UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
October 14, 1977
HOSPITAL ASSOCIATION OF NEW YORK STATE, INC., MISERICORDIA HOSPITAL MEDICAL CENTER, BUFFALO GENERAL HOSPITAL, THE GENESEE HOSPITAL, and THE MOUNT SINAI HOSPITAL on behalf of themselves and all other nonprofit hospitals which are members of the HOSPITAL ASSOCIATION OF NEW YORK STATE, INC. and which are reimbursed for Medicaid services rendered to hospital patients, Plaintiffs,
PHILIP L. TOIA, as Commissioner of Social Services of the State of New York, ROBERT P. WHALEN, as Commissioner of Health of the State of New York, PETER GOLDMARK, as Director of the Budget of the State of New York, HUGH L. CAREY, as Governor of the State of New York, and DAVID MATHEWS, as Secretary of the U.S. Department of Health, Education & Welfare, Defendants
The opinion of the court was delivered by: LASKER
New York State participates in the Medicaid program and reimburses hospitals for costs incurred in the treatment of Medicaid patients. On August 16, 1976, the Secretary of Health, Education and Welfare approved several amendments to the state plan, including a change in the reimbursement formula. Plaintiffs contend that the Secretary's approval was arbitrary and capricious because the amendments failed to meet the relevant, Federal regulatory standards and because the approval procedure was defective. For the claimed violations of 42 U.S.C. § 1396a(a)(13)(D) and the rules thereunder, 45 C.F.R. §§ 250.30(a), 246.10(a)(3), they seek relief against the Secretary.
HEW argues that the Secretary's actions are committed to agency discretion, that plaintiffs lack standing to sue, and that the issues are not ripe for review. Accordingly, it moves to dismiss the complaint against the Secretary. For the following reasons, the motion is denied.
The prohibition against judicial review extends to agency action which "is committed to agency discretion by law." 5 U.S.C. § 701(a)(2). As § 701(a)(2) has been interpreted, a court may not sit in judgment of an agency's decision when: 1) it was made pursuant to a statute that is "'drawn in such broad terms that in a given case there is no law to apply,'" Greater New York Hospital Association v. Mathews, 536 F.2d 494, 499 (2d Cir. 1976); quoting Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 410, 28 L. Ed. 2d 136, 91 S. Ct. 814 (1970) or 2) "'congressional intent is discernible to make [the decision] unreviewable,'" Langevin v. Chenango Court, Inc., 447 F.2d 296, 303 (2d Cir. 1971), quoting, 4 K. Davis Administrative Law § 28.16 at 965 (Supp. 1970) or 3) "'the subject matter [of the agency's action] is for some reason inappropriate for judicial consideration,'" Id; Kletschka v. Driver, 411 F.2d 436, 443 (2d Cir. 1969).
In this case, as to HEW only, the procedural regularity of its action has been challenged; none of the elements, mentioned above, that precludes judicial review is present here.
1) NO LAW TO APPLY
The bare instruction of the Medicaid Act, 42 U.S.C. § 1396a(a)(13)(D), that the Secretary "review and approve" state reimbursement plans, is amplified by the Secretary's own regulations, 45 C.F.R. § 250.30(a)(2), which specify the criteria that must be considered when approval is granted or withheld. The path that the Secretary must follow in reaching a decision about a state plan is not unmarked; at the very least, he must measure the proposal against the standards named in the regulations. With these conditions imposed on the approval procedure that is the object of the plaintiffs' challenge, it cannot be said that this is "one of what must be a very limited number of cases where the statute under which the challenged action was performed is "'. . . drawn in such broad terms that . . . there is no law to apply.'" Greater New York Hospital Association v. Mathews, supra, 536 F.2d at 497.
2) CONGRESSIONAL INTENT
The government does not argue that Congress intended to shield the question of procedural regularity from judicial review, nor that Congress intended it to be the final arbiter in cases where its own procedures were challenged.
