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California Association of Rural Health Clinics v. Maxwell-Jolly

October 18, 2010

CALIFORNIA ASSOCIATION OF RURAL HEALTH CLINICS AND AVENAL COMMUNITY HEALTH CENTER, PLAINTIFFS,
v.
DAVID MAXWELL-JOLLY, DIRECTOR OF CALIFORNIA DEPARTMENT OF HEALTH SERVICES; TOBY DOUGLAS, CHIEF DEPUTY DIRECTOR FOR HEALTH CARE PROGRAMS OF THE CALIFORNIA DEPARTMENT OF HEALTH CARE SERVICES; AND THE CALIFORNIA DEPARTMENT OF HEALTH CARE SERVICES, DEFENDANTS.



The opinion of the court was delivered by: Frank C. Damrell, Jr. United States District Judge

MEMORANDUM AND ORDER

This matter is before the court on plaintiffs California Association of Rural Health Clinics ("CARHC") and Avenal Community Health Center ("ACHC") (collectively, "plaintiffs") motion for summary judgment. The parties agree this case presents purely legal questions involving the federal Medicaid law definitions of mandatory Rural Health Clinic ("RHC") and Federally-Qualified Health Center ("FQHC") services benefits, and thus, resolution of the case via plaintiffs' motion for summary judgment is appropriate.*fn1

Plaintiffs contend Congress defined both Medicare and Medicaid RHC and FQHC services benefits to include the Medicare core services*fn2 identified in 42 U.S.C. § 1395x(aa)(1), which plaintiffs assert requires both programs to reimburse RHCs and FQHCs for the services of medical doctors, dentists, and subject to certain limitations, the services of optometrists, podiatrists and chiropractors. California's Medicaid program, Medi-Cal, formerly reimbursed RHCs and FQHCs for adult dental, chiropractic, optometric and podiatric services. However, on February 19, 2009, the California legislature adopted California Welfare & Institutions Code § 14131.10 ("§ 14131.10") which ended coverage of certain Medicaid benefits to the extent they are "optional" under federal law, including, among others not relevant here, adult dental, podiatry, optometry, and chiropractic services, beginning July 1, 2009.

Since that date, defendant California Department of Health Care Services ("DHCS"), the state agency that administers the Medi-Cal program, has discontinued reimbursement to RHCs and FQHCs for most of these services provided to Med-Cal beneficiaries. In opposing the motion, defendants describe that they recently reinstated reimbursement for optometry services provided by RHC/FQHCs, having determined that the Medicaid Act requires payment for optometry services, even if not included in the State Medicaid Plan ("State Plan"), if the State Plan had previously provided these services (42 U.S.C. § 1396d(e)). Defendants indicate reimbursement will be retroactive to July 1, 2009. Thus, at issue on the motion is only § 14131.10's exclusion of coverage of adult dental, podiatry and chiropractic services.

By this action, plaintiffs, an association of RHCs (plaintiff CARHC) an a FQHC (plaintiff ACHC), seek declaratory and injunctive relief to stop the continued implementation of § 14131.10 in a manner that they allege conflicts with the federal statutory mandates to reimburse RHCs and FQHCs for providing the subject adult dental, podiatry and chiropractic services. Plaintiffs contend that under the Supremacy Clause, applicable federal law preempts any State law excluding these mandatory services benefits from coverage. Additionally, plaintiffs contend that defendants have violated federal law because DHCS has not received federal approval of its proposed changes to the State Plan reflected in § 14131.10, discontinuing reimbursement of RHCs and FQHCs for these core services.

Defendants oppose the motion, arguing preliminarily that plaintiffs' motion should be denied because a private right of action does not exist to bring either of plaintiffs' claims. Alternatively, defendants request a stay of the action. Should the court reach the merits of the action, defendants argue the at-issue services are optional benefits which are not statutorily mandatory services for which RHCs and FQHCs are required to be reimbursed. Accordingly, the state law's exclusion of coverage for these services is permissible, and thus, there is no conflict with federal law. Defendants further contend that federal law does not require that they receive prior federal approval before implementation of any changes to the State Plan.

The court heard oral argument on the motion on October 8, 2010. By this order, it now renders its decision, GRANTING in part and DENYING in part plaintiffs' motion. The court finds that plaintiffs have a right under federal law to bring both of their claims, and there is no basis to stay the action. As for the merits, the courts finds that plaintiffs have not demonstrated § 14131.10 conflicts with federal law as the subject benefits are not mandatory services under federal Medicaid law required to be reimbursed to RHCs and FQHCs. However, federal law does require prior federal approval of changes to the State Plan at issue here, and thus, plaintiffs are entitled to a declaration finding as such as well as an injunction precluding further enforcement of § 14131.10 with respect to the subject benefits until the State's plan amendment is approved.

