COM. OF VA. EX REL. DMAS v. Bowen, Civ. A. No. 85-0933-R and 84-1171-R.

CourtUnited States District Courts. 4th Circuit. United States District Court (Western District of Virginia)
Citation680 F. Supp. 228
Docket NumberCiv. A. No. 85-0933-R and 84-1171-R.
PartiesCOMMONWEALTH OF VIRGINIA, ex rel. The VIRGINIA DEPARTMENT OF MEDICAL ASSISTANCE SERVICES, Plaintiff, v. Otis R. BOWEN, M.D., Secretary of Health and Human Services, et al., Defendants. Horace G. FRALIN, et al., Plaintiffs, v. Joseph L. FISHER, et al. and Otis R. Bowen, Secretary of Health and Human Services, et al., Defendants.
Decision Date03 February 1988

680 F. Supp. 228

Otis R. BOWEN, M.D., Secretary of Health and Human Services, et al., Defendants.

Horace G. FRALIN, et al., Plaintiffs,
Joseph L. FISHER, et al. and Otis R. Bowen, Secretary of Health and Human Services, et al., Defendants.

Civ. A. Nos. 85-0933-R and 84-1171-R.

United States District Court, W.D. Virginia, Roanoke Division.

February 3, 1988.

William G. Broaddus, Roger L. Chaffe, Richmond, Va., for Virginia Dept. of Medical Assistance Services.

E. Montgomery Tucker, Jennie Montgomery, Asst. U.S. Attys., Roanoke, Va., for Otis R. Bowen, M.D. et al.

William B. Poff, Woods, Rogers & Hazlegrove, Julia Krebs-Markrich, Roger L. Chaffe, Roanoke, Va., for Horace G. Fralin, et al.

Beverly Dennis, III, Regional Atty., James F. Feight, Asst. Regional Atty., Office of Gen. Counsel—Region III, Dept. of HEW, Philadelphia, Pa., for Joseph L. Fisher, et al.

680 F. Supp. 229


TURK, Chief Judge.

Plaintiff, the Commonwealth of Virginia (hereinafter the "Commonwealth"), appealed on behalf of Commonwealth's agency, the Virginia Department of Medical Assistance Services (hereinafter "DMAS"), a decision by the Grant Appeals Board (hereinafter the "Board") of the Department of Health and Human Services (hereinafter "HHS"). The Board's decision upheld a disallowance by the Health Care Finance Administration (hereinafter "HCFA") under 42 U.S.C. § 1396b(g)(5) (1982) of $292,732.48 in federal financial participation to the Commonwealth. The disallowance was based on the Board's interpretation of § 2363(c) of the Deficit Reduction Act of 1984, Pub.L. 98-369 (hereinafter "DEFRA"). Otis R. Bowen, M.D., Secretary of HHS, the Administrator of the Health Care Financing Administration, and the members of the Board (hereinafter collectively referred to as the "Secretary") are the named defendants.

In a similar case, Horace G. Fralin and other partners in several partnerships known as Medical Facilities of America, sued the administrators of the Virginia's Medical Assistance Program (hereinafter "VMAP"). VMAP, the Commonwealth's Medicaid program, has been administered by the DMAS since March 1, 1985.1 See Va.Code Ann. § 32.1-323 (1985). This suit also involves an interpretation of § 2363(c) of the DEFRA amendments. Both actions were consolidated for consideration of this issue.

The secretary has moved to dismiss both actions for want of subject matter jurisdiction. The court has conducted a hearing on the motion, and the motion is now ripe for consideration. For the reasons stated below, the court finds it has jurisdiction over disallowance disputes such as are at issue in the instant cases.

Title XIX of the Social Security Act, 42 U.S.C. §§ 1396-1396q (1985) establishes a joint state and federal program in which participating states share with the federal government the cost of medical services to certain persons needing care. Although states are not required to participate in the cooperative, the Commonwealth operates an approved Medicaid program pursuant to Va.Code Ann. §§ 32.1-323 (1985). The federal arm of the Medicaid cooperative is administered by the Secretary, through the HCFA.

To receive federal Medicaid reimbursements, the Commonwealth must abide by certain requirements. Specifically, the disputed requirement in this case is 42 U.S.C. § 1396b(g)(1) (1982). During the time in question (October to December 31, 1983), § 1396b(g)(1) required the Commonwealth to demonstrate to the Secretary that an "effective program of control over utilization of such services" was in operation. Such a showing included evidence that:

(A) in each case for which payment is made under the State plan, a physician certifies at the time of admission, ... or recertifies, ... at least every 60 days ... that such services are or were required to be given on an inpatient basis because the individual needs or needed such services; and (B) in each such case, such services were furnished under a plan established and periodically reviewed and evaluated by a physician; (C) such State has in effect a continuous program of review of utilization ... (D) such State has an effective program of medical review of the care of patients in mental hospitals, skilled nursing facilities, and intermediate care facilities pursuant to section 1396(a)(26) and (31) of this title whereby the professional management of each case is reviewed and evaluated at least annually by independent professional review teams.

