Kansas Health Care Ass'n, Inc. v. Kansas Dept. of Social and Rehabilitation Services
| Decision Date | 12 March 1992 |
| Docket Number | No. 91-3029,91-3029 |
| Citation | 958 F.2d 1018 |
| Parties | , Medicare & Medicaid Guide P 40,063 KANSAS HEALTH CARE ASSOCIATION, INC., on Behalf of Their Members and All Other Similarly Situated Nursing Facility Providers Certified by the State of Kansas to Participate in the Kansas Medicaid Program; Kansas Association of Homes for the Aging, Inc., on Behalf of Their Members and All Other Similarly Situated Nursing Facility Providers Certified by the State of Kansas to Participate in the Kansas Medicaid Program, Plaintiffs-Appellees, v. KANSAS DEPARTMENT OF SOCIAL AND REHABILITATION SERVICES; Dr. Robert C. Harder, Acting Secretary of Kansas Department of Social and Rehabilitation Services, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Bruce Roby (Robert F. Bennett and Patrick D. Gaston, of Bennett, Lytle, Wetzler, Winn & Martin, Prairie Village, Kan., with him on the briefs), Office of the General Counsel, Dept. of Social and Rehabilitation Services, Topeka, Kan., for defendants-appellants.
Jeffrey A. Chanay (William E. Enright, Scott, Quinlan & Hecht, with him on the briefs), Entz & Chanay, Topeka, Kan., for plaintiffs-appellees.
Before ANDERSON, TACHA and BALDOCK, Circuit Judges.
Defendants Kansas Department of Social and Rehabilitation Services (SRS) and Dr. Robert C. Harder appeal the district court's order preliminarily enjoining implementation of the Medicaid reimbursement rate freeze established by Kansas' State Plan Amendment TN-90-44, the reimbursement schedule established by State Plan Amendment TN-90-06, and the defendants from reimbursing Medicaid providers at rates not in compliance with federal law. 754 F.Supp. 1502 On appeal, defendants contend that plaintiffs, two health care associations, lack standing to seek the preliminary injunction granted by the district court. In the alternative, defendants contend that the district court abused its discretion in granting the preliminary injunction. We exercise jurisdiction under 28 U.S.C. § 1292(a)(1) and dismiss for lack of standing.
Plaintiffs, Kansas Health Care Association, Inc. (KHCA) and Kansas Association of Homes for the Aging, Inc. (KAHA), are nonprofit organizations, the members of which include a total of 335 nursing facilities located in Kansas. 1 Members of KHCA and KAHA participate in the federally funded Kansas Medicaid program and receive reimbursement for health care services provided to eligible Medicaid recipients.
By statute, Kansas has elected to participate in the Medicaid program established by Title XIX of the Social Security Act, 42 U.S.C. §§ 1396-1396u. See Kan.Stat.Ann. § 39-708c. SRS is the Kansas state agency responsible for administering the Kansas Medicaid plan.
Kansas, through SRS, implements a facility-specific reimbursement system and calculates each health care provider's rate by focusing on its historical costs and also considering where those costs fall in a percentile comparison with costs reported by other providers. 2 SRS increases rates by an incentive factor for facilities that incur low costs relative to the selected percentile reimbursement limitation and also adjusts to compensate for other special items.
On October 1, 1990, pursuant to State Plan Amendment TN-90-44, SRS implemented a Medicaid reimbursement "rate freeze." Prior to the rate freeze, each facility submitted two cost reports during each fiscal year--one in October and one at the end of the facility's fiscal year. SRS adjusted the reimbursement rate for each facility to reflect the most current cost report, corrected for inflation. Under TN-90-44, SRS no longer was to readjust the SRS also implemented State Plan Amendment TN-90-06, which provided for payment adjustments for reforms mandated by the Nursing Home Reform Act and the Omnibus Reconciliation Act of 1987, Pub.L. No. 100-203, § 4211(b)(2) (OBRA '87). 3 OBRA '87 requires each participating state to show that its Medicaid reimbursement rates account for the costs providers incur to comply with these reforms.
