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From Health Law Daily, August 19, 2015

SNFs sent back to drawing board with insufficient Medicaid complaint

By Mary Damitio, J.D.

Three skilled nursing facilities (SNFs) who filed suit against the Alabama Medicaid Agency (AMA) based on its refusal to hold fair hearings on benefits determinations for three of their residents did not sufficiently state a claim for relief because their complaint failed to allege separate counts for relief, specific facts as to each resident, and the legal basis for each claim, a district court ruled in dismissing most of the claims without prejudice. However, despite the insufficiency of their complaint, the SNFs were afforded an opportunity to again amend their complaint to bring it in compliance with federal pleading standards (Sunbridge Healthcare LLC v. Azar, August 17, 2015, Albritton, W.).

Background. Carl Carter, Eddie Adams, and Lavelle Barnes (the residents) were admitted to River City, Merry Wood Lodge, and Lynwood Nursing Home, which are SNFs located in Alabama. The residents were alleged to be mentally incompetent to manage their affairs. The SNFs filed applications for Medicaid benefits on their behalf and the AMA sent various responses to the three residents. The AMA sent a notice of denial directly to Carter, who did not have an authorized agent to handle his affairs, and an eligibility determination directly to Adams, which contained no information about her appeal rights. The AMA imposed a penalty on the third resident, Barnes, based on a previous transfer of property. When the SNFs filed appeals for all three residents, the AMA refused to hold hearings because the appeals were filed after the 60-day appeal deadline.

Lawsuit. Sunbridge Healthcare LLC d/b/a River City Center, Sunbridge Healthcare LLC d/b/a Merry Wood Lodge, and Diversicare Healthcare Services, Inc. d/b/a Lynwood Nursing Home filed suit on behalf of the residents against Stephanie McGee Azar in her official capacity as Acting Commissioner of the AMA. The SNFs subsequently filed a second amended complaint for Declaratory Judgment seeking a declaration that the AMA failed to hold hearings in violation of the Medicaid Act, federal regulations, the Americans with Disabilities Act (ADA), and the privileges and immunities guaranteed under the U.S. Constitution. The AMA moved for dismissal of the complaint, or, in the alternative, for partial summary judgment.

Medicaid claims. The SNFs alleged that the hearing denials violated federal law, which requires that individuals whose claims for medical assistance under a state Medicaid plan are denied or are not acted upon with “reasonable promptness,” must be afforded an opportunity to have a fair hearing before the state agency (42 U.S.C. § 1396a(a)(3)).

Adams. The claims relating to Adams were dismissed as moot because the AMA had issued a Notice of Award that closed the gap in coverage that was challenged in the suit. However, the court provided the SNFs an opportunity to amend their complaint to demonstrate how the Adams claims were not moot.

Carter. The AMA argued that the claims relating to Carter should be dismissed or that summary judgment should be granted because the SNF or another representative was acting on Carter’s behalf who failed to file a timely appeal. The SNFs argued that the AMA’s Notice of Denial was defective because it was sent directly to Carter, but those facts were not alleged in their Second Amended Complaint. The court provided the SNFs another opportunity to allege facts relating to AMA’s defective notice and cautioned them to allege specific claims as to each resident in separate counts.

Barnes. The SNFs’ complaint did not plead separate counts for relief. As a result, the court could not determine what violations of Barnes rights were being alleged. The court allowed the SNFs to amend their complaint to clarify the allegations as to each resident if they believed they could state a claim for relief.

Constitutional claims. The SNFs’ complaint referred to various provisions of the U.S. Constitution and 42 U.S.C. § 1983, but failed to allege separate counts for relief. The SNFs’ claims relating to privileges and immunities were dismissed, but they were given an opportunity to bring due process claims and ADA claims in their amended complaint. However, the court again cautioned them that they must set forth the basis for each claim in separate counts.

The case is No. 2:15cv170-WHA.

Attorneys: Kyla Groff Kelim (Aging in Alabama) and Mary H. Watters (Schutjer Bogar LLC) for Sunbridge Healthcare LLC d/b/a River City Center, Sunbridge Healthcare LLC d/b/a Merry Wood Lodge and Diversicare Healthcare Services, Inc. d/b/a Lynwood Nursing Home. James William Davis, State of Alabama, Office of the Attorney General and Mary-Frank Brown, Alabama Medicaid Agency, for Stephanie McGee Azar.

Companies: Sunbridge Healthcare LLC d/b/a River City Center; Sunbridge Healthcare LLC d/b/a Merry Wood Lodge; Diversicare Healthcare Services, Inc. d/b/a Lynwood Nursing Home

MainStory: TopStory MedicaidNews SNFNews EligibilityNews AlabamaNews

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