United States District Court, S.D. Illinois
October 4, 2005.
PROTESTANT MEMORIAL MEDICAL CENTER, INC., d/b/a MEMORIAL HOSPITAL, Plaintiff,
BARRY S. MARAM, in his official capacity as the Director of the Illinois Department of Public Aid, and THE CENTERS FOR MEDICARE & MEDICAID SERVICES, Defendants.
The opinion of the court was delivered by: DAVID HERNDON, District Judge
MEMORANDUM AND ORDER
Before the Court are Motions to Dismiss pursuant to Federal
Rules of Civil Procedure 12(b)(1) and 12(b)(6) submitted
separately by Defendant Centers for Medicaid and Medicare
Services ("CMS") (Doc. 47), Defendant Barry Maram (Doc. 73), and
Intervenor-Defendants Illinois Hospital Assoication, Children's
Memorial Hospital, Kenneth Hall Regional Hospital, Touchete
Regional Hospital Association, Mount Sinai Hospital, OSF
Healthcare System, and Valley West Community Hospital (Doc. 67).
Counts I through IV of Plaintiff's Second Amended Complaint arise
out of various provisions of 42 U.S.C. § 1396 and the Social Security Act. Counts V through VIII allege constitutional
violations. Count IX alleges a 42 U.S.C. § 1983 claim, and
Count X is a request for a declaratory judgment. (Doc. 39.) The
moving parties (collectively, "Defendants") argue both that the
Court lacks subject matter jurisdiction in this matter and, in
the alternative, that Plaintiff has failed to state a claim upon
which relief can be granted. Plaintiff responds in opposition.
(Docs. 64, 77, 81.) For the following reasons, the Court grants
Defendants' Motions. (Docs. 47, 67, 73.)
The Medicaid program is designed to provide medical care to
low-income individuals. 42 U.S.C. § 1395 et seq. The program is
jointly funded by the federal and state governments, and is
administered by the states pursuant to plans developed by
individual states. 42 U.S.C. § 1396a. In order to ensure
federal funding, states must submit their plans to the Secretary
of the Department of Health and Human Services (the "Secretary")
for approval. Id. Then, because the Secretary has delegated the
task of approving state plans to Defendant CMS, 42 C.F.R. §
430.14-15, CMS either approves or disapproves a state's plan.
Frequently, states opt to modify their plans via amendments
(State Plan Amendments, or "SPAs"). 42 U.S.C. § 1396(b); see
also Pharm. Research & Mfrs. of Am. v. Thompson, 313 F.3d 600,
602 (D.C. Cir. 2002). These amendments must also be submitted to
the Secretary, and automatically go into effect after ninety days
if not disapproved. 42 U.S.C. § 1316(a)(1). On February 3, 2004, the Illinois legislature passed
legislation amending its state Medicaid plan by imposing a tax on
health-care providers. (Doc. 39, p. 3.) Defendants state that
Illinois hospitals stand to gain $340 million in federal funding
as a result of this proposal, and, of this, Plaintiff stands to
gain over $540,000. (Doc. 68, pp. 4-6.) Plaintiff admits that it
will receive a net gain from the SPA.*fn1 (Doc. 64, p. 9.)
On February 6, 2004, the Illinois Department of Public Aid
("IDPA") submitted an SPA ("the SPA") to CMS for approval, as
required by federal law. 42 U.S.C. § 1396n(f); (Doc. 39, pp.
2-4). CMS approved the Illinois proposal on December 21, 2004.
(Doc. 39, p. 8.) The SPA took effect retroactively, running
from May 9, 2004 until June 30, 2005. (Doc. 8, Ex. C.)
