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

• Decision Date: 12 October 1994
• Docket Number: Civ. A. No. 94-10123-NG.
• Citation: 866 F. Supp. 1444
• Parties: VISITING NURSE ASSOCIATION OF NORTH SHORE, INC., et al, Plaintiffs, v. Bruce M. BULLEN, et al., Defendants.
• Court: U.S. District Court — District of Massachusetts

866 F. Supp. 1444

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

Civ. A. No. 94-10123-NG.

United States District Court, D. Massachusetts.

October 12, 1994.

COPYRIGHT MATERIAL OMITTED

John Mason, Richard P. Ward, and Susan T. Nicholson, Ropes & Gray, Boston, MA, for plaintiffs.

William L. Pardee, Office of the Atty. Gen. and Douglas Wilkins, Office of the Atty. Gen., Crim. Bureau, Boston, MA, for defendants.

CORRECTED MEMORANDUM AND ORDER

GERTNER, District Judge.

I. INTRODUCTION

This is a suit by providers of home health services, challenging the rates set by the state under Title XIX of the Social Security Act ("the federal Medicaid Act"), 42 U.S.C. § 1396a et seq. On January 1, 1994, the defendants¹ implemented a system for the reimbursement of such services which all parties agree was "new" in several respects. The old approach, "provider cost-based reimbursement,"² reimbursed each agency for Medicaid services based on that agency's costs for its most recent fiscal year (adjusted for inflation and subject to certain caps and incentives). The new system, a "class rate" system, selected a single rate, applicable to all agencies throughout the Commonwealth regardless of actual cost for each of the categories of home health services.

Plaintiffs are nine visiting nurse associations³ seeking declaratory and injunctive relief against the defendants under 42 U.S.C. § 1983 on the grounds that the new class rates — both in terms of how they were determined, the factors taken into account or ignored, and how they have been implemented — did not comply with the federal Medicaid Act and its regulations. The core of the plaintiffs' claim is that the new rates were driven by budgetary constraints, not the statutory factors.⁴

While the state may take budgetary factors into consideration, especially in a time of general belt-tightening, it may not flout the statutory requirements. The defendants' discretion in setting rates is limited by 42 U.S.C. § 1396a(a)(30)(A) hereinafter "(30)(A)". The "Equal Access" provision of (30)(A) requires the state defendants to fix the rates at a level consistent with both "efficiency, economy and quality of care" and sufficient to enlist enough providers so that Medicaid recipients have access to services equal to that of the general population in that geographic area.⁵ If budgetary restraints make it impossible for a state to comply with the statutory standards, so it is argued, they ought not participate in the program. This challenge to the rate setting itself shall be the subject of the trial on the merits.

As a preliminary matter, the plaintiffs raise two related procedural issues. They claim that defendants did not give adequate public notice of the rates and the new methodology undergirding them (the "public notice issue"). Nor, they allege, was the new approach spelled out with any specificity in the state plan amendment which the defendants were obliged to submit to the Health Care Financing Administration ("HCFA") for approval by the Secretary of Health and Human Services (the "plan amendment issue").

On March 8, 1994, plaintiffs moved for partial summary judgment based on the public notice and state plan amendment issue. They seek a declaration that 114.3 CMR § 3.00 as revised effective July 1, 1993, implementing the class rates, and its predecessor regulations, implementing the interim rates between July 1, 1991 and June 30, 1993, are void, and an injunction stopping implementation until the state complies with the regulations.⁶ Defendants have also moved for partial summary judgment on the same issues.

On March 9, 1994, defendants moved to dismiss on several grounds: (1) that § (30)(A) does not create a right enforceable by these providers; (2) that the complaint fails to allege an actual controversy under § (30)(A); (3) that plaintiffs' challenge to certain transitional rates implemented before the new class rates were in effect should be dismissed for want of jurisdiction, and (4) that the complaint should be dismissed for failure to state a "simple, concise and direct" claim in violation of Fed.R.Civ.P. 8.

A hearing was held on all pending motions on May 20, 1994. For the reasons that follow, the Court DENIES the defendants' motion to dismiss with respect to both the July 1, 1993 rates, and the transitional rates. The Court also GRANTS partial summary judgment for the plaintiffs only on the claim that the implementation of the current class rate (embodied in 114.3 CMR § 3.00 as revised effective July 1, 1993) did not comply with either the plan or the notice requirements of the Federal Medicaid Act, and that such implementation should be enjoined pending compliance. Since the Court requires additional briefing on the subject of the validity of the interim rates, it stays enforcement of this Order pending a determination of: (1) The length of time it will take the state to effect compliance; and, (2) Should it be necessary, which regulation (apart from the most recent regulation implementing the class rates as revised July 1, 1993) should be in effect in the interim. See Section IV, infra.

