Planned Parenthood of Greater Tex. Family Planning & Preventative Health Servs., Inc v. Smith

EDITH H. JONES, Circuit Judge:

*554The Texas Health and Human Services Commission's Office of Inspector General ("OIG") sought to terminate the Medicaid provider agreements of Planned Parenthood affiliates throughout the state. The agency based this decision largely on undercover video footage of graphic discussions with Planned Parenthood personnel concerning the prospective sale of liver, thymus, and neural tissue from fetuses aborted during the second trimester of pregnancy. The videos justified terminating the affiliates' provider agreements, the agency contended, because they indicated noncompliance with accepted medical and ethical standards. Three Planned Parenthood affiliates ("Provider Plaintiffs") and several Medicaid beneficiaries ("Individual Plaintiffs") sought a preliminary injunction against the termination decision. The district court held that the Individual Plaintiffs possessed a private right of action under the "qualified-provider" provision of the Medicaid Act, 42 U.S.C. § 1396a(a)(23), and issued a preliminary injunction preventing Texas from terminating Medicaid funding to the Planned Parenthood facilities statewide. The state agency has appealed.

We are constrained to affirm the district court's conclusion that the plaintiffs possess a private right of action, as held by this court in Planned Parenthood Gulf Coast v. Gee , 862 F.3d 445 (5th Cir.2017) (hereafter, " Gee ") (cert denied , --- U.S. ----, 139 S.Ct. 408, --- L.Ed.2d ---- ). But Judge Jones, in a separate concurrence, urges rehearing en banc on that issue, which has divided the appellate courts. We vacate the preliminary injunction and remand for the district court to limit its review to the agency record under an arbitrary-and-capricious standard.

I. BACKGROUND

A. Planned Parenthood Affiliates

The Provider Plaintiffs operate health centers and provide family planning services to about 12,500 Medicaid patients and the general public. Planned Parenthood Gulf Coast ("PPGC") runs seven health centers in the Houston area. Planned Parenthood Greater Texas ("PPGT") and Planned Parenthood South *555Texas ("PPST")² operate an additional 23 health centers. As affiliates of Planned Parenthood Federation of America ("PPFA"), they must adhere to various organizational standards to use the Planned Parenthood name and trademark.

Among the Provider Plaintiffs, only PPGC has sold fetal tissue for use in outside research.³ Melissa Farrell has served as PPGC's Research Director since 2006. In this role, she provides information about PPGC's services to outside researchers, develops budgets and contracts, and facilitates Institutional Review Board ("IRB") submissions. Ms. Farrell has been involved in several outside studies involving fetal tissue research. In 2006, PPGC participated in a first-trimester fetal tissue study. A second study, conducted in conjunction with the University of Texas Medical Branch in Galveston ("UTMB"), ran from 2010 to 2011 and concerned first-trimester placental tissue.

To facilitate these studies, Ms. Farrell stated that she would modify certain clinical procedures and require consent from the abortion patients whose procedures yielded fetal tissue. Both studies required that fetal tissue be processed and packaged following the abortions. The UTMB study additionally required PPGC to use a sterile process to collect the placental tissue after the abortion. Dr. Regan Theiler, a researcher involved in the UTMB project, also performed abortions at PPGC's facility.

Ms. Farrell communicated with Baylor College of Medicine regarding another fetal tissue donation project from 2013 through 2015. They discussed IRB approval, next steps, and draft contract terms, but no contract or budget was finalized.

B. Undercover Videos and Ensuing Investigations

In 2015, the Center for Medical Progress ("CMP"), a pro-life organization, released more than eight hours of undercover videos disclosing conversations held at the PPGC headquarters. In the CMP videos, two individuals posed as representatives from a fetal tissue procurement company. They claimed to be interested in purchasing liver, thymus, and neural tissue from fetuses aborted during the second trimester of pregnancy. Ms. Farrell features prominently in the video, as she discusses the possibility of a research partnership, provides a tour of PPGC's surgical facilities, and displays tissue samples from recently aborted fetuses.

*556Dr. Tram Nguyen, the director of PPGC's abortion facility, confirmed many of Ms. Farrell's statements.

The release of these graphic videos prompted federal and state investigations into numerous Planned Parenthood affiliates. The Harris County District Attorney, the Texas Rangers, and the Houston Police Department investigated but brought no charges. Likewise, the Texas Attorney General's Office, the Texas Department of State Health Services, and the Texas Health and Human Services Commission conducted investigations.

Additionally, the U.S. House of Representatives formed a Select Investigative Panel ("Select Panel") to investigate abortion providers' medical practices involving fetal tissue procurement. Representative Marsha Blackburn of Tennessee, a Republican, was named Chair of the bipartisan Select Panel. In December 2016, Blackburn emailed the Texas Attorney General Ken Paxton evidence the Select Panel had gathered about PPGC and asked Texas to investigate possible violations of Tex. Penal Code § 48.02, which prohibits the purchase and sale of human organs, and Tex. Penal Code § 37.08, which prohibits making a false report to a law enforcement officer.

C. Termination of Medicaid Provider Agreements

As participants in the Texas Medicaid program,⁴ the Provider Plaintiffs and each of their related health centers signed Medicaid provider agreements and agreed to comply with all Texas Medicaid policies and applicable state and federal regulations. The Provider Plaintiffs received $3.4 million from Texas Medicaid funds.⁵ Texas Health and Human Services Commission Office of Inspector General ("OIG" or "the agency") oversees compliance with state Medicaid policies and may conduct investigations and terminate Medicaid provider agreements for noncompliance.

OIG may terminate a Medicaid provider agreement when "prima facie evidence" establishes that a provider has committed a "program violation" or is "affiliated with a person who commits a program violation." 1 Tex. Admin. Code § 371.1703(c), (c)(6)-(8). A "program violation" includes any violation of federal law, state law, or the Texas Medicaid program policies. For instance, as explained in the Texas Medicaid *557Provider Procedures Manual, a provider violates Texas Medicaid rules if it fails to offer health services in accordance with "accepted medical community standards." See 1 Tex. Admin. Code § 371.1659(2).

