Second Circuit Rules That “Complaint Surveys” Are Not “Surveys” Under the Statutory Provision Requiring RNs on a Survey Team

All Medicare-certified skilled nursing facilities (“SNFs”) must be surveyed annually and not more than every 15 months, as well as on other occasions, such as for complaint investigations and revisits to determine compliance with the requirements for participation in Medicare. Thus, there are different types of surveys, mandated by statute and regulations. For decades, it was understood that the statute and implementing regulations required a registered nurse to be part of all surveys. Specifically, 42 C.F.R. § 488.314(a)(1) stated that all surveys must “be conducted by an interdisciplinary team of professionals, which must include a registered nurse.” (Emphasis added.) 59 Fed. Reg. 56,116, 56,119 (Nov. 10, 1994). However, on October 17, 2024, the United States Court of Appeals for the Second Circuit affirmed a district court’s decision rejecting a challenge to a federal regulation stating that registered nurses are not required on certain nursing home surveys, including “complaint surveys.” Avon Nursing & Rehab. v. Becerra, No. 23-492, 2024 U.S. App. LEXIS 26278 (2d Cir. Oct. 17, 2024).

The Final Rule

At the heart of the issue was a 2017 Final Rule (the “Final Rule”) promulgated by the Centers for Medicare & Medicaid Services (“CMS”). The Final Rule stated that “complaint surveys” and “revisit surveys” are subject only to the requirements of sections 1819(g)(4) and 1919(g)(4) (42 U.S.C. §§ 1395i–3(g)(4) and 1396r(g)(4)) – not sections 1819(g)(2) and 1919(g)(2) 42 U.S.C. §§ 1395i–3(g)(2) and 1396r(g)(2) – of the Social Security Act (“Act”). Such a statutory interpretation permits each state to determine the composition of the survey team for complaint and revisit surveys and eliminates the requirement that a registered nurse be a member of such survey teams.

While the Final Rule discards the requirement for a registered nurse to be a part of every survey team, it allows for “an attorney, auditor and appropriate health professionals, to identify, survey, gather and preserve evidence and administer remedies to noncompliant facilities.” See e.g., 42 C.F.R.§ 488.332(c). Notably, CMS does not elucidate or clarify who or what constitutes a “health professional.” Moreover, the inclusion of a health professional – such as a dietician or social worker – is not even mandatory. Thus, a state may send a survey team that lacks a registered nurse or other health care professional to a nursing facility since the inclusion of an unspecified health professional is discretionary. 82 Fed. Reg. 36,530, 36,624 (Aug. 4, 2017).

Origins of the 2017 Final Rule

The genesis of the 2017 Final Rule has an interesting if not tortured history. In September 2013, Avon Nursing and Rehabilitation (“Avon”) self-disclosed two occurrences of residents who came in contact with hot soup and sustained burns. What followed was a “complaint survey” that cited Avon with two deficiencies, including an “immediate jeopardy” level deficiency. However, the survey was conducted by two dieticians. No registered nurse was part of the survey team. CMS imposed a civil money penalty that Avon appealed.

On appeal, Avon asserted that the survey team was unlawfully constituted because it lacked a registered nurse, as required by section 1819(g)(2)(E)(i) of the Act and the implementing regulation at 42 C.F.R. § 488.314. Avon Nursing Home v. CMS, DAB CR4670 (2016). The administrative law judge (“ALJ”) noted, “The Secretary has by regulation required that all survey teams include a registered nurse. Specifically, 42 CFR 488.314(a)(1) requires that surveys ‘be conducted by an interdisciplinary team of professionals, which must include a registered nurse.’” Id. at 15. CMS appealed the ALJ decision, and the Departmental Appeals Board vacated and remanded the ALJ’s decision. The case settled, and the same year, CMS issued its 2017 Final Rule “to clarify” that only certain surveys, not including complaint investigations and revisit surveys require the presence of a registered nurse. 82 Fed. Reg. 36,530, 36,624 (Aug. 4, 2017).

Avon’s Challenge to the Final Rule

Avon challenged the 2017 Final Rule in the United States District Court for the Southern District of New York, which initially dismissed the appeal for lack of subject matter jurisdiction. On appeal, the Second Circuit held that the claim-stripping and channeling requirements do not apply under the Medicaid statute. Thus, the district court could adjudicate the case on the merits. On remand, it did, and it held that the Final Rule was validly promulgated. Avon then again appealed to the Second Circuit.

On October 17, 2024, the Second Circuit in a 2-1 decision, affirmed the district court’s decision rejecting Avon’s challenge to the Final Rule. All three members of the Second Circuit — the majority and the dissent — acknowledged that “[a]ccording to the parties . . . , the reach of the registered nurse requirement — and consequently the validity of the [Final] Rule — depends on whether ‘this subsection’ refers only to § 1396r(g)(2) or to all of § 1396r(g).” Avon Nursing & Rehab. v. Becerra, No. 23-492, 2024 U.S. App. LEXIS 26278, *10 (2d Cir. Oct. 17, 2024); id. at *15 (Park, dissenting) (“The government argues that ‘this subsection’ refers only to § 1396r(g)(2) and thus does not include surveys conducted in response to specific complaints, which are authorized under § 1396r(g)(4). Plaintiffs say that it refers to all of § 1396r(g), including (g)(4).”). And, on this score, the dissent concluded that Avon was “correct.” Id. The majority did not disagree. Instead, it assumed Avon was correct and then answered a different question. Id. at *10 (“even if we assume that the phrase ‘this subsection’ extends to all of § 1396r(g)” as Avon argued); id. at *17 (Park, dissenting) (“The majority decides this case on different grounds.”).

