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PROTESTANT MEMORIAL MEDICAL CENTER, INC. v. MARAM

October 4, 2005.

PROTESTANT MEMORIAL MEDICAL CENTER, INC., d/b/a MEMORIAL HOSPITAL, Plaintiff,
v.
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

I. Introduction

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.)

  II. Background

  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.

  III. Analysis

  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).

  1. Mootness

  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." ...


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