Northeast Medical Services, Inc. v. California Department of Health Care Services, Health and Human Services Agency, State of California et al

Filing 45


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1 IN THE UNITED STATES DISTRICT COURT 2 FOR THE NORTHERN DISTRICT OF CALIFORNIA 3 4 NORTHEAST MEDICAL SERVICES, INC., 5 6 7 8 9 Plaintiff, v. CALIFORNIA DEPARTMENT OF HEALTHCARE SERVICES, et al., Defendants. ________________________________/ No. C 12-2895 CW ORDER GRANTING FEDERAL DEFENDANTS’ MOTION TO DISMISS (Docket No. 30); GRANTING IN PART STATE DEFENDANTS’ MOTION TO DISMISS (Docket No. 29). 10 United States District Court For the Northern District of California Plaintiff Northeast Medical Services, Inc. (NEMS) brings this 11 action for declaratory and injunctive relief against Defendants 12 U.S. Department of Health and Human Services (HHS), HHS Secretary 13 Kathleen Sebelius, California Department of Health Care Services 14 (DHCS), DHCS Director Toby Douglas, and California Health and 15 Human Services Agency (HHSA). Federal Defendants HHS and Sebelius 16 move to dismiss for lack of subject matter jurisdiction and 17 failure to state a claim. State Defendants DHCS, Douglas, and 18 HHSA move separately to dismiss on the same grounds. After 19 considering all of the parties’ submissions and oral argument, the 20 Court grants Federal Defendants’ motion to dismiss and grants in 21 part and denies in part State Defendants’ motion to dismiss. 22 BACKGROUND 23 NEMS is a non-profit health center that offers medical care 24 to the “poor and medically-underserved populations of the San 25 Francisco Bay Area.” Docket No. 1, Compl. ¶¶ 19-20. It currently 26 serves over thirty-five thousand patients and conducts nearly two27 hundred thousand patient visits per year. 28 Id. 1 For the past four decades, NEMS has received federal funding 2 under § 330 of the Public Health Services Act. 3 Compl. ¶ 19. 4 medical services to communities with limited health care access 5 and may not refuse services to any person based on that person’s 6 inability to pay. 7 further condition of its funding, NEMS must also provide services 8 to any person enrolled in Medicaid. 9 42 U.S.C. § 254b; Under that provision, NEMS is required to provide Id. ¶¶ 1-2; 42 U.S.C. § 254b(a)(1). As a 42 U.S.C. § 254b(k)(3). Medicaid is a federal program that offers participating United States District Court For the Northern District of California 10 states financial assistance to provide medical services to the 11 poor. 12 “do not have to participate in Medicaid, . . . those that choose 13 to do so ‘must comply both with statutory requirements imposed by 14 the Medicaid Act and with regulations promulgated by the Secretary 15 of [HHS].’” 16 at *2 (9th Cir.) (citations omitted). 17 is that participating states reimburse federally-qualified health 18 centers for the services they provide to Medicaid enrollees. 19 U.S.C. § 1396a(a)(15). 20 like NEMS, typically receive funding from both the federal 21 government (under the Public Health Services Act) and the State 22 (under the Medicaid Act). 23 Cal. Welf. & Inst. Code § 10740; Compl. ¶ 22. While states Managed Pharmacy Care v. Sebelius, 2012 WL 6204214, One of these requirements 42 Thus, federally-qualified health centers, California participates in Medicaid through its Medi–Cal 24 program. 25 therefore required to reimburse NEMS for the organization’s costs 26 in providing care to Medicaid enrollees. 27 Compl. ¶¶ 3-5. 28 “managed care organization” called the San Francisco Health Plan Cal. Welf. & Inst. Code § 10740; Compl. ¶ 22. It is 42 U.S.C. § 1396a(bb); It provides these reimbursements through a 2 1 (SFHP), with which the State has contracted to help administer 2 Medi-Cal in the San Francisco area. 3 provides NEMS with regular payments that are meant to estimate 4 NEMS’s prospective costs for treating Medicaid enrollees for the 5 upcoming fiscal year. 6 year, NEMS is required to report its actual costs to DHCS, the 7 agency tasked with administering Medi-Cal, so that the agency can 8 determine whether the SFHP’s prospective payments fully 9 compensated NEMS for its Medicaid-related costs that year. Id. ¶¶ 60-61. Compl. ¶¶ 3, 77-79. SFHP At the end of every fiscal United States District Court For the Northern District of California 10 Id. ¶¶ 58-59, 85; 42 U.S.C. § 1396a(bb)(5). 11 that SFHP’s prospective payments exceeded NEMS’s actual Medicaid 12 costs for the year, then NEMS must return any excess funding it 13 received to DHCS. 14 SFHP’s payments fell short of NEMS’s actual costs for the year, 15 then DHCS must make up the shortfall by paying NEMS the 16 difference. 17 all federally-qualified health centers to complete, is known as 18 the annual “reconciliation.” 