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Plaintiff's did not need to exhaust Medicare administrative remedies in claim against nursing home - Salas v. Grancare, Inc., No. 99CA0089 (Colo.App. 01/04/2001)

Brief provided by Thomas McLean M.D., J.D.

The court held that in a tort action against a Medicare or Medicaid facility, the plaintiff does not have to exhaust administrative remedies before the case is ripe for judicial review.

The plaintiffs on behalf of themselves, their family members and their descendants filed suit against a nursing home claiming that they had received and continue to receive inadequate care and services. Because the nursing home was a provider for both the Medicare and Medicaid programs, the nursing home must comply with health, safety, and administrative standards established these statutes. [42 U.S.C. 1395i-3(a)-(d) & 1396r(a)-(d), Michigan Ass'n of Homes & Services for the Aging, Inc. v. Shalala, 931 F. Supp. 1338 (E.D. Mich. 1996). The trial court found that "plaintiffs seek a refund of the amounts that they paid, or that were paid on their behalf, while they were residents at Cedars and that they do not seek damages for any individual physical harm they may have suffered as a result of this alleged mistreatment." The plaintiffs alleged a number of complaints arising in both contract and torts.

The defendants filed a motion to dismiss all of the plaintiff's claims "asserting, inter alia, that the trial court lacked jurisdiction under the applicable state and federal statutes to hear disputes involving Medicare and Medicaid."  All plaintiffs who were at all times Medicare or Medicaid recipients were then dismissed for lack of jurisdiction. However, "the remaining plaintiffs could seek restitution and damages for emotional distress only for the period beginning with their stay at Cedars and ending when they first received any Medicare or Medicaid benefits." The appeals court construed the dismissal order to mean that only the plaintiff's tort claims were on appeal.

"The doctrine of exhaustion of administrative remedies serves as a threshold to judicial review and requires parties in a civil action to pursue available statutory administrative remedies before filing suit in district court." (State v. Golden's Concrete Co., 962 P.2d 919 (Colo. 1998)). The court took notice that under Social Security Act (42 U.S.C. 405) any an individual, "after any final decision of the Commissioner of Social Security made after a hearing to which he was a party . . . may obtain a review of such decision by a civil action commenced within sixty days." Further a claim "arising under" the Medicare Act "includes any claim in which both the standing and the substantive basis for the presentation of the claim is the Act. A claim may arise under the Act when it is inextricably intertwined with a claim for benefits. (Heckler v. Ringer, 466 U.S. 602, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984)).

Based on the logic of Golden Concrete, the court then observed "even if we assume that plaintiffs' claims are based to some extent on the Medicare and Medicaid Acts, and in that sense "arise under" those Acts, the remedy they seek is not available through Medicare's or Medicaid's administrative processes. Resort to administrative processes would have been futile, and could not operate as a precondition for plaintiffs' suit here." But, the court noted that plaintiff may not be entitled to restitution remedy. [Since the trial court's "certification order did not encompass its ruling that the remaining plaintiffs could not proceed with restitution, we do not address the appropriateness of restitution as a remedy."]

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