Opinion ID: 2708737
Heading Depth: 2
Heading Rank: 2

Heading: Constitutional Right to a Hearing

Text: Alternatively, Bryn Mawr argues on appeal that it is entitled to challenge the deficiency findings in a hearing before a federal or state ALJ—regardless of any regulatory failure to provide such an opportunity—because of the Due Process Clauses of the Fifth and Fourteenth Amendments, respectively. U.S. Const. amend. V (“No person shall … be deprived of life, liberty, or property, without due process of law … .”); amend. XIV, § 1 (“No state shall … deprive any person of life, liberty, or property, without due process of law … .”). Bryn Mawr’s claim that it is entitled to a hearing is a procedural due process claim—an unfortunate but necessary redundancy. See Gosnell v. City of Troy, Ill., 59 F.3d 654, 657 (7th Cir. 1995). A procedural due process claim requires a two-fold analysis. “First, we must determine whether [Bryn Mawr] was deprived of a protected interest [and, if so]; second, we must determine what process is due.” Pugel v. Bd. of Trs. of Univ. of Ill., 378 F.3d 659, 662 (7th Cir. 2004). The district court ruled that Bryn Mawr failed to establish a protected interest, and that has been the parties’ focus on appeal. [T]he range of interests protected by procedural due process is not infinite … and … with respect to property interests they are, of course, … not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law rules or understandings that secure certain benefits and that support claims of entitlement to those benefits. 12 No. 12-3678 Paul v. Davis, 424 U.S. 693, 709 (1976) (citing Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 570, 577 (1972)). But “defamatory publications,” like the publishing of deficiencies, “however seriously they may … harm[] [Bryn Mawr’s] reputation, d[o] not deprive [it] of any ‘liberty’ or ‘property’ interests protected by the Due Process Clause.” Id. at 712. Stigma is not enough. Id. at 709. Rather, “[t]o avoid constitutionalizing state defamation law, defamation by a government actor does not implicate the Due Process Clause unless ‘a right or status previously recognized by state law was distinctly altered or extinguished’ as a result.” Abcarian v. McDonald, 617 F.3d 931, 941 (7th Cir. 2010) (citing Paul v. Davis, 424 U.S. at 711). Accordingly, we apply a “stigma plus” analysis where “an injury to reputation along with a change in legal status constitutes the deprivation of a property right.” Somerset House, Inc. v. Turnock, 900 F.2d 1012, 1015 (7th Cir. 1990).4 Bryn Mawr acknowledges this standard and asserts that—in addition to the stigmatization of the deficiency findings—its rights were altered in three distinct ways: (1) it is now exposed to the potential of enhanced penalties based on 4 We do not decide whether defamation “in a manner that makes it virtually impossible for [Bryn Mawr] to” operate “in [its] chosen field” is sufficient to amount to a deprivation of a constitutionally protected right because Bryn Mawr has neither argued nor alleged that the deficiency publication had that effect. Abcarian v. McDonald, 617 F.3d 931, 941 (7th Cir. 2010) (“To plead a constitutionally relevant tangible loss of his employment opportunities, Abcarian must allege that his ‘good name, reputation, honor or integrity [was] called into question in a manner that makes it virtually impossible for [him] to find new employment in his chosen field.’” (citations omitted)). No. 12-3678 13 past noncompliance; (2) it no longer has the opportunity to correct “actual harm” deficiencies before remedies are imposed; and (3) that “past non-compliance” will be factored into the Rating System by “points associated with a ‘G’ level deficiency” if Bryn Mawr is found deficient again. Bryn Mawr’s third contention is quickly dispatched. Bryn Mawr cites CMS’s Design for Nursing Home Compare Five-Star Quality Raing System: Technical Users’ Guide (July 2012) (“Technical User’s Guide”)5 for the fact that past non-compliance is factored into its rating with the addition of points associated with a “G” level deficiency if the past non-compliance is followed by a “J,” “K,” or “L” deficiency. See Technical User’s Guide at 4 (describing how facts of compliance history are assigned point values to factor them into the Rating System). But this guide has nothing to do with determining deficiencies or penalties, it merely explains how deficiencies are factored into the Rating System. See Technical User’s Guide at 2 (“This document provides a comprehensive description of the design for the Nursing Home Compare Five-Star Rating System.”). Even if there could be a similar future defamation that is more defamatory because of this prior defamation, that is only a risk of greater stigma. That is not enough. The prior defamation does not amount to a “stigma plus” unless it causes a change in legal status. Therefore, this effect of Bryn Mawr’s having a deficiency on its record is not enough to trigger a right to due process. The remaining two contentions require more consideration. 5 Available at http://www.cms.gov/Medicare/Provider-Enrollment-andCertification/CertificationandComplianc/Downloads/usersguide.pdf. 14 No. 12-3678
