Warren E. Burger: We will hear arguments first in Barbara Plum, Commissioner of New York State Department of Social Services, v. Yaretsky. Mrs. Gordon?
Judith A. Gordon: Mr. Chief Justice, and may it please the Court. New York's alleged involvement in medical decisions about nursing home care for Medicaid patients was found below to constitute state action in two kinds of circumstances. A brief review of the kinds of circumstances in which state action was found to be present is necessary because that inquiry determines the additional question petitioners raise in this case; that is, the district court's jurisdiction under Article III to decide the claims that are now before you, and also, it aids the inquiry, the state action inquiry, in the event the court reaches that inquiry. The first circumstance in which state action was found to be present occurs when a patient's outside physician, or a physician on the staff of a nursing home, decides to decrease or increase the level of the patient's care because his condition has become worse or because it has become better. In our brief, we refer to the decision of the nursing home staff physician as a nursing home decision or transfer, and we refer to the decision of the outside physician as the decision of a private physician, albeit both of those decisions are private action within the constraints of the court of appeals' decision below. The second circumstance in which state action was found to be present occurs when a utilization review committee or a physician member of that committee decides to increase a patient's level of care because his condition has become worse. Parenthetically, it should be noted that utilization review is a federally-required peer review system, that a utilization review decision about a change in care for a patient who is already in a nursing home is made during a portion of that process called continued stay review, and the continued stay review is addressed to whether or not the patient needs nursing home care at all, and if he does, what kind of care he needs. Two further points with respect to utilization review, and that is the utilization review physician's decision to change a level of care is final once made if it is not opposed by the patient's own physician, and that requirement is specific to the federal regulations which are found at 42 CFR 556.336, and 442 CFR 556. 436, and the state regulations track the federal regulations in that regard. In addition, if the utilization review physician decides that the patient needs this upward change in level of care and his decision is opposed by the patient's private physician, if two utilization review physicians agree, then the decision of the utilization review committee becomes final, again, under the regulations that I just called to your attention.
Warren E. Burger: How much time do these physicians spend in this process as compared with the time they spend taking care of the patients?
Judith A. Gordon: Well, Your Honor, if you look at 42 CFR 456.330 following which describes these various utilization review procedures in quite tedious detail, I think you would have to conclude that he spends a great deal of time. However, I can't, in fact, give you an exact estimate, but certainly we have no indication that the physicians who serve on these committees are not attending to the care of their patients, at least in this record. Petitioners contend that the district court should never have reached the transfers that are at issue and that I just described with respect... in the circumstances I just described. And that is because there was no plaintiff and no class representative before the district court who could have raised the issues. Not only was there no one who had such a transfer or was threatened with such a transfer, there certainly was no one who had the reality or the prospect of the kind of distinct and palpable injury that Article III requires.
Byron R. White: But there was a case or controversy of some kind at the time the case began?
Judith A. Gordon: Absolutely, Your Honor. There was a case or controversy with respect--
Byron R. White: About some other kinds of movements.
Judith A. Gordon: --Exactly. There was a case or controversy with respect to the claims of the name respondents and the named intervenors, and that case or controversy rested on their claims that you URC's had improperly transferred them to lower levels of care. Not URC's--
Byron R. White: And that dispute was settled?
Judith A. Gordon: --That dispute was the initial predicate in this case, it was initially decided by a preliminary injunction back in January of 1978, it went up to the court of appeals in the first court of appeals in this case and it was ultimately resolved as you indicate on October 17, 1979 by the first partial final judgment in this case, which was entered--
Byron R. White: In the district court?
Judith A. Gordon: --Yes, it was resolved in the district court.
Byron R. White: Then why didn't the case end there?
Judith A. Gordon: That is exactly my question, Your Honor.
Byron R. White: Did you ask the court to end it then?
Judith A. Gordon: Pardon me?
Byron R. White: Did you ask the court to end the case then?
Judith A. Gordon: No, Your Honor, the assistants then--
Byron R. White: And you went right ahead and litigated these other issues?
Judith A. Gordon: --That is correct, Your Honor. The assistants handling the case at that point did indeed go ahead and litigate these other issues through the court of appeals and to this court on the petition here today.
Byron R. White: And you are raising a case or controversy here for the first time?
Judith A. Gordon: That is correct, Your Honor.
Byron R. White: But you submitted these issues in the court of appeals. I mean, you litigated those issues without objection in the court of appeals.
Judith A. Gordon: The issues, the merits of the issues were indeed litigated without objection in the court of appeals, and I would add one point to that, Your Honor. When it came time to consider the preparation of the petition for certiorari in this case, and Mrs. Siegel was then solicitor general of the state of New York... she is no longer... and we, myself and the assistants who aided me, reviewed the record in this case which was quite lengthy, we came to the conclusion that the Article III question was fairly presented by the record. We also observed that it had not been raised before and we had detailed conversations with Mrs. Siegel as to whether or not we should call it to your attention. The conclusion of those conversations was that we could not, consistent with the standards of our practice, fail to call them to your attention, lest this Court reach the merits of the case involving constitutional rulings, which was not adequately presented in terms of Article III.
Sandra Day O'Connor: Counsel, if the question were properly before the lower courts, dealing with the transfer to a higher level of care, would New York have stipulated eventually to the procedures for handling them as was done on transfers to lower level of care?
