The opinion of the court was delivered by: Moran, District Judge.
Before the court are two motions for preliminary injunction.
Because of the related nature of the cases and the desire on the
parts of the court and the parties to reach a swift decision, the
court has consolidated the actions for the purpose of these
motions.
Plaintiff Illinois Council on Long Term Care ("Council") is a
not-for-profit corporation representing a number of nursing homes
receiving Medicaid payments. Joined as plaintiffs with Council
are Council's member organizations. Plaintiff Illinois Health
Care Association ("IHCA") is also a not-for-profit organization
representing a number of nursing homes receiving Medicaid
payments. Defendant Miller is Director of the Illinois Department
of Public Aid ("DPA"). Defendant Heckler is the Secretary of the
United States Department of Health and Human Services ("DHHS").
Plaintiffs are concerned about the effects of Illinois Public Act
83-17 on Medicaid payments to be received by their member nursing
facilities.
Title XIX of the Social Security Act ("Act"), entitled "Grants
to States for Medical Assistance Programs," and commonly called
Medicaid, provides for the establishment of cooperative
federal-state medical and health programs for those with
insufficient income to meet their medical expenses. See 42
U.S.C.A. § 1396 et seq. State participation in the Medicaid
program is optional, but once a state agrees to participate it
must comply with federal statutory requirements. Harris v. McRae,
448 U.S. 297, 301, 100 S.Ct. 2671, 2680, 65 L.Ed.2d 784 (1980).
States that choose to participate are eligible to receive
matching funds if the state establishes a reimbursement schedule
that satisfies statutory and regulatory requirements embodied in
the Act and the regulations promulgated thereunder. See
Charleston Memorial Hospital v. Conrad, 693 F.2d 324, 326 (4th
Cir. 1983). Nursing home care is covered under Medicaid. 42
U.S.C.A. § 1396a(a)(13)(A).
In order to participate in Medicaid a state must determine the
rates at which it will reimburse those organizations which
dispense medical care to the needy covered by the Act. These
state plans must include rates
. . which the State finds, and makes assurance
satisfactory to the Secretary, are reasonable and
adequate to meet the costs which must be incurred by
efficiently and economically operated facilities in
order to provide care and services in conformity with
applicable State and Federal laws, regulations, and
quality and safety standards. . . .
42 U.S.C.A. § 1396a. States are given wide discretion in the
administration of local programs, Dawson v. Myers, 622 F.2d 1304,
1307 (9th Cir. 1980), vacated on other grounds, 451 U.S. 625, 101
S.Ct. 1961, 68 L.Ed.2d 495 (1981); Unicare Health Facilities,
Inc. v. Miller, 481 F. Supp. 496, 498 (N.D.Ill. 1980), and State
plans must be approved by the Secretary of DHHS if they meet the
Act's requirements. Once approved, they are subject to scrutiny
by the Secretary to ensure continued compliance. See Charleston
Memorial Hospital v. Conrad, 693 F.2d at 327. The state can amend
its plan as long as the plan, as amended, satisfies federal
requirements. See generally 45 C.F.R. § 201.3 (1982).
Illinois elected to participate in Medicaid and submitted its
state plan, as required, to the Secretary for approval. Included
in this plan is a reimbursement schedule for medical services
provided by nursing homes. The reimbursement rate for these
services consists of three distinct and independently calculated
components: the support component, the capital component and the
nursing component. The sum of the three components constitutes a
facility's reimbursement rate. Rates are expressed as the amount
received per patient per day.
The Illinois plan provides for general reimbursement rates to
be based on annual cost reports. There is necessarily a lag
between the data coming in and the DPA's assessment of
reimbursement rate levels. Accordingly, the plan provides for
cost of living increases in the reimbursement rate levels. See
Illinois State Medicaid Plan Attachment 4.19-D, at pp. 4-5. The
Illinois plan has been accepted by the Secretary.
