Opinion
Civil No. 03-2438 (JRT/FLN)
August 29, 2003
Samuel D. Orbovich, ORBOVICH GARTNER, St. Paul, MN, for plaintiffs
Suzette Schommer, MINNESOTA ATTORNEY GENERAL'S OFFICE, St. Paul, MN, for defendants
Margaret Chutich, MINNESOTA ATTORNEY GENERAL'S OFFICE, St. Paul, MN, for defendants
and Francis Ling, MINNESOTA ATTORNEY GENERAL'S OFFICE, St. Paul, MN, for defendants
Perry Sekus, UNITED STATES ATTORNEY'S OFFICE, Minneapolis, MN for defendants
and Fred Siekert, UNITED STATES ATTORNEY'S OFFICE, Minneapolis, MN for defendants
MEMORANDUM OPINION AND ORDER DENYING PLAINTIFFS' MOTION FOR A PRELIMINARY INJUNCTION
Plaintiffs, the Association of Residential Resources in Minnesota ("ARRM") and Mary Rodenberg-Roberts as guardian and parent of Amari Roberts, sued the Commissioner of Human Services for the State of Minnesota, the Director of the Disability Services for the Minnesota Department of Human Services ("DHS"), and David DuPre, acting regional administrator for Region V of the Centers for Medicare and Medicaid Services ("CMS"), alleging violations of federal Medicaid laws and regulations, and violations of constitutional rights. Plaintiffs request a preliminary injunction preventing DHS from implementing a change in the manner in which counties receive certain Medicaid funds. On March 14, the Court issued a temporary restraining order preserving the status quo as much as possible, pending full briefing and oral argument. The Court then heard oral argument on April 2, 2003, and took the matter under advisement. For the reasons discussed below, plaintiffs' motion for a preliminary injunction is denied, and the temporary restraining order is dissolved.
Since the Court heard oral argument in this case, the case has been consolidated with Masterman, et al. v. Goodno (03-2939 (JRT/FLN)). The instant order is applicable only to the above captioned case, and does not prevent the Masterman plaintiffs from pursuing injunctive relief, should they choose to do so.
BACKGROUND
I. PartiesARRM is a non-profit trade association of providers of residential and support services for Minnesota citizens with developmental disabilities. ARRM has 130 organizational members and represents approximately 85% of the residential service providers in Minnesota. Rodenberg-Roberts is the parent of Amari Roberts; Amari qualifies for the Medicaid waiver program at issue in this lawsuit, and receives home and community-based care through one of ARRM's members. Rodenberg-Roberts alleges that she was recently informed that payments to her service provider will be reduced by 7% and she will receive a reduction in service hours.
DHS contends that Rodenberg-Roberts misunderstood letters sent to her from the state and county indicating hours used. DHS argues that Rodenberg-Roberts' hours have not been reduced. There is no dispute that payments to Amari's providers are likely to be reduced by 7%; it is not clear how this reduction will impact services Amari receives.
Defendant Kevin Goodno, DHS Commissioner, is responsible for Minnesota's administration of the federal Medicaid plan. Shirley Patterson is the official at DHS responsible for supervising the administration of the waiver program at issue here. Patterson allegedly devised the "rebasing" plan that is at issue in this case. DuPre, Acting Director of Region V of CMS, approved the waiver plan submitted by Goodno and Patterson.
Among the requirements that the Medicaid Act establishes for state programs, 42 U.S.C. § 1396a(a)(5) mandates that a participating State "provide for the establishment or designation of a single State agency to administer or to supervise the administration of the [State's] plan." In Minnesota, that agency is DHS.
II. Medicaid and the Waiver Program
Medicaid is a jointly funded cooperative program between state and federal governments that provides medical assistance to low-income persons and individuals with disabilities. 42 U.S.C. § 1396-1396v; see Arkansas Medical Soc'y v. Reynolds, 6 F.3d 519, 521-22 (8th Cir. 1993). State participation in Medicaid is voluntary, but once a state chooses to participate it is bound by Medicaid statutory and regulatory requirements. Id. at 522 (citing Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498, 502 (1990)). A prerequisite to participation is the creation and approval of a detailed plan, referred to as the "State Plan" which complies with extensive Medicaid rules. 42 U.S.C. § 1396a(a); Arkansas Medical Soc'y, 6 F.3d 519. The State Plan must include, for example, a system of reimbursing providers of Medicaid services, and a guarantee that the State Plan be in effect in all political subdivisions of the State. 42 U.S.C. § 1396a(a).
Since the early 1980s, the federal government has allowed states to apply for waivers to provide developmentally disabled persons with home and community-based care. 42 U.S.C. § 1396n; see also Margaret K. Feltz, Note: Playing the Lottery: HCBS and Other Medicaid Litigation on Behalf of the Developmentally Disabled, 12 Health Matrix 181 (2002) (hereinafter " Playing the Lottery"). "Waivers are intended to provide the flexibility needed to enable States to try new or different approaches to the efficient and cost-effective delivery of health care services, or to adapt their programs to the special needs of particular areas or groups of recipients." 42 U.S.C. § 1396n; see also Wood v. Tompkins, 33 F.3d 600, 602 (6th Cir. 1994) ("waiver[s] save both the state and the federal government money, because home care is often less expensive than institutional care").
