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Christ the King Manor, Inc., et al v. Kathleen Sebelius

July 24, 2012

CHRIST THE KING MANOR, INC., ET AL., PLAINTIFFS,
v.
KATHLEEN SEBELIUS, ET. AL.,
DEFENDANTS.



The opinion of the court was delivered by: Hon. John E. Jones III

MEMORANDUM & ORDER

THE BACKGROUND OF THIS ORDER IS AS FOLLOWS:

Pending before the Court is Plaintiffs' Motion for Summary Judgment, (doc. 49), the Federal Defendants' Cross Motion for Summary Judgment filed by Kathleen Sebelius*fn1 and Donald Berwick,*fn2 (doc. 51), and the State Defendant's Motion for Summary Judgment filed by Defendant Michael Nardone.*fn3 (Doc. 54). For the reasons that follow, we shall deny Plaintiffs' motion, and grant the Federal and State Defendants' motions.

I. PROCEDURAL HISTORY

Plaintiffs*fn4 initiated the instant action by filing a complaint on October 15, 2009. (See Doc. 1). Secretary Dichter filed the State Motion to Dismiss (the "State MTD") on December 12, 2009, (doc. 10), and the Federal Defendants filed the Federal Motion to Dismiss (the "Federal MTD") on January 15, 2010. (Doc. 23). On June 29, 2010 we issued a memorandum and order denying the Federal MTD in its entirety and granting in part and denying in part the State MTD. (Doc. 36 at 27). We granted the State MTD to the extent it related to the State Defendant's conduct that predated the Federal Defendants' approval of TN 08-007 and TN 08-008, and also to the extent Plaintiffs sought declaratory and monetary relief. (Id.). However, we denied the motion to the extent of Plaintiffs' request for injunctive relief regarding the State Defendant's continued implementation of TN 08-007 and TN 08-008. (Id.).

Thereafter, on August 2, 2010 the State and Federal Defendants filed their respective answers to the complaint. (Docs. 42, 43). On October 1, 2010, Plaintiffs filed one of the pending motions for summary judgment and a brief in support thereof. (Docs. 49, 50). On the same day, the Federal Defendants filed a cross motion for summary judgment and supporting brief, (docs. 51, 52), and the State Defendants filed a motion for summary judgment and brief in support thereof. (Docs. 54, 55). Subsequently, on October 25, 2010, Plaintiffs filed a Motion to Strike Federal Defendants' Declaration of Keith T. Leuschner and Their Related Motion for Summary Judgment Supporting Brief, and a brief in support of their motion to strike. (Docs. 59, 60). The Federal Defendants filed a brief in opposition to the motion to strike on November 8, 2010, (doc. 62), and Plaintiffs filed a reply brief in further support of their motion on November 16, 2010. (Doc. 63). On February 7, 2011, we issued a memorandum and order denying Plaintiffs' motion to strike the declaration of Keith Leuschner ("Leuschner") and the Federal Defendant's brief in support of their summary judgment motion. (Doc. 64 at 8).

On February 14, 2011, the State Defendant moved to stay all proceedings in the case pending the United States Supreme Court's decision in Independent Living Center of Southern California v. Maxwell-Jolly, 572 F.3d 644 (9th Cir. 2009). (Doc. 65). After receiving supporting and opposition briefs, we granted the motion to stay on March 16, 2011 pending the Supreme Court's decision in Maxwell-Jolly v. Independent Living Center of Southern California. (Doc. 70 at 13). In compliance with our previous order, the parties submitted a status report on March 2, 2012, advising that the Supreme Court had entered its opinion in Douglas v. Independent Living Center of Southern California, Inc., et al, on February 22, 2012. (Doc. 78). As a result, we lifted the stay on March 5, 2012 and directed the parties to resume briefing on the cross motions for summary judgment. (Doc. 79).

On April 27, 2012, Plaintiffs filed a brief in opposition to the State Defendant's motion for summary judgment and a brief in opposition to the Federal Defendants' motion for summary judgment. (Docs. 84, 85). On the same day, the Federal Defendants filed a brief in opposition to Plaintiffs' motion for summary judgment, (doc. 86), and the State Defendant filed a brief in opposition to Plaintiffs' motion for summary judgment. (Doc. 87). On May 11, 2012, Plaintiffs filed reply briefs in further support of their motion for summary judgment, (docs. 88, 91), the State Defendant filed a reply brief in support of its motion for summary judgment, (doc. 89), and the Federal Defendants filed a reply brief in further support of their motion for summary judgment. (Doc. 90).

II. STANDARD OF REVIEW

Summary judgment is appropriate if the record establishes "that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). Initially, the moving party bears the burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The movant meets this burden by pointing to an absence of evidence supporting an essential element as to which the non-moving party will bear the burden of proof at trial. Id. at 325. Once the moving party meets its burden, the burden then shifts to the non-moving party to show that there is a genuine issue for trial. Fed. R. Civ. P. 56(e)(2). An issue is "genuine" only if there is a sufficient evidentiary basis for a reasonable jury to find for the non-moving party, and a factual dispute is "material" only if it might affect the outcome of the action under the governing law. Anderson v. Liberty Lobby, Inc, 477 U.S. 242, 248-49 (1986).

In opposing summary judgment, the non-moving party "may not rely merely on allegations of denials in its own pleadings; rather, its response must ... set out specific facts showing a genuine issue for trial." Fed. R. Civ. P. 56(e)(2). The non-moving party "cannot rely on unsupported allegations, but must go beyond pleadings and provide some evidence that would show that there exists a genuine issue for trial." Jones v. United Parcel Serv., 214 F.3d 402, 407 (3d Cir. 2000). Arguments made in briefs "are not evidence and cannot by themselves create a factual dispute sufficient to defeat a summary judgment motion." Jersey Cent. Power & Light Co. v. Twp. of Lacey, 772 F.2d 1103, 1109-10 (3d Cir. 1985). However, the facts and all reasonable inferences drawn therefrom must be viewed in the light most favorable to the non- moving party. P.N. v. Clementon Bd. of Educ., 442 F.3d 848, 852 (3d Cir. 2006).

