Bryn Mawr Care, Inc. v. Sebelius, Sec of US Dept of Health & Human Servs. et al
Filing
71
MEMORANDUM Opinion and Order Signed by the Honorable Harry D. Leinenweber on 9/26/2012:Mailed notice(wp, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
BRYN MAWR CARE,
Plaintiff,
v.
KATHLEEN SEBELIUS, in her
Official Capacity as SECRETARY
OF THE UNITED STATES
DEPARTMENT OF HEALTH AND HUMAN
SERVICES, and ARTHUR F.
KOHRMAN, M.D., in his Official
Capacity as DIRECTOR OF THE
ILLINOIS DEPARTMENT OF PUBLIC
HEALTH,
Case No. 11 C 734
Hon. Harry D. Leinenweber
Defendants.
MEMORANDUM OPINION AND ORDER
For the reasons stated, the Court grants Defendant Kathleen
Sebelius’ Motion for Summary Judgment and grants Defendant Arthur
F. Kohrman, M.D.’s Motion for Summary Judgment.
I.
BACKGROUND
Plaintiff Bryn Mawr Care (“Plaintiff”) operates a nursing home
in Chicago.
On April 2, 2010, the Illinois Department of Public
Health (the “IDPH”) surveyed the facility and gave Plaintiff
written
notice
regulations.
that
it
did
not
comply
with
certain
federal
Plaintiff denies that it was ever out of compliance
with the federal regulations.
On April 8, 2010, the IDPH provided
Plaintiff a notice stating that due to the noncompliance of the
April 2 survey, it had proposed certain remedies.
In the same
notice, the IDPH also stated that Plaintiff had an opportunity to
correct the deficiencies prior to the imposition of any such
remedies.
On April 18, 2010 Plaintiff requested that the Michigan
Peer Review Organization (the “MPRO”) perform an informal dispute
resolution of the matter. The MPRO granted Plaintiff’s request and
Plaintiff participated in the informal dispute resolution process.
On May 8, 2010, the MPRO made its final determination regarding
Plaintiff’s request and declined to modify the IDPH’s April 2
deficiencies survey.
On May 18, 2010, the IDPH conducted a revisit survey and found
that Plaintiff had cured all of the April 2 deficiencies and had
returned to substantial compliance.
On May 26, 2010, the IDPH
informed Plaintiff it would not impose any remedies on Plaintiff
for the April 2 deficiencies.
The initial April 2 survey results, however, were available on
the Centers for Medicare and Medicaid Services (“CMS”) website and
subsequently were disseminated to other commercial websites.
As a
result, on July 1, 2010, Plaintiff requested a hearing before CMS
to challenge the findings of the survey.
An Administrative Law
Judge (“ALJ”) dismissed the case, concluding Plaintiff did not have
a right to a federal hearing to challenge the survey findings.
In
July
2010,
after
reviewing
the
April
2
survey,
CMS
mistakenly calculated Plaintiff’s star rating (a rating system CMS
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uses to rate facilities for the purposes of providing the public a
comparison of nursing homes and to encourage compliance amongst
facilities), to be two out of five stars when it should have been
four out of five stars.
CMS published this rating on its website.
CMS failed to correct the rating until February 16, 2012.
On August 11, 2010, Plaintiff submitted a request to the IDPH
to
challenge
the
April
2
findings.
An
ALJ
again
dismissed
Plaintiff’s request, finding that Plaintiff did not have the right
to a hearing because CMS did not impose any remedies on Plaintiff
or impose any other adverse action.
Plaintiff filed a two-count Complaint in this Court for a
declaratory judgment and injunctive relief. Count One alleges that
Defendant Kathleen Sebelius, in her official capacity as the U.S.
Secretary
of
Health
and
Human
Services,
violated
Plaintiff’s
procedural due process rights under the Fifth Amendment. Count Two
alleges that Defendant Arthur F. Kohrman, M.D. violated Plaintiff’s
procedural due process rights under the Fourteenth Amendment. (Dr.
Kohrman is currently the Acting Director of the IDPH and has been
substituted in place of the original named Defendant, Damon T.
Arnold, M.D., pursuant to Federal Rule of Civil Procedure 25(d).)
Both Defendant Sebelius and Defendant Kohrman moved for summary
judgment.
