NJ ASS'N OF HEALTH CARE FACILITIES v. Gibbs

• Decision Date: 04 March 1993
• Docket Number: Civ. A. No. 90-1908 (JCL).
• Citation: 838 F. Supp. 881
• Parties: NEW JERSEY ASSOCIATION OF HEALTH CARE FACILITIES, INC., et al., Plaintiffs, v. Alan J. GIBBS, et al., Defendants.
• Court: U.S. District Court — District of New Jersey

838 F. Supp. 881

NEW JERSEY ASSOCIATION OF HEALTH CARE FACILITIES, INC., et al., Plaintiffs, v. Alan J. GIBBS, et al., Defendants.

Civ. A. No. 90-1908 (JCL).

United States District Court, D. New Jersey.

March 4, 1993.

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Fox, Rothschild, O'Brien & Frankel by Johnathan D. Weiner, Princeton, NJ, Cohen, Shapiro, Polisher, Shiekman & Cohen by Daisy B. Barreto, Lawrenceville, NJ, Reed, Smith, Shaw & McClay by Paul F. Leonard, Jr., Eugene Tillman, Washington, DC, for plaintiffs.

Robert J. Del Tufo, Atty. Gen. of NJ by Michael J. Haas, Deputy Atty. Gen., Trenton, NJ, Covington & Burling by Mark H. Lynch, Charles A. Miller, Ulanda D. Rippy, Washington, DC, for defendants.

                                            TABLE OF CONTENTS
                I.    INTRODUCTION .......................................... 886
                II.   THE PARTIES ........................................... 886
                III.  THE FEDERAL MEDICAID PROGRAM .......................... 887
                IV.   THE NEW JERSEY MEDICAID REIMBURSEMENT SYSTEM .......... 888
                      A. GENERAL CONSIDERATIONS ............................. 888
                      B. CALCULATION OF NURSING PAYMENTS .................... 891
                      C. ADVISORY STANDARDS FOR NURSE STAFFING .............. 892
                      D. INFLATION ADJUSTMENTS .............................. 893
                V.    PRELIMINARY INJUNCTION STANDARDS ...................... 893
                VI.   PROCEDURAL COMPLIANCE WITH THE BOREN AMENDMENT ........ 893
                      A. THE PROCEDURAL LAW ................................. 893
                      B. THE FINDINGS REQUIREMENT ........................... 895
                      C. THE ADEQUACY OF NEW JERSEY'S PROCEDURE ............. 895
                VII.  SUBSTANTIVE COMPLIANCE WITH THE BOREN AMENDMENT ....... 898
                      A. THE SUBSTANTIVE CHALLENGE .......................... 898
                      B. THE EXPERTS AND THEIR ROLES ........................ 898
                      C. PRESUMPTION OF VALIDITY ............................ 899
                      D. COST-RATE ANALYSIS ................................. 899
                      E. INDIVIDUAL COMPONENTS OF NEW JERSEY'S PLAN ......... 907
                         i.   NURSE STAFFING ANALYSIS ....................... 907
                         ii.  CONTRACT NURSING COSTS ........................ 913
                         iii. INFLATION ADJUSTMENTS ......................... 914
                         iv.  GEOGRAPHICAL WAGE EQUALIZATION ................ 916
                VIII. IRREPARABLE HARM ...................................... 917
                      A. THE LEGAL STANDARDS ................................ 917
                      B. PLAINTIFFS' ALLEGATIONS OF IRREPARABLE HARM ........ 917
                      C. ELEVENTH AMENDMENT CONSIDERATIONS .................. 927
                

                IX. BALANCING OF HARDSHIPS AND THE PUBLIC INTEREST .......... 928
                X.  CONCLUSION .............................................. 929
                

OPINION RE DENIAL OF PRELIMINARY INJUNCTION

LIFLAND, District Judge.

I. INTRODUCTION

1. Plaintiffs bring this action under 42 U.S.C. ? 1983, alleging that defendants have deprived plaintiffs of rights secured under Title XIX of the Social Security Act, 42 U.S.C. ? 1396 et seq. (commonly referred to as the "Medicaid program"). Specifically, plaintiffs allege that defendants' Medicaid payment rates are not "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) (commonly referred to as the "Boren Amendment"); Complaint at ? 3. Plaintiffs also allege that defendants have failed to follow certain procedures required by the Boren Amendment. This Court has jurisdiction over plaintiffs' claims pursuant to 28 U.S.C. ? 1331.

2. Plaintiffs filed a motion for a preliminary injunction, seeking the following specific relief: (a) adjustment of the method for calculating reimbursement for nursing costs; (b) inclusion of the costs of contract nursing in the calculation of the limit on nursing costs; (c) modification of the State's salary region groupings; (d) use of a different inflation index in calculating rates; and (e) reimbursement of all allowable costs for all facilities that fall below the statewide median for such costs.

