Asante v. Azar ( 2020 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
)
ASANTE, et al., )
)
Plaintiffs, )
)
v. ) Civil Action No. 20-cv-601 (TSC)
)
ALEX M. AZAR, et al., )
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Defendants. )
)
MEMORANDUM OPINION
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”), 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 claim that California’s
Medicaid plan impermissibly differentiates between in-state 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 Clause, and
the Medicaid Act, and that Defendants’ approval and funding of the scheme violate the APA.
The Hospitals move for a preliminary injunction to prevent the federal government from making
payments to California under the plan. 1 (ECF No. 2.) Having reviewed the parties’ filings, and
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The Hospitals also appear to seek a preliminary injunction preventing the Defendants from
“approving . . . California’s QAF program.” (ECF No. 2 at 2; ECF No. 2-1 (“Pls. Br.”) at 2.)
The Defendants have already approved the current QAF Program (effective July 1, 2019,
for the reasons set forth below, the court will DENY Plaintiffs’ Motion for a Preliminary
Injunction.
I. BACKGROUND
Medicaid, 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: the Department of Health and Human Services
(“HHS”); the Secretary of HHS, Alex Azar; the Centers for Medicare and Medicaid Services
(“CMS”); and the CMS Administrator, Seema Verma. (Compl. ¶¶ 11–14.) 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 the necessary and proper costs of administering its Medicaid program. 42 U.S.C.
§§ 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).
through December 31, 2021) (ECF No. 1 (“Compl.”) ¶ 99), and the Hospitals do not address this
element of relief in their briefing. The court will therefore deny that request for relief.
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California participates in the Medicaid program through Medi-Cal. See Cal. Welf. &
Inst. Code § 14000, et seq. At issue here is Medi-Cal’s 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 those hospitals from the
total funds. (Compl. ¶¶ 52–55.) Under California’s QAF program, certain in-state hospitals
receive supplemental payments while out-of-state hospitals do not (Id. ¶¶ 54–56), despite the fact
that out-of-state hospitals, particularly those near the California border, provide frequent and
necessary services to Medi-Cal patients. (Id. ¶¶ 2–5.) In order for California to operate the QAF
program, CMS must approve California’s state plan amendments. (Id. ¶¶ 94–98.) On February
25, 2020, CMS approved California’s state plan amendments for the current QAF program,
which covers the period July 1, 2019, through December 31, 2021 (“2019 QAF Program”). (Id.
¶ 99.) The Hospitals have settled claims with California regarding the QAF program covering
2009 through June 30, 2019. (Id. ¶¶ 20–26.)
The Hospitals allege that the QAF program’s differential treatment of in-state and out-of-
state hospitals unlawfully discriminates against out-of-state hospitals. (Id. ¶¶ 74, 80–81.) The
Hospitals assert three claims against the Defendants under the APA. 2 In Count One, they allege
that “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 the APA § 706(2)(A), (B). (Compl.
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The Hospitals first brought these claims on August 20, 2019. But CMS had not yet approved
the 2019 QAF Program, and the court dismissed the action because there was no final agency
action. Asante v. Azar, No. 19-cv-02512 (D.D.C. February 14, 2020).
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¶¶ 102, 104.) In Count Two, the Hospitals claim that “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. ¶¶ 106, 108.) 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 such funds to in-state hospitals” in violation of the Medicaid Act, and therefore
agency approval again violates the APA. (Compl. ¶¶ 111–113.) 3 The Hospitals seek declaratory
relief and an injunction barring Defendants from making supplemental payments to California
for the QAF program and preventing CMS from approving California’s state plan amendments
that include the 2019 QAF program. (Prayer for Relief ¶¶ 1–5.)
II. LEGAL STANDARD
A preliminary injunction is an “extraordinary and drastic remedy” that is “never awarded
as of right.” Munaf v. Geren, 553 U.S. 674, 689–90 (2008) (internal citations and quotation
marks omitted). A preliminary injunction “should not be granted unless the movant, by a clear
showing, carries the burden of persuasion.” Mazurek v. Armstrong, 520 U.S. 968, 972 (1997)
(internal citations and quotation marks omitted) (emphasis in original). Courts consider four
factors on a motion for a preliminary injunction: (1) the likelihood of plaintiff’s success on the
merits, (2) the threat of irreparable harm to the plaintiff absent an injunction, (3) the balance of
equities, and (4) the public interest. Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20
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Count Four alleges a cause of action under the Declaratory Judgment Act. (Compl. ¶¶ 114–18
(citing 28 U.S.C. §§ 2201, 2202).) Declaratory relief, however, is not a freestanding cause of
action, but rather a form of relief for the Hospitals’ other claims. See Ali v. Rumsfeld, 649 F.3d
762, 778 (D.C. Cir. 2011).
