Armstrong County Memorial Hospital and Monongahela Valley Hospital, Inc. v. DPW
67 A.3d 160
Pa. Commw. Ct.2017Background
- In 2010 Pennsylvania enacted Act 49, creating a hospital Quality Care Assessment (Assessment) to fund higher Medicaid payments, including enhanced capitation to managed care organizations (MCOs) intended to fund supplemental payments to hospitals.
- The Department of Public Welfare (now Human Services) sought CMS approval for State Plan and waiver amendments and attempted to include a distribution formula in MCO agreements; CMS approved the program but forbade the Department from dictating how MCOs must distribute enhanced capitation payments (citing 42 C.F.R. § 438.60).
- The Department and the Hospital and Healthsystem Association of Pennsylvania (HAP) initially documented a distribution formula in a July 2010 letter agreement; after CMS’s objection the parties revised the letter (January 2011) to require only that MCOs demonstrate they used funds to increase hospital payments.
- HAP and a Coalition of MCOs later executed a separate HAP/MCO Agreement (Feb. 2011) setting a methodology to distribute enhanced capitation payments; the Department provided some data to HAP to enable implementation but did not include the formula in the MCO Agreements approved by CMS.
- Two hospitals filed an original-jurisdiction petition (Armstrong County Memorial Hospital and Monongahela Valley Hospital) alleging the Department unlawfully imposed (directly or indirectly) the distribution method on MCOs in violation of the CMS-approved State Plan; after discovery both parties filed cross-applications for summary relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Department directly or indirectly imposed the manner MCOs must distribute enhanced capitation payments to hospitals | The Department devised and implemented a covert "Plan B" to force HAP and MCOs to adopt the Department’s distribution methodology after CMS forbade direct control | The evidence shows the Department removed itself after CMS’s decision; communications and limited data-sharing do not show the Department imposed the methodology | Court: No genuine issue of material fact supports plaintiff; denied plaintiff summary relief and granted defendants’ joint summary relief; petition dismissed with prejudice |
| Whether summary relief is appropriate on Count II (claim that Department violated CMS‑approved State Plan amendments) | Hospitals argued the undisputed record entitled them to judgment as a matter of law | Department and HAP argued Hospitals, as petitioners bearing the burden at trial, lack admissible evidence to prove the claim; defendants only had to show Hospitals cannot meet their burden | Court: Defendants met the put-up-or-stand-down standard; summary relief granted to defendants; Hospitals’ claim fails |
Key Cases Cited
- Armstrong County Memorial Hospital v. Department of Public Welfare, 67 A.3d 160 (Pa. Cmwlth. 2013) (prior decision in this matter addressing preliminary objections and framing Count II)
- Commonwealth v. TAP Pharmaceutical Products, Inc., 36 A.3d 1112 (Pa. Cmwlth. 2011) (overview of Department’s role in Medicaid managed care and payment systems)
- Borough of Nanty-Glo v. American Surety Co. of New York, 163 A. 523 (Pa. 1932) (rule limiting weight of uncorroborated, self-serving testimonial affidavits on summary judgment)
- Jubelirer v. Rendell, 953 A.2d 514 (Pa. 2008) (standard for summary relief under Pa. R.A.P. 1532(b))
- Brittain v. Beard, 974 A.2d 479 (Pa. 2009) (discussion that summary relief under Pa. R.A.P. 1532(b) is similar to summary judgment)