PA Home Care Association v. PA DHS

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
PA Home Care Association, :
Petitioner :
:
v. : No. 629 M.D. 2022
: Argued: September 11, 2023
The Commonwealth of Pennsylvania, :
Department of Human Services; :
Meg Snead, in her official capacity as :
Acting Secretary of the Department of :
Human Services; Jamie Buchenauer, :
in her official capacity as Deputy :
Secretary for the Department of :
Human Services’ Office of Long-Term :
Living, :
Respondents :
BEFORE: HONORABLE RENÉE COHN JUBELIRER, President Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE MARY HANNAH LEAVITT, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY
PRESIDENT JUDGE COHN JUBELIRER FILED: October 20, 2023
Before the Court are the Preliminary Objections (POs) of The Commonwealth
of Pennsylvania, Department of Human Services (Department), Dr. Valerie
Arkoosh,1 in her official capacity as Secretary of Human Services (Secretary), and
1
Although the Petition names Meg Snead as the Acting Secretary, Snead was replaced by
Dr. Arkoosh, who was confirmed as Secretary on June 29, 2023, and who is automatically
substituted as a respondent per Pennsylvania Rule of Appellate Procedure 502(c), Pa.R.A.P.
502(c).
Jamie Buchenauer,2 in her official capacity as Deputy Secretary for the Department’s
Office of Long-Term Living (Office) (collectively, Respondents), to PA Home Care
Association’s (PHA) “Petition for Review in the Nature of a Complaint for
Declaratory Relief” (Petition). In the Petition, PHA challenges the validity of the
Department’s Request for Application 08-22 (RFA), through which the Department
intends to implement its Agency With Choice (AWC) model for certain Medical
Assistance (MA) participants receiving Home- and Community-Based Services
(HCBS). In their POs, Respondents argue the Petition should be dismissed because
PHA lacks standing to assert the claims raised and this Court lacks subject matter
jurisdiction as there is an exclusive statutory remedy within the Commonwealth
Procurement Code (Procurement Code), 62 Pa.C.S. §§ 101-2311, for PHA’s
members to assert these claims.
I. THE PETITION
The Petition alleges the following facts. PHA is a not-for-profit state trade
association that represents almost 700 organizations that provide a variety of medical
and personal care, support, and therapies to individuals in their own homes. (Petition
¶¶ 12-13.) The Department is responsible for administering various programs
including HCBS, which is available to those “with physical disabilities or who are
dually eligible for Medicaid and Medicare[.]” (Id. ¶ 26.) The Department offers
HCBS through three programs: “the Community HealthChoices (‘CHC’)
2
Buchenauer no longer appears to be Deputy Secretary for the Office of Long-Term
Living; Juliet Marsala has assumed that role per the Department’s website.
2
program,[3] the Omnibus Budget Reconciliation Act (‘OBRA’) Waiver program, [4]
and the state-funded Act 150 program,[5]” all of which are administered through the
Office. (Id. ¶¶ 19, 26.) Many of these programs are provided through the MA
Program, which is funded by state and federal monies. (Id. ¶ 23.) Pennsylvania’s
participation in Medicaid is voluntary, but, to receive federal funds, the state’s plan
must meet all of the federal requirements; Pennsylvania has a federally approved
plan. (Id. ¶¶ 24-25.)
These programs allow for eligible individuals (Participants) to obtain a Direct
Care Worker (DCW) to assist in a variety of personal care and daily living activities.
(Id. ¶ 30.) The current means of obtaining a DCW under the three programs is:
(1) the agency model, whereby a Participant selects an agency from an approved list
and the agency provides the DCW, who is the agency’s employee; and (2) the
Fiscal/Employer Agent (F/EA) model, whereby a Participant selects their own
DCW. Under the agency model, the agency is responsible for hiring, training,
managing, paying (and related fiscal tasks), and discharging, as well as other
administrative tasks related to the DCWs. (Id. ¶ 33.) In contrast, in the F/EA model,
the Participant trains and supervises their DCW, and is considered “the common law
employer.” (Id. ¶ 34.) For Act 150 and OBRA Waiver Participants, the Office has
an agreement with a vendor to provide fiscal and administrative assistance, and for
3
The CHC program is a mandatory managed care program through which individuals
receive “home[-] and community-based waiver services or nursing facility services.” (Petition
¶ 27.)
4
The OBRA Waiver program “provides assistance to MA [participants] who have a
developmental physical disability to remain at home and in the community as independently as
possible.” (Id. ¶ 28.) The OBRA Waiver program is authorized by Section 1915(c) of the Social
Security Act, 42 U.S.C. § 1396n(c).
5
Act of December 10, 1986, P.L. 1477, No. 150, as amended, 62 P.S. §§ 3051-3058. The
Act 150 program is a state-funded program for those “who have a physical disability and want to
live at home and receive support and services.” (Id. ¶ 29.)
3
CHC Participants, the financial oversight was transferred from the Office to a
managed care organization (MCO), which in turn hired a vendor to perform those
services. (Id.)
At issue is the Department’s creation of a third model for Participants to obtain
DCWs, the AWC model, which is described as being a “hybrid” model. (Id. ¶ 3.)
Under the AWC model, “eligible Pennsylvanians choose their own caregivers, but
those caregivers will then be employed by a single, state-wide agency, []selected by
the Department.” (Id.) This model allows Participants to select their own DCW and
refer that worker to a third party, the “AWC Provider,” to be hired. (Id. ¶ 36.) The
Participant is responsible for training, managing, supervising, and discharging, if
necessary, the DCW, as well as scheduling and arranging for back-up services, and
“is considered the ‘managing employer[.]’” (Id.) The AWC Provider “is legally
responsible for managing the employment-related functions and duties for the
[DCWs] selected and referred by the Participants,” performing all human resource
and payroll functions and providing, inter alia, insurance and benefits to the DCWs.
(Id. ¶ 37.)
The Department did not issue regulations pertaining to or seek amendment of
the Human Services Code (Code), 62 P.S. §§ 101-1503,6 to implement the AWC
model. (Id. ¶ 5.) Rather, the Department issued the RFA “seeking to secure a single
entity to operate as the AWC [Provider] for CHC, OBRA, and Act 150 HCBS
[services to] Participants in all 67 counties in the Commonwealth.” (Id. ¶ 39
(quoting RFA § I-4.A).) The rationale for the AWC model, as set forth in the RFA,
is:
6
Act of June 13, 1967, P.L. 31, as amended, 62 P.S. §§ 101-1503.
4
Through the implementation of an AWC model . . . , the Department is
seeking to increase the opportunities for Participant choice and self-
direction; improve the efficiency and consistency of HCBS [services]
to Participants; identify options for quality improvement strategies and
process improvement; and strengthen the Department’s capacity to
produce and analyze benchmark statistics to support state and federal
monitoring of progress toward the goals of Participant choice and self-
determination.
(Id. ¶ 40 (quoting RFA § I-4.A).) The RFA further states it is within the “sole and
complete discretion” of the Department to “reject any application received as a result
of th[e] RFA.” (Id. ¶ 43 (quoting RFA § I-6).)
As part of the RFA’s eligibility requirements, an applicant for the AWC
Provider must be “independent” from “conflicts of interest” (Conflict Provision).
The Conflict Provision states:
Conflict Free. To provide an objective, unbiased process, the selected
Applicant, and any subcontractors[,] must be free of real or perceived
conflicts of interest. By the Operational Effective Date of the
agreement, the selected Applicant and its subcontractors must be
independent from all [MCOs], Prepaid Inpatient Health Plans, and
entities that are enrolled Medicaid service providers providing any
HCBS services through CHC, OBRA or Act 150 programs or nursing
facilities services, including, but not limited to, entities providing
traditional agency model home[ ]care in Pennsylvania. If an Applicant
is not conflict free at the time of application submission, it must become
conflict free by the Operational Effective Date of the agreement.
If, in its sole discretion, if [sic] the Department determines an Applicant
has a conflict of interest or is unable to become conflict free by the
Operational Effective Date of the agreement, the Department will not
select that Applicant for [Best and Final Offer (BAFO)] or negotiations.
