130 F.4th 305
2d Cir.2025Background
- The New York State Department of Health (NYSDOH) received federal approval to distribute $361.25 million to managed care organizations, who passed funds to the top one-third of revenue-generating Licensed Home Care Services Agencies (LHCSAs) in New York, based on a specific revenue threshold.
- The funding derived from Section 9817 of the American Rescue Plan Act (ARPA), which increased federal matching for state Medicaid home and community-based services expenditures following the COVID-19 pandemic.
- Plaintiffs—excluded LHCSAs—challenged the eligibility criteria, arguing it unlawfully favored large agencies and was not assessed for actuarial soundness before approval.
- The U.S. Centers for Medicare & Medicaid Services (CMS) pre-approved NYSDOH’s payment application without a pre-approval actuarial soundness assessment; actuarial soundness was instead evaluated during separate periodic rate certifications.
- The district court dismissed the plaintiffs’ amended complaint against the State Appellees and granted summary judgment to the Federal Appellees, holding the provider class was properly defined and actuarial soundness need not be assessed at the pre-approval stage.
- Plaintiffs appealed the judgment and contested exclusion of extra-record evidence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Provider class definition | Provider class improperly limited to top revenue LHCSAs | Class may be defined by revenue if goal-related | Limitation permissible: revenue cut-off allowed |
| Actuarial soundness at pre-approval stage | CMS must assess actuarial soundness before pre-approving | Actuarial soundness assessed later in rate review process | No legal/regulatory requirement at pre-approval |
| APA arbitrary/capricious challenge | Approval sans actuarial review was arbitrary/capricious | All processes used were consistent with regulatory scheme | CMS approval process not arbitrary/capricious |
| Admission of extra-record evidence | Needed to prove improper agency action | Not necessary—actuarial soundness not at issue in approval | Properly excluded; district court not abused discretion |
Key Cases Cited
- Ex parte Young, 209 U.S. 123 (1908) (provides exception to state sovereign immunity for certain claims against state officials)
- Kisor v. Wilkie, 588 U.S. 558 (2019) (discusses tools of regulatory interpretation, including deference to agency interpretations)
- Dubin v. United States, 599 U.S. 110 (2023) (statutory titles do not override plain meaning)
- Bhd. of R.R. Trainmen v. Baltimore & O.R. Co., 331 U.S. 519 (1947) (interpretive weight afforded to statutory headings or titles)
- American Cruise Lines v. United States, 96 F.4th 283 (2d Cir. 2024) (explains APA arbitrary and capricious review standard)
- Community Health Care Ass’n of New York v. Shah, 770 F.3d 129 (2d Cir. 2014) (Medicaid managed care structure in NY)
- Power Auth. v. M/V Ellen S. Bouchard, 968 F.3d 165 (2d Cir. 2020) (standard for reviewing statutory interpretation de novo)
- Nat’l Audubon Soc’y v. Hoffman, 132 F.3d 7 (2d Cir. 1997) (standards for administrative record review, extra-record evidence)