Not what you're
looking for? Try an advanced search.
Buy This Entire Record For
COMMUNITY HEALTH CARE ASS'N OF NEW YORK v. DEPARLE
September 27, 1999
COMMUNITY HEALTH CARE ASSOCIATION OF NEW YORK, PEEKSKILL AREA HEALTH CENTER, LUTHERAN MEDICAL CENTER, WILLIAM F. RYAN COMMUNITY HEALTH CENTER, SYRACUSE COMMUNITY HEALTH CENTER, BEDFORD STUYVESANT FAMILY HEALTH CENTER, JOSEPH P. ADDABBO FAMILY HEALTH CENTER, CENTERCARE, WESTCHESTER PREPAID HEALTH SERVICES PLAN, AND HEALTH PLUS, PLAINTIFFS,
NANCY-ANN MIN DEPARLE, IN HER OFFICIAL CAPACITY AS ADMINISTRATOR, HEALTH CARE FINANCING ADMINISTRATION, DONNA SHALALA, IN HER OFFICIAL CAPACITY AS SECRETARY, UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, KEVIN P. MAHON, IN HIS OFFICIAL CAPACITY AS COMMISSIONER, WESTCHESTER COUNTY DEPARTMENT OF SOCIAL SERVICES, AND BARBARA DEBUONO, IN HER OFFICIAL CAPACITY AS COMMISSIONER, NEW YORK STATE DEPARTMENT OF HEALTH, DEFENDANTS.
The opinion of the court was delivered by: Barrington D. Parker, Jr., District Judge.
MEMORANDUM DECISION AND ORDER
Plaintiffs are six New York state outpatient medical facilities
designated by the federal government as federally qualified
health centers ("FQHCs"); three managed care plans affiliated
with FQHCs, and an association of FQHCs in New York state.
Defendants are Donna Shalala, Secretary of the United States
Department of Health and Human Services ("HHS"); Nancy-Ann Min
DeParle, the Administrator of the Health Care Financing
Administration ("HCFA"), which is part of HHS; Barbara DeBuono,
Commissioner of the New York State Department of Health, and
Kevin P. Mahon, Commissioner of the Westchester County Department
of Social Services ("WCDSS").
Plaintiffs commenced this action pursuant to 42 U.S.C. § 1983,
and the Administrative Procedure Act, 5 U.S.C. § 500, et seq.,
seeking a declaratory judgment that local, state and federal
officials violated the cost reimbursement provision of the
federal Medicaid program. See 42 U.S.C. § 1396(b)(m)(2), et
seq. Before this Court are (1) federal defendants DeParle and
Shalala's motion to dismiss the complaint, pursuant to Federal
Rules of Civil Procedure 12(b)(1) and (6); (2) the county
defendant Mahon's motion to dismiss the complaint pursuant to
Fed.R.Civ.P. 12(b)(6); and (3) the state defendant Barbara
Debuono's motion to dismiss the complaint pursuant to Rules
12(b)(1) and (6). This Court will address each motion separately.
In deciding a 12(b)(6) motion, the Court must accept as true
all material facts alleged in the complaint and draw all
reasonable inferences in the nonmovant's favor. See Thomas v.
City of New York, 143 F.3d 31, 37 (2d Cir. 1998). Likewise, in
considering a motion to dismiss for lack of subject matter
jurisdiction under Rule 12(b)(1), "the Court must accept as true
all material factual allegations in the Complaint and refrain
from drawing inferences in favor of the party contesting
jurisdiction." Serrano v. 900 5th Avenue Corp., 4 F. Supp.2d 315,
316 (S.D.N.Y. 1998). The following facts, common to all
three motions, are construed accordingly.
A. Medicaid Managed Care Plans (the "plans")
This case involves the administration of one portion of
Medicaid, the federal program which provides federally subsidized
health insurance to eligible, typically low-income, residents of
states that voluntarily elect to participate. Enacted in 1965
under Title XIX of the Social Security Act, 42 U.S.C. § 1396 et
seq., Medicaid is a joint federal and state cost-sharing system
"designed to enable participating states to furnish medical
assistance to persons whose income and resources are insufficient
to meet the costs of necessary medical care and services."
DeJesus v. Perales, 770 F.2d 316, 318 (2d Cir. 1985).
New York joined the Medicaid program in 1966, authorizing the
New York State Department of Social Services ("NYSDSS") to
establish a Medicaid plan covering both the categorically and the
medically needy. See 1966 N.Y.Laws, ch. 256, as amended §
N YSoc.Serv.Law 363 et seq. While participation in Medicaid is
voluntary, New York's Medicaid plan must be approved by the
federal Health Care Financing Administration ("HCFA"), as meeting
the standards and conditions set by federal law.
42 U.S.C. § 1396a(a).
In Medicaid programs, eligible patients receive health care
services from healthcare "providers" including hospitals, doctors
and outpatient health centers, which are enrolled and paid by the
states. Although the payment is made by states, in New York, the
State treasury contributes about 25% of the program's cost.
N YSoc. Serv.L. § 368-a(1)(d). Approximately fifty percent comes
from the federal government and the remaining 25% or so comes
from local governments.
This case involves Medicaid managed care, a form of Medicaid
service delivery and reimbursement where the state or its local
social service district contracts with managed care plans. The
managed care plan receives a fixed monthly fee for each Medicaid
patient that enrolls in the plan. The plan, which is responsible
for providing the Medicaid services needed by the enrolled
patient, fulfills that obligation by contracting with providers
of medical services which are paid by the plan according to
relevant contractual provisions. In New York, as in all states,
the HCFA approves the contracts between the state or local social
service districts and Medicaid managed care plans.
