concurring). In contrast, while the majority in O'Bannon reached no conclusion about the existence of transfer trauma, it assumed for purposes of this decision that some nursing home residents may encounter severe emotional physical hardship as a result of a transfer. Id. at 2475 n.16. See also note 13 supra.

70 Levitan, supra note 13, at 654-55.

71 O'Bannon v. Town Court Nursing Center, Inc., 100 S. Ct. 2467 (1980).

72 Some courts have required a hearing for Medicaid patients facing transfer from a terminated nursing home. See, e.g., Klein v. Califano, 586 F.2d 250 (3d Cir. 1978); Bracco v. Lackner, 462 F. Supp. 436 (N.D. Cal. 1978). But see O'Bannon v. Town Court Nursing Center, Inc., 100 S. Ct. 2467 (1980). Other courts have required a hearing for nursing home patients before reclassification of their level of services. See, e.g., Roberson v. Wood, 464 F. Supp. 983 (E.D. 111. 1979); Feld v. Berger, 424 F. Supp. 1396 (S.D.N.Y. 1976). For a general discussion of the requirement of a pretransfer hearing, see Note, Transfer of Nursing Home Patients Requires Prior Notice and Hearing, 7 CLEARINGHOUSE REV. 663 (1974).

73 See, e.g., Bracco v. Lackner, 462 F. Supp. 436, 447 (N.D. Cal. 1978).

74 This argument was specifically rejected by the U.S. Supreme Court in O'Bannon v. Town Court Nursing Center, Inc., 100 S. Ct. 2467 (1980), when it stated that “since decertification does not reduce or terminate a patient's financial assistance, but merely requires him to use it for care at a different facility, regulations granting recipients the right to a hearing prior to a reduction in financial benefits are irrelevant.” Id. at 2475. Town Court addressed only transfers from one facility to another providing the same level of care. T h e plaintiffs’ argument that transfer amounts to a reduction in Medicaid benefits would be more persuasive if applied to a transfer from an SNF to an ICF or other facility providing a less intensive level of care.

75 See note 57 supra.

76 42 U.S.C. § 1396a(8)(1976).

77 See note 43 supra.

78 U.S. CONST, amend. V: “No person shall be … deprived of life, liberty or property without due process of law ….” U.S. CONST, amend. XIV, § 1: “No state shall … deprive any person of life, liberty, or property, without due process of law.“

79 u.S. CONST, amend. V.

80 u.S. CONST, amend. XIV.

81 For a discussion of a corporation's rights under the fifth and fourteenth amendments, see First Nat'l Bank of Boston v. Bellotti, 435 U.S. 765, 778-80, 780 n.15 (1978), rehearing denied, 438 U.S. 907 (1979); California Diversified Promotions, Inc. v. Mustek, 505 F.2d 278, 283 (9th Cir. 1974); Morrow Elec. Co., Inc. v. Cruse, 370 F. Supp. 639 (N.D. Ga. 1974). But see D.D.B. Realty Corp. v. Merrill, 232 F. Supp. 629 (D. Vt. 1964)(a corporation is not a “citizen” for purposes of suit to recover for deprivation of liberty under the due process clause of the fourteenth amendment).

82 Wolff v. McDonnell, 418 U.S. 539, 557-58 (1974); Boddie v. Connecticut, 401 U.S. 371, 377-78 (1971); Goldberg v. Kelly, 397 U.S. 254, 267 (1970). For a general discussion of procedural due process, see L. TRIBE, AMERICAN CONSTITUTIONAL LAW §§ 10-7—10-19 (1978); Friendly, Some Kind of Hearing, 123 U. PA. L. REV. 1267 (1975).

83 See, e.g., Arnett v. Kennedy, 416 U.S. 134 (1974).

84 Perry v. Sindermann, 408 U.S. 593 (1972)(nonrenewal of employment contract at a state university); Morrissey v. Brewer, 408 U.S. 471 (1972)(parole revocation); Bell v. Burson, 402 U.S. 535 (1971)(driver's license suspension); Goldberg v. Kelly, 397 U.S. 254 (1970)(welfare benefits); Sniadach v. Family Finance Corp., 395 U.S. 337 (1969)(wage garnishment).

85 Hathaway v. Mathews, 546 F.2d 227 (7th Cir. 1976); Ivy Nursing Home, Inc. v. Califano, No. 77-585 (D. Pa. 1977), reprinted in [1977-1978 Transfer Binder] MEDICARE & MEDICAID GUIDE (CCH) ¶ 28,407, at 9672.

86 See, e.g., Case v. Weinberger, 523 F.2d 602 (2d Cir. 1975).

87 See Town Court Nursing Center, Inc. v. Beal, 586 F.2d 266, 277 (3d Cir. 1978).

88 See Briarcliff Haven, Inc. v. Department of Human Resources, 403 F. Supp. 1355 (N.D. Ga. 1975)(relying on nursing home services manual); Shady Acres Nursing Home v. Canary, 39 Ohio App. 2d 47, 316 N.E.2d 481 (1973)(relying on state statutes). Cf. Maxwell v. Wyman, 458 F.2d 1146 (2d Cir. 1972)(dealing with nonrenewal of a Medicaid provider agreement and relying on federal regulations).

89 For an excellent example, see Hathaway v. Mathews, 546 F.2d 227, 230 (7th Cir. 1976). The court seems satisfied that the enactment of Medicaid legislation created an expectation of receipt of Medicaid funding by providers accepted into the Medicaid program. Although the court cites several relevant Supreme Court decisions, it does not discuss the case in relation to them. Similarly, in Case v. Weinberger, 523 F.2d 602, 606 (2d Cir. 1975), the court merely states: “It is clear that Mrs. Case has a property interest in her expectation of continued participation in the Medicaid program.” This lack of analysis of the property interest issue applies throughout the cases addressing termination procedures.