Instead of deciding the issue as framed by both Avon and the government, the majority resolved the matter on entirely different grounds: “the registered nurse requirement does not apply to complaint investigations, because these inspections are not ‘surveys’ under § 1396r(g).” Id. at *10. As Judge Park noted in dissent, the “majority’s theory that activities under § 1396r(g)(4) never entail ‘surveys’ is one of its own creation, an argument raised neither by the parties nor the district court.” Id. at *20 (Park, dissenting).

The majority observed that “the statute does not use the term ‘survey’ to refer to the investigatory and enforcement activities addressed in § 1396r(g)(4),” and, thus, concluded that “by the plain text of the statute, a registered nurse is not required to participate in activities that are not referred to as surveys, such as investigations or other enforcement activities conducted under Section 1396r(g)(4).” Id. at *11. The majority dismissed the fact that the government’s “regulations refer to this type of inspection as a ‘complaint survey,’” because “our interpretation of the statute should not rest on the taxonomy developed by the agency.” Id. at *12. “The registered nurse requirement only extends to surveys as that term is used in the statute, regardless of the terminology used by the agency.” Id.

In his dissent, Judge Park disagreed with the majority’s conclusion “that activities under § 1396r(g)(4) never entail a ‘survey.’” Id. at *17-18 (Park, dissenting). Some investigations under § 1396r(g)(4) may not require a survey; but some do. And, in fact, “[i]n several contexts, the Final Rule requires states to conduct ‘surveys’ in response to complaints.” Id. at *18. Judge Park reasoned that “it makes little sense to conclude that the same investigation is a ‘survey’ when required by 1396r(g)(2) or (g)(3), but ‘not a survey’ when required by the Final Rule.” Id. at *19. He concluded that “[t]he Medicaid Act states that all surveys must include a registered nurse on survey teams. The Final Rule says the opposite and is thus invalid.” Id. at *20.

Analysis

It is unfortunate that, as Judge Park noted in his dissent, the majority saved the Final Rule with a “theory . . . of its own creation, an argument raised neither by the parties nor the district court.” Id. at *20 (Park, dissenting). In charting this course, the majority rejected a position that Avon did not take — that complaint investigations, rather than just complaint surveys, are subject to the registered nurse requirement of 42 U.S.C. § 1396r(g)(2)(E)(i). At the same time, it embraced a position that the government never took — that surveys flowing from complaint investigations (which the Final Rule refers to as “complaint surveys”) are not, in fact, surveys.

Regrettably, the majority did not invite the parties or the district court to weigh in on its new theory — by requesting supplemental briefing or by remanding the case for further proceedings. Had it done so, it might have heard (and had the opportunity to consider) the argument that Avon (and the Final Rule) refer to complaint surveys as such because “surveys” are the statutory foundation of enforcement remedies. 42 U.S.C. § 1396r(h)(1) (“If a state finds, on the basis of a standard, extended, or partial extended survey under subsection (g)(2) or otherwise. . . . ”). If a complaint survey is not, as the majority posits, a “survey” under the statute for purposes of the registered nurse requirement, does that mean that it also is not a “survey” under the statute for purposes of serving as a foundation for enforcement under § 1396r(h)? Questions like this might have been addressed by the parties had the court invited them to address the issues it newly raised. They may yet be addressed if the court is asked to take up the case en banc.

For now, under the majority’s opinion, revisit surveys and complaint surveys — at least those conducted within the Second Circuit — will not require that a registered nurse on the survey team. One wonders if non-registered nurses have the clinical skills, education, and experience to accurately determine compliance with complex clinical issues routinely found in all nursing facilities. It remains challenging to comprehend how surveys without a registered nurse will improve the care residents deserve and receive. And it remains unknown if the complaint surveys that the majority concluded were not “surveys” will still be treated by the government as “surveys” under provisions of the Medicaid Act requiring “surveys,” such as enforcement under 42 U.S.C. § 1396r(h).

To paraphrase from George Orwell’s classic, Animal Farm, all surveys are equal, but some surveys are more equal than others. As of this writing, Avon is considering whether it will request an en banc hearing, according to Brian Feldman, counsel for Avon.

For more information, please contact AGG Healthcare attorneys Alan C. Horowitz or W. Jerad Rissler. AGG filed an amicus curiae brief on behalf of the AMDA – The Society for Post-Acute and Long-Term Care Medicine in support of Avon because it believes the Final Rule will seriously undermine the quality of care residents receive once the composition of survey teams has been enfeebled by eviscerating the registered nurse requirement.