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II.
LEGAL STANDARD
Summary judgment is appropriate if the moving party “shows
that there is no genuine dispute as to any material fact and [it]
is entitled to judgment as a matter of law.”
FED . R. CIV . P. 56(a).
A dispute is “genuine” if the evidence would permit a reasonable
jury to find for the non-moving party.
A dispute is material if it
could affect the outcome of the case.
Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986).
If the moving party satisfies its
burden, the non-movant must present facts to show a genuine dispute
exists to avoid summary judgment.
477 U.S. 317, 323–24 (1986).
See Celotex Corp. v. Catrett,
The Court construes all facts and
draws all reasonable inferences in favor of the non-moving party.
Ricci v. DeStefano, 129 S.Ct. 2658, 2677 (2009).
If a party asserts that a fact cannot be, or is genuinely
disputed,
it
must
support
materials in the record.
that
assertion
with
citations
to
FED . R. CIV . P. 56(c)(1).
Such cited
materials must be served and filed. Local Rule 56.1.
A court need
only consider
the
cited
materials,
but
it
is
within
court’s
discretion to consider the entire record. FED . R. CIV . P. 56(c)(3).
If a party fails to support an assertion, the court may consider
the fact undisputed, and grant summary judgment if the record
supports it, or issue any other appropriate order.
P. 56(e).
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FED . R. CIV .
III.
DISCUSSION
Defendant Sebelius (“Sebelius”) claims summary judgment is
appropriate
reputational
because
harm
Plaintiff’s
does
not
claim
require
due
is
meritless
process
because
protection.
Sebelius alternatively argues that summary judgment should be
granted because Plaintiff received adequate due process through an
informal dispute resolution.
Finally, Sebelius contends because
Plaintiff is a Medicaid-only facility, it was not entitled to a
hearing
at
the
federal
level
to
challenge
the
findings
of
noncompliance.
Plaintiff responds that the harm suffered to its reputation is
distinguishable from the precedent cited by Sebelius because, in
this case, the allegations published and disseminated were never
admitted and were never subject to a judicial challenge.
In fact,
Plaintiff denies it was ever out of substantial compliance on
April 2.
However, because Plaintiff fails to support its alleged
compliance on April 2 with anything in the record, pursuant to
Local Rule 56.1, this Court will deem such fact undisputed.
Defendant Kohrman (“Kohrman”), like Sebelius, claims summary
judgment should be granted because Plaintiff has not been deprived
of a liberty or property interest sufficient to trigger procedural
due process rights under the Fourteenth Amendment.
argues
that
pursuant
42
C.F.R.
§
431.151
the
Kohrman also
IDPH
was
authorized nor required to provide Plaintiff with a hearing.
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not
Plaintiff
responds
to
Kohrman
in
the
same
manner
that
Plaintiff responds to Sebelius; first arguing that Plaintiff does
have
a
protectable
property
interest,
and
then
arguing
that
pursuant to 42 C.F.R. § 431.151(a)(1)(ii) the IDPH should have
provided Plaintiff with a hearing.
A.
Sebelius’ Motion for Summary Judgment
1. Fifth Amendment Procedural Due Process
Requires a Protectable Liberty or Property Interest
Procedural due process claims require a two-step analysis.
First, the Court must determine if the plaintiff was deprived of a
protected liberty or property interest.
Assuming such an interest
exists, the Court then must determine what process is due.
See
Pugel v. Bd. Of Trs. Of Univ. of Illinois, 378 F.3d 659, 662 (7th
Cir. 2004).
In determining the specific due process requirements
the Supreme Court advises courts to consider three factors.
First, the private interest that will be affected by the
official action; second, the risk of an erroneous
deprivation of such interest through procedures used, and
the probable value, if any, of additional or substitute
procedural safeguards; and finally, the Government’s
interest, including the function involved and the fiscal
and administrative burdens that the additional or
substitute procedural requirement would entail.
Mathews v. Eldridge, 424 U.S. 319, 335 (1976).
It is with this
framework that the Court examines Plaintiff’s claim that it was
deprived of a protected property or liberty interest.
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Plaintiff claims it has “a constitutionally protected property
interest . . . in maintaining its reputation.”
Pl.’s Resp. to
Def.’s Mot. for Summ. J. at 8.
