Asante v. Azar II
| Decision Date | 14 February 2023 |
| Docket Number | 20-cv-601 (TSC) |
| Parties | ASANTE, et al., Plaintiffs, v. ALEX M. AZAR II, Secretary, U.S. Department of Health and Human Services, et al., Defendants. |
| Court | U.S. District Court — District of Columbia |
Plaintiffs are eight hospitals located in Arizona, Nevada, and Oregon. Compl. ¶ 10, ECF No. 1. Defendants are the federal agencies and officials responsible for administering Medicaid: the Department of Health and Human Services (“HHS”); former Secretary of HHS, Alex Azar; the Centers for Medicare and Medicaid Services (“CMS”); and former CMS Administrator, Seema Verma. Id. ¶¶ 11-14. Plaintiffs contend that California's subsidy distribution scheme discriminates against them in violation of the Commerce Clause and the Equal Protection Clause, and that it violates the Administrative Procedure Act (“APA”) and the Medicaid Act, specifically 42 U.S.C. § 1396a(a)(16) and its implementing regulation, 42 C.F.R. § 431.52 Id. ¶ 7.
Plaintiffs and Defendants have both moved for summary judgment. Pls.' Mot. for Summ. J., ECF No. 37; Defs.' Cross Mot. for Summ. J., ECF No. 42. For the reasons set forth below, the court will DENY Plaintiffs' motion and GRANT Defendants' motion.
In 2010, California created the Quality Assurance Fee (“QAF”) program, which requires certain California hospitals to pay a QAF, but exempts state public hospitals, small and rural hospitals, long-term care hospitals, and specialty hospitals (except for charitable research hospitals). ECF No. 37-1 at 14. The collected fees are matched with federal Medicaid funds and then distributed to California hospitals, including hospitals that are exempt from the QAF. Id. Each year the California Department of Health Care Services (“Department”), pursuant to a state plan amendment (“SPA”) approved by CMS, pays California hospitals over $4 billion in federal Medicaid QAF subsidies. Compl. ¶ 1. The Department does not, however, pay those subsidies to out-of-state “border hospitals,” which are located 55 miles or less from the California border. Id. Border hospitals are critical for enrollees in California's Medicaid program (“Medi-Cal”) who live in certain rural areas of California because the border hospitals are sometimes the closest major medical center available to them. Id. ¶ 4. The border hospitals provide over seventy percent of the inpatient care that California Medi-Cal beneficiaries receive from out-of-state hospitals. Id.
Plaintiffs are border hospitals that provide services to Medi-Cal patients while they are in Arizona, Oregon, or Nevada. Id. ¶ 2. Plaintiffs are part of a larger group of thirty-seven border hospitals that provide services to Medi-Cal enrollees but that do not receive a portion of the QAF subsidy.
All states participating in the Medicaid program must adopt a state plan and obtain approval of amendments from CMS. 42 U.S.C. §§ 1396a(a), 1396b; ECF No. 37-1 at 10. The QAF program at issue here covers the period from July 1, 2019, through December 31, 2021.
ECF No. 37-1 at 17. During that time, Congress expressly delegated to former Secretary Azar the responsibility and authority to administer the Medicaid program and to review state Medicaid plans and plan amendments for compliance with federal law. Compl. ¶ 14; 42 U.S.C. § 1396a(b) (“The Secretary shall approve any plan which fulfills” the statutory requirements). Former Secretary Azar delegated to former Administrator Verma and CMS the authority to administer the Medicaid program pursuant to the Social Security Act, 42 U.S.C. §§1396a(13)(A)(iv), 1396r-4(a)(1)(B). Compl. ¶ 14.
Since 2010, out-of-state hospitals have filed several lawsuits attempting to enjoin the QAF program and receive a portion of the subsidy distribution. Id. ¶ 16-17. Plaintiffs previously settled claims with California regarding the QAF program period from 2009 to June 30, 2019. Id. ¶ 19-29.
Plaintiffs first brought these claims against these Defendants on August 20, 2019, when CMS had not yet approved the 2019 QAF Program. See Asante v. Azar, No. 19-cv-02512-TSC (D.D.C. 2019), ECF No. 1. Consequently, the court dismissed the action without prejudice because there had been no final agency action. See Asante v. Azar, No. 19-cv-02512 (D.D.C. February 14, 2020), ECF No. 33. On February 14, 2020, CMS approved the Department's QAF waiver requests for July 1, 2019, to December 31, 2021. SPA 19-0018 Tax Waiver Approval, 00769, Administrative Record Joint Appendix (A.R.J.A.); SPA 19-0019 Tax Waiver Approval, 00305, A.R.J.A. On February 25, 2020, Defendants approved California's QAF program for that same program period. SPA 19-0018 CMS Approval Letter, 00002, A.R.J.A.; SPA 19-0019 CMS Approval Letter, 00002, A.R.J.A. This approval was a final agency action.
