The opinion of the court was delivered by: DUFFY
Plaintiffs Albert Schwartzberg and Sigmund Lefkowitz, owners and operators of two licensed health care facilities located in the Bronx, have brought this action to enjoin federal defendants Joseph Califano and Jacqueline G. Wilson, as well as state defendants Barbara Blum, and others
from terminating the facilities' participation in the Medicare and Medicaid programs pending an administrative hearing on the alleged deficiencies which warrant termination. The two facilities are known as Kings Harbor Care Center ("Kings Care"), a nursing home, and Kings Harbor Manor Facility ("Kings Manor"), a health related facility. This opinion will consider only issues relating to Kings Care.
Since in or about April 1976, plaintiffs have entered into Provider Agreements with the United States Department of Health, Education and Welfare ("HEW") wherein Kings Care agreed to "maintain compliance with operating standards and to provide services in accordance with statutory provisions, rules and regulations in exchange for reimbursements for such services." Supplemental Complaint at P17. The most recent agreement expired on March 31, 1978 and, by letter dated March 1, 1978, HEW advised plaintiffs of its determination not to renew Kings Care's Medicare Provider Agreement for the period commencing April 1, 1978. The determination not to renew the Provider Agreement was apparently rendered following a survey of the facility, but without a prior hearing "at which plaintiffs would have an opportunity to be represented by counsel, present evidence and examine and cross-examine witnesses." Id. at 36. Termination in this manner, according to plaintiffs, violated their rights to due process under the Fifth and Fourteenth Amendments to the United States Constitution.
Following the decision not to renew the Medicare Provider Agreement, the state defendants notified plaintiffs that Kings Care's Medicaid Provider Agreement would not be renewed. The state decision necessarily flowed from the federal decision since the conditions of participation for the Medicare and Medicaid skilled nursing home programs are the same. See 42 U.S.C. §§ 1395 cc(c)(2), 1396ie8b).
Plaintiffs contend that the failure to renew the Medicaid agreements also violated their rights under the due process clause as well as the N.Y. Public Health Law § 2806(2).
On April 19, 1978 plaintiffs' motion for a preliminary injunction restraining the Federal and state defendants from terminating Kings Care's participation in the Medicare and Medicaid programs pending an administrative hearing was granted. Defendants now move to dismiss the complaint of Kings Care for lack of jurisdiction or in the alternative for summary judgment. Plaintiffs oppose the motion and have also cross moved for summary judgment.
Defendants urge as the ground for their motion that federal question jurisdiction under 28 U.S.C. § 1331 is precluded by 42 U.S.C. § 405(h), since the final decision of the secretary of HEW is reviewable as provided in 42 U.S.C. § 405e8g). Defendants rely primarily on Weinberger v. Salfi, 422 U.S. 749, 45 L. Ed. 2d 522, 95 S. Ct. 2457 (1975), a case in which the Supreme Court held that § 405(h) deprives a court of federal question jurisdiction in an action which seeks to recover social security benefits.Id. at 7567-7.
Salfi involved a widow's application for social security benefits for herself and her child, following the death of her husband of six months. Plaintiffs, on behalf of themselves and others similarly situated, appealed the denial of their application on the grounds that the statute which excluded from its coverage surviving widows and stepchildren "who had their respective relationship with the deceased wage earner for less than nine months prior to his death" was unconstitutional. Weinberger v. Salfi, supra at 754. Plaintiffs sought declaratory and injunctive relief as well as the benefits allegedly due them.
In noting the absence of § 1331 jurisdiction, the Supreme Court examined carefully the third sentence of § 405(h) which provides:
"No action against the United States, the secretary, or any officer or employee thereof shall be brought under [ § 1331 et seq.] of Title 28 to recover on any claim arising under [Title II] of the Social Security Act."
42 U.S.C. § 405(h). The Court determined that this sentence quite plainly barred any federal question jurisdiction under § 1331 where a party is seeking social security benefits, notwithstanding the constitutional challenge to the statute. The Court observed:
"It would, of course, be fruitless to contend that Appellees' claim is one which does not arise under the Constitution, since their constitutional arguments are critical to their complaint. But it is just as fruitless to argue that this action does not also arise under the Social Security Act. For not only is it social security benefits which Appellees seek to recover, but it is the Social Security Act which provides both the standing and the substantive basis for the presentation of their constitutional contentions."
Weinberger v. Salfi, supra, at 76061.
At first blush the application of Salfi to the case at bar seems appealing; however, a closer examination and comparison of the two cases reveal their distinguishable characteristics. In Salfi the named plaintiffs had filed an application with the Secretary for benefits and, upon its denial, filed their complaint. Thus while § 1331 did not serve as a basis for jurisdiction, this prior resort to administrative remedies gave the federal courts jurisdiction under 42 U.S.C. § 405(g) which provides for judicial review following "any final decision of the Secretary." In the instant case, plaintiffs' challenge is to the manner in which benefits were denied; that is, without a prior hearing. Were Salfi to control, plaintiffs would have no remedy since they would be required to await the final decision of the Secretary after a hearing which would follow the termination of benefits to Kings Care. Thus, by the time it came to be considered, their claim that the procedure followed by the Secretary is unconstitutional would be moot. I do not read Salfi to require such a result, and, in any event, I do not believe that this case falls within a literal reading of the Salfi holding since plaintiffs are not seeking judicial review of a decision after a hearing to deny benefits, but rather are "seeking only to assure that procedures comporting with due process be followed by the Secretary in resolving the dispute over Kings [Care's] continued participation in the Medicare/Medicaid Programs." Plaintiff's Memorandum in Opposition to Defendants' Motion at 6. Accordingly, I find there is jurisdiction to entertain this complaint. See generally South Windsor Convalescent Home, Inc. v. Mathews, 541 F.2d 910, 913-14 (2d Cir. 1976); St. Louis University v. Blue Cross Hospital Service, 537 F.2d 283 (8th Cir. 1976), cert. denied, 429 U.S. 977, 50 L. Ed. 2d 584, 97 S. Ct. 484 (1977); But see Dr. John T. MacDonald Foundation v. Califano, 571 F.2d 328 (5th Cir. 1978).
Defendants also argue, alternatively, that if this Court has jurisdiction to entertain the complaint, they are entitled to summary judgment since "a hearing more than sufficient to satisfy the requirements of due process..." has been provided by virtue of the reconsideration process afforded plaintiffs. Defendant's Memorandum of Law at 17. In support of their position, defendants point to the 69 page report detailing deficiencies in the nursing home, plaintiffs' opportunity to reply to the report, a reinspection by two allegedly disinterested inspectors and plaintiffs' appearance before the decision maker to argue their position.According to defendants, the review had herein fully complied with the requirements of due process established in Case v. Weinberger, 523 F.2d 602 (2d Cir. 1975) a decision which both plaintiffs and defendants rely on, but to which each give a different interpretation. In Case the Second Circuit was called upon to decide whether or not a full evidentiary hearing was necessary prior to a nursing home's decertification as a skilled nursing facility under the Medicaid program. The nursing home in question, Case Nursing Home, was found after a survey, to have Life Safety Code Violations which the Secretary of HEW determined not to ...