States, Interest Groups Launch Fresh Attack Against Federal Nursing Home Minimum Staffing Rule in New Litigation

The Biden administration’s controversial Final Rule establishing minimum staffing requirements for nursing homes is under new attack. The Final Rule, long decried by nursing home industry leaders as a one-size-fits-all unfunded mandate that will have devastating consequences for nursing homes and the people they serve, has inspired fresh litigation from 20 states, 17 nonprofit organizations, and two long-term care (“LTC”) facilities claiming that the Rule is contrary to law and arbitrary and capricious.

Current federal law requires a registered nurse (“RN”) on site eight hours a day, seven days a week, but does not obligate the RN to engage in direct patient care. Facilities thus are free to meet this requirement by including an RN’s administrative duties. Current rules also require nursing homes to have a licensed nurse on site 24 hours per day. But current federal law offers some flexibility in the staffing required to meet residents’ needs, mandating that a facility provide “sufficient” nursing staff to assure resident safety and attain or maintain each resident’s highest practicable physical, mental, and psychosocial well-being as determined by resident and facility assessments.

In April 2024, responding to perceived ongoing safety and quality concerns for the 1.2 million residents receiving services in Medicare and Medicaid certified LTC facilities each day, the Center for Medicare & Medicaid Services (“CMS”) established new minimum nursing home staffing standards. When the new Rule takes full effect, it will require all federally funded nursing homes to meet a total nurse staffing standard of 3.48 hours per resident day (“HPRD”), which must include at least 0.55 HPRD of direct RN care and 2.45 HPRD of direct nurse aide care. The Rule will also require nursing homes to have an RN on site 24 hours a day, seven days a week, available to provide direct resident care. Finally, a portion of the Final Rule already in effect requires enhanced facility assessments. These must include inputs from facility staff and residents (or their representatives). Facilities must use the assessments to evaluate the specific needs for each resident unit in the facility and develop a plan to maximize direct-care staff recruitment and retention.

In response, in Spring 2024, three organizations representing long-term and post-acute care providers — the American Health Care Association (“AHCA”), LeadingAge, and the Texas Health Care Association — and three nursing facilities filed suit in the Northern District of Texas. Independently, but contemporaneously, the State of Texas sued in the same court, and the cases have been consolidated (collectively, the “AHCA Litigation”). Together, the consolidated cases argue that the Final Rule is arbitrary, capricious, and beyond CMS’s authority. They allege: (1) numerous studies show that “one-size-fits-all “ staffing approaches don’t lead to better quality; (2) CMS has a long history of consistently backing away from blanket federal staffing ratios, recognizing that the “one-size-fits-all” approach doesn’t work for a sector known to be highly regional; (3) the study CMS relied on to justify the Final Rule doesn’t actually support it; (4) there’s no workforce available to meet the mandate; and (5) there’s no new funding for the rule, which will be expensive to comply with. Summary judgment briefing in these cases is currently calendared to conclude in mid-January 2025.

On October 8, 2024, 20 additional states and 17 additional provider organizations joined the fray, filing their own suit in the Northern District of Iowa (the “States’ Litigation”). “This Final Rule poses an existential threat to the nursing home industry as many nursing homes that are already struggling will have no choice but to go out of business,” the plaintiffs said in their complaint. “And the main victims will be the patients who will have nowhere else to go.” Like the AHCA Litigation, the new case posits that the HPRD and 24/7 RN requirements are outside of CMS’ authority, arbitrary, and capricious. Unlike the AHCA Litigation, the States’ Litigation also takes aim at the facility assessment requirements. Per the plaintiffs, the Final Rule imposes a monumental financial burden on LTC facilities, with costs conservatively projected to exceed $5 billion per year after the Final Rule is fully implemented. The States’ Litigation details the financial hardships the Final Rule imposes on the plaintiffs.

Moreover, the States’ Litigation emphasizes the immediacy of the financial burdens. For example, the enhanced facility assessment requirements are already in effect and causing financial harm to LTC facilities, costing an estimated $4,995 per nursing home. Plaintiffs project that compliance with the Final Rule’s minimum staffing requirement will cost Kansas nursing facilities an average of $211,905 per facility in the first year alone. Though the staffing requirements have staggered implementation periods of up to three or five years for urban or rural facilities, respectively, the reality of the tight labor market requires nursing homes to hire immediately because the available supply of nurses will dwindle as the full implementation date approaches. This year, a South Carolina facility paid an extra $500,000 to staffing agencies ahead of time in order to come into compliance with the Final Rule. The Final Rule does not provide any additional funding to nursing homes to offset these increased costs.

“This proposed minimum staffing rule for nursing homes will result in nothing but reduced access to needed nursing home care, and even more closures of nursing homes, particularly across the rural communities in our country,” says Rachel Monger, president & CEO of LeadingAge Kansas. At least one nursing home operator — LaVie Care Centers, which operates 43 facilities in five states — bears that out, as it has filed for bankruptcy protection in part because of the Final Rule and other workforce challenges.

“The CMS mandate overlooks the fact that aging services providers across the Commonwealth and the United States continue to grapple with a historic workforce shortage,” said LeadingAge Pennsylvania president and CEO Garry Pezzano. “An unfunded federal mandate will only further exacerbate the consequences we are seeing as a result of an inadequate and broken Medicaid reimbursement system: closures, sales, and reduced access to care. Even if the federal mandate was fully funded, there are not enough workers. It’s a human capital issue. You can’t mandate qualified workers into existence.”

The States’ Litigation plaintiffs acknowledge that CMS is seeking to encourage people to pursue careers in nursing by investing over $75 million in financial incentives such as tuition reimbursement. But the one-time workforce effort is a drop in the bucket compared to the funding necessary to train the additional required nursing staff, they say, and does practically nothing to offset the billions of dollars in annual costs that the Final Rule imposes on LTC facilities.

Plaintiffs in both the States’ Litigation and the AHCA Litigation may have a clearer path to victory in the wake of the Supreme Court’s recent opinion in Loper Bright Enterprises, Inc. v. Raimondo,¹ which ended 40 years of judicial deference to administrative agencies’ interpretations of ambiguous statutes governing them. The previous deferential scheme had sometimes insulated agency rulemaking from judicial scrutiny, even where the agency relied on a new interpretation of an unchanged statute to implement policy that departed from the historical interpretation and application of the statute. Post-Loper Bright, the plaintiffs may gain more ground with their arguments that the Final Rule is an unlawful departure from the staffing requirements laid out by Congress, a sharp departure from past CMS policy without reasoned explanation, and that CMS did not consider important aspects of the problem such as the cost and impossibility of complying with, the Final Rule.

The new lawsuit is State of Kansas et al v. Becerra et al, U.S. District Court for the Northern District of Iowa, No. 1:24-cv-00110. The complaint may be accessed here. For more information about the federal nursing home minimum staffing Final Rule, please contact AGG Healthcare attorney Lisa Churvis.

[1] 144 S. Ct. 2244, 219 L. Ed. 2d 832 (2024).