Judith A. Gordon: That is a very interesting point, Your Honor. At page 14 of our main brief we describe briefly what the state policies were before the judgment on review came up. One of the state policies with respect to URC transfers to higher levels of care, which you just called to my attention, was that those transfers would be, in effect, advisory. In other words, the state of New York, the Medicaid authorities, would not change the level of benefits based on a URC decision, it would simply await what the doctor did, what the URC did. If the patiently ultimately got transferred by virtue of that URC decision, then it would adjust the benefits. If it did not, if the patient did not get transferred, they would leave the benefits intact. Now, aside from substantial equity problems that were involved in that policy which was, of course, superseded by this judgment; namely, there were people in nursing homes who in fact needed a much more intensive level of care and were not receiving it, that being one of the equities on a change of policy side. The federal government came along and advised us that although they had required hearings on URC transfers to lower levels of care, that our FFP, our federal financial participation, was in serious jeopardy if we avoided hearings on higher levels of care. And the letters with respect to that appear in the second supplement to the Joint Appendix, which includes some letters referred to in petitioner's brief... pardon me, respondents' brief... at page 4, note 4. In other words, respondents refer to a letter by Commissioner Blum to the federal authorities saying can't we please give hearings on URC transfers to higher levels of care now, since you already told us there is a program requirement... not as a constitutional requirement... that we have to give them on transfers to lower levels of care. That is the first letter in the second supplement to the Joint Appendix.
Sandra Day O'Connor: All right, so your answer is no from advice of the federal government.
Judith A. Gordon: Right. The answer from the federal government was that they did not perceive that to be an effective way of utilization review, at least for transfers to higher levels of care.
Sandra Day O'Connor: You have, I think, taken the position in your brief that private transfer decisions for patients in nursing homes are medical decisions unaffected by the state. Now, what about a decision by the nursing home itself to transfer, when made by someone other than a physician? Is that a medical decision?
Judith A. Gordon: Well, it can be or it cannot be depending on how... what the facts are. And as I indicated, we do not have any plaintiffs who present the facts that would support those kinds of conclusions. However, when we viewed this judgment, we thought of it as pertaining really only to medical decisions; decisions by a nursing home's medical director and therefore medically predicated. There is a possible other reading which plaintiff... which respondents point out essentially at page 22 of their brief and throughout their brief, that a nursing home, not through its medical director but through its administrator, might want to discharge somebody because he is a bad patient, or for some other non-medical reason. Now, those discharges, in fact, present this case in microcosm, because those kinds of discharges are covered by something called the patient's bill of rights, which is codified in federal regulations and codified in state regulations. And what that bill of rights says is, if you were transferred by your nursing home,... presumably a human being who has made a decision who is affiliated with the nursing home. If you were transferred for non-medical reasons, for non-payment, for your own welfare, you have a right to challenge that nursing home decision. You do not have a right to bring a Medicaid reimbursement claim against the state in a fair hearing to get money; that does not do you any good. You have a right to bring a private action against the nursing home. And we suggest to you that the kinds of medical decisions that are at issue in this case, made as they are by these private URC's, the facility medical director, the staff physician, your outside physician, present exactly the same kind of private transactions as the purely... as respondents call them... the purely non-medical needs decisions, and that the remedy for these, if there is to be a remedy, is against the people who made the decisions. Not in a request to the state to pay you money for a service that an individual in the private sector has already refused to provide you.
Sandra Day O'Connor: Let me ask you one more question while you are interrupted. Do transfer decisions, even those made by private physicians, have to be made by applying state-defined criteria?
Judith A. Gordon: The state prescribes the use of what respondents have called and what are, in fact, a DMS-1 form and a DMS-9 form. Those forms can be found... they are not referenced in respondents' briefs, but they can be found in Appendix C1 to Volume C of Title x of the New York Code Rules and Regulations. Their are displayed there in full. Now, the state has prescribed those forms, and what those forms consist of are, one, a standard sheet which assigns... in fact, the sheet is called New York State Numerical Standards Master Sheet. That is the DMS-9 form. And the DMS-1 form is called the New York State Long-Term Care Placement form. And what those forms do is describe certain kinds of medical conditions, certain kinds of patient conditions... in other words, self-care in dressing, needs help, needs total help... and certain other kinds of conditions such as needs restraints, requires... is assaultive. And the numerical standards assign certain weights to these depending on when the condition occurs. Now, those two forms used in combination... and they are used throughout this proceed including with respect to these medical decision... create what are called predictor scores. If you get a score of 60, you are arguably appropriate for an intermediate care facility; if you get a score of 180 you are arguably appropriate for an SNF or skilled nursing facility.
Sandra Day O'Connor: Can a patient be transferred who does not meet the state's criteria?
Judith A. Gordon: Now, respondents say that those forms determine the choice. In other words, the fact that the doctor has to use this form means that the state has made up his mind for him. The answer to that is absolutely no. The specific regulations which control the use of these forms; namely, 10 New York Code Rules and Regulations, Section 415.1A(2) and Section 420.1B, state in terms that all the physician who gets this form has to do to say that his patient needs another kind of care that is not consistent with the predictor score, is say so. In other words, the physician has an override; the form does not foreclose the patient's access to the kind of care that the doctor wants to see him have. And it does not determine what the doctor is supposed to do. One other fact--
Warren E. Burger: Mrs. Gordon, we have granted certiorari on just two questions here, relatively narrow, and about half of your time is gone.
Judith A. Gordon: --Very well, Your Honor. I would--
Warren E. Burger: If you would focus on those two questions.