When Bryn Mawr was cited with the deficiencies at issue in this case, it was given the opportunity to correct them before any remedies were imposed. The regulations gave IDPH the discretion to afford Bryn Mawr this opportunity. See State Operations Manual § 7304.1 (Rev. 63 2010). However, after Bryn Mawr was cited with deficiencies involving actual harm (“G” level deficiencies”), had it been found deficient on the next survey, there would have been no opportunity to correct the deficiencies before remedies were imposed (though it would be afforded a hearing).6 See State Operations Manual § 7304.2.1 (Rev. 63 2010) (mandating that facilities with “G” deficiencies on the last survey not being given a pre-remedy opportunity to correct); see also 42 C.F.R. §§ 431.151; 431.153 (providing a hearing when remedies are imposed). Bryn Mawr 6 The follow-up survey where Bryn Mawr was found in compliance did not alleviate this risk because regulators look to the “previous standard survey.” State Operations Manual § 7304.2.1 (Rev. 63 2010). Now, while this case has been pending, Bryn Mawr has performed well on subsequent standard surveys, so it is no longer at risk of this predicament. Regardless, we must decide whether this risk was a change in legal status that required a hearing because a finding of a “G” level deficiency could occur again, but the oneyear reset after standard surveys could result in the issue always evading review. See, e.g., United States v. Peters, 754 F.2d 753, 757–58 (7th Cir. 1985) (“A case is not moot, however, where even though the factual controversy is over, the case involves an order ‘capable of repetition, yet evading review.’ Two conditions must be met to avoid mootness: ‘the challenged action was in its duration too short to be fully litigated prior to its cessation or expiration, and there was a reasonable expectation that the same complaining party would be subjected to the same action again.’” (citations omitted)). No. 12-3678 15 contends that this was an alteration of its right. But what right was altered? Bryn Mawr never had a right to an opportunity to correct; such an opportunity was always a matter of IDPH’s discretion. “A property interest of constitutional magnitude exists only when the state’s discretion is ‘clearly limited’ such that the plaintiff cannot be denied the interest ‘unless specific conditions are met.’” Brown v. City of Mich. City, Ind., 462 F.3d 720, 729 (7th Cir. 2006) (citing Colburn v. Trs. of Ind. Univ., 973 F.2d 581, 589 (7th Cir. 1992)). IDPH’s discretion was subject to no such limitations. See State Operations Manual § 7304.1 (Rev. 63 2010). Bryn Mawr “cannot point to a state law, or another independent source, that guarantees [it]” an opportunity to correct. Brown, 462 F.3d at 729. So, “[b]ecause the right to” an opportunity to correct deficiencies “is not ‘securely’ [Bryn Mawr’s], it cannot be claimed as a valid property interest.” Id. If Bryn Mawr had held a secure right to an opportunity to correct that was lost—or even altered, e.g., narrowed in scope—that might have been enough. See Somerset House, Inc. v. Turnock, 900 F.2d 1012, 1015 (7th Cir. 1990) (“[T]he combination of the Conditional License with the loss of eligibility for QUIP funding was sufficient because the loss of eligibility for funding was a change in legal status.” (emphasis added)); Cameo Convalescent Ctr., Inc. v. Senn, 738 F.2d 836, 843 (7th Cir. 1984) (“Cameo’s placement upon the SOR list, like the individual placed on the list of known drunks in Davis, deprived Cameo of a right under state law: the right to receive referrals from state social service departments and agencies.” (emphasis added)). But because the opportunity to correct is not a right that is securely Bryn Mawr’s, deprivation or alteration of the opportunity does not give rise to a right to due process. 16 No. 12-3678