In October 2015, OIG sent each Provider Plaintiff a Notice of Termination, stating that each was "no longer capable of performing medical services in a professionally competent, safe, and legal manner." The Notice listed the bases for termination and stated that, unless the Provider Plaintiffs responded within 30 days, a Final Notice of Termination would issue.

Instead of responding to the Notice and pursuing administrative and state judicial avenues of relief, the Provider Plaintiffs sued in federal court to block the termination. The Individual Plaintiffs-Texas Medicaid beneficiaries who have received services from the Provider Plaintiffs-joined in this challenge. On the state agency's motion, the district court stayed the proceedings for almost a year pending a Final Notice of Termination. OIG sent the Final Notice on December 20, 2016.

The Final Notice states that the Inspector General had determined that the Provider Plaintiffs were "not qualified to provide medical services in a professionally competent, safe, legal and ethical manner under the relevant provisions of state and federal law pertaining to Medicaid providers." The Final Notice bases this conclusion on the CMP videos and evidence provided by the Select Panel. The Final Notice states that the Inspector General consulted with the Chief Medical Officer, who reviewed the evidence and concluded that PPGC had violated "generally accepted medical standards, and thus [was] not qualified to provide medical services."

The Final Notice then specifies the "numerous violations of generally accepted standards of medical practice" established by the CMP video, including "a history of deviating from accepted standards to procure samples that meet researcher[s'] needs" and "a history of permitting staff physicians to alter procedures to obtain targeted tissue samples needed for their specific outside research." The Final Notice also states that evidence establishes that PPGC engaged in misrepresentations regarding fetal tissue procurement. The Final Notice concludes that under OIG's regulations, affiliates of a terminated entity are also subject to termination. See 1 Tex. Admin. Code § 371.1703(c)(7).

D. Court Proceedings

After reviewing the Final Notice, the plaintiffs filed an amended complaint and a new motion for a preliminary injunction. The district court conducted a three-day evidentiary hearing, during which it reviewed the CMP videos and heard testimony from medical and ethics experts on both sides. The plaintiffs offered testimony of the Provider Plaintiffs' CEOs, Ms. Farrell, and PPGC's Medical Director. The agency offered testimony of the Inspector General, OIG's Chief Medical Officer, an expert in obstetrics and gynecology, and a bioethics expert.

Much of the evidentiary hearing consisted of review and analysis of clips from the CMP videos. The agency focused on evidence that PPGC had violated federal regulations relating to fetal tissue research by altering abortion procedures for research purposes or allowing the researchers themselves to be involved in performing abortions to harvest their preferred tissue samples. See 42 U.S.C. § 289g-1(c)(4) (requiring researchers to certify that they "had no part in any decisions as to the timing, method, or procedures used to terminate the pregnancy made solely for the purposes of the research"); 45 C.F.R. § 46.204(i) (for research involving pregnant *558women or fetuses, requiring that "[i]ndividuals engaged in the research will have no part in any decisions as to the timing, method, or procedures used to terminate a pregnancy"); 42 U.S.C. § 289g-1(b)(2)(A)(ii) (requiring researchers to certify that "no alteration of the timing, method, or procedures used to terminate the pregnancy was made solely for the purposes of obtaining the tissue"). The plain purposes of the regulations are to prevent conflicts of interest between the researcher and patients and to eliminate any temptation to place research studies above the patients' medical needs. In addition to federal regulations, state regulations authorize sanctions for providers who fail to adhere to "accepted medical community standards." See 1 Tex. Admin. Code § 371.1659(2).

Various of Ms. Farrell's statements were offered as evidence that PPGC had violated or is willing to violate these standards. For example, at one point in the video, Ms. Farrell responds to questions about whether PPGC has "physicians who would be able to change the procedure a bit" for research purposes, and Ms. Farrell says, "Yep." She then adds:

Yes. And it will depend. Obviously the change in the procedure will have to be where it's not going to put the patient at more risk ... prolong the procedure putting her at more risk, and altering the procedure where we leave content in the patient, which obviously we're trying to get ... and that's something we'll have to discuss, you know, with the docs ... and see how they can do it. Because some of our[ ] doctors in the past have projects, and they're collecting the specimens so they do it in a way that they get the best specimen. So I know it can happen.

Later in the video, Ms. Farrell identifies Dr. Theiler, a participant in the UTMB study, as someone who would be a good reference. She explains:

Yeah. So she knows what's involved in modifying what we need to do to get you the specimens that are intact because she's done it. ... And she was doing those here.

Dr. Nguyen confirmed that the PPGC abortion facility can obtain intact liver and thymus. The doctor stated, sarcastically, that while federal law (prohibiting partial birth abortions) restricts a facility from intentionally retrieving an intact fetus, PPGC can make it happen by signing a form that they did not so "intend." Nguyen also stated that obtaining intact specimens of liver, thymus, and neural tissue depends upon the amount of cervical dilation of the patient and the patient's pain tolerance. The doctor noted risks associated with fetal tissue procurement that PPGC is willing to take because "it is for a good cause." The doctor acknowledged that two particular PPGC doctors can alter the abortion procedure to meet a researcher's request. Relying on these statements, others like them, and their expert testimony, OIG sought to justify its termination decision.

The plaintiffs' live witnesses, on the other hand, denied that PPGC ever altered abortion procedures for research purposes. Ms. Farrell herself testified that, in the videos, she was actually discussing changes to clinical operations and not changes to the abortion procedures themselves.

