San Lazaro Ass'n, Inc. v. Connell
Decision Date | 24 January 2002 |
Docket Number | 00-55963,00-55377,No. 00-55065,00-55610.,00-55065 |
Citation | 278 F.3d 932 |
Parties | SAN LAZARO ASSOCIATION, INC., dba Biomedical Laboratory, Plaintiff-Appellee, v. Kathleen CONNELL, Controller of the State of California, Defendant-Appellant. Oganes Nagapetyan; Khachik Simonyan, Plaintiffs-Appellees, v. Kathleen Connell, Controller of the State of California; Joseph Munso, Chief Deputy Director of the California Department of Health Services, Defendants-Appellants. Clinical Care Laboratory, Inc., Plaintiff-Appellee, v. Kathleen Connell, Controller of the State of California; S. Kimberly Belshe, Director of the Department of Health Services, Defendants-Appellants. |
Court | U.S. Court of Appeals — Ninth Circuit |
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
Sandra L. Goldsmith, Deputy Attorney General of the State of California, Los Angeles, California, for the defendants-appellants.
Patric Hooper, Hooper, Lundy & Bookman, Inc., Los Angeles, California, for the plaintiffs-appellees.
Robert D. Kamenshine, United States Department of Justice, Civil Division, Washington, D.C., for amicus United States Department of Health and Human Services, in support of defendants-appellants.
Before: NOONAN, SILVERMAN, and PAEZ, Circuit Judges.
This case arises from a joint effort by the State of California and the Federal Bureau of Investigation ("FBI") to investigate fraud in the State's Medicaid/Medi-Cal Program. Plaintiffs are providers of medical services to Medi-Cal recipients. The California Department of Health Services ("DHS") instructed the Controller of the State of California ("Controller") to withhold payments to Plaintiffs after receiving an audit report from the Controller and other information from the FBI that Plaintiffs may have submitted fraudulent payment requests. Plaintiffs, in three separate actions under 42 U.S.C. § 1983, sought to enjoin DHS from utilizing the Controller's audit and the FBI information to withhold payments. The district court, ruling on cross-motions for summary judgment, granted Plaintiffs the relief they requested. It enjoined DHS from utilizing the Controller's audits to withhold payments to Plaintiffs. The district court concluded that: (1) by authorizing the Controller to conduct Medi-Cal provider audits, DHS improperly delegated its discretionary authority to the Controller in violation of a requirement under the Medicaid Act1 that a single state agency administer or supervise the State's Medicaid program; (2) Plaintiffs, as Medi-Cal providers, had a right under 42 U.S.C. § 1983 to enforce the single state agency requirement; and (3) the Controller's audit could not constitute "reliable evidence" sufficient to justify withholding payments under 42 C.F.R. § 455.23. The district court also awarded Plaintiffs attorney's fees under 42 U.S.C. § 1988.
Because there have been significant developments regarding the status of several of the Plaintiffs as Medi-Cal providers during the course of the district court proceedings as well as after entry of the district court's judgments, we initially address whether any of Plaintiffs' claims are moot. We conclude that, because Plaintiff San Lazaro Association, Inc. ("San Lazaro") canceled its laboratory license, its claims are moot. Accordingly, we dismiss the appeal in case no. 00-55065. Nonetheless, we have jurisdiction over Defendants' appeal in case no. 00-55610 from the district court's order granting San Lazaro attorney's fees. Aside from San Lazaro's claims, the other Plaintiffs' claims present live controversies over which we have jurisdiction. We also have jurisdiction over Defendants' appeals from the district court's orders granting attorney's fees to these Plaintiffs.
On the merits, because we hold that the single state agency requirement does not establish a right that the remaining Plaintiffs can enforce under 42 U.S.C. § 1983, we reverse the district court's summary judgments. We also reverse the attorney's fee awards under 42 U.S.C. § 1988. Finally, we hold that Plaintiffs Nagapetyan and Simonyan cannot assert a viable claim for relief under 42 C.F.R. § 455.23.
We briefly review the structure of the Medicaid Act and its implementation in California. We also summarize the events that precipitated the instant actions, and the district court's resolution of Plaintiffs' claims.
