Ariz. Alliance for Cmty. Health Ctrs. v. Ariz. Health Care Cost Containment Sys.

• Decision Date: 02 September 2022
• Docket Number: 21-16262
• Parties: ARIZONA ALLIANCE FOR COMMUNITY HEALTH CENTERS; Canyonlands Healthcare; Chiricahua Community Health Centers; Desert Senita Community Health Center; Mariposa Community Health Center; Marana Health Center ; Mountain Park Health Center; Native Health; North Country Healthcare ; Sun Life Family Health Center; Sunset Community Health Center ; United Community Health Center-Maria Auxiliadora, Plaintiffs-Appellants, v. ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM; Jami Snyder, Director, Arizona Health Care Cost Containment System, in her official capacity, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

47 F.4th 992

ARIZONA ALLIANCE FOR COMMUNITY HEALTH CENTERS; Canyonlands Healthcare; Chiricahua Community Health Centers; Desert Senita Community Health Center; Mariposa Community Health Center; Marana Health Center ; Mountain Park Health Center; Native Health; North Country Healthcare ; Sun Life Family Health Center; Sunset Community Health Center ; United Community Health Center-Maria Auxiliadora, Plaintiffs-Appellants,
v.
ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM; Jami Snyder, Director, Arizona Health Care Cost Containment System, in her official capacity, Defendants-Appellees.

No. 21-16262

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 10, 2022 Phoenix, Arizona
Filed September 2, 2022

Matthew Sidney Freedus (argued) and Rosie Dawn Griffin, Feldesman Tucker Leifer Fidell LLP, Washington, D.C., for Plaintiffs-Appellants.

Logan T. Johnston (argued), Johnston Law Offices PLC, Phoenix, Arizona, for Defendants-Appellees.

Before: Richard A. Paez, Richard R. Clifton, and Paul J. Watford, Circuit Judges.

CLIFTON, Circuit Judge:

This appeal arises from the District Court's dismissal of a complaint brought by federally-qualified health centers ("FQHCs") operating in Arizona and the Arizona Alliance for Community Health Centers, the "nonprofit membership organization representing Arizona FQHCs" ("Plaintiffs"). They filed suit against the Arizona Health Care Cost Containment System ("AHCCCS"), which administers Arizona's Medicaid program, and Jami Snyder, AHCCCS's Director ("Defendants"). Plaintiffs' complaint alleged that Defendants violated 42 U.S.C. "§ 1396a(bb) and binding Ninth Circuit precedent by

47 F.4th 995

failing or refusing to reimburse FQHCs for the services of dentists, podiatrists, optometrists, and chiropractors." It cited California Ass'n of Rural Health Clinics v. Douglas ("Douglas "), 738 F.3d 1007 (9th Cir. 2013), for its "holding that § 1396a(bb) affords each FQHC an enforceable federal right to reimbursement for FQHC services, which include the services of its dentists, podiatrists, optometrists, and chiropractors (among others)."

Defendants brought a Rule 12(b)(6) motion to dismiss. The District Court granted the motion. It concluded that "Defendants cannot rely on [ 42 U.S.C. §] 1396d(a)(2)(C) as a basis for excluding mandatory coverage of FQHC Services," which is a separate mandatory benefit for which Defendants must reimburse Plaintiffs serving Medicaid recipients under § 1396a(bb). However, the court ruled that "Plaintiffs fail to state a claim for relief" because "Arizona may cover [FQHC] Services with limits" and rejected Plaintiffs' contention that "Arizona impermissibly categorically excludes FQHC Services in violation of the Medicaid Act and Douglas [.]" Plaintiffs timely filed a notice of appeal challenging the court's grant of Defendants' motion to dismiss.

We commend the District Court and counsel for both sides for their skillful handling of the uncommonly complex issues presented by this case. We summarize our resolution of those issues as follows.

First, we consider the District Court's ruling that "Defendants cannot rely on § 1396d(a)(2)(C) as a basis for excluding mandatory coverage of FQHC services" because "the phrase ‘which are otherwise included in the plan,’ modifies only the immediately preceding phrase, ‘and any other ambulatory services offered by a [FQHC.]’ " We agree. Our precedent in Douglas established that "FQHC services" are a mandatory benefit under § 1396d(a)(2)(C). Douglas , 738 F.3d at 1014–15.

Second, we recognize that Douglas held that the mandatory benefit of "FQHC services" under § 1396d(a)(2)(C) includes "services furnished by ... dentists, podiatrists, optometrists, and chiropractors" as well as doctors of medicine and osteopathy. Id. at 1016.

Third, we hold that Arizona's categorical exclusion of adult chiropractic services violates the unambiguous text of the Medicaid Act as interpreted in Douglas. Therefore, we reverse the District Court's grant of Defendants' Rule 12(b)(6) motion to dismiss in that regard.

