Georgia Department of Community Health v. United States Department of Health and Human Services , 110 F. Supp. 3d 95 ( 2015 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
GEORGIA DEPARTMENT OF
COMMUNITY HEALTH,
Plaintiff,
v. Civil Action No. 13-1281 (GK}
UNITED STATES DEPARTMENT OF
HEALTH & HUMAN SERVICES,
et al.,
Defendants.
MEMORANDUM OPINION
Defendant United States Department of Health and Human
Services ("HHS"), through its operating division, the Centers for
Medicare & Medicaid Services ("CMS") (collectively, "Defendants") ,
has filed a Rule 59 (e) Motion to Alter or Amend the Judgment
("Motion") [Dkt. No. 29] issued by the Court partially granting
Plaintiff Georgia Department of Community Heal th' s ("Georgia")
Motion for Summary Judgment and ordering CMS to return $90, 050, 230.
See Memorandum Opinion on the Motions for Summary Judgment [Dkt.
No. 27].
Upon consideration of the Motion, Opposition ("Opp' n") [Dkt.
No. 30], Reply ("Reply") [Dkt. No. 31], Sur-Reply ("Sur-Reply")
[Dkt. No. 34], the entire record herein, and for the reasons stated
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below, Defendants' Motion to Alter or Amend the Judgment is granted
in part and denied in part.
I . BACKGROUND
A brief recitation of the facts is necessary. For a detailed
summary of the facts, see this Court's Memorandum Opinion on the
Motions for Summary Judgment [Dkt. No. 27].
In 2003, Georgia launched a new system to process claims
submitted by medical providers. It suffered from severe problems
that resulted in significant delays in paying the providers, who
were threatening to stop caring for patients. In response to this
crisis, Georgia and CMS agreed that Georgia could make "advance"
payments to providers until the new system was fixed. Between April
1, 2003, and June 30, 2005, Georgia made approximately $2 billion
in advance payments to providers under this arrangement. Georgia
Dep't of Cmty. Health, HHS Departmental Appeals Board ("DAB" or
"the Board") No. 2521, 6 (Jun. 28, 2013) [hereinafter DAB No.
2521]
For its own internal accounting purposes, Georgia classified
the advance payments as "provider receivables" (i.e. money to be
recouped from Medicaid providers). However, for purposes of its
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Quarterly Statement of Expenditures ("QSE") 1 that it submitted to
CMS, Georgia reported the advance payments as current-quarter
expenditures. Id.
In the process of preparing its State fiscal year 2005
financial statements, Georgia inadvertently included the federal
share of its provider receivables balance $45,025,115.09
("$45 million") -- in its decreasing adjustment on the QSE for the
quarter ended September 30, 2005 ("September 2005 QSE"). Id. This
error had the effect of mistakenly crediting $45 million to CMS.
Of particular note for the issues raised in this motion, Georgia
"netted the $45,025,115.09 provider receivables adjustment against
an unrelated transaction in the amount of $15,289,462 (an increase
in expenditures)." AR 63 (Georgia DAB Br. at 10, n.9). It was the
net of the two amounts ($29,735,653) that was reported as a
reduction in expenditures (i.e., a credit to CMS). Id.
While preparing its financial statements for State fiscal
year 2006, Georgia 2 again inadvertently credited $45 million to
1 The QSE is an "accounting of actual recorded expenditures" for
the quarter, which details and reconciles how the federal grant
award monies were spent.
2 While the number of employees involved in making the two $45
million errors is not relevant to the outcome of the case,
Georgia has indicated that it was a single employee who made the
mistakes. See Georgia Motion for Summary Judgment [Dkt. No. 13)
at 14-16 (referencing errors made by "a State employee").
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CMS, this time on the QSE for the quarter ended June 30, 2006. DAB
No. 2521 at 7-8.