Judith A. Gordon: --I would just like to point out one other factor with respect to the DMS-1 forms because in the entire array of federal and state laws which the respondents bring to bear on their argument... which is not the court of appeals' argument... that state action is somehow found in these transfers because the state forces them, the only point that needs clarification is, in fact, the use of these DMS-1 forms. Justice O'Connor, if I just might finish, the respondents also say that somehow, even if we use these forms and they are not specifically controlled by the state, their results are not specifically controlled by the state, that we at some point review them, and we determine whether they are correctly drawn or incorrectly drawn, and disapprove or approve the physician choices that appear on those forms. That is an absolutely incorrect statement. The portion of the record that the respondents cite for that point is an affidavit by Donald Davidoff, which is document 18 of the record on appeal, and the affidavit simply does not say that, and that is not in fact what we do. We leave the forms as we find them. We do collect them, we use them for statistical purposes, and it is possible that in the course of receiving those forms or in the course of another procedure that the respondents called to your attention which are called periodic medical reviews and independent professional reviews which are audits essentially of the quality of care offered in nursing homes, it is possible that in the course of any of this regulatory complex that the state might, indeed, find a nursing home patient who is inappropriately placed. That did not happen in this case, certainly not on these facts. But if the state were to find that patient and it were to direct that patient's removal from a nursing home, well then, certainly, we would not be here today arguing this case. That would be a state initiated transfer, and New York at least would not come before this Court and claim that state action was not present. But the kinds of transfers that were decided below are all medically initiated for reasons determined by private parties, and have nothing whatsoever to do with the state's control, intervention or forcing of any of the decisions at issue. Returning just briefly to the standing point, Your Honor, respondents make essentially two arguments against the petition... the petitioner's claim that they lack standing. The first is... depends on their acknowledge that indeed, in January of 1978, the district court did enjoin the URC transfers to lower levels of care. But they turn around and they say that notwithstanding that injunction, the same individuals... presumably the respondents and the intervenors... were subject to the same kind of risk, albeit the injunction was enforced, because the nursing home was going to adopt that URC decision as its own. It was going to simply say oh, well, URC, you are enjoined; now we are going to enforce that... we are going to make the same choice and disregard the order. Well, the argument omits to point out that in the very order that enjoined the URC's... to wit: the January 5, 1978 injunction... the nursing homes themselves were also enjoined. And therefore, the argument assumes that the nursing homes would have entered into some kind of subterfuge or circumvention of the order to make the same choice and say it was their own and not a URC order. The record is completely barren of any evidence which even suggests that the nursing home sought to circumvent the order in this regard, and indeed, it is barren of any evidence that the nursing home ever threatened or transferred any of the named respondents in any way whatsoever once the order was issued. Moreover, even if you accept the logic of the argument, it still fails because the injunction upon which it relies; namely, URC transfers to lower levels of care, is not at all coextensive with the claims that the respondents sought to put before the court; namely, including those claims to higher levels of care and to... and physician transfers to lower levels of care. A second argument that respondents make with respect to our claim that they lack standing relies on the speculation that there must be some other member of this class, even if it is not the named respondents and intervenors, who in fact had a physician transfer to a higher level of care, or a URC transfer to a higher level of care. I suggest to the Court that that argument is impossible because the laws established that the claims of class members can never be broader than the claims of class representatives, and the only class representatives before the court below were indeed the named respondents and the intervenors who only had the URC transfers to lower levels of care. Respondents also called to your attention two letters... actually, three letters; two are identical and one is slightly different... in support of their claim that some member of the class had these transfers. The letters are dated a year and a year and a half after the district court entered the last partial final judgment in this case, and they are appended to their brief in opposition to certiorari. And obviously, a transfer, even assuming the person who was receiving it was aggrieved, and these letters do not suggest that they were, a transfer happening to somebody a year or a year and a half after the district court determined the claims that are at issue, cannot serve to place those claims before the district court.
William H. Rehnquist: Well, do they purport to be transfers of named parties to the action?
Judith A. Gordon: Two of the letters, Your Honor, dated December 18th, 1980, are to nursing homes and do identify two individuals. As Your Honor reviews those letters I think you will find, as I have found, that what they describe are the enforcement procedures under the partial final judgment that is in issue in this case. In other words, they were telling the nursing home liaison how to comply. And the patient is identified in that context. It is not suggested for a moment that any of the identified patients... or either of the identified patients... thought that they should have a hearing right on any of the transfers that are in issue, or even that they had any opinion at all. In other words, they do not show that these individuals were aggrieved by the... on the same basis as aggrieved by the claims that were adjudicated below. As I indicated before on the state action point, or as I perhaps should have indicated before, we think the stay action analysis is controlled by Jackson versus Metropolitan Edison Co. We think that the close nexus between state and private action that that decision requires must be shown with respect to the state's imprimatur or weight or affirmative conduct with respect to one of the kinds of choices--
John Paul Stevens: Before you get too deeply in the state action argument because it is hard for me to keep these proceedings clearly in mind, in the prior proceeding that is not now before us which involved, as I understand, downward decisions by a URC and which might result I guess in the discharge of a patient from a nursing home, was it decided that there was state action involved there?
Judith A. Gordon: --No, Your Honor. The issue never arose because in 1976, while a district case was in progress before the Southern District, the federal government advised us that hearings had to he held on URC transfers to lower levels of care. In other words, there was a Medicaid program requirement--
John Paul Stevens: In other words, the hearing requirement was imposed by federal regulation.
Judith A. Gordon: --Exactly. Right. And indeed, when they so advised us... and their exchange of letters on this point is referred to in our brief at page 6 in the footnote there... they characterized our antagonism, if you will, to providing hearings in that context as not the most reasoned approach to fair hearings... to utilization review decisions. But they did, indeed, impose that requirement.
John Paul Stevens: Now may I ask just one more question. The last section of your opponent's brief, as I remember it, and I have not glanced at it right now, suggests that federal regulations or state regulations require hearings on everything that is before us now. Are those the same regulations that govern your decision in the downward URC transfers? Or do they apply to both of them?
Judith A. Gordon: Those are the same regulations which the federal government told us to apply in the downward URC transfers. Which, as I just noted to you, characterizing themselves as not the most reasoned application of the regulations. And the reason that it is not the most reasoned application is what makes... is what makes those regulations inapplicable here and, in fact, Your Honor, I will close with that. The regulations require fair hearings for agency action reducing or terminating assistance or denying a service, essentially. And they are much like the fair hearing regulations in Goldberg vs. Kelly or available in other assistance programs. The decision to transfer a patient, at least in the context of this case, is not an agency decision, and so much is revealed by the exhibit letter from the federal government which is attached to our brief, wherein the letter acknowledges that if a physician made this choice, not the URC, then there would be no fair hearing requirement obligations. In other words--
John Paul Stevens: Let me just get this one question out and then I will... why, if there is a URC decision to increase the level of care which would require moving patient from one place to another and which might give rise to this phenomenon of transfer trauma, why wouldn't the regulation apply to that? Because it would be, in effect, a denial of the existing care.
