Indiana State Bd. of Public Welfare v. Tioga Pines Living Center, Inc.

• Decision Date: 30 June 1994
• Docket Number: No. 30A01-9106-CV-176,30A01-9106-CV-176
• Citation: 637 N.E.2d 1306
• Parties: INDIANA STATE BOARD OF PUBLIC WELFARE, Indiana Department of Public Welfare, and Suzanne Magnant, in her capacity as Administrator of the Indiana Department of Public Welfare, Appellants-Defendants, v. TIOGA PINES LIVING CENTER, INC., Communicare of Indiana, Inc., d/b/a American Village Retirement Community, Bloomington Convalescent Center, Inc. Meadow Heights Nursing Center, Inc., d/b/a Lincoln Hills of New Albany, Appellees-Plaintiffs.
• Court: Indiana Appellate Court

Page 1306

637 N.E.2d 1306

45 Soc.Sec.Rep.Ser. 275

INDIANA STATE BOARD OF PUBLIC WELFARE, Indiana Department of Public Welfare, and Suzanne Magnant, in her capacity as Administrator of the Indiana Department of Public Welfare Appellants-Defendants, v. TIOGA PINES LIVING CENTER, INC., Communicare of Indiana Inc., d/b/a American Village Retirement Community Bloomington Convalescent Center, Inc. Meadow Heights Nursing Center, Inc., d/b/a Lincoln Hills of New Albany, Appellees-Plaintiffs.

No. 30A01-9106-CV-176.

Court of Appeals of Indiana First District.

June 30, 1994.

Rehearing Denied Aug. 30, 1994.

Charles A. Miller, S. William Livingston, Jr., Mark H. Lynch, Covington & Burling, Washington, DC, Pamela Carter, Atty. Gen., Gordon E. White, Jr., Deputy Atty. Gen., Eric N. Allen, Brand & Allen, Greenfield, for appellants.

David F. McNamar, Randall R. Fearnow, Janet A. McSharar, Alastair J. Warr, McNamar, Fearnow & McSharar, Indianapolis, Michael J. Tosick, Greenfield, Malcolm J. Harkins, III, Mark J. Biros, David M. Levine, William M. Altman, Proskauer Rose Goetz & Mendelsohn, Washington, DC, Paul R. Black, Brian W. Welch, McHale, Cook & Welch, Indianapolis, for appellees.

ROBERTSON, Judge.

The defendants below, the Indiana State Board of Public Welfare; the Indiana Department of Public Welfare; and, Suzanne Magnant, in her capacity as the Administrator of the Indiana Department of Public Welfare (hereinafter collectively referred to as the State) bring this interlocutory appeal pursuant to Ind.Appellate Rule 4(B)(3) to challenge the entry of a preliminary injunction, and the denial of the State's motion to dissolve the injunction, in this class action brought by both for-profit and not-for-profit intermediate and skilled nursing facilities, intermediate care facilities for the mentally retarded and community residential facilities for the developmentally disabled in the State of Indiana. The injunction prohibits the State from implementing certain proposed changes to its Medicaid reimbursement rate methodology, which the State initially promulgated as 470 I.A.C. 5-4.2 (now 405 I.A.C. 1-4). We affirm.

The class brought this action in January of 1990 under 42 U.S.C. § 1983 and the Indiana Uniform Declaratory Judgment Act, Ind.Code 34-4-10, alleging that the State's reimbursement scheme in effect since 1983, 470 I.A.C. 5-4.1 (4.1), did not conform with federal or state statutory requirements, either procedurally or substantively. The Hancock County Circuit Court preliminarily enjoined the State from employing 4.1 on May 29, 1990, and on June 18, 1990, entered an order which required the State to make monthly deposits into an escrow account. The fourth district of this court vacated the May 29, 1990, preliminary injunction and the June 18, 1990, escrow order on July 22, 1991 in Indiana State Board of Public Welfare v. Tioga Pines Living Center, Inc. (1991), Ind.App., 575 N.E.2d 303, trans. denied. (Tioga I ).

On February 26, 1991, after the trial of the class' initial allegations had begun but had not yet been completed, the State adopted the proposed rules (4.2) which are the subject of this appeal. The class moved to supplement its complaint to incorporate a challenge to this new reimbursement scheme and obtained the preliminary injunction which we now review. The injunction reinstated the requirement that the State make monthly deposits into escrow as required under the first preliminary injunction. On May 27, 1994, at the oral argument on the merits of the injunction contested in this appeal, counsel for the class stipulated that that portion of the trial court's order which required the State to pay certain amounts into escrow was no longer valid. Upon agreement of the parties, we vacated the escrow component of the Hancock Circuit Court's order of May 14, 1991 as modified on July 8, 1991 by separate order dated June 7, 1994, effective July 1, 1994.

