Legal Bulletin
Health and Hospital Corporation of Marion County, et al., v. Gorgi Talevski
The Impact the U.S. Supreme Court Could Have on Nursing Homes
The U.S. Supreme Court has agreed to hear a case over whether state-owned nursing homes can face private lawsuits accusing them of violating Medicare and Medicaid rules on patient care. On May 2, 2022, the Court granted a petition to hear the case from the Health and Hospital Corp of Marion County, Indiana (HHC) and a nursing home it operates, Valparaiso Care and Rehabilitation. (Health and Hospital Corporation of Marion County, et al., v. Gorgi Talevski). They are asking the court to overturn an appeals court ruling that allowed a lawsuit on behalf of a nursing home resident.
The 2019 Lawsuit
In her 2019 lawsuit, Ivanka Talevski said her husband was subjected to harmful psychotropic drugs and inappropriately transferred to an all-male facility in violation of the Federal Nursing Home Reform Act (FHNRA), the 1987 law that established a "bill of rights" for residents of nursing homes receiving Medicare and Medicaid funding.
Mrs. Talevski alleged that, because HHC was publicly owned, she could sue for damages under Section 1983 of the U.S. Code, which allows individuals to sue government entities that violate their legal rights.
FNHRA provides comprehensive guidance to the states on the regulation and operation of nursing homes, and in return, the states receive Medicaid funding. There are two directives to nursing homes that are at issue in Talevski. First, “a nursing facility must protect and promote the rights of each resident, including . . . [t]he right to be free from physical or chemical restraints” subject to certain circumstances. 42 U.S.C. § 1396r(c)(1)(A)(ii). Second, a nursing facility “must permit each resident to remain in the facility and must not transfer or discharge the resident from the facility unless [certain criteria are met].” 42 U.S.C. § 1396r(c)(2).
HHC has maintained that Talevski's treatment was related to his violent behavior toward staff and other residents. It moved to dismiss the case, arguing that the FHNRA did not allow individuals to sue for violations under the law.
The United States District Court Ruling
U.S. District Judge James Moody agreed, finding that the federal rules for Medicare and Medicaid recipients stemmed from the government's spending power, and should be understood as contracts between the government and providers that do not allow for third-party claims.
7th Circuit Court of Appeals Ruling
The 7th U.S. Circuit Court of Appeals revived the case, however, finding that FHNRA's language did support such claims. It noted that the Supreme Court had allowed private lawsuits stemming from the government's spending power before, most recently in a 1990 decision, Wilder v. Virginia Hospital Association, allowing hospitals to sue states over Medicaid reimbursement rates.
The Court utilized a balancing test to conclude that Congress intended these rights under FNHRA to benefit nursing home residents; that the rights they protect fall within the judiciary’s interpretive competence (i.e., “it does not take a medical review board to determine whether” rights to be free from chemical restraints or involuntary transfer have been violated); and that the rights are mandatory rather than precatory. The Court then held that these rights under FNHRA were presumptively enforceable under sec. 1983, and that the nursing home failed to rebut the presumption.
The 3rd and 9th circuits also have held that residents can sue under Section 1983 for violations of those rights.
The U.S. Supreme Court
HHC and Valparaiso argued to the Supreme Court that by allowing the lawsuit to go forward the 7th Circuit had effectively "federalized" malpractice law for public nursing homes, overriding state malpractice laws that often cap damages and attorneys' fees.
Indiana and 16 other states submitted a brief supporting the petitioners, as did long-term care industry group American Health Care Association and its Indiana affiliate
In asking the Supreme Court to accept the petition, HHC argued that nursing facility residents and their families should not be permitted to use sec. 1983 and FNHRA as a means of “second guessing garden-variety treatment and transfer decisions made by physicians and nursing facility administrators.” HHC argued that third-parties should not be permitted to sue for monetary damages under Spending Clause legislation unless Congress has expressly authorized it, and that right is not explicit in FNHRA.
