Pennsylvania Pharmacists Ass'n v. Houstoun

Opinions of the United

2002 Decisions States Court of Appeals

for the Third Circuit

3-13-2002

PA Pharmacists Assoc v. Houstoun

Precedential or Non-Precedential:

Docket 0-1898

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PRECEDENTIAL

Filed March 13, 2002

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 00-1898

PENNSYLVANIA PHARMACISTS ASSOCIATION; BELL

EDGE PHARMACY; BROAD STREET APOTHECARY;

BURNS PHARMACY; CAMBRIA PHARMACY #3;

CHRISTIAN STREET PHARMACY; ELWYN PHARMACY;

ESTERSON PHARMACY; FOSTERS PHARMACY; GETWELL

PHARMACY; MCKEAN STREET PHARMACY; ROSICA

PHARMACY; S&S COMMUNITY DRUG, INC.; SILVERMAN

PHARMACY; TIOGA DRUG COMPANY; WELDON

PHARMACY, and other Similarly Situated Pharmacies;

TIRELLI, INC., dba BROAD STREET APOTHECARY;

ROBERT SCHREIBER, dba BURNS' PHARMACY;

CAMBRIA PHARMACIES, INC.; BARRY JACOBS, dba

ELWYN PHARMACY; 2401 EAST YORK STREET, INC., dba

ESTERSON'S PHARMACY; RIAZ U. RAHMAN, dba

GETWELL PHARMACY; FOSTER PHARMACY, INC.;

HAUSSMANN'S PHARMACY; MCKEAN STREET

PHARMACY, INC.; THOMAS BETTERIDGE, dba ROSICA

PHARMACY; WELDON PHARMACY, INC,

Appellants

v.

FEATHER O. HOUSTOUN

ON APPEAL FROM THE

UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

(Dist. Court No. 99-cv-00491)

District Court Judge: Ronald L. Buckwalter

Argued April 20, 2001

Before: ALITO, McKEE, and ALARCON, Circuit Jud ges.

Argued En Banc November 28, 2001

Before: BECKER, Chief Judge, MANSMANN, SCIRICA,

NYGAARD, ALITO, ROTH, McKEE, RENDELL, BARRY,

AMBRO, and FUENTES, Circuit Judges

(Opinion Filed: March 13, 2002)

Gregory L. Liacouras (Argued)

Leslie H. Smith

Joseph W. Marshall, III

Liacouras & Smith, LLP

1515 Market Street, 9th Floor

Philadelphia, PA 19102

Attorneys for Appellants

Joseph McHale

Kimberley A. Hendrix

Stradley, Ronon, Stevens &

Young, LLP

2600 One Commerce Square

Philadelphia, PA 19103-7098

John A. Kane (Argued)

Commonwealth of PA

Office of Legal Counsel

Department of Public Welfare

P.O. Box 2675

Health & Welfare Building

Harrisburg, PA 17120

Attorneys for Appellee

2

OPINION OF THE COURT

ALITO, Circuit Judge, with whom Judges NYGAARD, ROTH,

BARRY, AMBRO and FUENTES join:

The Pennsylvania Pharmacists' Association1 and 16

pharmacies operating in southeastern Pennsylvania

brought this action under 42 U.S.C. S 1983 against Feather

O. Houstoun, the Secretary of the Pennsylvania Department

of Public Welfare (the "Department"), to challenge the

reimbursement rates paid to pharmacies under

Pennsylvania's Medicaid program. The plaintiffs claimed

that the Department, in administering its HealthChoices

Southeast program ("HealthChoices"), was violating

provisions of Title XIX of the Social Security Act (the

"Medicaid Act"), 42 U.S.C. SS 1396a(a)- 1396v. The

plaintiffs' principal claim was based on 42 U.S.C.

S 1396a(30)(A) ("Section 30(A)"). In accordance with its

interpretation of prior circuit precedent, the District Court

held that the plaintiffs could assert their Section 30(A)

claim under S 1983, but the District Court nevertheless

granted summary judgment against the plaintiffs. We now

hold that the plaintiffs, as Medicaid providers, may not

assert their claims under S 1983, and we therefore affirm

the order of the District Court on this alternative ground.

