Visiting Nurse Ass'n of North Shore, Inc. v. Bullen

• Citation: 93 F.3d 997
• Decision Date: 11 January 1996
• Docket Number: Nos. 95-1849,95-1999,s. 95-1849
• Parties: , Medicare & Medicaid Guide P 44,573 VISITING NURSE ASSOCIATION OF NORTH SHORE, INC., et al., Plaintiffs, Appellees, v. Bruce M. BULLEN, et al., Defendants, Appellants. VISITING NURSE ASSOCIATION OF NORTH SHORE, INC., et al., Plaintiffs, Appellants, v. Bruce M. BULLEN, et al., Defendants, Appellees. . Heard
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 997

93 F.3d 997

51 Soc.Sec.Rep.Ser. 522, Medicare & Medicaid Guide

P 44,573

VISITING NURSE ASSOCIATION OF NORTH SHORE, INC., et al., Plaintiffs, Appellees, v. Bruce M. BULLEN, et al., Defendants, Appellants.

VISITING NURSE ASSOCIATION OF NORTH SHORE, INC., et al., Plaintiffs, Appellants, v. Bruce M. BULLEN, et al., Defendants, Appellees.

Nos. 95-1849, 95-1999.

United States Court of Appeals First Circuit.

Heard Jan. 11, 1996.

Decided Aug. 22, 1996.

Douglas H. Wilkins, Assistant Attorney General, Boston, MA, with whom Scott Harshbarger, Attorney General, and William L. Pardee, Assistant Attorney General, were on brief, for appellants Bullen, et al.

Richard P. Ward, Boston, MA, with whom John H. Mason, Susan T. Nicholson and Ropes & Gray were on brief, for appellees Before CYR, BOUDIN and STAHL, Circuit Judges.

Visiting Nurse Association of North Shore, Inc., et al.

CYR, Circuit Judge.

Nine Massachusetts health care providers initiated this civil rights action under 42 U.S.C. § 1983, alleging substantive and procedural violations of the Medicaid Act, see 42 U.S.C. § 1396a(a)(30) ("Act"), by the named defendants, various officials of the Massachusetts Medicaid program. The district court granted partial summary judgment for plaintiffs, declaring defendants in noncompliance with certain procedural requirements relating to the establishment of reimbursement rates for health care services provided to Medicaid recipients. Defendants appealed. Plaintiffs cross-appealed a district court ruling dismissing their remaining claims. We reverse the district court judgment against defendants and dismiss the cross-appeal.

I BACKGROUND

Medicaid is a joint federal-state program designed to afford medical benefits to low-income individuals. See 42 U.S.C. § 1396 et seq.; Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498, 502, 110 S.Ct. 2510, 2513-24, 110 L.Ed.2d 455 (1990). A State which elects to participate in Medicaid is eligible to receive federal funds only if its State Plan is approved by the Federal Health Care Financing Administration ("HCFA"). ¹ Among the sixty-two criteria for HCFA approval, see 42 U.S.C. § 1396a(a)(1)-(62), is the so-called "equal access" clause:

[A State plan for medical assistance must] provide such methods and procedures relating to the utilization of, and the payment for, care and services available under the plan (including but not limited to utilization review plans as provided for in section 1396b (i)(4) of this title) as may be necessary to safeguard against unnecessary utilization of such care and services and to assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area.

Id. § 1396a(a)(30) (emphasis added); 42 C.F.R. § 447.201(b) ("The plan must describe the policy and the methods to be used in setting payment rates for each type of service....").

Massachusetts establishes its reimbursement rates through the Massachusetts Rate Setting Commission, with the approval of the Division of Medical Assistance of the Massachusetts Executive Office of Health and Human Services ("DMA"). See Mass.Gen.L. ch. 6A, §§ 32, 36. Before 1991, Massachusetts used a "cost-based" methodology for setting reimbursement rates, laconically described in its approved plan as "fixed negotiated fee schedules." Ostensibly, the term "negotiated" connoted an intent to calculate a different rate for each individual health care provider, based on its reported costs for delivering five different categories of medical services (skilled nursing, occupational, physical and speech therapy, and home-health-aide services) during the preceding fiscal year, adjusted for such uniform factors as inflation and allowing for incentive caps (e.g., to promote efficiency). See Mass.Regs.Code tit. 114.3, § 3.00.