90 See, e.g., Marshall Nursing Homes, Inc. v. Aggrey, 50 Ohio App. 2d 15, 361 N.E.2d 522(1976).

91 See note 72 supra.

92 See note 7 supra.

93 See, e.g., 105 C.M.R. §§ 190.001-.009 (Mass. 1979). The federal Medicare regulations governing the transfer of patients state that a facility must have written procedures for consulting with a patient who is to be transferred or discharged “except in a medical emergency.” 42 C.F.R. § 405.1121(j)(1979). Applicable to Medicaid providers as well, id. § 442.202(c), this requirement does not provide for a hearing or specify the extent of the patient's participation in a transfer decision. New amendments to the federal Medicaid regulations (1) limit the situations in which an SNF can involuntarily transfer a patient; and (2) require notice at least 15 days before an involuntary intrafacility transfer, or at least 30 days before any other form of involuntary transfer. 45 Fed. Reg. 47,368 (July 14, 1980)(to be codified at 42 C.F.R. § 483.50(k)). The new amendments, however, require neither a hearing nor patient participation in the transfer decision. The adoption of these regulations has been delayed until 1981 “until the receipt of revised cost estimates by the Department and the final draft of a GAO evaluation of the impact of the proposed regulations, and in no case, prior to January 12, 1981.” H.R.J. Res. 644, approved by the President as Pub. L. No. 96-536 on Dec. 16, 1980.

94 Mathews v. Eldridge, 424 U.S. 319, 335 (1976).

95 See, e.g., Memphis Light, Gas & Water Div. v. Craft, 436 U.S. 1, 16-19 (1977).

96 See, e.g., Goss v. Lopez, 419 U.S. 565, 572-76 (1975) (continued public education); Goldberg v. Kelly, 397 U.S. 254, 261-63 (1970) (welfare benefits).

Some Medicaid providers have claimed that decertification proceedings infringe their constitutionally protected liberty interest in maintaining their good reputation. These claims, however, have been rejected. See, e.g., Ross v. Wisconsin Dep't of Health & Social Servs., 369 F. Supp. 570 (E.D. Wis. 1973); Paramount Convalescent Center, Inc. v. Department of Health Care Servs., 15 Cal. 3d 489, 542 P.2d 1, 125 Cal. Rptr. 265 (1975). A review of Supreme Court cases suggests that most courts would concur that termination does not infringe an SNF's liberty interest. See, e.g., Paul v. Davis, 424 U.S. 693 (1976); Codd v. Velger, 429 U.S. 624, 627-28 (1976). Consequently, this Article's analysis of an SNF's constitutionally protected rights will focus on property interests.

97 Board of Regents v. Roth, 408 U.S. 564, 571-72 (1972).

98 Id. at 577; Perry v. Sindermann, 408 U.S. 593, 601 (1972). For example, in Perry the Court indicated that a de facto tenure system might be sufficient to create a property interest for an untenured state college teacher. 408 U.S. at 599-600.

99 Bishop v. Wood, 426 U.S. 341, 345 n.9 (1976). For example, a statute permitting government employees to be discharged only “for cause” creates a property interest in continued employment. Arnett v. Kennedy, 416 U.S. 134, 151-52 (1974). This property interest, however, is “conditioned by the procedural limitations which had accompanied the grant of that interest.” Id. at 155. In contrast, an ordinance allowing a city to terminate a municipal worker's employment “at the will” of city officials, regardless of the quality of the employee's performance, does not create even a conditional property interest. Bishop v. Wood, 426 U.S. at 345.

100 Board of Regents v. Roth, 408 U.S. 564, 577 (1972). Until recent cases raising procedural due process claims, the Court has distinguished “privileges” from “rights,” finding that only “rights” warrant procedural due process protection. See, e.g., id. at 571 n.9; Bailey v. Richardson, 182 F.2d 46, 58 (D.C. Cir. 1950), aff'd, 341 U.S. 918 (1951). In more recent cases, the Court abandoned this distinction, recognizing instead that citizens increasingly must depend on government “privileges” for employment, financial support, or other benefits. See, e.g., Morrissey v. Brewer, 408 U.S. 471, 481 (1972); Graham v. Richardson, 403 U.S. 365, 374 (1971); Goldberg v. Kelly, 397 U.S. 254, 262 (1970).

Under the Burger Court, however, the old dichotomy appears to be returning in the form of a distinction between a “legitimate entitlement” that merits procedural due process protection, and a “unilateral expectation” that is not so protected. Board of Regents v. Roth, 408 U.S. 564, 577 (1972). In the absence of a statute or of case law recognizing a constitutionally protected entitlement to a government benefit, the Court now maintains, an individual has no more than an expectation of receiving that benefit. See Bishop v. Wood, 426 U.S. 341 (1976); Paul v. Davis, 424 U.S. 693 (1976); Meachum v. Fano, 427 U.S. 215 (1976).

101 Board of Regents v. Roth, 408 U.S. 564, 576 (1972). A corollary factor is the extent of the effects of an alleged deprivation on an individual already receiving benefits. Mathews v. Eldridge, 424 U.S. 319, 342 (1976) (imposition of “significant” hardship on a disability benefits recipient); Goldberg v. Kelly, 397 U.S. 254, 261 (1970) (termination of welfare benefits placed recipients in an “immediately desperate” condition). Although the termination of government reimbursement has a less immediate and drastic effect on an SNF than on a welfare recipient, its impact remains sufficiently great that consideration of the SNF's probable losses is an important factor in determining appropriate termination procedures. See notes 66-76 supra and accompanying text.

