{1} This is the second appeal in a long-running ease concerning the sufficiency of Medicaid payments to pharmacists. This Court previously declined to consider an appeal involving the class certification of the plaintiff pharmacies (Plaintiffs). Starko, Inc. v. Cimarron Health Plan, Inc.,
I. BACKGROUND
{2} New Mexico elects to participate in Medicaid, which is a voluntary federal-state program providing medical services to the needy. See Atkins v. Rivera,
{3} HSD presumes enrollment in the managed care system for all Medicaid recipients, although HSD still maintains the fee-for-service system for a limited set of recipients, such as Native Americans, who are exempt from managed care. 8.305.4.9 NMAC (2005) (stating that “[a]ll medicaid eligible clients are required to participate in the medicaid managed care program” and then listing certain exceptions). Under the managed care system, services are neither provided nor reimbursed directly by HSD; rather, HSD contracts with private managed care organizations (MCOs) which in turn provide health care to Medicaid recipients. See 8.305.1.7(M)(1) NMAC (2005) (defining a Medicaid MCO as “[a]n organization licensed to manage, coordinate and assume financial risk on a capitated basis for the delivery of specified services to enrolled members from a certain geographic area”). These contracts with the MCOs include coverage for prescription medications sold by pharmacists and pharmacies. The MCOs then execute sub-contracts with individual pharmacies, pharmacy chains, or pharmacy provider groups to provide services to Medicaid recipients.
{4} Plaintiffs are a class of pharmacists and pharmacies who claim that they are not being properly reimbursed for filling Medicaid managed care prescriptions. Starko, Inc.,
A. The Relevant Statute and Plaintiffs’ Contentions
{5} NMSA 1978, § 27-2-16 (1984) contains this subsection:
B. If drug product selection is permitted by Section 26-3-3 NMSA 1978, reimbursement by the medicaid program shall be limited to the wholesale cost of the lesser expensive therapeutic equivalent drug generally available in New Mexico plus a reasonable dispensing fee of at least three dollars sixty-five cents ($3.65).
(Emphasis added.) It is the italicized language that Plaintiffs claim creates a right to reimbursement in (1) wholesale cost, which they claim equates to what is known in the industry as average wholesale price; and (2) a fixed dispensing fee of $3.65 for each prescription filled for a Medicaid recipient. The parties and the district court focused their arguments and decision below on the dispensing fee rather than wholesale price. We will limit our focus accordingly.
{6} Plaintiffs have alleged that under the managed care program the MCOs are not reimbursing the $3.65 dispensing fee. Plaintiffs allege that the MCOs pay a dispensing fee of as little as $2.00, and some MCOs have admitted that their sub-contracts with pharmacists provide for dispensing fees substantially less than $3.65. Plaintiffs allege that HSD does pay the $3.65 dispensing fee to pharmacists for the limited populations that are served under the Medicaid fee-for-service system, but that starting in 1997, HSD “began to violate the minimum reimbursement rates established by law when it permitted its managed care organizations in the [managed care program] to cut reimbursement rates for pharmacy services.” Plaintiffs contend this cut in reimbursement constituted a denial of procedural due process.
B. The District Court’s Ruling Giving Rise to This Appeal
{7} As noted, the individual defendants in this case were executives within HSD, each of whom acted either as the Secretary of HSD or as the director of the division controlling Medicaid. This appeal involves a sub-set of the individual defendants, the so-called “new” individual defendants who were added in the fifth year of the litigation. The district court, in both 1998 and 2003, had denied qualified immunity to those individual defendants who had been named in the early stages of the litigation. In denying qualified immunity in 2003, the court concluded that (1) the dispensing fee provision created a property right to reimbursement, (2) this right was “clear and unambiguous,” and (3) this provision was not discretionary. The district court recited that “plaintiffs must show that the actions of the individual defendants violated a constitutional right, and that the contours of that right were clearly established.” It then focused only on state law, concluding that Section 27-2-16(B) was “clear and unambiguous” and “not discretionary,” and that “[t]here is a property right to reimbursement ... as set out in the statute.” Without determining whether this property right was protected by the federal constitution, the court denied qualified immunity. The defendants affected by these orders sought writs of error in this Court, but we declined to grant review.