19 20 21 22 23 24 25 26 27 28 Id. Compl. ¶¶ 58-59. If the report reveals If the report shows that This process, which the Medicaid Act requires Id. ¶ 85.1 In May 2011, NEMS learned that the U.S. Attorney’s office for the Northern District of California had opened an investigation 1 The annual reconciliation process is described in the Medicaid Act as follows: In the case of services furnished by a Federally-qualified health center or rural health clinic pursuant to a contract between the center or clinic and a managed care entity (as defined in section 1396u-2(a)(1)(B) of this title), the State plan shall provide for payment to the center or clinic by the State of a supplemental payment equal to the amount (if any) by which the amount determined under paragraphs (2), (3), and (4) of this subsection exceeds the amount of the payments provided under the contract. 42 U.S.C. § 1396a(bb)(5). 3 1 into whether NEMS had knowingly reported false information to DHCS 2 on its annual reconciliation reports. 3 investigation focused on whether NEMS had violated the federal 4 False Claims Act (FCA), 31 U.S.C. § 3729, by under-reporting the 5 amount of payments it received from SFHP so that it could recoup 6 larger reconciliation payments from DHCS. 7 learned of the investigation when it was served with a Civil 8 Investigative Demand by HHS that month. Id. ¶¶ 88, 91. The Compl. ¶¶ 88-94. NEMS Id. ¶ 88. In response to the Civil Investigative Demand, NEMS has 10 United States District Court For the Northern District of California 9 produced thousands of documents to the U.S. Attorney’s office and 11 met several times with HHS and DHCS representatives to answer 12 questions about its financial record-keeping. 13 During a conference call with HHS and the U.S. Attorney’s office 14 on February 9, 2012, NEMS learned “for the first time” that the 15 United States was considering intervening in a qui tam action that 16 had previously been filed against NEMS in this district. 17 ¶ 93. 18 charges NEMS with violations of both the FCA, 31 U.S.C. § 3729, 19 and the California False Claims Act, Cal. Gov’t Code §§ 12650 et 20 seq., and seeks treble damages and civil penalties. 21 States & State of California ex rel. Trinh v. Northeast Med. 22 Servs., Case No. 10-1904-CW, Docket No. 1, at 1. 23 Id. ¶¶ 89-92. Id. That action, which was filed under seal on May 3, 2010, See United On April 9, 2012, an Assistant U.S. Attorney (AUSA) sent NEMS 24 a letter stating that the government’s preliminary review of 25 NEMS’s annual reconciliation reports “supports the allegations 26 made in the qui tam action.” 27 letter described how NEMS had apparently received over twenty- 28 seven million dollars in Medicaid-related payments from SFHP Compl., Ex. 2, at 2. 4 The AUSA’s 1 between 2005 and 2010 but only reported receiving thirteen million 2 dollars from SFHP on its annual reconciliation reports to DHCS. 3 Id. 4 to recoup nearly fifteen million dollars in overpayments from DHCS 5 during that period. 6 liable under the False Claims Act” and invited NEMS to discuss the 7 issue further in settlement negotiations. 8 the federal government would soon be deciding whether or not to 9 intervene in the qui tam action. This under-reporting, according to the letter, allowed NEMS United States District Court For the Northern District of California 10 Id. The letter concluded that “NEMS could be Id. It also noted that Id. In addition to describing the results of its initial 11 investigation, the government expressly rejected NEMS’s proffered 12 reasons for declining to report receipt of the full SFHP payments 13 to DHCS. 14 Attorney, NEMS had expressed the view that it was not statutorily 15 obliged to report all of the funds that it received from SFHP to 16 DHCS. 17 permitted it to report only a portion of the funds it received 18 from SFHP. 19 federal government did not agree with NEMS’s interpretation of the 20 Medicaid Act’s financial reporting requirements. 21 1-2. 22 Id. Previously, in a January 2012 letter to the U.S. Compl., Ex. 1, at 1-3. Id. Rather, it argued, the Medicaid Act The AUSA’s April 2012 letter explained why the Id., Ex. 2, at On April 12, 2012, three days after receiving the AUSA’s 23 letter, NEMS notified the U.S. Attorney that it had not changed 24 its position and “had no settlement to propose.” 25 U.S. Attorney’s office thus ceased its settlement efforts and 26 continued its investigation of NEMS. 27 turn, filed its annual reconciliation report for fiscal year 2011 28 on May 31, 2012. Id. ¶ 95. Id. ¶¶ 96-98. The NEMS, in Id. ¶¶ 15, 99. NEMS asserts that it filed the 5 1 report “in a manner consistent with its past practice” but 2 notified DHCS that its interpretation of its reporting 3 requirements differed from the interpretation that the U.S. 4 Attorney had recently articulated in its April 9 letter. 5 ¶ 15. 