New Vision Photography Program, Inc. v. Dist. of Columbia, Civil Action No. 13–1986 JEB

• Decision Date: 07 July 2014
• Docket Number: Civil Action No. 13–1986 JEB
• Citation: 54 F.Supp.3d 12
• Parties: New Vision Photography Program, Inc., et al., Plaintiffs, v. District of Columbia, et al., Defendants.
• Court: U.S. District Court — District of Columbia

54 F.Supp.3d 12

New Vision Photography Program, Inc., et al., Plaintiffs
v.
District of Columbia, et al., Defendants.

Civil Action No. 13–1986 JEB

United States District Court, District of Columbia.

Signed July 7, 2014

54 F.Supp.3d 17

Randy McRae, Largo, MD, for Plaintiffs.

Andrew J. Saindon, Melissa Lael Baker, D.C. Office of Attorney General, Washington, DC, for Defendants.

MEMORANDUM OPINION

JAMES E. BOASBERG, United States District Judge

As part of its Medicaid program, the District of Columbia provides an array of services designed to help adults with intellectual disabilities live in the community and avoid institutionalization. To offer those services, the District contracts with providers such as Plaintiff New Vision Photography Program, Inc. When New Vision failed its annual Provider Certification Review, however, the D.C. Department of Health Care Finance moved to terminate its Provider Agreement, and the Department of Disability Services froze new referrals to the program. New Vision and its owner, Plaintiff Albert Price, then pursued redress through the administrative channels provided by District law. Although their administrative appeal was still pending, Plaintiffs also brought this suit alleging violations of the Age Discrimination in Employment Act, deprivation of their Fifth Amendment right to due process, and contravention of various state laws. Plaintiffs named as Defendants both the District and two DDS employees, Cathy Anderson and Sherin Moses.

After weathering Plaintiffs' unsuccessful attempt to obtain a temporary restraining order, Defendants moved for dismissal, arguing that the federal causes of action in the First Amended Complaint fail to state a claim and that the Court lacks subject-matter jurisdiction over the state ones. Before the Court could rule on that motion, Plaintiffs sought leave to file a Second Amended Complaint. Defendants oppose the proposed amendment on futility grounds, arguing that even with the additions, this newest Complaint remains infirm.

While Plaintiffs may feel aggrieved by their contract's termination, intensity of emotion is no substitute for pleading facts adequate to state a claim. Even the proposed Second Amended Complaint, an improvement over earlier versions, is cobbled together out of mismatched elements of various constitutional doctrines that together do not add up to any actionable claim. Because of Plaintiffs' continued failure to allege facts sufficient to support any federal cause of action, the Court must deny leave to amend. It will dismiss the federal counts and permit Plaintiffs to take their state claims to the District of Columbia Superior Court, should they so desire.

I. Background

A. Medicaid

To provide some much-needed context for these claims, a brief primer on the District of Columbia's Medicaid program may prove helpful. “Medicaid is a cooperative federal-state program through which the Federal Government provides financial assistance to States so that they may furnish medical care to needy individuals.” Wilder v. Va. Hosp. Assn . , 496 U.S. 498, 502, 110 S.Ct. 2510, 110 L.Ed.2d 455 (1990) (citing 42 U.S.C. § 1396 ). Unlike Medicare, Medicaid is a public-assistance or “welfare” program, not insurance. See

54 F.Supp.3d 18

Patchogue Nursing Center v. Bowen, 797 F.2d 1137, 1140–41 (2d Cir.1986). In operation, states (and the District) pay approved healthcare providers directly for a range of services to low-income individuals, and the federal government reimburses them for a share of those expenditures. See D.C. Hosp. Ass'n v. District of Columbia, 224 F.3d 776, 777 (D.C.Cir.2000).

State participation in Medicaid is voluntary, but to qualify for federal funding a state must first have its Medicaid plan approved by the federal government. See Frew ex rel. Frew v. Hawkins, 540 U.S. 431, 433, 124 S.Ct. 899, 157 L.Ed.2d 855 (2004). Once in the program, in order to receive federal reimbursement, a state must comply with the requirements imposed by the Act and regulations promulgated by the Secretary of Health and Human Services. See U.S. ex rel. Digital Healthcare, Inc. v. Affiliated Computer Servs., Inc., 778 F.Supp.2d 37, 40 (D.D.C.2011).

