Florida Ass'n Rehab Fac v. FL Dept. Health & Rehab, No. 99-12507

• Decision Date: 01 September 2000
• Docket Number: No. 99-12507
• Parties: (11th Cir. 2000) FLORIDA ASSOCIATION OF REHABILITATION FACILITIES, INC., United Cerebral Palsy Association of Miami, Inc., et al., Plaintiffs-Appellees, v. STATE OF FLORIDA DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Gregory Coler, et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1208

225 F.3d 1208 (11th Cir. 2000)

FLORIDA ASSOCIATION OF REHABILITATION FACILITIES, INC., United Cerebral Palsy Association of Miami, Inc., et al., Plaintiffs-Appellees, v. STATE OF FLORIDA DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Gregory Coler, et al., Defendants-Appellants.

No. 99-12507.

United States Court of Appeals, Eleventh Circuit.

September 1, 2000.

September 14, 2000.

[Copyrighted Material Omitted] Appeal from the United States District Court for the Southern District of Florida.(No. 89-00984-CV-KMM), K. Michael Moore, Judge.

Before TJOFLAT, MARCUS and CUDAHY^*, Circuit Judges.

MARCUS, Circuit Judge:

This appeal involves difficult questions of mootness as well as the Eleventh Amendment. Plaintiffs, providers of Medicaid services to developmentally-disabled persons, sued various State of Florida officials seeking injunctive and declaratory relief for alleged violations of the Boren Amendment, which established federal standards governing state plans for reimbursing Medicaid providers. In September 1991 the district court entered a preliminary injunction essentially directing the Defendants to comply with the Boren Amendment. Not until April 1999, however, did the district court enter its final order concluding that Defendants had violated the Boren Amendment and directing Defendants to correct their reimbursement plan prospectively as well as retrospectively to 1991. In the meantime, Congress repealed the Boren Amendment in 1997, and Defendants contend that before entry of judgment they had already enacted a new rate plan in accordance with the requirements of the Boren Amendment's successor.

Defendants argue on appeal that these developments render some or all of Plaintiffs' claims moot, and that in any event the relief ordered by the district court is barred by the Eleventh Amendment to the extent it effectively requires the State to pay money to redress pre-judgment violations. Because the Eleventh Amendment bars retrospective relief affecting the state treasury in this case, we vacate the district court's judgment to that extent. We remand for determination of whether Plaintiffs' entitlement to prospective relief had become moot by the time of judgment.

I.

Although the facts of this case are relatively straightforward, its procedural history is anything but. Plaintiffs include the Florida Association of Rehabilitation Facilities, Inc. and several operators of intermediate care facilities for the developmentally disabled ("ICF/DDs"). Plaintiffs provide essential developmental and health care services to low income persons in numerous ICF/DDs throughout the State of Florida. A number of Plaintiffs operate and provide care in ICF/DDs located on land owned by the State-so-called "cluster" facilities. The care provided in the cluster facilities is the same as that provided in the private facilities.

Plaintiffs began this lawsuit in 1989, asserting that Defendants-various Florida officials responsible for formulating and administering the State's ICF/DD Medicaid Program-violated federal law by failing to reimburse Plaintiffs for reasonable costs incurred as a result of providing care and treatment to Florida's developmentally disabled citizens residing in ICF/DDs.¹ The suit alleged as well that Defendants violated federal law by reimbursing certain cluster providers inadequately through fixed-rate contracts.²

Plaintiffs' claims arose under the federal Medicaid program, established by Title IX of the Social Security Act, 42 U.S.C. 1396, et seq. This program is a cooperative federal-state effort to furnish with public assistance people who are unable to meet the cost of necessary medical services. Unlike major federal entitlement programs such as Social Security, Supplemental Security Income, and Medicare, Medicaid is not a federally-administered program with a uniform set of statutorily-defined benefits; rather, it is a state-administered program where the costs of services are allocated between the federal government and the states. No state is obligated to participate in the Medicaid program. If a state opts to participate in the Medicaid program, however, it must do so in a manner that complies with federal statutory and regulatory requirements. See 42 U.S.C. 1396n. Within the general framework of federal law, states that choose to participate in the Medicaid program (thus qualifying for federal financial aid covering the medical assistance costs of eligible individuals) are granted broad latitude in defining the scope of covered services as well as many other key characteristics of their programs. Florida, like all other states, participates in the Medicaid program.