When IDPH finds deficiencies at a nursing facility and sets about selecting which remedy (or remedies) to impose, it is required to look at a number of factors to determine the seriousness of the deficiency (the “initial assessment”). The mandatory factors pertain to the scope and severity of the particular deficiency found—those factors are summarized in the table infra at 3. However, IDPH and CMS are not limited to considering the mandatory factors. Following the initial assessment, CMS and the State may consider other factors, which may include, but are not limited to the following: (1) The relationship of the one deficiency to other deficiencies resulting in noncompliance[ and] (2) The facility’s prior history of noncompliance in general and specifically with reference to the cited deficiencies. 42 C.F.R. § 488.404(c). Bryn Mawr argues that, the moment it had the deficiencies at issue in this case on its record, its legal status was altered because there was the potential that future deficiencies would be punished with a harsher remedy based on the past deficiencies. The Secretary responds that Bryn Mawr’s argument is too contingent and too speculative to amount to an alteration of a right—if Bryn Mawr is found deficient in the future IDPH may select a harsher remedy based on past deficiencies. In return, Bryn Mawr points to Humphries v. Cnty. of L.A., 554 F.3d 1170, 1187–88 (9th Cir. 2009) rev'd and remanded on other grounds sub nom. L.A. Cnty., Cal. v. Humphries, 131 S. Ct. 447 (2010). No. 12-3678 17 In Humphries, the Ninth Circuit held that parents had been deprived of a liberty interest by being erroneously listed on a child abuse registry, when California “law effectively require[d] agencies to check [that] stigmatizing list and investigate any adverse information prior to conferring a legal right or benefit” (such as licensure, child custody, or employment).7 Id. at 1188. The Ninth Circuit reasoned that being on the list was “an added burden on entities wishing to confer legal rights or benefits, mak[ing] the chances of receiving a benefit conferred under California law less likely, and practically guarantee[ing] that conferral of that benefit will be delayed.” Id. at 1192. Therefore, the legally imposed burden on those entities was a “tangible burden” on the parents’ ability to obtain any of the rights meted out by those entities which was tantamount to an alteration of the parents’ rights. Id. at 1191–92.8 7 The Ninth Circuit used the phrase “effectively required” because only some agencies were actually required to check the list, but the court reasoned that the fact an entity “may” check the list “in conjunction with a rule or custom of ‘must’ can equally deprive a citizen of a liberty interest giving rise to a procedural due process claim.” Id. at 1191 (emphasis added). 8 The Second Circuit has reached a similar result where the legal impediment was even more onerous. See Valmonte v. Bane, 18 F.3d 992, 1001 (2d Cir. 1994) (“Valmonte has alleged that because of her inclusion on the Central Register, and because all child care providers must consult that list, she will not be able to get a job in the child-care field. In other words, by operation of law, her potential employers will be informed specifically about her inclusion on the Central Register and will therefore choose not to hire her. Moreover, if they do wish to hire her, those employers are required by law to explain the reasons why in writing.” (Emphasis added)). But see Smith v. (continued...) 18 No. 12-3678 IDPH and CMS are required to look at Bryn Mawr’s compliance history in the event of future noncompliance to see whether the agency may allow Bryn Mawr an opportunity to correct. See, e.g., State Operations Manual § 7304.2.1 (Rev. 63 2010) (necessitating a check of compliance history). But that check does not alter Bryn Mawr’s rights, see infra 12–13, nor does it burden IDPH or CMS’s determinations of whether to confer (or rather maintain) Bryn Mawr’s “rights or benefits” (participation in the Medicaid program without any remedies). IDPH or CMS will impose a remedy if there is a new deficiency and may look to Bryn Mawr’s compliance history as a factor in selecting a remedy. But the lack of a requirement that IDPH consider the prior deficiencies in selecting a remedy is only one thing that distinguishes this case from Humphries. The agencies that found Bryn Mawr deficient are the same agencies that would later determine whether to consider those deficiencies in crafting a remedial plan. And if they decide to base the remedial plan on that past deficiency as well, Bryn Mawr is entitled to challenge the past deficiency at the same hearing that it challenges the new deficiency. See 42 C.F.R. § 488.408(g)(1); Fort Tyron Nursing Home v. HCFA, DAB CR425 (H.H.S. 1996).9 Accordingly, any burden the deficiency finding has on Bryn Mawr’s rights is entirely speculative up until the (...continued) Siegelman, 322 F.3d 1290, 1297 (11th Cir. 2003) (rejecting the claim that being placed on a child abuse index was a deprivation of a liberty interest when the system contained no similar legal strictures). 