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West Virginia University Hospitals, Inc. v. Rendell

October 2, 2009

WEST VIRGINIA UNIVERSITY HOSPITALS, INC., PLAINTIFF,
v.
EDWARD G. RENDELL, GOVERNOR OF THE COMMONWEALTH OF PENNSYLVANIA, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Sylvia H. Rambo United States District Judge

JUDGE SYLVIA H. RAMBO

MEMORANDUM

The present case is the continuation of a dispute between the parties over whether Plaintiff West Virginia University Hospitals, Inc. ("WVUH") is entitled to trauma disproportionate share hospital ("Trauma DSH") payments under the Pennsylvania Trauma Systems Stabilization Act, 35 Pa. Cons. Stat. Ann. § 6943.1 et seq. ("Trauma Act"). Defendants are certain Pennsylvania state officials-Edward G. Rendell, Governor of the Commonwealth of Pennsylvania; Estelle B. Richman, Secretary of the Department of Public Welfare; and Michael Nardone, Deputy Secretary for Medical Assistance Programs (collectively referred to as "the Commonwealth" or "DPW"). The dispute between these parties has a long and winding procedural history involving two previous cases before this court:

W. Va. Univ. Hosps., Inc. v. Casey, No. 1:86-cv-0955, slip. op. (M.D. Pa. Oct. 18, 1990) ("WVUH I") and W. Va. Univ. Hosps., Inc. v. Rendell, No. 1:06-cv-0082, slip. op. (M.D. Pa. Nov. 5, 2007) ("WVUH II"). Although the instant dispute is only generally related to WVUH I,*fn1 it arose directly from WVUH II, a case decided only two years ago. The current case concerns the Commonwealth's decision to require WVUH to be accredited by the Pennsylvania Trauma Systems Foundation ("PTSF" or "the Foundation") as a prerequisite for receiving Trauma DSH payments for fiscal year 2008-2009. In its view, this requirement neither runs afoul of the court's decision in WVUH II nor the Constitution. Conversely, Plaintiffs believe that it runs afoul of both.

In effect, the current dispute is the one that went undecided by the court in its November 5, 2007 memorandum and order. In that memorandum, the court stated that "because an out-of-state hospital that would otherwise meet the criteria for a Level I trauma center cannot be certified as such by [PTSF], it cannot receive Trauma DSH payments from Pennsylvania." (1:06-cv-0082, Doc. 55 at 5.) The court noted in a footnote that "WVUH asserts that it has been certified as a Level I trauma center by West Virginia based on criteria approved by [the American College of Surgeons] . . .[and] that it meets or exceeds all criteria required for certification as a Level I trauma center in Pennsylvania apart from in-state residency. . . . Defendants claim that they lack information to verify these claims. . . ." (Id., n. 3.) The court demurred deciding whether WVUH met or exceeded PTSF's accreditation standards because Defendants in WVUH II admitted that they were treating WVUH differently solely because it is located outside the borders of Pennsylvania. Id. Here, however, whether WVUH's West Virginia and American College of Surgeons ("ACS") accreditations meet or exceed PTSF's accreditation is the core of the dispute in this case.

Pending is Plaintiff's motion for a preliminary injunction pursuant to Federal Rule of Civil Procedure 65. (Doc. 5.) Plaintiff seeks to enjoin the Commonwealth from paying Trauma DSH payments to any Pennsylvania hospital until a state plan amendment and any necessary statutory provisions have been submitted to and approved by this court. Plaintiff also seeks to enjoin the Commonwealth from requiring WVUH to obtain accreditation from the Foundation as a condition of receiving Trauma DSH payments. This motion was originally filed under the docket for WVUH II, 1:06-cv-0082, and a temporary restraining order was entered by consent of the Commonwealth under that number (1:06-cv-0082, Doc. 106.) On August 13, 2009, the court held a hearing on WVUH's motion for preliminary injunction under the WVUH II's docket number. On August 14, 2009, the court and the parties had a conference call to discuss procedurally how WVUH's motion should proceed. At the court's behest, the parties agreed that a new lawsuit would more appropriately address the issues raised by WVUH's motion for preliminary injunction, and agreed to a continuation of the temporary restraining order issued in 1:06-cv-0082 until October 12, 2009. (Doc. 3.) On August 28, 2009, WVUH filed the complaint in the captioned case. (Doc. 1.) That same day, WVUH filed its motion for preliminary injunction, (Doc. 5), and a stipulation between the parties, (Doc. 3), that the evidence presented at the August 13, 2009 hearing in 1:06-cv-0082 is admissible in this case.*fn2 WVUH's motion is now ripe for disposition.

