Hoag Memorial Hospital v. Tom Price ( 2017 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
HOAG MEMORIAL HOSPITAL No. 15-56547
PRESBYTERIAN, a California
corporation; KAWEAH DELTA HEALTH D.C. No.
CARE DISTRICT, a California Local 2:11-cv-10638-
Health Care District; ANAHEIM SVW-MAN
MEMORIAL MEDICAL CENTER, a
California corporation; LONG BEACH
MEMORIAL MEDICAL CENTER, a OPINION
California corporation; ORANGE
COAST MEMORIAL MEDICAL CENTER,
a California corporation;
SADDLEBACK MEMORIAL MEDICAL
CENTER, a California corporation;
PIONEERS MEMORIAL HEALTHCARE
DISTRICT, a California Local Health
Care District; SALINAS VALLEY
MEMORIAL HEALTHCARE SYSTEM, a
California Local Health Care District;
SAN ANTONIO COMMUNITY HOSPITAL,
a California corporation; SIERRA
VIEW LOCAL HEALTH CARE DISTRICT,
a California Local Health Care
District; SRM ALLIANCE HOSPITAL
SERVICES, a California nonprofit
corporation, DBA Petaluma Valley
Hospital; MISSION HOSPITAL
REGIONAL MEDICAL CENTER, a
California nonprofit corporation;
QUEEN OF THE VALLEY MEDICAL
2 HOAG MEMORIAL V. PRICE
CENTER, a California nonprofit
corporation; REDWOOD MEMORIAL
HOSPITAL OF FORTUNA, a California
nonprofit corporation; SANTA ROSA
MEMORIAL HOSPITAL, a California
nonprofit corporation; ST. JOSEPH
HOSPITAL OF EUREKA, a California
nonprofit corporation; ST. JOSEPH
HOSPITAL OF ORANGE, a California
nonprofit corporation; ST. JUDE
HOSPITAL, a California nonprofit
corporation; ST. MARY MEDICAL
CENTER, a California nonprofit
corporation; TAHOE FOREST HOSPITAL
DISTRICT, a California Local Health
Care District; TENET HEALTHSYSTEM
DESERT INC., a California corporation;
DOCTORS HOSPITAL OF MANTECA,
INC., a California corporation;
DOCTORS MEDICAL CENTER OF
MODESTO, INC., a California
corporation; FOUNTAIN VALLEY
REGIONAL HOSPITAL AND MEDICAL
CENTER, a California corporation;
JFK MEMORIAL HOSPITAL, INC., a
California corporation; SAN RAMON
REGIONAL MEDICAL CENTER, INC., a
California corporation; LAKEWOOD
REGIONAL MEDICAL CENTER, INC., a
California corporation; LOS
ALAMITOS MEDICAL CENTER, INC., a
California corporation; PLACENTIA-
LINDA HOSPITAL, INC., a California
corporation; SIERRA VISTA HOSPITAL,
HOAG MEMORIAL V. PRICE 3
INC., a California corporation; TWIN
CITIES COMMUNITY HOSPITAL, INC., a
California corporation; TENET
HEALTHSYSTEM KNC, INC., a
California corporation; SAN DIMAS
COMMUNITY HOSPITAL, a California
corporation; COMMUNITY HOSPITAL
OF LOS GATOS, INC., a California
corporation; TENET 1500 SAN PABLO,
INC., a California corporation, FKA
Anaheim MRI Holding, Inc.;
MEDICAL CENTER OF GARDEN GROVE,
a California corporation; AMI HTI
TARZANA JOINT VENTURE, a
Delaware General Partnership;
AMISUB IRVINE MEDICAL CENTER, a
California corporation; UHS-
CORONA, INC., a California
Corporation; LANCASTER HOSPITAL
CORPORATION, a California
corporation; UNIVERSAL HEALTH
SERVICES OF RANCHO SPRINGS, INC., a
California corporation; SAN
GORGONIO MEMORIAL HOSPITAL, a
California corporation; ADVENTIST
HEALTH CLEARLAKE HOSPITAL, a
California corporation; CENTRAL
VALLEY GENERAL HOSPITAL, a
California corporation; FEATHER
RIVER HOSPITAL, a California
corporation; GLENDALE ADVENTIST
MEDICAL CENTER, a California
corporation; Hanford Community
Hospital, a California corporation;
4 HOAG MEMORIAL V. PRICE
SAN JOAQUIN COMMUNITY HOSPITAL,
a California corporation; SIMI
VALLEY HOSPITAL AND HEALTH CARE
SERVICES, a California corporation;