I.

Medicaid is a cooperative federal-state program under

which the federal government furnishes funding to states

for the purpose of providing medical assistance to eligible

low-income persons. See 42 U.S.C. S 1396; Rite Aid of

Pennsylvania, Inc. v. Houstoun, 171 F.3d 842, 845 (3d Cir.

1999). If a state chooses to participate in the program, it

must comply with the Medicaid Act and implementing

regulations promulgated by the Secretary of Health and

Human Services ("HHS"). See Wilder v. Virginia Hosp.

_________________________________________________________________

1. The Pennsylvania Pharmacists' Association is a non-profit corporation

representing over 440 independent pharmacies and over 1,000

pharmacists employed at these pharmacies.

3

Ass'n., 496 U.S. 498, 502 (1990). In order to participate, a

state must submit a medical assistance plan to the

Secretary of HHS and obtain approval of the plan. See 42

U.S.C. S 1396; 42 C.F.R. S 430.10 (2001). With further

administrative approval, a state may amend a previously

approved plan. See 42 C.F.R. S 430.12 (2001).

Under the Medicaid Act, a state is required to pay for

certain enumerated services and may choose to pay for

certain additional services. 42 U.S.C. S 1396a(a)(10)(A); 42

C.F.R. S 440.210 (2001). Pennsylvania includes prescription

drugs among its optional services. See 42 U.S.C.

S 1396d(a)(12); 42 C.F.R. S 440.120(a) (2001).

Until 1997, Pennsylvania compensated participating

pharmacists directly under a "fee-for-service" program.

Payments to these pharmacies generally consisted of two

components: (1) ingredient cost reimbursement and (2) a

dispensing fee. Pharmacies were compensated for brand-

name drugs based on the "estimated acquisition cost" of the

drugs2 plus a "reasonable" dispensing fee. See 42 U.S.C.

S 1396(a)(30)(A); 42 C.F.R. S 447.300 et seq. Pharmacists

were compensated for generic drugs using acquisition cost

limits established by HHS plus a reasonable dispensing fee.

In 1997, the Pennsylvania Department of Public Welfare

began to implement its HealthChoices program, a

mandatory managed care program operated in five counties

in the southeastern part of the state pursuant to an HFCA

waiver from certain provisions of the Medicaid Act. 3 The

Department contracted with four health management

organizations ("HMOs") to administer HealthChoices. Three

of the four HMOs administer pharmacy benefits through

contracts with pharmacy benefits managers. When an HMO

contracts with a pharmacy benefits manager, the HMO and

the pharmacy benefits manager set the rates at which

_________________________________________________________________

2. The "estimated acquisition cost" is the"agency's best estimate of the

price generally and currently paid by providers for a drug marketed or

sold by a particular manufacturer or labeler in the package size of drug

most frequently purchased by providers." 42 C.F.R. S 447.301 (2001).

3. The waiver applies to 42 U.S.C. S 1396a(a)(1)(statewide scope),

S 1396a(a)(10)(B)(comparability of services), and S 1396a(a)(23)(freedom

of

choice).

4

pharmacies are reimbursed. The pharmacy benefits

manager then contracts directly with the participating

pharmacies to provide outpatient pharmacy services to

eligible beneficiaries.

In order to participate in HealthChoices, the named

pharmacy plaintiffs entered into standardized Medical

Assistance Provider Agreements with the Department. The

Agreements cover the provision of brand-name and generic

prescription drugs to eligible beneficiaries and obligate the

Department to reimburse the contracting pharmacies in

accordance with state and federal law.

In January 1999, the plaintiffs commenced this action in

the United States District Court for the Eastern District of

Pennsylvania and requested declaratory and injunctive

relief. The plaintiffs' principal claim was that the new

payment rates violate Section 30(A), which requires a state

Medicaid plan to assure that payments "are consistent with

efficiency, economy, and quality of care" and"are sufficient

to enlist enough providers so that care and services are

available under the plan at least to the extent that such

care and services are available to the general population in

the geographic area." The plaintiffs alleged that the

pharmacy benefits managers, without oversight from the

Department, had decreased the outpatient pharmacy

benefit rates so much that they were below the cost of

acquiring and dispensing the drugs.