6 Id. On June 4, 2012, less than a week after filing its 7 reconciliation report, NEMS filed this lawsuit. 8 NEMS requests: 9 (1) In its complaint, a judicial declaration that “the legal conclusions and United States District Court For the Northern District of California 10 positions (including that of the relator in the above- 11 described qui tam action) expressed in the AUSA’s letter are 12 unsupported by any (properly promulgated) rule or regulation, 13 are a departure from existing policy on the substantive 14 rights of Section 330 health centers, and contrary to law,” 15 id. ¶ 127; 16 (2) a judicial declaration that NEMS’s own proposed 17 interpretation of the statutory reporting requirements for 18 federally-qualified health centers is correct, id. ¶¶ 128-31; 19 (3) an order directing Defendants to “implement a payment system 20 (including past and future payments)” that comports with 21 NEMS’s interpretation of federal law, id. ¶ 131; 22 (4) attorneys’ fees and costs, id. ¶ 133; and 23 (5) “such other and further relief as the Court deems warranted 24 or just,” id. ¶ 134. 25 On July 25, 2012, the Court related this case to the pending 26 qui tam action against Plaintiff. 27 on August 2, the United States filed its notice of election to Docket No. 28. 28 6 One week later, 1 intervene in that action. 2 their motions to dismiss in this case. 3 On August 6, 2012, Defendants filed Five months later, on January 4, 2013, the State of 4 California filed its notice of election to intervene in the qui 5 tam action. 6 of California filed their joint complaint-in-intervention in that 7 case, charging NEMS with “knowingly submitt[ing] false 8 reconciliation reports” to DHCS in violation of the FCA and 9 California False Claims Act. On January 15, 2013, the United States and the State United States District Court For the Northern District of California 10 11 Docket No. 26 in Case No. 10-1904. LEGAL STANDARDS I. Subject Matter Jurisdiction 12 Dismissal is appropriate under Rule 12(b)(1) when the 13 district court lacks subject matter jurisdiction over the claim. 14 Fed. R. Civ. P. 12(b)(1). 15 must exist at the time the action is commenced. 16 Mission Indians v. Cal. State Bd. of Equalization, 858 F.2d 1376, 17 1380 (9th Cir. 1988). 18 issue which goes to the power of the court to hear the case. 19 Therefore, a Rule 12(b)(1) challenge should be decided before 20 other grounds for dismissal, because they will become moot if 21 dismissal is granted. 22 Cir. 1975). 23 Federal subject matter jurisdiction Morongo Band of Subject matter jurisdiction is a threshold Alvares v. Erickson, 514 F.2d 156, 160 (9th A federal court is presumed to lack subject matter 24 jurisdiction until the contrary affirmatively appears. 25 West, Inc. v. Confederated Tribes, 873 F.2d 1221, 1225 (9th Cir. 26 1989). 27 matter jurisdiction without giving the plaintiff an opportunity to 28 amend unless it is clear that the jurisdictional deficiency cannot Stock An action should not be dismissed for lack of subject 7 1 be cured by amendment. 2 637 F.2d 1211, 1216 (9th Cir. 1980). 3 II. 4 May Dep’t Store v. Graphic Process Co., Failure to State a Claim A complaint must contain a “short and plain statement of the 5 claim showing that the pleader is entitled to relief.” 6 Civ. P. 8(a). 7 state a claim, dismissal is appropriate only when the complaint 8 does not give the defendant fair notice of a legally cognizable 9 claim and the grounds on which it rests. Fed. R. On a motion under Rule 12(b)(6) for failure to Bell Atl. Corp. v. United States District Court For the Northern District of California 10 Twombly, 550 U.S. 544, 555 (2007). 11 complaint is sufficient to state a claim, the court will take all 12 material allegations as true and construe them in the light most 13 favorable to the plaintiff. 14 896, 898 (9th Cir. 1986). 15 to legal conclusions; “threadbare recitals of the elements of a 16 cause of action, supported by mere conclusory statements,” are not 17 taken as true. 18 (citing Twombly, 550 U.S. at 555). In considering whether the NL Indus., Inc. v. Kaplan, 792 F.2d However, this principle is inapplicable Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) 19 When granting a motion to dismiss, the court is generally 20 required to grant the plaintiff leave to amend, even if no request 21 to amend the pleading was made, unless amendment would be futile. 22 Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc., 911 23 F.2d 242, 246-47 (9th Cir. 1990). 24 amendment would be futile, the court examines whether the 25 complaint could be amended to cure the defect requiring dismissal 26 “without contradicting any of the allegations of [the] original 27 complaint.” 28 Cir. 1990). In determining whether Reddy v. Litton Indus., Inc., 912 F.2d 291, 296 (9th 8 1 2 DISCUSSION I. 3 Plaintiff’s Legal Claims Plaintiff asserts three causes of action in its complaint. 