Following the hearing, the district court issued a memorandum and order granting the plaintiffs' motion for a preliminary injunction. The district court held that the Individual Plaintiffs possessed a private right of action to challenge OIG's termination decision. Analyzing OIG's evidence of PPGC's program violations, the district court credited the plaintiffs' self-justifying explanations. The court found that even in the light most favorable to the agency, the *559videotaped discussions were ambiguous and open to interpretation. The district court stated, inaccurately, that the CMP video had not been authenticated and suggested that it may have been edited.⁶ The district court also noted that neither the Inspector General nor the Medical director had expert knowledge concerning abortion procedures. And the court discounted Ms. Farrell's videotaped statements because she claimed on the witness stand that she really had no personal knowledge of the medical aspects of abortion procedures and had never even been in the room when an abortion was performed.

While the court felt free to credit all of the trial testimony from the Provider Plaintiffs-none of which had been offered during the state administrative procedures-the court bound the IG solely to the administrative record and expressly refused to consider any support for termination "not included in the Final Notice and not part of the Inspector General's termination decision." Having thus narrowed the evidence, the court concluded that OIG "did not have prima facie ... evidence, or even a scintilla of evidence, to conclude the bases of termination set forth in the Final Notice merited finding the Plaintiff Providers were not qualified." The agency timely appealed.

II. STANDARD OF REVIEW

"A preliminary injunction is an 'extraordinary remedy.' " Texans for Free Enter. v. Tex. Ethics Comm'n , 732 F.3d 535, 536 (5th Cir.2013) (quoting Byrum v. Landreth , 566 F.3d 442, 445 (5th Cir.2009) ). "To be entitled to a preliminary injunction, the applicants must show (1) a substantial likelihood that they will prevail on the merits, (2) a substantial threat that they will suffer irreparable injury if the injunction is not granted, (3) their substantial injury outweighs the threatened harm to the party whom they seek to enjoin, and (4) granting the preliminary injunction will not disserve the public interest." Tex. Med. Providers Performing Abortion Servs. v. Lakey, 667 F.3d 570, 574 (5th Cir.2012) (brackets and citations omitted). The party seeking preliminary injunctive relief must clearly carry the burden of persuasion on all four elements. Id. This court "review[s] a preliminary injunction for abuse of discretion, reviewing findings of fact for clear error and conclusions of law de novo ." Texans for Free Enter. , 732 F.3d at 537. When a court applies incorrect legal principles, it abuses its discretion. See Atchafalaya Basinkeeper v. United States Army Corps of Engineers , 894 F.3d 692, 696 (5th Cir.2018).

III. DISCUSSION

The following discussion demonstrates that the district court erred in evaluating the evidence de novo , in its peculiarly asymmetrical way, rather than under the arbitrary and capricious standard, and in applying Gee' s reasoning to its determination of a "qualified" provider in this context. For those reasons, the court erred legally and Appellees are unable to show a likelihood of success on the merits of their claim. Accordingly, it is unnecessary for us to address the other elements of preliminary injunctive relief.

*560The Medicaid program exemplifies cooperative federalism-a partnership between federal and state agencies to provide medical services to needy individuals. The federal government shares the costs of funding the program with participating states. Atkins v. Rivera , 477 U.S. 154, 156-57, 106 S.Ct. 2456, 2458-59, 91 L.Ed.2d 131 (1986). In exchange for federal funds, the states must "agree[ ] to spend them in accordance with congressionally imposed conditions." Armstrong v. Exceptional Child Ctr., Inc. , --- U.S. ----, 135 S.Ct. 1378, 1382, 191 L.Ed.2d 471 (2015).

Under the Medicaid Act's "qualified-provider" provision, "[a] State plan for medical assistance must ... provide that [ ] any individual eligible for medical assistance ... may obtain such assistance from any institution ... qualified to perform the service or services required ... who undertakes to provide him such services." 42 U.S.C. § 1396a(a)(23). The Supreme Court has held that this provision "gives recipients the right to choose among a range of qualified providers, without government interference." O'Bannon v. Town Court Nursing Ctr. , 447 U.S. 773, 785, 100 S.Ct. 2467, 2475, 65 L.Ed.2d 506 (1980).

Relying on this court's decision in Gee , the district court concluded that the "qualified-provider" provision grants the Individual Plaintiffs a right of action to challenge OIG's termination of the Provider Plaintiffs' Medicaid agreements. 862 F.3d 445 (5th Cir.2017). The district court then issued a preliminary injunction against the agency after holding that the plaintiffs met the criteria for extraordinary relief.

On appeal, OIG raises two principal arguments: the plaintiffs lack a private right of action because Gee does not control this case; and the district court abused its discretion in concluding that the plaintiffs were likely to succeed on the merits of their challenge because, inter alia , the court erroneously applied de novo review in evaluating OIG's termination decision instead of limiting its review to the agency record under the deferential arbitrary-and-capricious standard.

A. Private Right of Action

In Gee , a divided panel of this court held that, under some circumstances, 42 U.S.C. § 1396a(a)(23) can afford Medicaid beneficiaries a private right of action to challenge a state's erroneous termination of Medicaid provider agreements. This "free choice of provider" provision mandates that "any individual eligible for medical assistance...may obtain such assistance from any institution...or person, qualified to perform the service or services required...." Gee involved a decision by the Louisiana Department of Health and Hospitals ("LDHH") to terminate the Medicaid provider agreements of two PPGC-affiliated clinics operating in Louisiana. 862 F.3d at 450-52. Although the OIG, as will be seen, attempts to distinguish Gee , we are constrained to follow that decision as the law of this circuit.

In Gee , LDHH advanced three reasons for terminating the provider agreements: (1) PPGC's settlement of several qui tam False Claims Act lawsuits, in which PPGC disclaimed all liability; (2) unspecified misrepresentations by PPGC in its letters to LDHH; and (3) a pending investigation of PPGC by LDHH and the Louisiana Office of Inspector General. See id . at 453. As in this case, PPGC and several Medicaid beneficiaries bypassed state administrative procedures and sued LDHH under 42 U.S.C. § 1983, arguing that PPGC's clinics were, in fact, "qualified" and that LDHH had failed to identify any valid ground under federal or state law for terminating the two clinics. The Gee majority agreed.

