Unicare Health Facilities, Inc. v. Miller

• Decision Date: 14 December 1979
• Docket Number: No. 79 C 2897.,79 C 2897.
• Citation: 481 F. Supp. 496
• Parties: UNICARE HEALTH FACILITIES, INC., a Wisconsin Corporation, Plaintiff, v. Jeffrey C. MILLER, Acting Director of the Illinois Department of Public Aid; and Dr. Robert DeVito, Director of the Illinois Department of Mental Health and Developmental Disabilities, Defendants.
• Court: U.S. District Court — Northern District of Illinois

481 F. Supp. 496

UNICARE HEALTH FACILITIES, INC., a Wisconsin Corporation, Plaintiff, v. Jeffrey C. MILLER, Acting Director of the Illinois Department of Public Aid; and Dr. Robert DeVito, Director of the Illinois Department of Mental Health and Developmental Disabilities, Defendants.

No. 79 C 2897.

United States District Court, N. D. Illinois, E. D.

December 14, 1979.

Stephen C. Shamberg, Judi Fishman, Friedman & Koven, Chicago, Ill., for plaintiff.

William J. Scott, Ill. Atty. Gen., James C. O'Connell, Sp. Asst. Atty. Gen., Welfare Litigation Div., Chicago, Ill., for defendants.

MEMORANDUM OPINION AND ORDER

CROWLEY, District Judge.

This is an action for declaratory and injunctive relief and reimbursement for reasonable cost of services brought under Title XIX of the Social Security Act, commonly known as Medicaid. 42 U.S.C. § 1396 et seq. Plaintiff, a private for profit corporation which operates an intermediate care facility for the mentally retarded, North Aurora Center, challenges the Illinois Medicaid Program as violative of certain federal regulations, the Supremacy clause of the Constitution of the United States and the equal protection and due process clauses of the Fourteenth Amendment.

Defendants are Jeffrey C. Miller, Acting Director of the Illinois Department of Public Aid, the agency responsible for the administration and supervision of the Illinois Medicaid Program and Robert deVito, the Director of the Illinois Department of Mental Health and Development Disabilities, the agency delegated to provide community programs for active treatment and rehabilitative services for residents of intermediate care facilities for mentally retarded persons.

Plaintiff alleges that the Illinois Medicaid plan violates federal regulation, 42 C.F.R. § 447.302(b), in that it fails to adequately reimburse plaintiff for the reasonable costs allowable for operating an intermediate care facility. In so doing, plaintiff challenges various methods adopted by IDPA for calculating payments for services rendered to eligible recipients. The major challenge is directed to the provision in the Illinois plan that creates a separate classification for state operated intermediate care facilities for the mentally retarded. Plaintiff alleges that such a classification is arbitrary and capricious because it results in reimbursements being made solely on the basis of the state operated classification rather than on the basis of the number of residents, the degree of the residents' retardation or services provided in compliance with federal regulations and state licensing and certification prerequisites. The result, according to the complaint, is that plaintiff is forced to absorb the cost of required services for which the federal Medicaid Act permits reimbursement. In contrast, plaintiff argues, although North Aurora houses persons with similar degrees of retardation and is therefore required to provide similar kinds of services as state operated facilities, state operated facilities receive substantially higher reimbursement payments. Finally, the complaint avers that federal regulations require that Day Care services be provided as part of habilitation services and that day care is an allowable cost. 42 C.F.R. § 477.279(b). Under the Illinois plan, however, payments for day care services are not allowed because such services are presumably covered by programs funded under Title XX, 42 U.S.C. § 1397 et seq. Plaintiff alleges that less than half of North Aurora's residents receive benefits under Title XX and that because day care is a required service North Aurora is obligated to pay the costs.

This matter is currently before the Court on plaintiff's motion for issuance of a preliminary injunction. Plaintiff contends that defendants' failure to pay the reasonable costs of allowable services has caused plaintiff to operate at a deficit and now threatens plaintiff's ability to continue to operate North Aurora Center. Thus, plaintiff seeks to enjoin defendants from implementing the challenged provisions of the Illinois Medicaid plan and seeks reimbursement for reasonable costs expended for required services, including day care programming.

A preliminary injunction is appropriate if (1) plaintiff has a "reasonable likelihood" of success on the merits; (2) there is no adequate remedy at law and irreparable harm will occur unless an injunction is issued; (3) the threatened injury to plaintiff outweighs the burden of the injunction on defendant; and (4) the injunction will not disserve the public interest. Fox Valley Harvestore v. A. O. Smith Harvestore Products, Inc., 545 F.2d 1096, 1097 (7th Cir., 1976). Each of these factors must be shown before an injunction is issued.

Medicaid is a program designed to aid persons whose economic resources are insufficient to meet the cost of medical care. The federal government provides matching funds to participating states. Although the state must comply with certain federal requirements, the actual administration of the Medicaid program is placed in the state agency which in turn transmits payments to providers of services. Before a Medicaid program may be implemented, the state must submit a plan to HEW for approval, and substantial deference is accorded the state in devising methods for administering its program. District of Columbia Podiatry Society v. District of Columbia, 407 F.Supp. 1259, 1263 (D.D.C., 1975); Briarcliff Haven, Inc. v. Department of Human Resources of Georgia, 403 F.Supp. 1355, 1361 (N.D.Ga., 1975).

Plaintiff contends that by classifying state facilities separate from private facilities in addition to imposing reimbursement ceilings, the Illinois plan violates 42 C.F.R. § 447.305 which requires that the plan set reasonable criteria for the class. Plaintiff argues that reasonable criteria must be based on factors that assist the agency in establishing payment rates that fully reimburse all economically and efficiently operated facilities and that because the state operated facility classification bears no relation to the number or needs of a facility's residents, it is arbitrary and capricious.

Although the evidence submitted with this motion shows that state operated facilities receive larger amounts of reimbursements than privately operated facilities, that fact alone does not necessarily disqualify the class under the regulation. The federal statutory scheme...