Summary judgment should not be granted when there is a disagreement about the facts or the proper inferences that a factfinder could draw from them. Peterson v. Lehigh Valley Dist. Council, 676 F.2d 81, 84 (3d Cir. 1982). Still, "the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; there must be a genuine issue of material fact to preclude summary judgment." Anderson, 477 U.S. at 247-48.

III. FACTUAL BACKGROUND

Medicaid is a program created under Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq. ("§ 1396"), designed to provide health care to qualified individuals. Federal and state authorities share responsibility for funding and administering the Medicaid program in a fashion consistent with both federal and state law. In accordance with federal law, Pennsylvania must submit a State Plan for Medical Assistance (the "State Plan") to CMS for approval. Pursuant to 42 U.S.C. § 1396a(a)(5) and 62 Pa. Cons. Stat. § 201, the DPW has been designated as the "single state agency" to supervise the creation and administration of Pennsylvania's State Plan.*fn5 Plaintiffs allege that Secretary Sebelius, in her official capacity as Secretary of the U.S. Department of Health and Human Services ("HHS"), is tasked with approving state plans for medical assistance only when they satisfy the requirements of §§ 1396a(a)-(b). (Doc. 1 ¶¶ 5, 14).*fn6 One such requirement mandates that state plans provide: . . . such methods and procedures relating to the utilization of, and payment for, care and services available under the plan . . . as may be necessary . . . to assure that such payments are consistent with efficiency, economy, and quality of care . . . 42 U.S.C. § 1396a(a)(30)(A). Accordingly, Plaintiffs assert that the Medicaid payments a participating state makes to nursing facility providers must be no greater than what is required to provide efficient and economic care, but high enough to provide for quality care. (Id. ¶ 16 (citing § 1396a(a)(30)(A))).

On June 28, 2008, DPW published a notice of a proposed change in its method and standards for computing Medicaid payments made to nursing facilities for fiscal years 2008 through 2011, which authorized use of a budget adjustment factor ("BAF"), explained below in more detail. See 38 Pa. Bull. 3561 (June 28, 2008).*fn7 The sentiment expressed in this notice was echoed in Pennsylvania's Act of July 4, 2008, P.L. 31, No. 44 ("Act 44"), which provided the following with regard to payments for nursing facility services:

Subject to Federal approval of such amendments as may be necessary to the Commonwealth's approved . . . State Plan, [DPW] shall do all of the following:

For each fiscal year between July 1, 2008 and June 30, 2011, the department shall apply a revenue adjustment neutrality factor*fn8 to county and nonpublic nursing facility payment rates. For each such fiscal year, the revenue adjustment neutrality factor shall limit the estimated aggregate increase in the statewide day weighted average payment rate so that the aggregate percentage of increase for the period that begins on July 1, 2005 and ends on the last of the fiscal years is limited to the amount permitted by the funds appropriated by the General Appropriations Act for those fiscal years. . . .

Pennsylvania Act of July 4, 2008, P.L. 31, No. 44.*fn9

Plaintiffs aver that on July 19, 2008, DPW published notices of proposed rates for nonpublic and county nursing facility providers*fn10 for the fiscal year ending ("FYE") on June 30, 2009. (Doc. 1 ¶ 34).*fn11

On September 30, 2008, DPW submitted to CMS amendments to Pennsylvania's State Plan implementing the new BAF limitation retroactive to July 1, 2008. The amendments were given the identifiers "TN 08-007," applying to nonpublic nursing facility payment rates, and "TN 08-008," applying to county home payment rates.*fn12 (Doc. 1 ¶ 36). Pursuant to these proposed state plan amendments ("SPAs"), Plaintiffs allege that DPW limited increases in nursing facility provider rates for the FYE June 30, 2009 by multiplying each nonpublic nursing facility provider's rate as of July 1, 2007 by 0.90891 and each county home provider's rate as of that date by 1.01. (Id. ¶ 37).*fn13 Plaintiffs allege that DPW did not submit with these proposed SPAs any information indicating that the resulting payments to nursing facility providers would be high enough to allow for "quality care," as required by 42 U.S.C. § 1396a(a)(30)(A), and CMS allegedly did not request the same. (See id. ¶¶ 38, 52). DPW published the proposed amendments, as submitted to CMS, in an updated notice in the Pennsylvania Bulletin on November 14, 2008. (See id. ¶ 44). CMS ultimately approved the amendments on December 12, 2008. (See id. ¶¶ 38, 52). On March 28, 2009, DPW published notice of the final rates for nursing facility provider reimbursement for fiscal year July 1, 2008 through June 30, 2009, which included the BAF rates submitted to CMS in September of 2008. (Id. ¶ 53).

Plaintiffs timely filed administrative appeals with the DPW's Bureau of Hearings and Appeals (the "BHA") to contest the final rates issued in March 2009 for FYE June 30, 2009. In doing so, Plaintiffs challenged the validity of CMS's approval of TN 08-007 and TN 08-008 and the conformity of the resulting payments with federal and state requirements.*fn14 This appeal was pending at the time Plaintiffs filed their complaint in the matter sub judice, which requests: (i) declaratory relief against the Federal Defendants pursuant to the Administrative Procedure Act, 5 U.S.C. § 702;*fn15 and (ii) ...


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