UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

) ASANTE, et al., ) ) Plaintiffs, ) ) v. ) Civil Action No. 20-cv-601 (TSC) ) ALEX M. AZAR, et al., ) ) Defendants. ) )

MEMORANDUM OPINION

Plaintiffs Asante, Asante Rogue Valley Medical Center, Asante Three Rivers Medical

Center, Asante Ashland Community Hospital, Renown Regional Medical Center, Renown South

Meadows Medical Center, Sky Lakes Medical Center, and Yuma Regional Medical Center

(collectively, the “Hospitals”), located in Oregon, Nevada, and Arizona, bring this action under

the Administrative Procedure Act (“APA”),

et seq., against the federal agencies

and personnel responsible for administering Medicaid. The Hospitals claim that California’s

Medicaid plan impermissibly differentiates between in-state and out-of-state hospitals to make

out-of-state hospitals like them ineligible to receive supplemental Medicaid payments. They

argue this discriminatory scheme violates the Commerce Clause, Equal Protection Clause, and

the Medicaid Act, and that Defendants’ approval and funding of the scheme violate the APA.

The Hospitals move for a preliminary injunction to prevent the federal government from making

payments to California under the plan. 1 (ECF No. 2.) Having reviewed the parties’ filings, and

1 The Hospitals also appear to seek a preliminary injunction preventing the Defendants from “approving . . . California’s QAF program.” (ECF No. 2 at 2; ECF No. 2-1 (“Pls. Br.”) at 2.) The Defendants have already approved the current QAF Program (effective July 1, 2019, for the reasons set forth below, the court will DENY Plaintiffs’ Motion for a Preliminary

Injunction.

I. BACKGROUND

Medicaid, authorized under Title XIX of the Social Security Act, establishes a

cooperative federal-state program that finances medical care for people who cannot afford

medical services. See 42 U.S.C. §§ 1396–1396v. Defendants are the federal agencies and

officials responsible for administering Medicaid: the Department of Health and Human Services

(“HHS”); the Secretary of HHS, Alex Azar; the Centers for Medicare and Medicaid Services

(“CMS”); and the CMS Administrator, Seema Verma. (Compl. ¶¶ 11–14.) The HHS Secretary

is responsible for the program and has delegated its administration to the CMS, an agency within

HHS. See Centers for Medicare & Medicaid Services; Statement of Organization, Functions and

Delegations of Authority; Reorganization Order,

(2001). States

participating in Medicaid must submit plans to CMS for approval that detail financial eligibility

criteria, covered medical services, and reimbursement methods and standards. 42 U.S.C.

§§ 1396a(a), 1396b. Once a state’s plan is approved, the federal government provides financial

assistance for the necessary and proper costs of administering its Medicaid program. 42 U.S.C.

§§ 1396b, 1396d(b). States must also amend their plans to reflect changes in law or operation of

its Medicaid program. CMS is responsible for reviewing all amendments to state plans to

“determine whether the plan continues to meet the requirements for approval.”

(c)(2).

through December 31, 2021) (ECF No. 1 (“Compl.”) ¶ 99), and the Hospitals do not address this element of relief in their briefing. The court will therefore deny that request for relief.

2 California participates in the Medicaid program through Medi-

, et seq. At issue here is Medi-Cal’s method for paying certain hospitals

supplemental Medicaid payments through their Quality Assurance Fee (“QAF”) program. Under

the program, California collects fees from certain hospitals, receives matching funds from the

federal government, and disburses supplemental Medicaid payments to those hospitals from the

total funds. (Compl. ¶¶ 52–55.) Under California’s QAF program, certain in-state hospitals

receive supplemental payments while out-of-state hospitals do not (Id. ¶¶ 54–56), despite the fact

that out-of-state hospitals, particularly those near the California border, provide frequent and

necessary services to Medi-Cal patients. (Id. ¶¶ 2–5.) In order for California to operate the QAF

program, CMS must approve California’s state plan amendments. (Id. ¶¶ 94–98.) On February

25, 2020, CMS approved California’s state plan amendments for the current QAF program,

which covers the period July 1, 2019, through December 31, 2021 (“2019 QAF Program”). (Id.

¶ 99.) The Hospitals have settled claims with California regarding the QAF program covering

2009 through June 30, 2019. (Id. ¶¶ 20–26.)

The Hospitals allege that the QAF program’s differential treatment of in-state and out-of-

state hospitals unlawfully discriminates against out-of-state hospitals. (Id. ¶¶ 74, 80–81.) The

Hospitals assert three claims against the Defendants under the APA. 2 In Count One, they allege

that “California’s methodology for making QAF payments, as reflected in the California State

Medicaid Plan, discriminates against interstate commerce and is unconstitutional under the

Commerce Clause,” and therefore CMS’s approval violates the APA § 706(2)(A), (B). (Compl.

2 The Hospitals first brought these claims on August 20, 2019. But CMS had not yet approved the 2019 QAF Program, and the court dismissed the action because there was no final agency action. Asante v. Azar, No. 19-cv-02512 (D.D.C. February 14, 2020).