9 Available at http://www.hhs.gov/dab/decisions/civildecisions/1996/cr425. pdf. No. 12-3678 19 time that Bryn Mawr would be entitled to a hearing to challenge it. This is a far cry from the state law in Humphries that required potential employers, licensing agencies, and family courts to look at a list and investigate the accusations of child abuse before bestowing any number of rights. The parents were constantly at risk of being denied rights because of the burden the law put on the agencies. And, after each denial, they are left at risk of rejection as they proceed, with the stigma still attached, to the next agency that must follow the law. The legal burdens on these agencies was a tangible burden on the parents. Bryn Mawr is in no such dilemma. Should its speculative harm of enhanced penalties manifest itself, it would immediately be afforded the opportunity to clear its name—once and for all. The Ninth Circuit concluded that legally burdening numerous agencies and entities by “effectively” requiring them to check a defamatory list is a tangible burden on an individual’s obtaining rights that is tantamount to altering that individual’s rights. We need not decide whether we agree with the Ninth Circuit. Bryn Mawr lost an opportunity to correct, and that is not a right. What is a right is Bryn Mawr’s ability to continue operating as a Medicaid facility without remedies imposed. That right is not burdened by the deficiency finding until (or unless) the finding is used to justify a remedy, at which time a hearing is afforded to challenge the deficiency finding. One final possibility merits consideration. IDPH and CMS could decide to select a more serious remedy for a new deficiency because of the past deficiencies, see 42 C.F.R. § 488.404 (permitting consideration of prior noncompliance in selecting a remedy), but without explicitly stating that the 20 No. 12-3678 remedy is being imposed for the past deficiencies. This does not appear to be the practice, but neither CMS nor IDPH have pointed us to a regulation that requires them to cite a past deficiency as a basis for a remedy. If this were to occur, it would be impossible for Bryn Mawr to challenge the past deficiency collaterally. Compare 42 C.F.R. § 488.408(g)(1) (permitting an “appeal [of] a certification of noncompliance leading to an enforcement remedy”) with id. at § 488.408(g)(2) (forbidding appeal of the “choice of remedy, including the factors considered by CMS or the State in selecting the remedy, specified in § 488.404.”) (emphasis added); see also 42 C.F.R. § 488.404(c)(2) (listing “[t]he facility’s prior history of noncompliance in general and specifically with reference to the cited deficiencies” among “factors which may be considered in choosing a remedy”) (emphasis added). Accordingly, a remedy could be enhanced because of (but not imposed based on) the past deficiencies and the regulations would quite explicitly forbid challenging that deficiency because it was merely a “factor in selecting the remedy” instead of a “certification of noncompliance leading to an enforcement remedy.”10 At first glance, this appears problematic. For example, if there had been a subsequent finding of noncompliance, IDPH would have imposed remedies. See State Operations Manual § 7304.2.1 (Rev. 63 2010). These remedies could be based on the new deficiency alone. However, instead of a $200 per day civil 10 We cannot be sure the Secretary would interpret her regulations this way, and we do not purport to definitively interpret them here because we have not been called on to interpret them since this situation has not occurred. We are merely weighing a harm that Bryn Mawr speculates could occur. No. 12-3678 21 money penalty, it could have imposed a $300 per day civil money penalty because, in its internal deliberations, it decided to consider Bryn Mawr’s “prior history of noncompliance.” 42 C.F.R. § 488.404(c)(2). This internal deliberation, and the deficiencies it considered, would be unchallengeable. 42 C.F.R. § 488.408(g)(2). However, any due process argument based on this fails for the same reason that Bryn Mawr’s argument on the loss of the opportunity to correct fails. It always lies within IDPH or CMS’s discretion to pick a remedy within a category—that is, it could impose a $300 civil money penalty regardless of whether it considered the prior deficiency. The fact that state and federal regulators may consider a defamatory statement (in fact, their defamatory statement) in the later exercise of their discretion is not an alteration of Bryn Mawr’s legal rights. Brown, 462 F.3d at 72911. If, as a result of the prior defamatory statement, new remedies not previously available to IDPH or CMS became available, that might be an alteration of Bryn Mawr’s rights, but there is no allegation that such is the case here.