If [the Department] discovers a conflict during the agreement term, [the
Department] may terminate the agreement for cause.
The Applicant must submit complete organizational information that
includes an organization chart listing all subsidiaries and beneficial
owners; a listing of all Agreements that the vendor has within
5
Pennsylvania; and a listing of any Agreements of its subsidiaries
associated with any MCO, Prepaid Inpatient Health Plan[,] and enrolled
Medicaid HCBS service provider doing business in Pennsylvania. If
an Applicant is not conflict free at the time of application submission,
it must include a plan to become conflict free by the Operational
Effective Date of the agreement.
(Id. ¶ 41 (quoting RFA § III-7.A).) Responses to the RFA were due on August 29,
2022, but, after receiving a protest to the RFA under Section 1711.1 of the
Procurement Code, 62 Pa.C.S. § 1711.1, the Department initially extended the due
date and, eventually, stayed the procurement. (Id. ¶¶ 44-47 (quoting RFA
Addendum 7).) Specifically, the Department stated, “[t]his ‘procurement has been
stayed due to the filing of protests.’ . . . . The Department ‘will issue an addendum
advising all prospective applicants when the protests have been resolved and
providing any additional information necessary to submit applications at a later
date.’” (Id. ¶ 46 (quoting RFA Addendum 7).)
PHA contends that its members that provide services to Participants through
the agency model will be negatively affected by the implementation of the AWC
model, particularly where those agencies have offered to hire the Participant-
selected DCWs and can and have been providing AWC-type services. (Id. ¶¶ 14,
48-51, 53, 56.) PHA avers that its members will be placed at a competitive
disadvantage because the chosen AWC Provider “will be able to charge an
administrative fee per member,” which can result in the AWC Provider being able
to pay higher wages, more overtime, and greater benefits than PHA’s members. (Id.
¶¶ 16, 57.) This is because, PHA alleges, “PHA’s members only receive the
reimbursement rates (and not an administrative fee) meaning PHA’s members must
use those rates to pay for all expenses, including wages, benefits, overhead, travel,
training, background checks, personal protective equipment, office space, and
6
similar costs.” (Id. ¶ 17.) This competitive disadvantage, PHA maintains, could
result in some members being unable to hire workers or losing workers and being
forced to stop providing services. (Id. ¶¶ 18, 58, 62-65.) Further, PHA avers the
Conflict Provision effectively precludes PHA’s members from applying to become
the AWC Provider. (Id. ¶¶ 42, 70.) According to PHA, the AWC model, and
choosing a single AWC Provider, will reduce Participant choice. (Id. ¶¶ 52, 54, 66.)
PHA filed its Petition under the Declaratory Judgments Act, 42 Pa.C.S.
§§ 7531-7541, on December 29, 2022, setting forth eight counts that challenge the
RFA and/or the AWC model. In Count I, PHA contends the AWC model violates
the Equal Protection Clauses of the United States Constitution and the Pennsylvania
Constitution7 by (1) excluding home care agencies that provide services using the
agency model or have not “cleanse[d] themselves” of that model before the effective
date of an AWC Provider agreement; and (2) including the Conflict Provision for
some programs but not for others that involve different, but similar clients. (Petition
¶¶ 42, 67-90.) PHA asserts in Count II that the Department lacks the statutory
authority under Sections 206 and 403.1(a)(4), (6) of the Code, 62 P.S. §§ 206
(relating to the Department’s authority), 403.1(a)(4), (6) (relating, respectively, to
the Department’s administration of assistance programs regarding provider
payments and fees and provider qualifications),8 to implement the Conflict
Provision. (Id. ¶¶ 91-101.) In Count III, PHA maintains the Conflict Provision in
7
The Equal Protection Clause of the United States Constitution is found in the Fourteenth
Amendment, which states, in pertinent part: “No State shall . . . deny to any person within its
jurisdiction the equal protection of the laws.” U.S. CONST. amend. XIV. Article I, section 1 of the
Pennsylvania Constitution provides: “All men are born equally free and independent, and have
certain inherent and indefeasible rights, among which are those of enjoying and defending life and
liberty, of acquiring, possessing and protecting property and reputation, and of pursuing their own
happiness.” PA. CONST. art. I, § 1.
8
Section 403.1 was added by Section 2 of the Act of June 30, 2011, P.L. 89.
7
the RFA “impose[s] new rules and regulations on home[ ]care agencies” and,
therefore, is a regulation which the Department was required, but did not, properly
promulgate. (Id. ¶¶ 102-06.)
In Counts IV through VIII, PHA contends the AWC model and Conflict
Provision are inconsistent with, and/or preempted by, federal law. Specifically, in
Count IV, PHA avers that the AWC model cannot be implemented because it is not
contained within the Department’s waivers for 2022 that have been federally
approved under Section 1915(c) of the Social Security Act (SSA), 42 U.S.C.
§ 1396n(c). (Id. ¶¶ 108-18.) PHA avers in Count V that the Conflict Provision
violates and is preempted by Section 1902(a)(19) of the SSA, 42 U.S.C.
§ 1396a(a)(19), because it is not “consistent with simplicity of administration and
the best interests of the recipients.” (Id. ¶¶ 119-32 (quoting 42 U.S.C.
§ 1396a(a)(19)) (emphasis omitted).) In Count VI, PHA similarly avers that the
AWC model and Conflict Provision violate Section 1902(a)(23) of the SSA, 42
U.S.C. § 1396a(a)(23) and related regulations, because they restrict MA participants’
freedom of choice of providers. (Id. ¶¶ 133-48.) PHA asserts in Count VII that the
AWC model violates Section 1915(c) of the SSA, and related regulations, because
it does not adhere to the assurances that Pennsylvania will not restrict or limit
Participant access to services contained within Pennsylvania’s waivers. (Id. ¶¶ 149-
54.) Finally, PHA contends in Count VIII that the RFA is arbitrary and capricious
in that it will not accomplish its claimed purpose and conflicts with federal law. (Id.
¶¶ 155-62.)
As relief, PHA asks the Court to:
(i) issue a declaration that the RFA, any substantially similar
request for applications, and any agreement that arises out of the
RFA is [sic] void and unenforceable; (ii) issue a declaration that
8
the Conflict Provision, or any substantially similar provision
included in this or any future RFA by the Department, is void
and unenforceable; (iii) issue a declaration that any requirement
that covers substantially similar subject matter as the Conflict
Provision imposed by the Department on home[ ]care agencies—
by contract or otherwise—is void and unenforceable; and (iv)
grant such further relief as may be just and appropriate under the
circumstances.
(Petition, Wherefore Clause.)
II. THE PRELIMINARY OBJECTIONS AND ANSWER
Respondents filed POs to the Petition, seeking its dismissal. In the first PO,
Respondents assert PHA does not have standing to present the asserted claims on
behalf of its members or on behalf of MA Participants for numerous reasons. (POs
¶¶ 10-17.) Those reasons include: a lack of harm to either PHA or its members; any
harm is speculative and contingent on future events; PHA members are not placed
in an intolerable position of choosing between two unappealing options – precluding
pre-enforcement review; PHA members’ interests are not in the zone of interests
protected by the SSA, which are those of the MA Participants; and even if the MA
Participants are harmed, PHA’s interests are not inextricably bound up with those
Participants to allow for it to challenge the AWC model and Conflict Provision on
their behalf. (Id. ¶ 17.)
Respondents’ second PO avers a lack of subject matter jurisdiction in this
Court because PHA’s members’ exclusive remedy to assert their claims is to appeal
any decision relating to the AWC model under the Procurement Code subject to
further appeal to this Court.9 (Id. ¶¶ 18-21.) Respondents point out that, as reflected
9
The Department denied the protests, and those protestors appealed to this Court. See
CareGivers Am., LLC v. Dep’t of Hum. Servs. (Pa. Cmwlth., No. 1287 C.D. 2022); Phila. Home
(Footnote continued on next page…)
9
in the Petition itself, some of PHA’s members, as potential applicants, have
exercised those rights and have sought appeals in this Court’s appellate jurisdiction.