Waivers are initially approved for three years, and can be reapproved for an additional five years. 42 C.F.R. § 430.25(h)(2)(i). Approved waivers can be amended, but presumably must continue to meet the statutory requirements for waivers. Waivers, by definition, allow exceptions to the State Plan, but "the Secretary may not waive any requirements that protect the well-being of Medicaid recipients." Wood, 33 F.3d at 602. Though waivers must be approved by CMS, states "retain great latitude in determining the composition and construction of a waiver." Feltz, Playing the Lottery 12 Health Matrix at 184 (listing services included under various waiver programs, including adult day care, adaptive equipment, and respite care).
There is little case law discussing the interplay between State Plans and waivers. Waivers clearly allow some exceptions to State Plan requirements, however, it is difficult to discern which requirements are necessarily waived, and which remain applicable despite the waiver. See id. at 185 (suggesting that waivers are akin to any other "optional service" offered under Medicaid and that waiver services are subject to the requirements of Medicaid law) (citing Tallahassee Mem'l Reg'l Med. Ctr v. Cook, 109 F.3d 693, 698 (11th Cir. 1997), which this Court notes is not a "waiver" case); see also Sandra L. Yue, Note: A Return to Institutionalization Despite Olmstead v. L.C.?: The Inadequacy of Medicaid Provider Reimbursement in Minnesota and the Failure to Deliver Home — and Community-Based Waiver Services, 19 Law Ineq. 307, 322-23 (2001) (hereinafter "Return to Institutionalization") (noting that most requirements of the State Plan can be waived, but that the equal access (§ 1396a(a)(30)(A)) and reasonable promptness provisions (§ 1396a(a)(8)) cannot be waived).
III. Minnesota's HCBS Waiver and the "Rebase"
Such a waiver — specifically Minnesota's Home and Community Based Services (HCBS) waiver program — is at issue in this case. Minnesota has participated in the waiver program since 1983 and receives federal funds to pay providers of in-home support or supported living services. See Affidavit of Shirley Patterson ("Patterson Aff.") at ¶ 2. The home and community-based care is intended to be an alternative to institutionalization for qualified individuals. Id. The HCBS program is funded about half through federal dollars and half through state appropriations. Id. at ¶ 4. Under the initial waiver (and the amended waiver at-issue here) DHS does not allocate the funds directly to beneficiaries or providers, instead, counties are responsible for allocating the funds. Id. at ¶ 4. Counties are also responsible for determining who will receive services and for developing "individual service plans" for each beneficiary. Id. at ¶ 7. The counties are then responsible for contracting with providers and approving "Service Agreements" on behalf of beneficiaries. Id. at ¶ 7-8. After providers negotiate contracts with counties, the providers must sign a "Minnesota Department of Human Services Provider Agreement," which enables DHS to pay the providers directly. DHS does not set rates for providers of waiver services.
In 1999, the HCBS program began to grow rapidly, in part because the Minnesota Legislature passed a statutory requirement that DHS spend up to all of the funds forecasted in the appropriations for the waiver program each fiscal year. Minn. Laws 1999, ch. 245, Art. 4, § 61. DHS in turn opened enrollment to all persons eligible for the waiver program, and did not cap the number of slots that could be approved. Patterson Affidavit at ¶ 11. In 2002, the legislature repealed the requirement that DHS spend all of its forecasted funds for the waiver program. Minn. Laws 2002, ch. 220, Art. 14 § 20.
Despite the repeal, the open enrollment period resulted in many new beneficiaries enrolled in the program. DHS learned that forecast expenditures for the waiver program exceeded the appropriation set by the 2002 Legislature. DHS determined that it would "rebase" allocations to each county in response to this significant funding shortfall. Defendant Patterson describes the initial budgeting process and the rebase as follows:
DHS utilized a system for funding counties that determined the maximum "allowable" funds to spend . . . for each county. The maximum "allowable" funds operate much like a "line of credit." This "line of credit" is the total amount that counties are authorized to spend on their Waiver recipients, rather than a specific block grant to counties.
Patterson Aff. at ¶ 4.
In determining the amount of the maximum "allowable" funds or "line of credit" counties first assigned one of four profiles to each of its recipients. [Each profile corresponded to a specific dollar amount].Id. at ¶ 5.
DHS decided to change its methodology of allocating funds to counties by basing allocations on counties' actual expenditures . . .Id. at ¶ 17.
Beginning in December 2002, DHS sent a series of memoranda to county human service directors that described the DHS plan to "rebase" the budget for home and community-based care waivers. On January 14, 2003, DHS e-mailed its "Proposed MR/RC [Mental Retardation and Related Conditions] Waiver Amendment" and "Allocation of Resources to County Agencies" to all county human services directors and to various associations including plaintiff ARRM. DHS allowed seven days for comment, and refused to extend the comment period when requested to do so. DHS apparently did not release the mathematical premises for its rebase plan until after the notice and comment period expired.
Plaintiffs filed this action on March 11, 2003. CMS was notified of the pending action. CMS approved the rebase plan on March 13, 2003. The Court held a hearing by telephone on March 14, 2003, and issued a temporary restraining order that day.
