The following is the third in a regular series of contributions to Park Place Live by Mark E. Reagan, the managing shareholder of Hooper, Lundy & Bookman. 

For too long, skilled nursing facilities (SNFs) have suffered under the weight of an inconsistent and unaccountable survey and enforcement system, and a biased appeal process. In recent years, this has been extended to the “weaponization” of the Five-Star system, along with a fundamental lack of due process.

The truth of the matter is that the care provided by operators is not being judged in a fair or equitable manner and it’s time for this chapter to come to an end. This article discusses two pending legal actions that are designed to address these problems and what operators can do to support survey and enforcement reform.

Case One

The first case, Sligo Creek Center v HHS, is an appeal of a seven-figure civil money penalty (CMP) applied against a Maryland SNF that was upheld by the Departmental Appeals Board (DAB) based upon a purported infection control deficiency. Beyond the merits of the deficiency, however, the appeal also raises the issue as to whether Sligo Creek was required to contest the CMP through the DAB appeal system or whether it should have had the right to seek a jury trial. In other words, the case raises whether the DAB system as applied to Sligo Creek is constitutional under the 2024 U.S. Supreme Court case, SEC v Jarkesy.

In Jarkesy, the court found that forcing a recipient of CMPs arising out of alleged fraud to appeal the CMPs through the SEC administrative appeal system was unconstitutional. Since Jarkesy, other courts have considered whether similar administrative enforcement systems are constitutional. In just the last few weeks, the Supreme Court granted review of two cases involving Federal Communications Commission enforcement and the right to a jury trial.

While the issue in Sligo Creek relating to Jarkesy focuses on the basis for, and context of, the infection control deficiency, a ruling that the SNF deserved the opportunity for a jury trial right could be a “game changer” for due process. Regardless of the outcome of the Sligo Creek case, it is important that SNFs consider seeking relief under Jarkesy in other CMP appeals before the DAB.

Case Two

The second case is one that was recently filed in the District Court for the Northern District of Illinois. In that case, Forest City Rehab and Nursing Center, LLC v Oz, the SNF is challenging the manner in which the Centers for Medicare and Medicaid Services (CMS) has applied enforcement under its MDS Schizophrenia Audit program outside of the established CMS survey and enforcement system.

Rather than seeking CMPs or other types of authorized enforcement, CMS has instead applied downgrades to SNF Five-Star scores as the “consequence” of alleged deficient practices. In states such as Illinois where Medicaid reimbursement is directly impacted by these scores, CMS has truly “weaponized” the Five-Star system. Even worse, there is no meaningful due process afforded by CMS in this program. The Forest City case seeks to either reverse the results of these audits or require due process before effectuating the downgrade.

As with Sligo Creek, operators would also be well-served to consider challenging these types of “shadow” enforcement that increasing uses Five-Star as its “weapon.”

The bottom line is that SNFs deserve fairness and equitable treatment and the efforts to achieve these goals are worth pursuing on multiple fronts. Stay tuned!