In 1991, however, Massachusetts decided to convert its rate-setting methodology to a so-called "class rate" system. Rather than basing reimbursement rates on the individual health care provider's idiosyncratic costs for the previous year, DMA decided to propose a single, fixed reimbursement rate for each of the five medical services categories, supra, which would be applied across-the-board to all in-state health care providers, without regard to their individual costs. During the Under the Medicaid Act and regulations, a State must meet two conditions before instituting "material" or "significant" changes in its Medicaid program: ² i.e., (1) submit a Plan amendment to HCFA for approval, "describ[ing] " the methods used to set rates under 42 U.S.C. § 1396a(a)(30), see 42 C.F.R. § 447.201(b) (emphasis added), and (2) provide public notice "describing the proposed change[s]" and "[e]xplain[ing] why [it] is changing its methods and standards," see id. § 447.205(c)(1), (3) (emphasis added).

transition to the new "class rate" system, a series of "interim" and "phase-in" rates were to be utilized.

During a thirty-month period beginning in June 1991, Massachusetts issued public notices relating to the proposed change, and published a series of regulations, setting forth the interim, phase-in, and final class rates in "bottom-line" dollar figures for each of the five medical service categories, without detailing the particular formula and factors used to arrive at the proposed "bottom-line" rate figures. Thereafter, DMA conducted a series of public meetings to explain the proposed changes to health care providers, including appellees, and other interested parties. On January 1, 1994, the final class rates took effect, superseding the interim and phase-in rates.

Plaintiffs soon filed this section 1983 action, alleging that the DMA commissioner and its members had violated various substantive and procedural requirements prescribed by 42 U.S.C. § 1396a(a)(30). ³ By way of procedural violations, the complaint alleged that the pre-January 1994 public notices issued by defendants contained legally deficient "descriptions" of the proposed new methods and procedures, by failing to disclose the formula defendants used to arrive at either the interim, phase-in, or final class rates. The complaint further alleged that defendants failed to file an appropriate amendment to the Massachusetts Plan, "describing" the "material" changes in its reimbursement rate methodology. Plaintiffs moved for partial summary judgment on their two procedural claims.

Massachusetts filed a Plan amendment ("Amendment 003") with the HCFA regional office in March 1994. ⁴ The amendment indicated the proposed change from a cost-based to a "class rate" system by deleting a single word from the original Plan description: "fixed negotiated fee schedules" now became simply "fixed fee schedules." Although a Plan amendment is deemed approved unless HCFA acts within ninety days of its filing, see 42 C.F.R. § 430.16(a), HCFA tolled the ninety-day period by advising defendants that additional information was needed--i.e., "the methodology or formula for the calculation of the fixed rate"--to enable a final approval determination. See id. § 430.16(a)(1)(ii).

Prior to the time DMA responded to the HCFA request for information, and before any final HCFA decision on Amendment 003, the district court granted partial summary judgment for plaintiffs on their procedural claims, ruling that neither Amendment 003 nor defendants' pre-January 1994 public notices provided adequate detail on the proposed "methods and procedures" for calculating final class rates. See Visiting Nurse Ass'n of N. Shore, Inc. v. Bullen, 866 F.Supp.

1444, 1459-62 (D.Mass.1994). The court concluded that these procedural lapses rendered the final class rates invalid, thus obviating any need to determine whether the proposed new methodology or rates reasonably ensured compliance with the substantive requirement--"equal access" to medical care--imposed by section 1396(a)(30). Id. at 1462.

Without conceding any procedural lapse, defendants issued another public notice on September 23, 1994, containing a detailed description of the methodology used to calculate the "new" final class rates, which were to take effect on November 1, 1994. In December 1994, defendants filed a second Plan amendment with HCFA ("Amendment 023"), which provided the same level of detail as the September 24, 1994 public notice. Defendants then asked the district court to declare them in compliance with the procedural requirements of section 1396a(a)(30). Then, in April 1995, while Amendments 003 and 023 remained pending, HCFA was notified that defendants wished to revise and update Amendment 003 to include the detailed information contained in Amendment 023. Defendants thus sought to make any HCFA Plan-amendment approval fully retroactive to January 1, 1994, rather than October 1994. See supra note 4. Three days later, HCFA approved Amendment 003, as revised, retroactive to January 1, 1994.

The district court entered final judgment, based on four essential holdings. Visiting Nurse Ass'n of N. Shore, Inc. v. Bullen, No. 94-10123-NG (D.Mass. June 30, 1995). First, the court reaffirmed its August 1994 declaratory ruling that defendants' initial implementation of the final class rates on January 1, 1994 was invalid for failure to comply with the public notice and Plan amendment requirements of section 1396a(a)(30), and directed entry of its declaratory judgment nunc pro tunc (i.e., effective September 30, 1994), the date on which its initial stay of the judgment expired. Id., slip op. at 2. Second, defendants were found to have been in compliance with the section 1396a(a)(30) procedural requirements as of November 1, 1994, after providing detailed descriptions of the new rate-setting methodology in their September 1994 public notice and in Amendment 023. Id. Third, the district court ruled that defendants...