4 The first and third causes of action essentially allege that the 5 AUSA’s letter mischaracterizes Plaintiff’s financial reporting 6 obligations and propounds an invalid interpretation of the 7 Medicaid Act. 8 action alleges that DHCS has violated the Medicaid Act by failing 9 to provide Plaintiff with timely reimbursements for the Compl. ¶¶ 115-18, 124-26. The second cause of United States District Court For the Northern District of California 10 organization’s costs in serving Medicaid enrollees. 11 ¶¶ 119-23. 12 Compl. Although Plaintiff asserts in its opposition brief that the 13 “allegations in the Complaint are (with certain exceptions obvious 14 from the text) directed toward and applicable to both (federal and 15 State) sets of defendants,” Opp. Fed. Defs.’ Mot. Dismiss 1, its 16 complaint does not delineate clearly which claims are asserted 17 against which Defendants. 18 Plaintiff’s first and third causes of action are directed at both 19 State and Federal Defendants or only at Federal Defendants. 20 e.g., Compl. ¶¶ 124-26 (referring to “defendants” generally 21 without further specification). 22 Court assumes that Plaintiff’s first and third causes of action 23 are directed at both sets of Defendants and that its second cause 24 of action is directed exclusively at State Defendants. 25 II. In particular, it is not clear whether In light of this ambiguity, the Subject Matter Jurisdiction 26 A. 27 Plaintiff seeks a judicial declaration that the federal 28 See, Claims Against Federal Defendants government’s interpretation of the financial reporting 9 1 requirements for federally-qualified health centers, as expressed 2 in the AUSA’s letter, is “contrary to law.” 3 It has sought review of the AUSA’s letter under the Administrative 4 Procedure Act (APA), 5 U.S.C. § 704. 5 that the Court lacks subject matter jurisdiction over Plaintiff’s 6 claims because the AUSA’s letter is not subject to judicial 7 review. Compl. ¶¶ 117, 127. Federal Defendants argue 8 Under the APA, a federal court may only review an agency 9 action if (1) a statute expressly provides for judicial review of United States District Court For the Northern District of California 10 that action or (2) the agency’s action is “final” in nature. 11 5 U.S.C. § 704. 12 authorized, “finality is a jurisdictional requirement to obtaining 13 judicial review under the APA.” 14 U.S. Army Corps of Eng’rs, 543 F.3d 586, 591 (9th Cir. 2009). 15 Thus, unless judicial review is statutorily Fairbanks Northstar Borough v. “For an agency action to be final, the action must (1) ‘mark 16 the consummation of the agency’s decisionmaking process’ and 17 (2) ‘be one by which rights or obligations have been determined, 18 or from which legal consequences will flow.’” 19 Desert Ass’n v. U.S. Forest Serv., 465 F.3d 977, 982 (9th Cir. 20 2006) (citing Bennett v. Spear, 520 U.S. 154, 178 (1997)). 21 inquiry requires the court to make a pragmatic consideration of 22 the effect of the challenged action -- not just its label. 23 985. 24 action imposes an obligation, denies a right, or fixes some legal 25 relationship as the consummation of the administrative process. 26 Id. at 986–87. 27 and immediate . . . effect on the day-to-day business’ of the 28 subject party.” Oregon Natural This Id. at The finality requirement is satisfied only when an agency “An agency action may be final if it has a ‘direct Id. at 987 (alteration in original). 10 1 Here, Plaintiff asserts that the AUSA’s letter constitutes a 2 “sufficiently final agency action to be judicially reviewable.” 3 Compl. ¶ 101. 4 view” as to how federally-qualified health centers, like 5 Plaintiff, are supposed to file their annual reconciliation 6 reports. 7 effects are “direct and immediate” because it instilled in 8 Plaintiff the “well-founded fear that the state and/or federal 9 government will enforce the positions and interpretations stated United States District Court For the Northern District of California 10 therein.” It argues that the letter represents “HHS’s current Id. In addition, Plaintiff contends that the letter’s Id. ¶ 112. 11 Even assuming that the AUSA’s letter actually constitutes 12 action by HHS -- something the parties dispute here -- it does not 13 satisfy the APA’s finality requirement. 14 summarizes the preliminary findings of the U.S. Attorney’s FCA 15 investigation, does not affect Plaintiff’s legal rights or 16 obligations. 17 government’s initial review of Plaintiff’s financial records 18 “seems to indicate” that Plaintiff falsified its reconciliation 19 reports and that this conduct “appears to violate” the FCA. 20 Compl., Ex. 2, at 2 (emphasis added); see also id. (“It appears 21 NEMS could be liable under the [FCA].” (emphasis added)). 