SONORA COMMUNITY HOSPITAL, a
California corporation; UKIAH
ADVENTIST HOSPITAL, a California
corporation; WHITE MEMORIAL
MEDICAL CENTER, a California
corporation; WILLITS HOSPITAL, INC.,
a California Corporation; SANTA
BARBARA COTTAGE HOSPITAL, a
California nonprofit corporation;
GOLETA VALLEY COTTAGE HOSPITAL,
a California nonprofit corporation,
Plaintiffs-Appellants,
v.
TOM PRICE, Secretary of United
States Department of Health and
Human Services, *
Defendant–Appellee.
Appeal from the United States District Court
For the Central District of California
Stephen V. Wilson, District Judge, Presiding
*
We substitute Tom Price for Kathleen Sebelius as Defendant-
Appellee. See Fed. R. App. P. 43(c)(2).
HOAG MEMORIAL V. PRICE 5
Argued and Submitted April 5, 2017
Pasadena, California
Filed August 7, 2017
Before: MILAN D. SMITH, JR. and N.R. SMITH, Circuit
Judges, and GARY FEINERMAN, District Judge **
Opinion by Judge Milan D. Smith, Jr.
SUMMARY ***
Medicaid
The panel reversed the district court’s summary
judgment entered in favor of the Secretary of U.S.
Department of Health and Human Services, and held that the
Secretary’s approval of a state plan amendment retroactively
implementing a 10% rate reduction for outpatient services
provided to beneficiaries of California’s Medicaid program
violated 42 U.S.C. § 1396(a)(30)(A)(“§ 30(A)”), and was
arbitrary and capricious.
The panel held that the Secretary erred in approving the
state plan amendment pursuant to § 30(A) without requiring
any evidence regarding “the extent that such care and
services are available to the general population in the
**
The Honorable Gary Feinerman, United States District Judge for
the Northern District of Illinois, sitting by designation.
***
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
6 HOAG MEMORIAL V. PRICE
geographic area.” The panel held that the Secretary’s
implicit interpretation of § 30(A) conflicted with the
statute’s plan language, and was not entitled to Chevron
deference. The panel remanded for further proceedings.
COUNSEL
Robert C. Leventhal (argued) and A. Joel Richlin, Foley &
Lardner LLP, Los Angeles, California, for Plaintiffs-
Appellants.
Jeffrey Eric Sandberg (argued), Lindsey Powell, and Mark
B. Stern, Attorneys, Appellate Staff; Eileen M. Decker,
United States Attorney; Civil Division, United States
Department of Justice, Washington, D.C.; for Defendant-
Appellee.
OPINION
M. SMITH, Circuit Judge:
In 2011, the Secretary of Health and Human Services
(HHS) implicitly interpreted 42 U.S.C. § 1396(a)(30)(A)
(§ 30(A)) to permit approval of a state Medicaid plan rate
reduction where the Secretary had not considered evidence
comparing beneficiaries’ access to medical services to that
of the general public. This appeal considers what deference
we owe the Secretary’s interpretation of the portion of
§ 30(A) requiring that state plans provide for rates
“sufficient to enlist enough providers so that care and
services are available under the plan at least to the extent that
such care and services are available to the general
HOAG MEMORIAL V. PRICE 7
population in the geographic area.” (emphasis added). In
light of this express statutory language, we hold that the
Secretary erred in approving a state plan amendment
pursuant to § 30(A) without requiring any evidence
regarding “the extent that such care and services are
available to the general population in the geographic area.”
