Rehab. & Cmty. Providers Ass'n v. Dep't of Human Servs. Office of Developmental Programs

Decision Date29 September 2022
Docket Number13 MAP 2021
Citation283 A.3d 260
Parties REHABILITATION AND COMMUNITY PROVIDERS ASSOCIATION, and Westmoreland County Blind Association, and Associated Production Services, Inc., and United Cerebral Palsy of Central Pennsylvania, Inc. and Scott Howard Schwartz by and Through Karen Newman and Linda S. Schwartz, Co Guardians, and Ryan Brett by and Through His Guardian Francis Brett, Appellants v. DEPARTMENT OF HUMAN SERVICES OFFICE OF DEVELOPMENTAL PROGRAMS, Appellee
CourtPennsylvania Supreme Court

Catherine Mary Chan, Esq., Law Offices of Christopher S. Lucas LLC, Philadelphia, Christopher Steven Lucas, Esq., for Appellants.

Camille Alyssa Howlett, Esq., Joshua Grant Light, Esq., Helene Eichenwald Loux, Esq., Pennsylvania Department of Human Services, Bureau of Hearings and Appeals, Doris M. Leisch, Esq., Pennsylvania Department of Human Services, Bureau of Hearings and Appeals, Philadelphia, for Appellee.

BAER, C.J., TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, BROBSON, JJ.

OPINION

JUSTICE MUNDY

This is a direct appeal from a Commonwealth Court order dismissing a petition for review for failure to exhaust administrative remedies. The underlying dispute involves the adequacy of state funding for community participation support services, which are designed to help individuals with autism or intellectual disabilities live independently. The primary issue on appeal relates to the exhaustion requirement.

Medicaid is the nation's primary health insurance program for low-income and high-need Americans. Enacted in 1965 and set forth at Title XIX of the Social Security Act, see 42 U.S.C. §§ 1396 – 1396w-6, Medicaid is jointly funded by the federal and state governments. Although a state's participation in Medicaid is optional, once a state elects to participate it must comply with Title XIX and applicable regulations. See Alexander v. Choate , 469 U.S. 287, 289 n.1, 105 S.Ct. 712, 83 L.Ed.2d 661 (1985) (citing Harris v. McRae , 448 U.S. 297, 301, 100 S.Ct. 2671, 65 L.Ed.2d 784 (1980) ). Medicaid is administered at the federal level by the Centers for Medicare & Medicaid Services ("CMS"), an agency of the United States Department of Health and Human Services. In Pennsylvania, it is administered by the state Department of Human Services ("DHS") and is known as Medical Assistance.

For states that participate in Medicaid, the federal government requires coverage for certain mandatory populations and services, but it also authorizes waiver programs, or simply "waivers" for short, which give states flexibility to operate outside federal rules. See Medicaid: An Overview at 1 (Congressional Research Service, updated Feb. 22, 2021), available at https://sgp.fas.org/crs/misc/R43357.pdf (last viewed June 21, 2022). Waivers must be approved by the CMS. See generally Casey Ball Supports Coordination, LLC v. DHS , 160 A.3d 278, 280 n.1 (Pa. Cmwlth. 2017).

One category of waivers, authorized by Section 1915(c) of the Social Security Act, 42 U.S.C. § 1396n, falls under the umbrella term Home and Community Based Services ("HCBS"). These waivers allow states to meet the needs of eligible individuals receiving long-term care supports and services in their home or community rather than in an institutional setting such as an intermediate care facility.1

Within DHS, the Office of Developmental Programs ("DHS/ODP"), the appellee herein, is responsible to fund and supervise the provision of services associated with HCBS waivers, most notably for present purposes, community participation support ("CPS") services. CPS services are "intended to ... support community life secondary to employment as a primary goal." Individual Support Plan Manual for Individuals Receiving Targeted Support Services, Consolidated or P/FDS Waiver Services or Who Reside in an ICF/ID , at 59 (DHS/ODP Feb. 23, 2018).

In Pennsylvania, CPS services are provided pursuant to three HCBS waivers: the Consolidated Waiver, the Person/Family Directed Support Waiver, and the Community Living Waiver. See DHS Long-Term Care Handbook § 489.4 (Nov. 1, 2018).2 The CPS services themselves are supplied by vendors, or providers, who in turn are reimbursed by DHS/ODP pursuant to rates developed and published by DHS.

In March 2019, DHS issued ODP Announcement 19-024, indicating it intended to change the rate structure for CPS services provided under the HCBS waivers. Whereas CPS services had previously been divided into 54 distinct types, the new payment scheme instead listed 15 types,3 and for each type it included a reimbursement rate based on a 15-minute unit of service, a method known as a "fee schedule." Announcement 19-024 invited interested parties to submit comments on the proposed fee schedule.

