Arizona Association of Providers v. State

• Court: Arizona Court of Appeals
• Writing for the Court: Per Curiam
• Citation: Arizona Association of Providers v. State, 219 P.3d 216 (Ariz. App. 2009)
• Decision Date: 30 April 2009
• Docket Number: No. 1 CA-CV 09-0167.,1 CA-CV 09-0167.
• Parties: ARIZONA ASSOCIATION OF PROVIDERS FOR PERSONS WITH DISABILITIES, an Arizona nonprofit corporation; Beverly Hermon, individually and as legal guardian for Eric Hermon; Toni McCleod, as legal guardian for E.K. and R.K.; Reeves Foundation, LLC, an Arizona limited liability company; Dominic Barreras; Abrio Family Services and Support, Inc., an Arizona corporation; Family Partners, LLC, an Arizona limited liability company; Metro Care Services, Inc., an Arizona corporation, Plaintiffs/Appellees, v. STATE of Arizona; Linda Blessing, in her official capacity as Director of the Arizona Department of Economic Security, Defendants/Appellants.

219 P.3d 216

ARIZONA ASSOCIATION OF PROVIDERS FOR PERSONS WITH DISABILITIES, an Arizona nonprofit corporation; Beverly Hermon, individually and as legal guardian for Eric Hermon; Toni McCleod, as legal guardian for E.K. and R.K.; Reeves Foundation, LLC, an Arizona limited liability company; Dominic Barreras; Abrio Family Services and Support, Inc., an Arizona corporation; Family Partners, LLC, an Arizona limited liability company; Metro Care Services, Inc., an Arizona corporation, Plaintiffs/Appellees, v. STATE of Arizona; Linda Blessing, in her official capacity as Director of the Arizona Department of Economic Security, Defendants/Appellants.

No. 1 CA-CV 09-0167.

Court of Appeals of Arizona, Division 1, Department E.

April 30, 2009.

Review Denied June 1, 2009.

Terry Goddard, Attorney General By Juliet Peters, Assistant Attorney General, Stacy L. Shuman, Assistant Attorney General, Kathleen E. Skinner, Assistant Attorney General, Nicole Davis, Assistant Attorney General, Phoenix, Attorneys for Defendants/Appellants.

Gammage & Burnham, P.L.C. By John R. Dacey, Ryan J. Millecam, Carolyn V. Williams, Cameron C. Artigue, Phoenix, Attorneys for Plaintiffs/Appellees.

Arizona Center for Disability Law By Jennifer L. Nye, Tucson, and Law Office of Michelle S. Michelson By Michelle S. Michelson, Tucson, Attorneys for Amicus Curiae, Arizona Center for Disability Law.

OPINION

PER CURIAM.

¶ 1 In response to a severe budget crisis in early 2009, the State abruptly suspended certain services to developmentally disabled persons and cut by 10 percent the rates it pays for other services to the developmentally disabled. Days after the cuts were announced, plaintiffs filed a complaint and, after an accelerated two-day hearing, won an order enjoining the measures. Although plaintiffs contend the cuts threaten harm to a large number of vulnerable persons, we conclude plaintiffs failed to present substantial evidence to support the proposition that by imposing the service suspensions and the rate reductions, the State at this time has violated or is likely to violate state or federal law. Accordingly, for the reasons stated below, we vacate the injunction and remand for further proceedings.

FACTUAL AND PROCEDURAL HISTORY

¶ 2 The Division of Developmental Disabilities (the "Division"), a division of the Arizona Department of Economic Security ("DES"), provides a wide variety of services to developmentally disabled Arizonans, including infants, children and adults. The services at issue in this case are "home-and-community-based," meaning they generally are provided outside a facility or hospital. The record reveals such services to the developmentally disabled include, for example, night-time attendant care for an adult who is so disabled that he cannot live alone and physical and cognitive therapies for infants born with severe disabilities.¹

¶ 3 Some of the developmentally disabled services the Division provides are paid for out of the State's general fund. The Division commonly refers to these services, which are not required by federal law, as "state-only" services.

¶ 4 Some developmentally disabled persons in Arizona receive services required by Title XIX of the federal Social Security Act. See 42 U.S.C.A. §§ 1396 et seq. (West 2003 & Supp.2007). Commonly known as Medicaid, Title XIX is a cooperative federal-state health benefits assistance program. J.K. v. Dillenberg, 836 F.Supp. 694, 696 (D.Ariz. 1993). States need not participate in Medicaid, but if they do, they must comply with all provisions of the federal act and its implementing regulations. Id. In Arizona, Medicaid services are administered by the Arizona Health Care Cost Containment System known as AHCCCS. Services that Medicaid requires be provided to developmentally disabled Arizonans are funded jointly by state and federal monies, at a ratio of roughly 35 to 65 percent. AHCCCS contracts with the Division to provide Medicaid services to qualified developmentally disabled persons.