{8} Then, in 2004, the district court also denied qualified immunity to the new individual defendants, who are the appellants in this appeal. In doing so, the district court concluded that: (1) the legislature created a property right by enacting Section 27-2-16(B); (2) it was important that HSD had paid a $3.65 dispensing fee “until the advent of managed care”; (3) the violation of the
[t]he right that was clear is the right to reimbursement pursuant to the statute, unless and until the legislature determines otherwise[, and t]he contours of this right are sufficiently clear that a reasonable official would understand that discontinuing the reimbursement practice, without legislative approval, violates the constitutional right to due process.
The new individual defendants petitioned this Court for a writ of error, which we granted to review the denial of qualified immunity. For the reasons that follow, we conclude that the district court improperly elevated a violation of state law into a violation of procedural due process and erroneously concluded that Defendants were not entitled to qualified immunity.
II. DISCUSSION
{9} We begin with a general review of § 1983 and the doctrine of qualified immunity. We then analyze whether qualified immunity should have been granted.
A. Section 1983 and Qualified Immunity
{10} Section 1983 does “not itself establish or create any rights.” Moongate Water Co. v. N.M. Env’t Dep’t,
{11} However, under § 1983, an individual official’s liability is limited by the doctrine of qualified immunity, which shields government officials performing discretionary functions “from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known.” Id. (internal quotation marks and citation omitted); see also Doe v. Leach,
{12} Qualified immunity grants not only immunity from damages but also immunity from suit, Romero v. Sanchez,
{14} The United States Supreme Court recently reaffirmed this federal-constitutional-question-first approach. Saucier,
B. Defendants Are Entitled to Qualified Immunity Because Plaintiffs Have Not Alleged Deprivation of a Constitutional Right
{15} We are presented, then, with one narrow question: Whether HSD executives violated procedural due process protections when they contracted with the MCOs in a way that resulted in pharmacists being reimbursed at a rate less than that specified in a state statute. To answer this question, we must determine whether Section 27-2-16(B) creates a property interest triggering procedural due process protections, and if so, whether the state acted to “deprive” Plaintiffs of their property without providing procedural safeguards. Because Plaintiffs are explicitly relying on a violation of procedural due process for a deprivation of a property right we begin with a review of that constitutional guarantee.
{16} We note that Plaintiffs’ claims in this case are very different from those in numerous other Medicaid provider lawsuits under § 1983. In those cases, the plaintiffs and providers relied on a violation of federal Medicaid law. See, e.g., Long Term Care Pharmacy Alliance v. Ferguson,
{17} The Fourteenth Amendment guarantees that states shall not “deprive any person of life, liberty or property without due process of law.” U.S. Const, amend. XIV, § 1. Once a property interest has been “created ... by ... an independent source such as state law,” then any deprivation of that interest by the state must “be preceded by notice and opportunity for hearing appropriate to the nature of the case.” Cleveland Bd. of Educ. v. Loudermill,
{18} The first step in a procedural due process claim is to identify the state-created substantive right at stake and determine whether this right triggers procedural due process protections. Garcia,
{19} Addressing the first step, we assume without deciding that Section 27-2-16(B) confers upon pharmacists a protected property interest in a dispensing fee of $3.65, particularly where they have already filled prescriptions and are awaiting reimbursement. See Jordan Hosp., Inc. v. Shalala,
{20} At first blush, Plaintiffs’ argument that they were provided no process before a deprivation has some force, because there is no showing that each pharmacy received any individualized hearing before it was reimbursed at a rate below the state law minimum. Thus, Plaintiffs seem to have a legitimate complaint that their property interest was impacted without any procedural safeguards and should be allowed to proceed under § 1983. The absence of any process whatsoever, prior to the deprivation of a property right, would weigh heavily against the state and may allow the conclusion that due process has been violated, even without a Mathews balancing analysis. See Lawrence v. Reed,
{21} Sometimes “to put the question is to answer it.” Bi-Metallic Inv. Co. v. State Bd. of Equalization,
{22} Second, not only is there a lack of a deprivation by the state here, but Plaintiffs fail to point out any procedural guarantees that should have been provided. Instead, Plaintiffs seek only to have HSD and the MCOs comply with the minimum dispensing fee. Plaintiffs have simply, but creatively, reframed their core complaint — that the individual defendants have permitted HSD and the MCOs to violate state law — so that it appears to be a procedural due process claim.