FACTUAL AND PROCEDURAL BACKGROUND
Appellants, who are 57 hospitals that provide outpatient
services to Medicaid beneficiaries, challenge the Secretary’s
approval of a state plan amendment (SPA) retroactively
implementing a 10% rate reduction for outpatient services
provided to beneficiaries of California’s Medicaid program
(Medi-Cal). 1 The rate reduction in question applied from
July 2008 through February 2009. California (the State) first
submitted the SPA to the Centers for Medicare and Medicaid
Services (CMS) for the Secretary’s approval in September
2008. The Secretary initially declined to approve the SPA
because “the State did not provide information concerning
the impact of the proposed reimbursement reductions on
beneficiary access to services, even though available
national data indicate[d] that this [might] be an issue for
California.”
The State requested that the Secretary reconsider the
decision, and submitted additional information in support of
the SPA. This new data included a study reflecting trends in
provider participation in Medi-Cal, as well as beneficiary
use of hospital outpatient services over a period of three
years. The study reflected a relatively constant level of
1
Two of the plaintiff hospitals that filed suit in this matter, Hospital
of Barstow, Inc., and Watsonville Hospital Corp., have dismissed their
appeals, and are not parties to this appeal.
8 HOAG MEMORIAL V. PRICE
Medi-Cal beneficiary utilization of hospital outpatient
services during that period. The study additionally
considered whether the percentage of hospitals providing
outpatient services to Medi-Cal beneficiaries had changed
over time, and found that it generally had not. The study
concluded that Medi-Cal beneficiary “access and utilization
were clearly not impacted by the 10% provider payment
reduction in effect from July 2008 through February 2009.”
On October 27, 2011, the Secretary approved the State’s
resubmitted SPA, including the temporary 10% rate
reduction for hospital outpatient services. The Secretary’s
approval letter states that the State’s documentation
adequately demonstrated “compliance with section
1902(a)(30)(A) of the [Social Security] Act, as it specifically
relates to reimbursement rates that are sufficient to enlist
enough providers so that care and services are available at
least to the extent that care and services are available to the
general population in the geographic area.” The letter
further states that, “[b]ecause the State implemented some
reductions, CMS was able to study the correlation between
the reduction to the reimbursement of those services and the
change in the above metrics.” It finds that “[b]ased on this
analysis, including a period of rate reductions, CMS was
able to conclude that the implementation of the above
reimbursement reductions complied with section
1902(a)(30)(A) of the Act.”
Appellants filed suit in district court in December 2011,
challenging the Secretary’s approval of the SPA on the
ground that the administrative record lacked evidence
regarding the comparative level of access available to Medi-
Cal beneficiaries and the general public. Appellants
additionally argued that the Secretary acted arbitrarily and
capriciously by failing to account for the effect of the
HOAG MEMORIAL V. PRICE 9
Emergency Medical Treatment and Labor Act (EMTALA),
42 U.S.C. § 1395dd, on the percentage of providers who
participate in Medi-Cal. The district court stayed the matter
pending our decision in Managed Pharmacy Care v.
Sebelius, 716 F.3d 1235 (9th Cir. 2013), a case that also
considered the reasonableness of the Secretary’s approval of
other SPAs. After we published our decision in Managed
Pharmacy Care, the parties filed cross-motions for summary
judgment.
