Consejo De Salud De La Comunidad De La Playa De Ponce, Inc. v. González-Feliciano

United States Court of Appeals
For the First Circuit
Nos. 11-1121, 11-1126, 11-1733
CONSEJO DE SALUD DE LA COMUNIDAD DE LA PLAYA DE PONCE, INC.,
CDT, d/b/a Centro de Diagnóstico y Tratamiento de la Playa de
Ponce; DR. JOSÉ S. BELAVAL, INC.; CONCILIO DE SALUD INTEGRAL
DE LOÍZA, INC. (CSILO); ATLANTIC MEDICAL CENTER, INC.;
CAMUY HEALTH SERVICES, INC.; CENTRO DE SALUD FAMILIAR
DR. JULIO PALMIERI FERRI, INC.; CIALES PRIMARY HEALTH CARE
SERVICES, INC.; CORPORACIÓN DE SERVICIOS MÉDICOS PRIMARIOS Y
PREVENCIÓN DE HATILLO, INC.; CORPORACIÓN DE SERVICIOS
INTEGRALES DE SALUD INTEGRAL DE LA MONTAÑA, INC.; CORPORACIÓN
DE SERVICIOS DE SALUD Y MEDICINA AVANZADA, INC.; EL CENTRO
DE SALUD DE LARES, INC.; EL CENTRO DE SERVICIOS PRIMARIOS
DE SALUD DE PATILLAS, INC.; MIGRANT HEALTH CENTER, INC.;
HOSPITAL GENERAL CASTAÑER, INC.; MOROVIS COMMUNITY HEALTH
CENTER, INC.; RINCÓN HEALTH CENTER, INC.;
GURABO COMMUNITY HEALTH CENTER, INC.,
Plaintiffs-Appellees, Cross-Appellants,
TOA ALTA COMPREHENSIVE URBAN/RURAL ADVANCED HEALTH
SERVICES, INC.; RÍO GRANDE COMMUNITY HEALTH CENTER, INC.,
Plaintiffs,
v.
LORENZO GONZÁLEZ-FELICIANO, Substituted for
Rosa Pérez-Perdomo, former Secretary, Department of Health,
Commonwealth of Puerto Rico,
Defendant-Appellant, Cross-Appellee,
COMMONWEALTH OF PUERTO RICO; DEPARTMENT OF HEALTH,
COMMONWEALTH OF PUERTO RICO; MICHAEL O. LEAVITT, Secretary of
the U.S. Department of Health; U.S. DEPARTMENT OF
HEALTH & HUMAN SERVICES,
Defendants.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Gustavo A. Gelpí, U.S. District Judge]
Before
Torruella, Selya, and Lipez,
Circuit Judges.
Caroline M. Brown, with whom Matthew J. Berns, Covington &
Burling LLP, Eliezer Aldarondo-Ortiz, Eliezer Aldarondo-López,
Marla Hadad-Orta, and Aldarondo & López-Bras was on brief, for
appellant/cross-appellee.
Robert A. Graham, with whom James L. Feldesman, Nicole M.
Bacon, and Feldesman Tucker Leifer Fidell LLP was on brief, for
appellees/cross-appellants.
August 20, 2012
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TORRUELLA, Circuit Judge. We press on down the long and
tedious road of litigation concerning the implementation of a
federally-assisted Medicaid program by the Commonwealth of Puerto
Rico (the "Commonwealth"), represented here by its Secretary of
Health, Lorenzo González-Feliciano (the "Secretary"). In fact,
these appeals mark the sixth time we have considered issues that
are related to a dispute between the Commonwealth and several
"federally qualified health centers" ("FQHCs").1 Plaintiffs-
Appellees are FQHCs serving medically underserved populations in
Puerto Rico. They have taken their claims for reimbursement
payments owed to them under the Medicaid program ("Medicaid" or the
"Program"), 42 U.S.C. §§ 1396 et seq., to the federal courts.
Consejo de Salud de la Comunidad de la Playa de Ponce ("Consejo"),
has, since February 2009, represented nineteen such FQHCs
(collectively, the "plaintiff FQHCs" or "plaintiffs"), acting in
the capacity of lead Plaintiff-Appellee.
As the litigation now comes to us, the Secretary presents
two main issues on appeal. The first is whether the formula that
1
All FQHCs are health centers, but not all health centers are
FQHCs. Under 42 U.S.C. § 254b(a)(1), "the term 'health center'
means an entity that serves a population that is medically
underserved, or a specially medically underserved population
comprised of migratory and seasonal agricultural workers, the
homeless, and residents of public housing, by providing" certain
statutorily-defined services. The FQHCs involved in this
litigation are eligible to receive Medicaid financial grants
because they "serve[] a population that is medically underserved."
Id.
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the district court set in place by way of a preliminary injunction
to calculate payments that the Commonwealth owes the FQHCs for
providing Medicaid services mistakenly factored costs associated
with beneficiaries whose care has been or should be paid solely
through Commonwealth funds, thus resulting in overpayment to the
plaintiff FQHCs. The second is whether the district court's
formula also erroneously included certain third party costs for
which the plaintiffs can already expect compensation through other
means.
The plaintiff FQHCs cross-appeal and raise two claims.
First, they contend that the district court's preliminary
injunction improperly denied them indemnification from debts owed
to third party managed care organizations. Second, the plaintiffs
challenge the district court's judgment that the Eleventh Amendment
bars a federal court from ordering the Commonwealth to reimburse
the FQHCs for costs incurred prior to the date of its preliminary
injunction.
After careful consideration of the parties' claims and
arguments, we conclude that the formula that the district court
endorsed in its preliminary injunction is not sufficiently
supported by the factual record. Accordingly, we remand to the
district court for further consideration and reformulation. With
regards to the claims raised by the plaintiff FQHCs on their cross-
appeal, we find that the issue of indemnification is not properly
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within the scope of this litigation and affirm the district court's
holding on that issue. Finally, we also affirm the district
court's determination that the Eleventh Amendment precludes a
federal court from imposing a judgment for money damages upon the
Commonwealth to make payments for periods predating the date of the
district court's preliminary injunction.
I. Background and Procedural History
We have laid out much of the background relevant to these
appeals in our past decisions in this protracted litigation.2 We
recount only the facts that are essential to the present appeals
and refer to our prior judgments wherever those prove helpful to
our exposition. We provide additional background relevant to each
of the discrete issues before us infra.
2
As explained further infra, these appeals are the first
involving all of four separate but factually and legally similar
cases that have now been consolidated into one. Before the
district court consolidated these cases, this court considered
three separate appeals in which Dr. José S. Belaval, Inc.
("Belaval"), an FQHC, appeared as lead plaintiff. Belaval has been
party to all five previous appeals and again appears before this
court, now represented by Consejo. For ease of reading, we refer
to our previous judgments in this continuing litigation as Belaval
I through Belaval V. Specifically, see Concilio de Salud Integral
de Loíza, Inc. v. Pérez-Perdomo, 625 F.3d 15 (1st Cir. 2010)
("Belaval V"); Concilio de Salud Integral de Loíza, Inc. v. Pérez-
Perdomo, 551 F.3d 10 (1st Cir. 2008) ("Belaval IV"); Dr. José S.
Belaval, Inc. v. Pérez-Perdomo, 488 F.3d 11 (1st Cir. 2007)
("Belaval III"); Dr. José S. Belaval, Inc. v. Pérez-Perdomo, 465
F.3d 33 (1st Cir. 2006) ("Belaval II"); and Río Grande Cmty. Health
Ctr., Inc. v. Rullán, 397 F.3d 56 (1st Cir. 2005) ("Belaval I").
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A. The Medicaid Framework
Medicaid is funded jointly through federal and state
funds. See, e.g., 42 U.S.C. § 1301(a)(8)(A)-(B); see also Rabin v.
Wilson-Coker, 362 F.3d 190, 192 (2d Cir. 2004). States are not
obligated to participate in Medicaid, but must rigidly comply with
several federally-imposed requirements if they opt to do so.3 See
Belaval I, 397 F.3d at 61. Importantly, participating states must
offer certain "federally-qualified health center services," 42
U.S.C. §§ 1396a(a)(10)(A), 1396d(a)(2)(C), which may only be
provided by FQHCs such as the consolidated plaintiffs in this
litigation.
Under the Program, FQHCs are entitled to reimbursement
for services they provide to Medicaid patients. 42 U.S.C.