The District Court certified a class of pharmacy plaintiffs

and denied the Department's motion to dismiss the

complaint, holding that the plaintiffs had "a private right to

enforce [Section 30(A)]." Pennsylvania Pharmacists Ass'n v.

Houstoun, No. CIV.A. 99-491 (E.D. Pa. October 21, 1999).

As support for its holding on this point, the Court cited a

footnote in a prior panel opinion of this Court. See Rite Aid

of Pennsylvania, Inc. v. Houstoun, 171 F.3d 842, 850 n. 7

(3d Cir. 1999).

The District Court subsequently granted the defendant's

motion for summary judgment. Pennsylvania Pharmacists

Ass'n v. Houstoun, No. CIV.A. 99-491, 2000 WL 730344, at

* 1 (E.D. Pa. June 7, 2000). The Court held that the

Department, in implementing its new program, had

5

properly considered efficiency, economy, and access to

quality pharmacy services, that its procedures were neither

arbitrary nor capricious, and that the resulting payment

rates did not violate Section 30(A). Pennsylvania

Pharmacists Ass'n, 2000 WL 730344, at * 3-5.

The Plaintiffs appealed, and their arguments were heard

before a regular panel. Under a longstanding practice of our

Court, a panel may not overrule another panel decision. A

footnote in the panel opinion in Rite Aid appeared to hold

that a provider may assert a Section 30(A) claim under

S 1983, but the footnote provided no elaboration.4 By the

time of the panel argument in this case, the other courts of

appeals were divided on this issue. Prior to the issuance of

a panel decision, we granted rehearing en banc primarily

for the purpose of considering the S 1983 issue.

II.

The threshold issue that we must consider is whether the

plaintiffs, as Medicaid providers (as opposed to Medicaid

recipients), may assert a Section 30(A) claim under 28

U.S.C. S 1983. Section 1983 provides a private right of

action against any person who, acting under the color of

state or territorial law, abridges "rights, privileges, or

immunities secured by the Constitution and laws" of the

United States. See also Maine v. Thiboutot, 448 U.S. 1, 4

(1980). In order to seek redress under S 1983, a plaintiff

"must assert the violation of a federal right," and not merely

a violation of federal law. Golden State Transit Corp. v. City

of Los Angeles, 493 U.S. 103, 106 (1989). Thus, a plaintiff

alleging a violation of a federal statute may not proceed

under S 1983 unless 1) the statute creates"enforceable

_________________________________________________________________

4. The Rite Aid panel wrote as follows in footnote 7 of the opinion:

The Department argues at least in part that Rite Aid and the PPA

[Pennsylvania Pharmacists Association] may not sue to enforce

[certain] Medicaid regulations as section 30(A) "does not support a

private cause of action." Brief at 27. The district court rejected

this

argument and we agree with this result. Rite Aid , 998 F. Supp. at

525-26.

171 F.3d at 850.

6

rights, privileges, or immunities within the meaning of

S 1983" and 2) Congress has not "foreclosed such

enforcement of the statute in the enactment itself." Wright

v. Roanoke Redevelopment and Housing Auth., 479 U.S.

418, 423 (1987).

In considering the first of these requirements -- that the

statute must create an enforceable right, privilege, or

immunity -- we must determine whether the three

conditions identified by the Supreme Court in Wilder and

Blessing v. Freestone, 520 U.S. 329 (1997), are satisfied.

First, the provision in question must have been"intend[ed]

to benefit the putative plaintiff." Wilder , 496 U.S. at 509

(quoting Golden State Transit Corp., 493 U.S. at

106)(brackets added in Wilder); see also Blessing, 520 U.S.

at 340. Second, the right allegedly protected by the statute

must not be so "vague and amorphous" that its

enforcement would strain judicial competence. Blessing,

520 U.S. at 340-41; Wilder, 496 U.S. at 509. Finally, the

statute must unambiguously impose a binding obligation

on the states, id., and thus the provision giving rise to the

asserted right must be couched in "mandatory, rather than

precatory, terms." Blessing, 520 U.S. at 341.