On September 17, 2015, the district court granted
summary judgment for Appellee and denied the motion filed
by Appellants. The district court found that Managed
Pharmacy Care controlled this case, and that “the Court
must [therefore] defer to the Secretary’s approval of [the]
SPA.” It went on to explain that under Managed Pharmacy
Care, Ҥ 30(A) requires only a substantive result; it does not
prescribe procedures for achieving that result.” From this
proposition it reasoned that the Secretary’s approval of the
SPA absent information comparing the level of services
available to Medi-Cal beneficiaries to that of the general
public was permissible, as the statute does not expressly
require any particular procedure for assessing compliance
with its mandated equal-access result. Finally, the district
court held that the Secretary’s SPA approval was neither
arbitrary nor capricious, as required for reversal under the
Administrative Procedures Act (APA), 5 U.S.C. §§ 500 et
seq.
10 HOAG MEMORIAL V. PRICE
ANALYSIS
I. The Secretary’s Implicit Interpretation of Section
30(A) Conflicts with the Statute’s Plain Language
and Is Not Entitled to Chevron Deference
When considering an agency’s construction of a statute
under Chevron, U.S.A., Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837 (1984), we first ask “whether
Congress has directly spoken to the precise question at
issue.” Id. at 842. If the statute is clear, we “must give effect
to the unambiguously expressed intent of Congress,”
regardless of the agency’s interpretation. Id. at 842–43. If,
however, “the statute is silent or ambiguous with respect to
the specific issue, the question for the court is whether the
agency’s answer is based on a permissible construction of
the statute.” Id. at 843. Where Chevron deference does not
apply, we may nevertheless seek guidance from the agency’s
position depending upon “the degree of the agency’s care,
its consistency, formality, and relative expertness, and . . .
the persuasiveness of the agency’s position.” United States
v. Mead Corp., 533 U.S. 218, 228 (2001).
Title XIX of the Social Security Act, 42 U.S.C. §§ 1396et seq., established Medicaid, a cooperative program
between the federal government and the states to provide
access to medical care for individuals “whose income and
resources are insufficient to meet the costs of necessary
medical services.” Id. § 1396-1. States electing to
participate in Medicaid must submit to the Secretary of HHS,
through submission to CMS, a plan setting forth the
parameters of the state’s program. 42 U.S.C. § 1396a(a);
42 C.F.R. § 430.10. States wishing to amend their plans
must similarly submit their proposed amendments to CMS.
42 C.F.R. § 430.12(c). Upon submission of a proposed
amendment, the Secretary must evaluate its compliance with
HOAG MEMORIAL V. PRICE 11
the requirements set forth in 42 U.S.C. § 1396a(a).
42 U.S.C. §§ 1316(a)–(b), 1396a(b). The requirement here
at issue, contained in § 30(A), states that,
A State plan for medical assistance must . . .
(30)(A) provide such methods and
procedures relating to the utilization of, and
the payment for, care and services available
under the plan . . . as may be necessary to
safeguard against unnecessary utilization of
such care and services and to assure that
payments are consistent with efficiency,
economy, and quality of care and are
sufficient to enlist enough providers so that
care and services are available under the plan
at least to the extent that such care and
services are available to the general
population in the geographic area . . . .
Id. § 1396a(a)(30)(A). In accordance with the framework
established by Chevron and its progeny, we determine the
degree of deference owed to the Secretary’s implicit
interpretation of this language by asking first whether
Congress has unambiguously expressed its intent in the
portion of the statute at issue. We find that it has.
We previously considered the deference owed to the
Secretary’s application of § 30(A) in Managed Pharmacy
Care v. Sebelius. The specific question addressed in
Managed Pharmacy Care was whether the Secretary must
take provider costs into consideration before approving a
rate-reducing SPA. 716 F.3d at 1240. The Secretary had not
done so with respect to most services, but rather had
primarily considered the (1) total number of providers by
12 HOAG MEMORIAL V. PRICE
type and geographic location, (2) total Medi-Cal
beneficiaries by eligibility type, (3) utilization of services by
beneficiaries over time, and (4) “[a]nalysis of benchmark
service utilization where available.” Id. at 1242–43. In
considering “whether the Secretary interpreted § 30(A) and
approved California’s SPAs within the exercise of [his]
delegated authority,” we looked to the “form and context of
the approvals.” Id. at 1246 (internal quotation marks
omitted). We held that the “broad and diffuse” wording of
§ 30(A), which “uses words like ‘consistent,’ ‘sufficient,’
‘efficiency,’ and ‘economy,’ without describing any specific
steps a State must take in order to meet those standards . . .
suggests that the agency’s expertise is relevant in
determining its application.” Id. at 1247–48 (internal
quotation marks and alteration omitted).