§ 1396a(bb)(1). Reimbursement payments owed by a participating
State to FQHCs are assessed through statutorily-set calculations
established by Medicaid's Prospective Payment System ("PPS"). Most
simply stated, "[u]nder the PPS, the reimbursement for a given year
is calculated by multiplying the number of visits by Medicaid
patients to [an] FQHC in that year by the average cost per patient
visit in fiscal years 1999 and 2000, adjusting to account for an
FQHC's change in services and inflation." Belaval V, 625 F.3d at17 (citing 42 U.S.C. § 1396a(bb)(3)).
3
Puerto Rico is considered a "State" under the Medicaid regime.
See 42 U.S.C. § 1301(a)(1).
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As is its prerogative, the Commonwealth has opted to
operate its Medicaid system by contracting with managed care
organizations ("MCOs"),4 which then provide health services to
Program beneficiaries. The Commonwealth pays these MCOs a fixed
monthly fee and the MCOs either profit or turn a loss depending on
whether the costs of provided services are less or greater than the
fixed fee they receive. See Belaval I, 397 F.3d at 62. However,
since MCOs often do not own facilities, they must routinely
subcontract with FQHCs to provide medical services. In practice,
an MCO will commonly contract with an FQHC to provide certain
services to Medicaid beneficiaries for a fixed per-patient price,
or "assigned capitation," on a pre-determined schedule. This
arrangement can lead to a problem that is at the heart of this
litigation: at times, an MCO's contract with an FQHC will not cover
the amount the FQHC is entitled to receive as determined by PPS
calculations. When this happens, the Commonwealth is statutorily
required to pay the FQHC a supplemental "wraparound" payment at
least three times a year to cover the difference between what an
MCO paid the FQHC and what the FQHC is entitled to receive under
the PPS regime. See 42 U.S.C. § 1396a(bb)(5)(A)-(B); see also
Belaval IV, 551 F.3d at 12 (explaining "detailed scheme for
calculating [] wraparound payments"). The upshot of this scheme is
4
"MCOs are also commonly referred to as health maintenance
organizations -- or HMOs." Belaval IV, 551 F.3d at 11.
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that an FQHC operating in Puerto Rico often should receive two
distinct payments for the services it provides Medicaid
beneficiaries -- a direct payment from the MCO and a wraparound
payment from the Commonwealth to supplement the former if it does
not meet the amount that the FQHC is entitled to receive.
B. The Road Here: Delayed Compliance and Litigation
As events actually transpired, the Commonwealth dragged
its feet in setting up an administrative system in order to comply
with the PPS regime -- which was supposed to come into effect on
January 1, 2001 -- and made no wraparound payments to FQHCs at all
in 2001. Despite some preliminary steps taken by the Commonwealth
to adopt the PPS methodology, three FQHCs -- Appellees Concilio de
Salud Integral de Loíza, Inc. ("Loíza"), Belaval, and Río Grande
Community Health Center, Inc. ("Río Grande") -- filed suit in 2003
in the U.S. District Court for the District of Puerto Rico claiming
that the Secretary had failed to release wraparound payments to
which they were entitled to under the Program. On March 31, 2004,
the district court granted a motion, filed only by Loíza, which
sought a temporary restraining order for emergency payments owed
for the first quarter of 2004 on account of the "precarious
financial position" that Loíza allegedly faced at the time. See
Belaval I, 397 F.3d at 65. In granting Loíza's request for
emergency relief, the district court also postulated a formula for
the Secretary to use in calculating those wraparound payments. Our
-8-
judgment in Belaval I, issued on February 14, 2005, affirmed the
district court's decision to enjoin the Secretary to make payments
to Loíza. See id. at 56.
On November 1, 2004, the district court granted a
preliminary injunction in favor of Loíza and its two co-plaintiff
FQHCs requiring the Secretary to set in place a system through
which to comply with the PPS framework and make owed payments. The
district court's November 1, 2004 order incorporated the formula it
had set out in its previous March 31, 2004 judgment in favor of
Loíza and endorsed it as the proper way to assess future payments
owed to Loíza, Belaval, and Río Grande.
In the spring of 2006, Consejo and two other groups of
FQHCs involved in these appeals filed separate suits against the
Secretary alleging similar claims to those being aired in the then-
pending action brought by Loíza, Belaval, and Río Grande.5 These
cases proceeded along discrete tracks until the district court
5
One group was comprised of twelve individual FQHCs: Atlantic
Medical Center, Inc., Camuy Health Services, Inc., Centro de Salud
Familiar Dr. Julio Palmieri Ferri, Inc., Ciales Primary Health Care
Services, Inc., Corporación de Servicios Médicos Primarios y
Prevención de Hatillo, Inc., Corporación de Servicios de Salud y
Medicina Avanzada, Inc., Corporación de Servicios Integrales de
Salud Integral de la Montaña Inc., El Centro de Salud de Lares
Inc., El Centro de Servicios Primarios de Salud de Patillas, Inc.,
Hospital General Castañer Inc., Morovis Community Health Center
Inc., and Rincón Health Center, Inc.
The other group of plaintiffs consisted of three individual
FQHCs: Gurabo Community Health Center, Inc., Migrant Health Center,
Inc., and Toa Alta Comprehensive Urban/Rural Advanced Health
Services, Inc.
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consolidated them into the current action and made Consejo the lead
plaintiff.
On March 27, 2007, the district court, acting sua sponte,
lifted the injunction it had set in place on November 1, 2004 as to
Loíza, citing mootness grounds and its understanding that the
Commonwealth had come into compliance with Medicaid's reimbursement
requirements. The district court explained that the Commonwealth
had established an office, the task of which was to calculate
wraparound payments owed to FQHCs and which had begun to process
these payments in earnest. Consequently, the district court
enjoined the Commonwealth to proceed with issuing wraparound
payments based on the formula it had laid out in its March 31, 2004
temporary restraining order. The court issued a similar order
relating to Belaval on July 3, 2007.
Both the Secretary and the FQHCs appealed the district
court's March 2007 ruling to this court, claiming that it left
crucial issues relating to the calculation of wraparound payments
unresolved. On December 15, 2008, in Belaval IV, we reversed the
district court's order vacating its preliminary injunction. See
551 F.3d at 17. Our decision explained that the district court had
failed to "rule on whether the formula adopted by the
[Commonwealth's] PPS Office was in compliance with the methodology
provisions of § 1396a(bb) [and failed to] fully determine what
constitutes compliance under these provisions." Id. Accordingly,
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we held that the district court had "erred in refusing to consider
and resolve these issues before vacating the preliminary injunction
and dismissing" the litigation on mootness grounds. Id. Our
judgment reinstated the district court's November 1, 2004
preliminary injunction, lifted the injunction ordering the
Secretary to use the district court's formula to calculate payments
because unresolved disputed issues remained, and remanded to the
district court for proceedings consistent with our opinion. See
id. at 18-19.
As proceedings below were again taking shape, Loíza and
Belaval filed a motion to the district court, now requesting
payment of reimbursements allegedly owed to them for Medicaid-
related costs accrued during what has, in the lexicon of this
drawn-out litigation, come to be known as the "gap period": i.e.,
the interval between the district court's decision to vacate its
preliminary injunction -- made on March 27, 2007, and July 3, 2007,
for Loíza and Belaval, respectively -- and our December 15, 2008
judgment in Belaval IV reversing those termination orders. The
Secretary opposed this motion and, on May 12, 2009, the district
court denied Loíza and Belaval's request for gap period
reimbursements. See Consejo de Salud Playa Ponce v. Pérez-Perdomo,
No. 3:06-cv-01260-GAG (D.P.R. May 12, 2009). Citing concerns
rooted in the Eleventh Amendment's protective scope -- which
precludes a federal court from ordering a State to pay monetary
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relief for past violations of a federal statute absent consent by
the State, waiver, or congressional abrogation, see Edelman v.
Jordan, 415 U.S. 651, 677-78 (1974) -- the district court reasoned
that "the Secretary was not under any court-imposed obligation to
issue any wraparound payments" during the gap period.
Loíza and Belaval pursued an interlocutory challenge to
the district court's ruling. See Belaval V, 625 F.3d at 18-19. In
Belaval V, we agreed with Loíza and Belaval's claims that the
Eleventh Amendment did not bar the district court from ordering the
Commonwealth to reimburse the health centers for Medicaid-related
costs incurred during the gap period. Our judgment, issued on
October 27, 2010, reasoned that the Secretary remained under a
court-imposed obligation to make wraparound payments throughout the
gap period by virtue of the original November 1, 2004 injunction,
notwithstanding our mandate in Belaval IV reversing the district
court's vacatur of the same injunction. See id. at 20 ("From the
issuance of the preliminary injunction onward, a district court
order was on the books requiring the formula payment; the district
court orders at issue in Belaval IV discontinued the preliminary
injunction requiring payment while simultaneously substituting
permanent ones requiring payment."). Once again, we remanded the
matter to the district court with instructions to proceed in a
manner consistent with our guidance.