3. The evidentiary record on the pending motion is extensive. Plaintiffs filed affidavits from representatives of each of the named plaintiff facilities as well as an affidavit from their expert witness, Dr. Barbara Manard ("Dr. Manard"), which was accompanied by a lengthy report prepared by Dr. Manard ("Manard Report"). Defendants filed declarations from Saul Kilstein ("Kilstein"), the Director of the New Jersey Division of Medical Assistance and Health Services ("DMAHS"), the division of the New Jersey Department of Human Services responsible for administering and developing policy for the Medicaid program, Ann Kohler ("Kohler"), the Assistant Director of DMAHS, and defendants' expert witness, Dr. Gretchen Engquist ("Dr. Engquist"). These affidavits and declarations were accompanied by numerous exhibits. The lengthy depositions of both experts and the representatives of the named plaintiffs were also filed as part of the record. A six-day hearing on the preliminary injunction motion was held at which the two experts testified and presented additional exhibits. The parties have also provided the Court with oral argument, extensive briefing and supplemental correspondence relating to relevant cases decided subsequent to oral argument. On the basis of this entire record, the Court finds that the plaintiffs are not entitled to a preliminary injunction.

II. THE PARTIES

4. The named plaintiffs in this class action are two non-profit associations of nursing facilities and four individual facilities. Three of the named plaintiff facilities are non-profit facilities: Greenwood House Home for the Jewish Aged, Inc. ("Greenwood House"); Presbyterian Homes of Northern New Jersey, Inc., d/b/a Robert Wood Johnson, Jr. ("Robert Wood Johnson"); and Mega Health Care Center, Inc., d/b/a Llanfair House ("Llanfair House"). The fourth facility, Holiday Medical Center, d/b/a Medicenter of Lakewood ("Medicenter"), is a for-profit facility. The proportion of for-profit and non-profit facilities among the named plaintiffs is not reflective of the industry as a whole; approximately two-thirds of New Jersey nursing homes are for-profit and one-third are non-profit. Hearing Transcript ("Tr.") at 3.84-3.85.

Defendant Alan J. Gibbs ("Gibbs") was the Commissioner of the New Jersey Department of Human Services ("DHS"), the state agency designated pursuant to 42 U.S.C. ? 1396a(a)(5) to administer the Medicaid program in New Jersey and the agency which enters into agreements with individual nursing facilities for the provision of services to Medicaid patients. Complaint at ? 15. Defendant Kilstein is the Director of DHS, which has day-to-day responsibility for administering New Jersey's Medicaid program. Id. at ? 16. Defendants are responsible for assuring compliance by DHS with state and federal law. Id. at ?? 15-16.

By Memorandum and Order dated March 11, 1991, the Court granted plaintiffs' motion for class certification under Fed.R.Civ.P. 23(a) and 23(b)(2). The class is comprised of all proprietary and not-for-profit nursing facilities which render care to beneficiaries of the New Jersey Medicaid program.

III. THE FEDERAL MEDICAID PROGRAM

5. The Medicaid program is a joint federal-state program designed to provide medical assistance to individuals "whose income and resources are insufficient to meet the cost of necessary medical services." 42 U.S.C. ? 1396. Although a state is not required to participate in the program, once a state has been accepted into the program it must comply with the Medicaid statute and federal regulations. Harris v. McRae, 448 U.S. 297, 301, 100 S.Ct. 2671, 2679, 65 L.Ed.2d 784 (1980).

6. Payment rates for nursing facilities are governed by an amendment to the Medicaid Act known as the Boren Amendment. Enacted as part of the Omnibus Budget Reconciliation Act of 1980 ("OBRA '80"), Pub.L. No. 96-499, ? 962(a), 94 Stat. 2599, 2650 (1980), the Amendment requires that states pay rates:

which the State finds, and makes assurances satisfactory to the Secretary of the Department of Health and Human Services, 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 law, regulations, and quality and safety standards....

42 U.S.C. ? 1396a(a)(13)(A).

7. In 1987, as part of the Omnibus Budget Reconciliation Act of 1987 ("OBRA '87"), Congress enacted extensive nursing home reform legislation. Pub.L. No. 100-203, ? 4211, 101 Stat. 1330-186. OBRA '87 mandated that nursing facilities meet numerous requirements relating to patient care, staffing levels and training, facility administration, resident assessment and related plans for care, and residents' rights generally. All of these requirements were designed "to attain or maintain the highest practicable level of physical, mental and psychosocial wellbeing of each resident." Id., ? 4211(a), 100 Stat. 1330-185. States were required to bring their Medicaid programs into compliance with these new requirements no later than October 1, 1990. 42 U.S.C. ? 1396r.

8. OBRA '87 also amended the Boren Amendment to require that reimbursement rates for nursing facilities take into account the costs of complying with the specific new staffing and service provisions established by OBRA '87. Pub.L. No. 100-203, ? 4211(b)(1)(A), 100 Stat. 1330-203 (1987).

9. In the Omnibus Budget and Reconciliation Act of 1990 ("OBRA '90"), Congress amended the 1987 amendment to the Boren Amendment to specify that states include "the costs of services required to attain or maintain the highest practicable physical, mental, and psychosocial well-being of each Medicaid resident" when taking into account the costs of complying with OBRA '87....