Judith A. Gordon: --As the federal government used the regulations, a transfer to a higher level of care normally results in an increase in assistance, all right, not a reduction or termination of assistance. So in that sense, it is inapposite, although there are some exceptions in New York because we have a varying rate system. But certainly, our rate system is not coextensive with all transfers, so it out on that basis. Second, it is not agency action, and it is out on that basis. No matter how one characterizes it, albeit the federal government did and would withhold our FFP if we disagreed with them on URC down-transfers, under the decision in this case, the court of appeals decision, the URC is a private body, not the state agency, and therefore, it could not make a relevant decision. But perhaps more importantly, if we want to put aside all the technical deficiencies in the terms of the regulations, I think we come back to what I indicated to Justice O'Connor before, and that is that the fair hearing does not address the issues. The dispute here is between the URC and the patient, the physician and the patient. If I take a fair hearing and the state therefore then says to me, well, all right, we will continue to reimburse Mrs. X's SNF care. That does not mean that her doctor is going to give her that care. That does not mean that the facility medical director is going to give her that care. That decision to provide the facility with money does not change the doctor's mind. Thank you.
Warren E. Burger: Mr. Kirklin?
John E. Kirklin: Mr. Chief Justice, and may it please the Court: The respondents contend that the record in this case clearly discloses the existence of a justiciable controversy between the parties. The justiciability inquiry focuses properly on three main areas of concerns: the circumstances of the named plaintiffs at the time of the consent judgment, the joint pretrial order in this case, and the standing allegations of the organizational plaintiff, the Grey Panthers. With the entry of the consent judgment, which ended the implementation of adverse utilization review committee determinations, the named plaintiffs and class members came under the immediate threat of being transferred out of their facilities by the facilities themselves. It is the unequivocal command of applicable state law that a nursing facility must promptly transfer, without a hearing, any Medicaid patient who is thought not to need that level of care. Thus, Section 505.20 of the state department of social services regulations state simply and clearly that patients who no longer need skilled nursing or health-related facility care shall be discharged promptly.
William H. Rehnquist: What are the sanctions which the state attaches to a violation of what you describe as its command?
John E. Kirklin: Your Honor, the penalties that can ensue if a facility fails to promptly discharge a Medicaid patient are retroactive denial of reimbursement for services rendered, fines and suspension from the Medicaid program itself.
William H. Rehnquist: But it is not a question of a public health type of regulation where they would shut down the facility if they failed to comply, I take it. It is more like a regulation governing a contractor with the state.
John E. Kirklin: I imagine that might be the case. What is significant is that the state commands the result; it backs it up with certain kinds of sanctions.
William H. Rehnquist: But I take it the nursing home is perfectly free to say we will go without the money and operate as we choose.
John E. Kirklin: Well, Your Honor, we assume that nursing homes, like everybody else, will comply with the law.
William H. Rehnquist: So supposing that the state of New York is contracted for the production of 20,000 envelopes or something like that with a contract, and it has certain sanctions attaching to the contractor's failing to comply with certain production regulations. Now, if the contractor does not comply, he will not get paid by the state of New York, but you would not say that the contractor is commanded to comply with those regulations.
John E. Kirklin: Let me distinguish two situations, it might be helpful. If a private doctor, for example, were providing services to a Medicaid patient and the state, as in your hypothetical, declined retroactively to pay the physician, it is true that the physician might, in the future, decline to provide services. Now, that is in sharp contrast to what happens here. The state here does not just say that if you do not do something, we... it does not simply say we are retroactively possibly going to deny compensation for services rendered. It directly requires... it specifically says to the facility if that patient do not need that level of care, you shall promptly discharge that patient without a hearing. It has behind it obviously certain sanctions like any affirmative command of the state, but it is the nature of that command which does not just impose an indirect harm on the patient, but it interferes directly with that patient's right to be in that facility. The conduct of the government, directly commands that the facility must move the patient.
William H. Rehnquist: And the sanction is not that the facility becomes unlicensed or goes to jail, but simply that money is cut off which it otherwise would have received.
John E. Kirklin: More than that, Your Honor. The facility stands not just to lose compensation for services rendered; it stands to be fined, it stands to lose its right to participate in the Medicaid program. And that is pretty serious in the state of New York because more than 90 % of the patients in nursing facilities in New York state are Medicaid patients. Literally, the facility depends for its very survival being part of the Medicaid program.
William H. Rehnquist: What is the fine?
John E. Kirklin: The fines I believe, Your Honor, can be up to $1000 a day for violations.
William H. Rehnquist: So it does have some aspects of a public health regulation, then?
John E. Kirklin: To that extent I guess it does. But in addition there are these other serious sanctions. And sanctions which, if applied with--
Sandra Day O'Connor: Do those sanctions apply, counsel, to a failure to move the patient up to a higher, more expensive level of care?
John E. Kirklin: --That is right, Your Honor. The state regulation that I cited at 505.20 specifically requires a facility to move a patient who does not need that level of care. The regulations of the state department of health additionally say that a facility must promptly transfer a patient whose care is inadequate; that is, who should be moved to a higher level of care. Further, those same regulations require that a patient must be promptly moved, again without a hearing, if the patient is otherwise inappropriately placed because of a behavior problem, emotional disorder, some other problem that jeopardizes the welfare of that patient or of other patients in the facility.
Byron R. White: Well, you still have the problem of the fact that the decision to transfer is not the state's, at least in the first instance.
John E. Kirklin: In some sense, it is the state's, Your Honor, for this reason. The regulation that I cited of the state department of social services also states that the facility's judgment about whether a patient needs a level of care as provided there must be based on the assessment of that patient as against the state's long-term care assessment form, called the DMS-1.
Byron R. White: Right, so that the standard is applied by the state.
John E. Kirklin: That is right.
Byron R. White: But the decision is made not by a state official but by a private party, and you have to, nevertheless, say that that private action is state action.
John E. Kirklin: That is right, Your Honor, and we--
Byron R. White: And what is your bridge? How do you get to that?