In order to demonstrate a procedural due process violation of
a property right, a party must show that there is “(1) a cognizable
property interest; (2) a deprivation of that property interest; and
(3) a denial of due process.”
554, 559 (7th Cir. 2004).
Fifth
or
Fourteenth
Hudson v. City of Chi., 374 F.3d
A property interest protected by the
Amendment
consists
of
more
unilateral expectation of the claimed interest.
than
a
mere
Instead, a party
must “have a legitimate claim of entitlement to it.”
Bd. of
Regents of State Colls. v. Roth, 408 U.S. 564, 577 (1972).
This
entitlement must be established by statutes or regulations that
delimit the scope and the condition of the right.
Id.
In the instant case, Plaintiff fails to prove that it has a
valid
property
protections.
interest
sufficient
to
trigger
due
process
Plaintiff claims that it has a property interest in
maintaining its reputation as a reputable nursing home and the CMS
mistaken rating of two out of five stars has caused Plaintiff to
lose potential patients.
While it is true that this mistaken
rating could have caused some potential patients to look elsewhere
for their care, this does not amount to a property interest in
which
Plaintiff
can
claim
it
is
legally
entitled.
To
hold
otherwise, would obviate the concept of the rating system and in
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theory would allow any facility to possess property rights in their
current CMS rating.
Moreover, both the Supreme Court and the Seventh Circuit have
held that harm to a party’s reputation is insufficient to trigger
due process protections.
See Paul v. Davis, 424 U.S. 693 (1976).
In Paul, the Court held that police distribution of a flyer titled
“Active Shoplifters” including an individual’s name and photograph
did not constitute a sufficient liberty or property interest
protected
by
the
Due
Process
Clause
despite
the
fact
that
distribution of a flyer may have harmed the individual plaintiff’s
reputation.
Id. at 701-02.
Referencing Paul, the Seventh Circuit
in Abcarian v. McDonald, held that a physician did not have a
procedural due process claim against a state actor for reporting
the settlement of a malpractice case to the National Practitioner
Data Bank because “defamation alone, even by a state actor, does
not violate the Due Process Clause . . .”
617 F.3d 931, 941 (7th Cir. 2010).
Abcarian v. McDonald,
Instead, the Seventh Circuit
held that in order for a party to allege a procedural due process
claim, the party must allege that “(1) he was stigmatized by the
defendant’s conduct, (2) the stigmatizing information was publicly
disclosed and (3) he suffered a tangible loss of other employment
opportunities as a result of public disclosure.”
Abcarian, 617
F.3d at 941 citing Townsend v. Vallas, 256 F.3d 661, 669-70 (7th
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Cir. 2001).
This standard, now commonly referred to as the
“stigma-plus” test, applies both to individuals and corporations.
See, e.g., Medley v. City of Milwaukee, 969 F.2d 312, 318 (7th Cir.
1992) (finding that plaintiffs did not have a liberty interest
sufficient to trigger a procedural due process claim because the
disciplinary actions “did not ‘effectively put [them] out of
business.’”)
Stated
differently,
in
order
for
a
plaintiff
corporation to satisfy the stigma-plus standard, the plaintiff must
show that its alleged reputational harm entirely destroyed its
property right.
If the plaintiff’s alleged stigmatization falls
short of this, then the plaintiff has no property or liberty
interest sufficient to trigger the Due Process Clause. See Chicago
United Industries, Ltd. v. City of Chicago, No. 05 C 5011, 2007 WL
4277431 *7 (N.D. Ill. Dec. 3, 2007) (granting a defendant’s summary
judgment motion on a plaintiff’s procedural due process claim
because plaintiff could not establish that it had been entirely
excluded from its field as a result of defendant’s actions and
could not establish that its economic activity had been interrupted
for a significant period of time.)
Plaintiff argues that it can satisfy the stigma-plus standard
because its reputation has been harmed and its legal status has
been altered.
Plaintiff, however, has not adequately established
a change in legal status as is required by the “stigma-plus” test.
Plaintiff argues that the CMS five-star rating system includes a
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“qualitative assessment and comparative analysis,” and this type of
dissemination of information is unique from the harm alleged in
Defendant’s
cited
precedent,
and
therefore
Plaintiff’s legal status has been altered.
