AMERICAN HEALTH LAWYERS
Long Term Care
Barbara L. Miltenberger
Task Force Chair
Husch & Eppenberger LLC
Jefferson City, MO
Hinshaw & Culbertson, Chicago, IL
LONG TERM CARE
Year in Review 2005-2006
I. ARBITRATION & ADMISSION AGREEMENTS
California Appeals Court Compels Arbitration When Daughter Signs
Admission Agreement Pursuant to a Durable Power of Attorney
A California appeals court found that an attorney-in-fact under a durable power of
attorney (DPOA) was authorized to sign on behalf of her mother two arbitration
agreements during the nursing home admissions process, and therefore ordered
the case referred to binding arbitration. The DPOA authorized the attorney-in-fact
(Garrison) to act on behalf of her mother, Ms. Needham, to make all healthcare
decisions for her to the extent Needhem would make them for herself if she had
the capacity, and granted Garrison all rights as an agent including deciding
where Needham should live. To the extent Needham’s wishes were not known,
the attorney-in-fact was authorized to make decisions in accordance with what
the agent thought to be in Needham’s best interest. Nowhere in the DPOA was
Garrison’s authority as Needham’s agent restricted from entering into an
arbitration agreement on Needham’s behalf.
The arbitration agreements contained the state required language in boldface
and all capital letters that by signing the arbitration agreement the resident did
not waive his/her right to bring a lawsuit in court against a facility for violations of
the Patient’s Bill of Rights, concerning transfer or discharge, and claims relating
to disputes about payments owed the facility. The arbitration agreements also
required that the arbitration be conducted by one or more arbitrators selected by
the American Arbitration Association in Los Angeles and pursuant to California
law. The court did not find persuasive Garrison’s arguments that no one told her
that signing the arbitration agreement was optional or could be rescinded within
thirty days, that she did not have her glasses with her so she was unable to read
the document, and was distraught and preoccupied by her mother’s health and
was in no condition to make rational informed decisions when she signed the
admitting documents. Instead, the appeals court reaffirmed California black letter
law, which holds that an agent or fiduciary that contracts for medical treatment on
behalf of the beneficiary retains the authority to enter into an agreement requiring
arbitration for medical claims.
Garrison v. Superior Court, No. B179957, 2005 WL 2064077 (Cal. Ct. App.
Aug. 29, 2005).
An arbitration agreement will be upheld even though signed by an attorney-in-
fact if it contains the appropriate language and the DPOA gives the attorney-in-
fact broad powers.
Texas Supreme Court Holds Payment of Medicare Funds Sufficient to
Invoke the Federal Arbitration Act
The family of a deceased resident filed sued a nursing home under the Texas
Wrongful Death Act and the Texas Survival Statute. Plaintiff asserted that the
arbitration agreement at issue violated the section of the Texas General
Arbitration Act (TAA) requiring the signature of a party's counsel on arbitration
agreements in personal injury cases. The nursing home moved to compel
arbitration pursuant to the Federal Arbitration Act (FAA). The Texas Supreme
Court compelled arbitration, finding that Medicare payments made on behalf of
the resident were sufficient to establish interstate commerce necessary to invoke
preemption by the FAA.
The court dismissed plaintiff’s other arguments against enforcement of the
arbitration agreement, holding that the nursing home’s failure to raise preemption
at trial did not prevent it from raising it in its motion to reconsider, noting that the
home’s actions did not evince intent to waive its arbitration rights. The court also
held that the nursing home did not waive its right to arbitration by concealing the
arbitration agreement in contravention of a Texas statute requiring a party to
produce medical records upon written request by another party.
In re Nexion Heath at Humble, Inc., No. 04-0360 (Tex. May 27, 2005).
This case will be of significant interest to many providers since it reinforces
similar holdings in other states.
Texas Appeal Court Holds McCarran-Ferguson Act Prevented Preemption
by FAA of State Statute on Arbitration Notice Requirements
Nursing home Southfield Healthcare Center sought to enforce an arbitration
agreement signed by a deceased resident’s wife. The nursing home argued that
the FAA controlled as agreed to in the signed arbitration agreement and
preempted any condition required under the Texas General Arbitration Act (TAA),
which had been revised at the time of the hearing. Plaintiff Kepka argued that the
McCarran-Ferguson Act (MFA) “reverse preempts” the FAA, preventing the FAA
from preempting the former sections of the TAA. The MFA prevents Congress
from enacting laws that impair or invalidate a state’s ability to regulate insurance.
Reading the former TAA statute as part of the whole purpose of the law, rather
than in a vacuum as suggested by Southfield, the court found that the statute
was enacted to control escalating costs of professional medical liability insurance
through modifications of the insurance, tort, and medical malpractice systems.
With this finding, the court held that the MFA prevents the FAA from preempting
Texas’ notice requirement for an arbitration agreement. The court also held that
Kepka signed the agreements in her representative capacity only when she
signed on a line that indicated the signature was by “Resident and/or the Legal
Representative.” Therefore, her individual claims were not subject to arbitration
In re Kepka, 178 S.W.3d (Tex. App. July 28, 2005).
Florida Appeals Court Holds Arbitration Agreement Void as Contrary to
Public Policy, Which Differs from Finding It Unconscionable
Husband of a senile resident signed an arbitration agreement that required
binding arbitration administered by the National Health Lawyers Association
(NHLA) (now the American Health Lawyers Association). The NHLA’s
procedures required clear and convincing evidence of intentional or reckless
misconduct. The Florida District Court of Appeals found these procedures
effectively eliminated recovery for negligence provided for in the Nursing Home
Residents Act. As such, the procedures, and hence the agreement, defeated the
remedial provisions of the statute, violated public policy, and were unenforceable.
The court also refused to uphold the requirement to arbitrate by severing the
procedures section. The court made clear that its decision to hold a contractual
provision unenforceable for violating public policy is separate and distinct from
finding a provision unenforceable because it is unconscionable.
Finally, the court also noted that the husband’s authority to sign the arbitration
agreement was at best as a statutory healthcare proxy. That statute did not
authorize a proxy to make decisions or enter into contracts not strictly related to
healthcare matters. The court held a statutory proxy cannot waive a person’s
Blankfeld v. Richmond Health Care, Inc., 902 So.2d 296 (Fla. Dist. Ct. App.
May 25, 2005).
These two cases (In re Kapka and Blankfeld), although one was decided under
law no longer in effect, represent the creative arguments made to avoid
arbitration. All possible arguments against enforcement under state and federal
law should be considered and addressed if possible when drafting such clauses.
Mississippi Supreme Court Holds FAA Applicable to Nursing Facility
Admission Agreement and Partially Enforces Arbitration Provisions in
For some reason, the facility resident and the responsible party signed two
different admission agreements, one on the date of admission and another two
weeks later. The arbitration clauses in the two agreements differed. Among other
differences, the clause in the second agreement disallowed punitive damages
and limited recovery for actual damages.
The responsible party later filed several claims against the facility and other
individual and corporate defendants relating to the resident’s care, including
negligence, medical malpractice, fraud, breach of fiduciary duty, and statutory
survival and wrongful death claims. The facility moved to stay proceedings and to
enforce the second arbitration clause.
The court held that admission agreements between a facility and its residents
affect interstate commerce and, therefore, the FAA applies to their arbitration
agreements. However, the facility could not establish any instance when a
resident was admitted to the facility after declining to agree to arbitration. Thus,
the court found that the contract was one of adhesion but that the adhesive
nature of the contract did not per se render the contract unconscionable or
invalidate the arbitration clause.
The court examined the circumstances, including the lack of exigency in the
resident’s admission and the visual presentation of the arbitration clause in the
agreement, and held that the arbitration clause was procedurally valid. In so
holding, the court considered the placement of the arbitration clause within the
agreement, that it appeared in bold-faced type, that the type size was equal or
greater than that in the rest of the document, and the proximity of the clause to
the signature lines for the resident and responsible party, who executed both
In evaluating the substantive validity of the arbitration clause, the court held that
it was enforceable as it merely provided a mutually agreeable forum for the
parties. The limited liability and punitive damages provisions, however, were
substantively unconscionable and, as a result, unenforceable. The limited liability
provision limited the recovery on behalf of the resident but not that of the facility
and was therefore “unilaterally oppressive in its effect.” Similarly, although both
the facility and the resident waived the right to recover punitive damages under
the arbitration clause, the court found the benefit of the clause inured solely to
the facility as a practical matter.
Based on precedent, statute, and basic contract law principles, the court
invalidated only the unconscionable provisions of the agreements in lieu of
striking the agreements in their entirety.
Vicksburg Partners, L.P. v. Stephens, 911 So.2d 507 (Miss. Sept. 22, 2005).
This approach to ascertaining the validity of an arbitration clause looks beyond
merely whether a contract of adhesion exists by continuing to evaluate the
arbitration clause itself and enforcing its procedurally and substantively valid
Missouri Appeals Court Says Unambiguous Admission Contract Requires
Payment by Responsible Party
Following a resident’s death the nursing home sent the daughter attorney-in-fact
under a durable power of attorney a statement for $14,773.23 for care provided
to her father. The daughter returned the statement marked “Deceased, not
responsible for bills.” The nursing facility filed suit. Upon the resident’s admission,
the attorney-in-fact signed the facility’s “Conditions of Admission” and agreed to
its terms, including “whether he/she signs as agent or as resident . . . he/she
hereby individually obligates himself/herself to pay the account of the facility in
full” and “to pay all cost(s), charges and expense incurred on behalf of the
The court held that the contract should be enforced as written because, based on
the plain and ordinary meaning of its language, the financial terms in the
Conditions of Admission were neither uncertain nor capable of conflicting
Care Center of Kansas City v. Horton, 173 S.W.3d 353 (Mo. Ct. App. Sept. 20,
This case was defended pro se by the resident’s daughter/attorney-in-fact under
the resident’s durable power of attorney.
Mississippi Supreme Court Holds Arbitration Clause Is Not Enforceable If
Resident or Resident’s Legal Authority Does Not Sign Specific Arbitration
We Care Homes’ admission agreement contained an arbitration clause. The
arbitration portion of the admission agreement had a place for the resident or
representative to initial that they had read the arbitration clause and contained a
separate signature line indicating agreement with the arbitration clause. The
resident’s legal conservator signed the admission agreement at the end of the
contract on page seven but did not sign the arbitration section on page five. The
lower court and the court of appeals found that because the conservator did not
sign the on the signature line for the arbitration section, the conservator could not
be compelled to arbitrate her claims of negligence and gross negligence. The
high court affirmed.
Bedford Care Center-Monroe Hall v. Lewis, No. 2005-CA-00382-SCT, 2006
WL 60774 (Miss. Jan. 12, 2006).
Ohio Appeals Court Upholds Arbitration Agreement Against Allegations
That Agreement Was Procedurally and Substantively Unconscionable
The court in this case upheld an arbitration clause that had been signed by a
resident’s daughter in the resident’s presence. At the time the agreement was
signed, no one objected either to the agreement or to the daughter’s authority, so
the court concluded that the defendant nursing home had no reason to believe
that the daughter did not have authority to bind the mother.
The court rejected the daughter’s arguments that the agreement was
procedurally and substantively unconscionable. On the procedural claim, the
court reviewed the circumstances and found against the daughter—this was not
an emergency, no evidence of pressure was adduced, the mother was elderly
but competent, the daughter was a registered nurse, and the agreement itself
was written in plain language and set out in bold letters. Furthermore, and
perhaps most critical, the provision clearly stated it was not a condition of
admission, however the daughter never complained or asked to have it removed.