102 This line of argument usually appears in cases that decline to require a pretermination hearing when termination takes the form of a nonrenewal of a provider agreement. See, e.g., Town Court Nursing Center, Inc. v. Beal, 586 F.2d 266, 277 (3d Cir. 1978); Paramount Convalescent Center, Inc. v. Department of Health Care Servs., 15 Cal. 3d 489, 499, 542 P.2d 1, 6, 125 Cal. Rptr. 265, 270 (1975), cert, denied, 425 U.S. 992 (1976).

103 See Seneca Nursing Home v. Kansas Bd. of Social Welfare, 490 F.2d 1324 (10th Cir. 1974), cert, denied, 419 U.S. 841 (1974); Agustin v. Quern, 461 F. Supp. 441, 444 (N.D. 111. 1978), aff'd, 611 F.2d 2061 (7th Cir. 1979); Crossroads Academy, Inc. v. Carballo, 432 F. Supp. 620 (E.D. Wis. 1977).

104 Bishop v. Wood, 426 U.S. 341, 344 (1976) (“A property interest in employment can, of course, be created by ordinance, or by an implied contract.“). See also Perry v. Sindermann, 408 U.S. 593, 601 (1970); Larionoff v. United States, 533 F.2d 1167, 1179 (D.C. Cir. 1976), aff'd, 431 U.S. 864 (1977); Hostrop v. Board of Jr. College Dist. No. 515, 471 F.2d 488 (7th Cir. 1972), cert, denied, 411 U.S. 967 (1973).

105 Several courts have expressed a contrary opinion. See note 89 supra; Town Court Nursing Center, Inc. v. Beal, 586 F.2d 266, 277 (3d Cir. 1978); Case v. Weinberger, 523 F.2d 602, 607 (2d Cir. 1975).

106 Town Court Nursing Center, Inc. v. Beal, 586 F.2d 266, 277 (1978); Agustin v. Quern, 461 F. Supp. 441, 444 (N.D. 111. 1978).

107 E.g., Briarcliff Haven, Inc. v. Department of Human Resources, of Ga., 403 F. Supp. 1355, 1363 (N.D. Ga. 1975).

108 Id. See also Minnesota Ass'n of Health Care Facilities, Inc. v. Minnesota Dep't of Pub. Welfare, 602 F.2d 150, 153-54 (8th Cir. 1979); Humana of S.C., Inc. v. Califano, 590 F.2d 1070, 1083 (D.C. Cir. 1978); Pennsylvania Dep't of Pub. Welfare v. Temple Univ., 21 Pa. Commw. Ct. 162, 169, 343 A.2d 701, 705 (1975). Proponents of this argument assert that when an organization enters into a contract in a heavily regulated industry, it must expect that “minor repairs” to the regulatory structure will occur, and that the regulatory environment in which the contract functions will not remain the same throughout the life of the contract. See Adams Nursing Home of Williamstown, Inc. v. Mathews, 548 F.2d 1077, 1081 (1st Cir. 1977).

109 Paramount Convalescent Center, Inc. v. Department of Health Care Servs., 15 Cal. 3d 489, 542 P.2d 1, 125 Cal. Rptr. 265 (1975), cert, denied, 425 U.S. 992 (1976). For a seminal case considering the relationship between a government and its contractors, see Perkins v. Lukens Steel Co., 310 U.S. 113 (1940).

110 See Nicobatz v. Weinberger, No. 74-1778-WPG (D. Cal. July 15, 1974), reprinted in [1974-1976 Transfer Binder] MEDICARE & MEDICAID GUIDE (CCH) ¶ [27,427, at 9828 (“the welfare of the patients is of primary importance“); Paramount Convalescent Center, Inc. v. Department of Health Care Servs., 15 Cal. 3d 489, 501, 542 P.2d 1, 8, 125 Cal. Rptr. 265,272 (1975), cert, denied, 425 U.S. 992 (1976).

111 See notes 49-50 supra.

112 See note 1 supra.

113 45 Fed. Reg. 47,368 (1980). See also DRAFT REGULATORY ANALYSIS, supra note 1, at app. IV.

114 The proposed regulations require SNFs and ICFs to meet the same conditions of participation. Thus, if an SNF violates a condition that would also be a decertification for an ICF, the SNF will not qualify as a provider of ICF-level care. It may, however, be able to qualify for personal acre home status (providing only room and board without medical service).

115 see, e.g., Minn Stat.§ 145.832.845 (Supp. 1979).

116 Id § 145.834. Such a program can approve only those changes in services or captital expenditures over $150,000 that a state agency finds necessary in light of the health care needs of the geographical area. While a facility's SNF services may be necessary in its area, a different type or level of services may not be. But see, e.g., Mass. Gen. Laws Ann. ch. Ill, § 25B (west Supp. 1980-81) (excluding a decrease in the level of services from CON requirements).

117 See note 115 supra.

118 See, e.g., Bicknell & Walsh, Certification-of-Need: The Massachusetts Experience, 292 New England J. Med. 1054, 1059 (1975); Sullivan, Damsgaard & Rodkey, A Critique of the Massachusetts Determination-of-Need Program, 300 New England J. Med. 794 (1979).

119 California Ass'n of Nursing Homes v. Williams, 4 Cal. App. 3d 800, 84 Cal Cal. Rptr.

120 State Medicaid agencies reiburse SNFs for services to Medicaid-eligible patients on a “reasonable cost-related basis.” 42 U.S.C. § 1396a(a)(13)(E)(Supp. II 1978). States need not provide a profit to SNFs, 43 Fed. Reg. 4863 (1978), but reimbursement rates must cover “actual allowable costs of a facility that is economically and efficiently operated.” 42 C.F.R. § 447.302(b)(1979).

