O'Bannon v. Town Court Nursing Center

Town Court Nursing Center, Inc. (the defendant) operates a nursing home in Philadelphia which was certified in 1976 as eligible to be reimbursed for providing care to persons eligible for Medicare and Medicaid. However, the Department of Health, Education and Welfare (HEW) notified the defendant that it was terminating its Medicare provider agreement in 1977. As a result, the defendant was no longer an eligible facility for Medicare recipients, and residents with Medicare at the defendant’s nursing home would have to move to a Medicare-eligible facility. The notification stated how the defendant could request reconsideration of the decision, and directed the defendant to notify Medicare beneficiaries that their benefits were being terminated. Several days later, HEW terminated the defendant’s Medicaid provider agreement and the defendant filed for reconsideration. As the request was pending, the defendant and its six Medicaid residents (the plaintiffs), filed a complaint alleging that the defendant and its residents were entitled to an evidentiary hearing before the defendant’s Medicare and Medicaid eligibility was terminated.

The district court denied the plaintiffs’ claims. The Court of Appeals for the Third Circuit held that the defendant did not have a right to a pre-termination hearing, acknowledging that only its residents did because it held that the patients had a constitutionally protected property interest in continued residence at the defendant’s nursing home, giving them a right to a pre-termination hearing. The Secretary of HEW filed a petition for certiorari, which the Supreme Court granted.