Combined, Georgia erroneously credited CMS $90,050,230
between 2005 and 2006 ("$90 million"). Georgia did not realize its
errors until 2008. Once Georgia discovered the errors, it attempted
to reclaim the $90 million by including the amount in the QSE for
the quarter ended June 30, 2009. DAB No. 2521 at 8. CMS ultimately
disallowed the $90 million adjustment. Georgia appealed CMS' s
decision to the Board. On June 28, 2013, the Board sustained the
entire $90 million disallowance. See generally DAB No. 2521.
Georgia then filed its Complaint with this Court on August
23, 2013 [Dkt. No. 1]. The parties filed cross-Motions for Summary
Judgment [Dkt. Nos. 13, 14]. On February 10, 2015, this Court
upheld DAB's decision to disallow the $90 million adjustment, but
also found that CMS had been unjustly enriched and ordered CMS to
return the $90 million to Georgia. See Order on Motions for Summary
Judgment [Dkt. No. 26] and accompanying Memorandum Opinion
("Opinion") [Dkt . No. 2 7] .
II. STANDARD OF REVIEW
Defendants seek relief under Fed. R. Civ. P. 59(e), which
provides that " [a] motion to alter or amend a judgment must be
filed no later than 28 days after entry of the judgment." Fed. R.
Civ. P. 59(e). A district court may grant a Rule 59(e) motion if
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there is "an intervening change of controlling law, the
availability of new evidence, or the need to correct a clear legal
error or prevent manifest injustice." Ciralsky v. Cent.
Intelligence Agency, 355 F.3d 661, 671 (D.C. Cir. 2004) (internal
quotation and citation omitted). "[A] Rule 59(e) motion may not be
used to . raise arguments . that could have been raised
prior to the entry of judgment." GSS Grp. Ltd. v. Nat' 1 Port Au th. ,
680 F.3d 805, 812 (D.C. Cir. 2012) (citation and internal quotation
marks omitted) .
The Court has discretion in deciding a Rule 59 (e) motion.
Firestone v. Firestone, 76 F.3d 1205, 1208 (D.C. Cir. 1996) (per
curiam), although such relief "is an extraordinary remedy which
should be used sparingly." Charles Alan Wright et al., Federal
Practice and Procedure § 2810.1 (3d ed. 2004).
III. ANALYSIS
A. Adequate Legal Remedy
In its Opinion, the Court found that Georgia did not have an
adequate remedy at law, a prerequisite to considering equitable
relief. The remedy at law was inadequate because, under the Board's
interpretation of the relevant Regulations, the limitations
periods for recuperating credits made erroneously were cut short.
In some instances, Georgia was actually time-barred from
recovering the mistaken credits the moment they were made.
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Defendants argue that Georgia has not offered any evidence
showing what portion of the credits were immediately time-barred,
that the portion is "likely quite small," and that
accordingly, "Georgia has not shown that the rationale underlying
the Court's ruling . applies to a significant portion of its
claims." Motion at 5.
Defendants' argument is not persuasive. As the Court
explained in its Opinion, under the Board's interpretation, the
two-year limitations period was shortened for all the mistaken
credits. Defendants support their argument by focusing on
Georgia's negligence and CMS's initial disallowance, Motion at
5-7. However, this focus is misplaced as neither Georgia's
negligence nor the disallowance affects whether Georgia had an
adequate remedy at law.
In their Reply, Defendants argue, for the first time, that
the two-year limitation is actually a statute of repose, rather
than a statute of limitations. Not only was this argument not
raised in the cross-Motions for Summary Judgment, Defendants
failed to even raise it in their opening Motion to Alter or Amend.
As mentioned previously, a Rule 59(e) motion "may not be used to
. raise arguments . . that could have been raised prior to
the entry of judgment." Nat'l Port Auth., 680 F.3d at 812 (internal
quotation and citation omitted). In addition, "[c]ourts ordinarily
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decline to consider arguments that are raised for the first time
in a reply to an opposition." Taitz v. Obama, 754 F. Supp. 2d 57,
61 (D.D.C. 2010). Accordingly, the Court will not consider
Defendants' belated argument that the two-year limitation is a
statute of repose.
B. Equitable Relief
Defendants next argue that the Supreme Court's recent
decision in Armstrong v. Exceptional Child Center, Inc., 135 S.
