Blum v. Yaretsky

Brief Fact Summary. The Respondent, Yaretsky (Respondent), is a Medicaid recipient who was transferred from a nursing home to a lower level of care in a health related facility after case review by the nursing home’s utilization review committee. Respondent alleges that this transfer was done in violation of his rights and federal law under the Due Process Clause of the 14th Amendment of the United States Constitution (Constitution).

Synopsis of Rule of Law. Private entity decisions are not converted to state action simply because the state reacts to the decision.

Facts. Medicaid recipients have nursing home stays paid for by the City of New York if they meet specific eligibility criteria.
Federal regulations require each nursing facility to establish a utilization review committee (URC) of physicians who periodically review patient cases for appropriate patient placement.  The URC may decide that a patient does not need the intensive level of care found in the nursing home and transfer the patient to a lower level of care.

In 1975 the URC decided that Respondent should be transferred to a health related facility providing a reduced level of care. Respondent was transferred without notice or benefit of administrative hearing to challenge the decision.

Issue. Did the decision by a nursing home committee to transfer a Medicaid patient to another facility violate his Due Process rights under the Constitution?

Held. No. The decision was based on independent medical judgment made by private parties. The fact that the state responded by adjusting the benefits does not make the state responsible for the decision to transfer the patient. There is no indication that these decisions were influenced by the state’s obligations to adjust payment accordingly.

Dissent. The majority oversimplified the problem by mischaracterizing the facts. The state is heavily involved in the placement of the patients, as this is just a legislative means of cost containment. The state encourages these “medical judgments” to help achieve its legislative goals. So, the state and the nursing homes are closely intertwined and interdependent for their financial survival.

Discussion. The majority provides a nice review of the three axioms for determining when there is state action by a private entity. They are as follows:  Being subject to state regulation does not convert a private action into state action.  A state is responsible for a private decision only when it has exercised coercive power or has provided significant encouragement of the decision, or the private entity has exercised powers that are “traditionally the exclusive prerogative of the state.”