The court held, joining the Sixth, Seventh, and Ninth Circuits, that *561Section 1396a(a)(23) can provide Medicaid beneficiaries with a right of action to challenge a state's termination decision that is unrelated to a provider's qualifications. See id . at 462.⁷ The court relied on the definition of "qualified" cited by other circuits: "[t]o be 'qualified' in the relevant sense is to be capable of performing the needed medical services in a professionally competent, safe, legal, and ethical manner." See id . at 462 (quoting Planned Parenthood of Ind. , 699 F.3d at 978 ). The court then determined that none of LDHH's asserted justifications for terminating the Medicaid provider agreements implicated whether the health clinics were "qualified" under this definition. See id . at 470.

OIG argues that Gee is distinguishable. Specifically, the agency suggests that Gee must be narrowly construed to prevent conflict with the Supreme Court's decision in O'Bannon v. Town Court Nursing Center, 447 U.S. 773, 100 S.Ct. 2467, 65 L.Ed.2d 506 (1980). In O'Bannon , the Supreme Court held that patients lacked a private right of action under Section 1396a(a)(23) to challenge the state agency's termination of a nursing home's Medicaid provider agreements for failure to meet statutory and regulatory standards. The Court asserted that the Medicaid Act "clearly does not confer a right on a recipient to enter an unqualified home and demand a hearing to certify it, nor does it confer a right on a recipient to continue to receive benefits for care in a home that has been decertified." Id . at 785, 100 S.Ct. at 2475. Consequently, under Section 1396a(a)(23), a patient "has no enforceable expectation of continued benefits to pay for care in an institution that has been determined to be unqualified." Id . at 786, 100 S.Ct. at 2476.

Over a cogent dissent by Judge Owen, see 862 F.3d at 475 (Owen, J., dissenting), the Gee majority distinguished O'Bannon for two reasons. First, the majority stated that O'Bannon involved a due process challenge whereas the Gee plaintiffs "assert[ed] the violation of a substantive right." Id. at 460. Second, the majority asserted that, in O'Bannon , the state had "decertified" the nursing center, whereas in Gee , "there was no decertification decision." Id. at 461. "When, as here, a state terminates only a Medicaid provider agreement, independent of any action to enforce statutory and regulatory standards, O'Bannon is inapposite." Id .

OIG focuses on the majority's second reason for distinguishing O'Bannon -the absence of a "decertification decision" by LDHH. OIG emphasizes that LDHH had "conceded that [the clinics were] competent to provide the relevant medical services" and had not sought to decertify the health centers beyond ejecting them from the Medicaid program. Id . at 466. Thus, LDHH admitted that its termination of the clinics' Medicaid provider agreements was "independent of any action to enforce statutory or regulatory standards." 862 F.3d at 461. Texas, however, has not conceded that the Provider Plaintiffs are "qualified" in any way. Moreover, unlike LDHH, the OIG's termination action is predicated on specific findings that federal and state statutory and regulatory standards have been violated. In other words, the plaintiffs in this case are doing precisely what *562O'Bannon disallowed-challenging the merits of a state agency's decertification decision.

The Gee majority indeed indicated several times that the plaintiffs were not contesting the "the merits of [LDHH's] decertification decision." 862 F.3d at 461. But we are unpersuaded by the distinction urged by the state. The Gee majority states that "it bears repeating that LDHH has conceded that PPGC is competent to provide the relevant medical services to any and all non-Medicaid patients ." 862 F.3d at 466 (emphasis added). Although the Gee majority acknowledged that LDHH's justifications for termination "might well relate to a provider's qualifications," the state had "taken no action to revoke PPGC's license and has not called into question any qualification that enables PPGC to offer medical care generally." 862 F.3d at 469 (emphasis in original).⁸

Here, there is far stronger evidence in support of OIG's termination decision than the justifications offered by LDHH, but there is also no evidence that the state of Texas questions the competence of the Provider Plaintiffs or that it has taken steps to prevent the Provider Plaintiffs from offering medical care to non-Medicaid patients. In the end, the plaintiffs' claim here is roughly the same as it was in Gee : the state agency violated the "qualified provider" provision by excluding them from the Medicaid program for reasons allegedly unrelated to whether they are "capable of performing the needed medical services in a professionally competent, safe, legal, and ethical manner." OIG's attempt to distinguish Gee regarding an implied individual claim is unavailing.

This does not mean, of course, that the agency's O'Bannon -based arguments are frivolous. Seven judges on this circuit joined a dissent from the denial of rehearing en banc focused on the conflict with O'Bannon . See Planned Parenthood of Gulf Coast, Inc. v. Gee , 876 F.3d 699, 700 (5th Cir.2017) (Elrod, J., dissenting from denial of rehearing en banc) (explaining that Gee "is directly at odds with the Supreme Court's holding in O'Bannon "). But this panel lacks authority to contradict the current law of the circuit.

B. Likelihood of Success on the Merits

Gee controls this appeal as to the plaintiffs' right of action but the plaintiffs, and to an extent the district court, suggest that this case is merely Gee redux. That is incorrect. In Gee , the state agency's purported justifications for termination were tantamount to contending that a provider can be excluded "simply because state law says so," 862 F.3d at 466, or that a state can "simply label[ ] any exclusionary rule as a 'qualification' " to circumvent Section 1396a(a)(23) 's requirements. Id . at 466 (quoting Planned Parenthood of Ind. , 699 F.3d at 980 ). OIG, however, based its termination decision on, inter alia , a record of incriminating admissions by PPGC's own personnel that show, the agency contends, a failure to comply with federal regulations or, at the very least, a failure to comply with the ethical standards that Texas requires of Medicaid providers.

