TN Assoc. of Health Maintenance v. Grier
| Decision Date | 14 June 2001 |
| Docket Number | 00-6150,00-5298,Nos. 00-5297,00-6048,s. 00-5297 |
| Citation | 262 F.3d 559 |
| Parties | (6th Cir. 2001) Tennessee Association of Health Maintenance Organizations, Inc., et al., Intervenors-Appellants, v. Gaynell Grier, et al., Intervenors-Plaintiffs-Appellees, Fredia Wadley, Commissioner, Tennessee Department of Health, et al., Defendants-Appellees. Tennessee Association of Health Maintenance Organizations, Inc., et al., Intervenors-Appellees, Gaynell Grier, et al., Intervenors-Plaintiffs-Appellees, Fredia Wadley, Commissioner, Tennessee Department of Health, et al., Defendants-Appellees, v. THA, An Association of Hospitals and Health Systems; Hospital Alliance of Tennessee; Tennessee Pharmacists Association, Intervenors-Defendants-Appellants. Tennessee Association of Health Maintenance Organizations, Inc., et al., Intervenors, THA, an Association of Hospitals and Health Systems; Hospital Alliance of Tennessee; Tennessee Pharmacists Association, Intervenors-Appellants, v. Gaynell Grier, et al., Plaintiffs-Appellees, Fredia Wadley, Commissioner, Tennessee Department of Health, et al., Defendants-Appellees. Argued: |
| Court | U.S. Court of Appeals — Sixth Circuit |
Appeal from the United States District Court for the Middle District of Tennessee at Nashville, No. 79-03107, John T. Nixon, District Judge. [Copyrighted Material Omitted] John S. Hicks, Gary C. Shockley, BAKER, DONELSON, BEARMAN & CALDWELL, Nashville, Tennessee, William B. Hubbard, William M. Barrick, Weed, Bubbard, Berry & Doughty, Nashville, TN, William L. Penny, Wyatt, Tarrant & Combs, Nashville, TN, for Intervenors-Appellants.
Gordon Bonnyman, Tennessee Jusice Center, Nashville, TN, for Plaintiffs-Appellees.
Linda A. Ross, Asst. Attorney Gen., Nashville, TN, Sue A. Sheldon, Office of the Attorney General, General Civil Division, Nashville, TN, Jennifer Helton Hann, Deputy Atty. General, or Defendants-Appellees.
Michael L. Roden, Asst. U.S. Attorney, Nashville TN, for Defendants-Appellees.
Before: JONES, DAUGHTREY, and COLE, Circuit Judges.
Intervenors-Appellants appeal the district court's entry of a revised consent decree governing the hearing and appeal procedures in Tennessee's Medicaid managed care program. The parties to the consent decree were the plaintiffs (the recipients of Medicaid in Tennessee) and the defendants, including the State of Tennessee. Appellants contend that since they were not parties to the consent decree, they can not be bound by it under the Due Process Clause of the Fourteenth Amendment. Appellants also argue that the district court failed to conduct a fairness hearing to determine the reasonableness of the consent decree. Finally, Appellants raise several substantive objections to the consent decree. For the reasons provided below, we REMAND this case to allow the district court to conduct a fairness hearing.
This case began in 1979 as a 42 U.S.C. § 1983 class action lawsuit. The original plaintiffs, who were present and future Medicaid recipients, alleged that Tennessee's Medicaid program violated requirements of both the Medicaid Act, 42 U.S.C. § 1396, et seq., and the Due Process Clause of the Fourteenth Amendment. Plaintiffs argued that defendants failed to provide them with adequate notice and procedural protection upon denial of claims submitted by their Medicaid providers.
In September 1992, the district court approved a Second Consent Decree, which the parties had negotiated to resolve their disputes. The Second Consent Decree required defendants to give Medicaid recipients written notice upon denial of either their requests for medical assistance pre-authorization or their providers' claims for reimbursement. It also required defendants to provide recipients, upon request, with administrative hearings to review such denials.
In January 1994, Tennessee converted its traditional Medicaid fee-for-service program to a managed care model, and expanded the scope of eligibility. The new program, known as TennCare, operates as a special demonstration project authorized by the Secretary of Health and Human Services under the waiver authority conferred on him by Section 1115 of the Social Security Act, 42 U.S.C. § 1315. Under TennCare, the state no longer directly purchases medical services for eligible individuals as it did in the former Medicaid fee-for-service program. Instead, TennCare contracts with private managed care contractors ("MCCs"), which control beneficiaries' access to covered services. 1 From TennCare's inception, the MCCs were required by their contracts to comply with federal notice and hearing requirements of 42 C.F.R. § 431, Subpart E. Pursuant to its contract with the State, the MCCs agreed that the state could "develop additional grievance process guidelines or rules, which shall be followed by the [MCC], if TennCare determines that it is in the best interest of the TennCare program or if necessary to comply with federal or judicial requirements." (J.A. at 897.)