We further held that “the Secretary’s interpretation that
§ 30(A) requires a result, not a particular methodology such
as cost studies, is based on a ‘permissible’ reading of
§ 30(A).” Id. at 1249. As we explained, “[t]he statute says
nothing about cost studies. It says nothing about any
particular methodology. Rather, by its terms § 30(A)
requires a substantive result—reimbursement rates must be
consistent with efficiency, economy, and quality care, and
sufficient to enlist enough providers to ensure adequate
beneficiary access.” Id. (emphasis added) (citations
omitted). Accordingly, because Congress delegated
authority to the Secretary to interpret vague statutory
language, and the Secretary permissibly exercised that
authority, we held that the Secretary’s implicit decision that
states need not inquire into provider costs before imposing
rate cuts was entitled to Chevron deference. Id. at 1247.
However, neither the Secretary nor Managed Pharmacy
Care directly discussed § 30(A)’s express requirement that
HOAG MEMORIAL V. PRICE 13
state plan rates must “assure that payments . . . are sufficient
to enlist enough providers so that care and services are
available under the plan at least to the extent that such care
and services are available to the general population in the
geographic area.” 42 U.S.C. § 1396a(a)(30)(A) (emphasis
added). Appellants’ challenge in this case rests on that
omission.
Appellee does not argue that the Secretary considered
information comparing beneficiary access to services with
that of the general public. 2 Rather, Appellee points to our
holding in Managed Pharmacy Care that § 30(A) does not
“prescribe any particular methodology a State must follow
before its proposed rates may be approved,” but rather
employs “broad and diffuse” language in describing a
required “substantive result.” See Managed Pharmacy
Care, 716 F.3d at 1245, 1247. Appellee’s argument frames
the requirement that Medi-Cal beneficiaries have equal
access to care as merely part of the “substantive result”
required by Managed Pharmacy Care rather than a directive
to the Secretary to employ any particular methodology in
making his decision. Therefore, Appellee argues that
Managed Pharmacy Care controls here, and the Secretary’s
decision is entitled to Chevron deference.
This conclusion elides critical distinctions between the
issue actually decided in Managed Pharmacy Care and the
case presented here. Appellee quotes Managed Pharmacy
Care’s statement that “by its terms § 30(A) requires a
substantive result—reimbursement rates must be . . .
2
Indeed, at oral argument, counsel for Appellee repeatedly
emphasized that the Secretary need not consider any information
reflecting the general public’s level of access to care and services as part
of his approval process.
14 HOAG MEMORIAL V. PRICE
sufficient to enlist enough providers to ensure adequate
beneficiary access,” see 716 F.3d at 1249, in support of its
contention that equal access was part of the “substantive
result” previously addressed in Managed Pharmacy Care.
Yet the very language quoted by Appellee undercuts such an
analysis: In Managed Pharmacy Care, we did not grapple
with the statute’s express requirement of equal beneficiary
access. Id. Rather, we concluded that the Secretary’s
“position that [provider] costs might or might not be one
appropriate measure by which to study beneficiary access,
depending on the circumstances of each State’s plan, is
entirely reasonable.” Id. Our conclusion here is consistent
with this observation, and we reaffirm our holding in
Managed Pharmacy Care that § 30(A) does not require the
Secretary to follow any fixed methodology or consider any
given factor in reaching the statute’s required substantive
result.