It is true that the district court purported to find "not ... even a scintilla of evidence" impugning PPGC's qualifications. But this occurred only after the district *563court credited the plaintiffs' witnesses' self-serving testimony about their videotaped statements, while asymmetrically refusing to consider OIG's post-termination evidence. None of the plaintiffs' evidence, moreover, was ever presented to the agency through the standard administrative procedures or judicial review required by the Medicaid statutes.

OIG challenges the district court's procedures as facially inequitable. But the agency's principal argument on appeal is that the district court abused its discretion by reviewing the agency's decision de novo instead of under the deferential arbitrary-and-capricious standard required by this court's decision in Abbeville General Hospital v. Ramsey , 3 F.3d 797 (5th Cir.1993). We agree that Abbeville 's analysis applies here: a state agency's decision terminating a Medicaid provider agreement-and the agency's determination that the provider is not "qualified"-should be reviewed like any other administrative case-on the record that was made before the agency and under the arbitrary-and-capricious standard.

However, before explaining the appropriate standard of review, it is first necessary to clarify how Gee 's analysis of the "qualified-provider" requirement applies to state agencies like OIG. We then explain why the district court had to review the agency's decision under the more deferential standards.

1. The meaning of "qualified"

The Medicaid Act itself does not define what it means for a provider to be "qualified to perform the service or services required." 42 U.S.C. § 1396a(a)(23). But "Medicaid regulations allow states to set reasonable standards relating to the qualifications." Gee , 862 F.3d at 462 (quoting 42 C.F.R. § 431.51(c)(2) ). And Gee emphasized that "states retain broad authority to define provider qualifications and exclude providers on that basis." Id . at 465 ; see also Detgen ex rel. Detgen v. Janek , 752 F.3d 627, 631 (5th Cir.2014) (explaining that states possess "broad discretion to implement the Medicaid Act"). Nevertheless, Gee held that a state's discretion is "circumscribed by the meaning of 'qualified' in this context." 862 F.3d at 465.

Rather than offer a comprehensive definition of what it means for a provider to be " 'qualified' in this context," Gee instead relied on a general definition used by several other circuits. See id . at 462. This definition of "qualified," which LDHH never challenged, is "capable of performing the needed medical services in a professionally competent, safe, legal, and ethical manner." See id . at 462 (quoting Planned Parenthood of Ind. , 699 F.3d at 978 ). Absent further explanation, this broad statement could unduly circumscribe an agency's ability to "define provider qualifications and exclude providers on that basis," Gee , 862 F.3d at 465, and it conflicts with other Medicaid statutory provisions and with the interpretation of federal funding statutes.

First, the word "capable" must be construed with reference to the limiting terms "competence," "safety," "legality," and "ethics." Being "capable of" providing health services is not the same as being "qualified" to do so. Being "capable of" denotes merely the ability to perform a function.⁹ In contrast, being "qualified" means "[h]aving qualities or possessing accomplishments which fit one for a certain ... function" and, often, it means that this *564fitness is "officially recognized."¹⁰ If being merely "capable" of providing health services-say, safely-were the standard for being a "qualified" provider, a Medicaid provider could challenge its termination by showing that it could have acted safely-even if it seriously or frequently failed to do so. A state agency should not have to show that a provider is incapable of operating appropriately to hold a provider accountable under the "qualified-provider" provision. None of the cases that have relied on the general definition of "qualified" have indicated otherwise.

Similarly, courts may not interpret Gee to hold that a Medicaid provider must be considered "qualified" until the state has totally barred that provider from serving the public. A literal understanding of "capable of performing the needed medical services" could lead to that interpretation, as could several of the Gee majority's statements in dicta. See, e.g. , id. at 465 ("While as a general rule a state may terminate a provider's Medicaid agreements for reasons bearing on that provider's general qualification to provide medical services, we are not aware of any case that holds a state may do so while continuing to license a provider's authorization to offer those same services to non-Medicaid patients."). But any such requirement would hamstring state agencies like OIG that have no authority to decertify health care providers generally. The Provider Plaintiffs' Texas medical licenses are regulated by the Texas Medical Board, which is a separate agency operating under separate statutory authority. See Tex. Occ. Code §§ 151.003(2), 152.001(a). And to the extent the Provider Plaintiffs or their affiliated health clinics are abortion providers, they are separately licensed by the Texas Department of State Health Services. See 25 Tex. Admin. Code § 139.1(a). Moreover, if Louisiana's failure to revoke the health clinics' licenses were dispositive, the Gee majority would not have needed to review LDHH's justifications for termination at all. In sum, a state's decision to revoke a health care provider's license may be sufficient, but it is not necessary in order for a state to exclude a provider from the Medicaid program.

Second, requiring a state to decertify a provider entirely before jettisoning it from the Medicaid program would also conflict with the Medicaid Act's provision of numerous grounds on which the Secretary of the Department of Health and Human Services ("HHS") or a state can or must exclude a Medicaid provider from the program. See 42 U.S.C. §§ 1396a(p)(1) - (3), 1320a-7. Indeed, the general exclusionary provision in Section 1396a(p)(1) authorizes a state to disqualify a provider for many reasons unrelated to violations that would require the provider to cease operating entirely. Suspension from another state health care program, for example, is one of many statutory bases upon which the Medicaid Act allows a state to exclude a provider. See id. § 1320a-7. The applicable regulations amplify that "a State may exclude an individual or entity ... for any reason for which the Secretary could exclude that individual or entity from participation in Federal health care programs" and "[n]othing contained in this part should be construed to limit a State's own authority to exclude an individual or entity from Medicaid for any reason or period authorized by State law." 42 C.F.R. § 1002.3(a) - (b). Gee also recognized that "[s]tates undoubtedly must be able to terminate provider agreements in cases of criminal activity, fraud and abuse, and other instances of malfeasance."

*565862 F.3d at 469. The Medicaid Act's comprehensive regulatory framework nowhere suggests that a provider may only be disqualified once it is deemed unfit to provide care for the general public.