121 See note 108 supra.

122 See note 50 supra. Total payments to vendors under the Medicaid program rose from $1,193,768,000 in 1966 to $17,139,712,000 in 1977. 43 Soc. SEC. BULLETIN 58 (1980). As noted by one commentator discussing the coercive effect of conditions placed on the receipt of government health care funds of all types,

the threat of denial or withdrawal of federal funds may be so large that the provider-recipient is denied any effective choice regarding its participation…. Almost every hospital and many nursing homes currently depend so heavily on federal financial support, principally through Medicare and Medicaid reimbursements, that there is little choice but to comply with any condition or regulatory requirement imposed by the federal government.

Wing, & Silton, , Constitutional Authority for Extending Federal Control Over the Delivery of Health Care, 57 N.C.L. REV. 1423, 1443 (1979).Google Scholar

123 No reported opinion has recognized that the inducement for institutional providers to participate in the Medicaid and Medicare programs may be, in effect, large enough to constitute coercion. Consequently, conditions and regulatory requirements so far have withstood, challenges based, in part, on this argument. For cases rejecting such challenges by nursing homes, see Briarcliff Haven, Inc. v. Department of Human Resources, 403 F. Supp. 1355, 1362-63 (N.D. Ga. 1975); California Ass'n of Nursing Homes v. Williams, 4 Cal. App. 3d 800, 817, 84 Cal. Rptr. 590, 602 (1970), Despite the outcome of these decisions, however, the statistics cited in notes 50 and 122, supra, support the conclusion that nursing homes are heavily dependent on Medicaid funding, in large part due to the economic needs of their elderly patients.

124 Ross v. Wisconsin Dep't of Health & Social Servs., 369 F. Supp. 570, 573-75 (E.D. Wis. 1973)(Reynolds, J., concurring). See also Perkins v. Lukens Steel Co., 310 U.S. 113, 125-30 (1940); Schraier v. Hickel, 419 F.2d 663, 667 (D.C. Cir. 1969); Gonzalez v. Freeman, 334 F.2d 570, 574 (D.C. Cir. 1964); Copper Plumbing & Heating Co. v. Campbell, 290 F.2d 368, 371 (D.C. Cir. 1961).

125 See, e.g., Ross v. Wisconsin Dep't of Health & Social Servs., 369 F. Supp. 570, 573-75 (E.D. Wis. 1973). The cases do not justify this fear, however. Only one decision concerning a government contractor's rights has cited cases involving Medicaid providers. In Laketon Asphalt and Refining, Inc. v. United States Dep't of Interior, 476 F. Supp. 668 (N.D. Ind. 1979), the court distinguished as inapposite both Klein v. Mathews and Hathaway v. Mathews because they dealt with economic benefits related to basic human needs. Id. at 672. The court viewed such benefits as very different in nature from the interest in a continued supply of crude oil under a government contract.

126 in general, courts have not yet accepted nursing homes as essentially the same as a public utility. California Ass'n of Nursing Homes v. Williams, 4 Cal. App. 3d 800, 817, 84 Cal. Rptr. 590, 602 (1970). Cf. New Jersey Ass'n of Health Care Facilities v. Finley, No. A 83/84 (June 5, 1980), reprinted in [1980 Transfer Binder] MEDICARE & MEDICAID GUIDE (CCH) ¶ 30,535, at 10,072.

127 The flexibility that government requires lies in monitoring the quality of services, rather than in obtaining a particular type of service.

128 See note 57 supra.

129 Myers & Myers, Inc. v. United States Postal Serv., 527 F.2d 1252 (2d Cir. 1975); Gonzalez v. Freeman, 334 F.2d 570 (D.C. Cir. 1964). See also ART-METAL-USA, Inc. v. Solomon, 473 F. Supp. 1 (D.D.C. 1978); Pan American Airways, Inc. v. Marshall, 439 F. Supp. 487 (S.D.N.Y. 1977).

130 Such courts usually do not recognize a debarred or suspended contractor as possessing a property interest; instead, they focus on the economic effect of debarment. Myers & Myers, Inc. v. United States Postal Serv., 527 F.2d 1252, 1259 (2d Cir..1975). Consequently, their analysis stresses fundamental fairness rather than procedural due process as the ground for a hearing. Courts do recognize a property interest, however, when the government has terminated an unexpired contract. Farr v. Chesney, 437 F. Supp. 521 (M.D. Pa. 1977), supplemented. 441 F. Supp. 127 (M.D. Pa. 1978); Pan American World Airways, Inc. v. Marshall, 439 F. Supp. 487, 493 (S.D.N.Y. 1977).

131 See notes 39-44 supra and accompanying text.

132 see note 110 supra.

133 “The committee bill is designed to liberalize the Federal law under which states operate their medical assistance programs so as to make medical services for the needy more generally available.” [1965] U.S. CODE CONG. & AD. NEWS 1943, 2014 (emphasis added).

134 “[T]he real parties in interest [of the Medicare Part B program] are the beneficiaries; physicians are parties in interest only as assignees of beneficiaries.” Cervoni v. Secretary of HEW, 581 F.2d 1010, 1018 (1st Cir. 1978). While a provider may have a sufficient interest to require recognition for standing purposes, such an interest is not necessarily of a sufficient magnitude to constitute a property interest that requires due process protection. Id.

135 A few courts have recognized that a Medicaid provider's economic interest is sufficient to confer standing, or a right to sue, in a variety of contexts. See, e.g., National Union of Hosp. & Health Care Employees & Dist. 1199 v. Carey, 557 F.2d 278, 280 (2d Cir. 1977)(nursing home providers have standing to challenge alleged violations of the Social Security laws, but providers to other providers do not); Greater N.Y. Hosp. Ass'n v. Blum, 476 F. Supp. 234 (E.D.N.Y. 1979)(hospital Medicaid providers have standing to protect their statutory right to reimbursement). The criteria for identifying an interest sufficiently important to confer standing, however, are less rigorous than those used to identify a property interest for procedural due process analysis. For standing purposes, a plaintiff must allege “injury in fact, economic or otherwise.” Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 152 (1970). He or she also must have a legal interest that is “arguably within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question.” Id. at 153.