After the comment period, DHS issued ODP Announcement 19-061 on May 24, 2019, explaining it received comments from more than 3,000 interested persons and organizations. As a result, it adjusted its prior assumptions concerning full-time versus part-time staff use, staff wages, and training costs, and it increased the fee-schedule rates for three of the 15 types of CPS services. The following day, DHS published its Final Notice of Fee Schedule Rates for CPS Services (the "Final Notice") in the Pennsylvania Bulletin, incorporating the changes reflected in Announcement 19-061. See 49 Pa. Bull. 2685 (May 25, 2019). The Final Notice explained that the fee schedule was developed in accordance with 55 Pa. Code Chapter 51 (relating to the "Office of Developmental Programs Home and Community-Based Services") using a market-based approach,4 and it expressed DHS's expectation that CPS services would be funded "at a level sufficient to ensure access and encourage provider participation, while at the same time ensuring cost effectiveness and fiscal accountability." Id .

That view of the matter apparently did not garner universal public agreement because on November 13, 2019, Rehabilitation and Community Providers Association (the "Association"), Westmoreland County Blind Association, United Cerebral Palsy of Central Pennsylvania, Associated Production Services ("APS"), Scott Howard Schwartz, and Ryan Brett filed a first amended petition for review in the nature of a complaint/equity action for declaratory and injunctive relief (the "Petition"), challenging the legality of the new fee schedule and alleging the new reimbursement rates were too low to sustain the provision of CPS services to eligible recipients. The Petition, which was directed to the Commonwealth Court's original jurisdiction, named DHS/ODP as the sole respondent. In terms of parties, the Petition explained that the Association is an advocacy organization representing over 350 members who provide services relating to mental health, drug and alcohol dependency, developmental disabilities, physical disabilities, child brain injuries, and the like; Westmoreland County Blind Association and United Cerebral Palsy of Central Pennsylvania are service providers and members of the Association; APS is a high-tech contract packager staffed by 500 developmentally disabled adults and is a member of the Association; and Schwartz and Brett are developmentally-disabled adults who receive CPS services through APS.

In the Petition, the current appellants (hereinafter, "Petitioners") averred the Final Notice amounted to an unpromulgated regulation as it created a binding norm and failed to comply with the Commonwealth Documents Law,5 the Regulatory Review Act,6 and the Commonwealth Attorneys Act.7 They also alleged it was not submitted to CMS for approval and incorporation into the HCBS waivers prior to the July 1, 2019, effective date. Additionally, they stated the Final Notice's fee schedule did not reflect reasonable costs relating to CPS service delivery sufficient to ensure access, encourage provider participation, and promote provider choice as required by federal law and the federally-approved HCBS waivers. Thus, Petitioners sought a declaration, per the Declaratory Judgments Act,8 that the Final Notice was an unpromulgated regulation inconsistent with the federally approved payment methodologies, as well as an injunction prohibiting DHS/ODP from implementing the new rates and directing the agency to establish rates sufficient to meet reasonable provider costs. The following day, Petitioners moved for partial summary judgment in the form of an order declaring the Final Notice to be an unpromulgated regulation.

DHS/ODP filed an answer asking the court to deny Petitionersrequest for partial summary judgment. It also filed preliminary objections asserting: (a) Westmoreland County Blind Association, United Cerebral Palsy of Central Pennsylvania, and APS (the "Provider Petitioners") failed to exhaust their administrative remedies; (b) similar claims were then pending in an administrative appeal initiated by APS before DHS's Bureau of Hearings Appeals (the "BHA");9 (c) Schwartz and Brett (the "Individual Petitioners") and the Association lacked standing; (d) Petitioners generally lacked standing to seek relief on behalf of other providers delivering services under the HCBS waivers; and (e) Petitioners failed to state a claim on which relief could be granted because (i) the Final Notice did not violate the Commonwealth Documents Law, the Regulatory Review Act, the Commonwealth Attorneys Act, or any federal statute or regulation, (ii) Petitioners lacked a privately-enforceable right to challenge DHS's administration of a program operating under a waiver granted by the federal government, and (iii) Petitioners did not allege the elements necessary for injunctive relief.

Petitioners responded with their own set of preliminary objections in the form of a motion to strike DHS/ODP's preliminary objections on the grounds that they failed to conform to the pleading requirements set forth in the rules of civil procedure, and they lacked adequate specificity. See Pa.R.C.P. Nos. 1019(a), 1028(a)(2), (3).10

A three-judge panel of the Commonwealth...

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