Managed Pharmacy Care v. Kathleen Sebelius, 705 F.3d 934

Background

Consolidated MPC, CMA, CMTA, CHA cases challenge DHCS/Secretary approvals of Medi‑Cal rate reductions under 42 U.S.C. §1396a(a)(30)(A) and SPA process.
Secretary’s approval argued to have Chevron deference; Orthopaedic Hospital distinguished for agency interpretation.
DHCS submitted SPAs 11‑009 and 11‑010 with a monitoring plan; CMS approved the SPAs for rate reductions.
District court granted preliminary injunctions, holding SPAs violated §30(A) and that the Secretary’s approval was not entitled to Chevron deference.
Plaintiffs cross‑appealed the district court’s modification allowing some rates to take effect before injunctions.
Court reverses: vacates injunctions, remands for proceedings consistent with the opinion; some cross‑appeals moot.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Orthopaedic Hospital controls here	Orthopaedic Hospital controls, requiring costs consideration before rate reductions.	Secretary’s interpretation and SPA approvals comport with §30(A) and Chevron deference.	Orthopaedic Hospital does not control.
Whether the Secretary’s SPA approvals are entitled to Chevron deference	Secretary’s approval should not be given Chevron deference since no explicit methodology was required.	Secretary’s approvals are entitled to Chevron deference under Mead/Brand X framework.	Secretary’s approvals deserve Chevron deference.
Whether the approvals comply with §30(A) under APA review	SPAs fail §30(A) because not enough costs/impact analysis.	Approvals meet §30(A) with MACPAC framework and monitoring plan.	Approvals not arbitrary or capricious; satisfy §30(A).
Whether Supremacy Clause preemption supports plaintiff claims against the Director	Supremacy Clause provides private enforcement of §30(A).	No implied private right; Secretary’s approvals suffice.	Supremacy Clause claims unlikely to prevail against the Director.
Whether there is a takings claim viable against participation in Medi‑Cal	Rate reductions constitute a taking since participation was voluntary.	No property interest in continued Medicaid payments; no taking.	Takings claim not viable.

Key Cases Cited

Orthopaedic Hosp. v. Belshe, 103 F.3d 1491 (9th Cir. 1997) (cost considerations not mandated before SPAs; cost data not required for §30(A))
Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984) (deference to agency interpretations of statutes|)
Price v. Stevedoring Servs. of Am., Inc., 697 F.3d 820 (9th Cir. 2012) (delegation and deference considerations under Mead)
Alaska Dept. of Health & Soc. Servs. v. Centers for Med. & Med. Servs., 424 F.3d 931 (9th Cir. 2005) (administrative review of SPA approvals; deference framework)
Douglas v. Independent Living Ctr. of S. Cal., 132 S. Ct. 1204 (2012) (Supreme Court on Supremacy Clause and SPA approvals)
Mead Corp. v. United States, 533 U.S. 218 (2001) (Mead test for Chevron deference applicability)
Brand X Internet Servs. v. Nat’l Cable & Telecomm. Ass’n, 545 U.S. 967 (2005) (prior judicial construction may trump agency interpretation only if unambiguous)
United States v. Hinkson, 585 F.3d 1247 (9th Cir. 2009) (standards for reviewing district court abuse of discretion in injunctive rulings)
Sanchez v. Johnson, 416 F.3d 1051 (9th Cir. 2005) (Supremacy Clause standing principles)
Rite-Aid of Pa., Inc. v. Houstoun, 171 F.3d 842 (3d Cir. 1999) (§30(A) does not require a prescribed method)
Minn. Homecare Ass’n, Inc. v. Gomez, 108 F.3d 917 (8th Cir. 1997) (no fixed method required under §30(A))
Methodist Hospitals, Inc. v. Sullivan, 91 F.3d 1026 (7th Cir. 1996) (no mandatory pre‑modification cost studies required)
Holder v. Martinez Gutierrez, 132 S. Ct. 2011 (2012) (statutory interpretation where statute silent on method; deference allowed)
Erickson v. U.S. ex rel. HHS, 67 F.3d 858 (9th Cir. 1995) (no property interest in continued participation in Medicaid/Medicare)