Third, because the Medicaid program transfers funds to states on conditions, a "clear statement" of any mandatory condition is required by Pennhurst State Sch. & Hosp. v. Halderman , 451 U.S. 1, 17, 101 S.Ct. 1531, 67 L.Ed.2d 694 (1981), and OIG's interpretation and implementation of the regulations is valid unless "plainly prohibited" by the statute. Detgen ex rel. Detgen v. Janek, 752 F.3d at 631. As noted above, states have definitional latitude, and there is no federal definition of "qualified provider."

In light of this analysis, Gee 's holding that a state may not exclude a Medicaid provider for "reasons unrelated to that provider's qualifications." 862 F.3d at 462 (emphasis in original), is best read to mean that a state agency's justifications for terminating a provider must actually implicate whether the provider operates in a "safe, legal, and ethical manner" under state and federal law. A state cannot exclude a provider "for no reason at all." Id. at 468. Nor can a state "simply label[ ] any exclusionary rule a 'qualification' " and then contend a provider is unqualified on that basis. Id . at 469 (quoting Planned Parenthood of Ind. , 699 F.3d at 978 ). Thus, the Seventh and Ninth Circuits found violations of the "qualified-provider" requirement where states excluded providers merely because they provided abortions. As Gee explained, "a state may not exclude a provider simply based on the scope of the services it provides." 862 F.3d at 469.

To comply with Gee , a state agency undertaking to decide that a Medicaid provider is not "qualified" should identify regulations concerning the "safe, legal, and ethical manner" of furnishing healthcare services and point to evidence of the provider's violations. As reflected in the Gee majority's analysis, this should be an easy standard for the state to meet in most cases. See id . at 468 ("[W]e reiterate for emphasis the unique circumstances of the instant case.").

2. Arbitrary and Capricious Review

With the governing legal standard in mind, we turn to the proper standard of judicial review. OIG contends that the district court erred procedurally by applying de novo review and allowing the plaintiffs to offer evidence outside the administrative record, because this court held in Abbeville that the "substantive adequacy and reasonableness" of a state agency's findings in administering the Medicaid Act should be reviewed by courts "using the arbitrary and capricious standard of review." 3 F.3d at 803-04. Although the district court did not specify the standard of judicial review, the court clearly did not defer to OIG's findings. Instead, the court distinguished the state's findings at every opportunity. And by considering and crediting the plaintiffs' post-termination evidence, while expressly discrediting the state's witnesses, the court did not limit its review to the agency record. This procedure violates Abbeville 's requirements.

In Abbeville , this court held that the deferential arbitrary-and-capricious standard applies to a state agency's rate-setting action under the Medicaid Act's Boren Amendment. Abbeville , 3 F.3d at 802. Federal courts are accustomed to applying the "deferential" standard to the actions of federal agencies under the Administrative Procedure Act. See Nat'l Ass'n of Home Builders v. Defs. of Wildlife , 551 U.S. 644, 658, 127 S.Ct. 2518, 2529, 168 L.Ed.2d 467 (2007) ; 5 U.S.C. § 706(2)(A). Under this deferential standard, *566an agency's finding may only be overturned if it fails to satisfy "minimum standards of rationality." La. Envt'l Action Network v. U.S. E.P.A. , 382 F.3d 575, 582 (5th Cir.2004). Courts accordingly may consider only "whether the agency action 'bears a rational relationship to the statutory purposes' and [whether] there [is] 'substantial evidence in the record to support it.' " Id . at 582 (quoting Tex. Oil & Gas Ass'n v. U.S. E.P.A. , 161 F.3d 923, 934 (5th Cir.1998) (quoting Mercy Hosp. of Laredo v. Heckler , 777 F.2d 1028, 1031 (5th Cir.1985) ) ). Arbitrary and capricious review is conducted on the basis of the agency record alone. Luminant Generation Co. v. U.S. EPA , 675 F.3d 917, 925 (5th Cir.2012) (internal citation omitted).

Abbeville 's application of this deferential standard to a state agency was not novel; indeed, the court referred to the applicability of this standard as an "indisputable proposition" supported by a "litany of cases." See Abbeville , 3 F.3d at 802 & n.6 (citing cases); see also Miss. Hosp. Ass'n, Inc. v. Heckler , 701 F.2d 511, 517 (5th Cir.1983) (reviewing state agency's Medicaid reimbursement plan under the arbitrary-and-capricious standard). Abbeville clarified that whether a state had complied with the Medicaid Act's procedural requirements was subject to de novo review. Id . at 802.¹¹ However, once a state agency complies with any required Medicaid procedures, "a presumption of regularity and [a] deferential standard attaches" to the agency's decision. Id . at 804.

The plaintiffs argue that Abbeville is inapposite because the instant case does not actually involve the appeal of an agency decision; rather, it is "a statutory claim under the Medicaid Act giving rise to a right of action in federal court under §[ ]1983." The plaintiffs contend that there is "no case law imposing arbitrary-and-capricious review on such a claim." The plaintiffs are mistaken. Abbeville itself involved a Section 1983 action seeking to enforce statutory rights. See Abbeville , 3 F.3d at 801 ("The Hospitals filed a § 1983 action against the Secretary of LDHH and other agency officials, claiming their actions deprived them of rights secured under the Boren Amendment.").¹² Other courts have likewise concluded that the review of state Medicaid decisions as applied to individual plaintiffs in Section 1983 cases is governed by the arbitrary and capricious standard. See Smith v. Rasmussen , 249 F.3d 755, 760 (8th Cir.2001) ; Brown v. Day , 434 F.Supp.2d 1035, 1041 (D. Kan. 2006).