II. DEFENDANTS' MOTION TO DISMISS

In order to decide the pending motion to dismiss, the Court is obliged to assume the truth of a plaintiffs' well pleaded factual allegations making all reasonable inferences in plaintiffs' favor. See, Garita Hotel Ltd. v. Ponce Federal Bank, 958 F.2d 15, 17 (1st Cir.1992).

A. Whether 42 U.S.C. § 1396a(a)(30)(A) Confers a Right Enforceable Under 42 U.S.C. § 1983.

1. Framework for Analysis

Section 1983 provides a cause of action for persons subject to the "deprivation of any rights, privileges or immunities secured by the Constitution and laws of the United States." The statutory right that the plaintiffs seek to enforce is the right under § 1396a(a)(30)(A) to rates that are consistent with efficiency, economy and quality of care and that are sufficient to ensure that Medicaid recipients have equal access to services.

For the past twenty years, the Supreme Court has reaffirmed the holding that the phrase "and laws" of § 1983 creates a federal cause of action against state officials for violation of rights defined by federal statutes.⁷ To be sure, the case law has recognized that not all federal statutes confer rights enforceable under § 1983, a result that could supplant other specific federal enforcement mechanisms, or totally undermine the political compromises that may have given rise to the statute. Much of the litigation has focussed on the issue of identifying statutory rights and the circumstances under which they may be enforced.

In Golden State Transit Corp. v. Los Angeles, 493 U.S. 103, 106, 110 S.Ct. 444, 448-49, 107 L.Ed.2d 420 (1989) and Wilder v. Virginia Hospital Ass'n, 496 U.S. 498, 110 S.Ct. 2510, 110 L.Ed.2d 455 (1990), the Supreme Court fashioned a two step analysis. In the first step, the court asks three questions: a) Whether the statutory provision "`was intended to benefit the putative plaintiff,'" Wilder v. Virginia Hospital Ass'n., supra at 509, 110 S.Ct. at 2517 (1990) (quoting Golden State Transit Corp. v. Los Angeles, supra at 106, 110 S.Ct. at 448-49 (1989)). If so, the provision creates an enforceable right unless it b) "reflects merely a `congressional preference' for a certain kind of conduct rather than a binding obligation on the governmental unit." Wilder v. Virginia Hospital Ass'n, supra at 509, 110 S.Ct. at 2517 (quoting Pennhurst State School and Hospital v. Halderman, 451 U.S. 1, 19, 101 S.Ct. 1531, 1541, 67 L.Ed.2d 694 (1981)). Finally, an enforceable right will exist unless c) the plaintiff's interest is so "vague and amorphous as to be" "beyond the competence of the judiciary to enforce." Wilder v. Virginia Hospital Ass'n., supra at 509, 110 S.Ct. at 2517 (quoting Golden State Transit Corp. v. Los Angeles, supra at 106, 110 S.Ct. at 448 and Wright v. Roanoke Redevelopment and Housing Authority, 479 U.S. 418, 431-32, 107 S.Ct. 766, 774-75, 93 L.Ed.2d 781 (1987)). On this issue, the party seeking to assert the right bears the burden of proof. See Arkansas Medical Society, Inc. v. Reynolds, 6 F.3d 519, 523 (8th Cir.1993).

In the second step, the inquiry focuses on whether Congress foreclosed private § 1983 enforcement by providing a comprehensive remedial scheme within the statute. Golden State Transit Corp. v. Los Angeles, supra at 106-107, 110 S.Ct. at 448-49. As to this issue, the defendant bears the burden of proof. Id. at 106-107, 110 S.Ct. at 448-49; Arkansas Medical Society, Inc. v. Reynolds, supra at 523. Applying the Golden State framework and continuing a tradition of § 1983 enforcement of the Social Security Act,⁸ the Supreme Court in Wilder held that § 42 U.S.C. § 1396a(a)(13)(A) of the Medicaid Statute (hereinafter the "Boren Amendment" or § 13(A)) created an enforceable right under § 1983.

While the most recent decision of the Supreme Court, Suter v. Artist M, ___ U.S. ___, 112 S.Ct. 1360, 118 L.Ed.2d 1 (1992),⁹ has created some confusion in this area,¹⁰ most courts, have taken the position that Suter did not change the Golden State analytical framework. In Albiston v. Maine Commissioner of Human Services, 7 F.3d 258 (1st Cir.1993), the court held that Suter, reflecting concerns that states be aware of their obligations prior to accepting federal funds, heightened the burdens on the plaintiff who sought to enforce a statute enacted under the Spending Power. It construed Suter as holding that the intent to impose conditions on the grant of federal monies directly on the states must be "demonstrated," not "presumed," and must be delineated unambiguously, i.e. "with sufficient specificity to permit states to exercise their choice to participate in the statutory scheme knowingly, cognizant of the consequences of their action." Albiston v. Maine Commissioner of Human Services, supra at 262-263 (quoting Pennhurst State Sch. &...