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Matters proceeded rapidly following Belaval V. On
November 8, 2010, the district court issued an order and
preliminary injunction directing the Commonwealth to issue
prospective payments to the plaintiff FQHCs. This order excluded
Loíza and Belaval, for which the district court had already issued
injunctive relief, and -- as the district court clarified in a
subsequent order issued on November 9, 2010 -- Consejo, which had
obtained similar relief on November 13, 2009. Importantly, in
issuing the November 8, 2010 order requiring the Commonwealth to
issue payments as of that date, the district court rejected the
FQHC Plaintiff-Appellees' contention and its own prior
determination that the Secretary had waived Eleventh Amendment
protections as early as 2006 by virtue of its conduct in the
litigation.
Challenging certain aspects of the district court's
formula for calculating wraparound payments owed, which we explain
in further detail below, the Secretary timely appealed the district
court's preliminary injunction order on January 5, 2011. The
plaintiff FQHCs cross-appealed as to the district court's
conclusions regarding the Commonwealth's Eleventh Amendment
immunity and debt indemnification.
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II. Discussion
A. Appealed Issues Regarding Formula for Calculation of
Reimbursements Owed under 42 U.S.C. § 1396a(bb)
The Secretary does not challenge the district court's
decision ordering the Commonwealth to reimburse the plaintiff FQHCs
for future Medicaid-related costs. Rather, he claims that the
district court erred when it incorporated two separate components
into the formula whereby those reimbursement payments are to be
assessed. First, the Secretary argues that the formula erroneously
factors into its calculations non-Medicaid beneficiaries whose care
is solely funded through State funds. Second, the Secretary
challenges the district court's inclusion of certain costs into the
formula for which he claims the plaintiff FQHCs can properly expect
to receive remuneration from third parties. We address each of
these arguments in turn.
1. GHIP Recipients Included in Reimbursement Calculations
a. The Commonwealth's Health Insurance Structure
Established in 1965, Congress structured Medicaid to be
"a cooperative federal and state cost-sharing venture for the
provision of basic medical services to eligible applicants . . . ."
Hogan v. Heckler, 769 F.2d 886, 887 (1st Cir. 1985) (internal
citations omitted). As stated, once a State chooses to participate
in Medicaid, it must agree to satisfy certain federally-imposed
conditions and requirements. In accordance with this arrangement,
a participating State must submit a "State plan" proposal for
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approval from the U.S. Secretary of Health and Human Services
before it is eligible to receive federal Medicaid funding. See 42
U.S.C. §§ 1396a(b), 1396b(a)(1), (i)(17); see also Concourse Rehab.
& Nursing Ctr. Inc. v. DeBuono, 179 F.3d 38, 41 (2d Cir. 1999).
Among other things, a State plan must set forth the
categories of beneficiaries that a State intends to cover through
Medicaid funding. Coverage of certain "categorically needy"
beneficiaries -- for example, individuals who benefit from federal
assistance plans such as the Aid to Families with Dependent
Children ("AFDC") program or Supplemental Security Income for the
Aged, Blind, and Disabled ("SSI") -- is compulsory, see 42 U.S.C.
§ 1396a(a)(10)(A); Hogan, 769 F.2d at 888, but a State retains
discretion to cover other categories of beneficiaries if it elects
to do so. First, a State may classify certain groups of
individuals as being "optionally categorically needy" under 42
U.S.C. § 1396a(a)(10)(A)(ii)(I)-(XXII). The Commonwealth has opted
to cover a number of these groups -- e.g., individuals who are
under the age of 21 and meet AFDC's income requirements. Second,
a State may similarly opt to cover "medically needy" individuals
who satisfy categorical requirements but whose earnings or other
assets put them over the financial eligibility limit. 42 U.S.C.
§ 1396a(a)(10)(C). Such individuals are eligible for Medicaid
coverage if they "spend down" any excess income by incurring
medical costs, thereby coming down to Medicaid eligibility levels.
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See Hogan, 769 F.2d at 889. The Commonwealth covers a small number
of these groups as well -- e.g., pregnant women and individuals
under age 18 who, but for income and resources, would otherwise
qualify as categorically needy.
As is the case with other Medicaid-participating
jurisdictions, the Commonwealth also administers its own health
insurance plan. Under Puerto Rico's "Plan de Salud del Gobierno"
(otherwise known in Spanish as "Reforma"), the Commonwealth
services beneficiaries that it considers "medically indigent" but
who do not satisfy criteria for Medicaid eligibility. Certain
individuals who are not considered "medically indigent" -- such as
Puerto Rico Police officers and government employees -- are also
included in Reforma coverage. The services provided to these
groups of individuals are paid solely from Commonwealth funds.
Important to our discussion, the Commonwealth has
structured its health care system so that a single administrative
entity manages the provision of both federally-matched Medicaid and
Reforma services. Specifically, the provisions codified at P.R.
Laws Ann. tit. 24, §§ 7001, 7003-7004, create the Puerto Rico
Health Insurance Administration, or "ASES" as it is known by its
Spanish-language acronym, and task it with administering the
Commonwealth's Government Health Insurance Program ("GHIP"), which
provides medical services to four primary and discrete recipient
populations. First, the GHIP covers all Medicaid beneficiaries.
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See P.R. Laws. Ann. tit. 24, §§ 7025, 7029(a). Second, the GHIP
covers individuals eligible for assistance under the federally-
created but jointly-administered Children's Health Insurance
Program ("CHIP").6 Third, the GHIP covers individuals deemed
"medically indigent" under the Commonwealth's Reforma plan. See
id. Fourth, the GHIP covers individuals, such as Puerto Rico
Police officers, who do not meet eligibility criteria under
Medicaid or Reforma, but for whom the Commonwealth has nonetheless
extended Reforma coverage. As noted above, the services provided
to these third and fourth recipient groups are paid entirely out of
funds drawn from the Commonwealth's fisc.
Whether this arrangement constitutes the most reasonable
way to administer such a system is far beyond the province of this
court to decide. What is certain, however, is that this scheme --
which calls upon a single administrative body to oversee the care
provided to approximately 1.5 million beneficiaries, some covered
by joint federal-state Medicaid funding and some covered only by
Commonwealth funds -- has muddled an already convoluted set of
factual and legal issues and generated continuous controversy.
6
In 2009, Congress enacted and the President signed into law the
Children's Health Insurance Program Reauthorization Act of 2009
(CHIPRA). Pub. L. No. 111-3, 123 Stat. 8 (2009). Among other
things, CHIPRA renamed the "State Children's Health Insurance
Program" ("SCHIP") to its current form, omitting the word "State"
from the program's title. For ease of reading, this opinion will
uniformly refer to the program as "CHIP," even if that was not the
program's title during much of the relevant time period.
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Because only a portion of GHIP recipients are eligible for
Medicaid-covered services, the parties have disputed whether the
formula used to calculate wraparound payments has at times been
underinclusive by leaving out costs incurred in providing care to
certain Medicaid beneficiaries (in which case the plaintiffs would
be short-changed of certain reimbursements owed to them) or
overinclusive in factoring individuals who actually receive only
Commonwealth-funded benefits (in which case the Commonwealth would
overpay the plaintiff FQHCs reimbursement for costs they are not
owed).
b. Inclusion of "State/Other Medicaid" Modifier
in Wraparound Payment Formula
Currently, the preliminary injunction uses a formula for
calculating the wraparound payments owed to an FQHC under the PPS
by adopting much of the methodology that one of the Commonwealth's
auditors, Ramón L. Marrero Rosado ("Marrero"), first employed in
2003. See Belaval I, 397 F.3d at 63 (discussing Marrero
methodology). Marrero began by identifying the total number of
patients seen by an FQHC in 1999 and 2000, the PPS "base years."
See id. He then multiplied the total number of patients by "the
percentage of patients attended [] who are 'purely Medicaid.'" Id.Marrero then divided the costs that could be accredited to "purely
Medicaid" beneficiaries by the number of "purely Medicaid" patients
to determine the figure that the statute takes as the base for
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wraparound payment calculations for each FQHC. See 42 U.S.C. § 1396a(bb)(3).
