Safe Haven Home Care, Inc. v. United States Department of Health and Human Services (HHS), 681 F.Supp.3d 195

Background

Plaintiffs (licensed home care services agencies) challenged New York’s March 2022 ARPA-funded “2022 Disbursement,” which awarded $361.25 million (50% federal share) to LHCSAs in each region defined as the top one-third by managed-care revenue, payable as a uniform $3.80 per service hour for an April–Sept 2021 utilization base.
New York submitted a § 438.6(c) preprint application to CMS; CMS approved the Final Preprint Application on March 4, 2022; payments were disbursed around March 31, 2022.
Plaintiffs sued State Defendants (NY DOH and officials) and Federal Defendants (HHS/CMS and officials), alleging violations of the Medicaid Act, implementing regulations (notably 42 C.F.R. § 438.6 and related provisions), and the APA; they sought injunctive and declaratory relief.
State Defendants moved to dismiss; Federal Defendants moved to dismiss or for summary judgment and submitted the certified administrative record; Plaintiffs sought to supplement the record with expert declarations and rate certifications.
The district court concluded the claims against State Defendants failed because Ex parte Young relief was not available (no plausible threat of future similar disbursements) but granted limited leave to amend; the court granted summary judgment to Federal Defendants, holding CMS’s pre-approval complied with § 438.6(c)(2)(ii) and was not arbitrary and capricious, and denied the request to admit extra-record evidence focused on actuarial soundness.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
1) Are claims against NY State officials justiciable under Ex parte Young (i.e., is there an ongoing or imminent violation that supports prospective relief)?	Plaintiffs: the State may recoup and re-distribute funds and could repeat similar distributions; prospective relief would prevent recurrence.	State: the Disbursement already paid (moot); no plausible threat of future similar payments; counsel’s statement that NY will not repeat is sufficient.	Denied Ex parte Young relief: case not moot but plaintiffs failed to plead a plausible threat of future similar unlawful disbursements; dismissal for failure to state a claim; leave to amend limitedly.
2) Can plaintiffs enforce the cited Medicaid statutes/regulations via private equitable action (implicit private right / scope of Ex parte Young)?	Plaintiffs: seek equitable relief under Ex parte Young even absent express private right of action.	State: no private right of action; Armstrong and related limits may bar private enforcement.	The court did not foreclose Ex parte Young generally but held plaintiffs did not allege ongoing or imminent state action; thus no equitable remedy against State Defendants on present record.
3) Was CMS’s March 2022 pre-approval unlawful under the APA, the Medicaid Act, or 42 C.F.R. § 438.6(c) (including requirements that payments be based on utilization, apply equally to a provider class, and be actuarially sound)?	Plaintiffs: CMS acted arbitrarily and capriciously and exceeded authority by approving a reverse‑engineered, revenue‑restricted provider class, and by ignoring actuarial soundness and other regulatory requirements.	Federal Defs: CMS followed the § 438.6(c) pre-approval process and applied the regulatory criteria in § 438.6(c)(2)(ii); actuarial-soundness rules govern rate-setting by States/CMS in a different process and are not prerequisites to § 438.6(c) pre-approval.	Held for Federal Defs: CMS reasonably concluded the preprint satisfied the § 438.6(c)(2)(ii) criteria (payments based on utilization; directed equally under same terms to the defined class) and did not act arbitrarily and capriciously; CMS was not required to assess actuarial soundness during pre-approval.
4) Should the court consider extra-record evidence (expert declarations and actuarial rate certifications)?	Plaintiffs: extra-record evidence needed because CMS ignored important aspects (actuarial soundness) and the issues are complex.	Defs: review limited to administrative record; actuarial soundness was not an administratively relevant factor in pre-approval.	Denied: the court concluded actuarial soundness was not an ‘‘important aspect’’ that CMS was required to consider in § 438.6(c) pre-approval; review confined to the administrative record.

Key Cases Cited

Ex parte Young, 209 U.S. 123 (U.S. 1908) (equitable authority to enjoin state officials for ongoing or imminent violations of federal law)
Armstrong v. Exceptional Child Ctr., Inc., 575 U.S. 320 (U.S. 2015) (limits on private enforcement in Medicaid context; Ex parte Young is equitable, not statutory)
Concentrated Phosphate Export Ass’n v. United States, 393 U.S. 199 (U.S. 1968) (voluntary cessation does not moot case unless misconduct cannot reasonably recur)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility pleading standard)
Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading standards; conclusory allegations not entitled to deference)
Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (U.S. 1983) (arbitrary-and-capricious review standard)
Christ the King Manor, Inc. v. Sec’y, U.S. Dep’t of Health & Human Servs., 730 F.3d 291 (3d Cir. 2013) (agency approval arbitrary when required statutory factors were not considered)
Kakar v. U.S. Citizenship & Immigr. Servs., 29 F.4th 129 (2d Cir. 2022) (agency must consider statutory-relevant factors; scope of arbitrary-and-capricious review)
Nat. Res. Def. Council v. EPA, 808 F.3d 556 (2d Cir. 2015) (agency must consider factors that governing law makes relevant)
Knox v. Serv. Emps. Int’l Union, Local 1000, 567 U.S. 298 (U.S. 2012) (definition of mootness and effectual relief)