O'Bannon v. Town Court Nursing Center

Town Court Nursing Center, Inc. (Town Court) operates a nursing home in Philadelphia, PA. It was certified in April 1976 as eligible to be reimbursed for care for persons eligible for Medicare and Medicaid. In May 1977, the Department of Health, Education and Welfare (HEW) notified Town Court that it was terminating its Medicare provider agreement. Town Court would no longer be an eligible facility for Medicare recipients, and residents who received Medicare would have to move to a Medicare-eligible facility. The notification stated how Town Court might request reconsideration of the decision and directed it to notify Medicare beneficiaries that benefits were being terminated. Several days later, HEW similarly terminated Town Court’s Medicaid provider agreement. Town Court filed for reconsideration. While the request was pending, Town Court and six of its Medicaid residents (plaintiffs) filed a complaint in the United States District Court for the Eastern District of Pennsylvania alleging that Town Court and its residents were entitled to an evidentiary hearing before Town Court’s Medicare and Medicaid eligibility was terminated. The district court denied plaintiffs’ claims. On appeal, the United States Court of Appeals for the Third Circuit held Town Court did not have a right to a pre-termination hearing, but that its residents did. It held that the patients had a constitutionally protected property interest in continued residence at Town Court that gave them a right to a pre-termination hearing. The Secretary of HEW filed a petition for certiorari, which the Supreme Court granted.