On April 30, 2010, the California Association of Health Facilities filed a lawsuit against the California Department of Health Care Services, and against David Maxwell-Jolly, the Director of the Department, in his official capacity. On the same day, the Developmental Services Network and the United Cerebral Palsy/Spastic Children's Foundation of Los Angeles and Ventura Counties filed a lawsuit against the same defendants. Both suits were filed in the U.S. District Court for the Central District of California. Plaintiffs in both suits were entities that represented certain Medicaid service providers. In the first case, the Plaintiffs represented intermediate care facilities for the developmentally disabled and also freestanding pediatric subacute care facilities. The Plaintiffs in the second case also represented intermediate care facilities for the developmentally disabled.
Plaintiffs in both cases sought declaratory and injunctive relief, seeking to prevent California from implementing aspects of legislation passed by the State Assembly that would freeze Medicaid reimbursement rates for these classes for facilities at either their 2008-09 or 2009-10 levels (the Clearinghouse contains several related cases filed in response to this and similar legislation.) Under the Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq. (the Medicaid Act), such modifications must be approved by the federal Department of Health and Human Services Centers for Medicare and Medicaid Services (CMS) prior to being put in place. The legislation passed by the California assembly was not conditioned on such approval. Plaintiffs alleged that no studies or other analyses had been conducted that could show that the rate freezes were consistent with efficiency, economy, and quality of care requirements of 42 U. S. C. §1396a(a)(30)(A). The Plaintiffs in both cases sought relief under the Supremacy Clause of the United States Constitution, arguing that the California law was incompatible with federal Medicaid law and therefore preempted. The Plaintiffs in Developmental Services Network also claimed as a cause of action 42 U.S.C. § 1983, which creates a private cause of action for state violations of federally guaranteed rights under color of law.
On May 27, 2010, the Plaintiffs in Developmental Services Network filed an amended complaint, which made further arguments in support of Plaintiffs' standing to bring the suit, but which does not appear to have added any substantive claims or requests for relief.
On June 15, 2010, the Court granted the Defendants' motion to consolidate the two cases. From this point on, all orders and opinions referred to both cases, and the Plaintiffs from both cases were required to file joint briefs.
On June 24, 2010, the Court (Judge Christina A. Snyder) order the cases stayed pending the outcome of several petitions for certiorari review to the Supreme Court from related cases. California Association of Health Facilities v. Maxwell-Jolly, 2010 WL 2612694 (C.D.Cal. 2010). On February 9, 2011, the Supreme Court granted cert in these cases, consolidating them for the purpose of review. See Douglas v. Independent Living Center of Southern California (Clearinghouse code PB-CA-16).
On March 28, 2011, the Court granted the Plaintiffs' ex parte motion to lift the June 2010 stay, and on May 5, 2011, the Court granted the Plaintiffs' motion for a preliminary injunction, preventing the implementation of the Medi-Cal reimbursement rate freezes for intermediate care facility services for the developmentally disabled as well as for freestanding pediatric subacute facilities. Cal. Assoc. of Health Facilities v. Maxwell-Jolly, 2011 WL 6938438 (C.D.Cal. 2011). The Defendants appealed this decision to the Ninth Circuit Court of Appeals on May 26, 2011. Pending the outcome of this appeal, the case was again stayed.
On November 30, 2011, the Appellate Court (Judge Ferdinand Francis Fernandez) vacated the order granting the preliminary injunction and remanded the case to District Court, finding that although California did have an obligation to submit Medicaid plan amendments to CMS and obtain approval prior to implementing these amendments, there was no individual cause of action under 42 U.S.C. § 1983 available to the Plaintiffs. Developmental Services Network v. Douglas, 666 F.3d 540 (9th Cir. 2011). The Defendants applied for a rehearing at the Ninth Circuit, arguing that the Court failed to address recent events and newly issued opinions which it argued should have led to a holding that a State may modify its reimbursement rates without receiving prior approval. The Appellate Court declined to grant a rehearing.
On March 19, 2012, the District Court granted the motions of Plaintiffs' in both cases to amend their complaints; it is not clear from the docket if these complaints were ever filed. On the same day, the Court ordered the cases stayed, in light of the Supreme Court's decision in Independent Living Center, which remanded that case and the related cases to the Ninth Circuit for further deliberation. Independent Living Center and several related cases are, as of the time of this writing (July 2013) in joint settlement mediation proceedings before the Ninth Circuit. The stay on the two instant cases has not yet been lifted. The parties are required to file quarterly reports on the status of the case while the stay remains in place.Alex Colbert-Taylor - 07/26/2013