The court did not reach the issue of substantive unconscionability because it
found the agreement procedurally acceptable.
The daughter also argued the agreement was unenforceable because AHLA was
designated as the arbitrator and would no longer accept pre-claim agreements.
The court resolved this claim by severing this provision.
Finally, the court joined the many other courts rejecting the argument that
arbitration agreements constitute “additional consideration” and therefore are
illegal under federal Medicaid law. The court noted that the daughter cited no
authority for this proposition.
Broughsville v. OHECC, LLC, No. 056CA008672 (Ohio Ct. App. Dec. 21,
Florida Appeals Court Holds Arbitration Clause Unenforceable as
Procedurally and Substantively Unconscionable
In this case, a Florida appeals court found both procedural and substantive
unconscionability and refused to enforce an arbitration agreement despite the
fact that it could be rescinded within three days of signing.
Procedural unconscionability was present because the father/resident was on his
way in an ambulance to the nursing home when the papers were presented to
the daughter who signed them. The court determined that this constituted some
degree of unfairness because she never had the opportunity to read or
understand the provisions in the agreement.
Probably of greater significance were the terms of the agreement, which limited
non-economic damages, eliminated punitive damages, and restricted discovery.
The court found that these provisions “appreciably diminish” the resident’s
statutory rights under Florida’s nursing home resident’s rights statutes and
deprived him of significant remedies. Thus, the agreement was substantively
It should be noted here that merely having the agreement be rescindable may
not save it if the terms of the agreement are otherwise unconscionable, as the
court here willingly stretched a bit to find the procedural element needed to
refuse to enforce the agreement.
Prieto v. Healthcare & Retirement Corp. of Am., No. 3D03-3244, 2005 WL
3479850 (Fla. Dist. Ct. App. Dec. 21, 2005).
Missouri Appeals Court Says Arbitration Agreement Unenforceable Against
Daughter Who Was Not a Signatory to Contract
A resident’s granddaughter executed on behalf of the resident a contract that
contained an arbitration agreement. After the resident died the resident’s
daughter filed suit for wrongful death. The daughter was not a signatory to the
contract, only the granddaughter. Almost two years later, the nursing home filed
a motion to compel arbitration, which the trial court denied. The trial court held
that there was no Missouri case supporting the proposition that the Missouri
arbitration statute is preempted by the FAA. The trial court also found that there
was no basis to conclude that interstate commerce was involved. Therefore, the
federal statute did not preempt Missouri’s. Since that arbitration clause did not
comply with Missouri law, it was held unenforceable. The nursing home
The appeals court upheld the trial court but on different grounds. The appeals
court stated it did not need to address the preemption issue because the case
could be decided on other grounds—namely, that the daughter was not a
signatory to the contract. Because the daughter was not a signatory to the
contract, she was not bound by its provisions, regardless of any decision
regarding its enforceability. The nursing home argued that the daughter was
bound by the contract signed on the decedent’s behalf, that but for decedent’s
death, there would be no cause of action. According to the nursing home, the
daughter stands in the shoes of the resident as a party to the contract and that
the cause of action for wrongful death belongs to the decedent. The appeals
court held this was a misstatement of the law. A wrongful death claim does not
belong to the decedent or her estate. Instead, it is based on a new cause of
action not found in common law.
The appeals court held that the damages under Missouri’s wrongful death statute
are different from those allowed to the decedent. Since the cause of action for
the daughter was totally separate from the decedent, for the daughter to have
been bound by the arbitration agreement, she would have had to have been a
party to the contract. Since she was not, the agreement did not apply to her.
Finney v. National Healthcare Corp., No. 26971, 2006 WL 1030323 (Mo. Ct.
App. Apr. 20, 2006).
Florida Appeals Court Says Right to Arbitration Is Waived If Not Asserted at
Lee Williams was admitted with Alzheimer’s disease to Manor Care by his wife,
who signed the admission agreement on his behalf. The admission agreement
contained an arbitration agreement. Following Williams’ death, his estate filed
suit. Manor Care answered, demanding a jury trial and neglecting to mention
arbitration. Nine days later Manor Care filed a motion to compel arbitration. The
circuit court granted the motion after a hearing. The estate appealed the trial
court’s ruling that: (1) Manor Care had not waived its right to arbitration, (2) that
the arbitration agreement was binding on the estate, and (3) that it was neither
substantively or procedurally unconscionable.
The appeals court did not reach the second and third issues, finding that Manor
Care waived its right to arbitrate. The court examined the three elements
necessary to determine a motion to compel arbitration: (1) whether there is a
valid reason to arbitrate, (2) whether an arbitratable issue exists; and (3) whether
the right to arbitration is waived. The court held that Manor Care waived its right
to arbitrate because it answered the complaint rather than demanding arbitration.
The court also held that a motion to compel arbitration after it has been waived is
ineffective to reclaim the right.
Estate of Lee Williams v. Manor Care of Dunedin, Inc., 923 So.2d 615 (Fla.
Dist. Ct. App. Mar. 29, 2006).
Massachusetts Appeals Court Denies Unemployment Claims to Hospice
Nurse Who Violated Policy That On-Call Nurse Make Home Visits When
In order to provide around the clock care to terminally ill patients and families, the
employer hospice developed a triage system. After business hours an answering
service fielded calls and referred them to a triage nurse. The triage nurse, an
experienced and supervisory nurse, called the client and determined the course
of action, including whether an in-home visit was necessary. If so, the triage
nurse directed the on-call nurse to make a home visit and report back to the
triage nurse. During a twelve-hour period beginning early one Sunday afternoon,
the on-call nurse repeatedly failed to follow the triage nurse’s direction to make a
home visit. The on-call nurse was terminated and sought unemployment benefits.
The initial denial of benefits was appealed.
In a telephone hearing, the examiner held that there was no policy as to who
made the final decision that a home visit was necessary. Instead there was only
a mere “expectation” that the triage nurse would decide. With no policy, it could
not be concluded that the discharge was attributable to a knowing violation of a
reasonable rule or policy. The examiner then determined whether the discharge
was attributable to deliberate misconduct in willful disregard of the employer’s
interests. The on-call nurse testified that she thought the on-call nurse made the
decision whether to make a home visit, which she confirmed with a co-worker,
and that she repeatedly called the family and was told not to visit (thus effectively
refusing services as allowed under the Patient’s Bill of Rights). The review
examiner held in favor of the on-call nurse and awarded benefits, which was
The appeals court reversed, holding that (1) the telephone hearing prevented the
hospice from admitting its policy into evidence and did not allow the examiner to
effectively evaluate the credibility of the witnesses; (2) the examiner’s conclusion
was contrary to his/her finding that the on-call nurse failed to visit the client’s
house when instructed to do so by the triage nurse; and (3) the repeated failure
to follow instructions over a twelve-hour period was sufficient to find the requisite
intent to commit a violation of a hospice policy.
Allen of Mich., Inc. v. Deputy Director of the Div. of Employment & Training,
833 N.E.2d 627 (Mass. App. Ct. Aug. 30, 2005)
This case demonstrates that maintaining and following written policies has
importance and benefits beyond that of regulatory compliance.
III. HOME HEALTHCARE
Missouri Appeals Court Holds Covenant Not to Compete Unenforceable
Against Former Home Health Employees
Two at-will employees signed post-employment, non-compete agreements with
Oxford, a home health company. The non-competes required that they would not
directly or indirectly on their own account or as agent, stockholder, owner,
employer, employee, or otherwise, engage in a business competitive to Oxford
within a100-mile radius of Joplin, Missouri. The signed agreements further
provided that neither would divert nor attempt to divert from Oxford any business
or employees or influence any of Oxford’s customers or employees. The terms
extended for two years following termination of employment by Oxford.
Both employees had extensive contacts with other Oxford employees, the clients,
and the clients’ caseworkers. Most of Oxford’s clients were Medicaid eligible.
Both resigned but before their last day of work with Oxford they engaged in
business activities for a competitor in Joplin, including meeting with the state
certification agency. Other Oxford employees resigned and clients requested to
have their care transferred to the competitor. Oxford sued for breach of contract.
The employees counterclaimed for tortuous interference of business and sought
a declaratory judgment that the covenants not to compete were unenforceable.
The trial court found the contract enforceable and that each employee made a
conscious decision to violate its terms but that Oxford did not prove any
damages. The court found against the employees on their counterclaims.
The employees appealed alleging that in Missouri a non-compete agreement is
unenforceable except to protect trade secrets or client contacts. The appeals
court agreed. First, the court held there were no trade secrets known to the
employees. As for customer lists, employees only worked with Medicaid clients.
When a Medicaid patient requires in-home care, they can choose any approved
provider. If no provider is chosen, the state agency assigns a provider on a
rotating basis. The court held that Oxford’s Medicaid clients did not constitute a
“protectable interest” similar or equal to a customer list or contacts. The court
reversed and remanded employees’ tortuous interference claim since the trial
court’s decision was predicated on a valid non-compete agreement.
Healthcare Servs. of the Ozarks, Inc. v. Copeland, Nos. 26410, 26452, 2005
WL 1759942 (Mo. Ct. App. July 27, 2005).
Home health providers should not depend on non-compete agreements to
protect a client base if the majority of the clients’ services are paid for by a
IV. EMPLOYMENT & LABOR
Ninth Circuit Holds National Labor Relations Act Preempts State Statute
Preventing Use of State Money by Employers for Union Related Speech
California Assembly Bill 1889 codified at CAL. GOVT. CODE 16645-49 (AB 1889) in
pertinent part prohibited a recipient of a grant of state funds from using the funds
to assist, promote, or deter union organizing. AB 1889 prohibited state funds
from being used for any such expense, including consulting and legal fees, and
salaries of employees and supervisors incurred in research, preparation,
planning, coordination of, or carrying out an activity to assist, promote, or deter
union organizing. It imposed draconian recordkeeping requirements on the
employer to demonstrate a complete separation of state funds. The employer
was required to track and identify every expense related to union organizing
activities and track all employees’ time that related to those efforts. The statue
created a presumption that the employer used state funds for a prohibited
purpose unless the employer proved otherwise, even when the employer had
sufficient private funds to cover all expenses of the activities. The statute also
allowed unions to commence lawsuits or intervene and demand an audit,
injunctive relief, damages, and civil penalties for treble damages. Several nursing
home companies were sued under this statute.
The court found AB 1889 preempted under both preemption principles of the
National Labor Relations Act (Act), the Garmon and Machinists doctrines set
forth by the U.S. Supreme Court in San Diego Building Trades Council v.
Garmon, 359 U.S. 236 (1959), and Machinists v. Wisconsin Employment
Relations Commission, 427 U.S. 132 (1976). The Garmon preemption doctrine
holds that state conduct is preempted if it is (1) is actually prohibited or protected,
(2) arguably prohibited, and (3) arguably protected by the Act. This preemption
principal focuses on avoiding the “potential conflict of two law-enforcing
authorities, with the disharmonies inherent in two systems, one federal and the
other state, of inconsistent standards of substantive law and differing remedial
schemes.” The Garmon preemption doctrine applied in this case because the
state law prohibited a federal right of an employer to communicate with its
employees concerning its positions in collective-bargaining negotiations. The
doctrine of Machinists preemption preserves the balance Congress intentionally
maintained between management and labor. The district court held that AB1889
alters the balance of power between the two by infringing on the employers right
of free speech. Therefore, the statute violated this prong of the Act as well.
Chamber of Commerce of the United States v. Lockyer, Nos. 03-55166, 03-
55169, 2005 WL 2140798 (9th Cir. Sept. 6, 2005).