At the time this suit was filed in 1989, and until October 1, 1997, the Boren Amendment applied to the reimbursement claims at issue. The Boren Amendment to the Medicaid Act, formerly codified at 42 U.S.C. 1396(a)(13)(A), authorized a "state plan to provide ... for payment ... of the hospital services ... through the use of rates ... which the State finds, and makes assurances satisfactory to the Secretary are reasonable and adequate ...." Thus, the Amendment required that states pay ICF/DD providers under rates "reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities in order to provide care and services in conformity with applicable State and federal laws, regulations and quality and safety standards ." Id. The purpose of the Boren Amendment was "to give states greater flexibility in calculating reasonable costs and in containing the continuing escalation of those costs." Children's Hospital and Health Ctr. v. Belshe, 188 F.3d 1090, 1093-94 (9th Cir.1999) (citation and internal quotation marks omitted), cert. denied, U.S. , 120 S.Ct. 2197, 147 L.Ed.2d 233 (2000).

As the Ninth Circuit has summarized:

[T]he Boren Amendment authorizes states to develop their own Medicaid reimbursement standards and methodologies for payment of hospital services, but subjects those standards and methodologies to three general federal requirements. First, states must take into account hospitals serving a disproportionate share of low-income patients. Second, states must make findings that the rates are reasonable and adequate to meet the necessary costs of an efficiently operated hospital. And third, states must assure Medicaid patients reasonable access to inpatient hospital care.

Id. (citations and internal quotation marks omitted). Although the Boren Amendment was intended to grant states greater freedom "in establishing the methodology for their reimbursement rates, the amendment was 'not intended to encourage arbitrary reductions in payment that would adversely affect the quality of care.' " Tallahassee Memorial Regional Med. Ctr. v. Cook, 109 F.3d 693, 704 (11th Cir.1997) (citing S.Rep. No. 139, 97th Cong., 1st Sess., at 478, reprinted in 1981 U.S.C.C.A.N. 396, 744).

On September 13 1991, the district court entered a preliminary injunction in Plaintiffs' favor, finding specifically that Defendants, in violation of the Boren Amendment, were not adequately reimbursing Plaintiffs for the costs of providing ICF/DD care. The district court found that Defendants' use of fixed-rate contracts for payment of cluster providers (i.e., private providers of ICF/DD care in state-owned facilities) also violated the Medicaid Act. The district court enjoined Defendants from reimbursing providers at inadequate rates, making that ruling retroactive to September 4, 1991 (the date of the preliminary injunction hearing). The court also enjoined Defendants from reimbursing cluster providers "in a manner other than as provided in a Rate Plan" at the "full Medicaid rate." The court further ordered that Defendants file by October 4, 1991 a rate plan complying with the substantive standards of the Boren Amendment. Defendants filed a rate plan by the required date and did not appeal the preliminary injunction.

Defendants insist that Plaintiffs never filed any objection to the new rate plan or the rates paid under it. As best we can tell from the record, Defendants are correct. Although Plaintiffs filed multiple motions for contempt or sanctions, only two of those motions implicated the preliminary injunction order, and none squarely challenged either the lawfulness of the plan or the specific rates.³ Plaintiffs contend that Defendants were always on notice of their objections to the plan and to the State's post-injunction reimbursement practices.

While the case remained pending before the district court (due in part to repeated continuances sought by Defendants), the Boren Amendment was repealed effective October 1, 1997. See Balanced Budget Act of 1997, Pub.L. 105-33, 4711(a)(1), 111 Stat. 251, 507-08 (1997). Congress amended the Medicaid Act to "eliminate the Boren Amendment and establish instead a [public] notice and comment provision." Belshe, 188 F.3d at 1093 (citation and internal quotation marks omitted). The new provision repeals the substantive limitations of, and the methodology set forth in, the Boren Amendment, substituting a "public process" for determining rates.

The successor statute requires that a state plan for medical assistance:

(13) provide -

(A) for a public process for determination of rates of payment under the plan for hospital services ... under which -

(i) proposed rates, the methodologies underlying the establishment of such rates, and justifications for the proposed are published,

(ii) providers, beneficiaries and their representatives, and other concerned State residents are given a reasonable opportunity for review and comment on the proposed rates, methodologies, and justifications,

(iii) final rates, the methodologies underlying the establishment of such rates, and justifications for such final rates are published, and

(iv) in the case of hospitals, such rates take into account ... the situation of hospitals which serve a disproportionate...