Once these requirements are satisfied -- and the

existence of a federal right is established -- a rebuttable

presumption arises that the right is enforceable under

S 1983. Blessing, 520 U.S. at 341. This presumption may

be rebutted by showing that Congress expressly or

impliedly foreclosed an action under S 1983. Id.; see also

Livadas v. Bradshaw, 512 U.S. 107, 133 (1994).

III.

A.

In the present case, the focus of our inquiry is the

requirement that the provision in question must have been

intended to benefit the plaintiffs. Blessing, 520 U.S. at 340;

Wilder, 496 U.S. at 509; Golden State Transit Corp., 493

U.S. at 106; Wright, 479 U.S. at 430. It is important to keep

in mind that the question whether a statute is intended to

benefit particular plaintiffs is quite different from the

7

question whether the statute in fact benefits those plaintiffs5

or even whether Congress knew that the statute would

benefit those plaintiffs. In the present case, it may well be

that Section 30(A) in fact benefits pharmacies in some

states and that Congress realized this in enacting that

provision. For example, if Section 30(A) were not on the

books, a state plan might provide lesser access to

pharmacy services than Section 30(A) requires. In any such

state, Section 30(A) presumably has the effect of increasing

drug sales, and these increased drug sales presumably

benefit pharmacies -- as well as drug wholesalers, drug

manufacturers, many other businesses (e.g., lessors of

pharmacy premises, cleaning service firms retained by

pharmacies, trash collection companies retained by

pharmacies, private security firms retained by pharmacies),

employees of all of these businesses, etc. Congress

undoubtedly realizes that federal subsidies have such ripple

effects, but it would be outlandish to argue that the

Wilder/Blessing intended-to-benefit requirement permits all

of these businesses and individuals to assert Section 30(A)

claims in federal court. Our inquiry, consequently, is quite

narrow: did Congress, in enacting Section 30(A), intend to

benefit providers?

In attempting to answer this question, the Supreme

Court has instructed us to pay careful attention to the way

in which the statutory provision at issue is framed. In

Cannon v. University of Chicago, 441 U.S. 677, 689 (1979),

the Court wrote that the question whether a statute is

enacted for the benefit of a particular class of plaintiffs "is

_________________________________________________________________

5. If the intended-to-benefit requirement could be satisfied simply by

showing that a plaintiff in fact benefits from the law in question, the

requirement would be superfluous. No plaintiff may assert a claim in

federal court without establishing Article III standing, and this demands,

among other things, that the plaintiff demonstrate"injury in fact." See,

e.g., Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). A

plaintiff

asserting a claim based on an alleged violation of a federal law cannot

demonstrate injury in fact unless proper enforcement of the law would

benefit the plaintiff. Therefore, if the intended-to-benefit requirement

could be met simply by showing that the plaintiff would benefit by

proper enforcement, that requirement would add nothing to the injury-

in-fact test.

8

answered by looking to the language of the statute itself."

The Court noted the importance of any "right- or duty-

creating language" in the statute. Id. at 690 n.13. Moreover,

in holding that the statute in that case was intended to

benefit the plaintiffs, the Court observed that the statute

was "phrased in terms of the persons benefited" and was

"draft[ed] . . . with an unmistakable focus on the benefited

class." Id. at 691, 692 n.13. More recently, in Alexander v.

Sandoval, 121 S.Ct. 1511, 1520 (2001), the Court again

commented on the importance of the particular phrasing of

a statute in this regard.

While Cannon and Alexander concerned the implication

of a private right of action under a statute, rather than the

assertion of a statutory claim under S 1983, the tests

applied in these contexts partially overlap,6 and both tests

ask whether the statute at issue was intended to benefit the

putative plaintiff or plaintiffs. See Wright, 479 U.S. at 432-

33 (O'Connor, J., dissenting). Thus, in cases applying the

Wilder/Blessing test, the Court has also relied on the terms

in which the statute is drafted.

Wilder itself is illustrative. In Wilder , a hospital filed a

S 1983 action asserting a violation of the now-repealed

Boren Amendment to the Medicaid Act, 42 U.S.C.