Def.’s Mtn. for Summ. J. at 6.
illustrates
how
See Pl.’s Resp. to
However, Plaintiff fails to
articulate how this makes its case unique and fails to support this
argument with any authority.
Thus, this Court will not consider
such an argument in making its summary judgment determination. See
United States v. Olmeda-Garcia, 613 F.3d 721, 723-24 (7th Cir.
2010) (stating that arguments which are perfunctory, undeveloped,
or unsupported by authority are waived and a district judge is not
compelled to respond to such arguments).
Plaintiff further argues that its legal status has been
changed because the CMS five-star rating system seeks to affect
future behavior.
However, this alone is insufficient to rise to
the level of a change in legal status as required by the Seventh
Circuit.
Plaintiff alternatively argues that the Seventh Circuit has
recognized a constitutionally protected property interest in a
facility maintaining its reputation.
Plaintiff’s support for such
a proposition, however, is misplaced.
Plaintiff cites Somerset v.
Turnock, 900 F.2d 1012, 1014 (7th Cir. 1990) and Cameo Convalescent
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Center, Inc. v. Senn, 738 F.2d 836 (7th Cir. 1984), but both cases
are readily distinguishable from the one at bar.
In Cameo, the Seventh Circuit affirmed a district court’s
determination that a nursing home had a procedural due process
claim where a licensed nursing home sued officers of the Wisconsin
Department of Health and Human Services after the officers placed
the
nursing
home
on
a
Suspension
of
providing the nursing home a hearing.
Referrals
list
without
Cameo, 738 F.2d at 839.
Unlike the present case, in Cameo, Wisconsin state law required
defendants to provide agencies a hearing prior to being placed on
such a list and the effect of being placed on such a list precluded
social service agencies from referring nursing home patients to
facilities named on the list.
Id. at 840.
The Seventh Circuit
held that the nursing home established a procedural due process
claim because it proved it suffered not only an injury to its
reputation, but also suffered a change in its legal status, namely
its inability to receive referral patients.
The
instant
case
is
distinguishable
from
Cameo
in
that
Plaintiff did not suffer an alteration in its legal status.
Even
if this Court assumes Plaintiff’s reputation was harmed due to the
publication and dissemination of the mistaken two out of five star
rating, this rating, without more does not have the effect of
changing Plaintiff’s legal status. While Plaintiff states that the
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CMS rating publication likely had the effect of reducing the number
of referrals and potentially caused Plaintiff to have an increased
risk to its licensure, these changes are not analogous to the
tangible loss of referrals in Cameo and do not amount to a change
in
Plaintiff’s
legal
status.
Moreover,
unlike
Cameo
where
Wisconsin state law required a hearing prior to placing it on the
Suspension of Referrals list, here the federal regulation requires
that the IDPH provide a hearing only if the IDPH imposes remedies
on a facility.
C.F.R. §
Such remedies are specifically outlined in 42
488.406,
and
the
publishing
of
information
deficiency finding is not included on the list.
§ 488.406.
about
a
See 42 C.F.R.
Thus, Plaintiff’s reliance on Cameo is misplaced.
Plaintiff also relies on Somerset v. Turnock, 900 F.2d 1012,
1014
(7th
Cir.
1990).
Somerset,
like
Cameo,
is
readily
distinguishable from the instant case. In Somerset, a nursing home
brought a § 1983 action to enjoin the Director and Associate of the
Illinois Department of Public Health from implementing certain
statutory remedies, arguing that the nursing home had been deprived
of a property interest without due process of law as required by
the Fourteenth Amendment.
Id. at 1013.
The district court found
such a property interest to exist because defendants changed the
nursing home’s unconditional license to a conditional license and
this change in licensure caused the facility to become ineligible
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for funding, thereby altering the facility’s legal status.
Id. at
1014-15.
Similar to Cameo, Somerset differs from Plaintiff’s case in
that Plaintiff has not suffered a tangible change in legal status
like the facility in Somerset.
In Somerset, the Seventh Circuit
specifically pointed out that the district court found that:
[T]he imposition of the Conditional License alone caused
only damage to reputation which would not rise to
constitutional levels, . . . but the combination of the
Conditional License with the loss of eligibility funding
for QUIP was sufficient because the loss of eligibility
of funding was a change in legal status.
