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California Advocates for Nursing Home Reform, Inc. v. Chapman

United States District Court, Ninth Circuit

June 3, 2013

CALIFORNIA ADVOCATES FOR NURSING HOME REFORM, INC., et al., Plaintiffs,
v.
RON CHAPMAN, et al., Defendants.

ORDER GRANTING MOTIONS TO DISMISS Re: ECF Nos. 8, 16

JON S. TIGAR, District Judge.

In this action for declaratory and injunctive relief, Plaintiffs California Advocates for Nursing Home Reform, Inc. and Gail Dawson allege that the Federal Nursing Home Reform Act preempts California's nursing facility licensing laws. In particular, Plaintiffs challenge the state's approval of a management agreement entered into between Defendants Country Villa East, L.P. and C.V. Westwood Single Purpose Entity, L.L.C., which are licensed by the state Department of Public Health to operate a skilled nursing facility, and Defendant Country Villa Service Corp., a nursing facility management company, on the grounds that the agreements delegate operational control of a skilled nursing facility to a third party in contravention of the Nursing Home Reform Act. The State Defendants and the Country Villa Defendants separately move to dismiss Plaintiffs' Complaint on several grounds. Because Plaintiffs lack Article III standing, the Court will grant the motions.

I. BACKGROUND

A. Statutory and Regulatory Framework

i. Federal Nursing Home Reform Act

The Medicare Act, passed pursuant to Title XIX of the Social Security Act in 1965 and codified at 42 U.S.C. § 1395, et seq., established a federally financed health insurance program for the aged and disabled. 42 U.S.C. § 1395c. The Department of Health and Human Services ("HHS") oversees its implementation. Id . § 1395kk. In 1987, Congress amended the Medicare Act through the Nursing Home Reform Act ("NHRA"), passed as part of the Omnibus Budget Reconciliation Act, Pub. L. No. 100-203, §§ 4201-4218, 1987 U.S.C.C.A.N. (101 Stat.) 1330, 1330-160 to -221. The NHRA provides for the oversight and inspection of Skilled Nursing Facilities ("SNFs") that participate in Medicare and Nursing Facilities ("NFs") that participate in Medicaid. To participate, SNFs and NFs must comply with the requirements set forth at 42 U.S.C. § 1395i-3 and 1396r. The requirements for certification include satisfying certain standards in areas such as "quality of care" and "resident rights." Id . §§ 1395i-3(g), 1396r(g). To that end, HHS enters into agreements with state agencies to conduct surveys of facilities on its behalf. The NHRA authorizes HHS to engage in a variety of enforcement actions against facilities found to be non-compliant. See, e.g., id. § 1395i-3(h)(2)(B)(ii). The Act dictates that "[i]t is the duty and responsibility of the Secretary to assure that requirements which govern the provision of care in skilled nursing facilities under this subchapter, and the enforcement of such requirements, are adequate to protect the health, safety, welfare, and rights of residents and to promote the effective and efficient use of public moneys." Id . § 1395i-3(f)(1).

The administration requirements of the NHRA, id. § 1395i-3(d), form the basis of the complaint in this case. The NHRA provides that "[a] skilled nursing facility must be administered in a manner that enables it to use its resources effectively and efficiently to attain or maintain the highest practicable physical, mental, and psychosocial well-being of each resident." Id . § 1395i-3(d)(1)(A). SNFs must be licensed "under applicable State and local law." Id . § 1395i-3(d)(2)(A). The NHRA requires SNFs to notify the state agency responsible for licensing if a change occurs in:

(i) the persons with an ownership or control interest... in the facility,
(ii) the persons who are officers, directors, agents, or managing employees... of the facility,
(iii) the corporation, association, or other company responsible for the management of the facility, or
(iv) the individual who is the administrator or director of nursing of the facility.

Id. § 1395i-3(d)(1)(B). "[T]he term managing employee' means, with respect to an entity, an individual, including a general manager, business manager, administrator, and director, who exercises operational or managerial control over the entity, or who directly or indirectly conducts the day-to-day operations of the entity." Id . § 1320a-5(b). "The administrator of a skilled nursing facility must meet standards established by the Secretary" through rulemaking, as provided for in section 1395i-3(f)(4). Id . § 1395i-3(d)(1)(C).

ii. Federal Nursing Home Regulations

Pursuant to its statutory directive, HHS promulgated regulations setting forth the standards for certification of SNFs for participation in the Medicare and Medicaid programs, codified at 42 C.F.R. 483.1, et seq. Part 483.75 provides: "A facility must be administered in a manner that enables it to use its resources effectively and efficiently to attain or maintain the highest practicable physical, mental, and psychosocial well-being of each resident." In particular, the regulations state:

(d) Governing body
(1) The facility must have a governing body, or designated persons functioning as a governing body, that is legally responsible for establishing and implementing policies regarding ...

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