Constitutional Law

Fact pattern

H Corp, a private company, runs an in-patient mental health care facility in State A. Patients are often referred to the facility by the state through the State A Department of Health. When the Department of Health refers an individual to H Corp’s facility, the state often pays for the individual’s treatment.

H Corp also receives additional funding through the state, as do many other mental health entities in the state, because private companies have been the exclusive providers of mental health care throughout State A’s history. Between the costs paid for specific patients and the general state funding H Corp receives, 90 percent of H Corp’s budget comes from the state. 

For H Corp to receive funding and referrals, the state requires that H Corp keep detailed records of the caseloads of all their counselors, provide job descriptions for all positions, and maintain a detailed procedural manual that provides instructions to all employees and administrative personnel on how to provide patient care. The state regulations, however, do not dictate what the standard of care, job descriptions, or any other protocol must be.

Despite the funding H Corp receives from the state, it is struggling financially due to private patient bills that have gone unpaid. To cut costs, H Corp transfers many of its less sick private patients to an outpatient facility.

These patients are upset at the transfer and the less intensive care that they are receiving at the new facility. The transferred patients file a claim, asserting that H Corp violated their procedural due process rights for failing to provide adequate notice of the transfer. H Corp moves to dismiss the lawsuit, citing the state action doctrine.

Question

How should the court rule? Explain, focusing only on the state-action issue, but do not analyze the merits of the plaintiffs’ procedural due process claim.