States may not implement restrictions on the use of state funds to prevent an
employer from opposing union organization.
NLRB Decision Finds Registered Nurse Not an Employee Under NLRA
In this case, the National Labor Relations Board (NLRB) reversed its September,
2004 decision and held that a registered nurse with responsibility for weekend
supervision was a not a statutory employee within the National Labor Relations
Act. As a result, her termination for circulating a petition around the nursing home
where she worked was not a violation of the Act. The Board found significant her
discretion to initiate the disciplinary process against an employee as opposed to
merely reporting to managerial staff employee misconduct. The RN supervisor
also had and independently exercised her discretion to send employees home if
they were intoxicated or requested to leave early because of family matters and
to give them "write-ups" and evaluations. Secondarily, the Board considered the
fact that she was the lead supervisor and highest paid employee during the
weekend, and that she attended managerial meetings.
The result was a positive one for the employer in that the nurse did not have a
claim under the Act; however, the Board still required the home to post notices to
the effect that it would not discipline employees for exchanging salary information
or for circulating petitions and the like.
Wilshire at Lakewood and Lisa Jochims, Case 17-CA-21564 (NLRB Sept. 30,
There is potential downside to the finding: as a supervisor, the RN would not be
eligible to vote in a union certification election; statements by the RN could be
used as evidence of discrimination; and the employer would have a greater
likelihood of liability for the nurse’s actions towards other employees.
Minnesota Appeals Court Finds General Failure to Provide Care Is
Sufficient to Disqualify CNA from Unemployment Benefits
A certified nurse aide (CNA) filed for unemployment benefits after being
discharged by her employer nursing home for “employee misconduct.” The CNA
argued that the alleged acts or omissions did not rise to the level of “misconduct,”
which was defined as “any intentional, negligent, or indifferent conduct . . . (1)
that displays clearly a serious violation of the standards of behavior the employer
has a right to reasonably expect of the employees; or (2) that displays a
substantial lack of concern for the employment. MINN. STAT. § 268.094, subd.
4(1) (2004). The state agency and the court took into account the vulnerability of
the elderly with whom the CNA worked when finding that the following constituted
misconduct: handling residents without gloves following a warning; causing a
resident to fall by failing to attach an alarm and lacking credibility about saying
she attached an alarm on a resident who subsequently fell; failing to place a call
light within reach of a resident; leaving a resident in a precarious position in bed
after being asked twice to correct the position; and leaving the unit before her
Rieland v. Melrose Hosp. Centracare, No. A05-528, 2005 WL 2979304 (Minn.
Ct. App. Nov. 8, 2005) (Unpublished).
Incidents of seemingly minor offenses can constitute misconduct in the
aggregate to defeat a claim for unemployment benefits. Thus, documenting such
minor infractions may have significant impact for the nursing home at a later time.
Louisiana Appeals Court Holds Registered Nurse Injured by Resident Was
Independent Contractor Not Subject to Workers’ Compensation
We Care Homes, Inc. is a group home for mentally disabled adult males. One of
its requirements for licensure was to have a registered nurse available to its
residents. The RN performed assessments, drafted plans of care, completed
necessary paperwork, and was on call for the residents’ minor illnesses and
healthcare problems. The RN was injured by one of the male residents and filed
suit against We Care to recover for her injuries.
We Care moved for summary judgment claiming that the RN’s exclusive remedy
was through worker’s compensation. The trial court entered judgment in favor of
We Care. The Louisiana Court of Appeal reversed. The issue was whether the
RN was an independent contractor or an employee. The hallmark of an
independent contractor is control of the workplace. The court looked at the four
factors evidencing the right of control, which are (1) selection and engagement;
(2) payment of wages; (3) power of dismissal; and (4) power of control. The
evidence showed the RN used professional judgment in responding to patient
calls, determined when she visited the home, and there was little or no
supervision over her services. The court found that the professional nature of the
RN’s services, coupled with the freedom she was given in accomplishing the
services and the totality of the circumstances weighed against employee status
and in favor of her being an independent contractor.
Mouton v. We Care Homes, Inc., 915 So.2d 971 (La. Ct. App. Nov. 2, 2005).
Virginia Appeals Court Says Injury to Environmental Aide Occurring While
Preventing Resident Elopement Arose out of Employment
An environmental aide (housekeeper) injured her knee responding to an alarm
set off by a resident with dementia attempting to leave the facility. The deputy
commissioner denied the worker’s compensation claim for benefits finding that
the injury did not arise out of her employment duties of sweeping, vacuuming,
and taking out the trash. The full commission reversed and the nursing home
appealed. The Virginia Court of Appeals overturned the full commission’s
decision. In doing so, it found that the injury was a natural incident of the work
and resulted from actions reasonably expected of the employee by the employer.
The court found that the protection of residents was a work condition of the
nursing home and that the environmental aide’s hurrying to the aid of an eloping
resident benefited the nursing home. Further, the aide’s risk of injury was
peculiar to her job and not one to which the general public was equally exposed.
Heritage Hall v. Crabtree, 621 S.E.2d 694 (Va. Ct. App. Nov. 8, 2005).
D.C. Circuit Holds Hospital’s Actions Did Not Violate Collective Bargaining
Agreement by Implementing a Mandatory On-Call Policy
The certified collective bargaining representative of the registered nurses at
Enloe Medical Center was the California Nurses Association (Union). The
employer announced in March 2003 that it would be implementing a mandatory
on-call policy beginning in May 2003. In April, the Union representative called the
Vice President of Human Resources to argue that the change could not occur
without a negotiation with the Union. In May, the mandatory on-call policy was
implemented. Another change in 2003 was a switch to the patient “Rand Card,” a
record used to pass patient information between nursing shifts.
Two nurses met with a clinical coordinator to express their dissatisfaction with the
new system. The clinical coordinator and director subsequently met with these
same two nurses regarding their complaints, and the nurses agreed to refrain
from their negative behavior.
The Union representatives filed a complaint with the National Labor Relations
Board (Board) alleging violations of § 8(a)(1) and (5) of the National Labor
Relations Act and 29 U.S.C. § 158(a)(1) and (5), and the Board issued a
complaint against the employer. The Board affirmed the decision of the
administrative law judge (ALJ) that the employer had violated § 8(a)(1) by
interfering with the nurses’ protected activities.
The court noted its longstanding disagreement with the Board in interpreting the
scope of a collective bargaining agreement. The Board’s approach involved
asking whether the Union’s “waiver” of the rights was “clear and unmistakable.”
The court’s approach focused on whether the subject of the dispute was
“covered by” the agreement.
The Board had extended its waiver analysis beyond the decision itself to whether
the Union waived the effects of that decision. The court stated, however, that
whether the parties contemplated that the collective bargaining agreement would
treat the effect of a decision differently from the decision was just as much an
issue of ordinary contract interpretation as the initial decision of whether the
agreement covered the matter altogether.
The court found that the Union’s behavior indicated that the parties never
contemplated distinguishing between the decision and its effects. The Union
focused not on the effect of the policies, but the fact that the employer changed
them unilaterally and without bargaining with the Union. The facility thus did not
violate § 8(a), and its actions were sanctioned by its collective bargaining
agreement with the Union.
Enloe Med. Ctr. v. NLRB, No. 04-1388 (D.C. Cir. Dec. 23, 2005).
D.C. Circuit Overrules NLRB, Says Alabama Nursing Home Not Required to
In October,1995, the United Food and Commercial Workers Union began
organizing the service and maintenance employees of a Mobile, Alabama
nursing home. In April 1996, the Union requested recognition based upon
obtaining authorization cards signed by a majority of the employees. When the
employer refused, the Union filed an NLRB petition for an election. The election
was held on July 19, 1996 and the Union lost (72 to 52). The Union filed unfair
labor practice charges, and an NLRB ALJ sustained them in a June 1998
decision. The NLRB agreed in September 2001 and ordered the employer to
reinstate six fired employees with back pay, and to bargain with the Union in
spite of the fact that it lost the election. In November 2001, the employer argued
that the bargaining order was unnecessary because of significant employee and
management turnover since the 1996 election. In June 2004, the NLRB rejected
In a decision dated February 24, 2006, the D.C. Circuit held that the NLRB
should have considered the employer’s evidence of changed circumstances.
Only 44% of the current work force was employed during the organizing
campaign, and only 25 of the 82 employees who signed authorization cards were
still employed. Two of the co-owner managers who committed the unfair labor
practices had been replaced, and no unfair labor practice charges were filed after
the date of the ALJ’s decision. Although the original unfair labor practice charges
were egregious (including: installment of surveillance equipment; hiring a private
police force of thirty-five off-duty police officers; requiring employees to attend
mock bargaining sessions where all Union proposals were rejected; questioning
employees about support for the Union; prohibiting employees from wearing a
Union insignia at work; threatening the loss of benefits and closure if the Union
won the election; and firing six well-known Union supporters), the D.C. Circuit
overruled the bargaining order because the NLRB should have considered the
significant charges in the employer’s circumstances.
Cogburn Health Ctr., Inc. v. NLRB, 437 F.3d 1266 (D.C. Cir. Feb. 24, 2006).
U.S. Court in Minnesota Says Nurse Failed to Prove She Was Retaliated
Against in Violation of Whistleblower Act
Carol Skare was a regional nurse supervisor for Extendicare Health Services,
Inc., and was responsible for the clinical outcomes in eight facilities. While in that
position she told her supervisors that she believed the company’s admitting
practices resulted in facilities admitting patients whose needs could not be met in
the facilities and that this practice violated standards of care and nursing home
laws and regulations. She also recommended to her supervisors that one facility
not admit a potential resident who weighed over 900 pounds. Over her objections
the resident was admitted. Following these complaints, Skare alleged that she
was belittled and ridiculed by her supervisor who also asked her for hugs on
three occasions. Skare also was moved from regional nurse to a director of
nurses position at one facility but with no reduction in salary. Skare resigned this
position and filed suit alleging she was retaliated against for reporting violations
of various laws, regulations, and company policies. Skare alleged her actions
were protected under the Minnesota Whistleblower Act. The case was removed
to federal court on diversity jurisdiction.
The court analyzed the case under the Whistleblower Act, which prohibits an
employer from taking adverse employment actions against an employee because
the employee performed certain protected activities. Those activities include
reporting, in good faith, a situation in which the services provided by a healthcare
facility violated a standard established by state or federal law. The court found
that an adverse action was taken by Extendicare by changing her position to one
of a director of nurses rather than a regional nurse, despite the fact that her
salary did not decrease. However, the court held that Skare’s comments were
not a protected activity under the Whistleblower Act.
The court held that under the Act, the report must be presented in an official
manner. In this case, Skare could not remember when she made her comments
to her supervisor or his responses thereto. Further, Skare never expressed her
concerns in writing or used the company’s Corporate Compliance program. The
court also held the reports did not “blow the whistle” by notifying her employer of
a violation of a law that is clearly mandated public policy. Skare presented no
evidence that her complaints to her supervisor were made “for the purpose of
exposing an illegality.” Instead, the court found that Skare’s reports were
consistent with her normal job duties. “A report that is presented as part of an
employee’s job duties is not a report under the Act.” Finding that Skare failed to
raise a genuine issue of material fact regarding any protected activities, the court
dismissed her claim.
Skare v. Extendicare Health Services, Inc., Civ. No 05-1423, 2006 WL
1174177 (D. Minn. May 1, 2006).
