## Facts

- Federal and Pennsylvania welfare agencies revoked a Pennsylvania nursing home’s eligibility to receive Medicare and Medicaid payments after determining the facility failed to meet participation standards.
- The nursing home and several elderly residents who received Medicare and/or Medicaid benefits challenged the revocation in federal court.
- The residents argued that, before the government could decertify the facility and stop payments to it, the Due Process Clause required an evidentiary hearing at which the residents could contest the merits of the decertification.
- The district court rejected the residents’ claimed entitlement to a pre-decertification hearing.
- The Third Circuit reversed, reasoning that residents had a constitutionally protected interest in continued residence at the facility and relied on: (1) the Medicaid “free choice of provider” provision, (2) a regulation limiting transfers and discharges by certified facilities, and (3) a regulation requiring hearings before reduction or termination of financial assistance.
- The Supreme Court granted certiorari to determine whether residents had a property or liberty interest requiring pre-decertification process.

## Issues

1. Whether Medicaid/Medicare residents have a constitutionally protected property or liberty interest in continued government-funded residence in a particular nursing facility after it is found noncompliant.
2. Whether the Due Process Clause requires an evidentiary hearing for residents before federal and state agencies decertify a facility and terminate its eligibility for Medicare/Medicaid payments.
3. Whether statutory and regulatory provisions concerning free choice of provider, transfer/discharge limits, and termination-of-assistance hearings create an entitlement to continued publicly funded care at a specific facility.

## Decision

- The Supreme Court reversed the Third Circuit in a 7–1 decision.
- The Court held that residents had no constitutionally protected property or liberty interest in receiving Medicaid/Medicare-funded care in a particular facility once it is decertified.
- Because the decertification did not terminate residents’ eligibility for benefits, but only ended payments to that provider, the government was not required to provide residents a pre-decertification evidentiary hearing.
- The Court concluded the government action directly affected the facility’s provider status and only indirectly affected residents through the consequences of the facility’s loss of eligibility for reimbursement.
- The Court noted that residents might have state-law claims against the facility for failing to maintain qualified status, but that possibility did not create a federal due process right to participate in the government’s certification enforcement proceeding.

## Legal Principles

- A due process “property” interest requires a legitimate claim of entitlement created by law; Medicaid confers an entitlement to benefits for eligible individuals, not an entitlement to benefits at an unqualified provider.
- Medicaid’s free-choice-of-provider provision protects a recipient’s choice among qualified providers and freedom from improper governmental interference with that choice; it does not require continued payment to a provider that has been decertified.
- Regulations limiting transfers or discharges by certified nursing facilities protect residents against certain facility-initiated moves, but do not restrict the government’s ability to decertify a facility and thereby make relocation necessary.
- Regulations requiring hearings before reduction or termination of assistance address individual eligibility or benefit levels; they do not create a right to contest facility certification decisions.
- Government action that changes where services are received, while leaving eligibility for benefits intact, is not a constitutional “deprivation” merely because it has serious practical effects on recipients.

## Conclusion

The Court held that Medicaid and Medicare residents are not entitled to a due process hearing before a nursing facility is decertified because they have no constitutional entitlement to publicly funded care at a particular provider, and decertification affects patients only indirectly while their underlying benefit eligibility continues.


O'Bannon v. Town Court Nursing Ctr., 447 U.S. 773 (1980)