Hospital Ass'n of New York State, Inc. v. Toia

• Decision Date: 27 April 1978
• Docket Number: D,Nos. 77-6152,527,77-6174,Nos. 526,s. 526,s. 77-6152
• Citation: 577 F.2d 790
• Parties: HOSPITAL ASSOCIATION OF NEW YORK STATE, INC., Misericordia Hospital Medical Center, Buffalo General Hospital, the Genesee Hospital, and the Mount Sinai Hospital on behalf of themselves and all other nonprofit hospitals which are members of the Hospital Association of New York State, Inc., and which are reimbursed for Medicaid Services rendered to hospital patients, Plaintiffs-Appellants, v. Philip L. TOIA, as Commissioner of Social Services of the State of New York, Robert P. Whalen, as Commissioner of Health of the State of New York, Peter Goldmark, as Director of the Budget of the State of New York, Hugh L. Carey, as Governor of the State of New York, Defendants-Appellees, and F. David Mathews, as Secretary of the United States Department of Health, Education and Welfare, Defendant. ocket
• Court: U.S. Court of Appeals — Second Circuit

Page 790

577 F.2d 790

HOSPITAL ASSOCIATION OF NEW YORK STATE, INC., Misericordia Hospital Medical Center, Buffalo General Hospital, the Genesee Hospital, and the Mount Sinai Hospital on behalf of themselves and all other nonprofit hospitals which are members of the Hospital Association of New York State, Inc. and which are reimbursed for Medicaid Services rendered to hospital patients, Plaintiffs-Appellants, v. Philip L. TOIA, as Commissioner of Social Services of the State of New York, Robert P. Whalen, as Commissioner of Health of the State of New York, Peter Goldmark, as Director of the Budget of the State of New York, Hugh L. Carey, as Governor of the State of New York, Defendants-Appellees and F. David Mathews, as Secretary of the United States Department of Health, Education and Welfare, Defendant.

Nos. 526, 527, Docket Nos. 77-6152, 77-6174.

United States Court of Appeals Second Circuit.

Argued Jan. 13, 1978.

Decided April 27, 1978.

Jacob Imberman, New York City (Robert M. Kaufman, Alexander Gigante, David Rabinowitz, Proskauer, Rose, Goetz & Mendelsohn, New York City, of counsel), for plaintiffs-appellants.

Charles A. Miller, Sp. Asst. Atty. Gen., New York City (Louis J. Lefkowitz, Atty. Gen. of the State of New York, Patricia A. Barald, Mark I. Levy, Sp. Asst. Attys. Gen., Covington & Burling, Robert N. Sayler, Washington, D. C., of counsel), for State defendants-appellees.

Before MANSFIELD and VAN GRAAFEILAND, Circuit Judges, and DOOLING, District Judge. ^*

MANSFIELD, Circuit Judge:

The principal issue raised by these consolidated appeals is whether Congress' retroactive repeal of legislation requiring a state to waive its Eleventh Amendment immunity and to consent to suit against it in order to receive funds under the Medicaid Act nullifies a consent to suit already given by the State of New York, and entitles it to assert its immunity in pending litigation based on the consent. We hold that the legislation has a retroactive nullifying effect. Accordingly, we affirm the district court's dismissal of the pending suit instituted against New York State officials on the basis of the consent.

Medicaid is a cooperative federal-state welfare program designed to provide health care for the needy through federal grants to participating states, subject to certain conditions. Under Title XIX of the Social Security Act, 42 U.S.C. §§ 1396, et seq., hospitals that provide care to Medicaid-eligible patients in a participating state are reimbursed from funds jointly provided by federal and state authorities.

In May 1976 appellants, a group of public and voluntary hospitals in the State of New York (State), brought suit in the Southern District of New York against various officials of the State and the Secretary of the Department of Health, Education and Welfare (HEW), seeking damages, declaratory, and injunctive relief on the ground that the State had, in violation of the Medicaid Act, 42 U.S.C. §§ 1396, et seq., and regulations promulgated thereunder, 45 C.F.R. § 250.30(a)(2), amended the formula for reimbursing each hospital for providing in-patient services under the State's Plan for medical assistance. In substance, the amendments froze payments to be made for services in 1976 at rates paid in 1975. The plaintiffs claimed that the State's amendments to the reimbursement formula were illegal because they were put into effect without first obtaining the approval of the Secretary of HEW, and because they did not reimburse appellants for the "reasonable costs" of services provided by them to Medicaid patients, as required by the Act. ¹

On the plaintiffs' motion for a preliminary injunction to prevent use of the amended formula, the State argued that the Eleventh Amendment barred any award of monetary relief to the hospitals. The plaintiffs contended, however, that the State had waived its Eleventh Amendment immunity by executing on March 30, 1976, a "consent to suit" according to a provision contained in the Medicaid Act, 42 U.S.C. § 1396a(g), which became effective January 1, 1976, requiring states participating in the Medicaid program to "consent . . . to the exercise of the judicial power of the United States" with respect to claims arising out of the furnishing of in-patient hospital services. Any state that did not comply with this requirement was penalized a percentage of the total federal Medicaid funds to which it would otherwise have been entitled. ² Pursuant to this law, New York had executed a consent to suit.