In its Complaint, Plaintiff makes several statutory and
constitutional allegations. With regard to its statutory claims,
Plaintiff first alleges that the new tax violates 42 C.F.R. § 433.68(f)'s "hold-harmless"
provision.*fn2 Second, Plaintiff alleges that because the
percentage of Medicaid patients a hospital serves factors out of
the relevant SPA equations, the SPA violates provisions in
42 U.S.C. § 1396a and 42 U.S.C. § 1396b requiring payments to be
based on services provided to Medicaid patients. Third,
Plaintiff alleges that the SPA violates 42 U.S.C. 1396r, which
prohibits health-care providers from receiving payments in excess
of their Medicaid costs plus uninsured costs. Fourth, Plaintiff
alleges that because Medicaid usage factors out of the SPA's
equations governing payments, low-utilization Medicaid hospitals,
in some instances, receive more Medicaid funding than
high-utilization Medicaid hospitals, and therefore the SPA
violates provisions of 42 U.S.C. § 1396r,
42 U.S.C. § 1396a(13)(A), and sections 1902 and 1923 of the Social Security
Act. Plaintiff also alleges a substantive due process violation
on the ground that the SPA does not allocate Medicaid payments
based on Medicaid usage; a procedural due process violation on
the ground that Defendants failed to "follow and enforce the
requirements set forth in [several] federal regulations and
statutes" (Doc. 39, p. 14); and an equal protection claim based
on the fact that "the adjustment program was created because of, rather than in spite of, its allegedly
adverse impact on hospitals like Plaintiff." (Doc. 64, p. 14.)
Finally, Plaintiff alleges a "violation of [its]
Eleventh Amendment rights" (Doc. 39, p. 16) on the ground that Defendants'
"failure to follow the requirements mandated by federal
regulations and statutes" constitutes an Eleventh Amendment
violation. (Doc. 39, p. 16.)
Plaintiff filed its second-amended ten-count Complaint against
Defendants on March 10, 2005. Plaintiff seeks both declaratory
and injunctive relief. Counts I through IV assert Plaintiff's
statutory claims against both Defendants, while Counts V through
VIII assert Plaintiff's constitutional claims, also against both
Defendants. Count IX asserts a 42 U.S.C. § 1983 claim, and
Count X requests a declaratory judgment.
A. Lack of Subject Matter Jurisdiction
When ruling on a motion to dismiss for lack of subject matter
jurisdiction under Federal Rule of Civil Procedure 12(b)(6), a
court must accept the comp laint's well-pleaded factual
allegations as true and draw reasonable inferences from those
allegations in plaintiff's favor. Transit Exp., Inc. v.
Ettinger, 246 F.3d 1018, 1023 (7th Cir. 2001). The court must
then determine "whether relief is possible under any set of facts
that could be established consistent with the allegations."
Bartholet v. Reishauer A.G., 953 F.2d 1073, 1078 (7th Cir
1992) (citing Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).
A motion to dismiss tests the sufficiency of the complaint, not its merits. Gibson v. City
of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). A claim may
be dismissed only if it is beyond doubt that under no set of
facts would a plaintiff's allegations entitle her to relief.
Travel All over the World, Inc. v. Kingdom of Saudi Arabia,
73 F.3d 1423, 1429 (7th Cir. 1996). Nevertheless, plaintiff has the
obligation to establish jurisdiction by competent proof.
Commodity Trend Serv., Inc. v. Commodity Future Comm'n,
149 F.3d 679, 685 (7th Cir. 1998).
Article III of the U.S. Constitution extends a court's
jurisdiction only to "live" cases and controve rsies. U.S. CONST.
art. III, § 2; Murphy v. Hunt, 455 U.S. 478, 481 (1982);
Worldwide Street Preachers' Fellowship v. Peterson,
388 F.3d 555, 558 (7th Cir. 2004). "`A case is moot when the issues
presented are no longer `live' or the parties lack a legally
cognizable interest in the outcome.'" Stotts v. Com munity Unit
Sch. Dist. No. 1, 230 F.3d 989, 990 (7th Cir. 2000) (quoting
Powell v. McCormack, 395 U.S. 486, 496 (1969)). "This
requirement extends throughout the pendency of an action, not
just at the time a case is filed." Board of Educ. v. Steven L.,
89 F.3d 464,467 (7th Cir. 1996). Mootness, moreover, is a
threshold question. Worldwide Street Preachers' Fellowship,
388 F.3d at 558.
Here, among other relief, Plaintiff requests (1) an order
"declaring that the SPA submitted by IDPA [is] invalid and void;"
(2) an order "declaring that CMS'[s] approval of the Illinois SPA
[is] invalid and void;" and (3) "[a]n injunction preventing [Defendant] Barry S. Maram . . . from making payments pursuant to
the SPA." (Doc. 39, ¶¶ 37, 40, 43, 46, 51, 53, 57, 60, 66, 70.)