Marrero arrived at the "purely Medicaid" multiplier by
auditing ASES-created tables detailing the percentages of
respective FQHCs that could be classified into four different
categories of GHIP recipients: "'Pure' or 'Federal' Medicaid,"
"State/Other Medicaid," "CHIP," and "Other Reforma." Prior to the
district court's issuing an advance order on January 7, 2009, the
formula only required the Commonwealth to reimburse FQHCs for costs
accrued in servicing beneficiaries falling under the "Pure
Medicaid" label. In contrast, the current wraparound payment
formula -- which was rendered binding by the district court's
November 2010 injunction -- incorporates costs that the FQHCs incur
in providing care to beneficiaries belonging to three of the four
categories: "Pure Medicaid," "State/Other Medicaid," and "CHIP."
The Secretary does not challenge the inclusion of costs
accrued in relation to CHIP beneficiaries into the formula.7
7
CHIPRA established a reimbursement scheme applicable to CHIP
that is identical to Medicaid's. See 42 U.S.C. § 1397gg(e)(1)(G)
(adopting Medicaid's reimbursement scheme for services provided by
FQHCs and rural health clinics by cross-reference to § 1396a(bb)).
Although the Secretary once argued before the district court that
CHIP was a plan separate from Medicaid and that CHIP visits should
not factor into Program reimbursement calculations, the Secretary
now abides by the guidance of the Centers for Medicaid and State
Operations ("CMS") which, in 2010, endorsed the view that CHIP
programs were instead implemented as expansions to Medicaid. See
Letter from Cindy Mann, Director, CMS Center for Medicaid and State
Operations, at 2 (Feb. 4, 2010), available at
http://www.cms.gov/smdl/downloads/SHO10004.pdf. Consequently, the
Secretary now concedes that CHIP visits should be included in
wraparound payments made to the FQHCs.
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Neither do the parties dispute that costs accrued in connection
with recipients falling under the "Other Reforma" modifier -- such
as Puerto Rico Police officers and government employees -- should
be excluded from reimbursement calculations. The Secretary also
accepts the proposition that the Commonwealth must reimburse FQHCs
for relevant services provided to all federally-matched
beneficiaries, not just those that fall under Medicaid's mandatory
"categorically needy" classification.
This last point is an important one. The district
court's advance ruling rested in large part on the court's apparent
understanding that the Secretary's position below was a less
nuanced postulation. Specifically, the district court seemingly
understood that the Commonwealth considered that its responsibility
to reimburse FQHCs extended only to services provided to recipients
that must be covered as "categorically needy" under the Medicaid
statute. See 42 U.S.C. § 1396a(a)(10)(A). In its order modifying
its own prior preliminary injunction, the district court concluded
that certain "optional" groups, such as "foster care children,"
"individuals and families with up to 200% of the Puerto Rico
poverty level," and "dual eligibles" -- i.e., recipients who
qualify for both Medicaid and Medicare under 42 U.S.C. § 1396u-
5(c)(6)(A) -- were eligible for Medicaid federal assistance under
the Commonwealth's plan but, importantly, were not accounted for
under the "Pure Medicaid" modifier. Thus, the district court
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appears to have reasoned that these optional groups fell under the
"State/Other Medicaid" category and that the Commonwealth was
responsible for reimbursing FQHCs for reasonable services provided
to that entire population as well. See Amend. to Opinion and Order
of June 4, 2008 Re: "Pure Medicaid" Modifier, Consejo de Salud v.
Sec'y of Health, (Civil Nos. 06-1260 (GAG), 06-1542 (GAG) (Jan. 7,
2009)).
Even if that was indeed the Secretary's position at some
point, it no longer is at this juncture. What the Secretary
contests is the district court's inclusion of the "State/Other
Medicaid" category, which accounts for approximately 22 percent of
all GHIP recipients, into the formula the Commonwealth will follow
in calculating wraparound payments owed to the FQHCs. This
contention implicates the proper interpretation of § 1396a(bb) of
the Medicaid statute, and we consider it de novo.8 See Belaval IV,
551 F.3d at 16. We review the district court's findings of fact
for clear error and show "considerable deference" to its judgment
calls. New Comm Wireless Servs., Inc. v. SprintCom, Inc., 287 F.3d
1, 9 (1st Cir. 2002).
Simply stated, the Secretary's claim is that the
"State/Other Medicaid" classification of GHIP recipients does not
8
As noted, the Secretary does not challenge the district court's
decision to grant preliminary injunctive relief in the plaintiff
FQHCs' favor, a determination that we would normally review for
abuse of discretion. Charlesbank Equity Fund II v. Blinds To Go,
Inc., 370 F.3d 151, 158 (1st Cir. 2004).
-21-
implicate costs that FQHCs would incur in providing care
specifically to Medicaid-eligible patients. Understandably, the
federal Medicaid statute only requires the Commonwealth to
reimburse the FQHCs for care provided to federally-matched
Medicaid-eligible beneficiaries, not those that the Commonwealth
has pledged to support with its own funds through Reforma. In this
regard, Congress has anchored the scheme by which wraparound
payments are to be calculated to the amount of visits made by
Medicaid patients to a given FQHC in two "base" years, 1999 and
2000. See 42 U.S.C. § 1396a(bb)(2)-(3); see also Belaval IV, 551
F.3d at 12 (describing PPS calculations). The Secretary argues
that recipients falling into the "State/Other Medicaid" label are
Reforma-only beneficiaries and should not figure into this base
calculation. To the extent that the relevant modifier refers to
these patients as being "Other Medicaid" the label is a misnomer,
or so the argument goes.
The issue presented appears to be potentially two-
pronged. To suitably resolve the parties' controversy on this
point, it seems proper to first ascertain whether certain disputed
categories of recipients were covered by federal Medicaid
assistance under the Commonwealth's State plan. Second, it would
then be necessary to turn to the tables used to determine the
FQHCs' base rates and assess whether those categories of persons
-22-
are in fact listed under the "State/Other Medicaid" modifier or
instead belong to another category.
The Secretary points to evidence in the record which he
claims suggests that the identified groups were not, in fact,
stand-alone eligibility categories under the Commonwealth's State
plan or instead were elements of larger categories already
collapsed into the "Pure Medicaid" descriptor. Foster care
children, for example, are not expressly referenced as a separate
eligibility category in the Commonwealth's State plan. Similarly,
the Secretary highlights evidence in the record that he claims to
be contradictory of the plaintiff FQHCs' claim below (and the
district court's reasoning) that "dual eligible" recipients fit
squarely and solely into the "State/Other Medicaid" category. Most
notably, population distribution tables that the plaintiffs entered
into evidence place several thousand Medicare enrollees under
columns listing "Federal Medicaid" or "Pure Medicaid"
beneficiaries.
In briefing to this court, the plaintiff FQHCs counter
that the district court's findings as to groups such as foster care
children and dual eligibles belonging to the "State/Other Medicaid"
category are supported by evidence in the record and are consistent
with information that the Commonwealth has reported in the past to
federal health agencies. The plaintiff FQHCs cite to the
Commonwealth's profile in the 2005 National Summary of State
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Medicaid Managed Care Programs, a CMS-prepared document detailing
data culled from programs that employ MCOs to deliver health
services. See Ctrs. for Medicare & Medicaid Servs., 2005 National
Summary of State Medicaid Managed Care Programs, June 30, 2005,
available at http://media.khi.org/news/documents/2011/12/05/Medic
aid_managed_care_national_rpt_2005.pdf. Because this document
lists the disputed recipient groupings along with other Medicaid
beneficiaries, see id. at 461-62, the plaintiffs reason that the
Commonwealth has all but conceded that these controverted
populations are comprised of federally-matched Medicaid
beneficiaries and argues that the Secretary cannot now claim
otherwise.
The fact that controverted population groups -- such as
foster care children and "dual eligibles" -- appear on a CMS
listing alongside undisputed federally-matched populations appears,
at first blush at least, to cut in the plaintiff FQHCs' favor. We
are unconvinced, however, that the CMS 2005 National Summary
document does much to resolve matters. As the Secretary correctly
notes, the listing upon which the plaintiffs rely also enumerates
Puerto Rico Police officers as a distinct population, but this
recipient grouping is indisputably covered only by the
Commonwealth's Reforma funds. Thus, insofar as the CMS summary
document includes -- without differentiation -- both federally-
assisted persons and those covered only by Commonwealth funds, it
-24-
adds nothing to the question of how to distinguish between these
two groups. At best, the summary supplies further obfuscation
where none is necessary.