(Id. ¶ 20 (citing Petition ¶¶ 45-46).) Because PHA’s members’ exclusive remedy is
through the Procurement Code, not an action in this Court’s original jurisdiction,
Respondents argue we lack subject matter jurisdiction to address this matter. (Id.
¶ 21.)
PHA filed an answer to the POs, denying the material averments, and asserting
reasons why Respondents’ legal arguments regarding standing and this Court’s
jurisdiction are without merit, including that the POs raise questions of fact that must
be resolved through discovery.
The parties have filed briefs in support of their respective positions, and this
Court heard oral argument on September 11, 2023. The POs are now ready for
disposition.
III. DISCUSSION
A. Legal Standards
1. Declaratory Judgments Act
The Declaratory Judgments Act is used to “declare[] the rights, status, and
other legal relations ‘whether or not further relief is or could be claimed.’”
Eagleview Corp. Ctr. Ass’n v. Citadel Fed. Credit Union, 150 A.3d 1024, 1029 (Pa.
Cmwlth. 2016) (quoting Section 7532 of the Declaratory Judgments Act, 42 Pa.C.S.
§ 7532). “Any person . . . whose rights, status, or other legal relations are affected
by a statute [or] . . . contract . . . may have determined any question of construction
or validity arising under the . . . statute [or] . . . contract . . . and obtain a declaration
Health Servs. v. Dep’t of Hum. Servs. (Pa. Cmwlth., No. 1290 C.D. 2022). After Respondents
filed their POs in this matter, these protestors discontinued their appeals in this Court.
10
of rights, status, or other legal relations thereunder.” Section 7533 of the Declaratory
Judgments Act, 42 Pa.C.S. § 7533.
“[T]he purpose of awarding declaratory relief is to finally settle and make
certain the rights or legal status of parties.” Eagleview Corp., 150 A.3d at 1029(quoting Geisinger Clinic v. Di Cuccio, 606 A.2d 509, 519 (Pa. Super. 1992)). The
Declaratory Judgments Act requires a petitioner “to demonstrate an ‘actual
controversy’ indicating imminent and inevitable litigation and a direct, substantial
and present interest.” Cnty. Comm’rs Ass’n of Pa. v. Dinges, 935 A.2d 926, 931 (Pa.
Cmwlth. 2007) (citation omitted). “Declaratory judgments are not obtainable as a
matter of right.” Gmerek v. State Ethics Comm’n, 751 A.2d 1241, 1249 (Pa. Cmwlth.
2000), aff’d, 807 A.2d 812 (Pa. 2002). And “whether a court should exercise
jurisdiction over a declaratory judgment proceeding is a matter of sound judicial
discretion.” Id. The “grant[] of a petition for a declaratory judgment is a matter
lying within the sound discretion of a court [with] original jurisdiction.” Id.
2. Preliminary Objections
In ruling on preliminary objections, this Court “must accept as true all well-
pleaded material allegations in the petition for review, as well as all inferences
reasonably deduced therefrom.” Stanton-Negley Drug Co. v. Pa. Dep’t of Pub.
Welfare, 927 A.2d 671, 673 (Pa. Cmwlth. 2007) (Stanton-Negley I). The Court need
not, however, “accept as true conclusions of law, unwarranted inferences from facts,
argumentative allegations, or expressions of opinion.” Id. “In order to sustain
preliminary objections, it must appear with certainty that the law will not permit
recovery, and any doubt should be resolved by a refusal to sustain them.” Id.11
B. Standing
In their POs and brief, Respondents assert PHA lacks standing both on behalf
of its members and Participants, whom PHA claims will be harmed by the AWC
model and Conflict Provision, or as a taxpayer. We address these challenges in turn.
1. PHA Standing – PHA Members
In relation to PHA’s standing based on its members, Respondents assert that
PHA has not established that any of its members are aggrieved because the
connection between the alleged violations of law and harm are not immediate or
direct. Respondents contend that there is no immediate or direct connection between
the violations and the two aggrievements PHA claims its members will suffer, being
placed at a competitive disadvantage leading to harm to their business interests and
being unable to apply to become the AWC Provider due to the Conflict Provision.
According to Respondents, any harm from the alleged competitive disadvantage is
not immediate because it is speculative and contingent on facts that may not occur,
i.e., DCWs and Participants choosing to move to the AWC Provider. (Respondents’
Brief (Br.) at 9-10 (citing Highley v. Dep’t of Transp., 195 A.3d 1078, 1082 (Pa.
Cmwlth. 2018); Pittsburgh Palisades Park, LLC v. Commonwealth, 888 A.2d 655,
660 (Pa. 2005)).) The harm is not direct, Respondents argue, because the alleged
violations based on the Conflict Provision did not cause the competitive
disadvantage, but is caused by the alleged “superior funding of the AWC Provider.”
(Id. at 14 (citing Petition ¶ 16; Pittsburgh Palisades, 888 A.2d at 660).) Finally,
Respondents maintain that the Conflict Provision does not explicitly prevent PHA’s
members from applying to be the AWC Provider and any potential impediment is
speculative and, therefore, not immediate for the purposes of standing. The decision
of a PHA member to apply and, if selected, divest itself of its current business is a
12
business decision of that member, Respondents argue. It is equally conceivable that
one PHA member would choose not to apply, for business reasons, and a second
member would, for business reasons, apply and agree to divest itself of its business.
As these are equally conceivable, Respondents contend the harm is speculative and
does not qualify as immediate.
In its Answer and brief, PHA responds that it has standing based on the
immediate and direct harm to its members, which is caused by the AWC model and
Conflict Provision. PHA argues that the harm suffered by its members from the
unfair competitive advantage given to the chosen AWC Provider is direct,
“significant and substantial,” and immediate, and sets forth the harms cited in the
Petition. (PHA’s Br. at 18, 20-23.) PHA argues economic harm, even that which
has not yet occurred, can be sufficient to establish standing, and to the extent
Respondents challenge the alleged harms, those challenges raise factual issues that
require discovery and preclude sustaining the PO. (Id. at 24-26 (citing Allegheny
County v. Monzo, 500 A.2d 1096 (Pa. 1985); Phantom Fireworks Showrooms, LLC
v. Wolf, 198 A.3d 1205, 1215 (Pa. Cmwlth. 2018)).) PHA also asserts that its
members are harmed by the equal protection violations that flow from the inclusion
of the Conflict Provision in the RFA, which discriminates against homecare agencies
that use the traditional agency model and against homecare agencies within the
HCBS programs because a similar provision is not included in other MA programs’
agreements. (Id. at 18-19.) PHA maintains this harm is directly caused by the
Conflict Provision, as without that provision, there would be no discriminatory
treatment, and the harm is not remote or speculative because the Department will be
moving forward with the RFA. According to PHA, its members also have a direct
and immediate interest in not being subjected to unlawfully promulgated regulations
13
or a requirement, the Conflict Provision, that is outside the Department’s statutory
authority. (Id. at 19-20.) Such extralegal actions establish, PHA asserts, that its
members are irreparably harmed by the inclusion of the Conflict Provision in the
RFA. (Id. at 20 (citing Com. ex rel. Corbett v. Snyder, 977 A.2d 28, 41 (Pa. Cmwlth.
2009) (“A violation of statutory law constitutes irreparable injury.”)).) Finally, PHA
asserts its members would have standing because PHA is presenting pure questions
of law regarding its equal protection and Pennsylvania statutory claims without the
need for additional factual development, which can be adjudicated in a pre-
enforcement proceeding for declaratory judgment. (Id. at 27.)
Respondents, in their reply brief, reiterate many of their points, and maintain
that cases upon which PHA relies do not support that its members are aggrieved by
the challenged actions.10 They further argue that traditional standing principles apply
in actions seeking declaratory relief.
