Pediatric Specialty v. Ar Human Services

• Decision Date: 16 April 2004
• Docket Number: No. 03-2616.,No. 03-1015.,03-1015.,03-2616.
• Citation: 364 F.3d 925
• Parties: PEDIATRIC SPECIALTY CARE, INC.; Child & Youth Pediatric Day Clinics, Inc.; Family Counseling & Diagnostic Clinic, Inc.; Tomorrow's Child Learning Center, LLC; D & D Family Enterprises, Inc.; James Swindle; Stacey Swindle, as parents and next best friends of Jacob and Noah Swindle, Minors; Susann Crespino, as parent and next friend of Michael Crespino, a minor, Appellees, v. ARKANSAS DEPARTMENT OF HUMAN SERVICES; Kurt Knickrehm, in his individual capacity and in his official capacity as Director of the Arkansas Department of Human Services; Ray Hanley, in his individual capacity and in his official capacity as director of the Division of Medical Services of the Arkansas Department of Human Services, Appellants, Pediatric Specialty Care, Inc.; Child & Youth Pediatric Day Clinics, Inc.; Family Counseling & Diagnostic Clinic, Inc.; Tomorrow's Child Learning Center, LLC; D & D Family Enterprises, Inc.; James Swindle; Stacey Swindle, as parents and next best friends of Jacob and Noah Swindle, Minors; Susann Crespino, as parent and next friend of Michael Crespino, a minor, Appellees, v. Arkansas Department of Human Services; Kurt Knickrehm, in his individual capacity and in his official capacity as Director of the Arkansas Department of Human Services; Ray Hanley, in his individual capacity and in his official capacity as director of the Division of Medical Services of the Arkansas Department of Human Services, Defendants, Centers for Medicare and Medicaid Services, a component of the United States Department of Health and Human Services, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

364 F.3d 925

PEDIATRIC SPECIALTY CARE, INC.; Child & Youth Pediatric Day Clinics, Inc.; Family Counseling & Diagnostic Clinic, Inc.; Tomorrow's Child Learning Center, LLC; D & D Family Enterprises, Inc.; James Swindle; Stacey Swindle, as parents and next best friends of Jacob and Noah Swindle, Minors; Susann Crespino, as parent and next friend of Michael Crespino, a minor, Appellees, v. ARKANSAS DEPARTMENT OF HUMAN SERVICES; Kurt Knickrehm, in his individual capacity and in his official capacity as Director of the Arkansas Department of Human Services; Ray Hanley, in his individual capacity and in his official capacity as director of the Division of Medical Services of the Arkansas Department of Human Services, Appellants, Pediatric Specialty Care, Inc.; Child & Youth Pediatric Day Clinics, Inc.; Family Counseling & Diagnostic Clinic, Inc.; Tomorrow's Child Learning Center, LLC; D & D Family Enterprises, Inc.; James Swindle; Stacey Swindle, as parents and next best friends of Jacob and Noah Swindle, Minors; Susann Crespino, as parent and next friend of Michael Crespino, a minor, Appellees, v. Arkansas Department of Human Services; Kurt Knickrehm, in his individual capacity and in his official capacity as Director of the Arkansas Department of Human Services; Ray Hanley, in his individual capacity and in his official capacity as director of the Division of Medical Services of the Arkansas Department of Human Services, Defendants, Centers for Medicare and Medicaid Services, a component of the United States Department of Health and Human Services, Appellant.

No. 03-1015.

No. 03-2616.

United States Court of Appeals, Eighth Circuit.

Submitted: January 15, 2004.

Filed: April 16, 2004.

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Counsel who presented argument on behalf of the appellant Arkansas Department of Human Services was Breck G. Hopkins of Little Rock, AR. Also appearing the brief of Arkansas Department of Human Services was Lee S. Thalheimer of Little Rock, AR. The brief of appellant Centers for Medicare and Medicaid Services was submitted by William Kanter and Collette G. Matzzie with the Appellate Staff Civil Division of the USDOJ, Washington, D.C. Also appearing on Centers for Medicare's brief were Alex M. Azar II, General Counsel, Henry R. Goldberg, Deputy Associate General Counsel, Elaine R. Lubin and Daniel Aiebel, Attorneys with the Department of Health and Human Services, and Robert D. McCallum, Jr., Assistant Attorney General.

Counsel who presented argument on behalf of the appellee was Philip E. Kaplan, Little Rock, AR. Also appearing on appellees' brief was Martin W. Bowen, Little Rock, AR.

Before BYE, HEANEY, and SMITH, Circuit Judges.

HEANEY, Circuit Judge.

This case concerns proposed revisions to Arkansas's state Medicaid plan that would affect programs for special needs children. Arkansas has provided services to special needs children under its Child Health Management Services (CHMS) program, a comprehensive program that provides evaluation and therapy in a multi-disciplinary clinical setting. In November of 2001, the Arkansas Department of Human Services (ADHS) announced that it would significantly alter the program, removing its therapeutic and early intervention day treatment services. The district court¹ previously enjoined Arkansas from making such changes, and we affirmed in part, reversed in part, and remanded for further proceedings. See Pediatric Specialty Care, Inc. v. Ark. Dep't of Human Servs., 293 F.3d 472 (8th Cir.2002). On remand, the district court found that the proposed changes would result in a denial of procedural and substantive due process, and ordered the services to continue without any changes. ADHS now appeals the district court's adverse rulings on these claims. We affirm the district court's ruling that ADHS may not alter the CHMS program until it conducts an impact study to ensure that the changes are consistent with the principles of economy, efficiency, quality of care, and access to care. On the basis of the record before us, however, we reverse the district court's ruling as to the substantive due process claim.

