Court Decision Opens Door to Potential Flood of Federal Court Litigation Against Indiana Skilled Nursing Facilities

On July 27, 2021, the United States Court of Appeals for the Seventh Circuit (the "Court" or "7th Circuit") issued a ruling which could dramatically impact litigation involving Indiana skilled nursing facilities (SNFs). In the aftermath of the Court’s decision in the case of Gorgi Talevski, by next friend Ivanka Talevski vs. Health and Hospital Corporation of Marion County, et al. (No. 20-1664), SNFs and their attorneys should expect to see more cases initiated in federal courts by plaintiffs seeking not only money damages but recovery of attorney fees incurred in pursuing resident claims.

The 7th Circuit, in its decision, reversed a ruling of dismissal entered by a federal trial court in Hammond, Indiana. The trial court had determined that the plaintiff (Talevski), a former resident of a SNF in Valparaiso, Indiana, had not identified in his complaint a private right of action arising under the Federal Nursing Home Reform Act (FNHRA) which he could pursue under 42 U.S.C. Section 1983. On appeal, the 7th Circuit sided with the plaintiff, and two other federal appellate courts, in concluding that at least two of the "residents' rights" listed in the FNHRA, as enacted by Congress in 1987, are "rights" enforceable by way of a Section 1983 lawsuit in federal court.

The Talevski decision will impact nursing home litigation in Illinois, Indiana, and Wisconsin, the three states under the jurisdiction of the 7th Circuit. The most profound changes though will most likely be in Indiana which does not have a statute establishing a state court cause of action based on alleged violation of resident "rights" or a law allowing plaintiffs to seek an award of attorney fees incurred in enforcing those "rights."

Indiana has had in place for decades a system requiring potential plaintiffs to present cases of alleged "medical malpractice" to a provider review panel as a precondition to filing suit in state court. The Indiana General Assembly has also established monetary limits on damages in medical malpractice cases. There is no provision in Indiana for awarding attorney fees to a successful medical malpractice plaintiff. The current procedure is intended to compensate plaintiffs fairly for their injuries while creating greater foreseeability of damages within the health care sector. This system has helped produce an environment in which the cost of liability insurance for SNFs has remained competitive with other states. The Court's decision could disrupt the SNF marketplace by making liability insurance more expensive and less available.

The long-term care profession urged the Court in an amicus (or "friend of the court") brief filed in October of 2020 not to impose unnecessary additional legal and administrative burdens on a segment of the health care economy already ravaged by the pandemic. The brief, submitted on behalf of the Indiana, Illinois, and Wisconsin health care associations, cited a projection by an Indiana actuarial expert predicting SNF liability insurance premium increases of more than 65% resulting from an expansion of federal remedies.

The Court did not share the profession's concerns with disruption of state court procedures. "It does not take a medical review panel board to determine whether these rights have been violated," said the Court on page 10 of its opinion. The Court similarly did not view the existing administrative process for appealing transfer decisions as "a comprehensive enforcement scheme" (page 13) even though an Administrative Law Judge appointed by the Indiana State Department of Health ruled in favor of Talevski in his bid to return to the facility. Perhaps tellingly, the plaintiff chose, despite prevailing in his administrative appeal, not to return to Valparaiso, but to file instead a federal complaint for damages and attorney fees.

On August 25, 2021, the Court denied the defendant nursing facility’s request for rehearing en banc. The case will likely now return to the trial court where the parties will have the opportunity for a full evidentiary hearing. A preliminary issue will be for the trial court to determine whether the Indiana statute of limitations normally applicable to civil actions should result in dismissal of the case. If the trial court adopts the more expansive view of the filing deadline urged by the plaintiff, the presumably applicable two year statute of limitations could be seriously eroded in its application to cases like this in which the plaintiff alleges he was under a disability.

Although the 7th Circuit focused only on two FNHRA "rights", those being freedom from chemical restraint and the "right" not to be discharged from the facility, this was only because the plaintiff did not pursue protection of other "rights" listed in the FNHRA. The door is wide open for plaintiffs to link future Section 1983 actions to any of the other "rights" referenced in the federal law, all of which are embodied in state laws and regulations adopted in each of the three states impacted by the ruling.

There are some important limitations to the Court's ruling. The Court's expansion of "rights" based litigation may impact only "state-run" facilities. Arguably though, a majority of Indiana SNFs fall into the category of "state-run" facilities because of hospital participation in the state intergovernmental transfers (IGT) program. The courts could also limit strictly the expansion of Section 1983 actions not to include personal injury cases bearing no relation to the "rights" enumerated in the FNHRA. Plaintiffs' counsel will likely be creative in efforts to turn routine state court personal injury matters into federal civil rights cases. On the other hand, not all plaintiffs' attorneys will be anxious to pursue cases in federal over state court. Federal court dockets move quickly compared to state court practice and the rules of procedure can be more exacting for a practitioner in federal court.

Legal observers will have to gauge carefully the impact of this ruling on state administrative processes. Lawyers would be wise to alert their long-term care clients that the stakes in routine administrative matters may now be higher.

Regardless of the outcome, for example, of an involuntary discharge appeal, a SNF could face federal litigation brought by a private plaintiff in addition to defending a state administrative appeal. A SNF seeking to preserve its right to a hearing before a court will continue to be required to exhaust its administrative remedies before invoking state or federal court jurisdiction. There is no similar requirement imposed on SNF plaintiffs who will be allowed access to the federal courts on claims that "rights" were violated even if state administrative proceedings remain pending or were perhaps never pursued at all. Attorneys for SNFs must be aware that a state administrative action against a SNF may now only be dress rehearsal for a complex federal action which will be expensive to defend, and which may produce an award of attorney fees to the complainant.

For more information regarding the Court's decision, please contact your Quarles & Brady attorney or:

• Randall R. Fearnow: (312) 715-5194 / randall.fearnow@quarles.com
• Edward L. Holloran, III: (317) 399-2892 / ed.holloran@quarles.com