The district court's advance order is unfortunately
consonant with this confused state of affairs. Indeed, because the
ruling lacks citation to competent record evidence or relevant law,
it is unclear to us how the court reached the conclusion that the
disputed GHIP recipient groupings were comprised of optional
federally-matched Medicaid beneficiaries or, for that matter, that
those groupings could be properly subsumed into the "State/Other
Medicaid" collection of recipient populations. We are mindful that
any concerns we may have in this regard touch upon the court's
ability to reach factual determinations and balance the equities of
a case, an area in which we commonly accord considerable deference
to the district court's competence. See Waldron v. George Weston
Bakeries, Inc., 570 F.3d 5, 8-9 (1st Cir. 2009). But "deference
has its limits," Belaval IV, 551 F.3d at 16, and our cases are
clear that a district court's decision to "grant or deny a
preliminary injunction must be supported by adequate findings of
fact and conclusions of law," TEC Eng'g Corp. v. Budget Molders
Supply, Inc., 82 F.3d 542, 544-45 (1st Cir. 1996).
Here, we do not believe that the district court made
sufficiently specific and clearly-stated findings of fact. In its
three-page written order the district court concluded, without
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more, that the three above-cited populations -- i.e., "foster care
children," "individuals and families with incomes up to 200% of the
Puerto Rico poverty level," and "so-called 'Medicare dual
eligibles'" -- were comprised of non-CHIP optional federally-
matched beneficiaries under the State plan. As we have noted, the
Secretary proffers evidence which he claims is suggestive that this
is not the case, but in any event, the district court's order did
not communicate any specific findings as to whether those
populations properly belonged in the much maligned "State/Other
Medicaid" classification. In the compass of this convoluted
litigation, we do not believe that the district court's reasoning
supports its judgment modifying the wraparound payment formula to
its current form.
Neither do we believe, however, that the record permits
us to resolve the dispute regarding the size of the Commonwealth's
federally-matched beneficiary population in favor of either side.
The plaintiffs present evidence and arguments that muddy the waters
and complicate the questions we are asked to consider, some of
which were not raised below and which, as our cases command, this
court will not consider for the first time on appeal. See
Kozikowski v. Toll Bros., Inc., 354 F.3d 16, 23 (1st Cir. 2003).
Unable to undertake informed review of the issues presented, we
remand to the district court for additional factfinding and legal
determinations. See, e.g., TEC Eng'g Corp., 82 F.3d at 545
-26-
(remanding to district court where court "unable to engage in
meaningful appellate review"). On remand, the district court
should engage in the two-pronged analysis we have outlined above,
first ascertaining whether disputed GHIP recipient populations are
comprised of federally-matched Medicaid beneficiaries under the
Commonwealth's State plan, then locating whether these fall in the
"State/Other Medicaid" classification or otherwise. The district
court should also evaluate any as-yet unreviewed or unconsidered
evidence that the Secretary filed in response to its advance ruling
on the reimbursement formula.
2. Inclusion of Capitation Payments in Reimbursement
Calculations
The second claim that the Secretary presents concerns the
question of whether the Commonwealth can deduct certain funds that
an MCO has paid an FQHC's third party subcontractors from its
supplemental payment obligations.9 This issue arises because FQHCs
sometimes subcontract with third parties to provide Medicaid
services and those third parties are then reimbursed directly by
the MCO on a fee-for-service basis with funds from the FQHCs'
assigned capitation. The Secretary alleges that these payments to
third party subcontractors should count as payments to the FQHCs
9
We note that our discussion of the MCO payment to third party
subcontractor issue does not pertain to Consejo. The Secretary and
Consejo have agreed that costs incurred by third party providers
with whom Consejo has subcontracted should not figure into PPS
calculations specific to that FQHC.
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because, as a special master assigned to the case explained in
proceedings below, the FQHCs commonly include these third party
costs as expenditures in their own financial statements. Assigned
capitation amounts that an MCO pays either directly to an FQHC or
to an FQHC's third party creditor, the Secretary ultimately
contends, should be deducted from the Commonwealth's wraparound
obligations.
In essence, this issue concerns the proper interpretation
of the Medicaid statute. The statutory provision requiring the
Commonwealth to make the wraparound payments at issue in this
litigation is codified at 42 U.S.C. § 1396a(bb)(5). In pertinent
part, the statute provides:
In the case of services furnished by a[n]
[FQHC] pursuant to a contract between the
center or clinic and a[n] [MCO], the State
plan shall provide for payment to the center
or clinic by the State of a supplemental
payment equal to the amount (if any) by which
the amount determined . . . exceeds the amount
of the payments provided under the contract.
42 U.S.C. § 1396a(bb)(5)(A). The Secretary now appeals whether, in
a June 4, 2008 ruling, the district court correctly concluded that
MCO payments to third party service providers who have
subcontracted with FQHCs properly constitute "payments provided
under the contract" under § 1396a(bb)(5)(A).
The Secretary and the plaintiff FQHCs have consistently
disputed § 1396a(bb)(5)(A)'s scope. Seizing upon the "payments
provided under the contract" language, the Secretary first argued
-28-
that the Commonwealth could deduct the amount that an MCO owed an
FQHC under the terms of the contract between them from wraparound
calculations. See Belaval IV, 551 F.3d at 13. Conversely, as
early as 2005, the plaintiff FQHCs involved in the original action
stressed that the statute accounts for payments that an FQHC has
actually received from an MCO, not those which are owed but which
the MCO's had not yet disbursed in the center's favor. If the
Secretary could offset his wraparound obligations by deducting
these "phantom MCO payments," the plaintiffs argued, the FQHCs
could be left holding the bag as to certain funds owed to them if
the MCOs defaulted on payment. See id. (noting "[p]laintiffs
argued before the district court that the payments actually made by
MCOs often fall well short of the amounts budgeted by contract").
On October 6, 2005, the district court resolved this disagreement
in the plaintiff FQHCs' favor, specifically ruling that
"§ 1396a(bb)(5) barred the deduction of 'phantom MCO payments,'"
id. at 14, and "interpret[ing] the phrase 'payments provided under
the contract' to allow the deduction only of amounts actually paid
by the MCO to the FQHC," id. (internal citation omitted) (quoting
42 U.S.C. § 1396a(bb)(5)(A)).
The Secretary concedes the district court's October 6,
2005 ruling, but posits that decision bore specifically on the
narrower issue of contractual default on the part of an MCO and
does not inform the separate question, presented here, of whether
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payments made directly from an MCO to a third party should offset
wraparound calculations. Put another way, the Secretary reasons
that just because the sums an MCO pays a third party creditor never
flow through an FQHC's coffers it does not follow that they are not
"amounts actually paid by the MCO to the FQHC." Id. If they were
not, the Secretary contends, the FQHCs would be doubly reimbursed
for these costs -- once, when an MCO paid off their third party
debt for services rendered, and a second time when the Commonwealth
remitted the FQHC a wraparound payment for the same services.
The Secretary relies on a 2000 agency guidance letter to
support his proposition that assigned capitation is the correct
amount that the Commonwealth should be allowed to deduct from its
wraparound calculations. See Letter from Timothy M. Westmoreland,
Director of the Center for Medicaid and State Operations, HCFA, to
State Medicaid Director (Sept. 27, 2000), available at
https://www.cms.gov/smdl/downloads/smd092700.pdf (hereinafter, "CMS
Letter"). The CMS Letter discusses possible negative or positive
incentive structures in MCO-FQHC contractual relationships,
specifically, the way in which "MCOs frequently use their own funds
to include financial incentives in their contracts with
subcontracting providers." Id. In relevant part, the letter
states: "Inclusion of incentive amounts (whether positive or
negative) in calculating supplemental payments would negate the
financial impact [an] incentive is designed to provide. . . .
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[Therefore], the State's quarterly supplemental payment obligation
should be determined using the baseline payment under the contract
for services being provided." Id. (emphasis added). Relying on
the accentuated language the Secretary argues that, because the
letter calls for a wraparound payment based on the amount
contracted between an MCO and an FQHC, regardless of negative
incentives, CMS has interpreted the Medicaid statute's reference
to "the amount of the payments provided under the contract" to mean
assigned capitation. Further, since the CMS Letter interprets
§ 1396a(bb)(5)(A)'s predecessor statute and Congress reenacted the
wraparound provision without change when it set the PPS in place,
the Secretary posits that Congress in essence ratified the agency's
interpretation. See, e.g., Lorillard v. Pons, 434 U.S. 575, 580
(1978) ("Congress is presumed to be aware of an administrative or
judicial interpretation of a statute and to adopt that
interpretation when it re-enacts a statute without change.").