Plaintiff bases its requests on Defendants' alleged statutory and
constitutional violations. Plaintiff additionally asks for
attorney's fees and other relief deemed proper by the Court.
(Doc. 39.) As an initial matter, the Court finds that Plaintiff's
three primary requests are moot. First, the effectiveness of the
SPA in question terminated on July 1, 2005. Thereafter, the SPA
ceased to be valid. An order by the Court declaring the SPA
"invalid and void" after that date would have no effect. Second,
because the relevant funds have already been distributed and the
SPA is no longer valid, an unaccompanied order declaring CMS's
approval of the SPA "invalid and void" would be of no
consequence. Third, because Defendant Maram has already disbursed
the funds, no injunction may issue prohibiting distribution. See
Al-Am in v. Gram ley, 926 F.2d 680, 685 (7th Cir. 1991) ("When
there is no continuing vio lation of federal law, injunctive
relief is not part of a federal court's remedial powers.").
Accordingly, the "live" case or controversy requirement is not
met here, and Plaintiff's requests are moot.
The question of standing "involves both constitutional
limitations on federal-court jurisdiction and prudential
limitations on its exercise." Warth v. Seldin, 422 U.S. 490,
498 (1975). With regard to the Article III "case or controversy"
requirement, federal courts' jurisdiction to hear cases is
limited to "concrete, particularized, and actual or imminent rather than
conjectural or hypothetical" injuries. Lujan v. Defenders of
Wildlife, 504 U.S. 555, at 560-61 (1992); see also Gillespie
v. City of Indianapolis, 185 F.3d 693, 701 (7th Cir. 1999)
(holding that a plaintiff must show a "distinct and palpable"
injury in order to maintain a claim). The "essence" of a
standing inquiry is whether the parties have "`alleged such a
personal stake in the outcome of the controversy as to assure
that concrete adverseness which sharpens the presentation of
issues upon which the court so largely depends for illumination
of difficult constitutional questions.'"Gillespie,
185 F.3d at 701 (quoting Duke Power Co. v. Carolina Environmental Study
Group, Inc., 438 U.S. 59, 72 (1978)). In order to maintain a
claim, therefore, a party must show "(1) an `injury in fact;' (2)
a causal connection between the injury and the conduct of which
the party complains; and (3) that it is `likely' a favorable
decision will provide redress." Lujan, 504 U.S. at 560-61.
Here, Plaintiff does not assert that it has been directly
harmed by the SPA in question. In fact, it admits that the SPA
has actually improved its economic position. (Doc. 64, p. 9.)
Plaintiff's only allegation of injury revolves around the claim
that it would be entitled to greater benefit under a different
SPA one that properly complied with the Medicaid Act. (Doc. 64,
The Court finds that Plaintiff has not alleged a "distinct and
palpable" injury sufficient to grant the Court jurisdiction to
hear its case. Though Plaintiff appears to be correct that
Medicaid usage rates do indeed "factor out" of the SPA equations, at least in some instances,*fn3 Plaintiff cannot
obscure the fact that it suffers no "concrete, particularlized"
injury as a result. Even if another SPA one that properly
accounted for Medicaid usage rates would place Plaintiff in an
improved position, such an SPA exists pu rely in the
hypothetical, a state that courts have steadfastly held does not
give rise to standing. Lujan, 504 U.S. at 560; see also
Crosetto v. State Bar of Wisconsin, 12 F.3d 1396 (7th Cir.
1993) ("[F]ederal courts lack the power to give advisory
opinions in hypothetical cases."). For these reasons, Plaintiff
lacks standing to bring its claims.
B. Failure to State a Claim
Alternatively, the Court finds that Plaintiff has failed to
state a claim on which relief can be granted. When ruling on a
motion to dismiss for failure to state a claim, a court assumes
as true all well-pleaded facts, plus the reasonable inferences
therefrom, and construes these in the light most favorable to
plaintiff. Fries v. Helsper, 146 F.3d 452, 457 (7th Cir. 1998)
(citing Wiemerslage Through Wiemerslage v. Maine Tow nship High
School Dist. 207, 29 F.3d 1149, 1151 (7th Cir. 1994)). The
question is whether, under those assumptions, the plaintiff has a
right to legal relief. Id.