22 Plaintiff itself acknowledges in its complaint that the letter 23 uses “uncertain language” in describing the potential scope of its 24 FCA liability. 25 The letter, which merely It uses noncommittal language, noting that the Compl. ¶ 94. Furthermore, the letter makes clear that it is an invitation 26 to settlement negotiations rather than a formal declaration of 27 sanctions or penalties. 28 letters: “FOR SETTLEMENT PURPOSES ONLY.” Indeed, the subject line reads, in bold 11 Id. The letter also 1 states, again in bold print, that the government’s deadline for 2 intervening in the pending qui tam action is July 2, 2012, 3 indicating that any formal enforcement efforts would not begin, if 4 at all, for another three months. 5 demonstrate that the AUSA’s letter was “of a merely tentative or 6 interlocutory nature” and, thus, not subject to judicial review 7 under the APA. 8 v. United States, 23 F. Supp. 2d 497, 500-01 (D.N.J. 1998) 9 (holding that FCA settlement letters sent by the Department of Id. All of these elements See Bennett, 520 U.S. at 178; cf. N.J. Hosp. Ass’n United States District Court For the Northern District of California 10 Justice did not constitute final agency action because the 11 “settlement letters merely indicate a belief by the DOJ that 12 plaintiff’s member hospitals may have violated the Medicare Act” 13 (emphasis added)). 14 Plaintiff seeks to analogize this case to Sackett v. EPA, 132 15 S. Ct. 1367 (2012). 16 pair of residential property owners could challenge a “compliance 17 order” that the EPA issued instructing them to bring their 18 property into compliance with the Clean Water Act. 19 The Court concluded that the order qualified as a “final” agency 20 action because its findings were not subject to further agency 21 review and because the order imposed a binding “legal obligation” 22 upon the plaintiffs -- namely, to comply with the order or face 23 “double penalties in a future enforcement proceeding.” 24 1371-72. 25 In Sackett, the Supreme Court held that a Id. at 1371. Id. at In contrast, the findings in the AUSA’s letter here were not 26 only subject to further agency review but also had no impact on 27 Plaintiff’s legal obligations. 28 that the government was still considering whether or not its In fact, the letter itself stated 12 1 investigatory findings ultimately justified intervention in the 2 qui tam action. 3 carried no guarantee of future enforcement activity. 4 falls outside the ambit of APA finality and is not subject to 5 judicial review. 6 Consumer Prod. Safety Comm’n, 324 F.3d 726, 732 (D.C. Cir. 2003) 7 (“[T]he Commission’s actions here, which are merely investigatory 8 and clearly fall short of filing an administrative complaint, are 9 not final agency action. In short, the letter was merely speculative and As such, it See Reliable Automatic Sprinkler Co., Inc. v. No legal consequences flow from the United States District Court For the Northern District of California 10 agency’s conduct to date, for there has been no order compelling 11 [the plaintiff] to do anything.”). 12 The Court therefore dismisses all claims against Federal 13 Defendants for lack of subject matter jurisdiction. 14 United States has now filed its complaint in the qui tam action -- 15 and thus commenced an actual enforcement proceeding -- Plaintiff 16 may amend its claims for declaratory relief and raise them as 17 counterclaims in that action. Because the 18 B. 19 State Defendants argue that Plaintiff has failed to establish Claims Against State Defendants 20 both that it has standing and that its claims are ripe. 21 arguments are addressed in turn. 22 23 1. These Standing Because challenges to standing implicate a federal court's 24 subject matter jurisdiction under Article III of the U.S. 25 Constitution, they are properly raised in a motion to dismiss 26 under Rule 12(b)(1). 27 2000). 28 she has suffered an injury in fact that is concrete and White v. Lee, 227 F.3d 1214, 1242 (9th Cir. To establish standing, a plaintiff must show: “(1) he or 13 1 particularized, and actual or imminent; (2) the injury is fairly 2 traceable to the challenged conduct; and (3) the injury is likely 3 to be redressed by a favorable court decision.” 4 Recovery Alliance v. Gutierrez, 545 F.3d 1220, 1225 (9th Cir. 5 2008). 6 Salmon Spawning & A concrete injury is one that is “‘distinct and palpable 7 . . . as opposed to merely abstract.’” 8 Appeals for 9th Circuit, 279 F.3d 817, 821 (9th Cir. 2002) 9 (quoting Whitmore v. Arkansas, 495 U.S. 149, 155 (1990)). Schmier v. U.S. Court of The United States District Court For the Northern District of California 10 “injury must have actually occurred or must occur imminently; 11 hypothetical, speculative or other ‘possible future’ injuries do 12 not count in the standings calculus.” 13 (citing Whitmore, 495 U.S. at 155). 