In April 1995, the current plaintiffs, who are TennCare enrollees, filed a motion to amend the Second Consent Decree alleging that the TennCare program was being administered in a manner inconsistent with the Decree. Specifically, the plaintiffs argued that a modification was needed to "prevent the denial, delay, reduction, suspension, or termination of medical assistance or other adverse action without due process and a timely fair hearing decision in violation of Title XIX of the Social Security Act." (J.A. at 99.) Defendants acknowledged that the Decree had to be modified, but disagreed with plaintiffs' proposed modifications.
In May 1996, the district court held that the state's TennCare notice and hearing procedures violated Medicaid law and regulations, as well as the Due Process Clause of the Fourteenth Amendment. See Daniels v. Wadley, 926 F.Supp 1305, 1313 (M.D. Tenn. 1996). The district court ordered the defendants to submit proposed modifications to the Consent Decree within 90 days. Id at 1314.2 In August 1996, the district court entered an agreed order in which the parties negotiated the policies and procedures through which the federal Medicaid due process requirements would be implemented in the context of the new managed care program. That agreed order incorporated the terms of the 1992 consent decree which applied to the State defendants as well as to their "agents, employees, and representatives ...." (J.A. at 67.)
On March 11, 1999, plaintiffs filed a Motion to Hold State Defendants in Contempt for violation of the Second Consent Decree as modified by the agreed order. Six months of intensive discovery ensued, culminating on the eve of trial, with the defendants request for a court-supervised settlement conference. That conference produced the Revised Consent Decree Governing TennCare Appeals, which was approved by the court and entered on October 26, 1999. Section A of the decree provided that:
This order and previous orders incorporated by reference shall apply fully to the state defendants, their agents, servants, employees, and attorneys, and those persons in active concert or participation with them including any private or public entity that administers Medicaid-funded health benefits. These orders shall apply specifically, but not limited to, the state defendants and their managed care contractors (MCC) . . . .
(J.A. at 308.) The decree enjoined the defendants to adequately protect the due process rights of plaintiff class members in the context of managed care by complying with provisions of the decree which expanded the protections afforded by 42 C.F.R. § 431, Subpart E.
On November 24, 1999, six TennCare MCOs and their trade association, the Tennessee Association of Health Maintenance Organizations ("MCO Intervenors") moved to intervene for the purpose of challenging the Revised Consent Decree. On November 29, 1999, three other trade associations ("Provider Intervenors") filed a joint motion to intervene on behalf of hospitals and pharmacists. Both MCO Intervenors and Provider Intervenors filed motions for relief from the Revised Consent Decree arguing that the decree inappropriately relies on the hearing rights set forth in 42 C.F.R. § 431, Subpart E. Affidavit testimony filed in support of the intervenors' motions complained that the effect of the decree was to impose new requirements that they provide notice and services pending appeal.
On February 25, 2000, the district court granted intervenors' motions to intervene. The court noted that "[d]efendants and [p]laintiffs in this case rebuffed [p]roposed [i]ntervenors' attempts to be present when the terms of the Revised Consent Decree were negotiated and drafted" and that the existing parties would not be prejudiced by intervention. (J.A. at 990.) The district court also found that the intervenors' ability to protect their interests would be impaired if they were not allowed to intervene because the denial of intervention would preclude all appellate review of the Revised Consent Decree. The district court did not address the intervenors' substantive arguments to set aside the consent decree. Rather, the court ordered the intervenors' notices of appeal be filed nunc pro tunc as of the dates on which they had filed their motions to intervene.
On March 2, 2000, plaintiffs filed a Motion to Reconsider for the Purpose of Affording the Parties an Opportunity to Supplement the Record. Plaintiffs requested that instead of immediately ordering the intervenors to proceed with their appeals, the district court should hold a hearing on the interevenors' motion to modify or set aside the Revised Consent Decree Governing TennCare Appeals. On March16, 2000, plaintiff also filed a Motion for Relief from Judgment pursuant to Fed. R. Civ. P. 60, to modify the Revised Consent Decree.
Specifically, the plaintiffs requested that the court make certain changes necessary to...
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