John E. Kirklin: --The bridge, Your Honor, is the argument that when the state puts its weight on the side of private conduct, even if that initiative comes from a private party, by ordering it, by compelling it, by directing it--
Byron R. White: Compelling what?
John E. Kirklin: --Compelling the facility--
Byron R. White: They compel the decision to be made.
John E. Kirklin: --More than that.
Byron R. White: Then they provide the standards.
John E. Kirklin: More than that. The state requires that the facility kick the patient out.
Byron R. White: Not until the decision is made. By a private party. You still have to decide that the decision is a state decision.
John E. Kirklin: Respondents contend that where... even if the initiative came from a private party--
Byron R. White: Initiative? This is the decision... the decision that someone needs less or more care.
John E. Kirklin: --The decision, the standard is whether the person needs that level of care. That is correct. That is no different than--
Byron R. White: That is the decision I am talking about. Is that... and you must claim that that is a state decision.
John E. Kirklin: --We submit that when the state enforces that result by requiring the facility to kick the patient out, the state is involved. And that eviction of the patient from the facility is sufficient to require the state... when a state requires it, the state should hold a hearing to decide whether there is a violation of applicable federal and state law which prohibits a facility from kicking out an--
Byron R. White: So you say the enforcement mechanism is the... involves the state sufficiently to be blamed for the decision to transfer or to... to some other facility.
John E. Kirklin: --That is our primary argument; that when the state directs--
John Paul Stevens: May I just inquire, is this argument limited to nursing homes? Say you had a hospital and the state... say there is a shortage of hospital beds and rooms so the state passes a law and says that when a patient reaches a certain level of recuperation that the hospital must discharge him if the doctor thinks it is okay to do so. Would those be state decisions to discharge? Say a mother delivers a child... must be discharged in 48 hours--
John E. Kirklin: --I think it is true that there are similar requirements for Medicaid patients.
John Paul Stevens: --Would those decisions then by the doctor to say well, you are well enough to go home be a state decision, under your analysis?
John E. Kirklin: Yes. We maintain that if the state, again,--
John Paul Stevens: Or say they had a state law that said don't prescribe a certain drug unless certain symptoms are present... don't give him too much aspirin. And everytime a doctor prescribes aspirin, is that state action?
John E. Kirklin: --Again, Your Honor, the difference there is that the state does not tell a doctor, you cannot provide care that you think is required. It would merely say in the case of a Medicaid patient that perhaps retroactively, you will not be paid for that. The state does more here, and that is the point that--
John Paul Stevens: Well, in my hypothetical I was assuming it was a firm requirement of law. You just do not over-prescribe medicine, don't keep people in the hospital too long; otherwise, you will be sanctioned by fines and all the rest. That would make it a state action everytime the doctor--
John E. Kirklin: --No, it would not, because we maintain there is a difference--
John Paul Stevens: --And what is the difference?
John E. Kirklin: --The difference is this: that if the state merely said in this case to a nursing facility, you ought not to provide inappropriate care, with the consequences that might follow, that if they did so they might not be paid, we do not insist that that is state action. It is state action, though, when the state goes beyond that and says to the facility, if that patient is improperly there, kick him out immediately without a hearing, indeed the whole incentive... the incentive of the state to do this is self-evident. It is a cost-containment concern. It is not a concern that the facility--
Sandra Day O'Connor: Well, Mr. Kirklin, that is the point. I thought we were dealing here only with transfers to higher levels of care. I thought that was what was left and what we were concerned with. Is that right?
John E. Kirklin: --It is not just that issue, Your Honor.
Sandra Day O'Connor: As I read the briefs, the questions that we have here involved only the questions of transfers to higher levels of care, and secondly, whether there was an Article III standing problem. I thought those were the two questions. Now, the court resolved below the question of simply terminating the care altogether or assigning the patient to a lower level of care. And in fact, the parties stipulated that in those situations, a fair hearing would be required. And I understood that the litigation below and your argument below was based on the reduction of benefits that would ensue, and that gave the state its financial interest. Now, when you are talking about a higher level of care, the state does not have the same interest; it is going to cost the state a lot more money, and they are not eager to send some patient to a higher level of care and pay more money. So now you are making a totally new argument that I understand was not made in the courts below at all; that because of state regulation on the standards, that that makes the physician's decision state action. Have I summarized it correctly?
John E. Kirklin: Your Honor, let me explain what happened below. There was a consent judgment; that consent judgment resolved the controversy between plaintiffs and defendants about implementation of utilization review committee determinations. Ms. Gordon has explained utilization review committees. Those determinations were to discharge a patient, transfer him to a lower level of care. We settled that. The state said we are not going to enforce those determinations; they are too traumatic, they are too harmful to the patient. Now, what that left was the following: it left the facilities themselves capable... not only capable but required, as I have explained... to move those patients if they do not need that level of care. The state never maintained these people did not need that level of care, the state never retreated from its support of the so called DMS-1 instrument as a way of assessing that level of care. When the utilization review committee route to moving patients was closed, then these plaintiffs came under the threat of the state law that I described, that facilities must promptly move them. Before that time, the facilities could rely upon the utilization review process as a way of moving in appropriately placed patients. Now, both parties in the lower court understood full well that the threat that the facilities themselves would move these patients crystallized with the entry of the consent judgment. With the entry of the consent judgment, which the state resisted up to the last minute, the utilization review route was suddenly closed shut as a way to move these plaintiffs. Each one of these plaintiffs, though, had been assessed against the state's DMS-1 instrument and had been found by that evaluation which the plaintiffs challenged, not to need that level of care. Now, with a consent judgment entered, the only way that the facilities could comply with the requirement of state law that they must promptly without a hearing move inappropriately-placed patients was to move them themselves. The utilization review route was closed. The plaintiffs moved quickly when that threat existed to have the issue adjudicated simply because any delay in the resolution of that question obviously carried with it the serious risk that these transfers would be accomplished--
John Paul Stevens: But Mrs. Gordon informed us... and maybe I misunderstood her... that the injunction prohibited the nursing homes from doing Just that. Was I wrong in understanding that?
