AIDS Healthcare Found. v. Cal. Dep't of Health Care Servs.

Decision Date30 March 2023
Docket Number2:22-cv-06636 MEMF-Ex
CourtUnited States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California



Before the Court are the Motion to Dismiss and Request for Judicial Notice filed by Defendants California Department of Health Care Services and Michelle Baass, Director of the California Department of Health Care Services. ECF Nos. 24, 24-2. For the reasons stated herein, the Court hereby GRANTS IN PART the Motion to Dismiss and GRANTS the Request for Judicial Notice.


Plaintiff AIDS Healthcare Foundation (AHF) is a California non-profit organization headquartered in Los Angeles County which serves as the world's largest provider of health care services to people living with HIV and/or AIDS.[1] Compl. ¶ 8. Defendant Department of Health Care Services (DHCS) is the state governmental agency that oversees California's federal Medicaid program (“Medi-Cal”). Id. ¶ 11. Defendant Michelle Baass is the Department's Director. Id.[2]

This case concerns whether DHCS and Baass violated the constitutional rights of the AIDS Healthcare Foundation by declining to extend AHF's contract with DHCS on the basis of a letter that AHF sent to enrollees in its healthcare plan. The issue before the Court is whether AHF has adequately alleged its constitutional claims. The Court assumes for purposes of this motion that everything AHF has alleged in its Complaint is true. As a result of this Court's Order, the question of whether everything AHF has alleged is actually true will be answered at a later stage of the litigation.

In short, AHF's claims that Director Baass violated AHF's federal constitutional rights survive for now. First, AHF properly alleged in its Complaint that Director Baass was acting in her official capacity when she declined to extend AHF's contract; therefore, the Eleventh Amendment does not bar the claims. Second, AHF has properly alleged that it was speaking on a matter of public concern when it sent its letter, that it was acting in its private capacity when it sent its letter, and that the Department's declining to extend the contract because AHF failed to seek preapproval of the letter was not constitutionally permissible.

I. Factual Background[3]
A. Overview of Medi-Cal and the Department's Administration of Medi-Cal Benefits

In 1965, Congress created the Medicaid program [which] authorizes federal financial assistance to States that choose to reimburse certain costs of medical treatment for needy persons.” Pharm. Research and Mfrs. of Am v. Wash, 538 U.S. 644, 650-51 (2003); see also 42 U.S.C. §1369a. “The federal Medicaid program is administered in California by DHCS as the California Medical Assistance Program, also known as ‘Medi-Cal' in accordance with [the California] Welfare and Institutions Code section 14000 et seq. Declaration of Rafael Davtian ¶ 2. Approximately thirteen million Medi-Cal beneficiaries are enrolled in a Medi-Cal managed care plan (“MCP”). Id. ¶ 3. “MCPs provide services to Medi-Cal beneficiaries through at-risk contracts entered into with the State.” Id.

As part of its administration, the Department contracts with MCPs to provide covered MediCal services to enrolled members within a county or region, “in exchange for an actuarially certified, per-member monthly capitation payment.” Declaration of Michelle Retke 2. The Department oversees MCPs in accordance with federal and state Medicaid law. Id. “Each MCP contracts with its own provider networks and organized systems of care to provide services to its enrolled members.” Id. Coverage provides “payment of health care services covered under the federal Medicaid program, the state Medi-Cal program, and additional services covered pursuant to the MCP contract.” Id.

B. AHF's Positive Healthcare Special Needs Plan

AHF is a non-profit organization that originally started with “the mission to provide Los Angeles residents afflicted with AIDS a place and means to die with dignity.” Declaration of Michael Weinstein ¶ 3. AHF's mission progressed over time, and now it seeks to “provide cutting edge medical care to people living with HIV/AIDS regardless of their ability to pay with the goals of saving the lives of as many people living with HIV/AIDS as possible and ending the HIV/AIDS epidemic.” Id. ¶ 4. In “furtherance of this mission, AHF provides medical care” and services to “more than 1.6 million patients in 45 countries” across the world. Id.