However, despite our broad language in Managed
Pharmacy Care explaining that § 30(A) does not require
“any particular methodology,” we did not hold that the
Secretary was necessarily reasonable in using any
methodology (or no methodology at all). 3 See Arc of Cal. v.
Douglas, 757 F.3d 975, 988 (9th Cir. 2014) (emphasis
modified); see also Christ the King Manor, Inc. v. Sec’y U.S.
Dep’t of Health & Human Servs., 730 F.3d 291, 312 (3d Cir.
2013) (explaining that, although “Section 30(A) grants states
considerable latitude in selecting a method for calculating
reimbursement rates, and . . . does not impose any particular
method or process for meeting its substantive
3
Instead, we have since clarified that “Managed Pharmacy Care
approved the affirmative measures enumerated by the state in that case
as sufficient to meet the Section 30(A) requirements.” Arc of Cal. v.
Douglas, 757 F.3d 975, 988 (9th Cir. 2014) (emphasis added).
HOAG MEMORIAL V. PRICE 15
requirements[,] . . . that latitude is not limitless” (internal
quotation marks and citation omitted)). Managed Pharmacy
Care does not relieve the Secretary of his duty to do
something to ensure compliance with the applicable
substantive requirement, see Arc of Cal., 757 F.3d at 988,
and whatever metric the Secretary chooses to employ, that
metric must be reasonably targeted to achieve the statute’s
expressly required result: that beneficiaries have access to
care and services “at least to the extent that such care and
services are available to the general population in the
geographic area.”
Although, as we recognized in Managed Pharmacy
Care, § 30(A) “says nothing about cost studies,” the statute
is not silent as to the equal-access requirement, which is a
“concrete standard, objectively measurable against the
health care access afforded among the general population.”
Visiting Nurse Ass’n of N. Shore, Inc. v. Bullen, 93 F.3d 997,
1005 (1st Cir. 1996), abrogated on other grounds by Long
Term Care Pharmacy All. v. Ferguson, 362 F.3d 50, 55 (1st
Cir. 2004); see also Evergreen Presbyterian Ministries Inc.
v. Hood, 235 F.3d 908, 931 (5th Cir. 2000) (“Above all, the
equal access provision affords the ‘objective benchmark’ of
access to medical care equal to that of the general population
in the same geographic area.”), abrogated on other grounds
by Equal Access for El Paso, Inc. v. Hawkins, 509 F.3d 697(5th Cir. 2007). And, in contrast to the requirement that
payments be “consistent with efficiency, economy, and
quality of care”—language which Managed Pharmacy Care
found “broad and diffuse”—the phrase “at least to the
extent” sets forth a clear and unambiguous standard. 4
4
At first glance, our description of § 30(A)’s required “substantive
result” as “rates [that are] consistent with efficiency, economy, and
quality care, and sufficient to enlist enough providers to ensure adequate
16 HOAG MEMORIAL V. PRICE
Congress did not require the Secretary to ensure a
“reasonable” level of access, or a level of access
“comparable” or “similar” to that of the general public,
which ambiguous standards would benefit from the
Secretary’s judgment and expertise. See Cal. Ass’n of Rural
Health Clinics v. Douglas, 738 F.3d 1007, 1014 (9th Cir.
2013) (“[T]he imprecise language in question [in Managed
Pharmacy Care] made the agency’s expertise relevant to
determining how to understand and interpret the statute.”);
see also Managed Pharmacy Care, 716 F.3d at 1248 (“The
statute’s amorphous language ‘suggest[s] that the agency’s
expertise is relevant in determining its application.’”
(quoting Douglas v. Indep. Living Ctr. of S. Cal., Inc.,
565 U.S. 606, 614 (2012))). Instead, Congress required
equal access.
The words “at least to the extent” mean, on their face,
that the required level of access to care and services is equal
to or greater than that of the general population. C.f.
