Avon Nursing and Rehabilitation v. Azar

Background

Avon Nursing and Rehabilitation and other skilled nursing facilities challenged a 2017 rule issued by the Centers for Medicare and Medicaid Services, a division of the Department of Health and Human Services. The rule addressed the composition of teams conducting inspections of nursing facilities participating in Medicaid.

The dispute arose after the New York State Department of Health investigated a report that a resident at Avon’s facility had been burned by spilled soup. The state used a team of two dieticians, neither of whom was a registered nurse. The state survey team and the federal agency concluded that Avon was not in substantial compliance with two Medicaid participation requirements, and the federal agency imposed a civil monetary penalty. Avon challenged the penalty in an administrative proceeding. An administrative law judge ruled that the inspection violated Medicaid requirements because the team lacked a registered nurse, but the Departmental Appeals Board later vacated that ruling and sent the matter back for further proceedings. The administrative proceeding was eventually settled.

In 2017, the Department of Health and Human Services adopted the Final Rule. It provided that surveys conducted under 42 U.S.C. § 1396r(g)(2) must use a team that includes a registered nurse, while investigations of complaints and on-site monitoring under § 1396r(g)(4) may use a specialized team that includes appropriate health care professionals without a mandatory registered-nurse requirement.

The facilities sued under the Administrative Procedure Act, arguing that the Final Rule was arbitrary and capricious and conflicted with the Medicaid Act. The district court initially dismissed the case for lack of subject-matter jurisdiction based on failure to complete administrative proceedings. The Court of Appeals reversed that ruling as to the Medicaid claims and sent the case back for a decision on the merits.

The parties’ arguments

The facilities and the Secretary filed cross-motions for summary judgment, a procedure allowing judgment as a matter of law when there is no genuine dispute about a material fact. The facilities asked the court to vacate the Final Rule. The Secretary asked the court to uphold the rule and his interpretation of the Medicaid Act.

The relevant statutory language states that surveys under “this subsection” must be conducted by a multidisciplinary team including a registered professional nurse. The facilities argued that “this subsection” refers to all of § 1396r(g), including complaint investigations under § 1396r(g)(4). The Secretary argued that it refers only to § 1396r(g)(2), which covers ordinary annual and extended surveys, not complaint investigations under § 1396r(g)(4).

Court’s analysis

Judge Laura Taylor Swain concluded that the registered-nurse requirement applies only to surveys conducted under § 1396r(g)(2). She reasoned that the Medicaid Act uses the word “subsection” inconsistently and therefore the term could not be interpreted solely through the usual drafting hierarchy.

The court also relied on the structure of the statute. Section 1396r(g)(2) is titled “Surveys,” while § 1396r(g)(4) separately addresses “Investigation of complaints and monitoring nursing facility compliance.” The two provisions use different language about team composition: § 1396r(g)(2) says a team “shall” include a registered nurse, while § 1396r(g)(4) says a state “may” use a specialized team that includes appropriate health care professionals. The court concluded that these provisions establish different staffing rules.

The court further applied the principle that statutes should be read so that no provision becomes unnecessary. If the registered-nurse requirement applied to every team under § 1396r(g), the separate, permissive staffing provision for complaint investigations in § 1396r(g)(4) would have little or no independent effect.

Because the court found the statute unambiguous, it held that the Secretary was entitled to judgment as a matter of law without needing to defer to the agency’s interpretation. The court nevertheless added that, even if the statute were ambiguous, the Final Rule would be a reasonable interpretation. The rule allows state agencies to choose professionals suited to the complaint, such as when a complaint concerns a broken heater or food quality rather than a medical issue.

The court rejected the facilities’ argument that the rule was internally inconsistent because complaints may lead to standard or abbreviated standard surveys. It explained that abbreviated surveys can arise from different circumstances. Surveys based on changes in ownership or other grounds may fall under § 1396r(g)(2) and require a registered nurse, while abbreviated surveys based on complaints fall under § 1396r(g)(4) and use the flexible staffing rule.

Disposition

The court granted the Secretary’s motion for summary judgment and denied the facilities’ motion for summary judgment. The Clerk of Court was directed to enter judgment dismissing the complaint. The order resolved docket entries 89 and 95.