Federal Court Upholds CMS Final Rule: Not All Surveys Need a Registered Nurse


In August 2013, Avon Nursing and Rehabilitation (“Avon”) notified the New York State Department of Health (“NYSDOH”) that a resident sustained a burn when she spilled a bowl of soup. The NYSDOH then conducted an “abbreviated standard survey,” which is a typical response. However, the survey team was comprised of only two dieticians. No nurses were part of the survey team, which is not typical. The two dieticians determined — and the Centers for Medicare and Medicaid Services (“CMS”) agreed — that Avon was not in substantial compliance with CMS’s Requirement for Participation at 42 CFR part 483. Consequently, CMS imposed a civil money penalty (“CMP”) based on the dieticians’ findings.

Avon filed a formal appeal and argued that the CMP was predicated on an invalid survey as there were no nurses on the survey team, as required by regulation. The statute requires that “[s]urveys under this subsection shall be conducted by a multidisciplinary team of professionals (including a registered professional nurse).” 42 U.S.C. § 1396r(g)(2)(E)(i). The administrative law judge (“ALJ”) agreed with Avon that because there was no registered nurse involved with the survey it was fatally flawed. The ALJ held “the findings and conclusions of the survey team, which was constituted in violation of the Act and regulations, are invalid and cannot be the bases for the imposition of any enforcement remedy.” Avon Nursing Home v. CMS, CR4670 (August 2, 2016).

CMS appealed the ALJ’s decision to the Departmental Appeals Board (“DAB”), which vacated the ALJ’s decision. The DAB held that despite the statute and the implementing regulation requiring a registered nurse to be on the survey team, the absence of a registered nurses did not render CMS’s noncompliance determination invalid. Avon and CMS settled the administrative proceedings. But the story does not end there.

The Final Rule

In response to the ALJ’s decision, on May 4, 2017, HHS published a proposed rule regarding the composition of a survey team. 82 Fed. Reg. 21014, 21087-21088 (May 4, 2017). CMS interpreted the statute as permitting it to issue a final rule eliminating the requirement that a nurse be part of complaint surveys. The proposed rule stated that a registered nurse would be required on the survey team for annual and extended surveys, but not for surveys conducted to investigate complaints or monitor compliance. The Final Rule, which became effective on October 1, 2017, mirrored the proposed rule and mandated that registered nurses must be part of the survey team for annual surveys, but not for complaint investigations or for monitoring compliance.  Avon challenged the Final Rule as “arbitrary and capricious.”

Federal Court Appeals

Avon sought to have the district court invalidate the Final Rule that permitted complaint surveys to be conducted without a registered nurse. It asserted that the statute requires a registered nurse to be on all surveys. By contrast, CMS urged the district court to dismiss the case. The court granted CMS’s motion to dismiss based on a lack of jurisdiction because Avon had not exhausted its administrative remedies (when appealing an action that arises under the Medicare Act, a party must first “channel” its appeals through the administrative process, which had not occurred).

Following the district court’s dismissal, Avon appealed to the U.S. Court of Appeals for the Second Circuit. Typically, in cases arising under the Medicare statute, federal courts will not confer jurisdiction until the administrative route has been exhausted. However, Avon presented a novel argument to the court of appeals. It argued that the current appeal did not arise under the Medicare Act. Rather, it arose under the Medicaid Act, which does not contain the same jurisdiction stripping and administrative exhaustion requirements as the Medicare statute.

The court of appeals agreed with Avon that federal courts have jurisdiction in this matter and in a cogent decision, reversed and remanded the case back to the district court. Then, on March 31, 2023, the court held that CMS’s Final Rule eliminating the requirement that registered nurses be on all surveys was valid. The court afforded deference to CMS’s interpretation of the statute (the wording of the relevant portion of the statute was subject to two divergent interpretations, and the court agreed with CMS’s interpretation).

Thus, the Final Rule, allowing surveys involving complaint investigations or monitoring compliance may proceed without a registered nurse on the survey team. It is reasonable to question whether a survey team that does not have a registered nurse is capable of fairly evaluating complex medical issues that often require a physician’s explanation. It remains to be seen if a further appeal of the Final Rule will occur. Until then, complaint surveys without registered nurses as part of the survey team can and will go forward.