As set forth in Pittsburgh Palisades:
Prior to judicial resolution of a dispute, an individual must as a
threshold matter show that he has standing to bring the action. . . . The
traditional concept of standing focuses on the idea that a person who is
not adversely impacted by the matter [they] seek[] to challenge does
not having standing to proceed with the court system’s dispute
resolution process. . . . The courts in our Commonwealth do not render
decisions in the abstract or offer purely advisory opinions; consistent
therewith, the requirement of standing arises from “the principle that
judicial intervention is appropriate only when the underlying
controversy is real and concrete . . . .” City of Philadelphia v.
Commonwealth . . . , 838 A.2d 566, 577 ([Pa.] 2003).
10
To the extent Respondents appear to argue that PHA has failed to state a claim or
otherwise establish certain violations of law, (see Respondents’ Reply Br. at 4-6), Respondents
did not include such objections in the POs, and, therefore, they will not be considered.
Pennsylvania Rule of Civil Procedure 1028(b), Pa.R.Civ.P. 1028(b) (“All preliminary objections
shall be raised at one time.”).
14
Stated another way, a controversy is worthy of judicial review only if
the individual initiating the legal action has been “aggrieved.” In re
Hickson, . . . 821 A.2d 1238, 1243 ([Pa.] 2003) . . . . This principle is
based on the practical reason that unless one has a legally sufficient
interest in a matter, that is, is “aggrieved,” the courts cannot be assured
that there is a legitimate controversy. . . .
With respect to this requirement of being aggrieved, an individual can
demonstrate that [they are] aggrieved if [they] can establish that [they
have] a substantial, direct, and immediate interest in the outcome of the
litigation in order to be deemed to have standing. . . . An interest is
“substantial” if it is an interest in the resolution of the challenge which
“surpasses the common interests of all citizens in procuring obedience
to the law.” In re Hickson, 821 A.2d at 1243. Likewise, a “direct”
interest mandates a showing that the matter complained of “caused
harm to the party’s interest,” id., i.e., causal connection between the
harm and the violation of the law. . . . Finally, an interest is
“immediate” if the causal connection is not remote or speculative. . . .
The keystone to standing in these terms is that the person must be
negatively impacted in some real and direct fashion. If the individual
“is not adversely affected in any way by the matter [they] seek[] to
challenge[, they are] not ‘aggrieved’ thereby and ha[ve] no standing to
obtain a judicial resolution of [the] challenge. In particular, it is not
sufficient for the person claiming to be ‘aggrieved’ to assert the
common interest of all citizens in procuring obedience to the law.” In
re Hickson, 821 A.2d at 1243. . . .
Pittsburgh Palisades, 888 A.2d at 659-60 (some citations omitted).
“[A]n organization may have standing to bring a cause of action if at least one
of its members has standing individually.” Allegheny Reprod. Health Ctr. v. Pa.
Dep’t of Hum. Servs., 249 A.3d 598, 606 n.11 (Pa. Cmwlth. 2021), appeal filed, (Pa.,
No. 26 MAP 2021). “Where the organization has not shown that any of its members
have standing, the fact that the challenged action implicates the organization’s
mission or purpose is not sufficient to establish standing.” Ams. for Fair Treatment,
Inc. v. Phila. Fed’n of Tchrs., 150 A.3d 528, 534 (Pa. Cmwlth. 2016).
15
PHA argues that it has sufficiently pled that its members will be aggrieved by
the AWC model and the RFA, including the Conflict Provision, such that they, and
PHA on their behalf, have standing to challenge those actions as violating equal
protection principles, the Department’s enabling statute, and the requirements for
promulgating regulations. We agree. In considering Respondents’ POs, we remain
cognizant that we “must accept as true all well-pleaded material allegations in the
petition for review, as well as all inferences reasonably deduced therefrom.”
Stanton-Negley I, 927 A.2d at 673.
PHA avers that its members will suffer harm as a result of an award of the
RFA and implementation of the AWC model, as currently proposed with the
Conflict Provision in effect. In the Petition, PHA avers numerous facts, from which
reasonable inferences may be drawn, that support the conclusion that PHA members,
and therefore PHA, have standing. For example, PHA alleges reasons why its
members will be harmed, including that it will be unable to compete with the AWC
Provider in DCW wages and benefits because of the latter’s ability to charge an
administrative fee, which can be used to pay more and will result in Participant-
selected DCWs moving from PHA’s members to the AWC Provider. (Petition
¶¶ 16-17, 58-62.) PHA pleads that as “[a] significant percentage” – for some 50%
and 80% – “of home[ ]care agencies’ current [DCW] workforce is comprised of
Participant-selected [DCWs],” the shift in workforce will leave the traditional
agency providers without sufficient staff to provide services to Participants. (Id.
¶¶ 59-61, 64.) This will result, PHA avers, in the shuttering of some of its members.
(Id. ¶ 64.) In its brief, Respondents acknowledge that higher wages and benefits
“may cause some [DCWs] to move to the AWC Provider,” although they maintain
numerous other scenarios could occur. (Respondents’ Br. at 12.) Accepting PHA’s
16
averments as true, which we must do at this stage of the proceedings, those
averments reflect that PHA’s members’ interests “surpass[] the common interest[s]
of all citizens in procuring obedience to the law.” In re Hickson, 821 A.2d at 1243.
Further, in Monzo, our Supreme Court has recognized that a competitive
disadvantage created by a law can provide standing to challenge the law. 500 A.2d
at 1100-01.
As for whether PHA’s members’ interests are direct, Respondents focus on
whether the specific legal claim, i.e., whether the AWC model, RFA, and/or Conflict
Provision violates equal protection, the Department’s authorizing statute, or the
requirements for promulgating a regulation, causes specific harm to PHA’s
members. However, “the matter complained of” in this litigation is the
implementation of the AWC model and application of the Conflict Provision, in
alleged violation of the law, which PHA has averred will result in harm to its
members’ interests. Accordingly, PHA has adequately pleaded that its members’
interests are “direct” because there is “causal connection between the action
complained of and the injury to the party challenging it.” In re Hickson, 821 A.2d
at 1243.
Finally, the causal connection between PHA’s members’ alleged harm and the
alleged violations of law is sufficiently close so as to provide them, and, in turn,
PHA, standing. That connection, in this pre-enforcement challenge, is based on
reasonable inferences from the alleged facts addressed above. The potential that a
Participant and the Participant’s selected DCW would move from a home care
agency using a traditional agency model to the AWC Provider, which purports to
pay the DCW more with better benefits, is not as speculative or remote as
Respondents claim. Indeed, Respondents acknowledge the potential of movement
17
of DCWs from a home care agency operating under the traditional agency model to
the AWC Provider, even though it believes other scenarios could also occur.
(Respondents’ Br. at 12.) Consequently, PHA’s members’ interests in this matter
are immediate.
Ultimately, we are unpersuaded by Respondents’ arguments that PHA has
failed to plead that its members will not be “negatively impacted in some real and
direct fashion,” Pittsburgh Palisades, 888 A.2d at 660, by the matter complained of
and, therefore, lack standing. In essence, Respondents’ arguments would, for the
most part, have us disregard the allegations, and reasonable inferences therefrom, to
conclude that PHA’s members do not have a direct, immediate, and substantial
interest in this matter, and that the harm to PHA’s members is entirely speculative.
This is not the standard for considering POs. Stanton-Negley I, 927 A.2d at 673.
Because we conclude the Petition contains allegations that, when accepted as true
for the purposes of resolving this PO, establish PHA’s members’ aggrievement as to
Counts I, II, and III, it cannot be said with certainty that the law will not allow
recovery on this basis.11 Therefore, we overrule the first PO as to those counts.
2. PHA Standing - Participants
As to Participants and Counts IV through VIII, based on violations of federal
law, Respondents argue that neither PHA nor its members have standing because
they are not in the zone of interests protected by the SSA nor are its or its members’
interests inextricably bound up with the interests of the Participants, and, therefore,
its interests are not immediate. PHA’s interests in this matter, Respondents assert,
11
Because we conclude PHA has standing based on the alleged competitive disadvantage,
we do not address Respondents’ argument that PHA’s members are not aggrieved based on being
unable to apply to become the AWC Provider due to the Conflict Provision.
