913 F.3d 551
5th Cir.2019Background
- Texas OIG sought to terminate Medicaid provider agreements for three Planned Parenthood affiliates based largely on undercover CMP videos showing staff discussing procurement of fetal tissue for research; OIG concluded the affiliates violated medical and ethical standards and issued Final Notices of Termination.
- Provider Plaintiffs (Planned Parenthood affiliates) and Individual Plaintiffs (Medicaid beneficiaries) sued in federal court seeking a preliminary injunction barring termination; district court held beneficiaries have a private right of action under 42 U.S.C. § 1396a(a)(23) and granted the injunction after a three-day evidentiary hearing.
- The district court reviewed live testimony and video clips, credited plaintiffs’ witnesses, questioned the authenticity and probative value of the videos, and declined to consider OIG evidence developed after the Final Notice.
- The Fifth Circuit panel (per Judge Edith H. Jones) affirmed that beneficiaries possess a private right of action under circuit precedent (Gee) but held the district court erred by applying de novo review and admitting evidence outside the administrative record.
- The court concluded the proper review of OIG’s termination decision is arbitrary-and-capricious review limited to the administrative record and vacated the preliminary injunction, remanding for application of that standard.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Do Medicaid beneficiaries have a private right of action under 42 U.S.C. § 1396a(a)(23) to challenge state termination of a provider’s Medicaid agreements? | Beneficiaries rely on Gee: the "qualified-provider" provision creates an individual right to challenge exclusions from Medicaid. | OIG contends Gee is distinguishable and conflicts with O'Bannon; no private right to attack decertification enforcing statutory/regulatory standards. | Court: Bound by Gee; beneficiaries have a private right of action in this circuit (affirmed), though concurrence urges en banc rehearing. |
| What is the meaning of "qualified" under § 1396a(a)(23)? | Plaintiffs argue "qualified" means capable of providing services; termination here was unrelated to true qualifications. | OIG argues states may define qualifications and exclude providers for violations of safety, legality, ethics; "qualified" implicates competence, safety, legality, ethics. | Court: Adopts a limiting reading—state justifications must actually implicate whether provider operates in a "safe, legal, and ethical manner." States retain broad authority but may not relabel unrelated rules as "qualifications." |
| What standard of judicial review applies to a state agency's termination of a Medicaid provider? | Plaintiffs urged de novo review and allowed evidence beyond the administrative record (district court did so). | OIG urged arbitrary-and-capricious review limited to the administrative record under Abbeville and federal administrative law. | Court: Arbitrary-and-capricious review of the agency record applies; district court erred by conducting de novo review and admitting extra-record evidence. |
| Was the district court's preliminary injunction sustainable given the proper standard? | Plaintiffs argued they showed likelihood of success and irreparable harm. | OIG argued the injunction rested on improper review and misweighing of evidence. | Court: Vacated the preliminary injunction and remanded for the district court to apply arbitrary-and-capricious review to the administrative record. |
Key Cases Cited
- Planned Parenthood Gulf Coast v. Gee, 862 F.3d 445 (5th Cir. 2017) (recognized private right of action under § 1396a(a)(23) in this circuit)
- O'Bannon v. Town Court Nursing Ctr., 447 U.S. 773 (1980) (Supreme Court held § 1396a(a)(23) does not give recipients a right to continue benefits for care in a decertified institution)
- Abbeville Gen. Hosp. v. Ramsey, 3 F.3d 797 (5th Cir. 1993) (applies arbitrary-and-capricious review to state Medicaid agency actions)
- Planned Parenthood of Indiana v. Commissioner of Ind. State Dep't of Health, 699 F.3d 962 (7th Cir. 2012) (recognized private right of action under § 1396a(a)(23) in related context)
- Planned Parenthood of Kansas & Mid-Mo. v. Andersen, 882 F.3d 1205 (10th Cir. 2018) (followed Gee in recognizing beneficiaries' ability to challenge provider exclusions)