Id. at 1015.
In the present case, Plaintiff has not even had an imposition
of a conditional license let alone had a loss of funding as a
result of the CMS two-star rating.
Moreover, Plaintiff fails to
establish any other loss which the Court could construe as a change
in legal status.
Thus, the Court finds Plaintiff fails to establish a liberty
or property interest sufficient to trigger the protections of the
Due Process Clause of the Fifth Amendment.
2.
Informal Dispute Resolution Process
The Court declines to address Sebelius’ argument regarding the
adequacy of the informal dispute resolution process because the
Court has already determined that Plaintiff has not established a
protectable property or liberty interest sufficient to trigger due
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process. See Dandan v. Ashcroft, 339 F.3d 567, 575 (7th Cir. 2003)
(stating that before a party is entitled to Fifth Amendment due
process protections, a party must have a protected liberty or
property interest at stake).
3.
Medicaid-Only Providers Are Not
Entitled to an Appeal Hearing
Notwithstanding
the
fact
that
this
Court
has
already
determined that Plaintiff has not established a liberty or property
interest sufficient to trigger the due process protections under
the Fifth Amendment, Sebelius also raises an argument that because
Plaintiff is not a Medicare provider, Plaintiff was not entitled to
an administrative appeal hearing.
Plaintiff responds to this
argument, first admitting that it is not a provider of Medicare,
and then strangely by arguing that it was not required to exhaust
administrative remedies.
See Pl.’s Resp. to Defs.’ Mot. for Summ.
J. at 11.
The
Court,
confused
as
to
the
lack
of
Plaintiff’s
responsiveness, agrees with both Sebelius and the Administrative
Record of the Department of Health and Human Services Departmental
Appeal Board.
federal
Sebelius correctly points out that pursuant to
regulation
42
C.F.R.
Part
498,
Plaintiff
is
not
a
“provider” entitled to a hearing for the purposes of the regulation
because Plaintiff is only a Medicaid and not a Medicare provider.
See 42 C.F.R. § 498.2.
Indeed, in its decision, the ALJ for
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Plaintiff’s appeal made that finding of fact and further noted that
Plaintiff did not qualify for any of the exceptions to the general
rule laid out in 42 C.F.R. §498.3(a)(2)(i).
When reviewing a decision from an administrative agency a
district court’s standard of review is deferential.
Shalala, 998 F.2d 455, 458 (7th Cir. 1993).
Kendrick v.
Unless the court
determines that there was an error of law, the court will uphold
the findings of fact by the administrative law judge if such
findings are supported by substantial evidence.
Callahan,
138 F.3d
1150,
1152
(7th
Cir.
1998).
Griffith v.
Substantial
evidence means “relevant evidence as a reasonable mind might accept
as adequate to support a conclusion.”
Id.
In this case, the Court examined the ALJ’s decision and finds
that its determinations and findings of fact are supported by
substantial evidence, namely the plain language of the federal
regulations.
As such, the Court finds that Plaintiff was not
entitled to a hearing at the federal level to challenge the
findings of noncompliance because Plaintiff is not a Medicare
provider.
B.
Kohrman’s Motion for Summary Judgment
1.
Fourteenth Amendment Procedural Due Process
Requires a Protectable Liberty or Property Interest
The Court determines that Plaintiff does not have a valid
property interest sufficient to trigger due process protections
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pursuant to the Fourteenth Amendment for the same reasons stated
above regarding Sebelius’ Motion for Summary Judgment.
In his Motion for Summary Judgment, Kohrman adopts the same
arguments as Sebelius insofar as Plaintiff fails to establish
sufficient property or liberty interest to trigger due process.
The only distinction between the two motions is that Sebelius
argues that pursuant to the Fifth Amendment, Plaintiff’s property
interest is insufficient, while Kohrman, a state actor, argues the
same pursuant to the Fourteenth Amendment.
The Supreme Court has
stated that the same standard applies to both federal actors and
state
actors
through
the
Amendment respectively.
518
(1944)
(noting
Fifth
Amendment
and
the
Fourteenth
See Bowles v. Willingham, 321 U.S. 503,
that
the
Fifth
Amendment
and
Fourteenth
Amendment are typically construed in pari materia.) Therefore, the
Court refrains from repeating its prior analysis, and finds that
Plaintiff
has
not
adequately
established
a
property
interest
sufficient to trigger due process pursuant to the Fourteenth
Amendment.
