By this action plaintiff seeks a declaratory judgment that certain Medicaid regulations passed by the Pennsylvania Department of Public Welfare (DPW) are invalid and unenforceable. Plaintiff also seeks to have this court enjoin the enforcement of the subject regulations. Plaintiff in its complaint has alleged that the regulations were improperly adopted, the regulations do not conform with substantive requirements of the Medicaid Act, and application of the regulations to the plaintiff has resulted in violation of plaintiff's due process and equal protection rights.
We now address plaintiff's motion for a preliminary injunction which is restricted solely to the issue of whether the state may enforce the regulations prior to approval by the Secretary of Health and Human Services (HHS). Defendants have admitted that the Secretary has not yet approved these regulations and that the state is currently enforcing them. Because we conclude that plaintiff has not established a substantial likelihood of success on the merits we will deny plaintiff's motion for preliminary injunction.
Plaintiff is a provider of in-hospital services and a voluntary participant in the Pennsylvania Medical Assistance Program. The Commonwealth administers this program and receives contribution from the federal government through the Medicaid program. The DPW regulates coverage and rate of payment and makes reimbursement to participants in the program for services provided under the program. Reimbursement is made in interim payments with an annual accounting.
In October 1982 plaintiff began operation of a newly-constructed maternity wing. This $41,645,000 construction project received planning agency approval from the DPW. This new operation has substantially increased costs for the year 1982-83 because of increased interest and depreciation expenses. Plaintiff anticipated that under previous regulations it would be properly reimbursed for these additional costs.
As a result of fiscal belt tightening by the federal government the Commonwealth's DPW was forced to seek ways to limit increases in the program's budget. The contested regulations are the result. In effect these new regulations impose a 10% ceiling on increases in the DPW's interim payments to participants in the program. Because of its new project plaintiff's costs will exceed 110% of last year's costs. Although the new regulations do make provision for reimbursement of the cost associated with the capital expenditure, payments are made on a year-end basis and are not included in the interim payments. Furthermore, additional criteria must be met in order to obtain any payment.
The DPW submitted its new regulations to the Secretary for approval in accord with the Medicaid statute. The Secretary has not yet given approval. The DPW has already begun enforcement of the regulation. Plaintiff contends that these regulations are not enforceable without final approval of the Secretary and their enforcement should be enjoined until the occurrence of that eventuality. Defendants contend that the statute does not require prior approval.
The issue then is whether Congress required approval by the Secretary prior to the enforcement of any amendments to a state's Medicaid plan. A fortiori, a review of the relevant statutory provisions is in order.
In support of its position, plaintiff advances 42 U.S.C. § 1396. That section provides in part:
The sums made available under this section shall be used for making payments to States which have submitted, and had approved by the Secretary of Health, Education and Welfare, State plans for medical assistance.