S 1396a(a)(13) (1994) (repealed 1997). The Boren

Amendment required a state Medicaid plan to provide a

class of providers7 with payments that were "reasonable

_________________________________________________________________

6. In determining whether a statute creates an implied right of action,

the Supreme Court uses the four-part test of Cort v. Ash, 422 U.S. 66

(1975), to determine whether Congress intended to create a private

remedy. Under this test, the Court considers (1) whether the plaintiff is

within the class " `for whose especial benefit' the statute was enacted,"

(2) whether "there is any indication of legislative intent, explicit or

implicit, either to create such a remedy or to deny one," (3) whether a

private remedy would be "consistent with the underlying purposes of the

legislative scheme," and (4) whether "the cause of action [is] one

traditionally relegated to state law, in an area basically the concern of

the States." Id. at 78 (citations omitted). A S 1983 plaintiff need not

prove

that Congress specifically intended that a particular statutory right be

enforceable under S 1983 but instead need only meet the three-part test

outlined above. Wilder, 496 U.S. at 509 n. 9.

7. Namely, hospitals and nursing and intermediate care facilities. See

Wilder, 496 U.S. at 502 n.2.

9

and adequate to meet the costs which must be incurred by

efficiently and economically operated facilities" that comply

with applicable state and federal laws and standards. Id.

Holding that there was "little doubt" that the Boren

Amendment was intended to benefit these providers, the

Supreme Court stressed the Boren Amendment's cost-

reimbursement language, 496 U.S. at 503, and noted that

the Amendment "establishe[d] a system for reimbursement

of providers and [was] phrased in terms benefitting health

care providers." Wilder, 496 U.S. at 510 (emphasis added).

Thus, the Court relied on language in the Boren

Amendment that measured the adequacy of payments in

relation to the economics of providers, i.e., their need to

cover their reasonable costs. As the Court later emphasized

in Suter v. Artist M., 503 U.S. 347, 357 (1992), Wilder "took

pains to analyze the statutory provisions in detail."

B.

With these standards in mind, we focus on the language

of Section 30(A). Section 30(A) provides that a state plan for

medical assistance must:

[P]rovide such methods and procedures relating to the

utilization of, and the payment for, care and services

available under the plan . . . as may be necessary to

safeguard against unnecessary utilization of such care

and services and to assure that payments are

consistent with efficiency, economy, and quality of care

and are sufficient to enlist enough providers so that

care and services are available under the plan at least

to the extent that such care and services are available

to the general population in the geographic area.

Because this language is -- to put it mildly-- complex, it

is helpful to break it down. Under Section 30(A), a state

must provide "methods and procedures." These"methods

and procedures" must assure that payments to providers

produce four outcomes: (1) "efficiency," (2)"economy," (3)

"quality of care," and (4) adequate access to providers by

Medicaid beneficiaries.8

_________________________________________________________________

8. We use the phrase "adequate access" simply as shorthand for the

statutory requirement that providers be "available under the plan at

10

It seems clear to us that the first two required outcomes

-- "efficiency" and "economy" -- relate to the state program,

not providers, i.e., Section 30(A) requires that a state

program set payments at levels that make the program

efficient and economical.9 What sort of payments would

make a program inefficient and uneconomical? Payments

that are too high. Accordingly, the directive to achieve

"efficiency" and "economy" was obviously not intended to

benefit providers.

That leaves the directives to provide "quality of care" and

adequate access. These directives are "draft[ed] . . . with an

unmistakable focus on" Medicaid beneficiaries, not

providers. Cannon, 441 U.S. at 691. They are"phrased in

terms benefiting" Medicaid recipients, Wilder , 496 U.S. at

510, and these are the persons that Congress intended to

benefit. If Congress had wanted to look after pharmacies, it

would hardly have framed Section 30(A) in the terms it

chose.

