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From Health Law Daily, June 5, 2013

Advocacy group for SNF residents lacks standing to challenge California’s SNF licensing laws

By Paul Clark

Claims by a nonprofit advocacy organization for nursing home residents and the relative of a woman who died at a skilled nursing facility (SNF) that the federal Nursing Home Reform Act (NHRA) preempts California’s nursing facility licensing laws were dismissed because the organization did not have standing to bring the suit (California Advocates for Nursing Home Reform v Chapman, June 3, 2013, Tigar, J). California Advocates for Nursing Home Reform claimed that California’s approval of a management agreement entered into between two SNFs licensed by the state, and a nursing facility management company, delegated operational control of a SNF to a third party in contravention of the NHRA.

Background. The NHRA, enacted in 1987 as secs. 4201–4218 of the Omnibus Budget Reconciliation Act (P.L. 100-203), provides for the oversight and inspection of SNFs that participate in Medicare and nursing facilities (NFs) that participate in Medicaid. HHS enters into agreements with state agencies to conduct surveys of facilities on its behalf, and the NHRA authorizes HHS to engage in a variety of enforcement actions against facilities found to be non-compliant with federal laws and regulations.

The California Department of Public Health (CDPH) is the agency responsible for licensing SNFs in California. Any entity seeking to manage a health facility must seek approval through a CDPH application process. By permitting the licensing of management companies, California permits the entity licensed to operate the facility to delegate managerial control over it to a third party.

Gail Dawson is a Nevada resident and niece of Minnie Bell Green, who died at a SNF operated by Country Villa Service Corp. (CVSC) (the management company) and Country Villa East, L.P., and C.V. Westwood Single Purpose Entity, L.L.C (the two SNFs). The complaint alleges that Ms. Green received inadequate care, was subjected to cruel and inhumane conditions, suffered, sickened, and died while a patient at the facility.

The complaint noted that CVSC entered into management agreements with business entities that operate more than 40 SNFs in California, and that CVSC takes “operational control” of the facilities. The complaint further asserted that management agreements that delegate operational control of nursing facilities violate the NHRA and its implementing regulations because SNFs and NFs participating in Medicare and Medicaid must be “under the operational control of and managed by an Administrator licensed by the State of California and employed by the licensee (and not by an outside management company),” and because the Administrator must be “directed by and answerable only to the skilled nursing facility’s own ‘governing body.’”

Dawson and the advocacy group sought an order that included a finding that the provisions of the California statutory framework for licensing nursing facilities are preempted by the NHRA and its implementing regulations; and a declaration that the management agreements the nursing facilities had with CVSC are legally invalid.

Court’s reasoning. In dismissing the complaint, the court stated that Dawson and the advocacy group failed “to allege a sufficiently direct injury, and the interests they are asserting would not be redressed by a favorable decision, because they do not identify any injury suffered by residents of nursing facilities resulting from the execution of third-party management agreements.” The court further stated, “If a nursing home resident receives substandard care, they may have a claim against the facility that provided that care, or the owners or managers of that facility — but that is not the claim Plaintiffs plead here. Because Plaintiffs do not adequately plead that substandard care at a nursing facility is more likely simply by virtue of that facility’s execution of a management services contract, they have not established injury in fact or causation.”

The case number is 12-cv-06408-JST.

Attorneys: Russell Steven Balisok (Balisok and Associates) for California Advocates for Nursing Home Reform, Inc. Nimrod Pitsker Elias, California Attorney General’s Office, for Ron Chapman of the California Department of Public Health and Edmund G. Brown, Jr., Governor of the State of California. William Crawford Wilson (Wilson Getty LLP) for Country Villa Service Corp. and Country Villa East, LP. Dawn Arnold Phleger for C.V. Westwood Single Purpose Entity, LLC.

Companies: California Advocates for Nursing Home Reform, Inc.; California Department of Public Health; State of California; Country Villa Service Corp.; Country Villa East, LP; C.V. Westwood Single Purpose Entity, LLC

MainStory: TopStory CaseDecisions SNFNews CaliforniaNews

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