136 See notes 14-29 supra and accompanying text.

137 See note 35 supra.

138 See note 37 supra.

139 See notes 30-38 supra and accompanying text.

140 Bishop v. Wood, 426 U.S. 341, 345 n.9 (1976).

141 42 C.F.R. § 442.12(d)(1979)(the Medicaid agency may refuse to execute an agreement or cancel an agreement with an SNF when it has “adequate documentation showing good cause“). After an SNF has lost its Medicare provider agreement, a state Medicaid agency cannot enter into, or refuse to terminate, a Medicaid provider agreement with the facility. Id. § 442.20. Presumably, an SNF's failure to secure certification under the Medicaid program would be “good cause” for cancelling a Medicaid agreement.

142 Perry v. Sindermann, 408 U.S. 593, 601 (1971). Where no such understandings exist, courts have not found any reasonable expectation that a permanent contractual relationship with the government exists. See, e.g., Board of Regents v. Roth, 408 U.S. 564, 578 (1972); Rainbow Valley Citrus Corp. v. Federal Crop Insurance Corp., 506 F.2d 467, 470 (9th Cir. 1974); Crown Zellerbach v. Marshall, 441 F. Supp. 1110, 1118 (E.D. La. 1977).

143 Cervoni v. Secretary of Health, Educ. & Welfare, 581 F.2d 1010, 1018 (1st Cir. 1978).

144 Mathews v. Eldridge, 424 U.S. 319, 347-78 (1976).

145 See, e.g., Goldberg v. Kelly, 397 U.S. 254, 264-65 (1970).

146 Goss v. Lopez, 419 U.S. 565, 580-84 (1975).

147 “[T]he public has a strong interest in insuring that elderly infirm nursing home patients are not required to stay in non-complying homes longer than is necessary to assure that the provider had adequate notice and opportunity to respond to charges of deficiencies.” Town Court Nursing Center, Inc. v. Beal, 586 F.2d 266, 278 (3d Cir. 1978). Accord, Hathaway v. Mathews, 546 F.2d 229, 230 (7th Cir. 1976).

148 Ross v. Wisconsin Dep't of Health & Social Servs., 369 F. Supp. 570, 572-73 (E.D. Wis. 1973).

149 In the many states that do not offer an evidentiary hearing before termination of a provider agreement, the state agency need not wait to begin termination procedures. See, e.g., 105 C.M.R. § 190.007 (Mass. 1979), which allows an SNF to request administrative review of an agency decision to deny Medicaid certification. The hearing is held after the denial of certification has been made final. Massachusetts also allows suspension of longterm care providers from participation in the Medicaid program on 48 hours’ notice, when violations of federal and state regulations “are so serious as to immediately threaten the health or safety of recipients” in the facility. 106 C.M.R. § 456.030 (Mass. 1979). These regulations provide for expeditious termination of a provider's participation in the Medicaid program.

150 E.g., Town Court Nursing Center, Inc. v. Beal, 586 F.2d 266, 278 (3d Cir. 1978); Hathaway v. Mathews, 546 F.2d 227, 230-31 (7th Cir. 1976).

151 Town Court Nursing Center, Inc. v. Beal, 586 F.2d 266, 278-79 (3d Cir. 1978). The SNF in this case remained qualified from 1967 to 1974 because it was in substantial compliance with applicable regulations and submitted regular plans of correction. Id. at 271.

152 See, e.g., Klein v. Califano, 586 F.2d 250, 253-54 (3d Cir. 1978) (one and one-half years between initial inspection identifying deficiencies and termination); Maxwell v. Wyman, 458 F.2d 1146, 1152 (2d Cir. 1972)(SNFs were “operating under … temporary waivers [of compliance] for some time.“) See also Hathaway v. Mathews, 546 F.2d 229, 231 (7th Cir. 1976) (three-month delay between inspection identifying deficiencies and notification to the nursing home).

153 Butler, supra note 2, at 1351.

154 See notes 30-38 supra and accompanying text.

155 The government usually does not raise the issue of transfer trauma as one of its concerns. Instead, the issue usually is raised by patients. See, e.g., Bracco v. Lackner, 462 F. Supp. 436,455 (N.D. Cal. 1978).

156 Mathews v. Eldridge, 424 U.S. 319, 347-48 (1976).

157 See note 122 supra.

158 See note 1 supra.

159 Cf. Mathews v. Eldridge, 424 U.S. 319, 348 (1976)(stating the same proposition in regard to the Social Security Administration and disability payments).

160 44 Fed. Reg. 9752 (1979)(discussing comments received in connection with regulations now codified at 42 C.F.R. §§ 431.151-.154 (1979)). One commentator has pointed out the difficulties that arise from lack of funding pending the present posttermination hearing procedures. Gerst, supra note 44, at 7-8. See White Plains Nursing Home v. Whalen, 60 A.D.2d 726, 401 N.Y.S.2d 313 (1977), which granted financial assistance to a nursing home pending a hearing on the appropriateness of the state's elimination of a realty reimbursement. The court found that the nursing home had received no reimbursements for almost two years, and thus would have to close if relief were not given. Id. at 727, 401 N.Y.S.2d at 315.

161 See Rockhill Care Ctr., Inc. v. Harris, No. 80-0985-CV-W-6 (W.D. Mo. Dec. 1, 1980), reprinted in [1980 Transfer Binder] MEDICARE & MEDICAID GUIDE (CCH) ¶ 30,794, at 9438.