Fourth, we conclude that the record before us does not establish that Chevron deference applies to Arizona's limitations on adult dental, optometry, and podiatry services, which are components of the mandatory benefit of "FQHC services." Thus, we vacate the District Court's grant of Defendants' motion to dismiss in that regard and remand for the parties to further develop the record and for the District Court to rule in the first instance on whether Arizona's limitations on adult dental, optometry, and podiatry services are entitled to Chevron deference.

I. Background

The Medicaid program was established in 1965 via Title XIX of the Social Security Act, now codified at 42 U.S.C. § 1396 et seq. , and is "a cooperative federal-state program through which the federal government provides financial assistance to states so that they can furnish medical care to low-income individuals." Douglas , 738 F.3d at 1010. A state receiving Medicaid funds has discretion to develop its Medicaid program in a manner that is responsive to the needs of its citizens, as long as these programs are consistent with federal requirements, in a system that the

47 F.4th 996

Supreme Court has described as "designed to advance cooperative federalism." Wis. Dep't of Health and Family Svcs. v. Blumer , 534 U.S. 473, 497, 122 S.Ct. 962, 151 L.Ed.2d 935 (2002). "Medicaid is jointly financed by the federal and state governments and is administered by state governments through state ‘plans,’ which are approved by the federal Secretary of Health and Human Services" ("HHS"). B.K. ex rel. Tinsley v. Snyder , 922 F.3d 957, 963 (9th Cir. 2019) (citing Douglas , 738 F.3d at 1010 ); see also 42 U.S.C. § 1396a(b).

The HHS Secretary delegated "the responsibility and the authority to administer the Medicaid program and to review state Medicaid plans and plan amendments for compliance with federal law" to the regional administrator for Centers for Medicaid and Medicare Services ("CMS"), who "must review and approve or reject" any proposed state plan amendments ("SPAs"). Managed Pharmacy Care v. Sebelius , 716 F.3d 1235, 1241–42 (9th Cir. 2013) (citing 42 U.S.C. § 1396a(b) and 42 C.F.R. § 430.15(b) ). CMS has long approved Arizona's plan and SPAs, including a 2017 SPA establishing a $1,000 cap on adult emergency dental benefits. See Ariz. Rev. Stat. § 36-2907(A)(11) (2017).

FQHCs treat medically underserved areas or populations and are required to meet various eligibility criteria under the Medicaid Act. One criterion is that they must be "receiving a [federal] grant under [the Public Health Service Act, 42 U.S.C.] section 254b [.]" 42 U.S.C. § 1396d(l)(2)(B) (defining the term "Federally-qualified health center"). FQHCs may also seek mandatory reimbursement from state Medicaid plans under § 1396a(bb) for providing Medicaid recipients with services under the Medicaid Act. Section 1396a(bb) provides that "the State plan shall provide for payment for services described in section 1396d(a)(2)(C) of this title furnished by a Federally-qualified health center[.]"

Section 1396d(a)(2)(C) requires state Medicaid plans to cover "[FQHC] services (as defined in subsection (l)(2)) and any other ambulatory services offered by a [FQHC] and which are otherwise included in the plan." The cross-referenced subsection—§ 1396d(l)(2) of the Medicaid Act—defines the term "[FQHC] services" by reference to [ 42 U.S.C.] § 1395x(aa)(1) of the Medicare Act, which refers to, inter alia, "physicians' services[.]"

When CMS approves an SPA, we have held that CMS "implicitly approve[s the state's] interpretation of the Medicaid Act." Douglas , 738 F.3d at 1014. Under most circumstances, the HHS "Secretary's exercise of discretion in the ‘form and context’ of a SPA approval deserves Chevron deference." Managed Pharmacy Care , 716 F.3d at 1248 (quoting Price v. Stevedoring Servs. of Am., Inc. , 697 F.3d 820, 826 (9th Cir. 2012) (en banc)).

In this case, as the District Court noted, "[t]he parties agree that this action presents legal issues with no material dispute of fact." As outlined by the District Court, it is undisputed that:

Arizona's Medicaid plan covers the following dental, podiatry, optometry, and chiropractic services:

• Dental services for children under 21 and limited emergency and non-emergency dental services for elderly and developmentally disabled beneficiaries in long-term care facilities. Emergency dental services for adults (such as medically necessary extraction or treatment for an acute infection) up to $1,000 per year.

• Adult podiatry services if those services are ordered by a primary care provider and the authorization is documented in the medical record.

47 F.4th 997

• Optometry services for "[r]outine and medically necessary vision services, including examinations and the provision of prescriptive lenses" for beneficiaries under the age of 21. For adults, examination and treatment of medical conditions of the eye, and prescriptive lenses only when used as the sole prosthetic device following cataract surgery.

• Chiropractic services for children under 21 years of age.

II. Procedural History

Plaintiffs are a group of FQHCs operating in Arizona and the nonprofit membership organization representing Arizona FQHCs. Defendant Jami Snyder is the Director of Defendant Arizona Health Care Cost Containment System (AHCCCS), which administers Arizona's Medicaid program.

Plaintiffs initially filed this action in the District Court in 2019...