Supreme Court: Challenges to the Validity of Medicare Regulations Are to Be Made through Special Review Channel Created by Medicare Statutes-Shalala V. Illnois Council on Long Term Care, Inc

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Supreme Court: Challenges to the Validity of Medicare Regulations Are to be Made Through Special Review Channel Created By Medicare Statute--Shalala v. Illinois Council on Long Term Care, Inc.1--The Supreme Court of the United States, reversing the Seventh Circuit Court of Appeals, held that claims against the Secretary of Health and Human Services (HHS) alleging violations against Medicare, first had to be brought through a special review channel developed by Medicare statutes.2 Only then could the association seek judicial review if they were not satisfied with the Secretary's final decision after the initial hearing.

The Illinois Council on Long Term Care (Council), an association of nursing homes, sued the Secretary of HHS challenging the validity of the Medicare regulations which impose sanctions or remedies on nursing homes that violate certain standards. The Council alleged that certain Medicare-related regulations were in violation of statutes and the Constitution. The association had attempted to bring their claim under section 1331,(3) the federal question jurisdiction statute. The Court, however, ruled that the association was required to proceed under section 1395ii,(4) which incorporates section 405(h) of the Social Security Act5 prohibiting initial review in a federal court. The Council argued that it is able to obtain no review at all unless it obtains section 1331 review because it is entitled to review under the Medicare Act only when the Secretary terminates the home's provider contract. However, the Court agreed with the Secretary's interpretation of the statute that a dissatisfied home is entitled to review whether termination "or some other remedy is imposed" and that the language of the statute supports this interpretation.6

Under the Medicare Act, nursing homes complying with its numerous regulatory and statutory requirements will receive payments for providing care to Medicare beneficiaries after hospital stays. The requirements at issue dealt with the imposition of sanctions or remedies on nursing homes. If a home is dissatisfied with a determination made under the Act, it is entitled to a hearing and to judicial review of the Secretary's final decision. The association brought the action in federal district court attacking the regulations, saying they were unlawful in the following ways:

(1) certain terms, e.g., `substantial compliance' and `minimal harm' are unconstitutionally vague; (2) the regulations and manual, particularly as implemented, violate statutory requirements seeking enforcement consistency and exceed the legislative mandate of the Medicare Act; (3) the regulations create administrative procedures inconsistent with the Federal Constitution's Due Process Clause; and (4) the manual and other agency publications create legislative rules that were not promulgated consistent with the Administrative Procedure Act's demands for `notice and comment' and a statement of `basis and purpose. …