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SCHWARTZBERG v. CALIFANO

October 26, 1979

ALBERT SCHWARTZBERG and SIGMUND LEFKOWITZ, Plaintiff, against JOSEPH CALIFANO, Secretary of the United States Department of Health, Education and Welfare, et al., Defendants.


The opinion of the court was delivered by: DUFFY

This action was commenced by Albert Schwartzberg and Sigmund Lefkowitz as the owners and operators of two licensed health care facilities located in the Bronx seeking to enjoin the federal defendants, Joseph Califano and Jacqueline G. Wilson, and the state defendants, Barbara Blum and Robert P. Whalen, *fn1" from terminating the facilities' participation in the Medicare and Medicaid funding programs pending a pre-termination administrative hearing. The two health care facilities involved are the Kings Harbor Care Center (hereinafter referred to as "Kings Care") and Kings Harbor Manor Facility (hereinafter referred to as "Kings Manor").

The facts underlying the instant action, more fully set forth in my prior Opinion reported in D.C., 453 F. Supp. 1042, are as follows.

The plaintiffs were the owners and operators of two health care facilities *fn2" who in April, 1976, entered into "Provider Agreements" with the Department of Health, Education and Welfare (hereinafter referred to as "HEW") and the New York Department of Social Services (hereinafter referred to as "DSS") in order to secure Medicare and Medicaid funding for the health care services rendered to qualified patients.

 The Medicare Program is a comprehensive health insurance plan through which the federal government provides health benefits to the aged and disabled. See 42 U.S.C. §§ 1395 Et seq. The program is administered and funded exclusively by the federal government. However, its coverage is limited and consequently most older and disabled Americans must also avail themselves of Medicaid benefits. Medicaid, like Medicare, also provides health benefits to the aged and disabled. Unlike Medicare, however, this program is administered and funded jointly by the federal and participating state governments of which New York is one. See 42 U.S.C. §§ 1396 Et seq.

 In order to secure Medicare and Medicaid funding, a Provider Agreement must be executed by HEW, DSS and the facility rendering health services for which funding is sought. An integral part of the Provider Agreement is that the health facility agrees 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 P 17.

 The plaintiffs first entered into Provider Agreements with the HEW and the DSS in April, 1976. These Agreements were renewed in April, 1977. However, in March, 1978, HEW advised plaintiffs of its decision not to renew Kings Care's Provider Agreement for the period commencing April 1, 1978. As the record indicates, the decision not to renew was reached after HEW had inspected the facility and found numerous deficiencies in the facility and in the services being rendered to its patients.

 Thereafter, the DSS followed suit and informed plaintiffs that it too would not renew its Provider Agreement with plaintiffs. This, however, was a foregone conclusion since the conditions of participation for Medicare and Medicaid reimbursements are identical. See 42 U.S.C. §§ 1395cc(c)2, 1396i(b). See also 45 C.F.R. 249.33(a)(10), dated October 1, 1976, which provides that facilities not approved for eligibility by HEW shall not be recognized for purposes of payment under Title XIX of the Social Security Act. Thus, HEW's decision to terminate the reimbursements mandated the identical response from the DSS.

 Plaintiffs' supplemental complaint originally contained five claims for relief. The third, fourth and fifth claims charged that by terminating Medicare and Medicaid benefits without a prior administrative hearing, HEW and DSS had deprived plaintiffs of procedural due process. The state and federal defendants moved for summary judgment arguing that under the circumstances the Due Process Clause did not mandate a pre-termination hearing. I agreed and granted defendants' motion for summary judgment. In doing so, I found that plaintiffs' property interest would be sufficiently vindicated by means of a post-termination hearing and directed that said hearing take place as soon as possible. The plaintiffs, however, have yet to seek such a hearing. *fn3"

 Plaintiffs' first claim seeks redress under 42 U.S.C. § 1983. In particular, plaintiffs argue that the investigative techniques employed by HEW and DSS prior to their decisions to terminate reimbursement funding, constituted harassment and acted to prevent plaintiffs from conducting their business. They conclude that this conduct, under color of state law, deprived plaintiffs "of their property without due process of law and without compensation therefor." Supplemental Complaint at P 24.

 Plaintiffs' second claim seeks recovery under the National Health Planning and Resources Development Act of 1974, 42 U.S.C. §§ 300k Et seq. (hereinafter referred to as either "the Act" or "the National Health Planning Act"). The Act provides, in part, for the elimination of excess nursing home and health care facilities. It is urged that the conspiracy which is alleged to have existed between the state and federal defendants resulted in the closing of plaintiffs' facilities without compliance with the procedural requirements of the Act.

 The state defendants now move for judgment on the pleadings or, in the alternative, for summary judgment with respect to plaintiffs' first and second claims. The plaintiffs oppose both motions and themselves move for a massive production of documents, *fn4" an order substituting counsel, and if defendants' motion is granted, plaintiffs seek leave to amend their complaint. The state defendants oppose the motions to produce and to amend and have taken no position with respect to the request to substitute counsel.

 The state defendants seek judgment as to plaintiffs' first claim on dual grounds. First, defendants argue that plaintiffs' 1983 claim fails to plead a constitutional violation with the degree of particularity required in this Circuit under Powell v. Workmen's Compensation Board, 327 F.2d 131, 137 (2d Cir. 1964). Second, defendants urge that even if the pleading is sufficient, the plaintiffs have failed to allege any constitutional violation a necessary element to state a valid 1983 claim. See Adickes v. Kress & Co., 398 U.S. 144, 150, 90 S. Ct. 1598, 26 L. Ed. 2d 142 (1958). While expressing no opinion as to the pleading sufficiencies of plaintiffs' first claim, I find defendants' second contention to be meritorious, thus entitling them to judgment as a matter of law.

 Section 1983 provides that whoever, under color of state law, deprives any person of his constitutional rights shall be liable to the injured party. It is now settled, however, that § 1983 in and of itself does not provide a substantive basis for relief. Rather, it is essentially a procedural or remedial device through which a party may seek relief for the deprivation of a constitutional right. Chapman v. Houston Welfare Rights Organization, 441 U.S. 600, 615-620, 99 S. Ct. 1905, 1915-1917, 60 L. Ed. 2d 508 (1979). Thus, in order to state a valid claim under § 1983, the pleader must allege an independent substantive basis, grounded either in a federal constitutional or statutory right. *fn5" Id.

 Although it proceeds under various theories, the essence of plaintiffs' complaint is that through HEW investigation, their health care facilities were found to be deficient and, as a result, Medicare and Medicaid funding was terminated prior to an administrative hearing. They conclude that they were ...


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