Court rules nursing homes can't sue state over Medicaid decisions

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Ohio nursing homes don't have standing to sue the state over Medicaid eligibility determinations unless specifically authorized.

Late last week, the U.S. District Court for the Southern District of Ohio dismissed claims brought by Communicare LLC, Saber Healthcare Group and Legacy Health Services.

The companies were suing directors of the state's Department of Medicaid and the Department of Job and Family Services. Between 2015 and 2017, the departments denied three residents Medicaid coverage for various reasons, including insufficient paperwork and excess resources.

Nursing homes are increasingly turning to the courts to overcome coverage and funding issues with state Medicaid agencies. Operators argue they are losing money over decision delays, drawn-out appeals and low reimbursement rates. In many states, delays and low reimbursement are being blamed for closures meaning reduced access for seniors in need of around-the-clock care.

Illinois, for example, has been ordered to pay $586 million per month to Medicaid providers to make up for several years of unpaid bills.

The nursing homes in this lawsuit alleged that Ohio's Medicaid agency didn't comply with federal law and regulations when it reviewed and denied the residents' Medicaid applications. They alleged violations of the Medicaid Act, the 14th Amendment due process and equal protection clauses, the Americans With Disabilities Act, the Rehabilitation Act, and federal civil rights law.

But the court agrees with the state's arguments that skilled nursing facilities aren't authorized to sue on residents' behalf.

In one case, a patient representative form was signed after the initiation of the lawsuit. But even in the others, Judge George C. Smith ruled April 12 that representative forms authorize only specific actions, including Medicaid applications, reviewing eligibility for Medicaid benefits, and taking action to establish eligibility.

“The initiation of this lawsuit does not fit into any of those categories,” Smith wrote. “Plaintiffs are alleging civil rights violations caused by the alleged improper denial of the Medicaid benefits ... None of the language of the authorized representative form allows for such a lawsuit.”

Chadwick O. Bogar, CEO of the Harrisburg, PA, law firm representing the nursing homes, told Bloomberg Law Ohio courts “have been all over the place” on nursing homes' right to sue the state Medicaid agency. He said he is awaiting a decision from an Ohio intermediate appeals court that should help clear up the confusion.

Courts in other states have already recognized providers' rights to sue on behalf of residents.

In January, five Illinois-based nursing home groups sued the state's Department of Healthcare and Family Services, claiming low reimbursement rates are jeopardizing their ability to provide adequate resident care.