AHF is under a managed care contract, through which the Department contracts with AHF to provide health care benefits and services to Medi-Cal beneficiaries with AIDS under AHF's Positive Healthcare (“PHC”) Special Needs Plan.[4] Id. ¶ 5; Declaration of Michael Weinstein ¶ 6. Through the PHC Special Needs Plan, AHF furnishes healthcare benefits and services to those enrolled in the plan (“enrollees”), all who have been diagnosed with AIDS, in exchange for “an actuarially certified, per-member monthly capitation payment” from the Department. Declaration of Michael Weinstein ¶ 6; Declaration of Michelle Retke ¶ 5. Around September and October of 2022, AHF had approximately 800-811 PHC enrollees in its PHC Special Needs Plan. Declaration of Michael Weinstein ¶ 9; Declaration of Donna Stidham ¶ 9; Declaration of Michelle Retke ¶ 5.

AHF's PHC Special Needs Plan's specialized services and benefits include access “to a team of healthcare professionals-specialized Registered Nurse care managers, expert HIV primary care physicians, Registered Nurses, licenses practical nurses, mental health professionals, social workers, and others[.] Declaration of Michael Weinstein ¶ 15; Declaration of Donna Stidham ¶ 15; Declaration of Michael B. Wohlfeiler ¶ 8. The PHC Special Needs Plan also focuses on strictly scheduled drug regimens, including anti-retroviral drugs, and the interactions between enrollees and “PHC expert service providers” to ensure each enrollee receives the information and care necessary. Declaration of Michael Weinstein ¶ 15; Declaration of Donna Stidham ¶ 15; Declaration of Michael B. Wohlfeiler ¶ 6. Most importantly to AHF, the PHC Special Needs care model assigns a professional Registered Nurse care manager to every enrollee. Declaration of Michael Weinstein ¶¶ 12, 19. Each assigned Nurse care manager “carefully monitors the care plan established by each [enrollee's] primary care physician, answers healthcare questions” and “develops an integrated care plan,” among other things, for enrollees. Declaration of Michael Weinstein ¶ 19; Declaration of Donna Stidham ¶ 20. No other Medi-Cal based program in Los Angeles County provides a similar Registered Nurse care manager for all its enrollees living with AIDS. Declaration of Michael Weinstein ¶ 19.

II. Factual Allegations[5]

Over the decades, the PHC contract between AHF and DHCS has been changed and amended a number of times, primarily expanding the scope and range of medical care AHF provides. Compl. ¶ 32. Originally, the PHC contract did not cover al care. Id. This changed over time until, on January 1, 2019, PHC became a “fully capitated” program, meaning it was responsible for the entirety of patient care benefits and services. Id.

Several contracts between AHF and DHCS have governed the Positive Healthcare special needs plan. Id. ¶ 33. At all relevant times, there have been two primary contracts - Contract Number 11-88286, which is referred to as the “Primary Contract,” and Contract Number 20-10355, which is referred to as the “Hyde Contract.” Id. There are amendments to the Primary Contract, as relevant to this matter, referred to as the “Bridge Contract,” which bears Contract Number 1188286 A10. Id.[6]These Contracts, which run concurrently and for a term of years, have been extended repeatedly over the years, and the PHC special needs plan has operated without significant interruption for over 27 years. Id. ¶ 34.

On November 12, 2021, AHF sent out a letter to PHC enrollees, stating the following:

Dear Member:

AIDS Healthcare Foundation (AHF) is always here to serve your healthcare needs under all circumstances. We are writing to tell you that PHC California, the Medi-Cal health plan which is operated by AHF, may sunset on December 31, 2021. If this letter causes you any confusion, please call us right away at 1-800-263-0067 (TTY users call 711).
We want to assure you that AHF will continue trying to work with the California Department of Health Care Services (DHCS) towards a solution for PHC California members so you can continue to see your doctor and enjoy the benefits that the health plan offers you now. But if PHC California does end, you may receive a letter from DHCS telling you that PHC California will no longer be available to Medi-Cal beneficiaries and current PHC California members after December 31, 2021. The letter will also explain that you will have to choose how you will receive your healthcare after December 31. In the letter, DHCS may limit your choices to other Medi-Cal managed care plans.
We suggest that you remain in PHC California until December 31, 2021. If PHC California ends, you can choose LA Care or HealthNet for your healthcare starting January 1, 2022. With those plans, you can continue to see your AHF Healthcare Center doctor. However, you will lose your Registered Nurse Care Team Manager and the Health and Wellness benefit, because these benefits are available only through PHC

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