Armstrong County Memorial Hospital v. Department of Public Welfare of Pennsylvania
67 A.3d 160
Pa. Commw. Ct.2013Background
- Hospitals filed a petition for review challenging Act 49 amendments to the Public Welfare Code and CMS approvals for the Medicaid program in PA.
- Act 49 amended Section 443.1 and Article VIII-G to add APR-DRG classification, base rates, and an Assessment funded via hospital net inpatient revenue.
- DPW implemented an enhanced payments framework, including enhanced capitation payments to MCOs, to augment hospital payments, subject to CMS approval.
- Hospitals allege DPW delegated ratemaking authority to HAP via a DPW/HAP Letter Agreement and that a DPW–HAP–MCO scheme bypassed CMS approval.
- Hospitals seek declaratory relief, injunction against the Assessment, mandamus directing DPW to fund hospitals per new APR-DRG rates, and attorneys’ fees.
- DPW and HAP filed preliminary objections asserting, among other things, lack of justiciability, exhaustion of remedies, and demurrers to Counts I, III, and IV.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Hospitals’ petition falls within this Court’s original jurisdiction rather than statutory administrative review. | Hospitals argue challenges are regulatory/legislative, not adjudicative, thus original jurisdiction applies. | DPW argues petition seeks review under 67 Pa.C.S. 1102(a) administrative remedy. | Hospitals’ claims target regulatory/legislative actions; original jurisdiction applies. |
| Whether DPW/HAP Letter Agreement impermissibly delegated ratemaking authority to HAP (Count I). | Hospitals contend DPW delegated ratemaking to HAP via the Letter Agreement. | HAP asserts no ratemaking authority was delegated; documents do not vest such power. | Count I demurrer sustained; no delegation of ratemaking authority found. |
| Whether DPW’s implementation of Act 49 may violate CMS-approved State Plan amendments (Count II). | DPW’s actions potentially contravene CMS-approved amendments by directing pass-through of funds. | CMS-approved amendments do not specify pass-through distribution; action not improper. | Count II overruled as to HAP; the court allows development of the claim. |
| Whether the 42 C.F.R. § 433.68 uniformity requirement is met (Count III). | The Assessment is not uniformly imposed, violating federal hold-harmless standards. | Petition fails to connect deficiencies to uniformity criteria in 433.68(d). | Count III sustained demurrer; claim dismissed. |
| Whether Act 49 unconstitutionally impairs hospital contracts (Count IV). | Acceleration clauses in MCO contracts are impaired by Act 49 as applied. | Section 443.1(1.2)(ii) preserves contract changes; 1.2(vi) allows new/amended agreements. | Count IV sustained demurrer; no constitutional impairment found. |
Key Cases Cited
- National Solid Wastes Mgmt. Ass'n v. Casey, 580 A.2d 893 (Pa.Cmwlth. 1990) (administrative remedy not applicable to broad regulatory challenges)
- Julia Ribaudo Senior Servs. v. Dep’t of Pub. Welfare, 969 A.2d 1184 (Pa. 2009) (statutory remedy applies to DPW decisions affecting providers)
- Bell Telephone Co. of Pennsylvania v. Driscoll, 343 Pa. 109 (1941) (legislative delegation of power to implement policy limitations)
- MCT Transp. Inc. v. Phila. Parking Auth., 60 A.3d 899 (Pa.Cmwlth. 2013) (concepts of statutory agency power and standards for exercise of power)