18
are similar to those of the clinics in Allegheny Reproductive Health Center, which
were insufficient “to assert either Medicaid recipients’ rights or [the clinics’] own
pecuniary interests.” (Respondents’ Br. at 16-17.) Respondents contend that the
interests protected by the federal law at issue are those of the Participants, and MA
providers, like PHA’s members, have no property rights in participating in MA
programs, in receiving specific amounts from participating in those programs, or in
submitting a bid in response to a request for proposals for such program. (Id. at 18
(citing, e.g., Stanton-Negley Drug Co. v. Dep’t of Pub. Welfare, 943 A.2d 377, 384-
85 (Pa. Cmwlth. 2008) (Stanton-Negley II); Walizer v. Dep’t of Pub. Welfare, 611
A.2d 1359, 1361 (Pa. Cmwlth. 1992); Pa. Pharm. Ass’n v. Dep’t of Pub. Welfare
542 F. Supp. 1349, 1355-56 (W.D. Pa. 1982)).) Thus, Respondents assert PHA’s
members are not in the zone of interests protected by the federal laws at issue. Nor
are those members’ interests inextricably bound up with those of the Participants,
Respondents argue, because their “pecuniary interests can be disentangled or
separated from . . . whether the Department complies with [federal] law” because
PHA has not explained why protecting its members’ financial interests “is the only
way to act within the best interests of the MA [Participants] or why protecting their
market niche is necessary to protect the health and welfare of MA [Participants].”
(Id. at 19-20.) Further, Respondents maintain that there is no indication that the MA
Participants, themselves, could not assert their own rights, which “prior litigation
history [has] show[n] that M[A Participants] are fully able to pursue their claims.”
(Id. at 20 (citing Allegheny Reprod. Health Ctr., 249 A.3d at 607).)
PHA asserts it has standing to challenge the AWC model and Conflict
Provision as violating the federal law relating to the MA Program because its
interests are inherently intertwined and coextensive with those of Participants. PHA
19
describes the relationship as being that “Participants have a federally[ ]protected
interest in having a choice of providers, and PHA’s members have an interest in
providing that choice to Participants.” (PHA’s Br. at 28.) PHA asserts its members’
interests are akin to those of the dentists in Pennsylvania Dental Association v.
Department of Health, 461 A.2d 329 (Pa. Cmwlth. 1983) (Pennsylvania Dental),
who were found to have standing to raise challenges based on a violation of their
patients’ privacy interests because they were responsible for, and had possession of,
the patients’ records and had knowledge of the effect of the challenged regulations.
(Id. at 29.) According to PHA, “[t]he RFA is an arcane and niche device” that is
being used to change how HCBS services are being provided, and Participants are
not likely to know of the effect of the RFA, and PHA is better capable of responding
to these issues. (Id.) PHA argues Allegheny Reproductive Health Center is
distinguishable because the patients in that case, who would be seeking abortion
care, would have advance knowledge that the care sought would not be covered by
MA, and, therefore, there was no obstacle to their ability to challenge the alleged
infringement of their rights. Unlike in that case, here, there are no clear examples
of Participants bringing legal challenges to the Department’s policies or solicitations
of bids.
In determining whether an entity has standing based on the interests of a third
party, this Court, in Harrisburg School District v. Harrisburg Education
Association, 379 A.2d 893 (Pa. Cmwlth. 1977), adopted the analytic paradigm of
Singleton v. Wulff, 428 U.S. 106 (1976). Under that paradigm,
courts should not adjudicate constitutional rights unnecessarily
because, inter alia, it may be that the holders of these rights do not wish
to assert them. Second, the [United States] Supreme Court held, as
characterized by this Court, that
20
third parties themselves usually will be the best
proponents of their own rights. The courts depend upon
effective advocacy, and therefore should prefer to construe
legal rights only when the most effective advocates of
those rights are before them.
Allegheny Reprod. Health Ctr., 249 A.3d at 605 (quoting Harrisburg Sch. Dist., 379
A.2d at 895) (emphasis omitted). Further, there must be “some genuine obstacle to
[the third party’s] assertion, [such that] the third party’s absence from court loses its
tendency to suggest that [its] right is not truly at stake, or truly important to [it], and
the party who is in court becomes by default the right’s best available proponent.”
Singleton, 428 U.S. at 116 (noting, for example, that forcing a third party to assert
her own right to remain anonymous “‘would result in nullification of the right at the
very moment of its assertion’”) (quoting Nat’l Ass’n for the Advancement of Colored
People v. Alabama, 357 U.S. 449, 459 (1958)).
Applying that standard in Harrisburg School District, we held that school
board members’ right to privacy was not “inextricably bound up” with the school
district’s collective bargaining interests, and there was no impediment to the school
board members asserting their own interests. 379 A.2d at 896. Therefore, the school
district did not have standing to bring claims based on the school board members’
interests in preventing union members from picketing in front of their homes. Id.
We reached a similar conclusion in Allegheny Reproductive Health Center. There,
we held that the petitioners, medical clinics that provided abortion services, did not
have standing to assert the rights of women on MA whose rights the petitioners
claimed were violated by excluding abortions from MA coverage except under
certain circumstances because they had not established that their interests were
“inextricably bound up” with those of the rights of all women receiving MA. 249
A.3d at 608. We likewise noted that the petitioners had not established that there
21
were obstacles to those who were directly affected from filing legal challenges to
the law.
In contrast, in Pennsylvania Dental, a dental association challenged an
amendment to an agreement between an insurer and the association’s participating
dentists, approved by the Department of Health, that gave the insurer access to
patient files as necessary to audit the dentists. 461 A.2d at 330. The dental
association asserted the amendment violated the privacy interests of its members’
patients and had standing to assert those patients’ interests. Id. at 331. We agreed,
reasoning that the privacy interests of the patients were “inextricably bound up” with
the interests of the dentists. Id. In finding the association could assert the interests
of the patients, we stated that
unless individual patients had some means of knowing that the effect
of the . . . [amendment] may be to disclose some medical information
which they may be entitled to withhold by invoking their constitutional
claim of privacy, the only way those rights could be protected would be
by the dentist who is responsible for the patient’s records.
Id.
Reviewing the relevant interests asserted by PHA, this matter is more akin to
Allegheny Reproductive Health Center and Harrisburg School District than
Pennsylvania Dental. In support of its claim that the interests of PHA’s members
and Participants are inextricably bound up, PHA states that “Participants have a
federally[ ]protected interest in having a choice of providers, and PHA’s members
have an interest in providing that choice to Participants.” (PHA’s Br. at 28.)
Although PHA asserts its members’ “interest” in providing choice, i.e., services, it
is well settled that MA providers do not have a protected property interest in being
able to fully participate in the MA Program, in receiving a specific amount from
22
participating in the MA Program, or in being able to submit bids in response to
solicitations for a MA Program. Stanton-Negley II, 943 A.2d at 384.
Further, PHA’s members’ interest in providing services to Participants, which
PHA claims will be hindered by the AWC model and Conflict Provision, is similar
to those asserted by the petitioners in Allegheny Reproductive Health Center, who
provided abortion services and whose ability to provide those services to MA
Participants was hindered by the law being challenged there. PHA’s members
interests are not like those in Pennsylvania Dental, where the privacy interests of the
patients were inextricably bound up with the dentist members’ interests because it
was the dentists’ files containing the patients’ private medical information that were
being sought, without the patients’ awareness. Absent the dentists stepping in and
asserting the patients’ interests, those interests would not have been raised.
Pennsylvania Dental, 461 A.2d at 331.