14 the facts that exist at the time the complaint is filed.” 15 v. City of Lakewood, 259 F.3d 996, 1006 (9th Cir. 2001). 16 Schmier, 279 F.3d at 821 “Standing is determined by Clark In the present case, Plaintiff appears to identify two 17 possible sources of legal harm in its complaint. 18 section of its complaint entitled, “Harm to NEMS,” it asserts, 19 20 21 22 23 First, in a The harm or hardship that makes this dispute ripe for review is not that NEMS faces a qui tam action or the prospect of having to defend itself against some other enforcement action . . . , but rather the compliance dilemma it faces as a result of an AUSA’s letter purporting to give an authoritative interpretation of statutory and regulatory provisions that have a direct, immediate, and harmful effect on NEMS’ current and future operations. 24 25 26 27 28 Compl. ¶ 100 (repeating text almost verbatim from ¶ 14). Second, in a later section of its complaint, Plaintiff alleges that State Defendants have failed to make timely reconciliation payments as required by the Medicaid Act. Id. ¶¶ 122-23. 14 Of these two 1 asserted injuries, only the latter is sufficient to confer 2 standing here. 3 The first injury that Plaintiff alleges -- the “compliance 4 dilemma” created by the AUSA’s letter -- is not fairly traceable 5 to State Defendants because Plaintiff has not alleged that DHCS or 6 HHSA played any role in drafting the AUSA’s letter. 7 even if Plaintiff had included such allegations in its complaint, 8 the injury Plaintiff asserts is still too abstract to support 9 standing here. Moreover, To establish standing based on a compliance United States District Court For the Northern District of California 10 dilemma, a plaintiff must allege that the government’s conduct has 11 presented it with an “immediate dilemma to choose between 12 complying with newly imposed, disadvantageous restrictions and 13 risking serious penalties for violation.” 14 Drug Enforcement Agency, 333 F.3d 1082, 1086 (9th Cir. 2003) 15 (emphasis added; citations and quotation marks omitted). 16 however, Plaintiff has not alleged that it faced any immediate 17 penalties or consequences for noncompliance. 18 expressly denies that any such consequences are the motivating 19 factor behind this lawsuit. 20 “harm or hardship that makes this dispute ripe for review is not 21 that NEMS faces a qui tam action or the prospect of having to 22 defend itself against some other enforcement action.” 23 ¶ 100 (repeating text almost verbatim from ¶ 14) (emphasis added). 24 Thus, as currently plead, Plaintiff’s “compliance dilemma” cannot 25 constitute an injury-in-fact because Plaintiff has expressly 26 declined to rely upon whatever harm it might face as a consequence 27 of its noncompliance. Hemp Indus. Ass’n v. Here, In fact, Plaintiff It states in its complaint that the 28 15 Compl. 1 The second injury that Plaintiff has asserted -- the State’s 2 failure to make timely reconciliation payments -- is more 3 concrete. 4 reimburse federally-qualified health centers every four months for 5 the services they provide to Medicaid enrollees. 6 § 1396a(bb)(5)(B); see also Three Lower Counties Cmty. Health 7 Servs. v. Maryland, 498 F.3d 294, 301-03 (4th Cir. 2007) (“[T]he 8 statute plainly provides that a State must make fully compensatory 9 supplemental payments no less frequently than every four The Medicaid Act requires participating states to 42 U.S.C. United States District Court For the Northern District of California 10 months.”). 11 “continuously and consistently failed to make fully compensatory 12 supplemental payments on the schedule” required by the Medicaid 13 Act, it has identified a cognizable legal injury here: 14 specifically, that DHCS has “deprive[d] NEMS of its right to full 15 and timely reimbursement.” 16 directly traceable to the conduct of State Defendants, is 17 sufficient to support standing here for Plaintiff’s second cause 18 of action for declaratory relief.2 Because Plaintiff’s complaint alleges that DHCS has Id. ¶¶ 122-23. This injury, which is 19 State Defendants contend that DHCS’s practice of making 20 interim prospective payments to NEMS satisfies the Medicaid Act’s 21 four-month payment requirement. 22 however, makes clear that federally-qualified health centers are 23 entitled to fully compensatory payments every four months. The language of the statute, 42 24 2 25 26 27 28 Plaintiff spends several pages of its opposition brief, which was filed on September 13, 2012, arguing that it will be injured if State Defendants fail to make a reconciliation payment by September 30, 2012. This injury cannot support standing here because it did not exist at the time the complaint was filed. See Clark, 259 F.3d at 1006. Nevertheless, because Plaintiff’s complaint alleges that DHCS’s violation of the Medicaid Act is ongoing, Plaintiff has identified a cognizable injury-in-fact here. 16 1 U.S.C. § 1396a(bb)(5)(B) (requiring the State to make “a 2 supplemental payment equal to the amount” by which the health 3 center’s actual costs exceed the amount of funding received from 4 the State (emphasis added)). 