The language of Section 30(A) contrasts sharply with that

of the Boren Amendment, which was interpreted in Wilder

as intended to benefit the relevant providers. As previously

noted, the Boren Amendment required a state Medicaid

plan to provide payments to providers that were

"reasonable and adequate to meet the costs which must be

incurred by efficiently and economically operated facilities"

that comply with applicable state and federal laws and

standards. Pub. L. No. 96-499, S 962(a), 94 Stat. 2650

(1980). It was thus "phrased in terms benefitting" providers

_________________________________________________________________

least to the extent that such care and services are available to the

general population in the geographic area." We do not suggest that

"adequate access" in the lay sense of the term will or will not meet this

statutory requirement.

9. Although the plaintiffs argue that these terms refer to the operation

of

pharmacies, this does not make sense. Suppose payments to pharmacies

were set far above cost. That would not make them inefficient or

uneconomical, i.e., "wasteful." Webster's Third New International

Dictionary (1971). It would simply make them very profitable.

Conversely, suppose payments to pharmacies were set well below costs.

That also would not make them inefficient or uneconomical. It would

simply make participation in the Medicaid program unprofitable and

might lead them to withdraw.

11

and measured the sufficiency of payments by reference to

the economics of providers. It plainly manifested concern

for the economic well-being of providers. Section 30(A),

unlike the Boren Amendment, does not demand that

payments be set at levels that are sufficient to cover

provider costs. Unlike the Boren Amendment, it evinces no

direct concern for the economic situation of providers.

Instead, it demands that payments be set at levels that are

sufficient to meet recipients' needs. It is "phrased in terms

benefitting" recipients, and the adequacy of payments is

measured in relation to the health needs of recipients. It

manifests concern solely for the well-being of recipients. It

is therefore apparent from the statutory language that the

intended beneficiaries of Section 30(A) are recipients, not

providers.

The principal dissent disagrees with this analysis and

maintains that the Boren Amendment and Section 30(A)

"confer nearly identical rights on providers." Principal

Dissent at 23. The principal dissent makes two principal

points. First, it dismisses the significance of the presence in

the Boren Amendment and the absence from Section 30(A)

of language focusing on provider costs. Second, it argues

that quality of care played essentially the same role in the

Boren Amendment as it does in Section 30(A). Neither point

is well taken.

The language in the Boren Amendment focusing on

provider costs is telling because it manifests a clear

congressional concern for the economic plight of providers

and an intent to benefit them. We are convinced that this

statutory language was the basis for the Wilder Court's

statement that the Boren Amendment was "phrased in

terms benefitting" providers. 496 U.S. at 510. The principal

dissent interprets this statement to mean simply that the

Boren Amendment "required states to establish a scheme

for provider reimbursement." See Principal Dissent at 24.

But if this interpretation were correct, the Supreme Court's

full sentence ("The provision establishes a system for

reimbursement of providers and is phrased in terms

benefitting health care providers") would say exactly the

same thing twice ("The provision establishes a system for

reimbursement of providers," 496 U.S. at 510, and

12

"require[s] states to establish a scheme for provider

reimbursement," Principal Dissent at 23). We therefore

disagree with the principal dissent and believe that the

reference to phrasing pertains to the Boren Amendment's

cost-reimbursement language.

This cost-reimbursement language is also of particular

significance in, to use the principal dissent's phrase, "the

dynamic of the real world of healthcare."10 Principal Dissent

at 24. Cost reimbursement schemes11 are generally

favorable to providers and greatly disliked by those required

to do the reimbursing.12 The House Committee Report

recommending repeal of the Boren Amendment cited a

Congressional Budget Office estimate that its elimination

would save $1.2 billion over four years,13 and the National

Governors Association provided even higher estimates.14 We

_________________________________________________________________

10. In its description of the "real world""context" of this case, the

principal dissent (at 24, 25-26) summarizes the plaintiffs' (but not the

defendant's) evidence about the effect of the new rates on access to

pharmacies. But (1) the plaintiffs' position is disputed, (2) the District

Court, which reached the merits of the access issue, held that the

plaintiffs had not adduced sufficient evidence to show that the access

requirement was not being met, Pennsylvania Pharmacists Ass'n, 2000

WL 730344, at * 6-8, and (3) the principal dissent does not purport to

have examined or to reach the merits of this issue. We express no view

whatsoever on the merits of this question.