In August, 1976, Judge Morris E. Lasker held that New York's compliance with the mandatory waiver requirement eliminated any Eleventh Amendment bar to the lawsuit, and that 42 U.S.C. § 1396a(a)(13)(D) required prior HEW approval of amendments to the State reimbursement formula. Since this approval had not been obtained prior to the State's implementation of the amended formula, the defendants were permanently enjoined from implementing the challenged regulations until HEW had approved them; furthermore, they were directed to recalculate the amounts owed to members of the plaintiff class under the previously approved reimbursement formula, and to pay the hospitals any additional money that was owing.

The defendants sought review of the district court's decision, but shortly after the State's notice of appeal was filed, the Secretary of HEW approved the principal regulations that had been found invalid for lack of prior approval. On August 17, 1976, we remanded the case to the district court to decide whether the Secretary's belated approval would permit retroactive application of the amended reimbursement formula to the period beginning January 1, 1976. On November 5, 1976, Judge Lasker concluded that the amended reimbursement formula could be implemented only from the date of the Secretary's approval August 16, 1976 and not from January 1, 1976, the date In the meantime, on October 18, 1976, while the case was sub judice in the district court, the President signed Pub.L. 94-552, which repealed the Medicaid Act's mandatory waiver of immunity provision, "effective January 1, 1976." Neither party brought the repeal to the district court's attention until after its November 5 decision had been filed and the payments made pursuant to that order. Upon their appeals from the district court's August and November orders, the defendants argued that the repealer legislation deprived the district court of subject matter jurisdiction to award monetary relief against the State. On March 16, 1977, we remanded the case to the district court to resolve this question, which had never been presented to or considered by it, and also the question of whether the withdrawal of the monetary relief previously awarded against the State would impair the hospitals' constitutional rights.

when the State had purported to put it into effect. Judge Lasker ordered the defendants to recompute the reimbursement rates for the period prior to August 16, and when a stay pending appeal was denied the defendants performed this recomputation and made payments totalling up to $40 million to the hospitals.

On August 4, 1977, the district court vacated its earlier judgment and dismissed the complaint insofar as it granted monetary relief against the state defendants, holding (1) that the repealer permitted the State to withdraw, retroactively to January 1, 1976, its consent to this suit, and to reassert its Eleventh Amendment immunity, and (2) that its ruling would not deprive the hospitals of any constitutional rights. Judge Lasker then concluded that since the State's Eleventh Amendment immunity had been revived validly by the repeal legislation, his remedial power, consistent with the amendment, was limited to prospective relief, see Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974), and he questioned the utility of trying the plaintiffs' claims against the state and federal defendants since the allegations contained in the complaint involved solely the State's 1976 reimbursement formula, which was substantially revised in 1977.

The plaintiffs, on the other hand, contended that the 1977 amendments to the reimbursement formula were irrelevant to the issues they sought to have adjudicated. On November 18, 1977, the court granted the defendants' motion to dismiss the complaint on the ground that the 1976 formula had "undergone substantial revision in 1977" and that, since the hospitals' challenge related only to the 1976 methodology, "the record before us is both incomplete and stale."

Plaintiffs appeal from both the initial decision dismissing their complaint against the State defendants insofar as it sought monetary relief, and from the subsequent decision dismissing the complaint against all but the federal defendant in its entirety. ³ The appeals have been consolidated for our review.

DISCUSSION

The determinative issue is whether Congress' enactment on October 18, 1976, of Pub.L. No. 94-552, retroactively repealing the consent-to-suit provision of the Medicaid Act, 42 U.S.C. § 1396a(g), which had gone into effect January 1, 1976, applies to cases pending at the time of enactment of the repealer. Unless the State's waiver of immunity continued to be effective for the period from January 1, 1976, to October 18, 1976, the pending claims against it for recomputation of the reimbursement rates would be barred by the Eleventh Amendment. See Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974).

Neither the language of the repealer statute nor its legislative history addresses the precise question of whether it was intended to allow states already engaged in litigation to withdraw previously executed consents-to-suit and to reassert their Eleventh Amendment immunity. The statute simply states:

"Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That subsection (g) of section 1902 of the Social Security Act and subsectio...