The plaintiff FQHCs dismiss the CMS Letter's import,
countering that the letter does not say what the Secretary says it
does. More importantly, the plaintiff FQHCs highlight a
distinction between what they term "FQHC services" and "non-FQHC
services," which they claim the Secretary's entire argumentation
overlooks. The plaintiff FQHCs contend that the current
preliminary injunction formula correctly ensures that FQHCs are
reimbursed for money paid by an MCO to a third party for non-FQHC
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(i.e., non-primary) services -- e.g., "hospitalization, specialty
care, [and] ancillary services unassociated with FQHC operations"
-- while allowing the Commonwealth to deduct costs associated with
"FQHC" or "primary" services that the FQHC provides. The plaintiff
FQHCs posit that reference to "primary care" services in these
documents clearly indicates that any payments from an MCO to a
third party for so-called non-FQHC services should not count
towards a reduction of their wraparound reimbursements.
Insofar as the parties ask us to resolve this dispute, we
note that we are again presented with evidence and arguments which
the parties have raised for the first time in briefing to this
court. As we have already explained, "'[i]t is well established
that this court will not consider an argument presented for the
first time on appeal,'" Hidalgo v. Overseas Condado Ins. Agencies,
Inc., 120 F.3d 328, 333 n.3 (1st Cir. 1997) (quoting Villafañe-
Neriz v. F.D.I.C., 75 F.3d 727, 734 (1st Cir. 1996)), and we see no
reason here to deviate from this well-settled rule. Although the
district court cannot be faulted for failing to consider evidence
that the parties did not bring before it, we also again find the
court's ruling on this issue too sparse for comfort. Indeed, to
the extent that the district court provided the reasoning behind
its decision not to allow the Commonwealth to offset MCO payments
to FQHCs' third party creditors from reimbursement obligations, the
district court only noted that the Secretary's argument had been
-32-
"squarely rejected" by the court in its October 6, 2005 ruling
regarding "phantom MCO payments." See Consejo de Salud Playa Ponce
v. Gurabo Cmty. Health Ctr., Inc., No. 3:06-cv-01260-GAG (D.P.R.
June 4, 2008). Here, we must agree with the crux of the
Secretary's postulation: the two issues are dissimilar enough that
one does not naturally follow from the other. That is to say, the
fact that the Commonwealth must reimburse an FQHC for moneys owed
but which an MCO never disbursed in the FQHC's favor does not
answer the separate question of which FQHC costs should be
altogether deducted from the Commonwealth's repayment obligations
because the MCOs have covered them in the first place.10
The district court's silence on this distinction is all
the more concerning in light of two of the findings that the
special master assigned to this case made during the proceedings
below. First, the special master determined that the FQHCs receive
three different types of "payment" from MCOs, including direct fee-
for-service reimbursement,11 third party fee-for-service
reimbursement, and capitation payments. Second, he notably
10
The Secretary notes that the district court appears to have
recognized this distinction during an evidentiary hearing in which
the district judge noted that the court had addressed the third
party payment issue previously but added: "I don't think it was
raised in that case the same [] way it was raised here."
11
Under a direct "fee-for-service" arrangement, the FQHC bills an
MCO for provided services on a fee-for-service sub-capitated basis.
The parties have agreed that payments made in this manner should be
properly subtracted from the wraparound amount owed by the
Commonwealth as payments already received directly from the MCO.
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concluded that if payments to third parties are excluded from
calculations of the wraparound amount due, those same costs must be
excluded from PPS rates used to calculate the Commonwealth's
reimbursement obligations. In its ruling, the district court did
not present reasons as to why it did not find that the special
master's factual conclusions informed the matter before it. We are
cognizant of the considerable discretion that a district court
retains regarding a special master's findings. See Ballard v.
Comm'r, 544 U.S. 40, 66 (2005) (Kennedy, J., concurring) ("The
court after hearing may adopt the special master's report or may
modify it or may reject it in whole or in part or may receive
further evidence or may recommit it with instructions." (quoting
Fed. R. Civ. P. 53(e)(2))). But, as we have already noted, a
district court's judgment to grant an injunction must be properly
grounded in both fact and law. Here, we cannot conclude that that
is the case. Accordingly -- and because we believe that the
district court is better-situated to view the parties' arguments
through the lens of this litigation's extensive record -- we again
remand so that the district court may further consider whether MCO
payments to third parties made on an FQHC's behalf can be deducted
from the Commonwealth's PPS base rates. See Harlow v. Fitzgerald,
457 U.S. 800, 820 (1982) (remanding where "trial court is more
familiar with the record so far developed and also [] better
situated to make any such findings as may be necessary"). As
-34-
before, we instruct the district court, in resolving this issue, to
review any as-yet unconsidered evidence or argumentation that the
parties presented after its ruling.
B. Indemnification of Plaintiff FQHCs' Debts to MCOs
We now address the issues that the plaintiff FQHCs raise
on cross-appeal. The plaintiff FQHCs first contend that the
district court improperly refused to either clarify or modify its
preliminary injunction to afford them protection from debts
accruing to MCOs. For the reasons we now outline, we agree with
the district court that the issue of debt indemnification is not
properly within the scope of this litigation and affirm the
district court's ruling on this question.
We briefly frame the plaintiff FQHCs' debt
indemnification claim. The plaintiff FQHCs' request for debt
protection is grounded in their stated concern that Puerto Rico's
managed care system improperly transfers financial risk from MCOs
to primary care providers. As has been explained in some detail
supra, the Puerto Rico Department of Health contracts with MCOs to
provide health care services. In turn, MCOs enter into
subcontracts with primary care providers, such as the plaintiff
FQHCs, to arrange for delivery of these services. To the extent
that the FQHCs' costs as determined by Medicaid's formula exceed
payments provided to them under their contracts with the MCOs, the
Commonwealth must then disburse a wraparound reimbursement to
-35-
ensure that FQHCs receive the amount to which they are entitled
under the statute.
As with the previously discussed matter of MCO payments
to an FQHC's third party creditors, the plaintiff FQHCs' debt
indemnification claim arises in the context of MCO-FQHC contractual
relations. Because third party health care providers are
reimbursed for FQHCs' costs by MCOs with funds out of the FQHCs'
assigned capitation, to the extent that third party costs exceed an
FQHC's assigned capitation amount, such an FQHC effectively incurs
a debt to an MCO. The plaintiff FQHCs argue that this arrangement
impermissibly "downloads" financial risk onto the FQHCs, forcing
them to "pay to play" -- i.e., participate -- in the Commonwealth's
Medicaid scheme. According to the plaintiff FQHCs, the resulting
debt obligation to MCOs in this scenario yields a dollar-for-dollar
reduction in the wraparound payment they would otherwise be
entitled to under the Medicaid formula prescribed by the district
court's preliminary injunction. Specifically, the plaintiffs
contend that, insofar as the preliminary injunction interprets the
statutory language "payments provided under the contract" to refer
to net capitation -- i.e., payments that the FQHCs have actually
received under their contracts with MCOs -- the injunction does not
account for situations in which FQHCs not only fail to receive any
actual payments from MCOs, but also incur a debt with the MCOs.
-36-
Despite the general allegations in the FQHCs' complaints
and other pleadings denouncing concerns over improper "risk
downloading" in Puerto Rico's managed care system, the FQHCs did
not specifically (or explicitly) request the district court for
relief pertaining to this specific claim until December 2010. At
that date, the plaintiff FQHCs asked the district court to amend
its November 2010 preliminary injunction in order to "either (1)
clarify its wraparound formula to state that the difference between
plaintiffs' costs and payments actually received from an [MCO] must
account for debt accrued to that [MCO] dollar for dollar, or (2)
order [the Secretary] to indemnify and hold plaintiffs harmless
against any [MCO] efforts to collect such debts."
The district court denied the motion on June 8, 2011. In
response, the plaintiffs filed a notice of appeal and a motion for
injunction pending appeal in which they restated their request to
alter the preliminary injunction to afford them protection against
debts accrued to MCOs. On June 30, 2011, the district court again
denied the plaintiff FQHCs' request in a two-sentence order in
which it declared that the motion "involves non-parties to this
action and the relief sought is outside the scope of this
litigation."
On cross-appeal, the plaintiffs charge that the district
court abused its discretion when it refused to grant their request
for debt indemnification. The plaintiff FQHCs point to allegations
-37-
in their complaints and other pleadings to support their claim that
the question of how MCO debts should be properly addressed squarely
falls within the scope of this case.
We find these arguments unavailing. The district court
without a doubt enjoys considerable discretion in deciding whether
or not to expand the scope of a case. See Donahue v. City of
Boston, 371 F.3d 7, 17 (1st Cir. 2004); see also Harper v. Colo.