I. Background*fn3

WVUH seeks a preliminary injunction barring Defendants from distributing Trauma DSH payments pending resolution of the instant case. The current dispute between these parties is inextricably linked with the court's decision in WVUH II, and a more detailed analysis of the court's decision in that case is helpful to a resolution of Plaintiff's motion for preliminary injunction.

A. WVUH II

It comes as no surprise to the court that the parties disagree about the scope and effect of the court's decision in WVUH II. Almost immediately after the court issued its decision, the parties took entrenched positions that continue to this day. In WVUH II, Plaintiff brought its claims under 42 U.S.C. § 1983 and asserted that Defendants refusal to pay it Trauma DSH payments violated the Equal Protection clause of the Fourteenth Amendment of the United States Constitution, and the Commerce Clause of Article I, § 8 of the United States Constitution.*fn4

Ultimately, the court agreed with WVUH. As to its equal protection claim, the court concluded that rational basis review applied, but that even with this low threshold, the Commonwealth's actions could not be justified:

Defendants' denial of Trauma DSH payments to all out-of-state hospitals fails rational basis review. The classification at issue here is a distinction between in-state and out-of-state hospitals providing trauma treatment to Pennsylvania residents. The state's proffered justification-improvement of access to trauma care for Pennsylvania residents-is not rationally related to the denial of the Trauma DSH payment to all out-of-state hospitals. Pennsylvania residents are routinely treated at out-of-state hospitals that are closer to their homes than Pennsylvania hospitals, or which are more capable of addressing their medical needs than Pennsylvania hospitals. Accordingly, because there is no rational relationship between improving access to trauma care, and the denial of Trauma DSH payments to out-of-state hospitals, the court will grant summary judgment in favor of WVUH on the equal protection claim. (1:06-cv-0082, Doc. 55 at 17.)

The court reached a similar conclusion concerning WVUH's Commerce Clause argument. First, the court dismissed Defendants' assertion that the Commerce Clause was inapplicable because, according to Defendants, Trauma DSH payments constituted a direct subsidy to in-state hospitals, and thus fall within a "subsidies" exception to the Commerce Clause. The court found this argument to be untenable in light of the dual state/federal nature of the funding for the subsidies, and the fact that by having incorporated the subsidies into their state Medicaid plan, the Commonwealth could not choose to withhold those payments in contravention of that plan. (Id. at 19-20.) Finally, as to the substance of WVUH's Commerce Clause argument, the court found that the Trauma Act's facial discrimination against out-of-state hospitals treating Pennsylvania Medicaid patients deserved heightened scrutiny, and that the Commonwealth articulated no legitimate basis for denying WVUH Trauma DSH payments while making these payments to in-state hospitals. (Id. at 20-21.) Accordingly, the court granted WVUH summary judgment on both its Equal Protection and Commerce Clause claims. (Id. at order.)

In its November 5, 2007 memorandum and order, the court deferred entry to judgment and conducted a conference call with the parties. That call was held on November 20, 2007. The purpose of the call was to allow the parties to assist in structuring a judgment and remedy consistent with the court's November 5, 2007 memorandum and order. After this conference call, the parties submitted short briefs concerning the scope of the injunction desired. Not surprisingly, the Commonwealth wanted a very narrow injunction, and WVUH wanted a broad injunction. In its brief, the Commonwealth argued that the court's November 7, 2009 memorandum narrowly determined that the Commonwealth cannot deny Trauma DSH payments to WVUH "solely on the basis of the hospital' [sic] out-of-state location[,]" and that the court "can[not] enjoin them from excluding Plaintiff from [Trauma DSH payments] on grounds other than its out-of-state location." (1:06-cv-0082, Doc. 61, Defs.' Mem. of Law Re: Remedy, at 2 (emphasis in original).) The Commonwealth went on to state-either prophetically or because it intended at that point to take this very step-that "nothing in the [c]court's opinion addressed the reasonableness of other requirements imposed by the Trauma Act, such as accreditation by the Pennsylvania Trauma Systems Foundation," and stated its position that "it is difficult to understand how reasonable accreditation requirements applied to all applicants, regardless of location, could violate the Equal Protection or Commerce Clauses." (Id.) Finally, in a footnote, Defendants took the position that the court's November 7, 2007 decision "effectively voided the Trauma Act by declaring unconstitutional a definition which is essential to and cannot be severed from the Act." (Id. at n.1.)