John E. Kirklin: --That is not a correct statement of the situation. By the consent judgment, the state agreed that for its part, it would not approve or enforce adverse utilization review committee determinations. The consent judgment left facilities free to move patients, and indeed, the state--
John Paul Stevens: But they were no longer required to because they were freed of the compulsion, as I understood it, of the URC determination. Isn't that right?
John E. Kirklin: --They were free of the obligation... when the state adopts the URC's--
John Paul Stevens: In other words, to put it differently, weren't they free to say we are going to keep this patient here and there is nothing the state can do to us if we do.
John E. Kirklin: --No.
John Paul Stevens: They were not?
John E. Kirklin: They were not. The state no longer was going to make the facility move the patient out because of a review committee determination. However, the facilities were left free to move patients if they thought they were not properly placed. And indeed, state law requires facilities on their own, wholly apart from the review committee functions, to move out patients not properly there. That is the distinction. The state for its own part... the state said we tie our hands; we are not going to be responsible anymore for making facilities move patients because there has been an adverse review committee determination. The state thought that too harmful, too traumatic. The parties both recognized... and that is why the state has fought this issue... that the facilities themselves not only were free but should be free to move patients on their own. And respondents contend that the state law is clear that they have to. Indeed, that is the only way that the facilities now could discharge their obligation under law to move any inappropriately placed patients. Indeed, it is precisely--
Thurgood Marshall: What is the prohibitant from doing it right now?
John E. Kirklin: --What prohibits them now, Your Honor, is the deterrent effect of a hearing at which these plaintiffs would test the validity of--
Thurgood Marshall: What kind of a hearing? A state hearing?
John E. Kirklin: --What the district court required after finding that there was state action and due process protection was that the state had to provide a hearing forum in which the plaintiffs, the named plaintiffs--
Thurgood Marshall: The state had to provide a hearing forum to decide as to whether a private hospital could change its status of a patient?
John E. Kirklin: --To decide whether the decision upon which the facility based its transfer was, under federal and state law, correct. Federal an state law says a facility cannot move a patient unless it is for good medical reasons--
Thurgood Marshall: What federal law says that in this case, in this posture, with this injunction, cannot do it? What federal law says that hospital A privately-owned, privately-financed, cannot change the status of a patient?
John E. Kirklin: --Well, Your Honor, that is the traditional barrier that is imposed by the law in the context of a review committee determination.
Thurgood Marshall: I am talking about federal law now.
John E. Kirklin: Federal law requires it there, for example, if doctors--
Thurgood Marshall: What federal law requires a private hospital to give a hearing?
John E. Kirklin: --The regulations... the federal regulations that Ms. Gordon discussed that state when a review committee determines a patient should be moved and that there is a Medicaid adjustment at issue, the state has to provide a so-called fair hearing.
Byron R. White: Well, this was not the court of appeals' decision. The court of appeals went on the constitutional basis, and I thought your submission was constitutional, too. I thought your answer might be to Justice Marshall, it is the Fourteenth Amendment that requires a hearing.
John E. Kirklin: Well, we maintain that it does, of course.
Byron R. White: But you say, you now say it is the federal regulation.
John E. Kirklin: We say both. I was trying to respond Justice Marshall's--
Thurgood Marshall: You were trying to get a private hospital, under the Fourteenth Amendment. That is what I understood you to be trying to do.
John E. Kirklin: --Well, we are trying to do that because this case is unique.
Thurgood Marshall: It sure is. If you are right about the regulations, we really should not reach any constitutional questions here.
John E. Kirklin: That is correct.
Byron R. White: Did you talk about the regulations before the court of appeals?
John E. Kirklin: Yes, we did.
Byron R. White: And they... did they reject your view of the regulations?
John E. Kirklin: They did not reach that issue.
Byron R. White: How do you know they didn't? They just did not write about it.
John E. Kirklin: That is true, they did not write about it.
William H. Rehnquist: V-11, if they were construing... deciding the case in an orthodox manner, if they reached the constitutional question they must have rejected your claim under the regulations because presumably, they do not reach a constitutional question if there is a statutory or a regulation way of disposing of the case.
John E. Kirklin: I guess that is true. We--
Byron R. White: So they rejected your regulatory submission?
John E. Kirklin: --Impliedly, as Justice Rehnquist characterized it--
Byron R. White: Was it briefed in the court of appeals?
John E. Kirklin: --Yes, Your Honor, it was.
Byron R. White: On both sides?
John E. Kirklin: Yes.
Byron R. White: Was the department... did the federal people take any position on the matter as amicus?
John E. Kirklin: Not officially before the court, no.
Byron R. White: How did they construe their own regulations? Or do you know? Or is it in the record?
John E. Kirklin: There is nothing officially in the record about AHS's position, but--
Sandra Day O'Connor: Well, insofar as transfers to higher levels of care are concerned... and I still think that is one of the issues before us, as I understand it.
John E. Kirklin: --Yes, it is.
Sandra Day O'Connor: Is not the federal position that no hearing is required for the transfers to higher levels of care?
John E. Kirklin: That is right, Your Honor.
Sandra Day O'Connor: You concede that, so you are not here making that argument to us, that it is required by federal regulation.
John E. Kirklin: I am not here making the argument that federal and state fair hearing regulations apply to transfers up.
Sandra Day O'Connor: Okay. But you are saying that the Fourteenth Amendment requires it.
John E. Kirklin: That is right. And as well, we are saying that these fair hearing regulations apply to transfer to a lower level of care or out of a facility into an adult home or the community, because there is a reduction--
Sandra Day O'Connor: And you and the petitioners differ on whether the consent decree covers those transfers to a lower level or out--
John E. Kirklin: --We do not disagree about that at all. We both understand that discharges because of utilization review committee determinations are forbidden. We are in full agreement that the consent judgment does not apply to facility initiated transfers or discharges.