Illinois Appeals Court Says Disclosure of Medical Information by Off-Duty
Employee May Give Rise to Employer Liability
Misty Young was a phlebotomist for Illini Hospital. In that position she came into
possession of confidential medical information. While at a public tavern, Young
disclosed without permission confidential medical information of Suzanne Bagent
to Bagent’s twin sister. Following this disclosure, Young accepted the hospital’s
offer of resignation in lieu of termination. Bagent sued Young and the hospital for
breach of confidentiality, invasion of privacy ,and negligent and intentional
infliction of emotional distress. The hospital filed a motion for summary judgment.
The trial court granted the hospital’s motion, finding that as a matter of law no
jury could find that Young’s actions were in the course of her employment or
done to serve the hospital’s purposes, necessary findings under a respondeat
superior theory. Bagent appealed.
The appeals court examined the hospital’s potential liability under a respondeat
superior theory in light of the importance placed on protecting the confidentiality
of medical records. For an employer to be held liable for an employee’s tort
under this doctrine, the tort must have been committed in the scope of
employment. The court held that whether the act was committed in the scope of
employment is generally inappropriate for summary judgment. In this case,
Young admitted that she had been trained on the hospital’s confidentiality policy
and had signed an agreement to maintain the confidentiality of the information
gained in her employment. However, the court found it significant that this
training did not limit the employee’s duty to maintain the confidentiality only
during working hours. Instead, the hospital’s training said the confidentiality duty
extended to all times and all places. Thus, the court held that for purposes of
patient confidentiality, Young was on duty 24/7, noting it was Young’s job to
refrain from unauthorized disclosures of confidential information at all times. The
court reversed the trial court, finding that it was a question of fact for the jury to
decide if Young acted within the scope of her employment when she made the
Bagent v. Blessing Care Corp., 844 N.E.2d 469 (Ill. App. Ct. Mar. 3, 2006).
Nebraska Supreme Court Finds Nursing Home Liable for Retaliatory
Discharge of Employee Who Reported Abuse to State
Rebecca Wendeln, a 21 year old certified nursing assistant, working at The
Beatrice Manor reported, as required by the Adult Protective Services Act
(APSA), abuse of an elderly relative who was a patient. Shortly thereafter
Wendeln was terminated and filed suit alleging retaliatory discharge in
contravention of public policy. Following a jury trial, the verdict of $79,000 was
entered in her favor. The nursing home appealed.
Wendeln did not actually observe the incident of alleged abuse. She was told by
more than one employee that her relative, who required two persons using a gait
belt to assist during transfer, fell when only one person attempted to transfer the
patient without the use of a gait belt. The patient required pain medicine and
assistance to get up off the floor. Wendeln called the state agency to make sure
that the incident had been reported and found it had not. She reported it as
abuse. A few days later, Wendeln was called into her supervisor’s office.
Wendeln testified that her supervisor was very angry that Wendeln had made the
report without discussing it first with the supervisor. Wendeln testified that the
conversation made her feel nervous and upset. She asked for time off from work
because she felt uncomfortable facing her supervisor. When she returned to
work, Wendeln was asked to resign and when she refused, she was terminated.
On appeal, The Beatrice Manor argued the public policy that Wendeln relied on
for her retaliatory discharge claim had not been recognized by the court.
Nebraska has held that unless constitutionally, statutorily, or contractually
prohibited, an employer may terminate an employee at will without incurring
liability. The court found it was important that abusive discharge claims of
employees be limited to “manageable and clear standards” where a very clear
mandate of public policy has been violated. In this case, the appeals court found
that the purpose of APSA would be circumvented if employees mandated by the
law to report suspected patient abuse could be threatened with discharge for
making such a report. The court allowed a public policy exception to the
employment-at-will doctrine for a cause of action for retaliatory discharge when
an employee is fired for making a report of abuse as mandated by the APSA.
The court also determined that this was a tort action, not a breach of contract,
and held that as a matter of law, damages for mental suffering are recoverable in
a retaliatory discharge action brought by a former at-will employee alleging that
the discharge violated a clear mandate of public policy. Furthermore, severe
emotional distress is not an element of the tort of retaliatory discharge in
contravention of public policy. Therefore, there is no threshold limitation based
upon the degree of severity of the mental suffering, nor is it necessary to show
that the plaintiff sought medical treatment or counseling for the mental suffering
in order for it to be recoverable as past and present damages. The trial court’s
decision was affirmed.
Wendeln v. The Beatrice Manor, 712 N.W.2d 226 (Neb. Apr. 7, 2006).
Second Circuit Says Nursing Home Must Provide Evidence of Permitted
Reason for Hiring Permanent Replacements of Striking Employees
Avery is a nursing home/assisted living facility for approximately 500 adults. The
Union has been the certified bargaining representative for all service and
maintenance employees at Avery since the early 1970’s. Union members began
an economic strike on November 17, 1999. On December 2, the Union President
warned that unless compromises were made, the strike was going to be a long
one. On or about December 15, 1999, Avery began hiring permanent
replacement employees. Avery took active measures to keep the replacement
hiring secret from the Union. By January 3, 2000, over 100 permanent
replacements had been hired. On January 5, 2000, the Union offered to return to
work immediately, but the offer was not unconditional. Avery rejected the offer.
On January 20, 2000, the Union offered to return to work unconditionally. Avery
recalled the strikers but only to those positions that were not occupied by
permanent replacements, ultimately reinstating 78 or 79 employees.
The Union filed suit alleging that Avery violated § 8(a)(1) and (3) of the National
Labor Relations Act (Act), 29 U.S.C. § 158(a)(1) and (3), when it failed to
reinstate all strikers upon their unconditional offer to return to work. Avery
refused to reinstate the strikers on the ground that it had hired permanent
replacements—a measure that an employer is free to take in order to withstand
or end a strike. The ALJ found that Avery had an independent, unlawful motive
for hiring the permanent replacements, specifically to break the Union, therefore
it violated the Act. The NLRB reversed, finding that there was a failure to
demonstrate that Avery had an independent unlawful motive for hiring the
permanent replacements. The Board cited the rule that an employer has a right
to hire permanent replacement workers as a valuable tool for fighting back in an
economic battle—absent a showing that the employer had an independent
unlawful motive for the hiring—stating that an employer is not “under a duty to
disclose to a union its intention to hire permanent replacements.” The Union
The Second Circuit concluded that the Board made an unwarranted inference
that rendered its conclusion arbitrary and capricious. Specifically, the court
focused on Avery’s motive for secretly hiring replacement employees. It noted
that trying to avoid violence would be a valid reason for an employer’s secret
hiring. However, that reason was not offered by Avery. The court held that if the
hiring of permanent replacements was intended to enhance the employer’s
bargaining leverage, or prolong the employer’s ability to withstand the strike,
there would be no need to keep the hiring of permanent replacements secret.
Conversely, if the employer’s motive was to break the union, there would be a
strong incentive to keep the hiring secret, noting that the replacement of over half
of a unionized workforce with nonunion workers would devastate the union’s
power and credibility.
The court went on to hold that under the permanent replacement safe harbor, the
employer must have achieved an employment relationship with the permanent
replacements somewhere between “a mere offer, unaccepted when the striker
seeks reinstatement” and “actual arrival on the job.” Therefore, an employer
needs enough time to establish an employment relationship with a large number
of permanent replacements before the union can react by offering to return to
The Second Circuit vacated the Board’s decision. The court noted that this
opinion is narrow because it did not decide whether there was substantial
evidence to support the Board’s conclusions. Instead, the court remanded the
case so that the Board could set forth its analysis of whether the secret hiring
was illicitly motivated.
New England Health Care Employees Union v. National Labor Relations
Bd., No. 05-0181-AG., 2006 WL 1030230 (2d Cir. Apr. 19, 2006).
V. FAILURE TO FOLLOW POLICIES OR ORDERED PROCEDURES
Sixth Circuit Holds Failure to Follow Facility Policy on Abuse Investigations
A nursing home was found out of compliance for failure to follow its policies and
procedures and adequately investigate several allegations of sexual abuse of
residents by staff over a number of months. A CNA notified the Director of
Nurses that she had observed a male aide sexually abusing a quadriplegic
resident. The facility failed to investigate or timely inform the resident’s physician
or family and never notified law enforcement as required by its policies. Several
months later two other residents in different parts of the nursing home claimed
they had been sexually abused by an aide, one of whom was involved in the first
incident. Again, the facility did not follow its policy requiring a physical
examination and informing the residents’ physicians and law enforcement.
The facility was cited with two deficiencies relating to resident abuse. The ALJ
held the evidence supported a finding that the nursing home failed to follow its
own policies and procedures and governing regulations to treat seriously
allegations of sexual abuse. The ALJ upheld the imposition of a civil money
penalty (CMP) based on that failure. However, the ALJ found there was
insufficient evidence to find the nursing home allowed its resident to be sexually
abused. Therefore, the CMP for that violation was overturned. These decisions
were upheld by the Departmental Appeals Board (DAB) and the Sixth Circuit.
In evaluating the evidence, the Sixth Circuit found no doubt that the nursing
home had the required policies in place but did an “abysmal job” of following
those policies, which required family, physician, and law enforcement notification,
as well as an assessment of the resident. The nursing home produced evidence
from one resident’s family that the resident had a history of making similar
unfounded accusations. The nursing home argued that with its population of
residents there were many false accusations and that the police would quickly
tire of responding if the nursing home called regarding every allegation.
The court held that “it is Petitioner’s own policies [that] do not allow it to exercise
its judgment, nor do the federal regulations governing its participation in the
Medicare/Medicaid program. Petitioner was required to follow its own polices and
procedures, and having failed to do so, it was subject to sanctions.”
Vandalia Park v. Leavitt, No. 04-4283, (6th Cir. Dec. 8, 2005).
Failure to Follow Facility Policy Not a Regulatory Violation
In a case similar to Vandalia Park, an ALJ held just the opposite with regard to
whether a failure to follow facility policy constituted a regulatory violation. In this
case, the ALJ found that the nursing home did not follow its policy regarding
hydration for three of the four residents cited. Nevertheless, the ALJ found that
the Centers for Medicare and Medicaid Services (CMS) did not make a prima
facia showing of a regulatory violation with respect to those three residents. The
ALJ found that in order to cite a facility under F327 (42 C.F.R. § 483.25(j))
relating to sufficient hydration of residents, CMS needed to present evidence of
insufficient fluid intake such as abnormal lab values or a diagnosis of
dehydration. As for the fourth resident, there was sufficient evidence as the
resident was hospitalized for dehydration and abnormal lab values. Therefore,
the deficiency was upheld for the single resident regardless of whether the facility
complied with its policy.
Woodland Village Nursing Ctr. v. CMS, CR1367 (Nov. 16, 2005).
Witnesses’ Testimony for Failure to Follow Procedures Excluded
In a preliminary order, the ALJ required the parties to produce as exhibits the
sworn written direct testimony of all proposed witnesses. Because CMS failed to
comply with this order, the ALJ ruled that the individuals CMS listed as witnesses
would not be permitted to testify in person. The parties decided that neither of
them had in-person testimony to present so the hearing was cancelled and the
matter decided on the written record. The nursing home objected to the
statements made in the statement of deficiencies (SOD) premised in part on
CMS’ failure to produce any sworn testimony of the surveyor witnesses.
Petitioner argued that it would be prejudiced if the ALJ allowed the SOD’s
findings into evidence without the opportunity to cross-examine the surveyors.
The ALJ overruled the objection but held that “the findings in the survey report
are hearsay and of little probative value absent on the record testimony of the
surveyors who made them. However, it is CMS, and not Petitioner, that pays the
price for failing to produce the surveyors’ sworn testimony.”