162 Mathews v. Eldridge, 424 U.S. 319, 347-48 (1976).

163 Id.

164 see Rockhill Care Center, Inc. v. Harris, No. 80-0985-CV-W-6 (W.D. Mo. Dec. 1, 1980), reprinted in [1980 Transfer Binder] MEDICARE & MEDICAID GUIDE (CCH) f 30,794.

165 Brown, , An Appraisal of the Nursing Home Enforcement Process, 17 ARIZ. L. REV. 304, 334 (1975).Google Scholar

166 See, e.g., 105 C.M.R. § 150.018 (I)(Mass. 1979), allowing the state Department of Public Health to revoke or refuse to renew a facility's license, but only after a hearing before a hearings officer.

167 This conclusion is based on the fact that few reported cases deal with license revocations; in contrast, the many cases challenging termination or decertification demonstrate the states’ more frequent use of these procedures. Indeed, the states apparently are reluctant to revoke the license even of a facility that has not complied with certification standards for a long period of time. See, e.g., Town Court Nursing Center, Inc. v. Beal, 586 F.2d 266 (3d Cir. 1978).

168 See e.g., Maxwell v. Wyman, 458 F.2d 1146, 1151 (2d Cir. 1972); Marshall Nursing Homes, Inc. v. Aggrey, 50 Ohio App. 2d 15, 19, 361 N.E.2d 522, 524 (1976).

169 See note 57 supra.

170 Compare 105 C.M.R. §§ 150.001-.017 (Mass. 1979)(containing licensure requirements for licensure of long-term care facilities) with 42 C.F.R. §§ 405.1101-.1137 (1979) (delineating “Conditions of Participation” applied during certification of Medicare and Medicaid providers). Massachusetts’ licensure requirements are more detailed and more rigorous than the federal certification standards.

171 See, e.g., Ross v. Wisconsin Dep't of Health & Social Servs., 369 F. Supp. 570, 572 (E.D. Wis. 1973)(patient removal without notice and a hearing may well limit the efficacy of a license). But see Mid-Atlantic Nephrology Ctr., Ltd. v. Califano, 433 F. Supp. 23 (D. Md. 1977)(certification as an ESRD provider is not a licensure requirement).

172 Mathews v. Eldridge, 424 U.S. 319, 335 (1976).

173 Id. at 343.

174 Id. at 343-44.

175 Goldberg v. Kelly, 397 U.S. 254, 269 (1970).

176 42 C.F.R. § 431.610(f)(1979). The standardized form used by inspection teams requires almost no actual observation of patient care; instead, it monitors a facility's compliance by inspecting documentary material. Butler, supra note 2, at 1333.

177 42 C.F.R. § 431.610(g)(3)(ii)(1979) requires a state survey agency to inspect a facility at least once within six months after an inspection has revealed deficiencies. The HHS Appeals Council recognized this possibility of outdated inspection reports in a case holding that, in addition to the original inspection, HHS must reinspect a nursing home Medicare provider on the date of its proposed termination. North Penn Convalescent Center, Inc., Social Sec. Administration, Bureau of Hearings & Appeals, Order of Appeals Council, No. PS-157 (Apr. 22, 1980) (available from the National Health Lawyers’ Association, note 10 supra). This requirement of reinspection prior to termination apparently has not yet been applied to Medicaid providers.

178 For instance, inspectors may disagree about what constitutes compliance with a given standard. In addition, when inspectors rely only on documentary evidence to prove noncompliance, discrepancies between documentation and actual patient care or operations may exist. See, e.g., Hathaway v. Mathews, 546 F.2d 227, 231 (7th Cir. 1976).

179 Comment, supra note 5, at 461. Although regulations require that a facility establish written policies and procedures ensuring that a patient “[i]s treated with consideration, respect, and full recognition of his dignity and individuality, including privacy in treatment and in care for his personal needs,” 42 C.F.R. § 405.1121(k)(9)(1979), they furnish no definition either of dignity or of individuality. The application of other standards is equally uncertain. See, e.g., id. § 405.1121(k)(7) (a facility must have procedures to ensure that a patient “[i]s free from mental and physical abuse, and free from chemical and (except in emergencies) physical restraints except as authorized in writing by a physician for a specified and limited period of time, or when necessary to protect the patient from injury to himself or to others“); id. § 405.1134(e)(describing standards for patient rooms as including “rooms … designed and equipped for adequate nursing care and the comfort and privacy of patients“). While these and other standards necessarily must include language broad enough to encompass varying types of patient care, this breadth allows varying interpretations, and thus leads to disagreements over what constitutes adequate compliance.

180 Hathaway v. Mathews, 546 F.2d 227, 231 (7th Cir. 1976).

181 Id.

182 See, e.g., Jones v. Ingraham, 45 A.D.2d 851, 358 N.Y.S.2d 494 (1974).

183 The need for an evidentiary hearing is strongest when a government decision relies “on incorrect or misleading factual premises or on misapplication of rules or policies to the facts of particular cases.” Goldberg v. Kelly, 397 U.S. 254, 268 (1970).

184 42 C.F.R. § 442.12(d)(1979).

185 Id. §442.105(b).

186 States that do not afford a pretermination hearing must offer an SNF an informal written reconsideration of a termination decision. 42 C.F.R. § 431.154(a)(1979). This procedure includes written notice of the denial, a statement of the findings supporting it, a reasonable opportunity for the SNF to refute those findings in writing, and a written affirmation or reversal of the denial. Id. at § 431.154(b). The Supreme Court has found similar, but not identical, procedures sufficient to satisfy due process in the context of Social Security disability payments. Mathews v. Eldridge, 424 U.S. 319 (1976).