Finally, the obstacle to Participants taking action that PHA cites is that the
RFA process is “niche” and “arcane,” making it “unlikely” that Participants know
about the effect of the change. (PHA’s Br. at 29.) However, the obstacle must be
“genuine” such that Participants’ absence reflects that their rights are not truly at
stake or important. Singleton, 428 U.S. at 116. PHA’s arguments that Participants
would be unlikely to know of the change and its effect is undercut by its averment
that, when the AWC model was announced, PHA, along with Participants,
“expressed concern and alarm.” (Petition ¶ 48.) Moreover, the RFA is public and
posted online on Pennsylvania’s “emarketplace,”12 making it different from the
patient files at issue in Pennsylvania Dental. And, while PHA characterizes this
process as “niche” and “arcane,” the object and purpose of the AWC model is clearly
12
See www.emarketplace.state.pa.us (last visited 10/19/2023).
23
expressly within the RFA, and it is PHA’s position, not necessarily that of all
Participants, that harm will occur as a result of the AWC model. That PHA believes,
in its view, that Participants may not understand the potential effect does not reflect
a “genuine obstacle” that renders their interest not truly at stake, particularly where
it pled otherwise. Absent PHA demonstrating that its members’ interests are
inextricably bound up with those of Participants and that there is an obstacle to
Participants’ protecting their own interests, which PHA has not done, PHA does not
have standing to assert Participants’ interest to challenge the AWC model and RFA,
including the Conflict Provision, as violating federal law.
As for Respondents’ contention that PHA lacks standing to raise the federal
law claims because its interests do not fall in the zone of interests sought to be
protected by those laws, we agree. While standing may be found where the litigant
shows that its interest falls “arguably within the zone of interests sought to be
protected or regulated by the statute or constitutional guarantee in question,”
Application of Biester, 409 A.2d 848, 851 n.6 (Pa. 1979), it is the interests of the
Participants, not the providers, that are protected by those federal laws.
The MA Program’s primary goal is to provide the medical assistance needed
by those who would otherwise be unable to afford medical care. Walizer, 611 A.2d
at 1361. Its purpose is to provide health care for the aged and poor, “not to subsidize
or otherwise to benefit health care providers.” Pa. Pharm. Ass’n, 542 F. Supp. at1355-56 (citing Green v. Cashman, 605 F.2d 945, 946 (6th Cir. 1979)). See also
Cabinet for Hum. Res. v. N. Ky. Welfare Rights Ass’n, 954 F.2d 1179, 1187 (6th Cir.
1992) (The SSA’s Medicaid provisions are “not designed to benefit health care
providers, but the indigent patients served by those providers”). Indeed, the
provisions of federal law PHA claims are violated by the AWC model and
24
RFA/Conflict Provision relate explicitly to the interests of those receiving MA:
Count V – Section 1902(c) of the SSA, 42 U.S.C. § 1396a(c) (requiring the provision
of safeguards “to assure that eligibility for care and services under the plan . . . will
be provided, in a manner consistent with simplicity of administration and the best
interests of the recipients”); Count VI – Section 1902(a)(23) of the SSA, 42 U.S.C.
§ 1396a(a)(23) (providing for “Freedom of Choice” for MA recipients by allowing
“any individual eligible for [MA to] . . . obtain such assistance from any institution,
agency, . . . or person . . .”); and Count VII – Section 1915(c)(2)(A) of the SSA, 42
U.S.C. § 1396n(c)(2)(A) (requiring states to show that the “necessary safeguards . . .
have been taken to protect the health and welfare of individuals provided services
. . .”) (emphasis added). Further, as discussed above, MA providers do not have a
protected property interest to fully participate, to receive set amounts for their
participation, or to submit bids in response to solicitations for a MA Program.
Stanton-Negley II, 943 A.2d at 384. The focus on the benefit to individuals receiving
MA, and the lack of protected rights for providers, reflect that PHA’s members are
not in the zone of interests protected by the cited federal laws.
For these reasons, it appears with certainty that the law will not allow recovery
on Counts IV through VIII because neither PHA nor its members’ interests are
inextricably bound up with those of Participants, nor do they fall within the zone of
interests protected by the federal law relied upon in Counts IV through VIII, leaving
PHA without standing to bring these claims.
3. PHA Standing – Taxpayer
Finally, Respondents assert PHA cannot assert taxpayer standing because it
cannot meet multiple elements of the test for such standing described in Pittsburgh
Palisades, 888 A.3d at 661. In particular, the challenged provisions are not likely to
25
go unchallenged by more appropriate parties, as MA Participants could challenge
the alleged violations on their own behalf, and a PHA member or other home care
service could challenge, and has challenged, the RFA and Conflict Provision through
the Procurement Code. (Respondents’ Br. at 22 (citing CareGivers Am., LLC v.
Dep’t of Hum. Servs. (Pa. Cmwlth., No. 1287 C.D. 2022); Phila. Home Health Servs.
v. Dep’t of Hum. Servs. (Pa. Cmwlth., No. 1290 C.D. 2022)).13)
PHA maintains that it, and its members, have taxpayer standing to assert all
the claims in the Petition. According to PHA, there are no other legal actions
pending that challenge the RFA and Conflict Provision and that others affected by
the AWC model, like the DCW, will benefit from that program. PHA asserts that
this means those actions will go unchallenged. (PHA’s Br. at 31-32.) Further, it
maintains there is “no other mechanism . . . to challenge [the Department’s] actions,”
providing PHA and its members taxpayer standing. (Id. at 32.)
Taxpayer standing is an exception to the traditional test for standing.
Pittsburgh Palisades, 888 A.2d at 661. To establish taxpayer standing, the petitioner
must satisfy five requirements:
1. the governmental action would otherwise go unchallenged;
2. those directly and immediately affected by the complained of
[matter] are beneficially affected and not inclined to challenge the
action;
3. judicial relief is appropriate;
4. redress through other channels is unavailable; and
5. no other persons are better situated to assert the claim.
13
As mentioned, these appeals were voluntarily discontinued after Respondents filed their
POs.
26
Consumer Party of Pa. v. Commonwealth, 507 A.2d 323, 329 (Pa. 1986).
As we have already concluded that PHA has standing in regard to Counts I
through III, we focus on PHA’s federal law claims and whether it can assert taxpayer
standing in those counts. Initially, it does not appear that the Petition contains
averments clearly invoking a claim of taxpayer standing on behalf of PHA and its
members. Notwithstanding this, we agree with Respondents that PHA has not
established at least the first and second of the five required elements: that the
government action will remain unchallenged and that those directly and immediately
affected will benefit from the complained-of action and are unlikely to file a
challenge. PHA asserts the Department’s actions will otherwise go unchallenged
because DCWs benefit from the changes in the form of better wages and benefits.
However, there are many that are “directly and immediately” affected by the
implementation of the AWC model—DCWs, PHA’s members, and Participants.
The Petition is replete with allegations that Participants will not benefit from the
implementation of the AWC model, as currently proposed, and that Participants’
federal statutory rights are being violated. Thus, it cannot be said that the challenged
government action would otherwise go unchallenged because “those directly and
immediately affected by the complained[-]of [matter] are beneficially affected.” Id.Because all of the requirements for taxpayer standing are not satisfied, PHA cannot
assert such standing to challenge Counts IV through VIII.
In sum, under the procedural posture of this case, Respondents were required
to establish that it “appears with certainty that the law will not permit recovery, and
any doubt should be resolved by a refusal to sustain” the POs. Stanton-Negley I, 927
A.2d at 673. As it does not “appear with certainty,” id., that PHA lacks standing to
assert Counts I through III on behalf of its members, we overrule Respondents’ first
PO as to those counts on this basis. However, because it does “appear with
27
certainty,” id., that PHA does not have standing to assert Counts IV through VIII
either on behalf of its members or Participants, or based on taxpayer standing, the
first PO is sustained as to those counts of the Petition, which are dismissed.
C. Jurisdiction
1. Exclusivity of the Procurement Code
If this Court finds that PHA has standing, Respondents argue this Court lacks
subject matter jurisdiction and, therefore, original jurisdiction, because, under
precedent, “the mandatory and exclusive remedy for a potential bidder exists under
the Procurement Code, . . . which is subject to an appeal to this Court under its
appellate jurisdiction.” (Respondents’ Br. at 24, 26 (citing Stanton-Negley I, 927
A.2d at 673).) As PHA’s members’ mandatory and exclusive remedy as prospective
or disappointed bidders is found in the Procurement Code, Respondents assert this
Court lacks subject matter jurisdiction over the claims here. (Id. at 26.)