The nursing home was cited because of allegedly dangerously high hot water.
The ALJ found the allegations to be “unpersuasive because CMS failed to lay
any foundation to show that the surveyors’ temperature readings are accurate.”
There was no credible evidence that the surveyors appropriately calibrated their
thermometers prior to taking to water temperatures. Therefore, the ALJ found the
temperatures cited unreliable, even though CMS argued that temperatures 28
degrees above the required maximum level were substantial enough to
overcome any failure to properly calibrate the thermometers.
The facility was also cited under F324 (42 C.F.R. § 483.25(h)(2)) for failing to
prevent an elopement. CMS argued that the elopement in and of itself was
sufficient evidence to support the deficiency. The ALJ disagreed, holding that
there is no strict liability standard and that the appropriate inquiry is whether the
measures implemented by the facility were reasonable and appropriate “at the
time that they were implemented” (emphasis in original) rather than in hindsight
as relied on by the surveyors. The ALJ found that the 15-minute checks plus the
other measures in place at the time of the elopement were adequate based on
the resident’s behaviors at the time.
Crestview Manor v. CMS, CR1350 (Sept. 22, 2005).
Parties should read carefully all preliminary orders and fully comply to avoid
CMS Must Prove Serious Harm Is Likely for Immediate Jeopardy Citation
Daughters of Miriam Center was cited at the immediate jeopardy level for one
day when an agency nurse gave several residents the wrong medication. In this
case, no one died or was hospitalized. Therefore, the ALJ had to evaluate
whether there was the potential for serious harm. The ALJ noted that the
regulation does not define serious harm. Relying on its common meaning, the
ALJ found that “serious” meant that it was “dangerous, grave, grievous, or life-
threatening.” The ALJ then held that for immediate jeopardy, a serious injury
required adverse consequences or the likelihood of adverse consequences to the
extent that hospitalization was required or produced long-term impairment or
severe pain. An injury that is temporary, easily reversible with ordinary care, does
not cause a period of incapacitation, heals without special medical intervention or
does not cause severe pain does not constitute immediate jeopardy.
In evaluating the facts of the case against this standard, the ALJ held that the
alleged injuries or potential injuries did not rise to the level of immediate
jeopardy. The nurse gave oral Vancomycin in the thigh; administered Dilantin
and Norvasc to the wrong person, and attempted to administer Insulin to a
resident who did not require it and refused the medication. CMS argued that
giving Insulin to a person who did not need it could be potentially lethal. The ALJ
agreed with that argument but noted in this case, the resident was alert and
oriented and refused the Insulin. Thus, CMS failed to prove there was a
likelihood of serious harm. For each example cited, the ALJ found that CMS was
basing its conclusion on the “potential for serious harm” as opposed to the
appropriate standard of a “probability of serious harm.” Lacking any probability of
serious harm, the immediate jeopardy citation was overturned.
Daughters of Miriam Ctr. v. CMS, CR1357 (Sept. 29, 2005).
VI. MEDICAID ISSUES
Ohio Appeals Court Says Transfer of Assets for Less Than Fair Market
Value Resulted in a Period of Disqualification
One year before entering a nursing home a resident transferred two parcels of
land to her daughter by quit-claim deed. The deeds were not recorded until after
the resident entered the home. After admission to the nursing home, the
daughter applied for Medicaid benefits on behalf of her mother. All parties agreed
that the transfer was improper under Medicaid regulations, giving rise to a six-
month exclusion period from receiving benefits. The issue was when the
exclusion period started—from the date of the transfer or the date the deeds
were recorded. Under Ohio’s administrative code, if the instrument was recorded
within six months of the signature on the transferring instrument, the date of the
signature controlled; if it was recorded after six months of the signature, the date
of the recording controlled.
The court looked to the tax records to determine when the transfer occurred and
found the taxes remained in the mother’s name and were paid for by the mother
until the deeds were recorded. Based on this information, the court held the
exclusion period began on the date the deeds were recorded.
Kinasz-Reagan v. Ohio Dep’t of Job and Family Servs., No. 85768, 2005 WL
2882932 (Ohio Ct. App. Nov. 3, 2005).
U.S. Court in New York Says It Lacks Jurisdiction to Hear Claims of Dual
Eligible Recipients Under Medicare Part D
Concerned that the transfer from Medicaid prescription drug coverage to
Medicare Part D for “dual eligibles” would not go smoothly and some eligible
recipients would be unable to access their prescriptions on January 1, 2006,
advocacy groups attempted to get an injunction mandating the Department of
Health and Human Services (DHHS) to retain dual eligibles on Medicaid as a
contingency plan to prevent gaps in coverage.
The court dismissed the suit for lack of jurisdiction. The Medicare Prescription
Drug, Improvement and Modernization Act (MMA), 42 U.S.C. § 1395w-101, et
seq., provides administrative remedies for claims that must be exhausted first
before federal courts have jurisdiction, the court said. Moreover, since no
individual had yet been denied coverage, no claims were ripe for review. Claims
under the Administrative Procedure Act also were dismissed as foreclosed under
Heckler v. Ringer, 466 U.S. 602, 614-15 (1984), which bars all claims arising
under the Medicare Act. Finally, even if it had jurisdiction, the court could find no
legal justification for ordering the relief requested, since it clearly contradicted the
MMA’s provisions, and the plaintiffs could not prove that DHHS had acted
arbitrarily and capriciously in implementing the MMA.
(As an aside, ironically, within days of this ruling, CMS was experiencing a
number of implementation problems and a very rocky start to Part D, which led to
pronouncements that everyone who was entitled to coverage would be covered,
essentially the remedy requested by the plaintiffs in this case.) This case can be
found at: www.nysd.uscourts.gov/RulingsOfInterest.htm.
New York Statewide Senior Action Council v. Leavitt, No. 05 Civ. 9549 (LAP)
(S.D.N.Y. Dec. 30, 2005).
U.S. Court in Wisconsin Holds Medicaid “Equal Access” Provision
Provides Right of Action Under ADA and RA for Recipients of Medicaid
The court found that the Medicaid “equal access” provision of 42 U.S.C. §
1396(a)(30)(A) provides a private right of action for recipients of Medicaid
services, allowing the plaintiffs to seek prospective relief for discrimination under
the Americans with Disabilities Act (ADA) and the Rehabilitation Act (RA).
Elderly and disabled plaintiffs alleged that Family Care, a Medicaid waiver
program that provides comprehensive community-based services, only offered
services to low-income adults with disabilities over the age of sixty in Milwaukee
County but provided services to any low-income disabled adult in most of the
other counties in the state. Furthermore, plaintiffs alleged that Milwaukee County
pays providers of these services less than other counties pay providers for
comparable services. After unsuccessful efforts to seek increased compensation,
providers in Milwaukee County indicated their intent to withdraw from the Family
Care program and notified the plaintiffs that they would have to move out of their
In response to the motion challenging plaintiffs’ standing and the sufficiency of
their complaint, the federal court found that plaintiffs had standing to assert their
claims. The court refused to dismiss claims that the state and county were
violating the ADA and RA. Specifically, the court stated that an action for
discrimination does not need to allege that services are being denied. It is
sufficient for plaintiffs to allege discrimination if less funding is provided for their
services than is provided to other persons with disabilities. The court did dismiss
claims based on age and geographic location but allowed claims alleging that
plaintiffs were treated worse than persons with less severe disabilities.
The court allowed plaintiffs’ claim that the lower payment to Milwaukee County
providers would force them into more restrictive, less integrated settings in
violation of the ADA and RA requirements. The court said that programs must be
administered in a way that enables individuals with disabilities to interact with
non-disabled persons to the fullest extent possible. Finally, the court noted the
ADA and RA provide that public entities reasonably modify their policies “when
the modifications are necessary to avoid discrimination on the basis of disability,
unless the public entity can demonstrate that making the modifications would
fundamentally alter the nature of the service, program or activity,” which requires
a fact-specific, individualized analysis of the disabled individual’s circumstances
and accommodations to determine what constitutes a reasonable
accommodation. Therefore, the court refused to grant the defendant’s motion
claiming that the plaintiffs’ requested alterations would fundamentally alter the
Family Care program.
The court held that the Medicaid “equal access” provision did provide a private
right of action for recipients of services under Medicaid. It is important to note
that the plaintiffs only had to plead fair notice of their claim and the grounds for
their claim in order for their claims to survive dismissal.
Nelson v. Milwaukee County, No. 04C0193 (E.D. Wis. Feb. 7, 2006).
U.S. Supreme Court Denies Review of Tenth Circuit Decision Holding
Funds Deposited Directly to Special Needs Trust Can Satisfy Medicaid Co-
The U.S. Supreme Court denied a petition to review a Tenth Circuit decision
upholding the Oklahoma statute that treated Social Security disability income,
even though it was deposited directly into a special needs trust, as an asset that
could be used to satisfy a Medicaid co-payment obligation to a nursing home.
Oklahoma law attempts to comply with the requirements of both the Special
Needs Trust, 42 U.S.C. § 1296p(d)(4)(A), and federal Medicaid pre- and post-
eligibility provisions, 42 C.F.R. § 435.733, by counting Social Security disability
income placed in the trust to determine co-payment obligations but by not
considering that income in determining an individual's eligibility for Medicaid. The
question the court addressed was "whether Congress meant to preclude the
distinction Oklahoma makes between Social Security income placed in a special
needs trust and Social Security income directly assigned." The court found that
the Oklahoma statute provided full protection to all income placed in the special
needs trust that was received from any source other than Social Security. The
plaintiff's efforts to convert her Social Security income into a trust asset by
directly depositing her checks into the trust so they never passed through her
hands was held to be a transfer or assignment of her Social Security benefits,
which is not permitted under 42 U.S.C. § 407(a). The court found that there was
no conflict between these two statutes. The Oklahoma statute was held to be a
straight forward implementation of the federal statute requiring states to reduce
their Medicaid payments in an amount equal to a recipient's income.
Reames v. Oklahoma, No. 04-6002 (W.D. Okla. June 14, 2005), review denied,
No. 05-807 (U.S. Feb. 27, 2006).
VII. FALSE CLAIMS
U.S. Court in Illinois Dismisses Qui Tam Case Alleging Improper
Unbundling of Charges Billed to Medicare
Qui Tam relator Anthony Camillo, a former Director of Corporate Health of Ancilla
Systems, Inc. d/b/a St. Mary’s Hospital of East St. Louis (Ancilla), filed a
Complaint seeking damages and civil money penalties under the False Claims
Act (FCA). After multiple procedural motions and orders, Camillo filed his Fourth
Amended Complaint. Camillo alleged among other things that Ancilla set up,
instigated, authorized, and ratified the procedures and decisions that caused
Ancilla’s subsidiary to engage in fraudulent billing practices. Camillo claimed that
individual lab tests were bundled under a profile for nursing homes but
unbundled the charges when the bills were submitted to Medicare. Camillo
alleged that Medicare was billed and paid double the amount actually due for the
nursing home services.
Ancilla moved to dismiss under FED. R. OF CIV. P. 12(b)(6) and 9(b). The U.S.
District Court for the Southern District of Illinois dismissed the Complaint holding
that knowledge, ratification, and creating procedures do not state a claim under
the FCA. Camillo failed to allege that Ancilla submitted false claims, caused the
false claims to be submitted, or knowingly made, used, or caused to be made or
used false records or statements to get a false claim paid, at least one of which is
a prerequisite for an FCA violation. The court also held that ratification
allegations failed as a matter of law because there is no “fraud by hindsight”
under the FCA. Further, knowledge of a violation without anything more does not
constitute a violation of the FCA. Finally, the court held that it is not a violation of
the FCA to create circumstances that lead to the submission of a false claim.