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(2008). The D.C. Circuit has traditionally evaluated claims for injunctive relief on a sliding
scale, such that “a strong showing on one factor could make up for a weaker showing on
another.” Sherley v. Sebelius, 644 F.3d 388, 392 (D.C. Cir. 2011). It has been suggested,
however, that a movant’s showing regarding success on the merits “is an independent, free-
standing requirement for a preliminary injunction.” Id. at 393 (quoting Davis v. Pension Ben.
Guar. Corp., 571 F.3d 1288, 1296 (D.C. Cir. 2009) (Kavanaugh, J., concurring)). Under either
approach, however, the movant must always show irreparable harm, and if a party cannot do so,
the court may deny the motion for injunctive relief without considering the other factors.
CityFed Fin. Corp. v. Office of Thrift Supervision, 58 F.3d 738, 747 (D.C. Cir. 1995).
III. ANALYSIS
A. Irreparable Harm
While “[t]he concept of irreparable harm does not readily lend itself to definition,”
Judicial Watch, Inc. v. U.S. Dep’t of Homeland Security, 514 F. Supp. 2d 7, 10 (D.D.C. 2007),
Plaintiffs carry a “considerable burden” to establish irreparable harm. Power Mobility Coal. v.
Leavitt, 404 F. Supp. 2d 190, 204 (D.D.C. 2005) (citing Wis. Gas Co. v. F.E.R.C., 758 F.2d 669,
674 (D.C. Cir. 1985)). The movant must provide some evidence of irreparable harm: “the
movant [must] substantiate the claim that irreparable injury is likely to occur” and “provide proof
that the harm has occurred in the past and is likely to occur again, or proof indicating that the
harm is certain to occur in the near future.” Wis. Gas Co., 758 F.2d at 674 (internal quotation
marks and citation omitted). The party seeking injunctive relief must prove that the purported
injuries are “both certain and great,” “actual and not theoretical,” and imminent. Id. The movant
must also “substantiate the claim” of irreparable harm and “show that the alleged harm will
directly result from the action which the movant seeks to enjoin.” Id. Finally, the harm claimed
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must be “beyond remediation.” Chaplaincy of Full Gospel Churches v. England, 454 F.3d 290,
297 (D.C. Cir. 2006). In general, economic loss is not irreparable harm “in and of itself.” Wis.
Gas Co., 758 F.2d at 674. But economic losses can be sufficient if they are unrecoverable and
threaten the existence of the business or, in the non-profit context, result in substantial reduction
of services. Texas Children’s Hosp. v. Burwell, 76 F. Supp. 3d 224, 242 (D.D.C. 2014) (citing
Nat’l Mining Ass’n, v. Jackson, 768 F. Supp. 2d 34, 52 (D.D.C. 2011); Bracco Diagnostics, Inc.
v. Shalala, 963 F. Supp. 20, 29 (D.D.C. 1997)).
The Hospitals seek to enjoin the federal government from paying approximately $4
billion in supplemental Medicaid funds to California, which would prevent California from
disbursing those funds to in-state hospitals. (Pls. Br. at 2; see also Compl. ¶ 7.) They contend
they are entitled to approximately $15 million of the funds and would lose the opportunity to
recover those funds without an injunction. (Id. at 37; see also Compl. ¶ 81.) The court finds,
however, that the Hospitals have failed to show that this loss constitutes irreparable harm.
The alleged $15 million loss results from California’s distribution of all QAF funds, both
federal and state-raised, to in-state hospitals. Thus, the action that directly results in their loss is
California’s distribution of the funds. And the action Plaintiffs seek to enjoin—the federal
payment—does not “directly result” in their $15 million loss. See Wis. Gas Co., 758 F.2d at 674
(requiring the harm to “directly result” from the enjoined action). The loss is, at most, an
indirect result of the $4 billion payment from the federal government to California. While the
Hospitals concede that enjoining the federal payment will not change California’s QAF program
and entitle them to payments, they contend that it is “highly unlikely” that California would risk
a $4 billion loss by continuing with the program. (ECF No. 22 “Pls. Reply” at 24.) This
speculation cannot meet the standard for irreparable harm. Moreover, California is not a
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defendant in this action and the court obviously has no power to compel a non-defendant to pay
$15 million to the Hospitals. Thus, their loss would not be remedied by an injunction against the
federal government.