3) INAPPROPRIATE SUBJECT MATTER
Read together, 42 U.S.C. § 1396a(a)(13)(D) and 45 C.F.R. § 250.30(a)(2) specifically obligate the Secretary to: (1) "review and approve" state reimbursement schedules, (2) conduct the review in advance of the state's application of those schedules and (3) consider a variety of factors in deciding whether to grant or withhold approval. Here the Hospitals allege that the Secretary unlawfully delegated, to the state, the responsibility for advance approval, by sanctifying a plan that was composed largely of "exceptions," the treatment of which had not been approved in advance by the Secretary. In addition, they contend that to the extent that the Secretary did conduct the statutorily required review, he failed to consider the criteria listed in the Medicaid regulations. The Hospitals argue that though the statute obliges the Secretary to conduct a particular kind of review and the Constitution imposes the more general requirement of due process, the Secretary has ignored both.
Whatever the complexities of the object of the Secretary's approval, the manner of that approval is, when claimed to offend the Constitution or the statute under which the Secretary acts, a matter peculiarly suited to judicial review. Greater New York Hospital Association v. Mathews, supra, 536 F.2d at 499-500; Langevin v. Chenango Court, Inc., supra, 447 F.2d at 303-04; Kletschka v. Driver, supra, 411 F.2d at 444.
There is no need to address the government's contention that the Secretary's determination that the state plan provides for reasonable cost reimbursement is unreviewable. In the impending trial against the Secretary alone, (the complaint having been dismissed as to the state defendants) we are not called on to reexamine the state plan. Of course, it is true that the statute obliges the Secretary to "review and approve" that plan. However, our inquiry is framed by the operative words: in this case, the issue is whether the Secretary did his "job," of reviewing and approving, and whether he did it adequately, that is, neither arbitrarily nor capriciously. The Secretary is not the author, but the editor. The substance of the plan is not in issue except to the extent necessary to determine whether, in approving the proposal, the Secretary gave it the consideration that, as a matter of Constitutional and statutory law, was its due.
Although HEW also questions the Hospitals' standing to challenge the Secretary's claimed procedural dereliction, it seems clear that such standing exists. Courts that have considered the question have found that participating hospitals are entitled to sue on such a claim. California Hospital Association v. Obledo, No. CV 76-903-R, slip op. at 7 (C.D. Cal. Nov. 11, 1976); New Jersey Hospital Association v. Klein, Civ. No. 76-64, slip op. at 6 (D.N.J. April 19, 1976). This result seems unassailable. Because, under the Medicaid Act, hospitals are reimbursed by state plans as approved and reviewed by the Secretary, they are vitally concerned with the approval procedure, and therefore, are more than "arguably within the zone of interests to be protected by" the Act's provision for preimplementation review. Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 153, 157, 25 L. Ed. 2d 184, 90 S. Ct. 827 (1969).
HEW contends that even if the Hospitals have a sufficient legal interest, they have failed to establish injury in fact, a necessary component of standing. We doubt that the concept of actual injury is applicable to a case such as this. Certainly it does not apply if it is construed to mean that the Hospitals must prove monetary injury to establish standing:
"[it] would be a mistake, under these circumstances, to permit the 'injury in fact' requirement to become a vehicle for converting the jurisdictional doctrine of standing into a tool for sub rosa decision of the merits of a controversy." City of Newburgh v. Richardson, 435 F. Supp. 1049, (S.D.N.Y. 1977).
The administrative review required under the Medicaid Act is designed for the protection of those affected by it, and certainly, the Hospitals, prominent members of that class, are subjected to serious injury if the reviewing body fails to do its job, or does it inadequately. Put another way, the failure properly to conduct the required review (which guarantees that plans which do not meet statutory and regulatory criteria will not be given effect) in itself constitutes injury in fact.
Because the Secretary has already conducted the review, the question whether he conducted it properly is ripe for judicial determination.
For the reasons stated above, the Federal defendant's motion to dismiss the complaint is denied.
It is so ordered.
MORRIS E. LASKER / U.S.D.J.