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Asante v. Azar

United States District Court, District of Columbia

January 16, 2020

ASANTE, et al., Plaintiffs,
v.
Alex M. AZAR, Secretary U.S. Department of Health and Human Services, et al., Defendants.

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         Dean L. Johnson, Camano Island, WA, Thomas J. Weiss, Weiss & Zaman, Los Angeles, CA, for Plaintiffs.

         Derek S. Hammond, U.S. Attorney's Office for the District of Columbia, Washington, DC, for Defendants.

         MEMORANDUM OPINION

         TANYA S. CHUTKAN, United States District Judge.

         Plaintiffs Asante, Asante Rogue Valley Medical Center, Asante Three Rivers Medical Center, Asante Ashland Community Hospital, Renown Regional Medical Center, Renown South Meadows Medical Center, Sky Lakes Medical Center, and Yuma Regional Medical Center (collectively, the "Hospitals"), eight hospitals located in Oregon, Nevada, and Arizona, bring this action under the Administrative Procedure Act ("APA"), 5 U.S.C. § 701 et seq., against the federal agencies and personnel responsible for administering Medicaid. The Hospitals seek a preliminary injunction to prevent Defendants from approving California's state plan amendment governing California's supplemental Medicaid payment program, and from providing federal matching funds under the program.

         The Hospitals claim California's Medicaid plan improperly differentiates between in-state and out-of-state hospitals to make out-of-state hospitals, like them, ineligible to receive supplemental Medicaid payments.

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          They argue this discriminatory scheme violates the Commerce Clause, Equal Protection, and the Medicaid Act, and that Defendants' approval and funding of the scheme violate the APA. Defendants have moved, pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), to dismiss the Complaint. Upon consideration of the motions and the parties' briefs, and for the reasons set forth below, the court will GRANT Defendants' Motion to Dismiss (ECF No. 19) and therefore will DENY as moot Plaintiffs' Motion for a Preliminary Injunction (ECF No. 2).

         I. BACKGROUND

         The Medicaid program, authorized under Title XIX of the Social Security Act, establishes a cooperative federal-state program that finances medical care for people who cannot afford medical services. See 42 U.S.C. §§ 1396-1396v. Defendants are the federal agencies and officials responsible for administering Medicaid: Department of Health and Human Services ("HHS"); Secretary of HHS, Alex Azar; Centers for Medicare and Medicaid Services ("CMS"); and CMS Administrator, Seema Verma. (ECF No. 1 ("Compl.") ¶ 10-13.) The HHS Secretary is responsible for the program and has delegated its administration to the CMS, an agency within HHS. See Centers for Medicare & Medicaid Services; Statement of Organization, Functions and Delegations of Authority; Reorganization Order, 66 Fed.Reg. 35,437 (2001). States participating in Medicaid must submit plans to CMS for approval that detail financial eligibility criteria, covered medical services, and reimbursement methods and standards. 42 U.S.C. §§ 1396a(a), 1396b. Once a state's plan is approved, the federal government provides financial assistance for necessary and proper costs of administering its Medicaid program. §§ 1396b, 1396d(b). States must also amend their plans to reflect changes in law or operation of its Medicaid program. CMS is responsible for reviewing all amendments to state plans to "determine whether the plan continues to meet the requirements for approval." 42 CFR § 430.12(c)(2).

         California participates in the Medicaid program through Medi-Cal. See Cal. Welf. & Inst. Code § 14000, et seq. At issue here is the Medi-Cal method for paying certain hospitals supplemental Medicaid payments through their Quality Assurance Fee ("QAF") program. Under the program, California collects fees from certain hospitals, receives matching funds from the federal government, and disburses supplemental Medicaid payments to certain in-state hospitals from the total funds. (Compl. ¶¶ 48-51.) Under past iterations of California's QAF program, certain in-state hospitals received supplemental payments while out-of-state hospitals did not, (Id.), despite the fact that out-of-state hospitals, particularly those near the California border, provide frequent and necessary services to Medi-Cal patients. (Compl. ¶ 2-5.) The Hospitals allege that because of this differential treatment, the previous QAF programs, which ran through June 30, 2019, unlawfully discriminated against out-of-state hospitals. (Id. ¶ 67, 69.) The Hospitals further claim that the currently proposed QAF program, which covers a period starting on July 1, 2019, ("2019 QAF Program") will do the same. (Id. ¶ 69.) The Hospitals, however, only seek relief from the proposed QAF program, as they have already settled claims with California regarding the QAF program covering 2009 through June 30, 2019. (Id. ¶¶ 19-24, Prayer for Relief ¶¶ 1-4.)

         To operate the QAF program—previous and proposed—CMS must approve California's state plan amendments, which it did for plan amendments for the QAF program through June 30, ...


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