United States District Court, District of Columbia
S. CHUTKAN UNITED STATES DISTRICT JUDGE
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.
Hospitals claim California's Medicaid plan improperly
differentiates between instate and out-of-state hospitals to
make out-of-state hospitals, like them, ineligible to receive
supplemental Medicaid payments. 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).
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).
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.)
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,
2019. (Id. ¶¶ 94-95.) It also granted two
tax waivers for California to collect the underlying fee to
operate the QAF program. (Id. ¶¶ 89-92.)
California now seeks approval for its state plan amendments
for the 2019 QAF program, but CMS has not decided whether to
grant such approval. (Id. ¶¶ 97-100.)
Hospitals assert three claims against the Defendants under
the APA. In Count One, they allege that “as it exists
as of July 1, 2019, California's methodology for making
QAF payments, as reflected in the California State Medicaid
Plan, discriminates against interstate commerce and is
unconstitutional under the Commerce Clause, ” and
therefore CMS's approval violates APA § 706(2)(A),
(B). (Compl. ¶¶ 105, 106.) In Count Two, the
Hospitals claim that “as it exists as of July 1, 2019,
California's differential treatment of in-state and
out-of-state hospitals under the QAF program, as reflected in
the California State Medicaid Plan, bears no rational
relationship to any legitimate state purpose and thus
violates the Equal Protection Clause of the Fourteenth
Amendment, ” and therefore agency approval also
violates the APA. (Compl. ¶¶ 110, 111.) Finally, in
Count Three, the Hospitals allege that “California does
not provide supplemental QAF monies to the plaintiffs
‘to the same extent' that it provides funds to
in-state hospitals” in violation of the Medicaid Act,
and therefore agency approval again violates the
(Compl. ¶¶ 115-117.) The Hospitals seek declaratory
relief and an injunction “as of July 1, 2019”
barring “all federal QAF payments, ” and
preventing CMS from approving California's state plan
amendments that include the allegedly discriminatory 2019 QAF
program. (Prayer for Relief ¶¶ 1-4.) Defendants
move to dismiss for lack of subject matter jurisdiction and
failure to state a claim. (ECF No. 18 (“Defs.
courts are of limited jurisdiction and “may not
exercise jurisdiction absent a statutory basis.”
Exxon Mobil Corp. v. Allapattah Servs., Inc., 545
U.S. 546, 552 (2005). “Limits on subject-matter
jurisdiction ‘keep the federal courts within the bounds
the Constitution and Congress have prescribed,' and those
limits ‘must be policed by the courts on their own
initiative.'” Watts v. SEC, 482 F.3d 501,
505 (D.C. Cir. 2007) (quoting Ruhrgas AG v. Marathon Oil
Co., 526 U.S. 574, 583 (1999)). Such limits are
especially important in the agency review context, where
“Congress is free to choose the court in which judicial
review of agency decisions may occur.” Am.
Petroleum Inst. v. SEC, 714 F.3d 1329, 1332 (D.C. Cir.
2013) (internal quotation marks omitted) (quoting
Watts, 482 F.3d at 505). The law presumes that
“a cause lies outside [the court's] limited
jurisdiction” unless the party asserting jurisdiction
establishes otherwise. Kokkonen v. Guardian Life Ins. Co.
of Am., 511 U.S. 375, 377 (1994) (citation omitted).
Thus, plaintiffs bear the burden of establishing jurisdiction
by a preponderance of the evidence. See Lujan v.
Defenders of Wildlife, 504 U.S. 555, 561 (1992);
Shekoyan v. Sibley Int'l Corp., 217 F.Supp.2d
59, 63 (D.D.C. 2002).
evaluating a motion to dismiss for lack of jurisdiction under
Federal Rule of Civil Procedure Rule 12(b)(1), a court must
“assume the truth of all material factual allegations
in the complaint and ‘construe the complaint liberally,
granting plaintiff[s] the benefit of all inferences that can
be derived from the facts alleged.'” Am.
Nat'l Ins. Co. v. FDIC, 642 F.3d 1137, 1139 (D.C.
Cir. 2011) (quoting Thomas v. Principi, 394 F.3d
970, 972 (D.C. Cir. 2005)). But the court “need not
accept factual inferences drawn by plaintiffs if those
inferences are not supported by facts alleged in the
complaint, nor must the Court accept [plaintiffs'] legal
conclusions.” Disner v. United States, 888
F.Supp.2d 83, 87 (D.D.C. 2012) (quoting Speelman v.
United States, 461 F.Supp.2d 71, 73 (D.D.C.
2006)). A motion to dismiss under 12(b)(1) “is not
limited to the allegations of the complaint.” Hohri
v. United States, 782 F.2d 227, 241 (D.C. Cir. 1986),
vacated on other grounds, 482 U.S. 64 (1987). And
“a court may consider such materials outside the
pleadings as it deems appropriate to resolve the question
[of] whether it has jurisdiction to hear the case.”
Scolaro v. D.C. Bd. of Elections & Ethics, 104
F.Supp.2d 18, 22 (D.D.C. 2000) (citing, inter alia,
Herbert v. Nat'l Acad. of Scis., 974 F.2d 192,
197 (D.C. Cir. 1992)).
a motion to dismiss under Rule 12(b)(6) for failure to state
a claim “tests the legal sufficiency of a
complaint.” Browning v. Clinton, 292 F.3d 235,
242 (D.C. Cir. 2002). “To survive a motion to dismiss,
a complaint must contain sufficient factual matter, accepted
as true, to ‘state a claim to relief that is plausible
on its face.'” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007)). A claim is plausible when the factual
content allows the court to “draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Id. Plaintiffs' factual
allegations need not be “detailed, ” but
“the Federal Rules demand more than ‘an
accusation.'” McNair v. District of
Columbia, 213 F.Supp.3d 81, 86 (D.D.C. 2016) (citing
Twombly, 550 U.S. at 570).
argue that the Hospitals' claims are not ripe for
adjudication, no final agency action has occurred, the
Hospitals lack standing, and the Hospitals have failed to
state a claim under the ...