Contrary to the plaintiffs' assertion, moreover, this case plainly involves judicial review of an agency action. Here, OIG, the state agency empowered to investigate violations of the Medicaid program and terminate providers for noncompliance, decided to exclude the Provider Plaintiffs after finding evidence that they had violated various medical and ethical standards. The plaintiffs have sought judicial review of that termination decision. The plaintiffs' challenge is functionally equivalent to any other appeal of an agency decision. To hold that the plaintiffs' challenge could receive review in federal court without the deference due in a case brought by the Provider Plaintiffs directly would be to elevate patients'

*567rights beyond the complex federal-state cooperative and enforcement structure of the Medicaid statute itself. Put otherwise, had the Secretary of HHS excluded the Provider Plaintiffs, there is no question that its decision would be subject to arbitrary and capricious review.¹³ And put otherwise again, the result the Individual Plaintiffs obtained goes far beyond their personal claims to be treated by the Provider Plaintiffs, as it prevents the state from denying millions in state funds to those entities; this result cannot be proportional to the litigation of an individual claim, but must arise from wholesale review of agency action toward the Providers.

The plaintiffs next contend that Gee precludes the application of arbitrary-and-capricious review in this context because Gee reviewed LDHH's termination decision de novo . Had Gee addressed this question and applied de novo review, we might be bound to do likewise. But Gee never addressed nor was it required to or even asked to address the applicable standard of review. LDHH's grounds for terminating the health clinics amounted to no more than unsupported suspicions of misconduct. Unlike in this case, LDHH had done no factfinding and conceded that the providers were "qualified." Thus, although Gee did not address Abbeville , it is consistent with the prior decision's requirements: as in Abbeville , the lack of findings rendered the LDHH decision subject to de novo review. This stands in stark contrast to the present case in which OIG made findings.

Further, not one of the circuits that have recognized a private right of action under Section 1396a(a)(23) has intimated that an arbitrary-and-capricious standard would be inappropriate. In Planned Parenthood of Indiana and Betlach , the Seventh and Ninth Circuits had no need to address this question because they dealt only with state laws, not agency decisions, that blocked Medicaid funding for abortion providers. See 699 F.3d at 967 ; 727 F.3d at 962. Likewise, the underlying issue in the Sixth Circuit's Olszewski decision was whether HHS reasonably construed the Medicaid Act's phrase "medical devices" to include "incontinence products." 442 F.3d at 465.¹⁴ The state agency's determination was not properly at issue. Additionally, the Tenth Circuit's decision in Andersen largely parrots Gee in its rejection of a state agency's termination decision and likewise does not discuss the standard of review. 882 F.3d at 1236.

The plaintiffs next argue that the deferential standard is inappropriate because the Individual Plaintiffs, as Medicaid beneficiaries, have no administrative remedy and thus cannot develop the administrative record.¹⁵ The plaintiffs also point out that Gee held that the plaintiffs "are not subject to ... any administrative exhaustion requirement." Gee , 862 F.3d at 455. That is true. But the absence of an exhaustion requirement does not mean there can be no consequences for the provider's decision *568to ignore the prescribed administrative process. The absence of an exhaustion requirement does not entitle plaintiffs to de novo review of OIG's factual findings and conclusions.

Indeed, it is a feature-not a bug-of the arbitrary-and-capricious standard that it incentivizes providers to use the state administrative appeal process required by the Medicaid Act itself. See 42 U.S.C. § 1396a(a)(4) ; 42 C.F.R. § 1002.213 ("Before imposing an exclusion under § 1002.210, the State agency must give the individual or entity the opportunity to submit documents and written argument against the exclusion."). It is highly doubtful that Congress intended a loophole whereby providers could use patients as litigation proxies to avoid the state's remedial procedures and develop separate, potentially conflicting judicial standards of compliance. Requiring arbitrary and capricious review that is limited to the administrative record encourages Medicaid providers to pursue a state's administrative-hearing procedures in order to develop the administrative record in their favor.¹⁶

In an effort to apply rather than distinguish Abbeville , the plaintiffs alternatively contend that the district court did no more than the federal court in that case and simply disregarded OIG findings that were not "bona fide " or "supported by some minimum quantum of evidence." Abbeville , 3 F.3d at 804, 805. As explained above, however, Abbeville was reviewing LDHH's procedural compliance with Medicaid standards, not its substantive compliance.

In any event, there is no question that the OIG here made factual findings after viewing the videos and related evidence. On the basis of the administrative record-not the post hoc justifications offered by plaintiffs' witnesses in the district court-the OIG determined that video discussions "centered on clinic processes and tissue packaging rather than the abortion procedure itself; the video featured repeated discussion about the position of the fetus in the uterus, the risk to the patient, and the patient's pain tolerance." The OIG further concluded, based on the videos, that the Provider Plaintiffs at a minimum violated federal standards regarding fetal tissue research and standards of medical ethics by allowing doctors to alter abortion procedures to retrieve tissue for research purposes or allowing the researchers themselves to perform the procedures. The plaintiffs' briefing with regard to the substance of the discussions contained in the videos (as opposed to their trial witnesses' post hoc justifications) is curiously silent.

The plaintiffs finally insinuate that arbitrary and capricious review should not apply because OIG has insufficient expertise to determine the qualifications of abortion providers. On this point, the district court was also dismissive, suggesting that the Inspector General and OIG's Chief Medical Officer were insufficiently informed regarding how to perform abortions. We reject this argument. OIG is the agency that the state of Texas has empowered to investigate and penalize Medicaid program violations. The agency is in the business of saying when providers are qualified and when they are not. That the Chief Medical Officer is a surgeon-and not himself an abortion provider-does not mean that he deserves no deference when deciding *569whether a provider has failed to meet the medical and ethical standards the state requires.¹⁷ It is even odder to claim that federal judges, who have no experience in the regulations and ethics applicable to Medicaid or medical practice, much less in regard to harvesting fetal organs for research, should claim superior expertise.