Plaintiffs in this action are organizations providing Medicaid
services to eligible patients. They include six outpatient
facilities located in New York state known as federally qualified
health centers ("FQHCs").*fn1 Three other plaintiffs are managed
care plans affiliated with FQHCs and the final plaintiff is an
association of FQHCs in New York state.
B. 42 U.S.C. § 1396b(m)(2)(A)(ix) — Reasonable Cost
This case concerns a provision of the Medicaid law that was in
effect from 1990 until October 1, 1997. Since 1989 Congress has
required state Medicaid programs to pay FQHCs a fee-for-service
medicaid rate which covers 100% of their
"reasonable costs" for treating Medicaid recipients. In 1990,
Congress extended the mandate to state Medicaid managed care
programs under 42 U.S.C. § 1396b(m)(2)(A)(ix), the provision of
federal medicaid law at issue in this case.*fn2 Under this law,
in order for the federal government to pay its share of Medicaid
expenses, plaintiffs allege states were required to include in
their contracts with managed care plans provisions allowing the
plans to elect reasonable cost reimbursement to FQHCs and
requiring the states to reimburse the plans for the extra costs
of paying reasonable cost reimbursement. The FQHC reasonable cost
reimbursement provisions were amended by the Balanced Budget Act
of 1997. See Balanced Budget Act of 1997 § 4712(b), Pub.L.
105-33. Under the Balanced Budget Act, states are now required to
pay reasonable cost reimbursement directly to FQHCs who render
services to Medicaid managed care patients, as opposed to
reimbursing the plans themselves. See 42 U.S.C. § 1396a
(A)(13)(C)(i) and 1396b(m)(2)(A)(ix). Plaintiffs do not
allege that any of the defendants have violated the new
reasonable cost provision.
Plaintiffs allege that from 1990 through October 1, 1997, the
period during which reasonable cost reimbursement was in effect,
New York state, Westchester County and other local social service
districts never put the required provisions in their contracts
with Medicaid managed care plans. As a result, plaintiffs allege,
inter alia, that no FQHC in New York state was able to elect to
receive, or has received, the reasonable cost reimbursement to
which they were entitled.
Plaintiffs allege that from 1995 through 1998, plaintiffs
repeatedly wrote, telephoned and met with federal, state and
local officials attempting to effect compliance with the FQHC
reasonable cost reimbursement requirements. HCFA, which approved
New York state's contracts with Medicaid managed care plans,
received a warning from its sister agency, the Federal Health
Resource Service Administration (HRSA) that New York was not in
compliance with the provision. Plaintiffs allege that despite
this warning, HCFA did nothing to insure New York's compliance.
In May 1997, New York state advised plaintiffs that it would not
act on plaintiffs' request, but would rather wait for HCFA to
reach a decision.
HCFA's decision was announced in April 1998, following a
February 14, 1998 meeting between plaintiffs and the HCFA
Administrator, defendant Nancy-Ann Min DeParle. In her ruling,
Deparle determined that New York FQHCs were not entitled to
receive reasonable cost reimbursement because there was "no
clear, written expression of intent by the FQHCs to seek and
receive cost-based reimbursement." Plaintiffs' Memorandum of Law
in Opposition to Federal Defendants [hereinafter Plaintiffs'
Opposition to Federal Defendants] at 5. This lawsuit followed.
Dismissal of a complaint pursuant to Fed.R.Civ.P. 12(b)(6) is
permitted "`only where it appears beyond doubt that the plaintiff
can prove no set of facts in support of the claim which would
entitle him to relief.'" Scotto v. Almenas, 143 F.3d 105,
109-10 (2d Cir. 1998) (quoting Conley v. Gibson, 355 U.S. 41,
45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). "The task of the court
in ruling on a Rule 12(b)(6) motion is `merely to assess the
legal feasibility of the complaint, not to assay the weight of
the evidence which might be offered in support thereof.'" Cooper
v. Parsky, 140 F.3d 433, 440 (2d Cir. 1998) (quoting Ryder
Energy Distribution Corp. v. Merrill Lynch Commodities, Inc.,
748 F.2d 774, 779 (2d Cir. 1984)).
A. State Defendant DeBuono's Motion to Dismiss
State defendant Barbara DeBuono, Commissioner of the New York
State Department of Health, moves to dismiss the complaint on
grounds that the Eleventh Amendment bars plaintiffs' claims
against her. State defendants erroneously assert that plaintiffs
seek retroactive monetary relief, when in fact, plaintiffs seek
only retroactive declaratory relief. This error by defendants,
however, does not prevent this Court from resolving defendant
The Eleventh Amendment provides:
The Judicial power of the United States shall not be
construed to extend to any suit in law or equity,
commenced or prosecuted against one of the United
States by Citizens of another State, or by Citizens
or Subjects of any Foreign State.
A State that has not consented to being sued is immune from suits
brought in federal courts by its own citizens as well as by
citizens of another state. Pennhurst State School & Hospital v.
Halderman, 465 U.S. 89, 100, 104 S.Ct. 900, 79 L.Ed.2d 67
(1984). In order to be sued in federal court, a state must
expressly and in no uncertain terms waive its Eleventh Amendment
immunity. Port Authority Trans-Hudson Corp. v. Feeney,
495 U.S. 299, 305, 110 S.Ct. 1868, 109 L.Ed.2d 264 (1990) ("The Court will
give effect to a State's waiver of Eleventh Amendment immunity
only where stated by the most express language or by such
overwhelming implication from the text as [will] leave no room
for any other reasonable construction.") (internal ...