On remand from the Second Circuit and in a summary judgment decision, Chief Judge Laura Taylor Swain of the federal district court for the Southern District of New York upholds a final rule promulgated in August 2017 permitting nursing home complaint surveys to be conducted without a registered nurse (RN) on the survey team. Avon Nursing and Rehabilitation v. Becerra, No. 18-CV-2390-LTS-SDA (S.D.N.Y. Mar. 31, 2023), 2023 West Law 2751799. Judge Swain bases her decision on the plain and unambiguous language of the Medicaid statute. Alternatively, if the statutory language is ambiguous, the Court holds that the final rule is a reasonable interpretation of the Medicaid statute and entitled to deference under Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984).
The case began in August 2013, when Avon Nursing and Rehabilitation self-reported to the New York State Department of Health that a resident had spilled soup on her lap during dinner and was burned. The state conducted an abbreviated survey at the facility, with two dieticians serving as the survey team. The Centers for Medicare & Medicaid Services (CMS) cited two deficiencies and imposed a civil money penalty (CMP). Finding that the state violated the law by not including an RN on the survey team, an Administrative Law Judge (ALJ) invalidated the CMP. An appellate panel of the Departmental Appeals Board held that the composition of a survey team was not a basis for invalidating a survey and remanded the case. The parties eventually settled their dispute in January 2018.
On May 4, 2017, in response to the ALJ’s decision, CMS published a proposed rule clarifying that the requirement for an RN surveyor applies to surveys conducted under 42 U.S.C. §§1395i-3(g)(2) and 1396r(g)(w) and not to complaint surveys conducted under §§1395i-3(g)(4), 1396r(g)(4). 82 Fed. Reg. 21014, 20187-21088 (May 4, 2017). Final rules were published on August 4, 2017, effective October 1, 2017, 82 Fed. Reg. 36625 (Aug. 4, 2017).
Plaintiffs, a group of individually named nursing facilities in New York and Rhode Island, filed a lawsuit in March 2018, challenging the final rule as arbitrary and capricious and in violation of the plain language of the statute. In September 2019, the district court originally dismissed the complaint for lack of subject matter jurisdiction. The Second Circuit reversed and remanded, holding that plaintiffs’ claims under the Medicaid Act are not barred because the Medicaid Act “does not incorporate the same claim-channeling and jurisdiction-stripping provisions as the Medicare Act.” Avon Nursing and Rehabilitation v. Becerra, Docket No. 1903953, pp. 2-3 (2nd Cir. Apr. 27, 2021).
On remand, the Court describes the issue as one of statutory construction – whether the final rule conflicts with the statute or not. The first question to resolve is whether the “this subsection” language in §§1395i-3(g)(2), 1396r(g)(2) refers to (g)(2) surveys only or to both (g)(2) and (g)(4) surveys.
The Court rejects plaintiffs’ argument that the common hierarchical meaning of the term “subsection” means that “this subsection” applies to (g)(2) and (g)(4) surveys, citing “many indications that Congress chose not to follow this traditional hierarchical scheme when drafting the Medicaid Act [italics in original].” Citing the language of the law, “the Court concludes that the legislative drafting hierarchy cited by Plaintiffs is not determinative of the meaning of the term ‘this subsection’ as used in the registered nurse clause.” The Court finds that “Congress did not use the term ‘subsection’ with its conventional meaning [in the Medicaid Act], and that the meaning of this term varies throughout the statute based on context.”
Subsection (g)(4) states:
“[a] State may maintain and utilize a specialized team (including an attorney, an auditor, and appropriate health care professionals) for the purpose of identifying, surveying, gathering and preserving evidence, and carrying out appropriate enforcement actions against substandard nursing facilities [italics added by Court].
The Court finds that (g)(4) “contains its own unique clause describing the composition of teams, which is at odds with the registered nurse clause at (g)(2).” Moreover, “the contrasting use of the permissive ‘may’ in (g)(4) and the mandatory ‘shall’ in (g)(2) shows that these two subdivisions establish distinct specifications for team composition.” The Court concludes that the RN clause is unambiguous and supports defendants.
Although finding the statutory language unambiguous, the Court applies the second Chevron step of determining whether the agency’s rule was reasonable if the statutory language is ambiguous. The Court finds defendant’s interpretation “certainly reasonable enough to clear this threshold.” The government’s final rule provided a valid rationale – providing states with flexibility in staffing decisions so that, as the Court describes the rule, states “can save resources and perform their duties more efficiently by only including necessary staff members on teams.”
May 4, 2023 – T. Edelman