HHC raised several important policy concerns in its petition. First, it argued that FNHRA and sec. 1983 can be used by plaintiffs to circumvent important state law, such as those damages caps in medical malpractice cases. Indiana has capped damages at $1.8M and Wisconsin has a cap on noneconomic damages at $750,000. Indiana also has a cap on recovery of attorneys’ fees at 32%. Filing a lawsuit pursuant to FNHRA and sec. 1983 arguably allows plaintiffs uncapped damages and virtually no limit on attorneys’ fee awards. HHC also argued that private rights under FNHRA threatens the quality of care in nursing facilities, which arguably will cause rapidly increasing liability insurance rates against a backdrop of chronic underfunding.
The Stakes for Providers and Insurers
The dispute in this case essentially comes down to a single question, and one that has nothing to do with the care of the nursing home patient behind the lawsuit.
Instead, it's about whether Mr. Talevski — or any other citizen — has the right to sue a government-owned nursing home for violating care standards set out in the Federal Nursing Home Reform Act.
Such lawsuits are not common. They are filed under a section of U.S. code that allows individuals to seek damages from government entities for civil rights violations. The lawsuits allow for substantial financial awards, including attorney fees, and provide another option beyond state malpractice claims for holding nursing homes accountable.
The issue is of particular interest in Indiana, which has about half of the 1,007 government-owned nursing homes in the United States.
If the Supreme Court lets the appellate ruling stand, Indiana's nursing homes and the public hospitals that own them could face a new level of financial exposure from federal lawsuits in the future.
Until then, we are expecting an increased federal litigation in states like Indiana, Wisconsin, and others with damages caps or other limitations not found in federal law. Arguably this was not anticipated by the states, nursing homes, or their liability insurers. If plaintiffs can craft a plausible argument that their rights under FNHRA were violated, they may be able to circumvent state statutory caps on damages and attorneys’ fee awards. It is likely they will attempt these lawsuits in jurisdictions outside of the Seventh Circuit.
Defense counsel throughout the country will need to be prepared to distinguish the Seventh Circuit’s opinion.
There are several other enumerated rights in FNHRA besides chemical restraints and involuntary transfer, but those were not raised by the plaintiff in Talevski.
Nursing homes must be prepared for federal lawsuits based upon all the provisions of FNHRA, and defense counsel should evaluate each complaint to see whether any such violations are arguably distinguishable based on the balancing test set forth in Talevski.
Talevski also has an impact on what nursing homes may have thought of as purely administrative issues. In the past, facilities faced appeals that were handled at administrative hearings. Now, the facility must consider that it may also need to defend a lawsuit for damages, which may also be expensive in terms of defense costs, awards of attorneys’ fees, and potential future impact on insurance premium payments.
Regardless of the outcome, for example, of an involuntary discharge appeal, a nursing home could face federal litigation brought by a private plaintiff in addition to defending a state administrative appeal. A nursing home seeking to preserve its right to a hearing before a court will continue to be required to exhaust its administrative remedies before invoking state or federal court jurisdiction. There is no similar requirement imposed on nursing home plaintiffs who will be allowed access to the federal courts on claims that "rights" were violated even if state administrative proceedings remain pending or were perhaps never pursued at all. Defense attorneys for nursing homes must be aware that a state administrative action against a nursing home may now only be a practice exercise for a complex federal action which will be expensive to defend, and which may produce an award of attorney fees to the complainant.
The nursing home in Talevski was owned by a government entity, so arguably the case may only apply to those government-owned nursing homes. The distinction should be raised by private nursing homes once new federal suits are filed. The impact that Talevski will have on doctors that practice in nursing homes is unclear. Doctors make the decisions on chemical restraints and transfers, and they are usually independent contractors of the facilities. There is nothing in Talevski or FNHRA that grants a private federal cause of action against those doctors, and plaintiffs typically prefer to pursue lawsuits against the facility only for various reasons. But the nursing homes will be forced to react to private federal lawsuits that in effect are second-guessing the decisions by those doctors, which may impact their relationship with the facility and the way they practice medicine.
A definitive ruling will either foreclose future nursing home lawsuits based on civil rights claims or open a clear and new path to more. Even more, the impact could extend beyond just nursing home cases to other issues involving government entities and alleged civil rights violations.
No time frame has been established for the U.S. Supreme Court argument. We’ll continue to update on this legal bulletin issue. Any questions or comments, we always welcome them.