Sandra Day O'Connor: --And you did argue below only on the basis of the reduction in financial benefits as the basis for holding that there was state action, is that right?
John E. Kirklin: No, we did not, Your Honor. We argued with respect to transfers to a higher level of care and to a lower level of care. The Fourteenth Amendment requires prior hearings with respect--
Byron R. White: You do not... I take it your submission here on the state action is not... certainly is not in defense of the court of appeals' rationale, is it?
John E. Kirklin: --We do not retreat from the court of appeals' rationale, but we believe that there is a simpler method of disposing of the state action question which is that--
Byron R. White: The state enforces a decision.
John E. Kirklin: --Requires it, orders it, that is right.
Byron R. White: So wouldn't you say the same thing then if there was a general state law about trespass or something, and the home decides to move a patient and the patient refuses to go, so the court... so the home goes to court and gets an order, just for self-protection gets an order to move the person out. That is state enforcement of the private decision. Would you say that is automatically state action?
John E. Kirklin: Well, no. I would say that when the state provides a forum for deciding whether there is state... there is a violation, that the mere provision of a judicial forum by itself--
Byron R. White: Well, but the trespass action would not give any hearing on the validity of the private decision; it would just say are you here without consent.
John E. Kirklin: --Well, the question, Your Honor, in this context is that again, if the federal and state regulations themselves say that a facility cannot move a person unless for valid medical reasons--
Byron R. White: Well, the general law says a person cannot stay on somebody else's property without consent. And a court will enforce it.
John E. Kirklin: --Here it is a question of... Your Honor, we think that, for example, in the Moose Lodge case where this Court had not trouble saying that if the state liquor control board has a regulation that says we are going to enforce a bylaw of a private club, even though it is neutral in its terms, that is state action. We submit that this is no different where the state says that regulation that says we are going to enforce or direct a nursing home to kick out a patient if the patient is not thought to be appropriately there, we think that is a state action as well.
Warren E. Burger: Or to raise the standards, you said before. If you enhance the care, given them higher care, more benefits, you also have to have a due process hearing.
John E. Kirklin: We maintain that we do, that it is required because there are due process protected interests there as well because the reg is again saying even if--
Warren E. Burger: On that theory you would be saying that under Goldberg against Kelly, if some welfare director wants to increase the welfare payments to a recipient they would have to have a hearing, a Goldberg v. Kelly hearing.
John E. Kirklin: --No, we would not because there is no property interest under law that protects someone against getting more benefits. Here the regulations say you cannot transfer a patient up or down or out unless for good cause. And that is the difference.
Lewis F. Powell, Jr.: What is the property interest if the transfer is to a higher level of care?
John E. Kirklin: Your Honor, the federal and state regulations state that a nursing facility may not transfer or discharge... that is the language--
Lewis F. Powell, Jr.: Well, I am asking you what the property interest is. Do you have a property interest if somebody wants to give you more money? A property interest, to decline it?
John E. Kirklin: --The property interest is the interest which is embedded in positive state and federal law that says that you should be free of having to move to a higher level of care unless there is good reason to do it. And the reason why that is done is not surprising because as indicated in a deposition in this case, when people are asked to go to a higher level of care, they think they are dying. And the trauma which--
Warren E. Burger: How do we know that that makes them think they are dying? Is there something in the record, a medical opinion to that effect?
John E. Kirklin: --Not to that precise effect. What is in the record, Your Honor, is the whole underpinning of the consent judgment... and it is in the record that the defendants made it very clear, affidavit statements and the commissioner's letters to the federal government, that the reason why it refused to enforce review committee determinations was because the move itself is so devastating and so harmful to patients that it should not be done.
Warren E. Burger: Do you think there is no trauma involved in an adversary hearing?
John E. Kirklin: There is, of course, trauma involved, but we do not maintain that a finding of transfer trauma is necessary for the... on the narrow issues that, as Your Honor pointed out, are before the Court, which is whether there is state action, and on the standing issue as well, that this Court did not take the questions of whether there are protected property or liberty interests involved. We do not think that they are critical.
John Paul Stevens: Well, how can the hearing... the Chief Justice's question makes me wonder, her could the pre-transfer hearing provide protection against this concern you expressed about the consequences of a transfer to a higher level? If the reason is that there is greater danger of mortality, does that... how does it help to make them spell it out in a hearing for the man or woman?
John E. Kirklin: Because that is not the only issue, Your Honor.
John Paul Stevens: But that would be in part. I mean, if that is one of the reasons you are saying the patient must be given the bad news in detail, is what you are saying.
John E. Kirklin: That would be part of the issue. The other part, again, in the regulations which talks about that a transfer cannot be accomplished unless it is in the interest of the patient or his welfare, is that if that patient could show that he or she had lived in a nursing home for 20 years and they propose to send that patient out of New York City to upstate New York on some erroneous medical judgment--
John Paul Stevens: Well, is there a case at all like that in this record before us?
John E. Kirklin: --There are--
John Paul Stevens: I can imagine some cases with extreme facts might present a problem, but do we have to decide... is there anything in this record that requires us to decide a case of that kind?
John E. Kirklin: --Of the transfers to a higher level of care?
John Paul Stevens: Yes. Where it is harmful to the patient to give him the added protection.
John E. Kirklin: The evidence that we have here as part of the joint pretrial order is that during the period in which this case was in litigation, and when the state did provide hearings... at one point it did... there were, the defendants state, at least 10 cases of transfers to a higher level of care; five were reversed at hearing.
John Paul Stevens: Yes, but are any of those litigants that are involved in this case?
