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Md. officials immune from suit for alleged Medicaid wrongs, 4th Circuit says

Dennis Schrader.

Dennis Schrader

Nursing homes cannot sue state officials to recover unpaid Medicaid benefits on behalf of past patients, a federal appeals court ruled Thursday in denying compensation requests by three Maryland facilities against health and social-services secretaries.

In its 3-0 decision, the 4th U.S. Circuit Court of Appeals said the federal Constitution’s 11th Amendment provides state officials immunity from suit for past actions conducted in their official capacities, such as their handling of Medicaid applications.

The 4th Circuit’s published ruling affirmed a Baltimore federal judge’s dismissal of the lawsuit nursing homes in Salisbury and Silver Spring brought on behalf of 11 patients against former Health Secretary Dennis R. Schrader and Lourdes R. Padilla, who still heads the Department of Human Services.

The facilities claimed the department heads had wrongfully denied the patients their Medicaid benefits, an alleged past transgression for which the Constitution provides states and their officials immunity, the 4th Circuit said in agreeing with U.S. District Judge Richard D. Bennett.

By contrast, federal courts could have provided relief had the facilities shown continuing mishandling of applications by state officials, the 4th Circuit said, citing the Supreme Court’s 1908 decision in Ex Parte Young that judges may enjoin states from wrongful conduct in the future, known as prospective relief.

However, a claim for prospect relief was not made as the 11 patients represented by the nursing homes have either died or are receiving assistance from Medicaid, a federally run health insurance program for the poor or disabled, the 4th Circuit added.

“Neither the deceased nor the living (nursing-home) residents could enjoy prospective or declaratory relief,” Judge G. Steven Agee wrote for the 4th Circuit.

“As to the deceased residents, it is axiomatic that a deceased litigant cannot enjoy prospective injunctive relief,” Agee added. “The living residents fare no better. The nursing homes concede the living residents are all now receiving Medicaid benefits.”

Agee was joined in the opinion by Judges Henry F. Floyd and John A. Gibney Jr., who serves on the U.S. District Court for eastern Virginia and was sitting by designation.

The Maryland attorney general’s office hailed the ruling in a statement Friday.

“The 4th Circuit vindicated the sovereign immunity of the state in rejecting an effort by nursing homes to obtain payments to which they were not entitled,” the office stated. “The result protects the state’s Medicaid program from having monies siphoned off by attorneys engaged in a nationwide effort to change the law for the further enrichment of nursing homes.”

The nursing homes were represented by the law firm sb2 Inc., which specializes in Medicaid eligibility and reimbursement issues for long-term care providers. Chad Bogar, the national firm’s chief executive officer, did not return telephone and email messages Friday afternoon seeking comment on the 4th Circuit’s decision and whether the facilities plan to appeal.

In their lawsuit, the nursing homes claimed the departments under Schrader and Padilla did not obtain the Medicaid applicants’ financial information, as required by federal regulation. In addition, the officials not only failed with their statutory obligation to tell Medicaid applicants when they were denied but erroneously told them their applications were being reconsidered or reactivated, the three facilities alleged.

The facilities are Oakview Rehabilitation and Nursing Center, in Silver Spring; Wicomico Nursing Home; and Anchorage Nursing and Rehabilitation Center, both in Salisbury.

Schrader and Padilla denied the allegations.

The 4th Circuit rendered its decision in Wicomico Nursing Home et al. v. Lourdes R. Padilla and Dennis R. Schrader, No. 17-1972.


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