187 Hypothetical justifications for noncompliance include financial problems or difficulty in obtaining needed qualified personnel. See, e.g., Case v. Weinberger, 523 F.2d 602, 606-07 (2d Cir. 1975). HHS's recognition of the usefulness of a hearing to test such claims is evidenced by its regulations requiring the states to afford at least a posttermination hearing. See 42 C.F.R. § 431.153(a)(1979).

188 A survey agency can certify a noncomplying facility, on the condition that such certification will end if the facility fails to correct its deficiencies within a specified period of time. 42 C.F.R. § 442.111 (1979).

189 For example, see note 9 supra, citing a variety of state regulations and statutes that do not require an exit interview.

190 See notes 30-38 supra and accompanying text.

191 See notes 148-50 supra and accompanying text.

192 Although such practices eventually will lead to deterioration of patient care through the diversion of resources, they might not create immediate, life-threatening situations comparable to those posed by fire and sanitary hazards.

193 Some courts explicitly have noted that their decisions not to require a pretermination hearing in a given case reflect the existence of emergencies arising from violations of fire safety standards. See, e.g., Caton Ridge Nursing Home, Inc. v. Califano, 596 F.2d 608, 609 (4th Cir. 1979); Case v. Weinberger, 523 F.2d 602, 607-08 (2d Cir. (1975). See also Klein v. Califano, 586 F.2d 250, 260 n.17 (3d Cir. 1978); Ross v. Wisconsin Dep't of Health & Social Servs., 369 F. Supp. 570, 572-73 (E.D. Wis. 1973).

194 When an emergency exists, some states allow courts to appoint receivers to operate a nursing home until the problems are corrected, or until the facility can be closed and its patients transferred. See, e.g., CONN. GEN. STAT. ANN. § 19-621 (West Cum. Supp. 1980); N.Y. PUB. HEALTH LAW § 2862(4) (McKinney 1977). For a discussion of the use of such receiverships, see Grad, , Upgrading Health Facilities: Medical Receiverships as an Alternative to License Revocation, 42 U. COLO. L. REV. 419 (1971)Google Scholar. See note 214 infra.

195 For example, the Supreme Court has not required a hearing before government action to protect consumers from improperly stored food, North Amer. Cold Storage Co. v. City of Chicago, 211 U.S. 306 (1908), or from mislabeled drugs, Ewing v. Mytinger & Casselberry, 339 U.S. 594 (1950).

196 Mathews v. Eldridge, 424 U.S. 319, 347-49 (1976). The Court was concerned that provision of a pretermination hearing would make the administration of the Social Security program more costly by requiring HHS to pay benefits pending the hearing, as well as by possibly increasing the number of hearings requested by recipients.

197 See notes 144-71 supra and accompanying text.

198 Arnett v. Kennedy, 416 U.S. 134, 155 (1974).

199 Id. at 152-55, 163.

200 Id. at 163.

201 Several commentators have criticized Arnett on this basis. See Monaghan, , Of “Liberty” and “Property,” 62 CORNELL L. REV. 405, 438 (1977)Google Scholar; L. TRIBE, AMERICAN CONSTITUTIONAL LAW §§ 10-12 (1978); Tushet, The Newer Property: Suggesting The Revival of Substantive Due Process, 1975 SUP. CT. REV. 261; Van, Alstyne, Cracks in the “New Property“: Adjudicative Due Process in the Administrative State, 62 CORNELL L. REV. 445 (1977)Google Scholar. Members of the Supreme Court also have rejected such a result. See, e.g., O'Bannon v. Town Court Nursing Center, 100 S. Ct. 2467 (1980)(Blackmun, J., concurring); Vitek v. Jones, 100 S. Ct. 1254, 1262 (1980).

202 Justice Powell, while agreeing with the result reached in the plurality opinion, stated that its reasoning “misconceive[d] the origin of the right to procedural due process. That right is conferred, not by legislative grace, but by constitutional guarantee. While the legislature may elect not to confer a property interest in federal employment, it may not constitutionally authorize the deprivation of such an interest, once conferred, without appropriate procedural safeguards.” Arnett v. Kennedy, 416 U.S. 134, 167 (1974) (Powell, J., with whom Blackmun, J., joined, concurring in part and concurring in the result in part).

Justice White reached a similar conclusion about the source of procedural due process rights:

The principles of due process “come to us from the law of England … and their requirement was there designed to secure the subject against the arbitrary action of the crown and place him under the protection of the law.” … The “right to be heard before being condemned to suffer grievous loss of any kind, even though it may not involve the stigma and hardships of a criminal conviction, is a principle basic to our Society.“

Id. at 178 (White, J., concurring in part and dissenting in part).

Justice Marshall, also disagreeing with the plurality result, noted that once a property interest is found, the proper analysis is to determine whether the due process clause required “greater procedural protections … than were accorded by the statute.” Id. at 211 (Marshall, J., with whom Douglas, J., and Brennan, J., concurred, dissenting).

203 See, e.g., Vitek v. Jones, 100 S. Ct. 1254, 1262 n.6 (1980); Memphis Light, Gas & Water Div. v. Craft, 436 U.S. 1, 11 n. 11 (1977); Mathews v. Eldridge, 424 U.S. 319, 334, 343 (1976).

Several Supreme Court justices have indicated in separate opinions that they view a majority of the Court as having rejected “an approach that looks no further than the face of the statute to define the scope of protected expectancies.” O'Bannon v. Town Court Nursing Center, Inc., 100 S. Ct. 2467, 2478 (1980)(Blackmun, J., concurring opinion). See, e.g., Bishop v. Wood, 426 U.S. 341, 350-55 (1976)(Brennan, J., with whom Marshall, J., joined, dissenting); id. at 355-61 (White, J., with whom Brennan, J., Marshall, J., and Blackmun, J., joined, dissenting).