State Bd. of Land Comm'rs, 248 F. App'x 4, 13 (10th Cir. 2007)
(holding that the management of the scope of the issues in a case
is committed to the district court's discretion). Here, a plain
reading of the plaintiffs' varied complaints and other filings
below confirms that the district court did not abuse its discretion
when it concluded that the debt indemnification relief that the
plaintiff FQHCs sought lies outside the scope of this long-running
litigation. Specifically, three of the four underlying complaints
in these consolidated appeals -- i.e., those filed by Atlantic
Medical Center, Gurabo, and Río Grande -- sought to "enjoin [the
Secretary] . . . from failing to pay federally-qualified health
centers." Consistent with this request, the plaintiff FQHCs then
proceeded to dissect the Medicaid statute's provisions regarding a
State's obligations to issue wraparound payments under a managed
care system. In a section titled "Violations of the Medicaid
Statute," the FQHCs denounced the Commonwealth's failure "to pay,
or assure payment to, FQHCs of the wraparound (or other payment) to
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which those FQHCs have been and continue to be entitled" under the
Medicaid statute. The fourth complaint, filed by Consejo, is
similarly structured and limited itself to "seeking an order
. . . directing defendant . . . to make future wraparound payments
as they become due." From these pleadings, the plaintiff FQHCs'
claims for relief appear limited to requesting injunctive relief
that would ensure that the Commonwealth issued prospective
wraparound payments under the Medicaid statute. As a result, the
pleadings do not suggest that the district court abused its
discretion in failing to accommodate the plaintiff FQHCs' final
hour request for modification of its injunction.
The plaintiff FQHCs attempt to buttress their request for
debt indemnification by claiming that any such request was properly
grounded on their repeated denunciation of the alleged "full risk"
feature of their contracts with MCOs -- a concern they expressed in
pleadings and filings submitted to the district court. With one
ineffectual exception,12 however, the plaintiffs never drew an
12
We note that plaintiffs Belaval and Loíza did raise the issue
of debt indemnification in separate filings before the district
court in 2006 and 2007, respectively. In issuing the final
judgment order that this court reversed in Belaval IV, the district
court concluded that Belaval's and Loíza's requests for debt
indemnification were, by then, a "moot matter." 551 F.3d at 15.
The fact that we ultimately reversed the district court's order in
our Belaval IV decision does not, however, help the plaintiff FQHCs
here because their appeal of the district court's entry of final
judgment was limited to issues pertaining to wraparound payments
and the 42 U.S.C. § 1396a(bb) formula. The plaintiffs' failure to
preserve their claim for debt indemnification on appeal thus
circumscribed the remaining live issues in that litigation to those
-39-
expressly-stated connection between the alleged "full risk" feature
of the contracts and the question of how properly to address MCO
debts. Instead, the gist of plaintiffs' complaint remained the
Commonwealth's failure to comply with the wraparound provisions of
the Medicaid statute. Thus, to the extent that plaintiff FQHCs
rely on any "risk downloading" or "full risk" concerns expressed
below to support their claim that the issue of debt indemnification
is within the scope of this litigation, their claim fails.
C. Eleventh Amendment Sovereign Immunity
Shortly after this court issued its judgment in
Belaval V, the Secretary filed an informative motion with the
district court arguing that our decision in that appeal had
"necessarily rejected" the district court's prior finding that the
Secretary waived Eleventh Amendment immunity since 2006. The
Secretary's motion cited our Belaval V opinion, in which we stated
that
a federal court cannot ordinarily order money
payments by a state to make up for past
violations of a federal statute . . . : only
if the state were disobeying a forward-looking
this court addressed (and remanded to the district court) in
Belaval IV. See United States v. Connell, 6 F.3d 27, 30 (1st Cir.
1993) ("Because the [appellate court's] mandate serves as a
limitation on the power of the trial court, the issues that remain
open on remand frequently will be circumscribed by the earlier
appeal and by the appellate court's disposition of the issues
therein."); see also Negrón-Almeda v. Santiago, 579 F.3d 45, 51
(1st Cir. 2009) (noting district court's entry of final judgment
makes order "appealable[,] and the plaintiffs' failure to challenge
it fits within the law of the case doctrine").
-40-
court order to make such payments could a
violation of that order be redressed by a
federal court remedial directive to make
payments to comply with the preexisting order.
625 F.3d at 19.
On November 8, 2010, the district court enjoined the
Secretary to make wraparound payments to the plaintiff FQHCs. As
part of its order, the district court made an about-face on its
prior ruling that the Commonwealth had waived Eleventh Amendment
immunity from 2006 through 2008 by means of its conduct in
litigation before the court. The FQHCs also appeal the district
court's ultimate finding on this issue. Before we conclude our
discussion we are therefore called upon to determine whether the
district court correctly found that the Commonwealth did not waive
Eleventh Amendment immunity and that fourteen13 of the nineteen
original Plaintiff-Appellee FQHCs may only obtain relief as of the
date of entry of the November 8, 2010 preliminary injunction
onwards. Within the standard of review applicable in the
preliminary injunction context, this presents a pure issue of law
13
As noted in our discussion of the reimbursement formula above,
Loíza and Belaval both obtained injunctive relief in 2004; it is
therefore undisputed that they are entitled to reimbursement
payments as of the respective dates that the district court issued
judgments as to them. FQHCs Consejo, Río Grande, and Toa Alta
Comprehensive Urban/Rural Advanced Health Services, Inc. have
either settled their disputes regarding the Eleventh Amendment
issue with the Secretary or are otherwise uninvolved in this aspect
of the case.
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that we review de novo.14 See Langlois v. Abington Hous. Auth., 207
F.3d 43, 47 (1st Cir. 2000); see also Entergy, Ark., Inc. v.
Nebraska, 241 F.3d 979, 987 (8th Cir. 2001) (noting Court of
Appeals considered "district court's decision to grant an
injunction [] under [] abuse of discretion standard" but "reviewed
de novo . . . legal conclusion that Nebraska had waived its
Eleventh Amendment immunity").
We begin our analysis of the issue with the fundamental
proposition that the FQHCs' claims against the Secretary have
always been grounded on 42 U.S.C. § 1983. See Belaval I, 397 F.3d
at 72-75. This important statute "imposes liability on anyone who,
acting under color of state law, deprives a person of any 'rights,
privileges, or immunities secured by the Constitution and laws.'"
Id. at 72 (quoting 42 U.S.C. § 1983). Asserting a violation of
federal law, however, will not always be enough to establish a
§ 1983 cause of action -- "[the] plaintiff must assert the
violation of a federal right," Blessing v. Freestone, 520 U.S.
329, 340 (1997), and we look to the provision that a plaintiff
14
Because our review is de novo, we do not concern ourselves with
the district court's interpretation of our opinion in Belaval V.
Nor do we find it necessary to consider whether the district
court's original judgment on this issue –- in which the court ruled
that the Secretary had waived the Commonwealth's sovereign immunity
–- has any bearing on the proper resolution of this question. See
United States v. Gen. Elec. Co., 670 F.3d 377, 384 n.6 (1st Cir.
2012) (noting, on de novo review, that the court "need not consider
whether the specific reasoning set out by the district court
contained errors" (quoting Euromotion, Inc. v. BMW of N. Am., Inc.,
136 F.3d 866, 872 (1st Cir. 1998))).
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seeks to enforce to determine whether it creates such a right, see
Gonzaga Univ. v. Doe, 536 U.S. 273, 283-84 (2002). Our judgment in
Belaval I, among other things, concluded that the portions of the
Medicaid statute at issue in this litigation so did. See
Belaval I, 397 F.3d at 74 (holding language found at 42 U.S.C.
§ 1396a(bb)(5)(A) "is rights-creating [] because it is mandatory
and has a clear focus on the benefitted FQHCs").
The federal courts' powers to bring state officials into
compliance with federally-recognized rights are not without limits.
Relevant here, the Eleventh Amendment shields a State from being
haled into federal court if it has not consented to the same.15 See
Pennhurst St. Sch. & Hosp. v. Halderman, 465 U.S. 89, 98 (1984).