ANALYSIS
Plaintiffs assert (1) violations of rights under federal law to receive payments under an approved waiver; (2) violations of rights under federal law to be free of retroactive waiver amendments implemented without CMS approval; (3) violations of rights under Amendments 5 and 14 of the United States Constitution; (4) violation of the Contract Clause; and (5) violations of federal law to receive services in sufficient amount, duration and scope under an approved waiver.
The complaint references the 4th and 8th Amendments, however, plaintiffs do not assert violations of the right to be free from unreasonable search and seizure or violations of the rights found in the 8th Amendment.
Plaintiffs mistakenly referenced the 8th Amendment in their complaint, plaintiffs acknowledge the Contract Clause is found in U.S. Const. Art. I, § 10, cl. 1, and the Court analyzes the claim under that Clause.
Plaintiffs argue that the rebase amendment materially reduces the amount of Medicaid revenue received by counties to pay for necessary services at the rates set under the approved waiver. Plaintiffs assert that waivers are authorized to provide services, and are not budgetary tools to reduce a state's financial responsibilities under Medicaid, and argue that the state must provide general assurances and information regarding the proposed waiver amendment before the amendment can be implemented. Plaintiffs also argue that the state must provide a meaningful notice and comment period before amending the waiver. Finally, plaintiffs argue that amendments that substantially change benefits cannot be retroactive.
Defendants first argue that this Court does not have jurisdiction over these plaintiffs, and also argues plaintiffs are not likely to prevail on any asserted claim. Before discussing the preliminary injunction request, the Court will address the jurisdictional concerns raised by defendants.
I. Standing
"To satisfy the case or controversy requirement of Article III, which is the irreducible constitutional minimum of standing, a plaintiff must, generally speaking, demonstrate that he has suffered injury in fact, that the injury is fairly traceable to the actions of the defendant, and that the injury will likely be redressed by a favorable decision." Rosebud Sioux Tribe v. McDivitt, 286 F.3d 1031, 1036 (8th Cir. 2002) (quoting Bennett v. Spear, 520 U.S. 154, 162 (1997)). In addition to constitutional concerns, plaintiffs must also satisfy prudential concerns which limit the Court's jurisdiction. Id. "Prudential limits require a plaintiff to show the grievance arguably falls within the zone of interests protected or regulated by the statutory provision invoked in the suit." Id.
Defendants argue that neither plaintiff ARRM nor plaintiff Rodenberg-Roberts satisfies these requirements.
A. Constitutional Standing
1. Mary Rodenberg-Roberts
Rodenberg-Roberts alleges that service hours to her daughter have been reduced, and that payments to the group that provides home care for her daughter have also been reduced. Defendant DHS argues that the hours have not, in fact, been reduced. However, plaintiffs inform the Court that providers cannot bill DHS for hours approved for a previous period of time. The ramification of this latter assertion is unclear, and the Court cannot resolve this dispute on the current record. Rodenberg-Roberts' allegations, however, certainly amount to an injury which is causally linked to the "rebase" and which the Court can redress.
The Court notes the assurances that Amari's hours have not been cut came only after this lawsuit was filed. "It is well settled that a defendant's voluntary cessation of a challenged practice does not deprive a federal court of its power to determine the legality of the practice." Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167, 189 (2000) (internal quotation omitted).
2. ARRM
ARRM brings this action on behalf of its members, and therefore the Court must consider association standing requirements in addition to the Article III and prudential concerns. Typically, an association will have standing if the following factors are met (1) at least one of the association's members possesses standing to sue in his or her own right; (2) the interests the suit seeks to vindicate are germane to the organization's purpose; and (3) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit. See Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167, 168-69 (2000) (citing Hunt v. Washington State Apple Advertising Comm'n, 432 U.S. 333, 343 (1977)).
ARRM alleges that the limitation on Medicaid services to waiver beneficiaries resulted or will result in reduced payment to them. The Court finds that this harm would not have occurred absent the rebase (satisfying the causation element); and the injury can be redressed through a favorable decision. See Westside Mothers v. Haveman, 289 F.3d 842, 864 (6th Cir. 2002) (finding chapters of the American Academy of Pediatrics and the American Academy of Pediatric Dentists had standing to challenge Michigan's Medicaid policies). There is no reason the claim or relief requires participation of individual members.
B. Prudential concerns
Notwithstanding the Court's determination that plaintiffs satisfy the requirements for constitutional standing, if there is no private right of action under the federal statutes or regulations in question, section 1983 cannot be used to confer standing on the plaintiffs. "[O]ne cannot go into court and claim a violation of [section] 1983 — for [section] 1983 itself does not protect anyone against anything. . . . The act only gives a remedy." Chapman v. Houston Welfare Rights Org., 441 U.S. 600, 617 (1978) (quotation omitted). Plaintiffs argue that Medicaid providers have a private right of action, pursuant to 42 U.S.C. § 1983, to advance rights secured by the federal Medicaid program. The Court certainly agrees with this proposition in the abstract. See, e.g., Wilder v. Virginia Hospital Ass'n, 496 U.S. 498 (1990) (holding that Boren Amendment created substantive federal right enforceable by health care providers under section 1983); see also Westside Mothers, 289 F.3d 842 (analogizing to Wilder and holding that the equal access provision ( 42 U.S.C. § 1396a(a)(30)(A)) creates private right of action for providers); Missouri Child Care Ass'n v. Martin, 2003 WL 184747 No. 01-4045 (E.D. Mo. Jan. 13, 2003) (relying on Wilder and Arkansas Medical Soc'y v. Reynolds, 6 F.3d 519, 521-22 (8th Cir. 1993) and Minnesota Homecare Ass'n v. Gomez, 108 F.3d 917 (8th Cir. 1997) to find that Child Welfare Act, 42 U.S.C. § 672, 675(4)(A), created rights enforceable by residential child care facilities).
