Pee Dee Health Care, P.A. v. Sanford, 06-2108.

• Citation: 509 F.3d 204
• Decision Date: 05 December 2007
• Docket Number: No. 06-2108.,06-2108.
• Parties: PEE DEE HEALTH CARE, P.A., Plaintiff-Appellant, v. Mark SANFORD, in his official capacity as the Governor of South Carolina; Robert F. Kerr, in his official capacity as Director of the South Carolina Department of Health and Human Services; South Carolina Department of Health and Human Services, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

509 F.3d 204

PEE DEE HEALTH CARE, P.A., Plaintiff-Appellant, v. Mark SANFORD, in his official capacity as the Governor of South Carolina; Robert F. Kerr, in his official capacity as Director of the South Carolina Department of Health and Human Services; South Carolina Department of Health and Human Services, Defendants-Appellees.

No. 06-2108.

United States Court of Appeals, Fourth Circuit.

Argued: September 26, 2007.

Decided: December 5, 2007.

ARGUED:

Tony Ray Megna, Blythewood, South Carolina, for Appellant. Kenneth Paul Woodington, Davidson, Morrison & Lindemann, P.A., Columbia, South Carolina, for Appellees.

ON BRIEF:

Charles E. Carpenter, Jr., Richardson, Plowden, Carpenter & Robinson, P.A., Columbia, South Carolina, for Appellant. William H. Davidson, II, Davidson, Morrison & Lindemann, P.A., Columbia, South Carolina, for Appellees.

Before MICHAEL, GREGORY, and DUNCAN, Circuit Judges.

Affirmed by published opinion. Judge DUNCAN wrote the opinion, in which Judge MICHAEL and Judge GREGORY joined.

OPINION

DUNCAN, Circuit Judge:

This case raises two issues of importance to healthcare providers who receive reimbursement from Medicaid. The first is whether healthcare providers serving Medicaid recipients have a right to sue state officials, under 42 U.S.C. § 1983, to enforce rights created under the Medicaid reimbursement program at 42 U.S.C. § 1396a(bb). The second is whether the appropriate venue for such an action can be limited by contract.

Pee Dee Health Care, P.A. ("Pee Dee") is a healthcare provider qualified under the Medicaid program to serve low-income individuals in rural areas of South Carolina. As a Medicaid service provider, Pee Dee is entitled to reimbursement payments from the state. The Benefits Improvement and Protection Act of 2000 ("BIPA") provides the methodology for computing those payments. To receive reimbursement payments, however, healthcare providers must first enter into a contract with the South Carolina Department of Health and Human Services ("SCDHHS"), the state agency responsible for the administration of the Medicaid program in South Carolina. Each contract contains a forum-selection clause which dictates that all reimbursement claims must be pursued through state administrative and judicial avenues.

Pee Dee claims that the SCDHHS payment methodologies do not comply with various provisions of BIPA. Pee Dee brought this action, pursuant to 42 U.S.C. § 1983, in the United States District Court for the District of South Carolina against the Governor of South Carolina, the Director of SCDHHS and SCDHHS itself, to enforce the reimbursement provisions of BIPA. The district court dismissed the BIPA claim, finding venue inappropriate based on the forum-selection clause in the provider contract between Pee Dee and SCDHHS. We affirm, holding that even though a healthcare provider has a private right of action under § 1983 to enforce 42 U.S.C. § 1396a(bb), Pee Dee agreed, in the forum-selection clause, to bring such an action in a state tribunal and is bound by that agreement.

I.

A. The Medicaid Scheme

Medicaid is a cooperative federal-state program designed to partially compensate states for the costs of providing healthcare to needy individuals. 42 U.S.C. § 1396. States are not required to participate in the program, but if they choose to do so, "they must implement and operate Medicaid programs that comply with detailed federally mandated standards." Antrican v. Odom, 290 F.3d 178, 183 n. 2 (4th Cir. 2002). To qualify for federal assistance, a state must submit a comprehensive plan to the federal Secretary of Health and Human Services describing the nature and scope of the state's Medicaid program. 42 C.F.R. § 430.10. Each state plan must include, among its details, a scheme for reimbursing rural health clinics ("RHCs") for services provided to Medicaid patients.¹ 42 U.S.C. § 1396a(bb).

The Medicaid Act, as amended by BIPA, Pub.L. No. 106-554, § 1(a)(6), 114 Stat. 2763, (codified as amended in scattered sections of 42 U.S.C.), regulates the way in which RHCs receive reimbursement payments for the services they provide to Medicaid patients. In general, BIPA allows for two methods of reimbursement. The first method is a "prospective payment system" based on historical-average costs plus a cost-of-living factor.² 42 U.S.C. § 1396a(bb)(2). The second method, set forth in § 1396a(bb)(6), authorizes an "alternative payment methodology" that can take a number of forms, provided that the state and the clinic agree upon the system and it results in payment of an amount which is at least equal to the amount authorized under the prospective payment system.