United States ex rel. Camillo v. Ancilla Sys. Inc., No. 03-CV-0024-DRH, 2005
WL 1669833 (S.D. Ill. July 18, 2005).
To sustain a claim under the FCA there must be more than mere knowledge or
ratification of the submission of a false claim.
U.S. Court in Texas Denies Recovery Under FCA in Challenge to Healthcare
Provider’s Judgment Regarding Treatment
Following the death of their mother, the plaintiffs brought a claim pursuant to the
federal FCA and a state common law fraud claim against the defendant
residential care center. The plaintiffs argued that the defendant provided
substandard care to their mother and submitted false reimbursement claims for
The federal district court noted that the Fifth Circuit had not addressed whether
the FCA provides a basis for recovery in a lawsuit challenging a specific course
of treatment. Applying the persuasive authority in United States ex rel. Mikes v.
Straus, 274 F.3d 687 (2d Cir. 2001), and United States v. NHC Healthcare Corp.,
115 F.Supp.2d 1149 (W.D. Mo. 2000), the court held that the FCA should not be
used to question the judgment of a healthcare provider in selecting a particular
course of treatment, but it may be invoked properly if the defendant’s services
are so deficient as to be worthless.
The court then granted the defendant’s motion for summary judgment as to the
federal FCA causes of action and declined to exercise supplemental jurisdiction
as to the remaining state law claim.
United States ex rel. Phillips v. Permian Residential Care Ctr., 386 F.Supp.2d
879 (W.D. Tex. Sept. 12, 2005).
Absent claim that services rendered were worthless, the defendant facility was
entitled to summary judgment in an FCA lawsuit challenging the facility’s decision
regarding the specific course of treatment.
U.S. Court in Washington Holds Question of Fact Existed as to Whether
Reasonable Person Would Consider Conduct Fraud
Sweeney filed a complaint asserting claims under the FCA and the United States
declined to intervene. Sweeney’s first claim was based on a “Quality of Care
Theory,” her second claim was based on a theory of “Worthless Services” under
the FCA, her third claim was FCA conspiracy, her fourth claim was FCA
retaliation, her fifth claim was termination in violation of public policy and her sixth
claim was slander/defamation. Sweeney worked as the Dietary Manager for the
facility. She noted that certain dietary supplements and snacks, which were
prescribed by physicians and clinical dieticians, were not served to the patients.
Sweeney claims that she repeatedly advised her manager of this concern,
specifically that the patients were not credited if they did not receive the
supplements. Sweeney claimed that she began an investigation of ManorCare in
December 2002. She told her manager that she would no longer sign the
Minimum Data Set (MDS). Meanwhile her manager claimed that there were
complaints that Sweeney was creating a hostile work environment and had
ordered another worker to falsify the freezer log.
The nursing home filed motions for partial summary judgment and to dismiss a
number of the claims pursuant to Federal Rule of Civil Procedure 12(b)(6). Under
the FCA retaliation claim, plaintiff has to prove three elements in a 31 U.S.C. §
3729(a), §3730 (h) action: (1) that the employee engaged in activity protected
under the statute; (2) that the employer knew that the employee engaged in
protected activity; and (3) that the employer discriminated against the employee
because she engaged in protected activity. In order to be protected by the anti-
retaliation provision of the FCA, the employee must be “investigating matters
which are calculated, or reasonably could lead, to a viable FCA action.” The court
held there were issues of fact as to whether a reasonable person would believe
fraud was occurring. For example, here the Dietary Manager was not involved in
billing. However, there was no dispute that snacks and supplements were not
always served to patients. There were also issues of fact on whether Sweeney
was fired because of her investigation. The fact that Sweeney’s replacement was
interviewed on January 7, 2003 after she had accused ManorCare of illegal
conduct on December 28, 2002, was sufficient to raise the inference, even
though she was not terminated until January 14, 2003.
As to termination in violation of public policy, to establish a prima facie case for
wrongful termination in violation of public policy, a plaintiff must show: (1) the
existence of a clear public policy, (2) discouraging the conduct in which they
engaged would jeopardize the public policy, (3) the public-policy-linked conduct
caused the dismissal, and (4) the defendant must not be able to offer an
overriding justification for the dismissal. The court noted that Washington has a
clear public policy regarding the proper billing of Medicaid services. Issues of fact
existed under this theory as well.
Sweeney’s claims were sufficient to defeat ManorCare’s motions for partial
summary judgment on the retaliation and wrongful termination claims. The
slander/defamation claim was dismissed.
United States ex rel. Sweeney v. ManorCare Health Servs., Inc., No. C03-
5320RJB, 2006 WL 1042015 (W.D. Wash. Apr. 5, 2006).
VIII. DEFAMATION & INVASION OF PRIVACY
New York Court Says Newspaper Headline Regarding Unscrupulous
Operation Did Not Constitute Defamation
A newspaper headline reading “Unscrupulous operation gouges nursing home”
that did not specifically reference a person by name, and omitted any reference
to a particular person whatsoever, did not constitute defamation. A series of
newspaper articles were critical of plaintiff’s operation of his nursing home and
use of federal low-interest housing rehabilitation loans for other unrelated
projects. The nursing home operator first sued the newspaper for defamation
based on the articles themselves. The court held that plaintiff was a “limited-
purpose” public figure and therefore to support his defamation, he had to show
actual malice—that is that the articles were false or written with reckless
disregard of the truth. Citing New York Times v. Sullivan, 376 U.S. 254 (1964),
the court granted defendants partial summary judgment.
The plaintiff later limited his claim to only the headline. The court held that if the
headline was a fair index of the related news article, it was not actionable as a
matter of law. In reviewing the headline, the court noted that the headline
accurately reflected the substance of the article and that no person was named in
the headline. Instead, it was the operation, not the operator, that was identified
as unscrupulous and gouging. Based on these facts, the case was dismissed.
White v. Berkshire-Hathaway, Inc., 802 N.Y.S.2d 910 (N.Y. Supreme Ct. Oct.
Maryland Appeals Court Finds Resident’s Claims Against Newspaper for
Trespass and Invasion of Privacy Survive Summary Judgment
Newspaper reporters sought to interview a facility resident who was a former
Congressman regarding unpaid bills incurred in his name. The reporters knew
the resident was in failing health, but without speaking to the resident, his family,
or the facility, they went to the resident’s room after one of them signed in at the
The reporters said they identified themselves and questioned the Congressman,
and he answered their questions without asking to stop the interview or
requesting them to leave. The Congressman’s private nurse supported the
reporters’ recollection of events. The nurse was unavailable for trial, but her
affidavit indicated she was in the room when the reporters entered, throughout
the ten-minute interview, and when the reporters left.
In contrast, the Congressman claimed he was alone in his room when the
reporters entered unannounced and without identifying themselves. He said he
repeatedly asked them to leave, but answered their questions when they did not.
According to the Congressman, the reporters also looked through some files
near his bed, and his nurse entered the room after the reporters.
The Congressman filed claims against the reporters and their employer alleging
trespass, invasion of privacy/intrusion upon seclusion, and intentional infliction of
emotional distress. The trial court granted the defendants’ motion for summary
judgment on all counts. The standard of review required the appellate court to
resolve factual disputes regarding the events in the Congressman’s favor.
The reporters argued on appeal that no trespass occurred because they had
implied consent through custom to enter a nursing facility resident’s room
unannounced and further that the Congressman indicated implied consent by his
acquiescence to their questions. The court found the state’s “Nursing Home
Resident’s Bill of Rights,” which requires staff members to knock on the door
before entering a resident’s room unless the resident is asleep, indicative of
community values and directly in contravention with the reporters’ assertion of
implied consent to enter the Congressman’s room.
The court further rejected the claim of implied consent by acquiescence because
a dispute of material fact existed as a result of the different versions of events
reported by the parties. The court found that if the Congressman asked the
reporters to leave as he stated, then the reporters exceeded the scope of any
consent to their presence, and his responses were an effort toward convincing
them to leave.
The reporters also contended that the failure of the private nurse to ask them to
leave evidenced implied and express consent to their presence. Again, because
of the different versions of events related by the Congressman and the reporters,
a dispute of material fact existed as to whether he consented to their presence.
The appellate court accordingly reversed the grant of summary judgment as to
the trespass claim. In addition, the court held that the Congressman’s version of
events, if believed, was sufficient to constitute a claim for invasion of privacy for
the reporters’ conduct in entering his room and refusing to leave. The grant of
summary judgment on the emotional distress claim was affirmed as the court
concluded the Congressman’s account indicated that the reporters’ actions were
not beyond all bounds of decency and the Congressman asserted insufficient
injuries, namely discomfort and disturbance to his peace and well-being, to
support this claim.
Mitchell v. Baltimore Sun Co., 883 A.2d 1008 (Md. Ct. Spec. App. Sept. 29,
Nursing facility residents retain right to privacy and can maintain trespass action
against unwelcome intrusions by third-party visitors to their resident rooms.
IX. PEER REVIEW
Ohio Appeals Court Holds to Protect Quality Assurance/Peer Review
Documents Facilities Must Produce Evidence That Committee Exists
Nursing Home was sued for negligence and concealment of facts about a
resident’s death from positional asphyxiation. The resident was found with his
head trapped between a mattress and the side rail with his lower limbs touching
the floor next to the bed. The nursing supervisor, administrator, and coroner were
notified by a staff nurse. During the facility’s investigation, the staff nurse and
aide who found the resident prepared written statements regarding the incident
as requested by the administrator. After reading the statements the administrator
crumpled the writings and put them in a desk drawer. The administrator then
asked the staff nurse and aide to write other statements with the assistance of
the director of nursing. The staff nurse testified in her deposition that she was not
told what to write or told to lie.
During the staff nurse’s deposition, defendant objected to questions about the
facility’s investigation including the aide’s and nurse’s written statements and
their conversations with the administrator. Defendant’s counsel instructed the
staff nurse not to answer, claiming that the information was privileged under the
state’s peer review statute. Plaintiff filed a motion to compel; defendant did not
respond and the court sustained the motion. Over two weeks later defendant filed
various pleadings seeking to set aside the ruling, including its suggestions in
opposition to the motion to compel. The trial court overruled all motions and
nursing home appealed.
The statute at issue provides that all records made available to the quality
assurance committee or a utilization committee of a hospital or long term care
facility are confidential and may be used only in the exercise of the proper
functions of the committee. Under the statute, the documents of those
committees shall be held in confidence and are not subject to discovery or
introduction into evidence in any civil action against the facility. Furthermore, an
individual who testified or presented information to the committee cannot be
asked about the individual’s testimony before the committee.
The appeals court held that defendant did not timely file its opposition to plaintiff’s
motion. Defendants argued its failure was based on excusable neglect. The court
held that even if there was a valid excuse for the failure to respond timely,
defendant failed to prove that the contested testimony and documents were
protected under the statute. Specifically, the court held that defendant did not
produce evidence that the nursing home had a peer review committee (such as
the name of the committee, its by-laws, or the scope of the committee), the
number and names of the committee’s members; that the administrator was on
the committee; that a peer review committee meeting was held on the facts at
issue; that any of the information gathered was ever presented to the committee;
or if any of the information gathered was used by the committee to assess the
facility’s quality of care or for any disciplinary matters. The court found that
absent proof of the peer review committee proceedings, the nursing home failed
to demonstrate that the objectionable information was protected. The court held
that at a bare minimum, the party claiming privilege must bring to the court’s
attention the existence of a peer review or quality assurance committee and
show that the committee investigated the case in question. Based on these
findings, the lower court’s ruling was affirmed.