Plaintiffs, however, must point to a specific statute or regulation in which Congress explicitly conferred a right on a class of persons that includes plaintiffs. Gonzaga University v. Doe, 536 U.S. 273, 283 (2002) ("We now reject the notion that our cases permit anything short of an unambiguously conferred right to support a cause of action brought under section 1983."); see also Suter v. Artist M., 503 U.S. 347 (1992) (holding that private rights of action must be conferred unambiguously when Congress intends to impose conditions on the grant of federal money and limiting Wilder to cases in which the statute provides adequate guidance to the courts). See also Blessing v. Freestone, 520 U.S. 329, 340 (1997) ("A plaintiff must assert the violation of a federal right, not merely the violation of federal law.).
Here, plaintiffs claim that the following statutory sections, "when read together," are intended to benefit them: 42 U.S.C. § 1396n(c)(2)(A) and 42 C.F.R. § 441.302 (requiring waiver to have necessary safeguards and requiring state to offer assurances to CMS before waiver is approved); 42 C.F.R. § 440.180 (definitional section); 42 C.F.R. § 447.205 (requiring notice, not specific to waivers); § 441.300 (setting out basis and purpose); 42 U.S.C. § 1396a(a)(30)(A) (the "equal access provision" requiring that "payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available."). Plaintiffs also rely on 42 C.F.R. § 430.25. The Court considers these sections and regulations seriatim. 1. 42 U.S.C. § 1396n(c)(2)(A) and 42 C.F.R. § 441.302
In plaintiffs' initial brief, there is apparent reliance on 42 C.F.R. § 447.253(i). This section, however, refers only to institutional providers (the section is titled "Payment for inpatient hospital and long-term care facility services"). The Court is not convinced that non-institutional providers are intended to be covered by this regulation, and plaintiffs do not appear to be pursuing this claim.
Congress has required states to provide various assurances to CMS before waivers will be granted. One assurance states must provide is the assurance that the waiver includes necessary safeguards to protect the health and welfare of individuals provided service under the waiver. 42 U.S.C. § 1396n(c)(2)(A). This section mentions providers, but the benefit of this section inures for the federal government and Medicaid recipients. The section specifically states that "the State must provide assurances to the Secretary" that "necessary safeguards (including adequate standards for provider participation) have been taken to protect the health and welfare of individuals provided services under the waiver." Id. (emphases added).
In Wood v. Tompkins, the Sixth Circuit interpreted this language and determined that it gave rise to enforceable rights for Medicaid recipients. Wood, 33 F.3d at 611 ("at least some of the subsections of §§ 1396n(c)(2) and 441.302 confer rights upon home care Medicaid recipients that are enforceable under § 1983"). Defendants challenge the vitality of Woods given the Supreme Court's decision in Gonzaga. Gonzaga, however, did not explicitly overrule Woods, and the Court finds Woods
persuasive here. Plaintiff Rodenberg-Roberts can pursue a cause of action pursuant to this regulation.
Given the Supreme Court's directive in Gonzaga, however, the Court declines to extend Wood to provide a right of action for Medicaid providers. The language of the section cannot fairly be said to "unambiguously" intend to benefit providers. ARRM members, therefore, do not have a private right of action under this regulation. 2. 42 C.F.R. § 430.25, 440.180 and 441.300
Regulation 430.25, in pertinent part, states that "[w]aivers receive a prospective effective date determined, with State input, by the Administrator." Plaintiffs argue that this provision prevents defendants from implementing a waiver amendment retroactively. This is not an unreasonable reading of the regulation, however, there is simply no language in the regulation that would allow the Court to find that Congress intended it to create rights for service providers or beneficiaries of waiver services. In addition, this regulation appears to speak to the initial implementation of waivers, as opposed to later amendments.
In addition, evidence in the record indicates that the DHS has received approval for previous amendments that have retroactive effective dates. The State Medicaid Manual, provided by CMS, indicates that "there are instances where the amendments may be approved with a retroactive effective date as far back as the beginning of the waiver year in which it was submitted."
