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National Union of Hospital and Health Care Employees v. Carey

decided: March 18, 1977.


Appeal from a judgment of the United States District Court for the Southern District of New York dismissing the complaint upon order of Hon. Charles M. Metzner, J., for lack of standing and failure to state a claim. Affirmed.

Mansfield, Van Graafeiland and Meskill, Circuit Judges. Mansfield, Circuit Judge.

Author: Van Graafeiland


The issue in this case is simply stated. Can a union, which has organized a number of nursing homes in the State of New York, sue the State to secure an increase in Medicaid payments to the homes in order that the union may negotiate higher salaries for its members? The District Judge held that it could not. We believe that he was right.

The State of New York, as a participant in the Federal Medicaid program under Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq., must adopt a plan for medical assistance and have it approved by the Secretary of Health, Education and Welfare. 45 C.F.R. §§ 201.2 and 201.3. The plan must provide for the payment of the reasonable cost of inpatient hospital services in accordance with the standards and principles prescribed for the Medicare program. 42 U.S.C. § 1396(a)(13)(D); 45 C.F.R. § 250.30(a)(2)(i).

Prior to 1969, the State of New York reimbursed hospitals on the basis of their actual costs. Finding that this was becoming increasingly expensive, the State, in May 1969, amended § 2807 of its Public Health Law to provide that payments must be reasonably related to the cost of the "efficient" production of the covered services. Hospital and nursing facilities were classified by groups, depending upon geographical location, size, etc., and each group was treated as a unit for the purpose of establishing rates. The institutions were thenceforth advised in advance of their proposed rate schedules so that they could plan their budgets accordingly. In order to accomplish this, a base year is used for the computation of actual costs; and adjustments are made thereafter, based upon intervening changes in costs and hospital related economic factors in the following so-called "trending" year, in order to establish the rate for the ensuing year.*fn1 Under this plan, the State does not reimburse nursing homes on the basis of their actual costs but pays, instead, at a prospective reimbursement rate which is reasonably related to the costs of the services performed. Broadacres Skilled Nursing Facility v. Ingraham, 51 App. Div. 2d 243, 245, 381 N.Y.S.2d 131 (3d Dept. 1976). The State believes that this accords with the provisions of § 1396(a)(30) which requires the State to assure that payments "are not in excess of reasonable charges consistent with efficiency, economy, and quality of care". See, e.g., Sigety v. Ingraham, 29 N.Y.2d 110, 116, 324 N.Y.S.2d 10, 272 N.E.2d 524 (1971).

In November 1975, the State amended 10 NYCRR § 86.21 (k), enacted pursuant to Public Health Law § 2807, to provide as follows:

Effective for fiscal years ending in 1976 and thereafter, allowable costs per unit of service (inpatient day, clinic visit, etc.) in a base year will not include any cost increases over the prior year which are in excess of the inflation factor used by the Department in determining the reimbursement rate in effect during such base year unless the cost increases in the base year resulted in a rate revision during the rate year in accordance with Section 86.17.*fn2

Although this regulation was intended to take effect on November 26, 1975, it was not approved by the Secretary of HEW as required by 42 U.S.C. § 1396a(b) until August 1976.*fn3 In the meantime, on February 9, 1976, appellants commenced this action challenging the legality of the regulation. In their complaint, they sought judgment for the following relief:

(1) Declaring that, insofar as the regulation forbids full payment of the actual reasonable cost of inpatient services, "including the costs of reasonable employee wage and benefit increases negotiated in collective bargaining agreements", it violates the Federal Medicaid statutes and regulations.

(2) Directing that, so long as New York State participates in the Medicaid plan, it must provide the full actual and current costs of inpatient services, including the costs of increases in employee wages and benefits negotiated in collective bargaining agreements.

(3) Declaring the regulation invalid as an encumbrance and restraint on collective bargaining under the United States Labor Management Relations Act.

(4) Enjoining the enforcement of the regulation and any other regulation which prohibits or restricts the payment of the actual reasonable current costs of health care services.

Following the service of their complaint, appellants moved for an order preliminarily enjoining the State from effectuating and enforcing the regulation. Instead of granting their motion, the District Court dismissed the complaint, holding that appellants were without standing to seek relief for alleged violations of 42 U.S.C. § 1396a and that the complaint failed to state a claim for alleged violation of the Labor Management Relations Act. It is this judgment which we affirm.

It has by now been well established that both welfare recipients and welfare providers (e.g., nursing homes) have standing to challenge alleged violations of the Social Security laws. Rosado v. Wyman, 397 U.S. 397, 420, 25 L. Ed. 2d 442, 90 S. Ct. 1207 (1970); Singleton v. Wulff, 428 U.S. 106, 96 S. Ct. 2868, 49 L. Ed. 2d 826 (1976); Massachusetts General Hospital v. Sargent, 397 F. Supp. 1056, 1059 (D. Mass. 1975). However, we find nothing in the Federal Medicaid statutes and regulations which gives standing to the providers of the providers, i.e., employees, medical supply houses, laundries, etc. which service nursing homes. A comparison of this case with the Supreme Court's recent decision in Singleton v. Wulff, supra, satisfies us that such right of suit does not exist.

In Singleton, two physicians brought suit against Missouri state officials challenging the constitutionality of a Missouri statute which denied Medicaid payments for abortions not "medically indicated". The Court was unanimous in holding that, because the physicians, as providers, would be reimbursed under the Medicaid program if permitted to perform the proscribed abortions, the relationship between the parties was "classically adverse", and a case or controversy existed. However, only five of the ...

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