reimbursement rates based on cost reports submitted between October 1, 1990 and September 30, 1991. Instead, SRS was to determine each facility's rate of reimbursement from that facility's last cost report on file before October 1, 1990. SRS was to inflate the rate for each reimbursement period from the time of the last cost report at an estimated inflation rate of 4.8%
Title XIX of the Social Security Act, 42 U.S.C. § 1396, authorizes the grant of federal funds to states for the purpose of providing medical assistance to low-income persons who are aged. Because Kansas participates voluntarily in the federal program, it must comply with federal Medicaid laws and regulations. See Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498, 110 S.Ct. 2510, 2513, 110 L.Ed.2d 455 (1990). To qualify for federal assistance, a State must submit to the Secretary of Health and Human Services--and more specifically to the Health Care Financing Administration (HCFA)-- that
provide[s] ... for payment ... of the hospital services, 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).
In Wilder, the Supreme Court held that the language of § 1396a(a)(13)(A) creates both a procedural and substantive right enforceable by health care providers under 42 U.S.C. § 1983. Wilder, 110 S.Ct. at 2517. Section 1396a(a)(13)(A) grants health care providers an enforceable procedural right "that rates be accompanied by findings and assurances (however perfunctory) of reasonableness and adequacy." Id. According to federal regulations, a state must make these findings at least annually and also each time reimbursement rates change. 42 C.F.R. § 447.253(b). In addition, § 1396a(a)(13)(A) grants providers an enforceable substantive right that the rates actually be reasonable and adequate. Wilder, 110 S.Ct. at 2517.
Plaintiffs brought this § 1983 action seeking a preliminary injunction of the two State Plan Amendments--TN-90-44 and TN-90-06--that currently constitute Kansas' system of reimbursement for services provided to Medicaid patients. Proceeding as representatives of their members, plaintiffs contend that although SRS made assurances to HCFA, the findings made by SRS following the 1990 State Plan amendments do not support the assurances made to HCFA and do not comply with the findings requirements imposed by federal law. Further, plaintiffs contend that, for a variety of reasons, the reimbursement rates established by SRS are substantively deficient, i.e., that the rates are not adequate and reasonable to meet the costs of efficiently and economically operated facilities.
After deciding that plaintiffs had standing, the district court determined that plaintiffs had a substantial likelihood of succeeding on the merits of their claims that defendants failed to comply with both the procedural and substantive aspects of § 1396a(a)(13)(A). Consequently, the district
court granted plaintiffs' request for a preliminary injunction and enjoined defendants from implementing State Plan Amendments TN-90-44 and TN-90-06 and from reimbursing Medicaid providers at rates not in compliance with standards set by federal law.
On appeal, defendants contend that the district court erred in deciding that plaintiffs have "associational standing" to bring this suit. We review de novo issues such as standing that are prerequisites to this court's jurisdiction. See Trustees of the Colo. Pipe Indus. Pension Trust v. Howard Elec. & Mechanical, Inc., 909 F.2d 1379, 1382 (10th Cir.1990), cert. denied, --- U.S. ----, 111 S.Ct. 958, 112 L.Ed.2d 1046 (1991).
The issue of standing imports both constitutional considerations related to the limitation of Article III and also prudential concerns "that, apart from Art. III's minimum requirements, serve to limit the role of the courts in resolving public disputes." Warth v. Seldin, 422 U.S. 490, 498-500, 95 S.Ct. 2197, 2206, 45 L.Ed.2d 343 (1975). One of these prudential limitations is "that the plaintiff generally must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties." Id. at 499, 95 S.Ct. at 2205. Nevertheless, "[e]ven in the absence of injury to itself, an association may have standing solely as the representative of its members." Id. at 511, 95 S.Ct. at 2211. In Hunt v. Washington State Apple Advertising Comm'n, 432 U.S. 333, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977), the Supreme Court stated a three-part test for associational standing:
[A]n association has standing to bring a suit on behalf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.
Id. at 343, 97 S.Ct. at 2441. This test takes into account both the constitutional dimension of standing and also the concern that the association properly represent its members in the particular suit.
As defendants concede, plaintiffs clearly meet the first and second prerequisites for associational standing. In Wilder, 110 S.Ct. at 2517, the Supreme Court held that health care providers can utilize 42 U.S.C. § 1983 to enforce both the procedural and substantive requirements of 42 U.S.C. § 1396a(a)(13)(A). Thus, the members of p...
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