¶ 5 To recap, the Division provides "state-only" developmentally disabled services and also, in its role as an AHCCCS contractor, provides other services to the developmentally disabled as required by Title XIX. At least as is revealed by the record in this case, the Division does not provide home-and-community-based services directly to the developmentally disabled; instead, it contracts with other entities or persons, called "providers," that actually deliver these services to the developmentally disabled.

¶ 6 Faced in early 2009 with a $1.6 billion state budget deficit for the current fiscal year, the Arizona legislature enacted Senate Bill 1001 ("S.B. 1001"), which ordered various budget cuts. S.B. 1001 was signed into law on January 31, 2009. The prior legislation establishing the state appropriation to DES and other state agencies for the 2008-2009 fiscal year had been 76 pages long, and the section pertaining to DES consumed 13 pages specifying line-item amounts for many programs within the Division. By contrast, S.B. 1001 was only 13 pages long. In a single one-line reference, S.B. 1001 ordered the amount previously appropriated to DES for the fiscal year reduced by $83,301,400. Including other measures such as fund transfers and expenditure reductions, S.B. 1001 reduced DES's fiscal-year budget by well over $100 million. 2009 Ariz. Sess. Laws, ch. 1 (1st Spec. Sess.).

¶ 7 Although the Joint Legislative Budget Committee had published some suggested cuts shortly before S.B. 1001 was enacted, the legislature did not in S.B. 1001 provide any specific direction to DES administrators about what program cuts or other measures to take to achieve the required budget reduction. See id. Working under tight time constraints due to the financial pressures facing state government, DES management combined program cuts, suspensions and reductions to reduce expenditures by the required amount. DES cut 100 positions within the Division, a reduction that, by DES's own account, meant the Division would "not be able to comply with case management, timeliness, monitoring, medical, quality management, and business deliverable requirements." Two other measures taken by the Division are at issue in this case:

• The Division suspended all state-only home-and-community-based services to the developmentally disabled. According to the Division, this move meant that more than 4,000 developmentally disabled persons would lose "all of their services such as therapies, habilitation, employment supports, after school and summer programs, attendant care, respite and transportation."

• The Division unilaterally imposed a 10 percent reduction in the rates it pays providers for home-and-community-based services for the developmentally disabled. According to the Division, this measure affected "850 agency and 3,500 independent providers" of such services.

¶ 8 DES posted notice of the 10 percent rate reductions on its website on February 13; the record contains various forms of notices dated in February and as late as March 3 that were sent to affected providers. The record also contains a form letter dated March 3 to be sent to individuals whose state-only services were suspended.²

¶ 9 On February 27, a collection of individuals who receive services ("Plaintiff Beneficiaries") and service providers ("Plaintiff Providers") (collectively "Plaintiffs") filed a complaint against the State and Linda Blessing, interim director of DES (together, "the State"). Plaintiffs argued the service suspensions and rate reductions violated both state and federal law and sought declaratory and injunctive relief enjoining the measures. On the same day, Plaintiffs filed an application for a temporary restraining order and a preliminary injunction. The superior court declined to grant a temporary restraining order but set an expedited hearing on the request for a preliminary injunction. On March 2 and March 3, the court heard testimony from several witnesses, including beneficiaries, providers and state officials.

¶ 10 On March 11, finding that "[p]reventing immediate and irreparable harm is required," the court issued a preliminary injunction that enjoined the State from "enforcing the service suspensions and reductions, rate cuts and the like ... or from taking any similar actions, for so long as this Preliminary Injunction shall remain in force and effect." The court issued a 21-page minute entry containing its findings of fact and conclusions of law in support of the injunction.

¶ 11 The State filed a notice of appeal and on March 12 filed a motion in the superior court to stay the preliminary injunction. The superior court denied the stay request. This Court likewise declined to stay the injunction, but set an expedited briefing schedule that culminated in oral argument on April 23. We have jurisdiction over this appeal pursuant to Arizona Revised Statutes ("A.R.S.") section 12-2101(F)(2) (2003).³

DISCUSSION

A. Standard of Review.

¶ 12 A party seeking a preliminary injunction traditionally must establish four criteria: (1) a strong likelihood of success on the merits, (2) the possibility of irreparable injury if the requested relief is not granted, (3) a balance of hardships favoring that party, and (4) public policy favoring a grant of the injunction. Shoen v. Shoen, 167 Ariz. 58, 63, 804 P.2d 787, 792 (App.1990). A court applying this standard may apply a "sliding scale." Smith v. Ariz. Citizens Clean Elections Comm'n, 212 Ariz. 407, 410, ¶ 10, 132 P.3d 1187, 1190 (2006). In other words, "the moving party may establish either 1) probable success on the merits and the possibility of irreparable injury; or 2) the presence of serious questions and [that] `the balance of hardships tip[s] sharply' in favor of the moving party." Id. at 411, ¶ 10, 132 P.3d at 1191 (citing Shoen, 167 Ariz, at 63, 804 P.2d at 792).

¶ 13 On appeal, Plaintiffs argue that because the balance of hardships tips sharply in their favor, w...