The Hospitals argue that their irreparable harm argument is similar to the one made in
Texas Children’s Hospital v. Burwell, 76 F. Supp. 3d 224, 242 (D.D.C. 2014). (Pls. Br. at 36–
38.) In that case, the plaintiff hospitals sought a preliminary injunction against HHS and CMS to
invalidate a new regulatory provision involving hospital Medicaid payments. Id. at 235. Had the
provision gone into effect, the plaintiff hospitals would have been required to return the money
already received. Id. at 232, 235. The court enjoined the federal defendants from enforcing the
new provision, therefore preventing both the federal government and the states from recouping
money already paid to the plaintiff hospitals. See id. at 244–45. Here, however, the Hospitals
are not at risk of losing funds already paid. Indeed, the only payments the Hospitals have ever
received for the QAF program were through settlements with California. (See Compl. ¶¶ 20–26.)
Moreover, the injunction in Texas Children’s Hospital directly remedied the harm because it
stopped the recoupment and permitted the hospitals to retain the funds during the litigation. See
76 F. Supp. 3d at 244–46. In this case, an injunction halting the federal government’s payments
would not remedy the Hospitals’ alleged $15 million loss because the injunction would only
prevent the federal government from paying funds to California and would not result in any
payment to the Hospitals.
Even were the injunction to remedy the alleged harm, the Hospitals, which are all non-
profits, have failed to “adequately describe and quantify the level of harm.” Air Transp. Ass’n of
Am., Inc. v. Exp.-Imp. Bank of the U.S., 840 F. Supp. 2d 327, 333–34 (D.D.C. 2012). They argue
that the loss of funds results in reduction in services and that they must provide Medicaid
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services to Medi-Cal patients. (Pls. Br. at 38.) To be sure, the loss of funds may result in some
reduction of services, but the Hospitals provide no specific facts (in the Complaint or in
supporting declarations) about the effects of the $15 million loss on their operations. Cf. Texas
Children’s Hosp., 76 F. Supp. at 243–44 (detailing the substantially reduced services due to the
economic loss).
The Hospitals also argue the loss is unrecoverable “practically” because distribution of
the funds to the in-state hospitals will leave no funds for out-of-state hospitals at the end of
litigation. 4 (Pls. Br. at 37.) But the Hospitals do not dispute Defendants’ point that if the court
sets aside California’s QAF program, the state would have to return the matching federal funds
to the federal government. (See Defs. Br. at 9 (citing 42 C.F.R. §§ 430.40, 430.42).) Therefore,
the distributed funds are not unrecoverable.
Accordingly, the Hospitals cannot meet their burden to show irreparable harm.
B. Other Factors
The court need not address the other preliminary injunction factors in light of the
Hospitals’ failure to show irreparable harm. See CityFed Financial Corp., 58 F.3d at 747.
Nonetheless, it will address briefly the three remaining factors because they support its finding
that a preliminary injunction is unwarranted. As to the balance of equities and public interest,
those factors weigh against an injunction. The Hospitals seek to enjoin $4 billion in federal
funds that would otherwise be disbursed to California hospitals during the nationwide emergency
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Plaintiffs also contend their losses are unrecoverable from California because the Eleventh
Amendment bars suit against California in federal court and a California statute prohibits a
judgment in favor of out-of-state hospitals under the QAF program. Defendants do not appear to
contest this argument, (See generally ECF No. 21 (“Defs. Br.”)), and the court therefore treats it
as conceded.
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caused by the COVID-19 virus. While the Hospitals share in this stress to medical institutions
due to the pandemic, the court declines to disrupt funding to California hospitals during this
national emergency. In addition, given the uncertainty of the “sliding scale” approach in this
Circuit after Winter, the court will not opine on whether the Hospitals have shown a likelihood of
success on the merits, except to say that it would not have tipped the balance either way. In sum,
not only have the Hospitals not shown irreparable harm, but none of the remaining factors swing
in their favor.
IV. CONCLUSION
For the reasons stated, the court will DENY Plaintiffs’ motion for preliminary injunction.
A corresponding Order will issue separately.
Date: April 21, 2020
Tanya S. Chutkan
TANYA S. CHUTKAN
United States District Judge
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