On July 1, 1983, the Illinois state legislature passed Public
Act 83-17, which affected the state's reimbursement plan for its
Medicaid programs. The Act delayed any rate or inflationary
increases until July 1, 1984. Passage of the Act saved the state
a considerable amount of money — over 35 million dollars. The DPA
submitted this change to the Secretary as an amendment to the
state Medicaid plan on July 14, 1983. The effective date of the
amendment was July 1, 1983. Also submitted were required
information and assurances that the plan, as amended, is
"reasonable and adequate to meet the costs that must be incurred
by efficiently and economically operated facilities to provide
services in conformity with applicable State and Federal laws,
regulations, quality and safety standards." (Defendants' Memo. in
Opp., Ex. B, at p. 4.)
Plaintiff Council and its member organizations seek to
preliminarily enjoin Public Act 83-17, relying upon the first
four counts of their amended complaint, which were the four
counts of their original complaint. Those counts allege (1) that
the proposed amendment cannot be implemented until actually
approved by the Secretary, (2) that the proposed amendment is in
violation of the Act because it is solely based on budgetary
considerations, (3) that Public Act 83-17 deprives Council's
member facilities of constitutionally protected property
interests created directly through their contracts with the state
and indirectly as third party beneficiaries of the contract
between the federal government and the state; and (4) that Public
Act 83-17 interferes with contract rights secured by the Contract
Clause of the United States Constitution. Plaintiff IHCA joined
in this motion.
On August 12, 1983, the DPA notified nursing homes receiving
Medicaid of its new fixed time rate. The DPA stated in its letter
that variable time had exceeded the Department of Public Health's
minimum staffing requirements plus 5%. Fixed time, therefore,
would be negative and subtracted from variable time for each
patient to determine reimbursable nursing time.
Plaintiff IHCA seeks to preliminarily enjoin application of the
newly calculated negative fixed time rate as violative of Public
Act 83-17. Plaintiff Council joins in this motion and has amended
its complaint to add claims relating to the negative fixed time
rate.
In granting or denying a request for a preliminary injunction
this court must examine four factors: (1) whether the plaintiff
has at least a reasonable likelihood of success on the merits;
(2) whether the plaintiff will have an adequate remedy at law or
will be irreparably harmed if the
injunction does not issue; (3) whether the threatened injury to
the plaintiff outweighs the threatened harm the injunction may
inflict on the defendant; and (4) whether the granting of a
preliminary injunction will disserve the public interest. Martin
v. Helstad, 699 F.2d 387, 389 (7th Cir. 1983); Atari, Inc. v.
North American Philips Consumer Electronics Corp., 672 F.2d 607,
613 (7th Cir. 1982), cert. denied, ___ U.S. ___, 103 S.Ct. 176,
74 L.Ed.2d 145 (1982). None of these factors is decisive, but
likelihood of success on the merits is often considered a
threshold requirement for the granting of preliminary relief.
Reinders Brothers, Inc. v. Rain Bird Eastern Sales Corp.,
627 F.2d 44, 49 (7th Cir. 1980). See Kolz v. Board of Education,
576 F.2d 747, 749 (7th Cir. 1978) (stating if a court finds no
probability of success on the merits and no irreparable injury,
it is unnecessary to consider other factors).
This court is mindful that the grant of a preliminary
injunction "is the exercise of an extremely far-reaching power
not to be indulged in except in a case clearly warranting it."
Fox Valley Harvestore v. A.O. Smith Harvestore Products, Inc.,
545 F.2d 1096, 1097 (7th Cir. 1976). Because of the extraordinary
nature of the remedy, the burden of persuasion is on the
plaintiff as to all the prerequisites for the exercise of this
power. Id. Plaintiff IHCA's claim is dependent upon Council's
claim and, therefore, Council's claim will be decided first.
III. PLAINTIFF COUNCIL'S LIKELIHOOD OF SUCCESS ON THE MERITS.
At the outset, the court recognizes the effect Public Act 83-17
can have on Medicaid reimbursements paid to provider nursing
homes. Yearly rate and inflationary increases were an integral
part of the state's original Medicaid plan. That plan, with the
increases, was accepted by the Secretary as being within federal
standards. Delaying the rate and inflationary increases
significantly changes the state plan and reduces the real level
of reimbursements paid to providers. If the prior plan only
minimally reached the threshold of federal acceptability, it
requires no great insight to conclude that a significant
reduction from the ...