The opinion of the court was delivered by: Charles R. Breyer, United States District Judge.
This action arises out of the Department of Health and Human Services imposition of monetary sanctions against plaintiff for its failure to comply with federal regulations governing the care and treatment of Medicare nursing home patients. Now pending before the Court are the state defendants' motion to dismiss and the federal defendants' motion to dismiss. The Court previously concluded that oral argument was unnecessary and took the motions under submission.
Medicare is a federally-administered program that provides payment for medical services for certain elderly or disabled persons. 42 U.S.C. § 426, § 1395c. The Medicare program is administered by the Centers for Medicare and Medicaid Services ("CMS"), an operating division within the federal Department of Health and Human Services ("DHHS"). Medicare provides coverage for certain nursing home services. 42 U.S.C. § 1395d(a)(2); 42 U.S.C. § 1396d(a)(4); Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1, 6 (2000). Payment for nursing home services is made directly to the nursing home.
In order for a nursing home to qualify for payment under the Medicare program, the home must entered into a provider agreement with DHHS, and it must comply with numerous statutory and regulatory requirements. See Shalala, 529 U.S. at 6. A state agency with whom DHHS has contracted conducts on-site surveys of the participating nursing homes to determine whether the homes are in substantial compliance with Medicare requirements. 42 U.S.C. § 1395aa(a). The state agency forwards its survey results and recommendations to CMS. If the state agency found violations of the regulations (deficiencies), CMS may impose various sanctions or remedies, including monetary penalties and termination of the facility's participation in the programs. See Shalala, 529 U.S. at 6; 42 U.S.C. § 1395i-3 (h); 42 U.S.C. § 1395cc(b)(2); 42 U.S.C. § 1396r(h).
If CMS decides to impose sanctions upon a home for substantial noncompliance, it must issue a notice to the nursing home. The notice must include, among other things, a description of the nature of the noncompliance, the dates of the noncompliance, factors that were considered in determining the sanction, and instructions for responding to the notice, including notification of the home's right to a hearing. 42 U.S.C. § 1395i-3 (h); 42 U.S.C. § 1395cc(b)(2); 42 U.S.C. § 1396r(h); 42 C.F.R. § 488.434. Regulations require that a facility be given the opportunity for informal dispute resolution to dispute the state agency's findings with the state agency.
If the informal dispute resolution proceeding is not resolved to the satisfaction of the nursing home, it may appeal a finding of noncompliance and imposition of sanctions to the Civil Remedies Division of the Departmental Appeals Board of DHHS ("DAB"). The nursing home may request a full evidentiary hearing before an administrative law judge ("ALJ"). 42 C.F.R. § 498.1, § 498.5, § 498.40(a). The appeal (request for a hearing) must be filed within 60 days of the date the home received the sanction notice unless that date is extended by an ALJ or "good cause shown." 42 C.F.R. § 498.40.
After the ALJ issues a written decision, either party may request review by the DAB's Appellate Division. 42 C.F.R. § 498.5 (c) and § 498.80. After the Appellate Division issues its decision, the nursing home may appeal by initiating an action in federal court. An appeal of a determination imposing a civil monetary penalty must be filed with the United States Court of Appeals within 60 days. 42 U.S.C. § 1320a-7a(e). Review of a DHHS determination that does not impose a monetary penalty is in the district courts. 42 U.S.C. § 405 (g).
Plaintiff Nursing Inn of Menlo Park ("Nursing Inn") was a Medicare-certified long-term care nursing facility located in Menlo Park, California. On August 13, 1999, the California Department of Health Services ("California Health Services"), operating pursuant to a contract with DHHS, completed a Medicare certification survey of Nursing Inn. California Health Services found that Nursing Inn was not in substantial compliance with certain federal regulations and issued a statement identifying 27 separate deficiencies. One month later, on September 16, 1999, CMS notified Nursing Inn in writing (the "September 16 Notice") that based on California Health Service's findings it was imposing the following remedies/sanctions: (1) a civil monetary penalty of $1,000.00 per day effective August 13, 1999; (2) denial of Medicare payments for new admissions effective October 1, 1999; and (3) denial of nursing aid training (after the current class). The September 16 Notice specifically advised Nursing Inn that it had a right to appeal the finding of noncompliance, but that to do so it must file its appeal within 60 days of the date of receipt of the notice. Shortly after receiving the September 16 Notice Nursing Inn utilized the informal dispute resolution process. On October 7, 1999, California Health Services notified Nursing Inn that as a result of that process it was deleting one deficiency finding and reducing the scope and severity of another finding. The findings with respect to the remaining 25 deficiencies remained the same.
California Health Services completed a follow-up survey of Nursing Inn on December 10, 1999 — after the 60 days for filing an appeal of the September 16 Notice had expired. California Health Services found that Nursing Inn was still not in substantial compliance with certain federal regulations. On January 7, 2000, CMS notified Nursing Inn that the remedies imposed in the September 16 Notice remained in effect. CMS also advised Nursing Inn that since it had not appealed the September 16 Notice, the monetary penalty of $1,000 per day from August 13 through December 9 (for a total of $119,000) was due and payable on January 22, 2000.
One week later California Health Services notified Nursing Inn that the Plan of Correction it had submitted to address the deficiencies identified during the December 10, 1999 survey was not acceptable. ...