2.
42 C.F.R. 431.151(a)(1)(ii)
Kohrman next argues that pursuant to the Code of Federal
Regulations, specifically, 42 C.F.R. § 431.151(a)(1)(ii), Plaintiff
was not entitled to a federal hearing.
arguing exactly the opposite.
Plaintiff responds by
The heart of the dispute lies in the
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words
“other
alternative
remedy,”
within
42
C.F.R.
§ 431.151(a)(1)(ii).
Kohrman recites the language of the regulation as proof that
Plaintiff was not entitled to a hearing.
Specifically, Kohrman
notes that because the IDPH can only provide a hearing when a
facility’s provider agreement has been denied or terminated or if
there is a dispute over a facility’s effective date of enrollment
in Medicaid, or if civil money penalties or alternative remedies
have been imposed, Plaintiff was not entitled to a hearing.
See 42
C.F.R. § 431.151 (a)(1)(ii). Plaintiff argues that the IDPH should
have provided Plaintiff a hearing pursuant to the exact same
federal regulation because Plaintiff considers the lowered star
rating by the CMS to be “an other alternative remedy.”
Plaintiff
directs the Court to the Administrative Record and the actual
Medicare website to support the fact that the lowered CMS rating
consists of a “remedy” pursuant to 42 C.F.R. § 431.151.
the
citation
to
the
Administrative
Record
However,
Plaintiff
alleges
supports its argument consists of the decision of the ALJ who
determined
that
Plaintiff
was
not
entitled
to
a
hearing.
Specifically, the ALJ’s decision states, “IDPH found deficiencies,
but it did not impose any remedies against Petitioner [Plaintiff].”
Bryn Mawr Care v. Centers for Medicare and Medicaid Services,
Decision No.CR2277 (Nov. 1. 2010) http://www.hs.gov/dab/index.html.
The
ALJ
concluded
that
Plaintiff
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had
not
been
“subject
to
compliance actions as the result of a CMS validation survey or CMS
review of State action, and the noncompliance findings appeal by
Petitioner [Plaintiff] were not generated as part of a denial of an
application by Petitioner [Plaintiff] to participate in Medicare as
a skilled nursing facility.”
Id. at 3.
These quotations appear on
the specific pages Plaintiff directs the Court to support the
argument that the CMS lowered rating is a remedy pursuant to the
federal regulation.
The next citation Plaintiff directs the Court to in an attempt
to argue that the lowered rating consists of a remedy is the
Official U.S. Government Site for Medicare.
However, this website
merely displays Plaintiff’s CMS rating. It does nothing to support
the fact that the rating consists of a remedy pursuant to 42 C.F.R.
§ 431.151(a)(1)(ii).
The Court also finds Plaintiff’s response to
Defendant’s Local Rule 56.1 statements to be persuasive.
In this
response, Plaintiff admits that on May 26, 2010 the IDPH informed
Plaintiff that no formal remedies would be imposed in connection
with the April 2 survey.
See Pl. Resp. to Def. Sebelius’ Local
Rule 56.1 Statement of Uncontested Facts at 2.
Thus, taken
together, the Court finds Plaintiff fails to establish that the
lowered CMS rating consists of an “other alternative remedy” which
entitles Plaintiff to a hearing.
The Court does recognize that it is unfortunate that CMS
mistakenly lowered Plaintiff’s rating and that it took CMS nearly
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two years to correct its mistake. However, the Court does not find
that these mistakes consist of remedies pursuant to the federal
regulation which entitles Plaintiff to a hearing and does not find
that Plaintiff has adequately established a protectable liberty or
property interest sufficient to trigger due process protections
under the Fifth or Fourteenth Amendments.
IV.
CONCLUSION
For the reasons stated herein, the Court grants summary
judgment to Defendant Sebelius on the Fifth Amendment Procedural
Due Process Claim; and grants summary judgment to Defendant Kohrman
on the Fourteenth Amendment Procedural Due Process Claim.
IT IS SO ORDERED.
Harry D. Leinenweber, Judge
United States District Court
DATE:9/26/2012
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