Ct. 1378 (2015), prohibits this Court from providing equitable
relief. See generally Reply at 2-8. In Armstrong, private medical
providers alleged that Idaho's reimbursement rates violated
Section 30(A) of the Medicaid Act and sought "to enjoin [Idaho
Health and Welfare Department officials] to increase these rates."
Armstrong at 1382. The Court held that the Medicaid Act implicitly
precludes private enforcement of Section 30(A), and therefore, the
medical providers could not invoke the Court's equitable powers.
Id. at 1385.
Defendants read Armstrong too broadly when they suggest that
"a party that fails to obtain relief under the Medicaid Act through
the prescribed administrative process cannot then resort to
equity." Reply at 2 (emphasis omitted). Georgia does not rely on
an implied cause of action, nor does it ask the Court to provide
injunctive relief to enforce a federal statute. The rationales
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relied on by the Armstrong Court are simply not analogous to the
case at hand.
Defendants also argue, again for the first time, that the
Supreme Court's decision in Sebelius v. Auburn Regional Medical
Center, 133 S. Ct. 817 (2013)·, controls and prevents the Court
from "resort[ing] to equitable principles." See Motion at 7-9. A
Rule 59 (e) motion may not be used as "a vehicle for presenting
theories or arguments that could have been advanced earlier."
Turkmani v. Republic of Bolivia, 273 F. Supp. 2d 45, 49 (D.D.C.
2002) . Defendants have offered no justification for their failure
to raise this argument- -which rests on a two-year old opinion.
Once again, the Court declines to consider Defendants' belated
argument which could have been advanced in CMS's original Motion
for Summary Judgment.
C. Adjustment and Clarification of Remedy
As discussed previously, in its September 2005 QSE, Georgia
netted the $45,025,115 mistaken credit against an unrelated amount
of $15, 289, 462 (an increase in claimed expenditures for prior
quarters). See supra at 3; AR 63; Motion at 12-13. It was the net
of the two amounts, $29,735,653, which was reported as a credit to
CMS. See supra at 3.
Defendants contend that the $90,050,230 judgment in Georgia's
favor should be reduced by the $15, 289, 462 ( "$15 million") because,
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as a result of the netting, Georgia never actually made a request
for Federal financial participation ("FFP")3 for the $15 million.
Georgia does not directly dispute that claims for the $15 million
in FFP were not timely filed, but rather argues that the Court's
finding of unjust enrichment is equally applicable to the $15
million.
As to this claim, Georgia's right to receive FFP for the $15
million in expenditures is subject to the two-year statute of
limitations. This is not an instance where Georgia had an
inadequate remedy at law for claiming FFP for the expenditures,
and therefore, equitable remedies are not available. Because
Georgia netted the mistaken $45 million credit against the $15
million in intended expenditure claims, it never submitted its
claims for these expenditures and only included $29,735,653 of the
mistaken credit on the September 2005 QSE.
While it is not disputed that, at the end of the day,
Georgia's errors cost the state $90 million, Georgia only
mistakenly credited CMS with $74,760,768. The netting of the
mistaken credit resulted in Georgia failing to timely file claims
for $15,289,462 in FFP, and therefore $15,289,462 in unclaimed
expenditures cannot be included in the $90 million judgment.
3 FFP is the federal share of a state's Medicaid expenditures.
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Accordingly, the Court grants Defendants' Motion with regard to
reducing this Court's prior judgment from $90,050,230 to
$74,760,768.
Defendants also ask the Court to clarify the remedy ordered.
Georgia shall submit an upward adjustment in the amount of
$74, 760, 768 on a future QSE as soon as is reasonably possible,
which CMS shall allow, to effectuate the return of the erroneous
credits.
IV. CONCLUSION
For all of the foregoing reasons, Defendants' Motion to Alter
or Amend shall be granted in part and denied in part. An Order
shall accompany this Memorandum Opinion.
June 22, 2015
United States District Judge
Copies via ECF to all counsel of record
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