BACKGROUND*fn3

1. General Factual Background

Plaintiff CARHC is a California non-profit corporation, whose mission is to provide education and advocacy regarding the role of California's RHCs in the rural health care delivery system in order to further the interests of RHCs and their patients. (Defs.' Resp. to Pls.' Stmt. of Undisp. Facts ["RUF"], filed Sept. 22, 2010, ¶ 6.) CARHC currently includes in its membership 65 health care providers each of which is certified by the United States Department of Health & Human Services' Center for Medicare and Medicaid Services ("CMS") as a RHC, as defined for purposes of the Medicaid Program in 42 U.S.C. § 1396d(l)(1). (RUF ¶ 7.) RHCs operate in designated medically underserved rural areas. Many CARHC's members are enrolled in the Medi-Cal program as providers and have provided dental and podiatry services to Medi-Cal beneficiaries. (RUF ¶ 8.) CARHC brings this suit on its own behalf and in its representative capacity on behalf of its members who have been directly and adversely affected by the discontinuation of Med-Cal reimbursement for dental, podiatry, optometry or chiropractic services. (RUF ¶s 9-10.)

Plaintiff ACHC is a California non-profit corporation with its principal place of business in Avenal, California, a designated medically underserved area. (RUF ¶ 12.) Avenal is also a designated dental professional shortage area.*fn4 (RUF ¶ 13.) ACHC is an approved FQHC as defined by the Medicaid Program in 42 U.S.C. § 1396(l)(2), and provides health care services to Medi-Cal recipients, among others. (RUF ¶s 16-17, 18.) As an FQHC, ACHC is required to provide care to all patients without regard to their ability to pay for such services. (RUF ¶ 19.) ACHC, as well as other FQHCs, are also required to maintain sliding fee scale policies that provide for, among other things, a 100% discount to patients whose incomes are below 100% of the Federal Poverty Guidelines, permitting only a nominal charge. (RUF ¶ 20.)

Both RHCs and FQHCs can seek federal reimbursement for certain health services provided to Med-Cal beneficiaries; not all services, however, provided by these types of clinics are reimbursable. (See RUF ¶s 18, 23, 28, 45, 46.)

In February 2009, in response to California's fiscal emergency, the California legislature enacted budget measures to reduce certain state programs, including through § 14131.10, the elimination of coverage for certain Medicaid benefits it deemed "optional" under federal law. In pertinent part, § 14131.10 provides:

(a) Notwithstanding any other provision of this chapter, . . . in order to implement changes in the level of funding for health care services, specific optional benefits are excluded from coverage under the Medi-Cal program.

(b)(1) The following optional benefits are excluded from coverage under the Medi-Cal program:

(A) Adult dental services, except as specified in paragraph (2). . . .

(D) Chiropractic services.

(E) Optometric and optician services, including services provided by a fabricating optical laboratory.

(F) Podiatric services.*fn5 . . .

(2) Medical and surgical services provided by a doctor of dental medicine or dental surgery, which if provided by a physician, would be considered covered physician services, and which services may be provided by either a physician or a dentist in this state, are covered. . . .

(d) This section shall only be implemented to the extent permitted by federal law.

The law became effective July 1, 2009. Prior to that time, RHCs and FQHCs were reimbursed for these services. (RUF ¶s 24-27.) Plaintiffs maintain that as a result of defendants' implementation of § 14131.10 since July 1, 2009, RHCs and FQHCs have not received Medi-Cal reimbursement from DHCS for most adult dental, podiatry, chiropractic and optometry services, other than Federally-required adult dental services ("FRADS"), specified in § 14131.10(b)(2).

Specifically during this time, plaintiffs have received significantly reduced Medi-Cal reimbursement for the services eliminated by the statute. (RUF ¶s 46-52.) In that regard, plaintiffs proffer evidence that: Adventist Health RHCs have received payments for dental and podiatry services for the period July 1 to Dec. 31, 2009 that are 25 to 30% less than the payments for dental and podiatry services for the first half of 2009. (RUF ¶s 9-11, 48.) Likewise, Medi-Cal payments for plaintiff ACHC for dental, podiatry and optometry services for the period July 1, 2009 to March 31, 2010, were approximately $19,000 per month less than the payments for these services during the preceding six months. (RUF ¶ 53.) Plaintiffs maintain that this decrease in payment has occurred during a period when they have seen an increase in demand from patients who are uninsured, and maintain that over time, RHCs and FQHCs will be forced to discontinue providing these services to their patients. (RUF ¶s 49, 54-55, 57.)

2. Essential Statutory Background

a. Federal Medicaid Law

Title XIX of the Social Security Act (the "Medicaid Act") establishes a cooperative federal-state program that provides federal funding to states that choose to participate for medical assistance to low-income persons. 42 U.S.C. § 1396. Medicaid is jointly financed by federal and state governments and administered by the states through a Medicaid State Plan approved by the Secretary for Health and Human Services ("HHS"). Id. at § 1396a. In exchange for federal matching funds, participating states agree to comply with federal Medicaid laws and regulations. 42 U.S.C. § 1396c; see also 42 C.F.R. § 430.35. CMS administers the ...


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