Regulation 440.180 provides general definitions, for example, "`Home or community-based services' means services, not otherwise furnished under the State's Medicaid plan, that are furnished under a waiver." Section 441.300 is similarly introductory, defining the basis and purpose of Section 1915(c) as permitting States to offer services an individual needs to avoid institutionalization. These general definition and purpose sections do contain "rights creating language," and do not support an independent cause of action pursuant to section 1983. 3. 42 C.F.R. § 447.205
Section 447.205 of chapter 42 of the Code of Federal Regulations requires that State Medicaid agencies publish notice of any proposed rate change in the methods and standards for setting payment rates for noninstitutional Medical Assistance services. The regulation specifically states that the notice must "[b]e published before the proposed effective date of the change." 42 C.F.R. § 447.205(d)(1). It is not clear, however, that this regulation provides a private right of action pursuant to section 1983. In addition, this section does not appear to apply to amendments to waiver plans. The waiver plan, by its definition, creates exceptions to the State Plan and the rate-setting process. Under Minnesota's waiver plan, plaintiff ARRM members negotiate payment rates with counties. Each county is free to negotiate its own rates, and rates are subject to change not in accordance with the State Plan, but with individual contracts with counties. To be sure, the rebase of the waiver plan impacts the negotiations between ARRM members and individual counties, but it is not the direct rate setting that 42 C.F.R. § 447.205 contemplates. This regulation cannot be read to confer a private right of action on plaintiffs in the waiver context.
Even if the Court were to find the section applicable to waiver amendments, it is not clear that the section provides a right of action. See American Soc. of Consultant Pharmacists v. Concannon, 214 F. Supp.2d 23, 32 (D. Maine 2002) (recognizing unsettled question but holding that even if there is private right of action "[t]he Court will not issue a preliminary injunction . . . for a minor violation of [42 C.F.R.] 447.205(c)'s notice requirements."); compare Oklahoma Nursing Home Ass'n v. Demps, 792 F. Supp. 721, 725-26 (W.D. Okla. 1992) (violation of Medicaid public notice regulation and medical care advisory committee regulation could form basis of private cause of action in non-waiver context) with Kan. Hosp. Ass'n v. Whiteman, 835 F. Supp. 1556, 1573 (D. Kan. 1993) (declining to follow Oklahoma Nursing Home Ass'n and holding that regulations cannot create rights).
4. 42 U.S.C. § 1396a(a)(30)(A)
This section, known as the equal access provision, dictates that "payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available." The Eighth Circuit, in Arkansas Medical Soc'y v. Reynolds, 6 F.3d 519, 521-22 (8th Cir. 1993), held that providers have a right of action pursuant to this section because the language "`sets forth a congressional command which is wholly uncharacteristic of a mere suggestion or nudge.'" (quoting and analogizing to Wilder, 496 U.S. at 512) (additional quotation omitted). Defendants question the continued vitality of Arkansas Medical Soc'y, and urge that the equal access provision "does not create a private right of action for [p]laintiffs under the holding of Gonzaga University." Gonzaga, however, did not overrule Arkansas Medical Soc'y. Nor did it overrule the case on which Arkansas Medical relied — Wilder v. Virginia Hosp. Ass'n. See Missouri Child Care Ass'n, 2003 WL 184747 at *7 ("In Gonzaga, the U.S. Supreme Court did not overrule Wilder."). At least one post- Gonzaga district court in this circuit has utilized the reasoning of Arkansas Medical and Wilder to find a right of action under section 1983. Id. This Court finds that reliance sound, and absent contrary direction from the Eighth Circuit, finds that the equal access provision continues to provide a private right of action for plaintiffs, at least in the typical Medicaid context. See also American Soc'y of Consultant Pharmacists v. Garner, 180 F. Supp.2d 953, 969-70 (N.D. Ill. 2001) (following Seventh Circuit precedent allowing cause of action pursuant to equal access clause, recognizing contrary authority in other circuits but holding that "at present, Methodist Hospitals is the Seventh Circuit's last clear word on a provider's right of action under [equal access clause]"). But see Pennsylvania Pharmacists Ass'n v. Houstoun, 283 F.3d 531, 541-42 (3rd Cir. 2002) (no private right of action for providers under equal access clause); Evergreen Presbyterian Ministries Inc. v. Hood, 235 F.3d 908 (5th Cir. 2000) (same); Burlington United Methodist Family Services, Inc. v. Atkins, 227 F. Supp.2d 593, 597 (S.D. W.V. 2002) (same).
Arkansas Medical Society, however, was a straightforward rate-setting case, not the waiver situation presented in this case. This Court must determine, therefore, whether the equal access provision is applicable here, or if the equal access provision, like the notice requirement, is not applicable in the waiver context.
Some commentators have suggested that the equal access requirement must be enforceable in waiver contexts, because the provision cannot be waived. Sandra L. Yue, Note: A Return to Institutionalization, 19 LAW INEQ. 307, 322-23 (2001) (citing Jane Perkins, Nat'l Health Law Program, Assuring High Quality Home and Community-Based Care Through Medicaid Reimbursement Provisions 2 (Sept. 29, 2000)). The language of the waiver statute supports this contention; the statute provides: "A waiver . . . may include a waiver of the requirements of section 1396a(a)(1) of this title (relating to statewideness), section 1396a(a)(10)(B) of this title (relating to comparability), and section 1396a(a)(10)(C)(i)(III) of this title (relating to income and resource rules applicable in the community)." 1396n(c)(3). Absent from this list is the ability to waive the equal access provision. Expressio unius est exclusio alterius, the familiar cannon of statutory construction, means that "to include one thing is to exclude another." Barnhart v. Peabody Coal Co., ___ U.S. ___, 123 S.Ct. 748, 760 (2003) (the cannon applies only where it is "fair to suppose that Congress considered the unnamed possibility and meant to say no to it."). That cannon is useful here — had Congress intended waivers of the equal access provision, that provision likely would have been included in the explicit list of waivable requirements set forth in the statute.
