722 F.3d 527
3rd Cir.
2013
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Background

  • New Jersey historically calculated FQHC "wraparound" payments by using FQHC-reported aggregate quarterly Medicaid encounters and MCO receipts to make up the difference between the PPS per-visit rate and MCO payments at least every four months.
  • In 2011 New Jersey changed practice: it sought claim-level data from FQHCs and then required two MCO payment fields (payment amount and payment date), stating it would rely on MCO-reported data (the Molina system) and effectively condition State wraparound payments on prior MCO payment.
  • NJPCA (representing New Jersey FQHCs) sued, alleging violations of the federal Medicaid statute, New Jersey regulations, and procedural due process; district court granted summary judgment and a preliminary injunction in favor of NJPCA ordering emergency payments under the prior methodology and enjoining the State from implementing the new policy.
  • The Third Circuit affirmed in part and reversed in part: it upheld the State’s authority to require claim-level data (including the two MCO data fields) but held that conditioning wraparound payments on prior MCO payment, absent a meaningful, timely State process to challenge adverse MCO determinations, violates the federal Medicaid statute’s requirement that FQHCs receive full and timely supplemental payments.
  • The court declined to adjudicate claims that rested solely on alleged violations of New Jersey law (Eleventh Amendment limits) and held there is no private right of action to enforce the federal requirement that state plan amendments receive CMS approval.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Whether the State may require FQHCs to provide claim-level data (seven fields) NJPCA objected initially but waived challenge on appeal State asserted authority under federal and state Medicaid rules to demand such data State may require the seven claim-level fields; injunction against data collection reversed
Whether State may require reporting of MCO payment amount/date before paying wraparounds NJPCA contended this effectively conditions State payment on prior MCO payment and causes underpayment of valid Medicaid encounters State argued "supplemental" means MCO must pay first and that MCOs help determine eligibility Collection of MCO payment data permissible, but conditioning wraparounds on prior MCO payment (without an adequate State challenge process) violates federal law
Whether the State’s change constituted an unapproved amendment to the federally approved State Medicaid Plan enforceable by FQHCs NJPCA said change was a de facto plan amendment requiring CMS approval and enforceable State argued administration, not plan terms, changed; alternative relief rests with CMS not private parties No private right to enforce the plan-approval requirement; court lacks jurisdiction on this claim
Whether the State’s change violated procedural due process by not using notice-and-comment and leaving FQHCs to MCO appeals NJPCA asserted deprivation of property (payments) without adequate process State argued constitutional due process does not mandate notice-and-comment and MCOs are not state actors No procedural due process violation; lack of adequate State-level challenge process to adverse MCO denials is instead a statutory Medicaid problem

Key Cases Cited

  • Harris v. McRae, 448 U.S. 297 (U.S. 1980) (general description of Medicaid as federal grant program administered by states)
  • Pa. Pharmacists Ass’n v. Houstoun, 283 F.3d 531 (3d Cir. 2002) (state plan compliance and Medicaid enforcement framework)
  • Three Lower Cntys. Cmty. Health Servs., Inc. v. Maryland, 498 F.3d 294 (4th Cir. 2007) (wraparound payments must be fully compensatory and timely)
  • Concourse Rehabilitation & Nursing Ctr. v. DeBuono, 179 F.3d 38 (2d Cir. 1999) (state administration vs. plan amendment analysis)
  • Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89 (U.S. 1984) (limits on federal courts ordering state officials to follow state law)
  • Blessing v. Freestone, 520 U.S. 329 (U.S. 1997) (test for whether a statute creates enforceable individual rights under § 1983)
  • Gonzaga Univ. v. Doe, 536 U.S. 273 (U.S. 2002) (clarifying requirement of unambiguously conferred rights for § 1983 suits)
  • Concilio de Salud Integral de Loiza, Inc. v. Perez-Perdomo, 551 F.3d 10 (1st Cir. 2008) (providers can challenge supplemental payment methodologies under § 1983)
  • Pee Dee Health Care, P.A. v. Sanford, 509 F.3d 204 (4th Cir. 2007) (similar enforcement of wraparound payment rules)
  • Cmty. Health Ctr. v. Wilson–Coker, 311 F.3d 132 (2d Cir. 2002) (providers can have § 1983 rights to certain Medicaid payments)
  • West Va. Univ. Hosps. v. Casey, 885 F.2d 11 (3d Cir. 1989) (statutory rights of providers under Medicaid)
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