Minnesota Ass'n of Health Care Facilities, Inc. v. Minnesota Dept. of Public Welfare

• Decision Date: 30 July 1979
• Docket Number: No. 78-1845,78-1845
• Citation: 602 F.2d 150
• Parties: MINNESOTA ASSOCIATION OF HEALTH CARE FACILITIES, INC., a Minnesota Nonprofit Corporation, Sunshine Villa, Inc., a Minnesota Corporation, Augustana Lutheran Homes, Inc., a Minnesota Nonprofit Corporation, Red Wing Nursing Home of TLC Nursing Centers, Inc., a Minnesota Corporation, and Mala Strana Nursing Home of New Prague, a Minnesota Partnership, and Texa-Tonka Nursing Home, Inc., and Excelsior Nursing Home of Iroquois-Excelsior, Inc., a Minnesota Corporation and Valleyview Nursing Home, Inc., a Minnesota Nonprofit Corporation, Appellants, v. MINNESOTA DEPARTMENT OF PUBIC WELFARE, Edward J. Dirkswager, Jr., Acting Commissioner of the Minnesota Department of Public Welfare, and Nursing Home Residents' Advisory Council, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 150

602 F.2d 150

MINNESOTA ASSOCIATION OF HEALTH CARE FACILITIES, INC., a

Minnesota Nonprofit Corporation, Sunshine Villa, Inc., a

Minnesota Corporation, Augustana Lutheran Homes, Inc., a

Minnesota Nonprofit Corporation, Red Wing Nursing Home of

TLC Nursing Centers, Inc., a Minnesota Corporation, and Mala

Strana Nursing Home of New Prague, a Minnesota Partnership,

and Texa-Tonka Nursing Home, Inc., and Excelsior Nursing

Home of Iroquois-Excelsior, Inc., a Minnesota Corporation

and Valleyview Nursing Home, Inc., a Minnesota Nonprofit

Corporation, Appellants, v. MINNESOTA DEPARTMENT OF PUBIC WELFARE, Edward J. Dirkswager,

Jr., Acting Commissioner of the Minnesota

Department of Public Welfare, and

Nursing Home Residents'

Advisory Council, Appellees.

No. 78-1845.

United States Court of Appeals,

Eighth Circuit.

Submitted Feb. 15, 1979.

Decided July 6, 1979.

Rehearing and Rehearing En Banc Denied July 30, 1979.

John M. Broeker, of Broeker, Hartfeldt, Hedges & Grant, Minneapolis, Minn., for appellants; Allene D. Evans, Minneapolis, Minn., on brief.

William P. Marshall, Special Asst. Atty. Gen., St. Paul, Minn., for appellee, Minnesota Dept. of Welfare; Warren R. Spannaus, Atty. Gen., Richard B. Allyn, Sol. Gen., Paul G. Zerby, Asst. Atty. Gen., St. Paul, Minn., on brief.

Laurie N. Davison, Legal Aid Society of Minneapolis, Inc., Minneapolis, Minn., for appellee, Nursing Home Residents'.

Before HEANEY and McMILLIAN, Circuit Judges, and BENSON, ^* Chief Judge.

McMILLIAN, Circuit Judge.

Excelsior Nursing Home of Iroquois-Excelsior, Inc., a Minnesota corporation (hereinafter Excelsior), and Valleyview Nursing Home, Inc., a Minnesota nonprofit corporation, appeal from an order entered in the district court ¹ for the District of Minnesota denying them preliminary injunctive relief. ² For the reasons discussed below, we affirm the judgment of the district court.

This action was originally brought by the Minnesota Association of Health Care Facilities, Inc. (hereinafter MAHCF) and four member nursing homes ³ to challenge the validity of Regulations of the Minnesota Department of Public Welfare for Determining Welfare Per Diem Rates for Nursing Home Providers under the Title XIX Medical Assistance Program (hereinafter DPW Rule 49) and a state statute, Minn.Stat.Ann. § 256B.48(1)(a) (West Supp.1978). The state defendants were joined by the Nursing Home Residents' Advisory Council (hereinafter NHRAC), a public interest organization with both private and Medicaid nursing home residents among its members. After denial of cross-motions for summary judgment by all parties in this matter and its companion case, Minnesota Hospital Association v. Minnesota Department of Public Welfare, No. Civ. 3-78-88 (D.Minn.), MAHCF, the four original nursing homes, intervenor Texa-Tonka, and two new applicants for intervention (appellants herein) sought a preliminary injunction against enforcement of the state statute pending judicial determination of its validity. The district court granted appellants' motions to intervene but denied the motion for preliminary injunctive relief; this appeal followed.

For reversal appellants argue that the district court erred in failing to grant them injunctive relief. Appellants argue that they made a clear showing as to the invalidity of the statute ⁴ and the nature of the serious and irreparable harm they would suffer if enforcement of the statute was not enjoined, especially in conjunction with the allegedly inadequate rate of reimbursement established under DPW Rule 49. ⁵ In particular appellants submit that enforcement of the statute has caused serious financial problems which jeopardize the quality of health care and medical services of Medicaid residents as well as the continued business operation of many of the state's nursing homes, the vast majority of which accept Medicaid recipients.