PHA argues Respondents’ jurisdictional arguments are misplaced. It disputes
that the Procurement Code applies to the RFA because, while the Procurement
Code’s language is broad, it is inapplicable to grants, and “the RFA clearly seeks to
award a grant.” (PHA’s Br. at 33-34 (citing Section 102(f) of the Procurement Code,
62 Pa.C.S. § 102(f); RFA §§ I-5, I-17, I-19.C, I-20.B.2, I-22, III-1).) In addition to
the RFA’s repeated use of the word “grant,” PHA argues the RFA and AWC model
neatly fit into the Procurement Code’s definition of “grant,” as the Department is
selecting a provider to administer the AWC model, not to obtain goods or services
for its own use. PHA further argues that not all of its members fit the category of
entities covered by the Procurement Code because only a small number of its 700
members attended pre-application sessions to express interest in applying for the
RFA, and many of its members “may not be interested in serving as the [single]
28
AWC Provider or could not qualify for the role even if they were interested,”
notwithstanding that they will be harmed if the AWC model is implemented. (Id. at
35.) Because those members would not qualify to proceed under the Procurement
Code but are nonetheless aggrieved, PHA contends those members retained the right
to file this action in our original jurisdiction. (Id. at 36 (citing GTECH Corp. v.
Dep’t of Revenue, 965 A.2d 1276 (Pa. Cmwlth. 2009) (holding that a taxpayer can
file an action in this Court’s original jurisdiction to protest the award of a contract)).)
In its reply brief, Respondents argue that, under Stanton-Negley I and Aetna
Better Health of Pennsylvania, Inc. v. Department of Human Services (Pa. Cmwlth.,
No. 351 M.D. 2016, filed July 19, 2016) (Brobson, J.) (single-judge op.) (Aetna),14
the Procurement Code is the mandatory and exclusive remedy for any agreement,
whether characterized as a grant or contract, related to the MA Program.
(Respondents’ Reply Br. at 20-21.) Respondents contend that, in Aetna, a single
judge of this Court granted a preliminary injunction precluding the award of a grant
pending final review based, in part, on a finding that the Department was judicially
estopped from arguing that the bid protest of a solicitation for a grant was outside
the scope of the Procurement Code because, in Stanton-Negley I, the Department
had argued that this procedure was the exclusive means to protest an agreement for
services under the MA Program. (Id. at 22-23 (citing Aetna, slip op. at 25-27).)
Under these cases, the bid protest mechanism made available to those that wanted to
protest the RFA was exclusive, and Respondents assert the same reasoning should
apply here.
14
Respondents cite Aetna for its persuasive value pursuant to Section 414(a) of this Court’s
Internal Operating Procedures, 210 Pa. Code § 69.414(a). See also Pennsylvania Rule of Appellate
Procedure 126(b)(1)-(2), Pa.R.A.P. 126(b)(1)-(2).
29
Section 1711.1(a) of the Procurement Code provides a general right of protest
to “[a] bidder or offeror, a prospective bidder or offeror or a prospective contractor
that is aggrieved in connection with the solicitation or award of a contract.” 62
Pa.C.S. § 1711.1(a). A “contract” is “[a] type of written agreement, regardless of
what it may be called, for the procurement or disposal of supplies, services or
construction . . . .” Section 103 of the Procurement Code, 62 Pa.C.S. § 103. Thus,
relevantly, the Procurement Code will apply if a contract is for the procurement of
services, and both of those terms are defined therein. Procurement is “[b]uying,
purchasing, renting, leasing, licensing or otherwise acquiring any supplies, services
or construction.” Id. And services are “[t]he furnishing of labor, time or effort by a
contractor not involving the delivery of a specific end product other than drawings,
specifications or reports which are merely incidental to the required performance,”
but “does not include employment agreements . . . .” Id. However, per Section
102(f), the Procurement Code “does not apply to grants. For the purpose of this
part, a grant is the furnishing of assistance by the Commonwealth or any person,
whether financial or otherwise, to any person to support a program. . . .” 62 Pa.C.S.
§ 102(f) (emphasis added).
A protest is to be filed, in writing, with the head of the purchasing agency. 62
Pa.C.S. § 1711.1(b). Section 1711.1(l) provides that protests under this section
“shall be the exclusive procedure for protesting a solicitation or award of a
contract by a bidder or offeror a prospective bidder or offeror, or a prospective
contractor that is aggrieved in connection with the solicitation or award of a
contract.” 62 Pa.C.S. § 1711.1(l) (emphasis added). “Thus, . . . the Procurement
Code sets forth the mandatory and exclusive remedy for disappointed bidders,
offerors, prospective bidders or offerors, and prospective contractors, to challenge
30
the solicitation or award of a contract.” Stanton-Negley I, 927 A.2d at 673(emphasis added). Respondents assert that this matter falls within scope of the
Procurement Code, while PHA argues that the Procurement Code is inapplicable to
the challenge here because the RFA awards a grant, not a contract.
There can be no dispute that Section 102(f) plainly reflects that grants are not
governed by the Procurement Code. Id.; U.S. Venture, Inc. v. Commonwealth, 255
A.3d 321, 337 (Pa. 2021). In U.S. Venture, Inc., our Supreme Court recently
examined Section 102(f) and the meaning of the term “grant” used therein. In
addition to the statutory definition, which reflects that a “grant [is] given to
‘furnish[’] . . . assistance . . . to any person or support program,” the Supreme Court
considered dictionary definitions of “grant” as meaning “something granted
especially: a gift (as of land or money) for a particular purpose” and as being
synonymous with a “subsidy,” meaning “[a] grant, usu[ally] made by the
government, to any enterprise whose promotion is considered to be in the public
interest.” Id. at 341-42 (citations omitted; emphasis in original). It reviewed the
grant at issue in that case, funds to add “[clean natural gas] pumps at existing service
stations,” and concluded that the purpose of the grant was “to promote the
Commonwealth’s Alternative and Clean Energy [(ACE)] program,” and that “[t]he
Commonwealth received nothing from that deal other than the advancement of its
desire to promote the ACE program and reduce harmful emissions.” Id. at 342.
Accordingly, the Supreme Court concluded that “[t]he Commonwealth gifted [the
petitioner] the grant funds, subject to the conditions [] outlined within the
agreements,” which “were designed to further the Commonwealth’s clean energy
policy . . . .” Id.
31
Here, the RFA consistently uses the term “grant” to describe what will be
awarded in the one “grant agreement” the Department seeks to award, and that the
chosen applicant will provide “grant services” and be supervised by a “Grant
Administrator” assigned by the Office. (See, e.g., RFA §§ I-5, I-19.C, I-20.B.2, I-
22, I-23, II-3, III-1, III-6.G.15) This fact, alone, raises questions over whether the
Procurement Code would apply to the RFA pursuant to Section 102(f). Additionally,
the “grant agreement” being awarded relates, not to the “procurement or disposal of
supplies, services or construction” to be provided to the Commonwealth, 62 Pa.C.S.
§ 103 (defining contract), but to “furnishing [] assistance . . . to a[] person,”
Participants who want to choose their own DCW without having the burden of being
a common law employer, “or [] to . . . support [a] program,” the HCBS program’s
purpose to allow Participants to remain at home and receive services there, 62
Pa.C.S. § 102(f) (defining grant); (RFA § I-3 (“Under AWC, the Participant is
supported by an agency that provides employment related functions to the [DCW]
selected by the Participant.”), § I-4 (“The Department is seeking to secure a single
entity to operate as the AWC [Provider] for . . . Participants . . . .”) (emphasis
added)). As in U.S. Venture, Inc., this language suggests that the grant would be
especially used “for a particular purpose” in order to promote the public interest and
the Commonwealth’s HCBS-related policies. 255 A.3d at 341-42. In light of the
repeated use of the term “grant” and identifying the Participant as the beneficiary of
the support provided by the chosen AWC Provider, we cannot say that Respondents
have established “with certainty that the [Procurement Code] will not permit
recovery” on this basis. Stanton-Negley I, 927 A.2d at 673 (emphasis added).
