Kansas Health Care Association, Inc. v. Kansas Department Of Social And Rehabilitation ServicesKansas Health Care Association, Inc. v. Kansas Department Of Social And Rehabilitation Services
Jeffrey A. Chanay (William E. Enright, Scott, Quinlan & Hecht, with him on the briefs), Entz & Chanay, Topeka, Kan., for plaintiffs-appellees.
Before ANDERSON, TACHA and BALDOCK, Circuit Judges.
TACHA, Circuit Judge.
Defendants Kansas Department of Social and Rehabilitation Services (SRS) and Dr. Robert C. Harder appeal the district court‘s order preliminarily enjoining implementation of the Medicaid reimbursement rate freeze established by Kansas’ State Plan Amendment TN-90-44, the reimbursement schedule established by State Plan Amendment TN-90-06, and the defendants from reimbursing Medicaid providers at rates not in compliance with federal law. 754 F.Supp. 1502 On appeal, defendants contend that plаintiffs, two health care associations, lack standing to seek the preliminary injunction granted by the district court. In the alternative, defendants contend that the district court abused its discretion in granting the preliminary injunction. We exercise jurisdiction under
BACKGROUND
Plaintiffs, Kansas Health Care Association, Inc. (KHCA) and Kansas Association of Homes for the Aging, Inc. (KAHA), are nonprofit organizations, the members of which include a total of 335 nursing facilities located in Kansas.1 Members of KHCA and KAHA participate in the federally funded Kansas Medicaid program and receive reimbursement for health care services provided to eligible Medicaid recipients.
By statute, Kansas has elected to participate in the Medicaid program established by Title XIX of the Social Security Act,
Kansas, through SRS, implements a facility-specific reimbursement system and calculates each health care provider‘s rate by focusing on its historical costs and also considering where those costs fall in a percentile comparison with costs reported by other providers.2 SRS increases rates by an incеntive factor for facilities that incur low costs relative to the selected percentile reimbursement limitation and also adjusts to compensate for other special items.
On October 1, 1990, pursuant to State Plan Amendment TN-90-44, SRS implemented a Medicaid reimbursement “rate freeze.” Prior to the rate freeze, each facility submitted two cost reports during each fiscal year—оne in October and one at the end of the facility‘s fiscal year. SRS adjusted the reimbursement rate for each facility to reflect the most current cost report, corrected for inflation. Under TN-90-44, SRS no longer was to readjust the reimbursement rates based on cost reports submitted between October 1, 1990 and September 30, 1991. Instead, SRS was to determine each facility‘s rate of reimbursement from that facility‘s last cost report on file before October 1, 1990. SRS was to inflate the rate for each reimbursement period from the time of the last cost report at an estimated inflation rate of 4.8%.
Title XIX of the Social Security Act,
provide[s] ... for payment ... of the hospital services, nursing facility services, and services in an intermediate care facility for the mentally retarded provided under the plan through the use of rates ... which the State finds, and makes assurances satisfactory to the Secretary, are reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities in order to provide care and services in conformity with applicable State and Federal laws, rеgulations, and quality and safety standards....
In Wilder, the Supreme Court held that the language of
Plaintiffs brought this
After deciding that plaintiffs had standing, the district court determined that plaintiffs had a substantial likelihood of succeeding on the merits of their claims that defendants failed to comply with both the procedural and substantive aspects of
DISCUSSION
On appeal, defendants contend that the district court erred in deciding that plaintiffs have “associational standing” to bring this suit. We review de novo issues such as standing that are prerequisites to this cоurt‘s jurisdiction. See Trustees of the Colo. Pipe Indus. Pension Trust v. Howard Elec. & Mechanical, Inc., 909 F.2d 1379, 1382 (10th Cir.1990), cert. denied, --- U.S. ----, 111 S.Ct. 958, 112 L.Ed.2d 1046 (1991).
[A]n association has standing to bring a suit on behаlf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization‘s purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.
Id. at 343, 97 S.Ct. at 2441. This test takes into account both the constitutional dimension of standing and also the concern that the assoсiation properly represent its members in the particular suit.
As defendants concede, plaintiffs clearly meet the first and second prerequisites for associational standing. In Wilder, 110 S.Ct. at 2517, the Supreme Court held that health care providers can utilize
However, defendants contend the district court erred in granting plaintiffs standing because plaintiffs do not satisfy the third prerequisite announced in Hunt. The district court focused on the preliminary injunctive relief sought by plaintiffs and concluded that the grant of a preliminary injunction would not require individual participation of the associations’ members. The court relied specifiсally on the Supreme Court‘s discussion in Warth of the fact that an association‘s “standing to invoke the court‘s remedial powers on behalf of its members depends in substantial measure on the nature of the relief sought.” Warth, 422 U.S. at 515, 95 S.Ct. at 2213. There, the Court distinguished cases in which an association seeks declaratory or injunctive relief from cases in which an association seeks damages. The Court denied standing in Warth because the association sought damages, the proof of which would require an individualized showing by each member of the fact and extent of its injury. Based on the reasoning in Warth, the district court concluded that “the requisites of associational standing for purposes of injunctive relief are satisfied by the plaintiffs in this action because it can reasonably be supposed that a preliminary injunction will inure to the benefit of the individual health care providers who may be injured by continuation of the current rate freeze.”