SCDHHS is the state agency in South Carolina responsible for administration of the Medicaid program. Healthcare providers in South Carolina are not required to accept Medicaid patients. However, if a healthcare provider elects to treat Medicaid patients and to seek reimbursement from SCDHHS for its services, it does so by entering into a contract ("provider contract" or "contract") with SCDHHS.

The contract provides for the method and amounts of payment, as well as for certain remedies if a healthcare provider believes it has not been reimbursed as required by law.³ For example, the contract provides:

A. Reimbursement

The Rural Health Clinic (RHC) Medicaid rate for services rendered under this contract shall be determined based upon applicable Medicare/Medicaid laws, rules or regulations and SCDHHS policies and procedures in accordance with Attachment 4.19-B of the State Plan for Medical Assistance.

J.A. 117.⁴

Should any dispute arise under the terms of the contract, a healthcare provider agrees, as part of its decision to accept Medicaid reimbursement payments, that its "sole and exclusive remedy" regarding such disputes would be to first file a Notice of Appeal of SCDHHS's action to the SCDHHS Appeals Division. J.A. 124. Upon exhaustion of all administrative remedies, judicial review of final agency decisions is available in the state court system. S.C.Code Ann. § 1-23-380. Such appeals are governed by Article VIII of the contract, which provides:

If any dispute shall arise under the terms of this contract, the sole and exclusive remedy shall be the filing of a Notice of Appeal within thirty (30) days of the receipt of written notice of SCDHHS's action or decision which forms the basis of the appeal. Administrative appeals shall be in accordance with SCDHHS's regulations R. 126-150 et seq. . . . Judicial Review of any final SCDHHS administrative decision shall be in accordance with § 1-23-380, Code of Laws of South Carolina (1976), as amended.

J.A. 124⁵ (emphasis added).

Such subsequent judicial review must proceed in the venue and location identified in Sections (R) and (S) of Article IX of the contract.⁶

R. Venue of Actions.

Any and all suits or actions for the enforcement of the obligations of this contract and for any and every breach thereof, or for the review of a SCDHHS final agency decision with respect to this contract or audit disallowances, and any judicial review sought thereon and brought pursuant to the S.C.Code Ann. § 1-23-380 (1976, as amended) shall be instituted and maintained in any court of competent jurisdiction in the County of Richland, State of South Carolina.

S. Place of Suit

Any action at law, suit in equity, or judicial proceeding for the enforcement of this contract or any provision thereof shall be instituted only in the courts of the State of South Carolina.

J.A. 128.

Pee Dee, through three Medicaid-certified RHCs, provides healthcare services to low-income individuals in rural areas of South Carolina. Its services are subject to reimbursement from Medicaid funds. Pee Dee has entered into two consecutive three-year contracts with SCDHHS since the enactment of BIPA. Each contract contains a forum-selection clause — Sections (R) and (S) — requiring that any claims that arise under the terms of the contract be pursued first through an administrative appeals process and then in state court.⁷

B.

Pee Dee originally filed this action in South Carolina state court against South Carolina Governor Mark H. Sanford, Director of SCDHHS Robert Kerr, and SCDHHS itself (collectively "Appellees").⁸ Appellees answered and removed this case to federal district court. Pee Dee filed an amended complaint asserting a federal cause of action against Appellees under 42 U.S.C. § 1983, seeking to enforce the reimbursement provisions of BIPA, 42 U.S.C. § 1396a(bb). Specifically, the new claim alleges that the reimbursement formula used by SCDHHS violates Pee Dee's statutorily conferred right to proper reimbursement as provided under § 1396a(bb).⁹ Pee Dee claims that if SCDHHS had computed payments in accordance with federal requirements, Pee Dee would have been compensated at higher rates than those at which it was actually paid beginning in January 2001.¹⁰

Appellees moved to dismiss Pee Dee's new claim under BIPA alleging that Pee Dee agreed, as part of its contract for Medicaid reimbursement, to pursue all claims arising under the contract through state administrative and judicial avenues. Thus, Appellees asserted that the voluntary forum-selection clause rendered venue in federal district court improper.

Following arguments on the motion to dismiss, the district court dismissed the reimbursement claim based on the forum-selection clause. Pee Dee now appeals the dismissal of that claim arguing the district court erred in holding that: (1) the exclusive remedy available to Pee Dee is provided in the provider contract between Pee Dee and SCDHHS, and (2) the claim against Appellees can only be brought in a state tribunal due to the forum-selection clause.

We review de novo the district court's dismissal based on a forum-selection clause. Sucampo Pharm., Inc. v. Astellas Pharma, 471 F.3d 544, 550 (4th Cir. 2006) ("[A] motion to dismiss based on a forum-selection clause should be properly treated under Rule...