The trial court entered a general judgment with "advisory findings" on the merits of the litigation relating to 4.1 in September, 1991, in favor of the class. The judgment became final on March 25, 1992. This court consolidated the judgment on the amended complaint challenging 4.1 with the Community Care Centers, Inc. v. Indiana State Board of Public Welfare case, and deferred ruling upon either the class' challenge to 4.2 or the merits of the State's appeal in the Indiana State Department of Public Welfare v. Lifelines of Indianapolis Limited Partnership (1994), Ind.App., 637 N.E.2d 1349, which too involved a substantive challenge to the State's rate-setting methodology, until the Indiana Supreme Court had had an opportunity to review the judgments on 4.1. The Indiana Supreme Court took jurisdiction of the State's consolidated appeal of the judgments against it on 4.1 pursuant to Ind.Appellate Rule 4(A)(10), (now App.R. 4(A)(9)), and reversed the judgment in favor of the Tioga Pines class on October 29, 1993. See Indiana State Board of Public Welfare v. Tioga Pines Living Center (1993), Ind., 622 N.E.2d 935, cert. denied, 510 U.S. 1195, 114 S.Ct. 1302, 127 L.Ed.2d 654. (Tioga II ). Having obtained the guidance of this state's highest court with respect to the common question of law in the Tioga Pines and Lifelines cases, we now report our decisions in separate opinions.

Standard of Review

[The] grant or denial of a preliminary injunction lies within the sound discretion of the trial court. College Life Insurance Co. of America v. Austin (1984), Ind.App., 466 N.E.2d 738, 741 [hereinafter referred to as College Life]; Wells v. Auberry (1982), Ind.App., 429 N.E.2d 679, 682. We will not interfere with the exercise of that discretion unless it is shown that the trial court's action was arbitrary or constituted a clear abuse of discretion. College Life, at 741; Wells, at 682. In reviewing the trial court's action, we will not weigh conflicting evidence, but will consider only that evidence supporting the trial court's findings, conclusions and order. College Life, at 744; Wells, at 682....

When determining whether the trial court abused its discretion, we review the trial court's findings of fact. "Whether such findings of fact are adequate depends upon whether they are sufficient to disclose a valid basis under the issues for the legal result reached in the judgment and whether they are supported by evidence of probative value. Such findings may not be set aside unless they are clearly erroneous." College Life, at 742.

Ridenour v. Furness (1987), Ind.App., 504 N.E.2d 336, 339, adopted in part, Ind., 514 N.E.2d 273.

The discretion to grant or deny preliminary relief is ordinarily measured by several factors, among them, whether the plaintiff's remedies at law are inadequate, thus causing irreparable harm pending resolution of the substantive action if the injunction does not issue; whether the plaintiff has demonstrated at least a reasonable likelihood of success at trial by establishing a prima facie case; whether the threatened injury to the plaintiff outweighs the threatened harm the grant of the injunction would occasion upon the defendant; and whether, by the grant of a preliminary injunction, the public interest would be disserved. Id.; Steenhoven v. College Life Ins. Co. of America (1984), Ind.App. 458 N.E.2d 661, 664. As this court observed in Wells v. Auberry (1982), Ind.App., 429 N.E.2d 679, 683, when these factors are applied over several cases, certain patterns emerge. Where there is a great danger of irreparable harm to the petitioner or the public, there is less of a need to go beyond the establishment of a prima facie case on the merits. Conversely, as the imminence of irreparable harm is reduced, the prima facie case requirement expands to the test of probability of recovery on the merits. Id. at 683.

Likelihood of Success on the Merits

Medicaid is a voluntary, cooperative program designed by Congress to enable participating states to obtain federal financial assistance in caring for the medical needs of the states' needy. To qualify for this assistance, a state must devise a scheme for reimbursing health care providers and have that plan approved by the Secretary of Health & Human Services. The state plan must comply with Section 1902(a)(13) of the Medicaid Act, 42 U.S.C. § 1396a(a)(13)(A) as amended by the Omnibus Reconciliation Act of 1980, Pub.L. 96-499 § 962(a), 94 Stat. 2650 (1980), the revision now commonly referred to as the Boren Amendment.

The Boren Amendment requires that a state plan provide

for payment ... of ... nursing facility services, and services in an intermediate care facility for the mentally retarded provided under the plan through the use of rates ... which the State finds, and makes assurances satisfactory to the Secretary, are reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities in order to provide care and services in conformity with applicable State and Federal laws, regulations, and quality and safety standards ...

42 U.S.C. § 1396a(a)(13)(A). ¹ Neither the Act nor the administrative regulations which implement it define "reasonable and adequate" or an "efficiently and economically operated" facility; nor do they require the state to expressly define these terms in its plan. ² Indeed, it was Congress' intent to give the states considerable latitude in meeting this standard, subject to the requirement that the state "find" its rates meet the substantive standard, and to review by the Secretary of the reasonableness of each state's assurances that its rates are "reasonable and adequate" to meet the costs of "efficiently and economically operated facilities." Wilder v. Virginia Hospital Association (1990), 496U.S.498,110S.Ct.2510,110L.Ed.2d455. Hence, the Boren Amendment creates both a procedural and substantive right, enforceable in a private cause of action pursuant to § 1983, to have the state adopt rates that it finds are reasonable and...