Georgia Hospital Ass'n v. Dept. of Med. Assistance

• Decision Date: 07 January 1982
• Docket Number: Civ. A. No. C81-88A.
• Parties: GEORGIA HOSPITAL ASSOCIATION, et al., Plaintiffs, v. DEPARTMENT OF MEDICAL ASSISTANCE, et al., Defendants.
• Court: U.S. District Court — Northern District of Georgia

528 F. Supp. 1348

GEORGIA HOSPITAL ASSOCIATION, et al., Plaintiffs, v. DEPARTMENT OF MEDICAL ASSISTANCE, et al., Defendants.

Civ. A. No. C81-88A.

United States District Court, N. D. Georgia, Atlanta Division.

January 7, 1982.

COPYRIGHT MATERIAL OMITTED

Jack S. Schroder, Jr., Scott R. Owens, Jones, Bird & Howell, Atlanta, Ga., for plaintiffs including intervenor.

Stephanie B. Manis, Asst. Atty. Gen., Atlanta, Ga., for state defendants.

Nina L. Hunt, Asst. U. S. Atty., F. Richard Waitsman, Asst. Regional Atty., U. S. Dept. of H. H. S., Atlanta, Ga., Barbara L. Gordon and Lewis K. Wise, U. S. Dept. of Justice, Washington, D. C., for federal defendant.

ORDER

SHOOB, District Judge.

This action challenges Georgia's demonstration project for hospital reimbursement under the Medicaid program.¹ This program is a three-year demonstration project, which went into effect on January 1, 1981, after receiving approval by the U. S. Department of Health and Human Services (HHS). Plaintiffs are the Georgia Hospital Association (GHS), a trade organization representing approximately 205 of Georgia's 222 licensed hospitals, two Georgia hospitals, Georgia Medical Center, Inc., and Redmond Park Hospital, Inc., The Hospital Authority of Cherokee County, John Marston, President of the Georgia Hospital Association, and plaintiff-intervenor, Charles L. Foster, Jr., Administrator of West Georgia Medical Center, Inc. Defendants are the Georgia Department of Medical Assistance, which administers Georgia's Medicaid program, Charles K. Pierce, Commissioner of the Department of Medical Assistance (the Department), Georgia's Board of Medical Assistance, the members of the said Board, and Richard S. Schweiker, Secretary of HHS (the Secretary). The Court has also allowed the filing of an amicus curiae brief by the Federation of American Hospitals.

The parties have filed cross-motions for summary judgment and numerous briefs. After the filing of briefs in response to those of amicus curiae, and of plaintiff-intervenor, the case is before the Court for decision.

I. Factual Background

On October 1, 1980, the Department applied to the Health Care Financing Administration (HCFA) of HHS for a grant for a demonstration project entitled "An Alternative Reimbursement System for Georgia Hospitals." State's Exhibit A. Georgia's application proposed the implementation of an alternative reimbursement system for Georgia's Medicaid Program beginning on January 1, 1981. State's Exhibit C. The system would be expanded at a later date to include the Medicare Program. Id. However, to this date Georgia has not applied for expansion of the project to the Medicare Program.

The demonstration project was reviewed by specialists in the field of hospital reimbursement methods prior to HHS' approval. Secretary's Exhibit D, ¶ 3. In particular, Georgia's proposal was reviewed by HHS' Hospital Cost Review Panel in July, 1979 as a continuation request and in November, 1980 as a new grant proposal. Id. The said panel was composed of representatives from HCFA, other HHS components and experts from nongovernmental institutions. Id.

In 1979, the Hospital Cost Review Panel ranked Georgia's proposal very high and recommended that it be approved for continued funding. Id., ¶ 6. In 1980, the panel ranked Georgia's proposal very close to the proposal with the highest scores though it was not recommended for an award. Id. The panel found the proposal not specific regarding the project's operation for the second and third year of the three year period. Id.

On the basis of the above panel's findings and HCFA staff analysis, on November 20, 1980, HCFA requested the Department to provide further information on the project's reimbursement methodology. State's Exhibit G at p. 1. The Department responded on December 1, 1980. Id. On December 5, 1980, HCFA's Regional Administrator recommended approval. Secretary's Exhibit G.

Finally, on December 31, 1980, HCFA approved Georgia's grant request and awarded Georgia $368,550 for 1981. Secretary's Exhibit H. This award consisted of $122,850 pursuant to 42 U.S.C. § 1315(a)(2) and $245,700 pursuant to 42 U.S.C. § 1395b-1(a)(1)(C). Id. The Department pledged $122,850.00 in state funds for a total of $491,400. Id. HCFA also granted Georgia a waiver of the reasonable costs requirements of the Medicaid program, 42 U.S.C. § 1396a(a)(13)(D); 42 C.F.R. § 447.261, pursuant to 42 U.S.C. § 1315(a)(1). Id. On January 16, 1981, plaintiffs filed this action seeking to enjoin the demonstration project.