3 ¶¶ 102, 104.) In Count Two, the Hospitals claim that “California’s differential treatment of in-

state and out-of-state hospitals under the QAF program, as reflected in the California State

Medicaid Plan, bears no rational relationship to any legitimate state purpose and thus violates the

Equal Protection Clause of the Fourteenth Amendment,” and therefore agency approval also

violates the APA. (Compl. ¶¶ 106, 108.) Finally, in Count Three, the Hospitals allege that

“California does not provide supplemental QAF monies to the plaintiffs ‘to the same extent’ that

it provides such funds to in-state hospitals” in violation of the Medicaid Act, and therefore

agency approval again violates the APA. (Compl. ¶¶ 111–113.) 3 The Hospitals seek declaratory

relief and an injunction barring Defendants from making supplemental payments to California

for the QAF program and preventing CMS from approving California’s state plan amendments

that include the 2019 QAF program. (Prayer for Relief ¶¶ 1–5.)

II. LEGAL STANDARD

A preliminary injunction is an “extraordinary and drastic remedy” that is “never awarded

as of right.” Munaf v. Geren,

, 689–90 (2008) (internal citations and quotation

marks omitted). A preliminary injunction “should not be granted unless the movant, by a clear

showing, carries the burden of persuasion.” Mazurek v. Armstrong,

(1997)

(internal citations and quotation marks omitted) (emphasis in original). Courts consider four

factors on a motion for a preliminary injunction: (1) the likelihood of plaintiff’s success on the

merits, (2) the threat of irreparable harm to the plaintiff absent an injunction, (3) the balance of

equities, and (4) the public interest. Winter v. Natural Res. Def. Council, Inc.,

, 20

3 Count Four alleges a cause of action under the Declaratory Judgment Act. (Compl. ¶¶ 114–18 (citing

, 2202).) Declaratory relief, however, is not a freestanding cause of action, but rather a form of relief for the Hospitals’ other claims. See Ali v. Rumsfeld,

(D.C. Cir. 2011).

4 (2008). The D.C. Circuit has traditionally evaluated claims for injunctive relief on a sliding

scale, such that “a strong showing on one factor could make up for a weaker showing on

another.” Sherley v. Sebelius,

(D.C. Cir. 2011). It has been suggested,

however, that a movant’s showing regarding success on the merits “is an independent, free-

standing requirement for a preliminary injunction.”

at 393 (quoting Davis v. Pension Ben.

Guar. Corp.,

(D.C. Cir. 2009) (Kavanaugh, J., concurring)). Under either

approach, however, the movant must always show irreparable harm, and if a party cannot do so,

the court may deny the motion for injunctive relief without considering the other factors.

CityFed Fin. Corp. v. Office of Thrift Supervision,

, 747 (D.C. Cir. 1995).

III. ANALYSIS

A. Irreparable Harm

While “[t]he concept of irreparable harm does not readily lend itself to definition,”

Judicial Watch, Inc. v. U.S. Dep’t of Homeland Security,

(D.D.C. 2007),

Plaintiffs carry a “considerable burden” to establish irreparable harm. Power Mobility Coal. v.

Leavitt,

(D.D.C. 2005) (citing Wis. Gas Co. v. F.E.R.C.,

,

674 (D.C. Cir. 1985)). The movant must provide some evidence of irreparable harm: “the

movant [must] substantiate the claim that irreparable injury is likely to occur” and “provide proof

that the harm has occurred in the past and is likely to occur again, or proof indicating that the

harm is certain to occur in the near future.” Wis. Gas Co., 758 F.2d at 674 (internal quotation

marks and citation omitted). The party seeking injunctive relief must prove that the purported

injuries are “both certain and great,” “actual and not theoretical,” and imminent. Id. The movant

must also “substantiate the claim” of irreparable harm and “show that the alleged harm will

directly result from the action which the movant seeks to enjoin.” Id. Finally, the harm claimed

5 must be “beyond remediation.” Chaplaincy of Full Gospel Churches v. England,

(D.C. Cir. 2006). In general, economic loss is not irreparable harm “in and of itself.” Wis.

Gas Co., 758 F.2d at 674. But economic losses can be sufficient if they are unrecoverable and

threaten the existence of the business or, in the non-profit context, result in substantial reduction

of services. Texas Children’s Hosp. v. Burwell,

(D.D.C. 2014) (citing

Nat’l Mining Ass’n, v. Jackson,

(D.D.C. 2011); Bracco Diagnostics, Inc.

v. Shalala,

(D.D.C. 1997)).

The Hospitals seek to enjoin the federal government from paying approximately $4

billion in supplemental Medicaid funds to California, which would prevent California from

disbursing those funds to in-state hospitals. (Pls. Br. at 2; see also Compl. ¶ 7.) They contend

they are entitled to approximately $15 million of the funds and would lose the opportunity to

recover those funds without an injunction. (Id. at 37; see also Compl. ¶ 81.) The court finds,

however, that the Hospitals have failed to show that this loss constitutes irreparable harm.