As noted by the district court in its memorandum and order, this Circuit has apparently adopted two alternative preliminary injunction tests: the familiar traditional test, E. g., Minnesota Bearing Co. v. White Motor Corp., 470 F.2d 1323, 1326 (8th Cir. 1973), and the test formulated by the Second Circuit, E. g., Gresham v. Chambers, 501 F.2d 687, 691 (2d Cir. 1974); Accord, William Inglis & Sons Baking Co. v. ITT Continental Baking Co.,526 F.2d 86, 88 (9th Cir. 1975). See Dakota Wholesale Liquor, Inc. v. Minnesota, 584 F.2d 847, 849 & n. 4 (8th Cir. 1978) (per curiam); Fennell v. Butler, 570 F.2d 263, 264 (8th Cir.), Cert. denied, 437 U.S. 906, 98 S.Ct. 3093, 57 L.Ed.2d 1136 (1978). The traditional test requires the moving party to show substantial probability of success on the merits and the possibility of irreparable injury if injunctive relief is denied. Fennell v. Butler, supra, 570 F.2d at 264. Other factors which may be considered include possible harm to other interested parties and the public interest. Minnesota Bearing Co. v. White Motor Corp., supra, 470 F.2d at 1326 (citation omitted). Under the slightly different Second Circuit test, the moving party must show there are sufficiently serious questions going to the merits to make the questions a fair basis for litigation and a balance of the hardships tipping decidedly in the party's favor. Id. Under both tests the district court must examine the merits and the nature of the possible injury suffered by either or both of the parties. "We accord the district court considerable discretion in weighing the equities of the case and determining whether or not a preliminary injunction should issue." Planned Parenthood of Minnesota, Inc. v. Citizens for Community Action, 558 F.2d 861, 866 (8th Cir. 1977), Citing American Train Dispatchers Ass'n v. Burlington Northern, Inc., 551 F.2d 749, 751 (8th Cir. 1977). On appeal our scope of review is limited to the question whether the issuance or denial of injunctive relief, in light of the applicable standard, constituted an abuse of discretion. E. g., Dakota Wholesale Liquor, Inc. v. Minnesota, supra, 584 F.2d at 849 (citations omitted); Planned Parenthood of Minnesota, Inc. v. Citizens for Community Action, supra, 558 F.2d at 866 (citations omitted).

After a careful review of the pleadings, affidavits and depositions filed in this case, we are unable to find that the district court abused its discretion in denying preliminary injunctive relief.

First, we agree with the district court that it appears appellants' likelihood of success on the merits is slim. ⁶ Although we express no opinion as to the ultimate outcome of this case, we note that challenges similar to appellants' attack upon the adequacy of the reimbursement rates established pursuant to DPW Rule 49 have been unsuccessful in other jurisdictions, including Minnesota. See Koronis Manor Nursing Home v. Department of Public Welfare, 311 Minn. 375, 249 N.W.2d 448 (1976); LaCrescent Constant Care Center, Inc. v. State, 301 Minn. 229, 222 N.W.2d 87 (1974) (en banc); Accord, Briarcliff Haven, Inc. v. Department of Human Resources, 403 F.Supp. 1355 (N.D.Ga.1975); Cf. Massachusetts General Hospital v. Weiner, 569 F.2d 1156 (1st Cir. 1978) (hospital providers); American Health Care Ass'n Inc. v. Califano, 443 F.Supp. 612 (D.D.C.1977) (organization representing all licensed health care institutions). A major problem confronting appellants is the statutory language itself. In 1972 Congress amended the existing Medicaid legislation ⁷ to require the states to provide payment to skilled and intermediate nursing care facilities for services rendered to Medicaid recipients on a "reasonable cost-related basis." 42 U.S.C. § 1396(a)(13)(E). This standard does not necessarily require the state to reimburse the provider (the nursing home) for "actual reasonable costs of care" as argued by appellants. Appellants' Brief at 15. Cf. Massachusetts General Hospital v. Weiner, supra, 569 F.2d at 1161 (court draws a distinction between a hospital's "actual costs" of treating a Medicaid patient and the "reasonable cost" requirement of 42 U.S.C. § 1396a(a)(13)(D). We further note that the Minnesota state plan has been approved by HEW.

Thus, appellants are entitled to a level of reimbursement established on a "reasonable cost-related basis." Whether or not DPW Rule 49 provides this level of reimbursement in accordance with the applicable federal statute and regulations, See 42 C.F.R. § 447.272-.311 (1978), is, of course, the question at the heart of the underlying litigation. We note, however, that for the purposes of this appeal the absence of a fixed rate of reimbursement weakens appellants' financial arguments. "The contractual relationship between nursing homes and the state is unique in that no reimbursement figure, be it a fixed per diem rate or schedule of maximum fees, is provided in the contract (or provider agreement)." LaCrescent Constant Care Center, Inc. v. State, supra, 222 N.W.2d at 91. Furthermore, appellants' argument is undermined by another condition of provider participation: providers are required to agree to accept, as payment in full, the amounts paid by the state agency. 42 C.F.R. § 447.15 (1978).

The structure and operation of the Medicaid program further diminishes the force of appellants' attack upon the equalization of rates ⁸ and payback ⁹ provisions. Participation by a nursing home as a provider of health care services to Medicaid recipients is voluntary. If appellants find that the reimbursement rates are insufficient, then they may either make their homes more efficient and economical or terminate their relationship with Medicaid and no longer accept Medicaid recipients as residents. See LaCrescent Constant Care Center, Inc. v. State, supra, 222 N.W.2d at 91; Cf. National Union of Hospital & Health Care Employees v. Carey, supra, 557 F.2d at 282 (in context of labor law question). Moreover, "(a) nursing facility's (economic) 'need' for patients has nothing to do with the statutory benefits structure. The facility's need is incidental. That...