Section 1396b(g)(1)(A-D)(1982).

The Secretary then reviews the Commonwealth's program to determine if it is satisfactory. If the Commonwealth fails to make a satisfactory showing, the Secretary may reduce federal reimbursements according

680 F. Supp. 230
to a prescribed formula. See § 1396b(g)(5)

In May 1984, HCFA reviewed ten intermediate care facilities in the Commonwealth. The purpose of the review was to verify compliance with the physician certification requirements of § 1396b(g)(1)(A) and (B), focusing on the last quarter of 1983. The HCFA found that sixteen patients, at five facilities, had not been properly certified by physicians. A $292,732.28 disallowance was computed under § 1396b(g)(5) and withheld from the Commonwealth. See also 42 C.F.R. § 456.657(b)(1986). Section 1396b(g)(5) imposes penalties for a state's failure to satisfy § 1396b(g)(1).

The DEFRA amendments were signed by the President in July of 1984.2 The DEFRA amendments eliminated the requirement that physicians certify a patient's need for care in an intermediate care facility every sixty days, and to regularly review and update the plan of medical care, as required by § 1396b(g)(1)(A)-(B) (1982). The DEFRA amendments only require that the state have "an effective program of medical review of the care of patients." § 1396b(g)(1) (1985). The Commonwealth argues that because the physician certification requirement has been deleted from the Medicaid Act, HCFA lacks the authority under § 1396b(g)(5) to penalize the Commonwealth for failure to certify.

The Commonwealth appealed the Secretary's disallowance to the Grant Appeals Board. The Board sustained the disallowance, Decision No. 660, on June 19, 1985. Both the Commonwealth's appeal and the Board's final decision were based on interpretations, albeit differing interpretations, of the DEFRA amendments. Thus, the crux of this controversy concerns to what extent the DEFRA amendments should be accorded retroactive effect. However, prior to any analysis on the merits, the threshold question of jurisdiction must be addressed.

The Commonwealth appealed the DEFRA decision of the Grant Appeals Board to this court, invoking the jurisdiction of the Administrative Procedure Act, 5 U.S.C. § 702 (1982) (hereinafter "APA"). Briefs on the DEFRA amendments were submitted. The Secretary then moved to dismiss on the basis that exclusive jurisdiction lies in the Claims Court. As subject matter jurisdiction cannot be waived, the court will limit its analysis at this time to the question of jurisdiction.

To adjudicate an action against the United States, a court must have subject matter jurisdiction and sovereign immunity must be waived. See United States v. Sherwood, 312 U.S. 584, 586-87, 61 S.Ct. 767, 769-70, 85 L.Ed. 1058 (1941). Without specific statutory language, the jurisdiction of this court must be based on a general district court jurisdiction statute. Under 28 U.S.C. § 1331 (1982), district courts have subject matter jurisdiction in "all civil cases arising under the Constitution, laws, or treaties of the United States." The APA, 5 U.S.C. § 702 (1982), includes a specific waiver of sovereign immunity for review of final agency action and provides:

An action in a court of the United States seeking relief other than money damages and stating a claim that an agency ... acted or failed to act in an official capacity or under color of legal authority shall not be dismissed nor relief therein be denied on the ground that it is against the United States ... Nothing herein ... (2) confers authority to grant relief if any other statute that grants consent to suit expressly or impliedly forbids the relief which is sought.

The APA is not itself an independent source of jurisdiction. See Califano v. Sanders, 430 U.S. 99, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977).

Other than the district court, the only possible forum for disallowance disputes is the United States Claims Court. Under the Tucker Act, 28 U.S.C. § 1491 (1982), actions filed against the United States for over $10,000.00 money damages must be

680 F. Supp. 231
brought in the Claims Court.3 28 U.S.C. § 1491(a)(1) provides
The United States Claims Court shall have jurisdiction to render judgment upon any claim against the United States founded upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or nonliquidated damages not sounding in tort.

In numerous cases dealing with the district court's jurisdiction under 42 U.S.C. § 1316, the outcome hinges on the characterization of the dispute as a noncompliance or a disallowance.4 A noncompliance decision refers to the entire state Medicaid plan. A disallowance refers to any "item or class of items" within the plan. § 1316(d). The statute provides that if a state is dissatisfied with a noncompliance decision, the "court of appeals for the circuit in which such state is located" has jurisdiction over the controversy. § 1316(a)(3) (1982). If a state is dissatisfied with a disallowance decision, "the State shall be entitled to and upon request shall receive a reconsideration of the disallowance." § 1316(d) (1982). The statute is silent as to the forum in which such reconsideration may be had.

This question has yet to be decided in the Fourth Circuit. State of North Carolina v. Heckler, 584...

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