The alleged $15 million loss results from California’s distribution of all QAF funds, both

federal and state-raised, to in-state hospitals. Thus, the action that directly results in their loss is

California’s distribution of the funds. And the action Plaintiffs seek to enjoin—the federal

payment—does not “directly result” in their $15 million loss. See Wis. Gas Co., 758 F.2d at 674

(requiring the harm to “directly result” from the enjoined action). The loss is, at most, an

indirect result of the $4 billion payment from the federal government to California. While the

Hospitals concede that enjoining the federal payment will not change California’s QAF program

and entitle them to payments, they contend that it is “highly unlikely” that California would risk

a $4 billion loss by continuing with the program. (ECF No. 22 “Pls. Reply” at 24.) This

speculation cannot meet the standard for irreparable harm. Moreover, California is not a

6 defendant in this action and the court obviously has no power to compel a non-defendant to pay

$15 million to the Hospitals. Thus, their loss would not be remedied by an injunction against the

federal government.

The Hospitals argue that their irreparable harm argument is similar to the one made in

Texas Children’s Hospital v. Burwell,

(D.D.C. 2014). (Pls. Br. at 36–

38.) In that case, the plaintiff hospitals sought a preliminary injunction against HHS and CMS to

invalidate a new regulatory provision involving hospital Medicaid payments.

. Had the

provision gone into effect, the plaintiff hospitals would have been required to return the money

already received.

. The court enjoined the federal defendants from enforcing the

new provision, therefore preventing both the federal government and the states from recouping

money already paid to the plaintiff hospitals. See

at 244–45. Here, however, the Hospitals

are not at risk of losing funds already paid. Indeed, the only payments the Hospitals have ever

received for the QAF program were through settlements with California. (See Compl. ¶¶ 20–26.)

Moreover, the injunction in Texas Children’s Hospital directly remedied the harm because it

stopped the recoupment and permitted the hospitals to retain the funds during the litigation. See

76 F. Supp. 3d at 244–46. In this case, an injunction halting the federal government’s payments

would not remedy the Hospitals’ alleged $15 million loss because the injunction would only

prevent the federal government from paying funds to California and would not result in any

payment to the Hospitals.

Even were the injunction to remedy the alleged harm, the Hospitals, which are all non-

profits, have failed to “adequately describe and quantify the level of harm.” Air Transp. Ass’n of

Am., Inc. v. Exp.-Imp. Bank of the U.S.,

, 333–34 (D.D.C. 2012). They argue

that the loss of funds results in reduction in services and that they must provide Medicaid

7 services to Medi-Cal patients. (Pls. Br. at 38.) To be sure, the loss of funds may result in some

reduction of services, but the Hospitals provide no specific facts (in the Complaint or in

supporting declarations) about the effects of the $15 million loss on their operations. Cf. Texas

Children’s Hosp., 76 F. Supp. at 243–44 (detailing the substantially reduced services due to the

economic loss).

The Hospitals also argue the loss is unrecoverable “practically” because distribution of

the funds to the in-state hospitals will leave no funds for out-of-state hospitals at the end of

litigation. 4 (Pls. Br. at 37.) But the Hospitals do not dispute Defendants’ point that if the court

sets aside California’s QAF program, the state would have to return the matching federal funds

to the federal government. (See Defs. Br. at 9 (citing

, 430.42).) Therefore,

the distributed funds are not unrecoverable.

Accordingly, the Hospitals cannot meet their burden to show irreparable harm.

B. Other Factors

The court need not address the other preliminary injunction factors in light of the

Hospitals’ failure to show irreparable harm. See CityFed Financial Corp., 58 F.3d at 747.

Nonetheless, it will address briefly the three remaining factors because they support its finding

that a preliminary injunction is unwarranted. As to the balance of equities and public interest,

those factors weigh against an injunction. The Hospitals seek to enjoin $4 billion in federal

funds that would otherwise be disbursed to California hospitals during the nationwide emergency

4 Plaintiffs also contend their losses are unrecoverable from California because the Eleventh Amendment bars suit against California in federal court and a California statute prohibits a judgment in favor of out-of-state hospitals under the QAF program. Defendants do not appear to contest this argument, (See generally ECF No. 21 (“Defs. Br.”)), and the court therefore treats it as conceded.

8 caused by the COVID-19 virus. While the Hospitals share in this stress to medical institutions

due to the pandemic, the court declines to disrupt funding to California hospitals during this

national emergency. In addition, given the uncertainty of the “sliding scale” approach in this

Circuit after Winter, the court will not opine on whether the Hospitals have shown a likelihood of

success on the merits, except to say that it would not have tipped the balance either way. In sum,

not only have the Hospitals not shown irreparable harm, but none of the remaining factors swing

in their favor.

IV. CONCLUSION

For the reasons stated, the court will DENY Plaintiffs’ motion for preliminary injunction.

A corresponding Order will issue separately.

Date: April 21, 2020

Tanya S. Chutkan TANYA S. CHUTKAN United States District Judge

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