But the well-settled doctrine first laid out in Ex Parte Young, 209
U.S. 123 (1908), nonetheless recognizes the federal courts' power
to enjoin a State's officers and "vindicate federal rights" if
necessary. Pennhurst, 465 U.S. at 105. The doctrine's boundaries
are well-defined, rendering it inapplicable "when 'the state is the
real, substantial party in interest . . . .'" Id. at 101 (quoting
Ford Motor Co. v. Dep't of Treas., 323 U.S. 459, 464 (1945)). As
a result, "[i]n a 42 U.S.C. § 1983 action, the federal courts'
remedial power 'may not include a retroactive award which requires
15
This Circuit has consistently recognized that "Puerto Rico
enjoys the same immunity from suit that a State has under the
Eleventh Amendment." Maysonet-Robles v. Cabrero, 323 F.3d 43, 53
(1st Cir. 2003); see also Arecibo Cmty. Health Care, Inc. v. Com.
of P.R., 270 F.3d 17, 21 n.3 (1st Cir. 2001).
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the payment of funds from the state treasury.'" Echevarría-
González v. González-Chapel, 849 F.2d 24, 32 (1st Cir. 1988)
(quoting Fernández v. Chardón, 681 F.2d 42, 59 (1st Cir.), cert.
denied, 459 U.S. 989 (1982)); see also Vaquería Tres Monjitas, Inc.
v. Irizarry, 587 F.3d 464, 478 (1st Cir. 2009) (noting suits
brought under the Ex Parte Young doctrine "may only seek
prospective injunctive or declaratory relief; they may not seek
retroactive monetary damages or equitable restitution").
Exceptions to this rigid rule are only allowed where
Congress abrogates a State's sovereign immunity through valid
legislation or when the State submits by waiving its immunity. See
Va. Office for Prot. & Advocacy v. Stewart, 131 S. Ct. 1632, 1638
(2011); cf. Vaquería Tres Monjitas, 587 F.3d at 478 (noting "'line
drawn by the Court represents a compromise between the impulse to
preserve state autonomy and the need to enforce federal law'"
(quoting Santiago v. Corporación de Renovación Urbana y Vivienda de
P.R., 554 F.2d 1210, 1212 (1st Cir. 1977))). There are three ways
in which a State may waive its immunity: "(1) by a clear
declaration that it intends to submit itself to the jurisdiction of
a federal court or administrative proceeding; (2) by consent to or
participation in a federal program for which waiver of immunity is
an express condition; or (3) by affirmative conduct in litigation."
New Hampshire v. Ramsey, 366 F.3d 1, 15 (1st Cir. 2004). Latching
on to the latter of these, the FQHCs argue that the Secretary so
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waived any immunity that may attach to the Commonwealth through his
conduct and good faith representations in federal court.
Specifically, the FQHCs reason that the Secretary waived any
protection that the Eleventh Amendment could bestow upon the
Commonwealth from, at a minimum, June 2006 onwards. At that point,
the Secretary made representations to the district court stating
that the Commonwealth had set in place a system by which to process
wraparound payments to the FQHCs and said payments would start
being issued as of mid-2006. The FQHCs reason that the district
court may therefore enjoin the Commonwealth to issue reimbursement
payments as of that date.
The FQHCs' arguments on this issue are unavailing because
they do not account for the well-settled principle that a State's
waiver of its Eleventh Amendment immunity through conduct in
litigation must be "unambiguous" and "evince a clear choice to
submit [its] rights [to] adjudication by the federal courts."
Ramos-Piñero v. Puerto Rico, 453 F.3d 48, 52 (1st Cir. 2006)
(internal quotation marks omitted). While the Commonwealth has
been embroiled in litigation regarding its failure to duly
establish a PPS reimbursement payment scheme for the better part of
the past decade, the Secretary has repeatedly asserted the
Commonwealth's Eleventh Amendment rights to either litigate certain
matters in its courts or otherwise protect its coffers from an
imposition of liability. This conduct generally forecloses a
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finding of consent or waiver. The Supreme Court's cases are as
clear as they are consistent in holding that a State only waives
its immunity under the Eleventh Amendment when it voluntarily
entreats a federal court to adjudicate its rights. See Lapides v.
Bd. of Regents of Univ. Sys. of Ga., 535 U.S. 613, 620 (2002)
(holding State waived immunity where it "voluntarily agreed to
remove the case to federal court"); Gardner v. New Jersey, 329 U.S.
565, 573-74 (1947) (holding State waived immunity where it
"invoke[d] the aid" of bankruptcy court by filing a proof of
claim); Clark v. Barnard, 108 U.S. 436, 447 (1883) (holding State
waived Eleventh Amendment immunity where it chose to appear as
intervenor); see also Ramsey, 366 F.3d at 16 (holding State waived
Eleventh Amendment immunity where it invoked jurisdiction of a
federal agency whose decisions were subject to review in federal
court). That a State is haled into federal court as a defendant
against its will and then defends itself once therein will not do.
See Fla. Dep't of State v. Treasure Salvors, Inc., 458 U.S. 670,
683 n.18 (1982) ("The fact that the State appeared and offered
defenses on the merits does not foreclose consideration of the
Eleventh Amendment issue . . . .").
Here we cannot say that the Secretary voluntarily invoked
the jurisdiction of the federal courts or otherwise waived its
immunity by litigation conduct. The Commonwealth has consistently
asserted its immunity to suit under the Eleventh Amendment, first
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doing so in 2003 as a defense to the first group of FQHCs' action
against it. As to the specific representations that the FQHCs
claim amounted to consent or waiver in 2006, we note that the
Secretary first made statements that the Commonwealth had
established a PPS reimbursement payment system and would begin
making payments within the context of a June 27, 2006 informative
motion to the district court that related only to the original suit
involving plaintiffs Río Grande, Loíza, and Belaval. At that point
in the litigation, the district court had already enjoined the
Secretary to set in place a PPS reimbursement payment system and
commence making payments to Loíza and Belaval. The June 27, 2006
motion purported to inform the court that the Secretary had, by
then, established such a system and that for the system to be
"fully operational" it "require[d] the cooperation of all FQHC[s]
in providing . . . information" needed to start payments as of the
third quarter of 2006.
In subsequent filings, however, the Secretary explained
the Commonwealth's position that the preliminary injunction in
place at the time should not be rendered permanent because, inter
alia, the preliminary injunction relied upon an inaccurate formula.
But importantly, the Secretary also then pressed his contention
that once an injunction ordering that the Commonwealth to comply
with the Medicaid statute issued, any disputes as to the proper
calculation of past payments owed had to be litigated in the
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Commonwealth's courts in accordance with the above-cited principle
that, even though a federal court may indirectly cause State funds
to be expended by means of ordering future compliance with federal
law, it may not "impose upon the State 'a monetary loss resulting
from past breach of a legal duty on the part of the defendant state
officials.'" Verizon Md. Inc. v. Pub. Serv. Comm'n of Md., 535
U.S. 635, 646 (2002) (quoting Edelman, 415 U.S. at 668). The
Secretary then raised this Eleventh Amendment-based argument in
each of the cases brought by the distinct groupings in the not-as-
of-yet consolidated actions, and, specifically, in the respective
actions relevant to the fourteen FQHCs that now cross-appeal the
district court's November 8, 2010 ruling on this issue.
Surveying the Secretary's litigation conduct insofar as
it can be gleaned from the record before us, we simply cannot agree
with the FQHCs' reasoning that the Secretary "unquestionably
consented" to make payments from the Commonwealth's coffers as
early as the third quarter of 2006. As our own case law commands,
any such waiver would require the Commonwealth to have "engag[ed]
in affirmative conduct during litigation sufficient to evince
conduct to suit." Bergemann v. R.I. Dep't of Envtl. Mgmt., 665
F.3d 336, 340 (1st Cir. 2011). A finding of waiver or consent
through conduct in litigation is simply foreclosed where, instead
of voluntarily invoking federal jurisdiction, a State does nothing
more than zealously defend against the same whenever possible.
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III. Conclusion
We make a few parting comments regarding our judgment to
remand for additional consideration on the formula that will be
used to calculate the Commonwealth's reimbursement obligations.
This decision is not lightly reached: we are mindful that our
judgment today imposes further burden on the district court and
postpones the eventual resolution of this long-enduring litigation.
But the stakes here are undeniably high -- the tangible effects of
this litigation involve multiples of millions of dollars and bear
on the health care of thousands of Medicaid beneficiaries in Puerto
Rico. On remand, we urge the parties to assist the district court
in its efforts to bring this controversy to an efficient and just
conclusion.
For the reasons we have explained above, we affirm the
district court's ruling on the Eleventh Amendment claims. We also
affirm its ruling regarding the plaintiffs' request for debt
indemnification relief. We reverse the district court's judgments
regarding the formula used to calculate the Commonwealth's
reimbursement obligations and remand for further proceedings
consistent with this opinion. All parties will bear their own
costs.
It is so ordered.
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