Although the equal access clause does not appear to have been applied in a case similar to this one, courts have found that similar subsections of § 1396a support private rights of action in the context of waiver programs. For example, in Bryson v. Shumway, 308 F.3d 79 (1st Cir. 2002), the Court held that the "reasonable promptness" provision of § 1396a(a)(8) confers federal rights enforceable under section 1983 with regard to state Medicaid waiver beneficiaries. The Court finds such cases instructive and finds that such cases, in combination with the structure of the statute, and the Arkansas Medical Society opinion, concludes that the equal access provision is applicable to waiver plans. Plaintiff ARRM and plaintiff Rodenberg-Roberts can pursue causes of action under this section. II. DATAPHASE FACTORS
Having addressed the threshold Article III and prudential standing concerns, and having found that plaintiffs can pursue a cause of action for at least some of the federal statutes and regulations pled in the complaint, the Court turns to the well-established test for determining whether injunctive relief should issue. A preliminary injunction may be granted only if the moving party can demonstrate: (1) that there is a likelihood of success on the merits; (2) that the movant will suffer irreparable harm absent the restraining order; (3) that the balance of harms favors the movant; and (4) that the public interest favors the movant. Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109, 113 (8th Cir. 1981).
A. Likelihood of Success on the Merits
a. Contract Clause
1. Constitutional Claims
Plaintiff ARRM argues that DHS's re-base scheme substantially impairs the obligation of existing contractual relationships. The federal Constitution provides that "[n]o State shall . . . pass any . . . Law impairing the Obligation of Contracts." U.S. Const., art. I, § 10, cl. 1. In this case, however, no law or legislation has been passed, therefore the Contract Clause is inapplicable. Even if the administrative action were legislative, however, plaintiffs would not have a viable claim. While it is true that the Contract Clause prevents states from retroactively rolling back payments to Medicaid providers for services already performed, see Minnesota Ass'n of Health Care Facilities, et al. v. Department of Pub. Welfare, 742 F.2d 442 (8th Cir. 1994), the rebase does not envision such a radical action; it does not require providers to reimburse fees already collected, as the legislation found unconstitutional in Minnesota Ass'n of Health Care Facilities. Id. at 451 (invalidating retroactive payback provision because by virtue of its retroactivity, "the statute imposes totally unexpected liability on nursing homes for charges that were permitted by law when collected."). Instead, the rebase contemplates that, going forward, providers might be subject to lower rates. Providers of home and community based health care, like nursing home providers, "could not reasonably expect that the terms of whatever contracts they had . . . would exempt them from rate regulation by the state." Id. at 450. In short, plaintiffs demonstrate no likelihood of success on this claim.
b. Substantive and Procedural Due Process
The Due Process Clause of the Fourteenth Amendment provides, "nor shall any State deprive any person of life, liberty, or property, without due process of law." To state a claim for a violation of due process, the claimant must have a protected property or liberty interest. Board of Regents v. Roth, 408 U.S. 564, 569 (1972). Procedural due process imposes certain constraints "before an individual is finally deprived of a property interest," Mathews v. Eldridge, 424 U.S. 319, 333 (1976), and only those interests to which an individual has a "legitimate claim of entitlement" are subject to procedural due process protections. Roth, 408 U.S. at 577. The "essential requirements of due process . . . are notice and an opportunity to respond." Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 546 (1985).
The first step in a due process challenge is to ascertain whether there has been a deprivation of a protected interest. American Mfrs. Mut. Inc. Co. v. Sullivan, 526 U.S. 40, 59 (1999). The inquiry then turns to the process that the applicant was granted before the deprivation occurred. In this case, plaintiff ARRM's only conceivable property interest is the interest in compliance with the equal access provision. However, ARRM points to no requirement in the Medicaid statute, or of state law, that the rates its providers contract for cannot be reduced. Rodenberg-Roberts claims the same interest stemming from the equal access provision; additionally, she has a legitimate property interest in continued Medicaid benefits for her daughter. Although both plaintiffs point to property interests, the Court finds it likely that the process plaintiffs received was adequate (or perhaps in the case of Rodenberg-Roberts, will be adequate) to satisfy procedural due process requirements. Although plaintiffs complain that they were not offered an opportunity to be heard, DHS did notify ARRM of the proposed changes, and met with ARRM representatives on more than one occasion. In addition, ARRM's concerns were sent to CMS, in the form of a letter from plaintiffs' attorney, before the amendment was approved. Benefits to Rodenberg-Roberts are protected by rigorous administrative appellate processes. The Court therefore finds that plaintiffs have not made a strong showing of deprivation of procedural due process rights.
