Case: Pediatric Specialty Care Inc. v. Arkansas Department of Human Services

On December 6, 2001, a number of healthcare providers and members of the state's Medicaid-established Child Health Management Services (CHMS) program filed this suit in the United States District Court for the Eastern District of Arkansas. Proceeding under 42 U.S.C. § 1983 and the Medicaid Act against the director of the Arkansas Department of Human Services (ADHS), the plaintiffs asked the court for declaratory and injunctive relief, claiming that the state's proposal to remove certain CHMS programs from the state's Medicaid plan and to cease paying for them violated their substantive and procedural due process rights and the Medicaid Act. Specifically, the state intended to stop paying for CHMS early-intervention day treatment for children who don't have a serious medical problem, but are still considered at risk. Plaintiffs were represented by private counsel.

On the same day as they filed their complaint, plaintiffs sought temporary injunctive relief; the state opposed such relief and moved to dismiss the matter altogether for failure to state a claim. The Court (Judge William R. Wilson) held a four-day trial beginning a week after the complaint was filed, and then, on Dec. 19, 2001, permanently enjoined the state from implementing the proposed spending cuts. (The court denied the motion for temporary injunctive relief as moot.) The court held that the Medicaid Act mandated that the state's plan must specifically include in its services early-intervention day treatment. Judge Wilson announced his ruling from the bench; there is no written opinion. DHS appealed the decision to the 8th Circuit Court of Appeals that same day.

On July 15, 2002, the 8th Circuit Court of Appeals (Judges McMillian, Heaney, and Riley) affirmed that at-risk children have a federal right to early-intervention day treatment when a physician recommends it. However, it reversed the lower court's holding to the extent that it required CHMS early-intervention day treatment services to be specifically included in the state's Medicaid plan. All that is required, the appellate court held, is that the state plan pay part or all of the cost of treatments for conditions discovered by a screening process when those treatments meet the definitions set forth in the Medicaid Act. The case was remanded to the district court with orders to modify its injunction in light of the appellate court's holding, as well as to consider the plaintiffs' procedural due process claim, which the district court initially did not reach in its decision.

On July 30, 2002, Judge Wilson entered an amended injunction, which did not require the state to specifically include CHMS early-intervention day treatment services in the state plan, but did require it to pay for those services when prescribed by a physician. The state must also inform potential Medicaid recipients about these available services.

The district court then held a number of hearings on the plaintiffs' procedural and substantive due process claims. On Nov. 27, 2002, Judge Wilson issued an Order and Opinion holding for the plaintiffs on all three of their counts: that the state's proposed plan was in violation of the Medicaid Act; that the state violated plaintiffs' procedural due process by failing to conduct a study about the effect such a change in the program would have had on the efficiency, economy, quality of care, and access to care, as required by the Medicaid Act; and that the state's attempt to move the CHMS services off-plan for cost savings violated plaintiffs' substantive due rights because it "shocked the conscience."

On December 18, 2002, the Court issued a second Order extending its injunction to the federal Centers for Medicare & Medicaid Services (CMS), the federal regulatory authority for the Medicaid program, and ordered that CMS continue to pay federal matching funds to any state expenditure on early-intervention day treatment services, even though CMS was not a party to the suit.

The state moved to amend the court's judgment and raised the question of whether guidelines published by the Arkansas Foundation for Medical Care, Inc. (AFMC), the organization contracted by the state to determine the eligibility of CHMS participants, also violated their procedural and substantive due process rights. The plaintiffs requested to amend their complaint to make AFMC a party and directly challenge the legality of those access guidelines. And on Dec. 18, 2002, the Court granted their request. That same day, the state and CMS appealed the Court's Nov. 27, 2002, Order and Opinion to the 8th Circuit Court of Appeals.

Throughout 2003 and 2004, the plaintiffs were granted permission to amend their complaint a number of times, which eventually culminated in a fifth amended complaint filed on Jan. 4, 2005. Meanwhile, on April 16, 2004, the 8th Circuit issued an opinion on the state's and CMS's appeal. It affirmed the lower court's holding that the state violated plaintiffs' procedural due process rights, but reversed district court's decision that the state violated substantive due process rights. It also reversed the district court's enjoining of CMS because the agency wasn't a party to the underlying suit.

Plaintiffs moved to compel ADHS and AFMC to reveal the names of the peer reviewers responsible for determining when and whether CHMS services are medically necessary. On Nov. 29, 2004, the district court granted the motion. The next month, AFMC appealed the decision to the 8th Circuit Court of Appeals.

During this period, the district court also considered damages claims against defendants who were current or past high-level supervisors of ADHS. They all moved for summary judgment, asserting qualified immunity. ADHS contended that it was entitled to absolute immunity under the 11th Amendment because it was an agency of the state of Arkansas. On Feb. 7, 2005, the district court (Judge Wilson) denied all but one of the defendant's motions for summary judgment on the grounds of qualified immunity. It was silent as to the ADHS's 11th Amendment claim. The state and remaining defendants appealed to the 8th Circuit Court of Appeals.

On April 17, 2006, the 8th Circuit Court of Appeals issued opinions on both outstanding appeals: AFMC's appeal regarding disclosure of the peer supervisors, and the qualified and absolute immunity claims of the individual defendants and ADHS. The appellate court held that the relevant Medicaid regulations did not require AFMC to reveal the names of its peer supervisors, and so reversed the district court on that count. With regard to the immunity claims, it affirmed the district court's decision rejecting the qualified immunity claims, but ordered that it dismiss ADHS from the suit on 11th Amendment grounds.

The remaining individual defendants who were not granted qualified immunity appealed to the Supreme Court of the United States. Apparently the parties settled, because on June 25, 2007, the Supreme Court vacated the judgment because it had become moot. Selig v. Pediatric Specialty Care, Inc., 551 U.S. 1142 (2007).

On Nov. 11, 2008, back in district court, the remaining plaintiffs entered a stipulation of dismissal with the defendants because both sides agreed to an undisclosed settlement agreement. The court then dismissed the case with prejudice.