For its part, WVUH stated that it has already demonstrated that it is similarly situated to other in-state trauma centers, and the Commonwealth's "suggestion that accreditation by the Pennsylvania Trauma Systems Foundation could be a reasonable basis for denying payment is without merit" because "[b]y statute, the role of [PTSF] is to establish standards for the operation of trauma centers in this Commonwealth." (Doc. 62, Pl.'s Resp. to Defs.' Mem. of Law Re Remedy, at 2-3 (footnote and internal quotations omitted) (emphasis in original).) WVUH also chafed at Defendants' suggestion that the entire Trauma Act was void, and instead argued that the court declared void only those sections of the Trauma Act that require geographic location in the Commonwealth and, because its jurisdiction is limited to the Commonwealth, the requirement for accreditation by PTSF. (Id. at 3.) According to WVUH, the affected parts of the Trauma Act were the definition of "hospital" and the definition of "trauma center" in 35 Pa. Cons. Stat. Ann. § 6943.2; the requirement for a list of Level I and Level II hospitals accredited by PTSF in 35 Pa. Cons. Stat. Ann. § 6943.4; and the requirement for PTSF data in 35 Pa. Cons. Stat. Ann. § 6943.5(c)(2). (Id. at n. 4.)

The parties respective post-summary judgment memoranda are snapshots of the dispute that is presently before the court, and if the court had been a better seer it would have explicitly dealt with these issues at that point in time; however, because the court's power of divination was limited, on December 12, 2007, the court issued the following order, only the relevant parts of which appear below:

2) The Pennsylvania Trauma Systems Stabilization Act, 35 Pa. Cons. Stat. Ann. §§ 6943.1 et seq. ("Trauma Act") is unconstitutional to the extent that it denies trauma disproportionate share hospital payments ("Trauma DSH Payments") to out-of-state hospitals serving Pennsylvania Medicaid patients. Those sections of the Trauma Act that limit eligibility for Trauma DSH payments to hospitals located in the Commonwealth of Pennsylvania are void.

3) Pennsylvania State Plan Amendment 04-009, the part of the Pennsylvania State Plan under Title XIX of the Social Security Act that establishes a class of disproportionate share payments to be distributed to hospitals located in the Commonwealth of Pennsylvania that are accredited as trauma centers by the Pennsylvania Trauma Systems Foundation, is unconstitutional to the extent that it limits eligibility for Trauma DSH payments to hospitals located in the Commonwealth of Pennsylvania.

4) Consistent with the existing Pennsylvania State Plan under Title XIX of the Social Security Act, Commonwealth of Pennsylvania Methods and Standards for Establishing Payment Rates -- Inpatient Hospital Care, Attachment 4.19A, which requires that an out-of-state acute care general hospital that treats in any one fiscal year more than 400 Pennsylvania medical assistance inpatient cases be paid in accordance with methods and standards applied to in-state inpatient hospitals for acute care services, Defendants shall treat WVUH as an in-state hospital for purposes of determining WVUH's eligibility for Trauma DSH payments.

5) Defendants shall not make or distribute any Trauma

DSH payments to any eligible provider until a state plan amendment has been fully approved and implemented. If approval and implementation of the state plan amendment requires amendment of the Trauma Act or other statute, Defendants shall not make or distribute any Trauma DSH payments to any eligible provider until an amended statute is passed and effective and whose constitutionality has been approved by this Court.

(1:CV-06-0082, Doc. 63 (emphasis added).)

A plain reading of this order demonstrates that the court did not declare the entire Trauma Act void on its face; rather, the court declared only those portions of the Act, and the then-existing state plan, unconstitutional that denied Plaintiff the ability to receive Trauma DSH payments solely because is was located out-of-state. The court agrees with WVUH's position that the relevant sections of the Trauma Act affected by the court's November 7, 2007 memorandum and its December 12, 2007 order are the following: (1) the definition of "hospital" and "trauma center" located at 35 Pa. Cons. Stat. Ann. § 6943.2; (2) the requirement contained in section 6943.4 requiring PTSF to prepare a list of the accredited Level I and II trauma centers; and (3) the requirement that the Commonwealth use data from PTSF to calculate payment distribution to level I and III trauma centers.*fn5

The court's order invalidated those sections of the Trauma Act which make distinctions between trauma centers located in-state that treat Pennsylvania Medicaid patients, and those located out-of-state that treat Pennsylvania Medicaid patients. With this in mind, the court turns to the events that occurring after the issuance of the December 12, 2007 order.

B. Preliminary Injunction Hearing

The court held a hearing on August 13, 2009, on WVUH's motion for a preliminary injunction. At that hearing, the court heard testimony from five witnesses, and admitted into evidence hundreds of exhibits by both parties.*fn6 Based on the evidence provided at that hearing, the court finds the following facts.

1. The non-party actors

Although the parties in this case are well known to the court, and their relationship was described in detail in the court's November 5, 2007 memorandum, the current case presents two new non-parties who are relevant to the case as a ...


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