In a major victory for Medicare beneficiaries, the United States Court of Appeals for the Second Circuit has reversed the decision of a district court and held that home health agencies (HHAs) must provide written notice before reducing or terminating services, regardless of the reasons for the action. Lutwin v. Thompson, No. 01-6269 (2d Cir., Feb. 26, 2004). The case, previously known as Healey and handled by attorneys from the Center for Medicare Advocacy, Greater Boston Legal Services, the National Senior Citizens Law Center, AARP Foundation Litigation, and a private attorney in San Francisco, had focused on the rights to written notice and to pre-deprivation review.

The district court had recognized the right to notice only when the HHA was making a coverage determination, and had denied the request for a pre-deprivation review process. Healey v. Thompson, 186 F.Supp.2d 105 (D.Conn. 2001). On appeal, the plaintiffs, who consisted of numerous individual home health beneficiaries from around the country and a nationwide class whom they represented, argued that both the Medicare statute at 42 U.S.C. § 1395bbb(a)(1)(E) and the due process clause required written notice before any discharge or termination. They contended, and were supported by an amicus brief filed by several doctors, that HHAs often inaccurately claimed that doctors supported the termination or cutback and that there should be no exceptions to when notice was required.

The majority of the three-judge panel agreed, concluding that the statute unambiguously required written notice in all terminations or cutbacks, not just in those involving alleged coverage determinations. In a significant rebuke to the Secretary and implicitly to segments of the home health industry, the majority pointed to a strong policy reason for its resolution: "Our reading of the statute is more consistent not only with the plain language of the statute, but also with the apparent purpose of the [notice] scheme set up by the Secretary, which purports to provide notice to Medicare beneficiaries of adverse coverage determinations and to prevent the arbitrary termination of home health services. To interpret the statute in the manner advocated by the Secretary – so as to exempt HHAs from any written notice requirements as long as the termination is based on profitability considerations or caprice, rather than on a judgment as to Medicare coverage – would render the statute and the [notice] process meaningless. Under such a reading of the statute, HHAs could always avoid issues [notices] simply by terminating coverage for any reason at all, so long as it was not strictly a Medicare coverage determination. Such a loophole undermines the entire [notice] regime and makes little sense."

One judge dissented, contending that the statute was ambiguous and that therefore the court should defer to the Secretary’s interpretation.

All three members of the panel upheld the district court’s refusal to view the due process clause as requiring pre-deprivation review. The burden to the government, the court said, outweighed the risk of erroneous deprivation.

Further information on the case is available from Gill Deford in the Center’s Connecticut office at (860) 456-7790 and from Sally Hart, who is of counsel to the Center in Tucson, Arizona at (520) 322-0126.