In sum, the district court erred by giving no deference to OIG's factual findings and by accepting evidence beyond the agency record. The arbitrary and capricious standard applies to review of the record alone.¹⁸

CONCLUSION

For these reasons, we must affirm that the Individual Plaintiffs possess a private right of action. However, because the district court apparently conducted de novo review of the OIG's decision, and its procedure was incompatible with the proper standard, the basis for its preliminary injunction cannot be sustained. Whether plaintiffs might establish a likelihood of success on the merits depends on application of the arbitrary and capricious standard to the administrative record alone.

We VACATE the preliminary injunction and REMAND for the district court to limit its review to the agency record under an arbitrary-and-capricious standard.

2 PPST is technically an umbrella organization comprising three other named plaintiffs: Planned Parenthood Cameron County, Planned Parenthood San Antonio, and Planned Parenthood South Texas Surgical Center.

3 PPGC itself does not technically provide abortions. But an affiliated entity-located in the same building as PPGC's headquarters and called Planned Parenthood Center For Choice ("PPCFC")-does provide abortions. PPGC's own research department handles all of PPCFC's research agreements because PPCFC has no separate research department or personnel of its own. The district court pretermitted the question whether PPGC and PPCFC were effectively a single organization.

4 Texas Medicaid only pays for abortions under narrow circumstances-specifically, when a woman's life is in danger or for victims of rape and incest.

5 This amount is a smidgen of the three affiliates' combined revenues of approximately $57 million in 2013.

6 In fact, the record reflects that OIG had submitted a report from a forensic firm concluding that the video was authentic and not deceptively edited. And the plaintiffs did not identify any particular omission or addition in the video footage. Moreover, the district court also suggested that there was no evidence that any of PPGC's research was federally funded, so the regulations relied on by OIG might be inapplicable. But the record actually establishes that the UTMB study was funded by the National Institute of Health.

7 See Planned Parenthood Ariz. Inc. v. Betlach , 727 F.3d 960 (9th Cir.2013) ; Planned Parenthood of Ind., Inc. v. Comm'r of Ind. State Dep't of Health , 699 F.3d 962 (7th Cir.2012) ; Harris v. Olszewski , 442 F.3d 456 (6th Cir.2006). After Gee was issued, the Eighth Circuit held that Section 1396a(a)(23) does not afford a private right of action. See Planned Parenthood of Ark. & E. Okla. v. Gillespie , 867 F.3d 1034 (8th Cir.2017). Then the Tenth Circuit joined the circuit majority in affirming a private right of action. Planned Parenthood of Kansas and Mid-Missouri v. Andersen , 882 F.3d 1205 (10th Cir.2018).

8 See also 862 F.3d at 476-77 (Owen, J., dissenting) (characterizing the majority opinion as holding, "whenever a State terminates a provider's Medicaid agreement, regardless of the grounds for termination, a patient may sue to contest the termination, unless the State also precludes the provider from providing services or care to all patients, not just Medicaid recipients.").

9 See The Oxford English Dictionary (online ed. 2018), available at http://www.oed.com/view/Entry/27354?redirectedFrom=capable#eid.

10 See The Oxford English Dictionary (online ed. 2017), available at http://www.oed.com/view/Entry/155867?rskey=k2PgDU& result=1& isAdvanced=false#eid.

11 In Abbeville , itself, the state agency "admit[ted] ... that it conducted no studies and made no efforts to" make the required findings. Id . at 806. For this reason, the court reversed the agency's reimbursement plan for procedural noncompliance without applying arbitrary and capricious review. Id . at 810.

12 Similarly, Miss. Hosp. Ass'n. does not cite Section 1983 but must also have been brought to enforce federal law under that provision.

13 See 5 U.S.C. § 706(2)(A) ; see also Nursing Ctr. v. U.S. Dep't of Health & Human Servs ., 606 F. App'x 164, 167 (5th Cir.2015) (reviewing whether Secretary's decision imposing sanctions on Medicaid provider was arbitrary and capricious).

14 The court applied Chevron deference to HHS's construction of the act and found it reasonable. Id . at 470.

15 The Individual Plaintiffs, of course, serve here as the Providers' litigation proxies, and the Providers had ample opportunity to develop the administrative record. If this deficiency ultimately operates to the detriment of the Individual Plaintiffs, O'Bannon recognized that Medicaid beneficiaries might well have a cause of action against their Providers for becoming decertified. 447 U.S. at 787, 100 S.Ct. at 2476.

16 In this way, requiring the deferential standard of review could ameliorate what some members of this court saw as negative consequences of the Gee decision. See Gee , 876 F.3d at 702 (Elrod, J., dissenting from denial of rehearing en banc) ("Disqualified providers can now circumvent state law because the panel majority opinion deems it unnecessary to have a final administrative determination so long as there are patients to join a lawsuit filed in federal court.").

17 Here, it seems necessary to consider the appropriate deference owed to OIG outside the abortion context. It is certainly inappropriate "to bend the rules when any effort to limit abortion, or even to speak in opposition to abortion, is at issue." Whole Woman's Health v. Hellerstedt , --- U.S. ----, 136 S.Ct. 2292, 2321, 195 L.Ed.2d 665 (2016) (Thomas, J., dissenting) (quoting Stenberg v. Carhart, 530 U.S. 914, 954, 120 S.Ct. 2597, 2621, 147 L.Ed.2d 743 (2000) (Scalia, J., dissenting) ). To bend the rules here would be particularly imprudent. Had OIG terminated the Medicaid provider agreements of any other type of health care provider, the incongruity of allowing that provider to use patient litigation proxies to avoid administrative review and receive de novo review in federal court would be obvious and unacceptable.

18 A separate issue raised by Planned Parenthood is whether OIG could terminate Medicaid funding for all of the Provider Plaintiffs where only one, PPGC, has engaged in or contemplated fetal tissue research. State regulations authorizing action against "affiliates" of a provider are at issue. This issue becomes relevant and must be reconsidered by the district court if, on remand, it upholds the OIG's termination decision against PPGC.