John E. Kirklin: Those litigants, those persons, were members of the class; none of them are named plaintiffs in this case. Your Honor, I want to briefly point out some significant aspects of the joint pretrial order in this case. In that case, in that joint pretrial order, there were the allegations made that a substantial proportion of facility transfers of Medicaid patients are improper under federal and state law. Defendants did not controvert that particular allegation. That is, at the stage of the case where in affidavit form and in statement under local court rules the defendants identified what allegations of the plaintiffs they disagreed with, they did not controvert that. And we submit that it is significant here when the class was defined without objection, without appeal by the defendants to include all Medicaid patients in nursing facilities in New York state, and given this allegation that class members were transferred improperly, not controverted by the defendants, standing was never interposed as a basis for objection below, that that class certification can bridge the gap between the allegations of the named plaintiffs and the allegations, unrefuted, unobjected to by the defendants concerning class members, when there was no objection taken to the certification of the class, no appeal taken in the statement of controverted issues that the proposition, that allegation about class members was not contested.
Warren E. Burger: Well, your time has expired, Mr. Kirklin. Do you have anything further, Mrs. Gordon?
Judith A. Gordon: Yes, Your Honor, I have just a few points.
Lewis F. Powell, Jr.: May I ask before you start, are the Grey Panthers parties to this case?
Judith A. Gordon: Not so far as I am concerned, Your Honor, because--
Lewis F. Powell, Jr.: They are not listed as parties?
Judith A. Gordon: --They are listed as parties, they were apparently parties in the first half of this case which ended with the consent judgment back in 1979, the October one. But if Your Honor turns to the pretrial order which starts at, I believe, page 250 of the Appendix... pardon me, 150 of the Appendix,... you will find that in the description of the nature of the action in proceedings and in the nature of the parties, which is on page 151--
Harry A. Blackmun: Mrs. Gordon, if you will stay on the microphone we will hear you better.
Judith A. Gordon: --I am sorry. That in the description of the nature of the action in proceedings at page 150 and following at page 151, the nature of the parties, the Grey Panthers are not described, and we have considered, as we indicated in our brief, that their claims were abandoned. If they were not abandoned, we also believe that their standing was not made out.
Lewis F. Powell, Jr.: Now, rules require that the parties be identified. Are they identified in the petition for certiorari?
Judith A. Gordon: I beg your pardon, Your Honor, I could not hear you.
Lewis F. Powell, Jr.: Our rules require that parties be identified. I did not find that they were included in the list of parties in the Petition for Certiorari. Were they or not? Maybe counsel on the other side could tell us.
John E. Kirklin: Yes, Your Honor, they are listed among the parties before this Court. Yes.
Lewis F. Powell, Jr.: Where, what page?
John E. Kirklin: The petition itself,--
Lewis F. Powell, Jr.: That is all right, I do not want to detain you.
John E. Kirklin: --They are definitely listed among the parties.
Lewis F. Powell, Jr.: They are, thank you.
Judith A. Gordon: Justice O'Connor, just a point of clarification, it is not only URC transfers to higher levels of care that are in issue in this case; it is also the medical decisions of the outside physician and the nursing home physician that are in issue. With respect to whether or not there was anything in the record which spoke to the federal... whether or not HHS was requiring hearings in the circumstances before the court, I call your attention to the exhibit that concludes our brief, wherein HHS, then HEW, states at page 2(a), "A change in medical care ordered by a patient's physician does not represent an agency proposal to terminate, suspend or reduce assistance payment. " "If a patient disagrees with his physician's determination of medical necessity for a specific service, his recourse is to the practitioner or his professional association, not to the medical assistance agency. " And again, I call your attention to the second supplement to the Joint Appendix, where in the letters that follow, Commissioner Blum's letter, show that the federal government not only did not consider URC transfers upward subject to fair hearing rights, but they threatened to withdraw FFP if we provided fair hearing rights with respect to them.
William J. Brennan, Jr.: Mrs. Gordon, on this matter of the Grey Panthers, this petition is yours, isn't it, the state's?
Judith A. Gordon: Yes, it is, Your Honor.
William J. Brennan, Jr.: And it says Barabara Blum, et cetera, against... and it names a number of people... and the Grey Panthers, New York Chapter.
Judith A. Gordon: Yes. It is not--
William J. Brennan, Jr.: You thought... when this was filed you thought they were respondents, didn't you?
Judith A. Gordon: --Yes. It was not that they are not technical parties. They were listed in the caption, Your Honor. It is just that they, one, had no standing in the original case, and to the extent that one has to rely on the post-consent judgment claims which are now before you, the Grey Panthers--
Thurgood Marshall: Well, the judgment of the court of appeals mentions them.
Judith A. Gordon: --Yes, they are listed--
Thurgood Marshall: And that is the judgment that is here.
Judith A. Gordon: --That is correct, Your Honor.
Thurgood Marshall: Well, aren't they here?
Judith A. Gordon: Yes, Your Honor, they are parties here in terms of their technical inclusion in the caption. However, they made no sufficient claims at the outset--
Thurgood Marshall: They are here also as technically in the judgment.
Judith A. Gordon: --Yes, Your Honor.
Thurgood Marshall: And that is not quite technical; that is the judgment.
Judith A. Gordon: Yes, Your Honor.
Thurgood Marshall: You haven't made any objection to that, have you?
Judith A. Gordon: I do not have an objection to their appearing in the caption. I have an objection to finding by reason thereof or any other predicate that they had standing in the first instance in this case, or that they had any claim specifically--
Thurgood Marshall: And where did you raise that objection? Right now?
Judith A. Gordon: --As I indicated earlier,--
Thurgood Marshall: You raised it now.
Judith A. Gordon: --That is correct, Your Honor.
Thurgood Marshall: You did not raise it before.
Judith A. Gordon: That is correct, Your Honor.
Thurgood Marshall: Isn't it a little late?
Judith A. Gordon: That is correct, Your Honor, but for the fact that it is a jurisdictional objection and cannot be waived, and as I indicated earlier, would not have been presented to this Court were it not for serious conversations on that point with the Solicitor General.
Thurgood Marshall: I am not bound by your serious conversations with your solicitor general.
Judith A. Gordon: That is certainly true, Your Honor. I would call the Court's attention to one portion of the legislative history with respect to utilization review, which I think makes it abundantly clear that utilization--
Warren E. Burger: Your time has expired, Mrs. Gordon.
Judith A. Gordon: --Thank you, Your Honor.