11. Before the Boren Amendment, states, as a practical matter, tended to

pay for "the actual costs incurred by hospitals in providing care to

Medicaid recipients, regardless of disparities in costs or efficiencies

among hospitals." New Jersey Hosp. Ass'n v. Waldman, 73 F.3d 509,

511 (3d Cir. 1995). The Boren Amendment replaced this actual-cost-

reimbursement scheme with a reasonable-cost-reimbursement scheme.

See id. at 514-15.

12. The National Governors Association unanimously recommended

repeal of the Boren Amendment. See 1997 WL 8219815 (March 11,

1997) (Testimony of Govs. Miller and Leavitt before Sen. Fin. Comm.);

1996 WL 7135617 (Feb. 21, 1996)(Statement of Govs. Thompson, Miller,

Chiles, Engler, Leavitt, and Romer before House Commerce Comm.)("The

Boren amendment and other Boren-like statutory provisions must be

repealed. `One hundred percent reasonable cost reimbursement' must be

phased out . . . .").

13. H.R. Rep. 149, 105th Cong., 1st Sess. 547 (1997).

14. See 1997 WL 8219815 (March 11, 1997) (Testimony of Govs. Miller

and Leavitt before Sen. Fin. Comm.).

13

take no side in the policy debate about cost reimbursement,

but we think that it is highly unrealistic to minimize the

significance of the presence in the Boren Amendment of

cost-reimbursement language. This language was plainly a

boon for providers, Congress surely understood its

implications, and its inclusion in the Boren Amendment

was an unmistakable sign of a congressional desire to

benefit providers.

The principal dissent also misinterprets the Boren

Amendment as containing a quality-of-care requirement

similar to that in Section 30(A). See Principal Dissent at 24

(Boren Amendment "mandates minimum reimbursement

rates defined by reference to quality of care . . . .") id. at 33

(rates must be "sufficient to ensure quality of care"); id. at

33 (same). In fact, however, quality of care played a

decidedly secondary role in the Boren Amendment.

Whereas quality of care is a primary benchmark for setting

payments in Section 30(A), the Boren Amendment simply

provided that reimbursements were to be calculated by

reference to the reasonable costs of providers that were

operating in compliance with other applicable legal

requirements -- in the precise language of the Amendment,

"with applicable State and Federal laws, regulations, and

quality and safety standards . . . ." 42 U.S.C. Section

1396a(a)(13)(A) (repealed 1997). Thus, for example, in

determining the reasonable costs of a nursing home, the

Boren Amendment looked to nursing homes that were

complying with state fire safety laws rather than those that

cut costs by doing without fire escapes, smoke detectors,

etc. (The principal dissent obscures this point by repeatedly

eliding the reference to "State and Federal laws[and]

regulations" and referring only to "quality and safety

standards." See Principal Dissent at 31, 33, 35.)15

_________________________________________________________________

15. We also disagree with Judge Rendell's view that Section 30(A)

manifests an intent to benefit providers simply because it says that a

state plan must provide methods and procedures "relating to the

utilization of, and payment for, care and services available under the

plan."

First, Judge Rendell's analysis looks at only part of Section 30(A), but

we do not think that it is possible to determine whether Section 30(A)

14

In attempting to point out what we view as the critical

differences between the Boren Amendment and Section

30(A), we do not dispute the obvious point that these

provisions have other features in common, as the principal

dissent points out. For instance, the principal dissent is

correct in noting that "[b]oth the Boren Amendment and

Section 30(A) require states to reimburse providers for

_________________________________________________________________

was intended to benefit providers or just recipients without looking at

the entire provision. Moreover, although Judge Rendell would look at

only one part of Section 30(A) in determining whether that provision was

intended to benefit providers, we assume that she would look at the rest

of the provision in determining whether Section 30(A) meets the next

requirement set out in Wilder and Blessing, viz., that the right allegedly

protected by the statute must not be so "vague and amorphous" that its

enforcement would strain judicial competence. Blessing, 520 U.S. at

340-41; Wilder, 496 U.S. at 509. If she did not do so -- if she confined

her analysis of this question to the portion of the statute that she

examines in relation to the intent-to-benefit issue-- she would have to

conclude that this second requirement cannot be met. If Section 30(A)

simply said that a state plan must "provide . . . methods and procedures

relating to the utilization of, and the payment for, care and services

available under the plan," it would not set out a standard that a court

could enforce. The substance of what a state plan must meet is set out

in the portion of Section 30(A) that follows, and this part of the

provision

cannot be ignored. We see no justification for examining only one part of

a statute in considering the intent-to-benefit issue and then considering

other parts of the statute in considering other prongs of the

Wilder/Blessing inquiry.