Under the Medicaid Act, the federal government underwrites part of the costs of state programs providing medical care to eligible needy individuals. In order to receive federal support, the States must comply with requirements of the Medicaid Act and with regulations promulgated by the Department of Health and Human Services ("HHS"). Wilder v. Va. Hosp. Ass'n, 496 U.S. 498, 502, 110 S.Ct. 2510, 110 L.Ed.2d 455 (1990).
Among the requirements that the Medicaid Act established for state programs, 42 U.S.C. § 1396a(a)(5) mandates that a participating State "provide for the establishment or designation of a single State agency to administer or to supervise the administration of the State's plan." HHS' regulations interpret this requirement as follows:
Under the Medicaid Act, "the state plan is required to establish ... a scheme for reimbursing health care providers for the medical services provided to needy individuals." Wilder, 496 U.S. at 502, 110 S.Ct. 2510. Various statutory provisions and regulations require the States to verify the legitimacy of payment claims. See, e.g., 42 U.S.C. § 1396a(a)(42) ( ); 42 C.F.R. § 447.202 ().
A provider may face various consequences for submitting an improper claim. A state's Medicaid agency can withhold payments to providers "upon receipt of reliable evidence" that a provider has engaged in "fraud" or "willful misrepresentation." 42 C.F.R. § 455.23(a). Overpayments can be recovered through administrative proceedings. See e.g., Cal. Code Regs. tit. 22, § 51047. Providers can be decertified and barred from participation in the Medicaid program. 42 U.S.C. § 1320a-7(a)(1) & (6). Medicaid fraud also may result in criminal prosecution. 42 U.S.C. § 1320a-7b(a)(setting forth criminal penalties for false statements or representations in provider claims for payments); 18 U.S.C. § 1347 ( ); see also United States v. Woodley, 9 F.3d 774, 778(9th Cir.1993) ( ).
Pursuant to 42 U.S.C. § 1396a(a)(5), California has designated DHS as its Medicaid agency, with responsibility for "administering or ... supervising the administration" of Medi-Cal, California's Medicaid program.
DHS retains a private contractor, Electronic Data Services ("EDS"), to process reimbursement claims by Medi-Cal providers. EDS utilizes an electronic claims processing system to review Medi-Cal claims and determine the amount owed. EDS then forwards its calculations to the Controller for payment. However, EDS does not conduct audits of provider claims.
DHS audits some provider claims, and supplements its own efforts by relying on audits performed by the Controller. DHS has defined the scope of the Controller's audit responsibilities through a series of inter-agency agreements with the Controller. A number of other agencies also may become involved in Medi-Cal fraud investigations. At relevant times, for example, the FBI has worked with both DHS and the Controller to investigate Medi-Cal fraud.
When the four Plaintiffs filed these actions, they were Medi-Cal providers. Khachik Simonyan was the owner of Eagle Medical Supply ("Eagle"), and Oganes Nagapetyan owned Nairi Pharmacy ("Nairi"). Both Eagle and Nairi provided medical supplies and equipment to Medi-Cal recipients. San Lazaro provided laboratory tests for Medi-Cal recipients. Clinical Care Laboratory, Inc. ("Clinical Care") provided clinical laboratory services to Medi-Cal recipients.
In 1998, the Controller audited all four Plaintiffs. In addition, the FBI, in coordination with the Controller, initiated an investigation of Eagle and Nairi. The investigations disclosed evidence of possible fraud. The Controller and the FBI reported their findings to DHS and either requested or recommended that DHS temporarily withhold payments to all Plaintiffs.2 DHS ultimately withheld payments to all four Plaintiffs.
1. Nature of the claims
Plaintiffs filed three separate lawsuits in federal district...
To continue reading
Request your trial-
Wright v. Fred Hutchinson Cancer Research Center
...of action to enforce federal law must be created by Congress."). Even the case on which plaintiffs rely, San Lazaro Ass'n. Inc. v. Connell, 278 F.3d 932, 941 (9th Cir.2002), evaluated the enforceability of rights created by a federal statute, not federal regulations, and clearly indicates t......
-
Oregon Bureau of Labor v. U.S. West Communications
...("Before we can reach the merits of the appeal, we must determine whether this case is moot."). 8. See San Lazaro Ass'n, Inc. v. Connell, 278 F.3d 932, 939 (9th Cir.2002) (quoting Cantrell v. City of Long Beach, 241 F.3d 674, 678 (9th Cir.2001)), amended by 285 F.3d 1165 (9th Cir.2002), ame......