1. Section 1983 Statutory Claims
Section 1983 provides a party with a cause of action against an individual acting under color of state law for the "deprivation
of any rights, privileges, or immunities secured by the
Constitution and laws." 42 U.S.C. § 1983. It does not, however,
"provide an avenue for relief every time a state actor violates a
federal law," Rancho Palos Verdes v. Abrams, 125 S. Ct. 1453,
1458 (2005). Rather, "it is rights, not the broader or vaguer
`benefits' or `interests,' that may be enforced under the
authority of that section." Gonzaga Univ. V. Doe,
536 U.S. 273, 283 (2002). Such rights must be unambiguous, for "anything
short of an unambiguously conferred right" fails to support an
action under section 1983. Id.
Here, Plaintiff argues that it should be allowed to bring a
section 1983 action to enforce "provisions of the Medicaid Act,
specifically § 1396 et seq." (Doc. 64, p. 3.) Plaintiff bases
this argument largely on the Supreme Court's holding in Wilder
v. Virginia Hospital Association, 496 U.S. 498 (1990), where
the Court found that a party could bring a section 1983 suit to
enforce the Boren Amendment, a since-repealed provision of the
Medicaid Act, 42 U.S.C. § 1396 et seq. The Court there held (1)
because the Boren Amendment (then codified at
42 U.S.C. § 1396(a)(13)(A)) was intended to benefit health-care providers
(such as that plaintiff), and (2) because the Amendment imposes a
binding obligation on states, it created a federal right capable
of enforcement via section 1983. Wilder, 496 U.S. at 509-514.
As noted above, Wilder considered a specific (and
now-defunct) provision of the Medicaid Act, the Boran Amendment.
Plaintiff asserts that although "[t]he specific section addressed by Wilder was [the Boran
Amendment,] the court couches its language in terms of § 1396
generally." (Doc. 64, p. 3.) In other words, Plaintiff argues
that Wilder creates a private, enforceable right under every
provision of the Medicaid Act, not just the Boran Amendment.
This is not the case. InWild er, the Court examined the Boran
Amendment to determine whether it created a federal right capable
of enforcement, applying the two-part test alluded to above.
Wilder, 496 U.S. at 509. It did not consider whether a
private, enforceable right exists under the Medicaid Act
generally. Id. ("We must therefore determine whether the
Boren Amendment creates a "federal right" that is enforceable
under § 1983." (emphasis added)). Though Plaintiff is correct
that the Wilder Court "did not foreclose enforcement of the
Medicaid Act under § 1983," (Doc. 64, p. 4), neither did it
create, via that section, a general right capable of being
Post-Wilder, as Plaintiff points out, the Seventh Circuit, in
Methodist Hospitals, Inc. v. Sullivan, 91 F.3d 1026 (7th Cir.
1996) and based largely on Wilder, found that a private,
enforceable right also exists un der 42 U.S.C. 1396(a)(30).
See also American Society of Consultant Pharmacists v. Garner,
180 F. Supp. 2d 953 (N.D. Ill. 2001) (M.J. Schenkier). This
decision, however, was, like Wilder, limited to a specific
provision within the Medicaid Act (42 U.S.C. § 1396(a)(30)),
not the Medicaid Act generally. Methodist Hospitals,
91 F.3d at 1029-30. Plaintiff nonetheless argues that this case also
stands for the proposition that a general right exists under 42 U.S.C. 1396. (Doc. 64, p.
Such a reading does flow from Methodist Hospitals. Despite
Plaintiff's arguments, neither Wilder or Methodist Hospitals
contains any language supporting the notion that a general right
exists under the Medicaid Act. For this reason, the Court finds
that Counts I through IV of Plaintiff's Complaint should be
dismissed for failure to state a claim upon which relief can be
2. Defendant Maram's Immunity
Unless immunity has been waived, the Eleventh Amendment
prohibits suit against a state, its officers, or state officials
acting in their official capacities. Edleman v. Jordan,
415 U.S. 651, 662-63 (1974). There is an exception, however, under
the doctrine first laid out inEx Parte Young, 209 U.S. 123
(1908). Under that doctrine, a claim may be brought against a
state actor in her official capacity provided the claim will
"enjoin prospective action that would violate federal law."