The substantive due process claims are even less likely to succeed. Substantive due process "bar[s] certain government actions regardless of the fairness of the procedures used to implement them." County of Sacramento v. Lewis, 523 U.S. 833, 840 (1998) (citations omitted). To violate substantive due process, an executive act must be "fatally arbitrary" and must be fairly characterized as "conscience shocking, in a constitutional sense." Id. at 841, 847. Conduct deliberately intended to injure in some way, unjustifiable by any government interest, is the sort of official action most likely to rise to the conscience-shocking level. Id. at 849.
Plaintiffs allege that defendants violated their substantive due process rights by prematurely submitting the rebase amendment. Plaintiffs argue that this premature submission was not based on adequate information and therefore was arbitrary and capricious. Plaintiffs also point out that determining the rebase allocations on actual expenditures is not rational when DHS must have been aware that the failure to use allotted sums was based on a workforce shortage. Defendants respond that it was reasonable to use actual expenditures. Defendants also point out that funds in excess of the actual expenditures have been allocated, and that counties are free to make up any funding differences out of their own budgets. Finally, defendants argue that the waiver amendment allows DHS to re-base county agencies' budget allocations as necessary and recipients can appeal any changes to their individual services plans before any changes take effect.
The Court finds that the waiver amendment, although surely hasty and perhaps ill-advised,
cannot fairly be characterized as conscience-shocking. Plaintiffs have not demonstrated a likelihood of success on this claims. The Court also notes that "[w]here a particular amendment provides an explicit textual source of constitutional protection against a particular sort of government behavior, that Amendment, not the more generalized notion of substantive due process, must be the guide in analyzing these claims." County of Sacramento v. Lewis, 523 U.S. 833, 842 (1998). Here, plaintiffs' allegations of arbitrary deprivations are fully covered by the Due Process Clause itself. See Prestera Center For Mental Health Services, Inc. v. Lawton, 111 F. Supp.2d 768, 779 (dismissing substantive, but not procedural, due process claims on this basis).
2. Statutory and regulatory claims
a. 42 U.S.C. § 1396n(c)(2)(A) and 42 C.F.R. § 441.302
As discussed above, only plaintiff Rodenberg-Roberts can pursue a cause of action under these sections. The court finds that plaintiff Rodenberg- Roberts has presented a strong showing that defendant DHS submitted the waiver amendment without first providing adequate assurances to CMS. The evidence indicates that the waiver amendment was submitted before counties, ARRM members, and other interested parties, such as plaintiff Rodenberg-Roberts, were able to submit comments and concerns.
Despite this hasty initial action, however, DHS continued to accept comments from concerned individuals, even though the amendment had been submitted. Plaintiffs' concerns did make their way to CMS, in the form of a letter from plaintiffs' counsel, before CMS approved the amendment. CMS made inquiries, apparently based on this letter, and in response, DHS submitted at least three additional letters. Those letters contain specific "assurances" that the health and welfare of waiver recipients had been considered, and will be protected. See Patterson Aff. exhibits 25-27 (responding to request from CMS for additional information regarding health and safety of waiver enrollees). The Court notes that the "assurances" section does not require that the State guarantee a certain level of payment to providers, and it does not require that the state assure that beneficiaries will receive services in excess of those required to guarantee health and welfare.
b. Equal access
Courts recognizing private rights of action under the equal access clause have taken both procedural and substantive rights approaches. See Yue, Return to Institutionalization, 19 Law Ineq. at 323 n. 130 (explaining the two approaches). The substantive rights approach focuses on the results of the rate changes, not the factors considered when determining the rates. See American Society of Consultant Pharmacists v. Garner, 180 F. Supp.2d 953 (N.D. Ill. 2001). Courts following the substantive rights approach refuse to rely on the equal access provision to enjoin rate changes, insisting instead that such claims be measured by results, not predictions. Id. This refusal stems in part from the reality that "providers . . . have an incentive to overstate the effect of a proposed cut, so as to minimize the size of the cut." Id. at 972. As the Seventh Circuit explained, "states may behave like other buyers of goods and services in the marketplace: they may say what they are willing to pay and see whether this brings forth an adequate supply. If not, the state may (and under § 1396a(a)(30), must) raise the price until the market clears." Methodist Hospitals Inc. v. Sullivan, 91 F.3d 1026, 1030 (7th Cir. 1996).
In contrast, the Eighth Circuit, at least in non-waiver cases, has followed a procedural rights model. In this model the inquiry focuses not on the impact of the rate, but on whether the state considered the "relevant factors" before implementing changes. The procedural rights model, because it depends on process, not results, is consistent with injunctive relief. See Arkansas Medical Soc'y v. Reynolds, 819 F. Supp. 816, (E.D. Ark. 1993), aff'd 6 F.3d 519 (8th Cir. 1993). However, even in cases in which the state clearly violated the equal access provision by using only budget consideration to adjust rates, courts have refused wholesale injunctions of rate changes. The district court in Arkansas Medical Society, for example, enjoined the proposed rate cut only to those types of services that the court found would have insufficient Medicaid providers given the rate cut. Id. (prohibiting rate cut only in obstetrics, pediatric care, and certain therapies for children).