On February 28, 2020, Plaintiffs filed the complaint in this case and moved for a preliminary injunction preventing the federal government from paying approximately $4 billion in supplemental Medicaid funds to California for disbursement to in-state hospitals. ECF No. 2, Pls.' Mot. for Prelim. Inj. This court denied Plaintiffs' Motion for Preliminary Injunction because they had not shown that their alleged $15 million loss from California's distribution of all QAF funds constituted irreparable harm. Mem. Op. Re Pls.' Mot. for Prelim. Inj., ECF No. 32; Order Den. Pls.' Mot. for Prelim. Inj., ECF No. 33.
Plaintiffs-who have not named California as a defendant in this matter-claim California's QAF program is discriminatory because it limits the distribution of federal QAF funds to in-state hospitals, even though both in-state and out-of-state hospitals treat Medi-Cal patients. ECF No. 37-1 at 17. They argue that “for the effect of the QAF program to be non-discriminatory, the plaintiff ‘border hospitals' should receive the same net QAF benefit as these in-state hospitals.” Id. at 16. Plaintiffs contend this discriminatory scheme violates the Commerce Clause, Equal Protection Clause, and the Medicaid Act, and that Defendants' approval and funding of the scheme violate the APA.
Ordinarily, summary judgment is appropriate when the pleadings and the evidence demonstrate that “there is no genuine dispute as to any material fact.” Fed.R.Civ.P. 56(a). However, when, as here, the court is reviewing a final agency action under the APA, Rule 56(a)'s standard does not apply. See Roberts v. United States, 883 F.Supp.2d 56, 62 (D.D.C. 2012). Instead of reviewing the record for disputed facts that would preclude summary judgment, the court's role is more limited: “[T]he function of the district court is to determine whether or not as a matter of law the evidence in the administrative record permitted the agency to make the decision it did.” Sierra Club v. Mainella, 459 F.Supp.2d 76, 90 (D.D.C. 2006) (quotation marks and citation omitted). This standard of review is “narrow,” and a court applying it “is not to substitute its judgment for that of the agency.” Motor Vehicle Mfrs. Ass n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).
The APA “sets forth the full extent of judicial authority to review executive agency action for procedural correctness.” FCC v. Fox Television Stations, Inc., 556 U.S. 502, 513 (2009). A court must “hold unlawful and set aside agency action, findings, and conclusions” that are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). An agency action is arbitrary and capricious if the agency “entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.” Motor Vehicle Mfrs., 463 U.S. at 43. The APA also requires courts to “hold unlawful and set aside agency action, findings, and conclusions” that are “contrary to constitutional right, power, privilege, or immunity.” 5 U.S.C. § 706(2)(B).
Plaintiffs claim that HHS, through CMS, approved an SPA allowing California to exclude out-of-state hospitals from its QAF subsidy distribution in violation of a federal statute, 42 U.S.C. § 1396a(a)(16), and its implementing regulation, 42 C.F.R. § 431.52. ECF No. 37-1 at 39-41. i. Chevron and Auer/Kisor Analysis
In assessing a challenge to an agency action based on a statute, a court must apply the test set forth in Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-43 (1984): “If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.” Chevron, 467 U.S. at 842-43. But “if the statute is silent or ambiguous with respect to the specific issue,” then the reviewing court must defer to the agency's interpretation so long as “the agency's answer is based on a permissible construction of the statute.” Id. at 843. “If Congress has explicitly left a gap for the agency to fill . . . [s]uch legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute.” Id. at 843-44.
In assessing a challenge to an agency's interpretation of its own regulation, a court must apply the test set forth in Auer v. Robbins, 519 U.S. 452, 461 (1997), and clarified in Kisor v. Wilkie, 139 S.Ct. 2400 2414-18 (2019): A court defers to an agency's interpretation of its rules only if a regulation is “genuinely ambiguous. . . And before concluding that a rule is genuinely ambiguous, a court must exhaust all the ‘traditional tools'...
To continue reading
Request your trial