Caminetti v. United States, 242 U.S. 470, 485–86 (1917)
(“Statutory words are uniformly presumed, unless the
contrary appears, to be used in their ordinary and usual
beneficiary access” seems to summarize the entirety of § 30(A)’s
requirements. However, what we described in Managed Pharmacy Care
as “adequate beneficiary access” is in fact expressly defined in the statute
as “care and services [that] are available under the plan at least to the
extent that such care and services are available to the general population
in the geographic area.” 42 U.S.C. § 1396a(a). We have consistently
recognized “the rule that statutes should not be construed in a manner
which robs specific provisions of independent effect.” County of Santa
Cruz v. Cervantes (In re Cervantes), 219 F.3d 955, 961 (9th Cir. 2000)
(quoting Davis v. City and County of San Francisco, 976 F.2d 1536,
1551 (9th Cir. 1992), vacated on other grounds, 984 F.2d 345 (9th Cir.
1993)). We do not read Managed Pharmacy Care as effectively reading
out equal access as a substantive benchmark for reviewing rates under
§ 30(A).
HOAG MEMORIAL V. PRICE 17
sense, and with the meaning commonly attributed to them.”).
Application of this unambiguous standard would essentially
require only (1) that the record include data showing the
level of access available to both Medi-Cal beneficiaries and
the general population, and (2) a comparison of those two
data sets to determine whether the Medi-Cal beneficiaries’
access meets or exceeds that of the general population.
Unlike the situation in Managed Pharmacy Care, this
straightforward comparison of data under the equal-access
requirement would derive little benefit from the Secretary’s
expertise.
We therefore hold that the Secretary’s implicit
interpretation of § 30(A) as not requiring consideration of
Medi-Cal patients’ access to care relative to that of the
general public is not entitled to Chevron deference. Cf. Cal.
Ass’n of Rural Health Clinics, 738 F.3d at 1014 (declining
to afford Chevron deference to the Secretary’s approval of
an SPA where “we cannot fairly say that Congress was silent
or ambiguous with respect to the issue at hand” (internal
quotation marks omitted)). How the Secretary determines
“sufficiency” of rates for the purpose of achieving
“efficiency, economy, and quality of care” may be within his
discretion; but the text of this portion of § 30(A) clearly
contemplates an approval process targeting the particular
“substantive result” of equal access. Thus the Secretary’s
approval of the SPAs in this case violated § 30(A), as it
failed to include any consideration regarding Medi-Cal
beneficiaries’ access to care relative to that of the general
public.
II. The Secretary’s Application of Section 30(A) Was
Arbitrary and Capricious
Under the APA, we may set aside agency action that is
“arbitrary, capricious, an abuse of discretion, or otherwise
18 HOAG MEMORIAL V. PRICE
not in accordance with law.” 5 U.S.C. § 706(2)(A). To meet
the standard for reversal set forth by the APA, a party must
show that
the agency has relied on factors which
Congress has not intended it to consider,
entirely failed to consider an important aspect
of the problem, offered an explanation for its
decision that runs counter to the evidence
before the agency, or is so implausible that it
could not be ascribed to a difference in view
or the product of agency expertise.
Managed Pharmacy Care, 716 F.3d at 1244 (quoting Motor
Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co.,
463 U.S. 29, 43 (1983)).
The Secretary’s approval of the SPA in this matter was
“arbitrary and capricious” because he “entirely failed to
consider an important aspect of the problem,” namely,
whether § 30(A)’s equal-access requirement would be
satisfied. The Secretary approved rates that must ensure
equal access to care for members of two groups, yet
considered only the level of access provided to one of those
two groups. To illustrate the error of this approach, consider
the task of evaluating whether employment positions A and
B offer an equal salary. Information regarding position A’s
compensation over time, the number of applicants who apply
at the present salary rate, and whether the salary suffices to
meet basic living standards is all very useful for determining
whether or not position A is itself sufficiently compensated.