Ameritech Corp. v. McCann, 297. F.3d 582, 586 (7th Cir.
2002). Importantly, the violation of fede ral law must be
"ongoing" and the relief sought must be characterized as
"prospective." Verizon Md. Inc. v. Pub. Serv. Comm'n of Md.,
535 U.S. 635, 645 (2002).
Here, Plaintiff seeks "[a]n injunction preventing Barry S.
Maram, in his official capacity as the Director of the Illinois
Department of Public Aid, from making payments to providers
pursuant to the SPA." (Doc. 39, p. 12.) Plaintiff seeks no other
relief from Defendant Maram. (Doc. 39.) Plaintiff's problem,
however, for Ex Parte Young purposes, is that these payments have already been
made. In fact, as noted above, the SPA in question expired on
July 1, 2005. For this reason, the relief Plaintiff seeks from
Defendant Maram cannot properly be characterized as prospective.
Accordingly, the Court finds that Plaintiff's claims against
Defendant Maram should be dismissed for failure to state a claim
upon which relief can be granted.
3. Defendant CMS's Immunity
As noted above, section 1983 provides a party with a cause of
action against an individual acting under color of state law for
the "deprivation of any rights, privileges, or immunities secured
by the Constitution and laws." 42 U.S.C. § 1983. "An action
brought pursuant to § 1983 cannot lie against federal officers
acting under color of federal law." Case v. Milewski,
327 F.3d 564, 567 (7th Cir. 2003). There are two circumstances in which a
defendant may be considered to have acted under color of state
law. "The first is when the state has cloaked the defendants in
some degree of authority normally through employment or some
other agency relationship. The second . . . is when the
defendants have conspired or acted in concert with state
officials." Id. (citations omitted). To establish the second
scenario, "the plaintiff must demonstrate that the state
officials and the private party somehow reached an understanding
to deny the plaintiffs their constitutional rights." Id.
(quoting Moore v. Marketplace Restaurant, Inc.,
754 F.2d 1336, 1352 (7th Cir. 1985)). Here, Plaintiff brings its claims against CMS under section
1983. Defendant CMS is a federal actor. Plaintiff makes no
suggestion that any provision under which it sues CMS waives its
immunity. Nor does Plaintiff suggest that Illinois has, in any
way, cloaked CMS with authority. Therefore, the issue of CMS's
immunity is reduced to a question of whether CMS "conspired or
acted in concert with state officials."
In this case, CMS approved, on behalf of the federal
government, the SPA submitted by the IDPA. This action was taken
under the authority delegated to it by the Secretary of the
Department of Health and Human Services. 42 C.F.R. § 430.14-15.
There is no suggestion here that Illinois officials played any
role in CMS's approval of the SPA, other than submission of the
SPA for approval. Nor is there any suggestion that CMS "reached
an understanding" with Illinois officials "to deny [Plaintiff of
its] constitutional rights." Furthermore, CMS undertook its role
in the approval process pursuant to federal, not state,
regulations, id., and even if it acted jointly with state
officials, it did so under color of federal, not state, law. See
Case, 327 F.3d at 567 (holding that while federal officials
cannot be sued under section 1983 for violations of federal law,
they may be sued under section 1983 "if they conspire or act in
concert with state officials to deprive a person of her civil
rights under color of state law" (citations omitted)
For these reasons, the Court finds that CMS may not be sued
here under section 1983. As such, Plaintiff's claims against CMS
should be dismissed for failure to state a claim upon which
relief can be granted. IV. Conclusion
For the reasons stated above, the Court GRANTS Defendants'
Motions to Dismiss pursuant to Federal Rule of Civil Procedure
12(b)(1) (Docs. 47, 67, 73), and DISM ISSES without prejudice
Counts I through X of Plaintiff's Second Amended Complaint for
lack of subject matter jurisdiction. (Doc. 39.) Alternatively,
the Court GRANTS Defendants' Motions to Dismiss pursuant to
Federal Rule of Civil Procedure 12(b)(6) (Docs. 47, 67, 73),
and DISM ISSES without prejudice Counts I through X of
Plaintiff's Second Amended Complaint for failure to state a claim
upon which relief can be granted.
IT IS SO ORDERED.
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