Smith v. Manor Care of Canton, Inc., Nos. 2005-CA-00100, 2005-CA-CA-
00160, 2005-CA-00162, 2005-CA-00174, 2006 WL 636975 (Ohio Ct. App. Mar.
X. WORKERS’ COMPENSATION
Louisiana Appeals Court Says Penalties and Attorney’s Fees Appropriate
When Denial of Compensation Is Not Based on Competent Medical Advice
Employee was granted temporary total disability benefits, supplemental earnings
benefits, penalties and attorney’s fees based on her employer’s failure to pay
indemnity benefits and discontinuing her medical benefits. Rose was working as
a certified nursing assistant when she began experiencing pain and numbness in
her right hand and fingers. On March 30, 2004, she experienced pain in her wrist
when she attempted to roll a patient over. She filed an accident report and saw
Dr. Sandifer, an orthopedic physician, who diagnosed her as having carpal tunnel
syndrome (CTS) and possible tendonitis in her wrist. She was given anti-
inflammatory medication. She was never released back to work and was
eventually terminated for that reason.
On April 21,2004, Risk Management Services, the third-party administrator for
Maison Deville, denied compensation for the injury, deeming it to be unrelated to
work. Rose’s medical benefits were terminated that day. Rose filed a claim and
the Workers’ Compensation Judge awarded Rose wage indemnity and medical
benefits, as well as penalties and attorney’s fees for the arbitrary and capricious
denial of indemnity benefits and the discontinuation of medical benefits. The
nursing home appealed.
On appeal, the court noted that the causal link between an employee’s
occupational disease and work-related duties must be established to a
reasonable probability. Rose offered the testimony of Dr. Sandifer based on his
examination, the history given to him by Rose, and his experience treating other
nursing assistants. She also called her regular treating physician, Dr. Breazeale.
Maison Deville offered the testimony of Dr. Mead who said that Rose most likely
had CTS and that it most likely started at the time of her injury. He did not
contradict Dr. Sandifer’s determination that the CTS was work related. Maison
Deville also sent Rose’s file to Dr. Poche, an out-of-state physician who
performed a utilization review. His qualifications were not noted. He did not
examine Rose, but he offered the opinion that her CTS was not work related. The
Workers’ Compensation Judge gave no weight to Dr. Poche’s opinion and
neither did the appeals court. The appeals court noted that the employer must
rely on competent medical advice when deciding to deny medical treatment
benefits. A long-distance diagnosis by a physician advisor is not an acceptable
basis for denial of treatment and benefits.
The court upheld the penalties and attorney’s fees awarded because of the
employer’s failure to comply with its duty to investigate, assemble, and assess
factual information before denying benefits.
Rose v. Maison Deville Care Ctr., No. WCA 05-1307, 2006 WL 864262 (La. Ct.
App. Apr. 5, 2006).
Tennessee Supreme Court Holds Injury Sustained Traveling to Off-Site
Orientation Course Compensable
A nursing home was ordered to pay Workers’ Compensation benefits for injuries
sustained by Sherry Hubble who was injured in an automobile accident on her
way to an Orientation Course located 30 miles away from the facility.
Hubble filed a complaint against Dyer seeking workers’ compensation benefits,
which Dyer had refused to pay. The trial court bifurcated the trial; first to
determine if Hubble was an employee and, if so, if she was acting in the scope of
her employment when the injuries occurred. The second phase was to determine
the percent of disability. During the Phase 1 trial, Dyer argued that Hubble’s
employment was conditioned upon her completion of the orientation program,
which she did not do. It was Dyer’s position that Hubble was never more than a
“prospective” employee although it admitted that it would pay her to attend the
orientation program. The evidence also showed Dyer required that the class be
taken before Hubble ever started actual work at the facility but that she had
participated in some aspects of the hiring process before going to the course.
Prior to taking the course, Hubble had undergone a tuberculosis test and
received an “employee package.” The trial court held she was an employee
acting in the scope of her employment. Dyer appealed.
The appeals court held that as a general rule, an employee is not acting within
the course of employment when the employee is going to or coming from work
unless the injury occurs on the employer’s premises. However, there are
exceptions to this rule, such as the “special errand exception.” This exception
applies when the employee is performing some special act, assignment, or
mission at the direction of the employer. In this case the employee was required
to travel 30 miles to a required orientation class. This was not the normal travel to
and from her employment at Dyer. Therefore, the inconvenience and hazard
were sufficiently substantial to be viewed as an integral part of her service and
qualified for the special errand exception. The appeals court affirmed the trial
Hubble v. Dyer Nursing Home, No. W2005-00503-SC-R3-CV, 2006 WL
940295 (Tenn. Apr. 12, 2006).
XI. CRIMINAL LAW
U.S. Court in Pennsylvania Holds Defendants’ Convictions Were Not
Reversible Under Gonzales v. Oregon
An eleven-count indictment was filed on August 24, 2004 against defendants Bell
and Atrium I Nursing and Rehabilitation Center. Both defendants were charged
with one count of Health Care Fraud in violation of 18 U.S.C. §§ 1347 and 2, and
ten counts of False Statements Relating to Health Care Matters in violation of 18
U.S.C. § 1035(a)(2). Both defendants were found guilty and filed Motions for
Judgment of Acquittal, which were denied. They then filed Motions for
Reconsideration based on the recent U.S. Supreme Court decision in Gonzales
v. Oregon, 546 U.S. __, 126 S. Ct. 904 (Jan. 17, 2006).
The defendants argued the Gonzales case required that they be acquitted on the
conviction count under 18 U.S.C § 1347 and granted a new trial as to all other
counts of conviction because the government prosecuted their alleged violations
under a “standard of care” enunciated at 42 C.F.R. § 483.15 and § 483.25, both
of which they alleged were vague and ambiguous. The district court found that
Gonzales was not controlling in this matter for several reasons: (1) Gonzales only
addressed the deference that should be given to an interpretative rule of the U.S.
Attorney General; (2) the present case involved more than failure to meet
required standards of care. Instead, these defendants were charged with
healthcare fraud based upon a scheme to falsify records which were used to
conceal from state and federal regulatory agencies the substandard care which
was being provided to residents at Atrium; and (3) the defendants falsely
represented that required care would be provided, failed to provide care, and
falsified records such that their actions were elevated to the level of criminal
fraud rather than mere failure to provide care. Thus, the defendants’ motions
United States of America v. Bell, No. 02:04cr0212, 2006 WL 952214 (W.D. Pa.
Apr. 12, 2006).
California Appeals Court Finds Transfer of and Refusal to Readmit
Resident Violated Federal and State Transfer/Discharge and Bed-Hold Laws
Nursing home transferred a demented, Farsi-speaking only resident to a hospital
when he attempted to wrap his call button cord around a caregiver’s neck. The
transfer form noted that his potential for rehabilitation was “fair.” The hospital
tried to transfer the resident back to the facility almost immediately and then
again after several days in the hospital. Each time the facility refused, stating he
was a danger to himself and others. On the day of the transfer the facility called
the resident’s son and sent him a letter notifying the son of the discharge. The
facility did not issue a bed-hold notice to the son or the resident.
Family appealed and the facility was given twenty-four-hour notice of a hearing.
The hearing officer found the home violated California law by failing to readmit
the resident, violated federal law by failing to issue a bed-hold notice, and failed
to comply with both state and federal transfer and discharge laws. The hearing
officer ordered the facility to readmit the resident but the home refused, arguing
that he posed a danger to residents and staff. The nursing home appealed. While
the hearing was pending the resident decided not to go back to the facility,
making the matter moot. The appeals court exercised its discretion to decide the
case on the merits, in part because a deficiency was still outstanding. It found the
nursing home’s due process was not violated because the nursing home had
constructive notice of a hearing when it notified the resident’s son of his right to
appeal; had an opportunity to attend, be heard at, or object to the hearing and
failed to object at the time; and California law does not require corporations to be
represented by counsel in administrative tribunals.
The appeals court held that a contemporaneous notice of discharge, even in an
emergency, did not comply with the federal requirement to give notice before
discharge. Although the notice period may be shortened, there is no provision for
contemporaneous notice. The notice requirement is necessary to provide
sufficient preparation and orientation to ensure a safe and orderly transfer or
discharge from the facility, which was absent in this case as evidenced by the
ineffective communication between the nursing home and hospital staff and a
failure of the nursing home to convene a family meeting to discuss the resident’s
disruptive behavior. Citing fifty-five instances of aggressive behavior over the
past several months, the court held that the nursing home had numerous
opportunities to give notice and orientation prior to the resident’s discharge.
Thus, the contemporaneous notice was not given “as many days before the date
of transfer or discharge as practicable.” Moreover, the court held that the home’s
failure to provide any notice of its bed-hold policy at the time of transfer violated
both state and federal law. The court found this failure particularly problematic
because it demonstrated that the home did not consider the possibility that the
resident could be treated effectively and return without further problems.
Kindred Nursing Centers West, LLC v. California Health and Human Servs.
Agency, No. D044215, 2005 WL 1460714 (Cal. Ct. App. June 22, 2005).
This case is particularly disturbing for nursing homes with residents who have
aggressive behaviors. If followed in other jurisdictions, nursing homes will have to
document that it discussed with families ahead of time what conditions would be
grounds for discharge and document measures taken to prevent those grounds.
Changes in Resident’s Care Between Assessments Need Not Be Included
in Care Plan Absent a Significant Change
This was a decertification case after six months of alleged continuous
noncompliance that ended on May 26, 2005. Judge Kessel held that the only
relevant time period was the facility’s compliance status as of the date of
termination, irrespective of the compliance status for the previous six months. If
the facility was in compliance on May 26, CMS would have no authority to
terminate the provider.
In the May 26 survey, the facility was cited for failing to update a care plan when
it made changes in the resident’s treatment between mandated assessment
periods (quarterly and annual). There was no evidence that the changes were
made pursuant to a significant change, but instead were made as part of the
ongoing care of the resident. Judge Kessel held there is no requirement that the
change had to be documented in the care plan. However, he did not go so far as
to hold that changes in care do not need to be documented somewhere in the
Judge Kessel also found that intermittent failures to document care and release
of restraints did not support an allegation of noncompliance. An inference is just
as reasonable that all routine services were provided and the care provider
“simply omitted to complete the paperwork for the shift.” Further, Judge Kessel
held that even though a single error may constitute substantial noncompliance,
every error or omission of staff does not automatically establish noncompliance.
CMS has the burden of proving that the error or omission is potentially harmful.
Evergreene Nursing Care Ctr. v. CMS, No. CR1337 (Aug. 18, 2005).
Nursing facilities should be careful not to read this case as allowing care changes
to go undocumented in the record. However, it supports the theory that a person
must look at the whole record to determine if the plan of care is documented. It
also provides that in the case of termination because of noncompliance for six
months, all that is necessary to avoid termination is compliance as of the
Facility Awarded Attorneys’ Fees Under Equal Access to Justice Act for
Appeal of CMPs
Park Manor Nursing Home was subject to civil money penalties (CMPs) for a
March survey and June revisit. Park Manor appealed. The deficiencies on the
revisit were overturned during informal dispute resolution (IDR), as were some of
the deficiencies in the March survey. CMS proceeded with its claims on six
deficiencies from the March survey and the only deficiency cited in the revisit.