But it tells one nothing about whether the compensation
equals that offered for position B.
This is precisely the scenario presented by the
Secretary’s approval of the challenged SPA. The Secretary
HOAG MEMORIAL V. PRICE 19
unquestionably considered substantial evidence regarding
the care and services available to Medi-Cal patients as part
of the SPA approval process. But Appellee has not
identified any evidence that indicates the level of service
available to Medi-Cal patients relative to that of the general
public. C.f. Christ the King Manor, 730 F.3d at 314
(recognizing that, although the record included data showing
that payments to providers would increase from the prior
year, that increase could not, alone, establish the equal-
access requirement (or the other § 30(A) requirements)).
Without evidence reflecting the general population’s level of
access, the Secretary cannot fulfill his duty to “make a
determination as to whether [the plan] conforms to the
requirements for approval.” See 42 U.S.C. § 1316(a)(1).
We may question the wisdom of requiring some form of
comparative analysis where the information available
indicates that rates are otherwise sufficient. We may not,
however, disregard the plain text of the statute. As a strictly
logical matter, the Secretary could not have considered
§ 30(A)’s expressly mandated result of equal access absent
some form of comparative-access data. 5 Accordingly, the
5
In addition to arguing generally that the Secretary failed to consider
relative degrees of access to care as between Medi-Cal beneficiaries and
the general public, Appellants contend that the Secretary’s failure to
consider the effect of EMTALA—pursuant to which hospitals must
provide emergency medical services to patients regardless of a patient’s
ability to pay—constitutes error. They reason that hospitals providing
emergency services will necessarily participate in Medi-Cal, as a means
of ensuring that they receive some payment for services provided to
patients unable to afford treatment, and that EMTALA therefore skews
the data regarding the percentage of service providers who participate in
Medi-Cal.
We agree that EMTALA likely affects this data. We decline to hold,
however, that the Secretary must specifically assess the impact of any
given statute on the availability of services to Medi-Cal patients. As we
20 HOAG MEMORIAL V. PRICE
Secretary’s approval of the SPA absent consideration of such
data was arbitrary and capricious.
CONCLUSION
Appellee conceded at oral argument that, as a logical
matter, a variable X cannot be established as equal to or
greater than a variable Y based solely on the properties of X.
Rather, the comparison requires some evidence regarding Y.
Appellee contends that this logic does not apply, however,
to the complicated task of implementing § 30(A)’s
requirements for SPAs due to our Managed Pharmacy Care
holding that the Secretary need not employ any particular
methodology in assessing compliance with § 30(A)’s
required substantive results.
Managed Pharmacy Care did not suggest that the
Secretary’s broad discretion to evaluate compliance with the
results prescribed by § 30(A) encompasses the ability to
abandon logic or disregard the express language of the
relevant portion of the statute. Here the Secretary could not
have considered whether rates under the challenged SPA
would ensure “that care and services are available under the
plan at least to the extent that such care and services are
available to the general population” absent some
consideration of the “care and services [] available to the
made clear in Managed Pharmacy Care, Ҥ 30(A) does not require any
particular methodology for satisfying its substantive requirements as to
modifications of state plans.” 716 F.3d at 1249 (internal quotation marks
omitted). So long as the Secretary considers evidence plausibly
reflecting the required substantive result of equal access to care, we leave
to his discretion how the potential effects of specific pieces of legislation
factor into that consideration. See id. (“Congress did not purport to
instruct the Secretary how to accomplish [§ 30(A)’s] substantive goals.
That decision is left to the agency.”).
HOAG MEMORIAL V. PRICE 21
general population.” Because the parties point to no
evidence that would inform such a consideration, we hold
that the Secretary’s approval of the SPA violated § 30(A),
and was arbitrary and capricious.
We reverse and remand to the district court for further
proceedings consistent with this opinion.
REVERSED and REMANDED.