Before reaching the merits of the case it is necessary to dispose of three procedural arguments raised by the federal defendant. These are (1) whether the Court has standing to decide this action, (2) whether the case is ripe for decision, and (3) whether plaintiffs have exhausted their administrative remedies. The Court concludes, as discussed below, that none of these issues precludes review of the merits.

II. Standing

Standing is established when plaintiff has alleged an actual or threatened "injury in fact, economic or otherwise," that is likely to be redressed by a favorable decision. Simons v. Eastern Ky. Welfare Rights Organization, 426 U.S. 26, 37-39, 96 S.Ct. 1917, 1923-1925, 48 L.Ed.2d 450 (1976); Association of Data Processing Service Organizations v. Camp, 397 U.S. 150, 152-53, 90 S.Ct. 827, 829-30, 25 L.Ed.2d 184 (1970). This injury must be "real and immediate," not conjectural or hypothetical. Rizzo v. Goode, 423 U.S. 362, 372, 96 S.Ct. 598, 604, 46 L.Ed.2d 561; O'Shea v. Littleton, 414 U.S. 488, 493, 94 S.Ct. 669, 674, 38 L.Ed.2d 674 (1974); Linda R. S. v. Richard D., 410 U.S. 614, 617, 93 S.Ct. 1146, 1148, 35 L.Ed.2d 536 (1973); Golden v. Zwickler, 394 U.S. 103, 109-10, 89 S.Ct. 956, 960-61, 22 L.Ed.2d 113 (1969).

Here, the Court finds that plaintiffs have adequately shown their standing to bring this action. First, hospital plaintiffs have alleged that the demonstration project will result in lower reimbursement to them than under the pre-existing regulations. The Court finds it unnecessary for hospital plaintiffs to itemize their financial injury as a condition to establish standing. As already noted, threatened economic injury is sufficient to create standing. Simons, supra, 426 U.S. at 37-39, 96 S.Ct. at 1923-1925; Alabama Nursing Home Association v. Califano, 433 F.Supp. 1325, 1328-29 (M.D. Ala.1977). Additionally, as held by then Chief Judge Frank M. Johnson, Jr., in Alabama Nursing Home Association, supra, at 1328:

Where a state plan is not in conformity with the Social Security Act, as plaintiffs contend here those individuals most directly affected by the administration of the program nursing homes in that case may seek judicial enforcement of the statute's requirements.

(Citation omitted.) The Court finds Judge Johnson's reasoning compelling. See also American Hospital Association v. Harris, CCH Medicare and Medicaid Guide, ¶ 30, 669 (D.D.C. Sept. 16, 1980).

Second, GHS, as a trade organization, has standing to bring suit on behalf of its members when: 1) its members have standing to sue on their own behalf; 2) the interests the organization seeks to protect are germane to the organization's purpose; and 3) neither the claim asserted nor the relief sought requires the participation of individual members in the lawsuit. Hunt v. Washington State Advertising Commission, 432 U.S. 333, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977). Here, given this Court's finding that GHS' members have standing, it is necessary only to determine whether GHS meets the second and third requirements of the Hunt case. The Court finds that GHS is clearly seeking to protect interests which are germane to its purpose and that participation of individual members is unnecessary. Therefore, GHS has standing to raise its claims on behalf of its members.

Third, the Court also finds that individual plaintiff Marston has standing to prosecute this action. Fourth, by failing to oppose Mr. Foster's motion to intervene, defendants have waived any objections as to his standing. Nevertheless, it is clear that he, as a member of the Department's Medical Care Advisory Board, has standing to challenge the project. In sum, each plaintiff has standing to protect those rights unique to such plaintiff.

III. Ripeness

Unlike standing, which focuses on who is the right plaintiff, the ripeness doctrine looks at whether the controversy is sufficiently developed for the courts to be able to decide the rights of the parties. In Abbott Laboratories, Inc. v. Gardner, 387 U.S. 136, 148-49, 87 S.Ct. 1507, 1515-16, 18 L.Ed.2d 681 (1967) the Supreme Court enunciated the following two-part analysis to determine whether a case is ripe for review: 1) whether the issues under consideration are fit for judicial decision; and 2) consideration of the hardship to the parties in withholding Court review.

The Court finds that this case is ripe for adjudication. First, the issues are fit for judicial review. The allegedly unconstitutional and illegal action concluded on January 1, 1981, when the program became effective. Additionally, plaintiffs are presently operating under the challenged program. Second, the hardships to plaintiffs in withholding review would be severe. If this action is not ripe until the demonstration project is completed as defendants contend, the Court might not be able to provide effective relief to plaintiffs. At that time prospective relief, if any is available, will not dissipate plaintiffs' monetary damages which are barred by the Eleventh Amendment. See Florida Department of Health and Rehabilitation v. Florida Nursing Home Association, 450 U.S. 147, 101 S.Ct. 1032, 67 L.Ed.2d 132 (1981); Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974).

IV. Exhaustion of Administrative Remedies

"Where a claim is cognizable in the first instance by an administrative agency alone, judicial interference is withheld until the administrative process has run...