204 See, eg., Memphis Light, Gas & Water Div. v. Craft, 436 U.S. 1 (1978). In Memphis Light, the Court required a public utility company to provide an opportunity for an informal meeting between a customer and utility personnel when the utility terminated services to the customer. The Court reached this result, although neither state statutes nor decisional law required a hearing or provided any procedural protection before termination of services. Id. at 9-10. The Court also has rejected the theory behind Arnett in North Georgia Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601, 606 (1975), finding that fourteenth amendment due process may require procedures beyond those that state statutes or other independent sources provide. For a general discussion of the Court's approach to identifying the procedures required in a case after Arnett, see L. TRIBE, AMERICAN CONSTITUTIONAL LAW §§ 10-12 (1978).

205 It should be noted, on the other hand, that even if Arnett were to be followed by the Supreme Court, state courts and legislatures would not violate due process requirements if they afforded more procedural protections than were required by the Supreme Court. See Smith v. Organization of Foster Families, 431 U.S. 816 (1977); United States ex rel. Hoss v. Cuyler, 452 F. Supp. 256 (E.D. Pa. 1978).

206 A provider's rights arise solely from its provider agreement; thus, the nonrenewal of an expired agreement leaves no source on which to base identification of an SNF's property right. Courts have concluded in other contexts that nonrenewal of government contracts after their expiration does not require a hearing before becoming final. E.g., Laketon Asphalt & Refining, Inc. v. United States Dep't of Interior, 476 F. Supp. 668 (N.D. Ind. 1979)(royalty oil contracts); Windham v. City of New York, 405 F. Supp. 872 (S.D.N.Y. 1976)(contracts for city day-care funding).

A court could reach a different conclusion, however, if it found that an understanding or assurance existed that the government would renew a provider's agreement. One court suggested that the government's informal assurances that providers could continue receiving the same level of payments throughout their participation in the Medicaid program was a factor in deciding whether an SNF has a property interest in receiving a particular level of payments. Adams Nursing Home of Williamstown, Inc. v. Mathews, 548 F.2d 1077, 1081 (1st Cir. 1977). In the Medicare context, one court has implied that a government promise, explicit or implicit, to continue the Medicare Part B program could be relevant in determining whether a physician's interest in continued Medicare reimbursement was a property interest. Cervoni v. Secretary of HEW, 581 F.2d 1010, 1018 (1st Cir. 1978). No cases dealing with SNF terminations and nonrenewals mention such promises or assurances on the part of government officials, however. Additionally, both statutes and regulations clearly indicate that HHS and the states can refuse to renew a provider agreement if certain deficiencies exist in a facility. The likelihood that courts will recognize a property interest in the nonrenewal situation, therefore, seems slim.

207 42 C.F.R. § 431.153(b)(1979).

208 See Comment, supra note 1.

209 Although nursing homes occasionally have argued both that due process has been denied their facilities and that patients are entitled to a pretermination or predecertification hearing, Colonial Gardens Nursing Home, Inc. v. Pennsylvania Dep't of Health, 34 Pa. Commw. Ct. 131, 382 A.2d 1273 (1978), it cannot be assumed that a nursing home is an adequate representative of patients’ interests, since the interests of SNFs and of their patients may conflict. See Town Court Nursing Center, Inc. v. Beal, 586 F.2d 280, 288 (3d Cir. 1978), aff'd sub now,. O'Bannon v. Town Court Nursing Center, Inc., 100 S. Ct. 2467 (1980).

210 Comment, supra note 5, at 456-67; Hitov, supra note 13, at 847.

211 See note 8 supra.

212 See Butler, supra note 2, at 1347-52.

213 Id. at 1349-50.

214 For examples of the use of receiverships to improve nursing home operations, see Bracco v. Lackner, 462 F. Supp. 436, 455-57 (N.D. Cal. 1978); Toler v. Lula Toler Convalescing Home, 236 Ark. 24, 364 S.W.2d 680 (1963). See also CONN. GEN. STAT. ANN. §§ 19-621a-621 (West Supp. 1980). For a discussion of the theory behind use of receiverships in nursing homes, see Butler, supra note 2, at 1352-56; Grad, supra note 194.

215 See Lackner v. Perkins, 91 Cal. App. 3d 433, 154 Cal. Rptr. 138 (1979)(upholding the constitutionality of California's citation system, under which nursing facilities are classified and fined according to the number of regulatory violations that inspections have uncovered). See also Butler, supra note 2, at 1356-62.

216 See Butler, supra note 2, at 1362-63.

217 Id. at 1366-67.

218 See Brown, , A Bill of Rights For Nursing Home Patients, 13 TRIAL 22 (1977)Google Scholar; Klenoff, , The Problems of Nursing Homes: Connecticut's Non-Response, 31 AD. L. REV. 1 (1979)Google Scholar; Comment, Nursing Home Access: Making The Patient Bill of Rights Work, 54 J. URB. L. 473 (1977); Comment, Regulation of Nursing Homes—Adequate Protection For The Nation's Elderly?, 8 ST. MARY's LAW J. 309 (1976); Note, Governmental Regulation of Nursing Homes—An Inquiry, 1973 UTAH L. REV. 270; Note, Legal Needs of the Elderly, 30 BAYLOR L. REV. 807 (1978); Note, Nursing Homes: Enforcement of Standards, 9 CLEARINGHOUSE REV. 248 (1975). Perhaps the most attractive alternative, whenever possible, is care provided entirely outside the institutional environment. Butler, , Financing Noninstitutional Long-Term Care Services For The Elderly And Chronically III: Alternatives to Nursing Homes, 13 CLEARINGHOUSE REV. 335 (1979).Google Scholar

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Termination of Skilled Nursing Facility Medicaid Provider Agreements: Procedural Due Process Requirements

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