5 Circuit has specifically rejected State Defendants’ argument here. 6 Three Lower Counties, 498 F.3d at 301, 303 (“Even though the 7 partial interim payment is made with the frequency required by the 8 statute, it does not fulfill the statutory requirement of full 9 compensation because the reconciliation payment comes a full six United States District Court For the Northern District of California 10 11 Relying on this language, the Fourth to nine months after the end of the applicable quarter.”). Accordingly, State Defendants’ motion to dismiss Plaintiff’s 12 second cause of action is denied. 13 identified an injury-in-fact sufficient to support standing for 14 its first and third causes of action, State Defendants’ motion to 15 dismiss those causes of action is granted. 16 leave to amend those claims by raising them as counterclaims in 17 the pending qui tam action. Because Plaintiff has not Plaintiff is granted 18 B. 19 Like standing, ripeness pertains to a federal court’s subject Ripeness 20 matter jurisdiction and is properly raised in a Rule 12(b)(1) 21 motion to dismiss. 22 598 F.3d 1115, 1122 (9th Cir. 2010) (citations omitted). 23 “‘claim is not ripe for adjudication if it rests upon contingent 24 future events that may not occur as anticipated, or indeed may not 25 occur at all.’” 26 Cir. 2009) (quoting Texas v. United States, 523 U.S. 296, 300 27 (1998)). Chandler v. State Farm Mut. Auto. Ins. Co., A Bova v. City of Medford, 564 F.3d 1093, 1095 (9th The Ninth Circuit has recognized that ripeness often 28 17 1 “coincides squarely with standing’s injury in fact prong.” 2 564 F.3d at 1095 (quotations and citations omitted). 3 Bova, Plaintiff’s first and third causes of action are not ripe 4 because, as explained above, Plaintiff has not identified a 5 cognizable injury-in-fact to support standing for those claims. 6 Plaintiff’s second cause of action, however, is ripe because it is 7 based on an injury that Plaintiff alleges is ongoing -- namely, 8 State Defendants’ failure to make timely reimbursement payments. 9 III. Failure to State a Claim United States District Court For the Northern District of California 10 As noted above, the Court lacks subject matter jurisdiction 11 over all of Plaintiff’s claims against Federal Defendants and over 12 Plaintiff’s first and third causes of action against State 13 Defendants. 14 these claims must be dismissed under Rule 12(b)(6). 15 Accordingly, there is no need to address whether Plaintiff’s only surviving cause of action is its claim 16 against State Defendants for their failure to make timely 17 reimbursement payments as required by the Medicaid Act. 18 two circuits have recognized that a federally-qualified health 19 center can bring such an action under 42 U.S.C. § 1983 to enforce 20 its right to timely reconciliation payments. 21 Counties, 498 F.3d at 303 (“At bottom, we conclude that the 22 Medicaid Act requires Maryland to pay FQHCs fully compensatory 23 supplemental payments not less frequently than four months after 24 Maryland has received the claim for supplemental payment, as 25 required by 42 U.S.C. § 1396a(bb)(5).”); Rio Grande Community 26 Health Ctr., Inc. v. Rullan, 397 F.3d 56, 75 (1st Cir. 2005) (“We 27 conclude that a private action can be brought by an FQHC under 28 section 1983 to enforce 42 U.S.C. § 1396a(bb).”); see also Pee Dee 18 At least Three Lower 1 Health Care, P.A. v. Sanford, 509 F.3d 204, 210-11 (4th Cir. 2007) 2 (“This court has also allowed a healthcare provider to pursue a 3 § 1983 action to enforce § 1396a(bb)(5) of the Medicaid Act.”). 4 Other circuits have permitted federally-qualified health centers 5 to bring claims for violations of similar Medicaid Act provisions. 6 See, e.g., Cmty. Health Ctr. v. Wilson–Coker, 311 F.3d 132, 136 7 (2d Cir. 2002) (permitting § 1983 claim against a state agency for 8 failing to provide adequate reimbursement payments in violation of 9 42 U.S.C. § 1396a(bb)(2)). These cases make clear that Plaintiff United States District Court For the Northern District of California 10 has stated a claim here by alleging that State Defendants have 11 violated the Medicaid Act by failing to provide timely 12 reimbursements.3 13 IV. 14 Eleventh Amendment Immunity State Defendants contend that, under the Eleventh Amendment, 15 DHCS and HHSA are immune from suit and cannot be subject to an 16 injunction or forced to pay monetary damages. 