ILLINOIS COUNCIL ON LONG TERM CARE v. MILLER

The opinion of the court was delivered by: Moran, District Judge.

MEMORANDUM AND ORDER

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.

I. FACTS

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).

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 nursing component of the reimbursement rate is relevant to IHCA's motion and will be discussed briefly. Among the elements making up the nursing component are two reimbursements for time spent with the patient. The variable time reimbursement is reimbursement for that time spent with patients which varies according to individual needs. The fixed time reimbursement was created to encompass that time spent "which does not vary with resident condition or which cannot be measured by an assessment tool." Illinois State Medicaid Plan Attachment 4.19-D, at p. 8. Fixed time is not measured but is calculated by subtracting the mean variable time for each patient from the Department of Public Health's minimum staffing requirements for single patients, plus 5%. This minimum staffing requirement is a measured value of average hourly nursing care required by nursing home patients. The fixed time figure is then added to the variable figure to determine the time element for the nursing component allotted for each patient. Id. at 8-9. Reimbursement for this time, plus reimbursements for fringe benefits and supplies, make up the nursing component. The determination of these rates occurs annually.

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.

II. LEGAL STANDARD

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 ...