Appeals Court: Chapin House Must Allow Medicaid Residents to Stay

RIO GRANDE — A local assisted living facility can’t evict residents who run out of private funds and rely on the government to pay their way, according to a recent decision from a state appeals court.
On April 19, a three-judge appellate panel dismissed an appeal by Assisted Living Concepts, a licensed operator of eight assisted living facilities in New Jersey, including Chapin House at 1047 Route 47 South. Assisted Living Concepts (ALC) had challenged a ruling by the state Department of Health and Senior Services (DHSS), which prohibited Chapin House from discharging residents who converted from private pay to Medicaid pay after their money was exhausted.
DHSS found, and the appellate court agreed, that it was Assisted Living Concepts’ own application when opening Chapin House that promised to allow Medicaid patients to remain and now governed their responsibility to do so.
On Feb. 1 1996, Assisted Living Concepts submitted a certificate of need application to the DHSS seeking licensing approval to develop a 39-unit, 47-bed assisted living facility, which became known as Chapin House.
A narrative section of the application stated: “ALC is committed to serving a moderate to low-income population which would include Medicaid eligible clients. ALC will apply to become a contracted Medicaid provider to serve low-income eligible clients. Approximately 20 percent of all residents will be Medicaid clients at the opening of the building. As private-pay residents spend down this percentage may increase to as high as thirty percent.”
On May 3, 1996, DHSS approved the application, granting a certificate of need for Chapin House. In granting the application, DHSS considered, among other things, that ALC provided “assurances that all residents of the area, particularly the medically underserved, will have access to services.” The approval was “limited to the proposal as presented and reviewed.”
According to the appeal, following approval Chapin House “voluntarily” maintained a Medicaid patient census of approximately 20 percent and retained those residents who converted from private pay status to the Medicaid waiver program.
Until, in late 2006, Mary Merklinger, an 83-year-old resident, who entered Chapin House as a private payer, was denied her request to continue her residency under the Medicaid waiver program. Merklinger had applied for Medicaid after her funds and assets were dissipated.
On May 22, 2007, ALC told Merklinger that Chapin House had reached its maximum number of Medicaid waiver program residents. On Sept. 14 of that year, ALC notified Merklinger it intended to discharge her.
Merklinger contacted the state regarding her impending discharge.
On Oct. 29, 2007, DHSS issued a “cease and desist order” notifying ALC that, pursuant to the conditions of Chapin House’s certificate of need, ALC was prohibited from discharging residents who converted from private pay to Medicaid. ALC did not appeal from that determination. Instead, it agreed not to discharge Merklinger and attempted to negotiate an acceptable proposal to resolve its obligation to accept Medicaid residents.
Negotiations failed and a year later ALC appealed.
On appeal, ALC maintained that DHSS’s imposition was unlawful and represented a post hoc restrictive condition on its license. DHSS argues the requirement prohibiting the discharge of residents who become Medicaid eligible, after “spending down” their resources, was part of ALC’s licensure proposal, accepted by DHSS when it awarded the certificate of need.
Following the appellate court’s review of the record, the judges concluded the Oct. 29, 2007 letter was a final agency decision regarding the scope of ALC’s certificate of need. The court determined that ALC had 45 days from the date of that letter to file an appeal. This appeal was filed on Oct. 3, 2008, nearly a year from the date of the letter. The court, therefore, dismissed the appeal as untimely.
For completeness, however, the court briefly addressed ALC’s challenge.
“ALC’s certificate of need application promoted its commitment to serving Medicaid eligible clients, pledged to apply to be a contracted Medicaid provider, and assured it would actively facilitate the referral of Medicaid clients,” the court stated.
“We reject ALC’s contention that the DHSS acted arbitrarily when it merely enforced the representations made to secure licensure. Dismissed.”