17 contend that DHCS Director Douglas is immune from suit because he 18 “does not have any enforcement authority that potentially could be 19 implicated based on the facts alleged in this lawsuit.” 20 Defs.’ Mot. Dismiss 13. 21 Further, they State Plaintiff appears to concede that its claims against DCHS and 22 HHSA are barred and that it may not recover damages for State 23 Defendants’ past conduct. 24 State Defendants’ argument that DHCS and HHSA are immune and, at 25 oral argument, it stated that it is only seeking “compliance going Its opposition brief does not address 26 27 28 3 Although Plaintiff does not invoke § 1983 in the section of its complaint alleging violations of the Medicaid Act, it does cite the provision in an earlier section of the complaint. See Compl. ¶ 18. 19 1 forward” rather than damages for past Medicaid Act violations. 2 Docket No. 44, Hr’g Tr. 14:11-:12.4 3 recognize that its claims against DHCS and HHSA are precluded by 4 the Eleventh Amendment and that damages for past conduct are not 5 available. 6 v. Metcalf & Eddy, Inc., 506 U.S. 139, 146 (1993) (stating that 7 the Ex Parte Young exception to Eleventh Amendment immunity 8 “applies only to prospective relief, does not permit judgments 9 against state officers declaring that they violated federal law in In short, Plaintiff seems to See generally Puerto Rico Aqueduct and Sewer Authority United States District Court For the Northern District of California 10 the past, and has no application in suits against the States and 11 their agencies, which are barred regardless of the relief sought” 12 (citations omitted)). 13 Plaintiff does, however, claim that Douglas has the requisite 14 authority to ensure DHCS’s future compliance with the Medicaid 15 Act’s reimbursement provisions. 16 sued here in his official capacity as director of DHCS, which is 17 the agency responsible for administering the Medicaid program in 18 California. 19 oversees the agency’s practice of making reconciliation payments 20 to federally-qualified health centers like Plaintiff. 21 & Inst. Code §§ 14001.11; 14132.100. 22 properly sued here and Plaintiff’s claim against him is not barred 23 by the Eleventh Amendment. It notes that Douglas has been See Compl. ¶¶ 22-23. As DHCS director, Douglas Cal. Welf. Accordingly, he has been 24 25 4 26 27 28 Plaintiff also noted at the hearing that it is currently challenging “the way in which the state says the Eleventh Amendment would apply here” before the Ninth Circuit in another case. Hr’g Tr. 14:15-:21. The Ninth Circuit has yet to hear argument in that case. See North East Med. Servs., Inc. v. Cal. Dep’t Health Care Servs., Case No. 11-16795 (9th Cir. appeal filed July 21, 2011). 20 1 CONCLUSION 2 For the reasons set forth above, Federal Defendants’ motion 3 to dismiss (Docket No. 30) is GRANTED and State Defendants’ motion 4 to dismiss (Docket No. 29) is GRANTED in part and DENIED in part. 5 In addition, Plaintiff’s motion to strike (Docket No. 39) is 6 DENIED as moot because the Court does not rely on the sections of 7 State Defendants’ reply brief to which Plaintiff objects. 8 9 Plaintiff is granted leave to amend its claims against Federal Defendants by raising them as counterclaims in the related United States District Court For the Northern District of California 10 qui tam action. 11 first and third causes of action against DHCS Director Douglas by 12 raising them as counterclaims in the qui tam action. 13 Plaintiff may proceed in this action on its remaining claim 14 against Douglas, the Court will consolidate this action with the 15 qui tam action for pre-trial case management purposes, and may 16 consolidate the two cases for trial if it appears that Plaintiff’s 17 claim raises the same issues as the qui tam action. 18 has reason to believe that Douglas’ defense to that claim will 19 raise the same issues as the qui tam action, it must raise the 20 claim as a counterclaim in that action, and may do so voluntarily 21 in any event. 22 Plaintiff is similarly granted leave to amend its Although If Plaintiff Pursuant to the parties’ stipulation in the qui tam action, 23 NEMS must file its responsive pleading to the United States and 24 the State of California’s complaint-in-intervention by March 1, 25 2013. 26 intervention, the motion will be heard at 2:00 p.m. on April 11, 27 2013. 28 both actions, regardless of whether NEMS moves to dismiss in the If NEMS files a motion to dismiss the complaint-in- A case management conference will be held on that date in 21 1 qui tam action. 2 statement by April 4, 2013. 3 IT IS SO ORDERED. The parties shall file a joint case management 4 5 6 Dated: 2/1/2013 CLAUDIA WILKEN United States District Judge 7 8 9 United States District Court For the Northern District of California 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 22

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