{23} Furthermore, we can see no benefit in forcing HSD to hold hearings on the contracts at issue. There is apparently no need for a fact finder to hear and determine whether Plaintiffs are indeed pharmacists who have filled prescriptions under the Medicaid managed care system because the parties do not dispute these facts. Plaintiffs do not seek any type of individualized determination as to their entitlement to the $3.65 dispensing fee. Rather, their complaint is with the general policy decision of HSD to allow contracts that allegedly violate state law. Where individualized hearings would be of no value and the core complaint is that a policy contravenes state law, we fail to see how any of the procedural due process elements, or the balancing test of Mathews, would apply. There are numerous cases holding that the failure to follow a state statute is not a per se violation of one’s rights to procedural due process allowing recovery under § 1983. Cf. Bagley v. Roger-son,
{24} We conclude that Plaintiffs are pursuing a substantive rather than a procedural due process claim, and we recognize that the difference between the two types of claims can be difficult to discern. For example, in Gonzales v. City of Castle Rock,
{25} We conclude that in the present case, similar to the circumstances in Gonzales, Plaintiffs are attempting to proceed under § 1983 by an innovative use of the “protected interest” notion from procedural due process in order to avoid the stringent standard of substantive due process. We think Plaintiffs’ claim, at base, is not directed at the fairness of any procedures that were used or should have been used before the state “deprived” them of a property interest. We need not answer whether Plaintiffs could state a substantive due process claim. We simply note that the test for a substantive due process violation is difficult to meet. It requires facts that shock the conscience or which amount to one of those “truly horrendous situations” of governmental abuses. Moongate Water Co.,
{26} Even if we were to evaluate this claim as a procedural due process claim under Mathews, Plaintiffs concede that they seek no actual procedural or administrative safeguards, and they do not even point to a forum that should have heard their complaint. Plaintiffs do not claim a right to notice, hearing, or an impartial fact finder, either before or after their deprivation. Plaintiffs want HSD or the MCOs to ensure that pharmacists are paid as set out in the statute; this is a claim seeking to enforce the substance of state law, not seeking any procedure surrounding its withdrawal. We are not persuaded that Plaintiffs allege procedural unfairness of any kind; rather they seek to elevate a statutory violation alone into a constitutional one. This we decline to do.
{27} We find further support from Garcia, a case in which this Court examined the subtle interrelationship between state law (creating a protected interest) and the separate matter of federal constitutional law mandating the procedures required for the state to deprive a person of that interest.
{28} Finally, we briefly respond to Plaintiffs’ argument that the following language from a footnote in Davis compels the conclusion that the violation of Section 27-2-16(B) constitutes an automatic violation of due process: “Neither federal nor state officials lose their immunity by violating the clear command of a statute or regulation — of federal or of state law — unless that statute or regulation provides the basis for the cause of action sued upon.”
{29} We are deciding only the discrete question of whether Plaintiffs may proceed against Defendants under § 1983, and not whether Plaintiffs can proceed against HSD under other state law remedies. Plaintiffs note the tension between the desire to contain costs while “at the same time ensuring reimbursement is sufficient to maintain an adequate number of providers,” and we do not doubt that this tension exists. However, Plaintiff pharmacists do not have a § 1983 action against the individual defendants based upon a constitutional violation.
III. CONCLUSION
{30} For the foregoing reasons, we conclude that the district court erred in denying Defendants’ motion for dismissal on grounds of qualified immunity. We remand for entry
{31} IT IS SO ORDERED.