Although the district court may have correctly determined that individual participation of the providers will not be required with respect to the injunctive relief sought by plaintiffs, that determination alone was insufficient to support a conclusion that plaintiffs meet the third standing prerequisite from Hunt. Under the Hunt test, an association has standing only if “neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.” Hunt, 432 U.S. at 343, 97 S.Ct. at 2441 (emphasis added). Therefore, we must determine whether resolution of plaintiffs’ two claims related to
Under some circumstances, a court may be able to make a cursory rеview of a state‘s Medicaid reimbursement system and determine that reimbursement rates are not adequate and reasonable to meet the costs of an efficiently and economically operated facility. For example, in AMISUB (PSL), Inc. v. Colorado Dep‘t of Social Servs., 879 F.2d 789 (10th Cir.1989), cert. denied, --- U.S. ----, 110 S.Ct. 3212, 110 L.Ed.2d 660 (1990), the district court found that some Colorado hospitals were efficiently and economically operated and that “all hospitals [were] reimbursed only about half of their reasonable costs,” id. at 799. This court was able to conclude—with minimal participation from individual providers—that Colorado‘s reimbursement system was inadequate to meet the costs of efficiently operated hospitals. In AMISUB, Colorado had determined its reimbursement rate for hospitals by looking to the costs repоrted by each hospital peer group, ordering those costs in a percentile relationship, and then identifying a point on the percentile scale at which the hospitals were efficiently and economically operated. However, solely because of budgetary concerns, Colorado then reimbursed the hospitals at fifty-four percent of the cost levеl it previously had determined was adequate for efficiently operated hospitals. Therefore, from this information alone, it was clear that Colorado was not “meeting the costs” of those facilities that it determined were efficiently operated. Even in that extreme case, our conclusion was premised on the district court‘s finding—a finding that required participation of individual hоspitals—that some Colorado hospitals were efficiently and economically operated. Id.
Although plaintiffs’ claims in this case may have merit, the evidence in the appellate record does not lend itself to a summary conclusion, such as that made in AMISUB, that the reimbursement rates established by SRS are not adequate and reasonable on their face. Instead, in order tо resolve plaintiffs’ claims, we will be required to examine evidence particular to individual providers. For example, to determine whether a 4.8% inflation rate insufficiently accounts for increased costs incurred by providers, we simply will be forced to review evidence that pertains to individual providers. Likewise, each of plaintiffs’ contentions supporting the inadequacy of rеimbursement rates must be accompanied by proof at trial showing a detrimental effect on efficiently operated providers. In addition, plaintiffs have not yet shown, nor has the district court found, that at least some members of the plaintiff organizations are efficiently and economically operated. Therefore, we conclude that proof of plaintiffs’ claim that rаtes are not adequate and reasonable will necessarily require individual participation of the associations’ members.
We next turn to plaintiffs’ claim that SRS failed to make the findings required by federal law. In AMISUB, we stated that at a minimum a state Medicaid agency must undertake the following procedures in order to make the “findings” required by federal law: “identify and determine (1) efficiently and economically operated hospitals; (2) the costs that must be incurred by such hospitals; and (3) payment rates which are reasonable and adequate to meet the reasonable costs of the state‘s efficiently and economically operated hospitals.” AMISUB, 879 F.2d at 796 (emphasis added). These procedural requirements clearly demand that the state agency, SRS in this case, undertake a detailed evaluation of individual health care providers. This fact alone indicates that the district court‘s review of these procedural findings likely will force the court to scrutinize specific health care providers—providers that are not parties to the action. Had the state made absolutely no findings or findings that were clearly inadequate, we could conclude—without individual participation by health care providers—that SRS failed to comply with federal law. See AMISUB, 879 F.2d at 796-97 (“Appellee‘s evidence at trial is flagrantly devoid of any effort to make the federally required findings.“).
Our holding in this case in no way reflects the adequacy of SRS’ findings. Instead, it lends integrity to the principle—or prudential concern—related to standing that a complainant, in this case a representative, be the “proper party to invoke judicial resolution of the dispute and the exercise of the court‘s remedial powers.” Warth, 422 U.S. at 518, 95 S.Ct. at 2215.
Because proof and resolution of the claims asserted by KHCA and KAHA will unavoidably require individual participation of their members, we hold that the two associations lack standing to sue as representatives of their members. Accordingly, we REVERSE the district court‘s holding that plaintiffs have standing to sue in this case, and we VACATE the preliminary injunctiоn issued by the district court.