Medicaid services, as a general rule, must be provided in a clinical setting. States, however, can request a waiver, known as a Home and Community–Based Services (HCBS) waiver, to allow for “payment for part or all of the cost of home or community-based services.” 42 U.S.C. § 1396n(c). The waiver is an agreement between the state and federal governments that allows the state to spend Medicaid funds on care that would otherwise be ineligible for coverage. Id. The waiver is the exception, not the rule, and as such it is highly restrictive; for example, the waiver authorizing the services New Vision provides is 169 pages in length. See District of Columbia's Home and Community Based Services Waiver for the Mentally Retarded and Developmentally Disabled, CMS Control # 0307.90.R1, available at http://goo.gl/v3B2mw.

Pursuant to its HCBS waiver, the District furnishes an array of services to allow intellectually disabled adults to live in the community and avoid institutionalization. The waiver program is operated by the Department of Disability Services under the supervision of the D.C. Department of Health Care Finance. See D.C. Mun. Regs. tit. 29, § 1900.3. DDS is responsible for the District's efforts to reform and regulate the care and habilitation services provided to residents with intellectual and developmental disabilities. See D.C.Code §§ 7–761.03, 7–761.04(b). To accomplish this, DDS is empowered to “[e]stablish rules, quality standards, and policies for Medicaid funded services,” and to “monitor the provision of all services ... and investigate, remediate, and enforce quality standards for all services” in the District. Id. §§ 7–761.05(3), 7–761.05(5).

In the District, waiver providers must meet an extensive list of qualifications, which includes the requirement that they “[c]omply with all applicable District of Columbia licensure requirements” and “[e]nsure compliance with the provider agency's policies and procedures and DDS policies.” D.C. Mun. Regs. tit.29, §§ 1904.4(d), (k). DDS oversight is a core component of the waiver program; indeed, the federal provision authorizing the HCBS waiver specifies that “[a] waiver shall not be granted under this subsection unless the State provides [satisfactory] assurances ... that ... necessary safeguards (including adequate standards for provider participation) have been taken to protect ... individuals provided services under the waiver.” 42 U.S.C. § 1396n(c)(2)(A). The federal government also retains the right to terminate a state program that fails to adequately oversee its providers. See Health & Human Servs. Office of Inspector General, OEI–02–08–00170, Oversight of Quality of Care in Medicaid Home and Community–Based

54 F.Supp.3d 19

Services Waiver Programs 6 (2012) (citing 42 CFR § 441.304(d) ).

B. Factual Background

For purposes of these Motions, the Court will take as true the facts from Plaintiffs' proposed Second Amended Complaint. According to that pleading, this suit arose from the acrimonious conflict surrounding the termination of New Vision's Medicaid Provider Agreement, which has formed the core of its business for over ten years. See 2d Am. Compl., ¶¶ 3, 7. Plaintiffs have pursued redress on two fronts—in this Court and, as provided by District law, in D.C.'s Office of Administrative Hearings. See id., ¶ 12. At the time this suit was filed, the OAH proceeding was still underway, but Administrative Law Judge Mary Masulla has since rendered a verdict, of which the Court takes judicial notice, and which offers some useful history for this case. See New Vision Photography Program (New Vision–OAH), No. 2013–DHCF–175 (OAH May 20, 2014).

New Vision Photography Program is a Maryland corporation that provides pre-vocational training programs for intellectually disabled adults. See 2d Am. Compl., ¶ 7. As its name suggests, New Vision's training programs focus on preparation for jobs in photography, such as working on one-hour photo-developing machines, producing photo-I.D. cards, and photographing small events. See New Vision–OAH, No. 2013–DHCF–175, at 4. It also provides instruction in general employment skills and offers job-placement services for program participants. See id. Plaintiff Price, although suing in his capacity as “Service Provider,” is “Founder/President & CEO” of New Vision. See, e.g., 2d Am. Compl. Caption; Am. Compl., Exh. 2 (Affidavit of Albert Price) at 1.

In 2003 New Vision entered into a Medicaid Provider Agreement with the District of Columbia, allowing it to receive reimbursement for vocational services rendered to HCBS waiver beneficiaries. See 2d Am. Compl., ¶ 7; see also New Vision–OAH, No. 2013–DHCF–175, at 4. In 2007, the District received approval from the federal government to offer expanded wellness services to HCBS waiver beneficiaries, which are outside the scope of what is typically permissible under the regular waiver program. See 54 D.C.Reg. 12,381 (Dec. 21, 2007); 55 D.C.Reg. 2,906 (March 21, 2008). By...