The federal Centers for Medicare & Medicaid Services (CMS) was not a party to the suit below. Nonetheless, the district court ordered it to continue to subsidize the services that ADHS was providing. CMS appeals, and we reverse.

BACKGROUND

Much of the historical background to this case was detailed in our prior decision. See Pediatric Specialty Care, Inc., 293 F.3d at 475-77. As part of its state Medicaid plan,² Arkansas has provided medical services to special needs children under the CHMS program. The program extends diagnostic and evaluative services, pediatric day treatment, and various therapies to children from six months to six years of age. In November of 2001, ADHS issued a press release announcing its intention to restructure the CHMS program, terminating day treatment and therapeutic services from the plan.

In response to this decision, Pediatric Specialty Care, Inc., a provider of CHMS services, along with other CHMS providers and parents of recipients of CHMS services (collectively the Plaintiffs), brought suit seeking to bar ADHS from changing the CHMS program. The district court found that the Medicaid Act³ entitled children to an enforceable right to early intervention day treatment services, and that such services were currently provided under the CHMS program. It further found, that although such services would still be available if recommended by a physician, cutting the CHMS program would inhibit the ability of children to readily receive the treatment they needed. Accordingly, the district court enjoined ADHS from changing the program and ordered it to continue to include CHMS early intervention day treatment services in its state Medicaid plan.

On appeal, our court agreed that children are entitled to day treatment under the Medicaid Act. Pediatric Specialty Care, Inc., 293 F.3d at 480. We reversed, however, the district court's holding "to the extent that it requires CHMS early intervention day treatment services be specifically included in the State Plan." Id. We reasoned that although the Medicaid Act required early and periodic screening, diagnosis, and treatment (EPSDT) services to be provided as part of the participating state's plan, id. at 479, those services need not be specifically or expressly listed, id. at 480. Rather, it was sufficient that ADHS continue to provide CHMS-like services when prescribed by a physician, without keeping the actual CHMS program. Id. at 480-81. We remanded the case for modification of the injunction and consideration of the Plaintiffs' procedural due process claim. Id. at 481.

On remand, the district court held further proceedings to consider the Plaintiffs' procedural and substantive due process claims. By order dated November 27, 2002, the district court found that by seeking to terminate elements of the CHMS program, ADHS made a decision affecting payment of services. According to the district court, this invoked 42 U.S.C. § 1396a(a)(30)(A), which mandates that changes in methods and procedures of payment must be consistent with the principles of economy, efficiency, quality of care, and equal access. Since ADHS had done nothing to determine the effect that terminating elements of the CHMS program would have on these principles, the district court enjoined ADHS from terminating the program until it completed an impact study. The district court further found that for a number of years, Arkansas had been trying to curtail its early intervention day treatment services program. The court noted that the decision seemed to be based on improper motivations, and would result in a loss of medical services for needy children. Finding that such conduct shocked the conscience, the court enjoined ADHS from restructuring the CHMS program or moving CHMS-like services "off-plan."⁴ On December 18, 2002, the district court extended its injunction to CMS, specifically requiring CMS to continue to provide federal funding for the CHMS program.

ADHS appeals, arguing that they should not be required to complete any study before changing the CHMS program. With regard to the substantive due process matter, ADHS notes that this issue was not remanded to the district court, and suggests that our prior opinion permitting ADHS to terminate elements of the CHMS program precluded the district court from ordering the plan to continue. It further argues that its decision to restructure the CHMS program is supported by a rational basis and thus no substantive due process violation would arise from the change. CMS appeals the extension of any injunction to it because it was never a party to the underlying action and did not act in concert with ADHS.

ANALYSIS

We review the grant of injunctive relief for an abuse of discretion. Randolph v. Rodgers, 170 F.3d 850, 856 (8th Cir.1999). We must necessarily consider the predicate facts and law to determine if the district court abused its discretion by ordering relief at all. See, e.g., FDIC v. Bell, 106 F.3d 258, 262-63 (8th Cir.1997). A district court abuses its discretion if it issues an injunction based on an incorrect understanding of the law or reliance on clearly erroneous factual determinations. Randolph, 170 F.3d at 856.

I. PROCEDURAL DUE PROCESS

On remand, the district court held that ADHS violated the tenets of 42 U.S.C. § 1396a(a)(30)(A), often referred to as the "equal access provision" of the Medicaid Act, see Ark. Med. Soc'y Inc. v. Reynolds, 6 F.3d 519, 522 (8th Cir.1993), by attempting to alter the CHMS program without first considering how efficiency, economy, quality of care, and access to care would be affected. It enjoined ADHS from changing the program until an impact study considering these principles was completed.

At the outset, we dispose of ADHS's argument that the equal access provision of the Medicaid Act cannot support the Plaintiffs' procedural...