15
Although the RFA is not attached to the Petition, it is referenced throughout the Petition
and its location is set forth in paragraph 38 of the Petition.
32
Neither Stanton-Negley I nor Aetna persuade the Court that the Department
has met its burden for purposes of its PO. First, Stanton-Negley I involved a
challenge to a request for proposal for two contractors to provide “specialty drugs”
to MA Participants, which was alleged by the petitioner to eliminate local
pharmacies from the process, in violation of the United States and Pennsylvania
Constitutions, as well as federal and state law and regulations. That opinion contains
no reference to the agreement at issue being for grant funds or to Section 102(f), let
alone a holding that the bid protest procedures of the Procurement Code applied to
the award of a grant. Second, Aetna, a single-judge opinion granting a preliminary
injunction that is only persuasive and was not a final decision on the merits of the
underlying claim, see Appeal of Little Britain Twp., 651 A.2d 606, 611 (Pa. Cmwlth.
1994), held that the Department was judicially estopped by its successful position
in Stanton-Negley I from arguing that any agreements for services under the MA
Program were not within the scope of the Procurement Code based on Section
102(f). It did not hold that another party, like PHA here, could not make such
argument. Thus, we are not persuaded that these cases make it “certain[] that the
[Procurement Code] will not permit recovery.” Stanton-Negley I, 927 A.2d at 673.
Further, it does not appear that the RFA would meet the definitions of
“procurement” and “services.” Through the RFA, the Department is not “[b]uying,
purchasing, renting, leasing, licensing or otherwise acquiring any supplies, services
or construction,” 62 Pa.C.S. § 103, but is providing money to incentivize and support
a program. Even if it could be viewed as a purchase of services, the RFA establishes,
essentially, an employment agreement between the DCW and the AWC Provider.
Not being for the procurement of services, the RFA does not otherwise fall within
the scope of the Procurement Code.
33
2. Sovereign Immunity
Respondents also assert in their brief in support of the POs that Pennsylvania
has only waived its sovereign immunity for claims based on contracts, or the
solicitation of contracts, when they are brought as “bid protests under Section 1711.1
of the Procurement Code,” 62 Pa.C.S. § 1711.1. (Respondents’ Br. at 25 (citing
Highley, 195 A.3d at 1078; Section 1702 of the Procurement Code, 62 Pa.C.S.
§ 1702).) Because this claim is not being brought as a bid protest, Respondents
asserts that they are immune from suit here.
PHA argues that Respondents’ sovereign immunity arguments are misplaced
as the Procurement Code does not preclude this claim and that declaratory judgment
actions are not barred under that doctrine. (Id. at 37 (citing GTECH Corp., 965 A.2d
at 1286 n.19; Brimmeier v. Pa. Tpk. Comm’n, 147 A.3d 954, 961 (Pa. Cmwlth.
2016)).)
As a threshold matter, we observe that Respondents did not raise their claim
of sovereign immunity in their POs, but in their brief in support of the POs. Because
Respondents did not include this objection in the POs, it will not be considered.
Pennsylvania Rule of Civil Procedure 1028(b), Pa.R.Civ.P. 1028(b) (“All
preliminary objections shall be raised at one time.”). Even if it was properly raised,
Respondents’ arguments are not persuasive.
In addition to reviewing the meaning of the term “grant” in Section 102(f),
our Supreme Court in U.S. Venture, Inc. explained that “at common law[,] sovereign
immunity barred a claimant from asserting a claim against the Commonwealth based
upon [a] contract,” but that “[t]he present immunity scheme is based entirely on the
constitutional and statutory law, since this Court has deemed the common[ ]law
justifications for sovereign immunity to be invalid.” 255 A.3d at 329 (citations
34
omitted). The Procurement “Code ‘waive[s] sovereign immunity as a bar to claims
against Commonwealth agencies brought in accordance with [S]ections 1711.1
(relating to protests of solicitations or awards) and 1712.1 (relating to contract
controversies) and Subchapter C (relating to Board of Claims) but only to the extent
set forth in this chapter.’” Id. (quoting 62 Pa.C.S. § 1702(b)). Based on these
provisions, along with Section 102(f), the Supreme Court held that a claim made to
the Board of Claims by an entity asserting it was entitled to disbursement of grant
funds, which had been denied based on how the entity had constructed and financed
the project, was barred by sovereign immunity. Id. at 336, 343. In finding that the
dismissal of the claim was proper, the Supreme Court observed that the limited
waiver of sovereign immunity set forth in the Procurement Code did not apply to
“disputes involving grants,” as Section 102(f) excluded those claims from the
Procurement Code’s scope. Id. at 337.
Although it is not clear and without doubt that the Procurement Code applies
here, thereby raising the potential specter of sovereign immunity, PHA has brought
its claims under the Declaratory Judgments Act and seeks declaratory and injunctive
relief, rather than damages in the nature of disbursement of grant funds, as was the
case in U.S. Venture, Inc. “[T]he law is clear that sovereign immunity does not bar
. . . declaratory judgment actions.” Brimmeier, 147 A.3d at 961. Nor does it bar an
“injunction seeking to prohibit state parties, i.e., state agencies or employees, from
acting.” Finn v. Rendell, 990 A.2d 100, 105 (Pa. Cmwlth. 2010). Therefore, to the
extent Respondents assert in their second PO that they are immune from suit, that
claim is rejected.
In sum, under the procedural posture of this case, Respondents were required
to establish that it “appears with certainty that the law will not permit recovery, and
35
any doubt should be resolved by a refusal to sustain them.” Stanton-Negley I, 927
A.2d at 673. As it does not “appear with certainty” that the Procurement Code or, if
properly raised, sovereign immunity “will not permit recovery,” we overrule
Respondents’ second PO asserting that this Court lacks subject matter jurisdiction
based on the Procurement Code providing the mandatory and exclusive remedy here
or that sovereign immunity would bar these claims, if properly raised.16
IV. CONCLUSION
For the foregoing reasons, we overrule Respondents’ first PO to the extent it
seeks dismissal of Counts I through III based on PHA’s lack of standing, but sustain
it as to Counts IV through VIII, and we dismiss Counts IV through VIII. In addition,
we overrule Respondents’ second PO asserting that this Court lacks subject matter
jurisdiction.
__________________________________________
RENÉE COHN JUBELIRER, President Judge
16
Based on disposition on these two arguments, we do not address PHA’s arguments that
not all of its members would be covered by the Procurement Code.
36
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
PA Home Care Association, :
Petitioner :
:
v. : No. 629 M.D. 2022
:
The Commonwealth of Pennsylvania, :
Department of Human Services; :
Meg Snead, in her official capacity as :
Acting Secretary of the Department of :
Human Services; Jamie Buchenauer, :
in her official capacity as Deputy :
Secretary for the Department of :
Human Services’ Office of Long-Term :
Living, :
Respondents :
ORDER
NOW, October 20, 2023, the Preliminary Objections of The Commonwealth
of Pennsylvania, Department of Human Services (Department); Dr. Valerie
Arkoosh, in her official capacity as Secretary of Human Services; and Jamie
Buchenauer, in her official capacity as Deputy Secretary for the Department’s Office
of Long-Term Living (collectively, Respondents), are OVERRULED IN PART
and SUSTAINED IN PART in accordance with the foregoing opinion, and Counts
IV through VIII of the Petition for Review in the Nature of a Complaint for
Declaratory Relief (Petition) filed by PA Home Care Association are DISMISSED.
Respondents are directed to file an Answer to the remaining counts of the Petition
no later than 30 days from the exit date of this Order.
__________________________________________
RENÉE COHN JUBELIRER, President Judge