The district court decision in Arkansas Medical Society illustrates the difficulty in cleanly separating the procedural and substantive rights approaches. That difficulty is more pronounced in the waiver context, because rates are not set by the State, but are set by individual counties and are subject to negotiation in accordance with those counties provider contracts. The rebase, however, is clearly a significant factor in the rates set by counties. The substantive rights approach, therefore, would be the better approach in waiver situations.
The Court will not resolve at this time which approach should be applied in waiver contexts because, under either, the Court will not issue injunctive relief. Assuming the procedural rights model applies, DHS should have considered the equal access factors in amending the waiver. DHS admits that the rebase was primarily based on the budget crisis and also asserts a desire to give counties more flexibility, but absent from this explanation is an indication that DHS considered the equal access factors. Although there is no particular methodology that the state must follow when considering these factors, a failure to consider the factors is a violation. See Minnesota Homecare Ass'n v. Gomez, 108 F.3d 917, 918 (8th Cir. 1997). Even under the procedural model, however, injunctive relief is not always appropriate. See Arkansas Medical Soc'y, 819 F. Supp. 816. In this case, there is inadequate evidence that the rebase will prevent ARRM members from continuing in the home service business. Given that absence, and considering the remaining Dataphase factors as discussed below, the Court finds it inappropriate to issue injunctive relief for this likely procedural equal access violation.
B. Public Interest and Balance of Harms
Due to the nature of this dispute, and the difficult policy interests implicated, these two factors are unusually difficult to balance at this stage of the proceedings. This dispute implicates an array of public interests and potential harms, and both sides make convincing arguments that certain aspects of the public interest are in their favor. For example, defendants point out that there is a public interest in fiscal responsibility, and in fairly allocating the state's limited resources. The State also notes the strong public interest in ensuring that the waiver program continue, and argues that if the program becomes too expensive, DHS will be forced to abandon the program, or at least limit additional waiver slots. On the other hand, the Court is sensitive to the interest in ensuring adequate care to vulnerable populations, and appreciates the public interest in compensating care providers at a level that allows their continued participation in the health care field.
The Court is cognizant of the budget issues facing the State, and in particular the budget problems at DHS. The Court also must recognize, as other courts have, "that those individuals who are being threatened with the curtailment of services due to the potential underreimbursement of Medicaid providers face what is possibly grievous harm." See Arkansas Medical Soc'y v. Reynolds, 834 F. Supp. 1097, 1103 (E.D. Ark. 1992) (enjoining state from cutting rates for certain services, but allowing rate cut for majority of services). At this time, however, the Court cannot make pertinent findings regarding the balance of harms, because the Court does not have adequate information regarding the cuts faced by particular individuals. Plaintiff Rodenberg-Roberts asserts that reimbursement to Amari's provider will be cut by 7%. There is no information, however, on whether the provider will be able to absorb that cut, or if the cut is severe enough to force the provider out of business. The Court recognizes that exhibits attached to the affidavit of Barnet Rosenfield indicate that several Ramsay County waiver recipients apparently face more significant budget cuts. Those indi viduals, however, are not parties to this action and the Court does not know the particular circumstances surrounding those perceived cuts.
Similarly, the Court also does not have adequate information on the circumstances of the state defendants. In particular, there was argument at the hearing that if this injunction issues, DHS would be forced to reallocate resources within its department, or seek additional funds from the legislature. Should the reallocation occur, the funding for this program would likely be at the expense of other important medical and social programs.
C. Irreparable Harm
Finally, the Court considers the possibility of irreparable harm. Defendants correctly argue that a showing of recoverable economic loss alone does not constitute irreparable harm that justifies injunctive relief. See Packard Elevator v. Interstate Commerce Comm'n, 782 F.2d 112, 115 (8th Cir. 1986). In this case, ARRM members will not be able to recover funds, because this Court does not have the power to order funds to be paid out of the state treasury. Despite the inability to recover funds, plaintiff ARRM has not asserted that its members will be unable to provide home and community-care services at lower rates. In addition, it is not clear that ARRM members will be asked to do so, or to what extent members might be forced to cut rates. The record indicates that individuals were approved for "lines of credit" beyond what those individuals required to assure health and safety. It is likely that some of the perceived "cuts" will be cuts of unused funds.
The Court acknowledges that several beneficiaries were simply unable to use all their funds due to a shortage of home and community care providers in many Minnesota communities.
Plaintiff Rodenberg-Roberts has also failed to demonstrate irreparable harm. As an initial matter, Rodenberg-Roberts is able to appeal any cuts in service hours. Counsel for Rodenberg-Roberts argues that such an appeal is illusory, because Rodenberg-Roberts cannot appeal the 7% reduction in payments to providers. However, the ARRM member that provides services to plaintiff Rodenberg-Roberts has not averred that it will be unable to provide services to Am ari given the 7% cut. There is no evidence before the Court that Amari will be denied access to care, or will suffer irreparable harm, absent an injunction.
The Court notes that if access to providers does prove impermissibly limited, the Court will order appropriate relief consistent with the reasonable access clause.
ORDER
Based upon the foregoing, the submissions of the parties, the arguments of counsel and the entire file and proceedings herein, IT IS HEREBY ORDERED that plaintiffs' motion for a preliminary injunction [Docket No. 3] is DENIED. The Temporary Restraining Order [Docket No. 12] is DISSOLVED.