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October 29, 1999


The opinion of the court was delivered by: Sporkin, District Judge.


This matter comes before the Court on the following motions filed by the plaintiffs: (1) Motion to Compel Defendants to Comply With Representations Made to the Court and (2) Motion for Summary Judgment. The defendants have also filed a Cross-Motion for Summary Judgment and a Motion for Judgment on the Pleadings.


Plaintiffs are the District of Columbia Hospital Association ("DCHA") and its non-public member hospitals that serve a disproportionate share of low-income patients. Defendants, the District of Columbia and the Deputy Director for Health Care Finance of the Medical Assistance Administration, are responsible for the administration of the District of Columbia Medicaid program. In accordance with Title XIX of the Social Security Act, commonly known as the Medicaid statute, the District of Columbia has devised a plan to reimburse qualifying hospitals for inpatient services furnished to individuals meeting Medicaid eligibility requirements.*fn1 Hospitals that serve a disproportionate share of low-income patients are known as a disproportionate share hospital ("DSH") and are entitled to an additional Medicaid payment. This adjustment is commonly referred to as a DSH payment.

Under the Medicaid statute, states must choose one of three payment options for calculating the DSH adjustments. 42 U.S.C. § 1396r-4 (c). In 1992 the agency in charge of the District's Medicaid program, the Medical Assistance Administration ("MAA"), choose option (c)(1), which is still in effect today. Under this option the DSH adjustment equals at least the product of (A) a base amount times (B) a percentage. The base amount is "the amount paid under the [Medicaid] State plan to the hospital for operating costs for inpatient hospital services . . ." 42 U.S.C. § 1396r-4 (c)(1)(A). The percentage is "the hospital's disproportionate share adjustment percentage" established under Section 1886(d)(5)(F) (iv) of the Social Security Act, 42 U.S.C. § 1395ww (d)(5)(F)(iv). 42 U.S.C. § 1396r-4 (c)(1)(B).*fn2

In 1992, the District of Columbia enacted legislation requiring those who qualify for Medicaid under the Aid to Families with Dependent Children program be enrolled in Medicaid managed care plans.*fn3 The Medicaid managed care program was implemented in late 1993 and early 1994. Following the implementation of this legislation, defendants advised the plaintiffs that, pursuant to the new legislation, they did not intend to make any DSH payments with respect to Medicaid managed care services. On April 26, 1994, plaintiffs filed suit in this Court challenging the legality of this policy. Specifically, the plaintiffs asserted that the District's failure to ensure direct DSH payments to DSHs for services furnished to Medicaid managed care patients conflicted with the Medicaid statute.

Shortly after the filing of the plaintiffs' suit, the defendants reversed their position. At a May 2, 1995 hearing, the defendants represented to this Court that managed care costs would be included in the DSH calculation. In making this representation the defendants relied on the deposition testimony of then acting Medicaid Commissioner, A. Sue Brown, whose sworn testimony disavowed the defendants' original litigation position. Specifically, Ms. Brown testified that the District's Medicaid plan did not exclude medical care services provided in conjunction with the Managed Care program for the purpose of disproportionate share calculations. The defendants subsequently informed the court that Ms. Brown's deposition testimony represented the policy of the district, and that, from that point on there would be no exclusions for Medicaid managed care when calculating the DSH payments. Acting on these representations, and with the consent of the plaintiffs, the court dismissed the action without prejudice as moot.

In the Fall of 1997, the MAA calculated the Medicaid DSH payments for qualifying hospitals for fiscal years 1992-1997 using the formula agreed to by the parties in the 1994 litigation. The District subsequently made one payment to the hospitals based on the agreed upon formula in September 1997. In the Spring of 1998, the MAA recalculated and adjusted the DSH payments using a new formula that excluded Medicaid managed care services in the base amount.

On August 26, 1998, plaintiffs filed the instant action. In it they challenge the defendants' failure to make DSH payments for Medicaid managed care services on two grounds. First, they claim defendants' failure breaches the representations the District made to the Court and to the plaintiffs in the prior litigation concerning the inclusion of Medicaid managed care payments in the DSH calculation. Second, they claim defendants failure to include Medicaid managed care payments in the base amount of the DSH calculation is a violation of the plain language of the Medicaid statute and the District's Medicaid State plan. They seek a declaration that the defendants' current policy of excluding Medicaid managed care payments from their calculations of plaintiffs' DSH entitlements is contrary to law and an order requiring defendants to recompute the plaintiffs' Medicaid DSH entitlements and pay them all additional amounts to which they are entitled under the revised calculations. Plaintiffs also ask for the award of costs, attorneys fees and any additional relief the court deems appropriate.


I. Defendants' Judgment on the Pleadings

After the first day of hearings in July 1999 Defendants filed a Motion for Judgment on the Pleadings. In it they assert the plaintiffs are barred from presenting their claims by the doctrine of res judicata and by Fed.R.Civ.P. Rule 60. They also claim this court lacks subject matter jurisdiction over plaintiffs' breach claim.

The doctrine of res judicata precludes a party from "relitigating issues that were or could have been raised" in a previous action dismissed pursuant to a final judgment on the merits. Allen v. McCurry, 449 U.S. 90, 94 (1980). Res Judicata does not, however, bar a party or parties from relitigating a previously asserted claim dismissed on justiciability grounds. Cutler v. Hayes, 818 F.2d 879, 888 (D.C.Cir. 1987). This Court dismissed the plaintiffs' prior lawsuit as moot after being advised by the defendants that there was no need to proceed farther as plaintiffs' demands had been met. The merits of plaintiffs' claims were never tested. Accordingly, as the prior lawsuit was dismissed on justiciability grounds, plaintiffs are not barred from relitigating the issue of whether defendants' exclusion of Medicaid managed care payments from the DSH calculation is lawful.

Defendants' second ground for dismissal is that plaintiffs exclusive remedy for asserting the breach of representations claim is a motion for relief from judgment or order made pursuant to Fed.R.Civ.P. Rule 60(b). Rule 60(b) allows a court to relieve a party from a final judgment or order on the basis of "misrepresentation, or other misconduct of an adverse party". Rule 60 motions must be made within one year of the entering of the judgment. Defendants maintain that since plaintiffs failed to bring a Rule 60 motion within the statutory time period, they may not now bring an independent action to enforce the defendants' previously asserted representations to the court.

In 1998, after becoming aware of the District's policy reversal with respect to calculating DSH payments, Plaintiffs chose to initiate a new lawsuit against the defendants. The current suit is not an attempt to set aside the court's previous order dismissing the suit (as would be appropriately made under Rule 60(b)), but rather is a wholly new, and different, action to enforce the ...

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