Park Manor moved for summary judgment and prevailed on the revisit claim.
Park Manor then prevailed after a hearing for all the March survey deficiencies.
Park Manor then filed under the Equal Access to Justice Act, 5 U.S.C. § 504, for
attorneys’ fees. The lower court found in favor of CMS. The DAB overturned the
decision on the revisit deficiency and, rather than remand the case, issued its
own opinion because of the length of time the case had been on appeal.
In order to obtain attorneys’ fees, the DAB held Park Manor had to show that it
was a prevailing party and that CMS’ position was not substantially justified or
there were no special circumstances in favor of CMS. The DAB held that CMS
was not substantially justified in going forward with the revisit claims that had
been overturned at the IDR. As for all other claims, CMS was substantially
justified in pursuing them, despite having lost after the hearing. The DAB held
that CMS’ pre-judgment actions were reasonable if (1) the SOD contained factual
allegations that provided a reasonable basis for noncompliance, (2) at least one
finding was legally sufficient to support the remedy imposed, and (3) CMS did not
know or have reason to know of credible evidence that would undermine the
legality of the remedy imposed.
Park Manor Nursing Home v. CMS, No. CR1263 (Dec. 16, 2005).
Arkansas Supreme Court Says State Did Not Need to Count Residential
Care Facilities When Determining Permits for Assisted Living Facilities
Arkansas Residential Assisted Living Association, Inc. (Association) challenged a
regulation requiring that permits of approval for residential care facilities “shall
also be considered permits of approval for assisted living without further action.”
The Association argued that all permits of approval for residential care facilities
must be counted as permits for approval of assisted living facilities, otherwise
more accommodations for the assisted living population would be created than
The court affirmed the rule, finding that the Arkansas Health Services Permit
Commission (Commission) “engaged in significant research and analysis” before
issuing the regulation. The Commission considered state statutes, undertook
surveys regarding other states, and held meetings with providers and others to
discuss facilities and resident needs. The Commission also considered
population projections and the future need for services affected by the rule. Thus,
the high court upheld the lower court’s grant of summary judgment to the
Arkansas Residential Assisted Living Ass’n, Inc. v. Arkansas Health Servs.
Permit Comm’n, No. 05-183, 2005 WL 3436665 (Ark. Dec. 15, 2005).
Minnesota Appeals Court Says Nursing Home Can Recover Past Due Fees
from Responsible Party/DPOA
A son signed an admission agreement as his mother’s attorney-in-fact and
responsible party. Although the mother received state assistance for payment of
the fees, the son failed to pay all of the co-payments, totaling almost $4,000.
Because the son voluntarily signed as the responsible party, the court held he
could be personally liable for the debt. However, a state statue only allowed
recovery for monies that the son misapplied, an issue the lower court failed to
address. The appeals court also held that the son could be personally liable for
the nursing home’s attorneys’ fees even though they were over three times more
than the debt owed, if the son, as the attorney-in-fact, acted in bad faith. The
appeals court remanded the case for the lower court to consider the issue of bad
faith and determine whether the funds were misapplied.
Northfield Care Ctr., Inc. v. Anderson, 707 N.W.2d 731 (Minn. Ct. App., Jan.
Arkansas Supreme Court Holds Management Company Is Not Liable for
Damages Under Resident’s Rights Statute When Company Is Not Licensee
Plaintiff, executrix of a resident’s estate, brought an action against a nursing
home and its management company for, among other claims, a violation of the
state’s resident’s rights statute. The jury found in favor of plaintiff and the
management company appealed. The circuit court found that the management
company was a “de-facto licensee” subjecting it to liability.
The Arkansas Supreme Court held that the statutory scheme did not reference a
“de-facto” licensee. Instead, it was clear from the statutory scheme and the
language of the statue that the legislature intended the facility itself, the one
actually providing the care, and not the manager of the facility, to be licensed in
accordance with the statutes. Finding that no license was issued to Health Care
Facilities Management Corporation, the management company was not liable
under the resident’s rights statute.
Health Facilities Management Corp. v. Hughes, No. 05-90, 2006 WL 301084
(Ark. Feb. 9, 2006).
California Appeals Court Holds Complaint Filed Against Nursing Home
Resident’s Attending Physician Raised Triable Issues of Negligence,
Wrongful Death, and Elder Abuse
A resident entered a nursing home after a lengthy hospitalization with multiple
disease processes including heart disease, diabetes mellitus, renal insufficiency,
anemia, status post hip repair, and Stage II heel ulcers. The attending physician,
Dr. Woods, wrote orders for a Ken Air bed, float heels at all times, and
medications. Although nutritional supplements were ordered in the hospital,
those orders were not carried over to the nursing home nor was any wound care
ordered. Woods performed a history and physical shortly after her admission.
There was no evidence in the record that Woods removed the heel bandages
and examined the wounds. Woods went on vacation for two weeks while his
partners covered for him. The resident’s condition declined. Upon Woods return
he ordered Ensure once a day rather than the dietician’s recommended twice a
day for weight loss and mild to moderate malnutrition. The resident’s chart did
not reflect that the nursing home staff floated the resident’s heels. The wounds
progressed to a Stage IV despite treatment orders later given by Woods. Within
weeks after entering the nursing home the resident was hospitalized and later
The trial court granted Woods’ motion for summary judgment on the plaintiff’s
allegations of negligence, wrongful death, and elder abuse. The appeals court
overturned the ruling on all claims. The appeals court held the plaintiff’s evidence
that Woods ignored the fact that the resident’s weight was not being taken
regularly, that Woods did not monitor her nutritional status, and that Woods
recklessly failed to ensure that his order to float her heels was being followed
after being informed that the wounds were not healing was sufficient to raise a
triable issue of fact regarding recklessness under the Elder Abuse Act, and
regarding the negligence and wrongful death claims.
Leong v. Woods, 2006 WL 42260 (Cal. Ct. App. Jan. 10, 2006) (Unpublished).
Indiana Appeals Court Holds Board of Health Facility Administrators Acted
Arbitrarily and Capriciously By Imposing Harsher Sanctions Than ALJ
Without New Findings of Fact
The Board of Health Facility Administrators sanctioned a nursing home
administrator’s license for resident-to-resident injuries including one occurring in
September 1999 when a resident JM pushed another resident causing her to fall
and hit her head and receive injuries from which she later died. Resident JM had
organic brain syndrome with violent outbursts. After one verbal outburst the
facility tried to transfer JM but was told by the ombudsman that she would block
the move. JM also had a history of murder which was unknown to the
administrator or the facility until after the September incident. The administrator
appealed the sanction.
An ALJ found that JM had numerous violent outbursts during his stay at the
nursing facility during the administrator’s tenure. In viewing all the evidence, the
ALJ found that administrator’s management style did not negatively impact
resident care at the facility. The ALJ did find that the administrator violated state
law by failing to know that the ombudsman could not block a transfer and failing
to exercise sound judgment in failing to transfer JM sooner than he was. The
administrator also violated federal law by failing to ensure that the social service
department implemented more effective behavioral control measures for JM. In
spite of these findings, the ALJ found the fact that resident care overall was very
good under the administrator’s leadership should mitigate any sanction the Board
imposes on her. The ALJ recommended that the administrator be censured and
not required to pay the costs of the proceedings (about $16,000).
The Board reviewed the ALJ’s decision and, without adopting any findings of its
own, imposed an indefinite suspension of the administrator’s license with the
opportunity to seek reinstatement in five years. The administrator moved to
vacate that decision on the Board’s failure to adopt findings and conclusions. The
Board then adopted the ALJ’s findings of fact and conclusions of law in toto
without any additional findings or conclusions, but imposed its previous sanction.
The administrator appealed. The trial court found in favor of the administrator and
the Board appealed.
The appeals court found that the Board’s sanction of the suspension was
arbitrary and capricious since it rested entirely on the ALJ’s findings and
conclusions and they did not contain a reasonable basis for the severity of the
sanction imposed. Rather than requiring that the ALJ’s remedy be imposed as
the trial court held, the appeals court remanded the case so that the Board could
make findings to support the harshness of its sanction or modify the sanction it
Indiana State Bd. of Health Facility Adm’rs v. Werner; 841 N.E.2d 1196 (Ind.
Ct. App., Feb. 10, 2006).
Second Circuit Holds Neither an Association Nor Its Individual Members
Had Standing to Challenge State’s Rate-Setting Measures
Concluding a long history of pleadings beginning in 1995, the Second Circuit
affirmed the lower court’s denial of the Association’s motion for summary
judgment. An Association of residential healthcare facilities and a number of its
members individually filed a series of complaints challenging the adequacy of
New York’s reimbursement rates. Primarily they challenged the cost-control
measures the state enacted to control its budget. Plaintiffs stated that the budget
cuts violated the now repealed Boren Amendment as well as the current
requirements of 42 U.S.C. §§ 1936a(a)(13)(A) and (30)(A).
In a per curium decision, viewing the evidence in the light most favorable to the
non-moving party, the Second Circuit upheld the lower court’s finding that the
Eleventh Amendment barred the Boren Amendment claims and that there were
no enforceable rights granted the plaintiffs under 42 U.S.C. § 1936a(a)(13)(A)
New York Ass’n of Homes and Servs. for the Aging, Inc. v. DeBuono, No.
04-3448, Medicare & Medicaid Guide (CCH) ¶ 301,832, (2d Cir. Apr. 6, 2006).
Facility Not in Substantial Compliance for Failing to Administer CPR
Morrow Memorial Home’s policy regarding CPR stated that residents who have a
witnessed arrest and have indicated the desire to have CPR will be resuscitated.
The resident’s desire is to be written on a specific form. CPR would not be
performed on an unwitnessed arrest. The policy also stated that all licensed
nursing staff was required to be certified. Morrow was cited with an immediate
jeopardy deficiency for failing to perform CPR on a resident who had expressed
her desire for CPR on the proper form when the arrest was witnessed by a social
Morrow appealed, arguing that the arrest was “unwitnessed” since it was not
witnessed by nursing personnel. Further, the nurse who responded exercised
sound nursing judgment within the scope of her license by refusing to initiate
CPR. The home argued that 7 minutes had passed before the first opportunity for
a registered nurse to arrive and when she did, she found the resident with no
pulse, blood pressure, or respirations, the oxygen saturation was zero, the
resident’s eyes were fully dilated with no pupil reaction and her face color was
black. The nurse also found that vomit and blood were coming out of the
resident’s mouth. The facility argued that CPR is not required when the resident
is obliviously dead and calling “911” would not have resulted in the necessary
suctioning to clear the resident’s airway since the ambulance could not arrive in
The ALJ upheld the deficiency, focusing on the fact that performing CPR on the
resident for a witnessed arrest was part of this resident’s care plan and that
without any resuscitation, the resident had no chance for survival. The ALJ
determined that it did not require a professional person to witness the arrest,
especially since the social service person sought help in response to her
observation of the resident. The ALJ also found that the nurse qualified to
perform CPR violated the standard of practice when she failed to ascertain when
the arrest had occurred, failed to perform a finger sweep to clear the airway and
to initiate CPR for a resident who had suffered a witnessed arrest within 4-6
minutes of the nurse’s arrival at the bedside.
Morrow Mem’l Home v. Centers for Medicare & Medicaid Servs., Dec. No.
CR1433, Medicare & Medicaid Guide (CCH) ¶ 120, 956, (DHHS Dep’tal App.
Bd., Civil Remedies Div. Mar. 4, 2006).