Second, if the mere reference to "payment" in the part of Section 30(A)

that Judge Rendell examines were enough to show an intent to benefit

providers, it would be virtually impossible to draft a provision requiring

a state plan to provide services without creating an entitlement to sue on

behalf of the providers who furnish those services. Providers, after all,

must be paid, and according to Judge Rendell's position, if a statute

makes any mention of "payment," it evidences an intent to benefit

providers. It is interesting to apply Judge Rendell's analysis to the

current version of 42 U.S.C. S 1396a(a)(13), which replaced the Boren

Amendment. One of Congress's main objectives -- perhaps its dominant

objective -- in repealing the Boren Amendment was to take away the

right to sue under S 1983, but the provision that replaced the Boren

Amendment, refers to the "determination of rates of payment under the

[state] plan" and goes on to refer repeatedly to "rates."

15

services rendered." Principal Dissent at 32. But as we

began by cautioning, the inquiry mandated by Wilder and

Blessing - whether Congress intended for Section 30(A) to

benefit providers as opposed to simply knowing that

providers would be benefitted -- calls for us to draw a fine

line and to take into account the precise statutory language

adopted by Congress. After considering the language of the

Boren Amendment and Section 30(A), we remain convinced

that there are critical differences and that Section 30(A),

unlike the Boren Amendment, was not intended to benefit

providers.

C.

We have examined the legislative history of Section 30(A)

and have found nothing inconsistent with our reading of

the statutory language. The plaintiffs note that when

Section 30(A) was originally enacted in 1967, see Social

Security Amendments of 1967, Pub. L. 90-248, S 237, 81

Stat. 821, 911 (1968), it differed in two respects from the

current version: it required a state plan to assure that

payments were "not in excess of reasonable charges," and

it lacked the adequate access requirement that the current

version contains.16 In 1981, Congress changed these

features.

Nothing in the 1981 amendments suggests that the

current version of the statute is intended to benefit

providers. On the contrary, the effect of the 1981

_________________________________________________________________

16. As enacted in 1967, it required a state to:

provide such methods and procedures relating to the utilization of,

and the payment for, care and services available under the plan as

may be necessary to safeguard against unnecessary utilization of

such care and services and to assure that payments .. . are not in

excess of reasonable charges consistent with efficiency, economy,

and quality of care.

This provision originated as a Senate Amendment to the House bill, and

the brief discussion of this provision in the Conference Committee report

says nothing that has a bearing on the issue before us. See Conf. Rep.

No. 1030, 90th Cong., 1st Sess. (1967), reprinted in 1967 U.S.C.C.A.N.

3179, 3213 (1967).

16

amendments was to sharpen the focus on Medicaid

beneficiaries. Language referring to providers' charges was

removed, and language providing a further protection for

beneficiaries was added.

The plaintiffs note, however, that the House Committee

Report on the 1981 amendments observed that "in

instances where the States or the Secretary fail to observe

these statutory requirements, the courts would be expected

to take appropriate remedial action." H.R. Rep. No. 158,

97th Cong., 312-13 (1981). This statement certainly

suggests that the Committee anticipated that some class of

plaintiffs would be able to sue to enforce Section 30(A), but

it does not show that the Committee anticipated that

Medicaid providers, as opposed to recipients, would be able

to do so. It is thus of little value for present purposes.

The plaintiffs rely, finally, on certain HHS regulations

that the plaintiffs view as showing that HHS has

interpreted Section 30(A) as intended to benefit providers.

We have examined these regulations, and we do not believe

that they evidence any such interpretation. The most

pertinent of the current regulations cited by the plaintiffs

establish upper limits on what a state program may pay for

drugs. See 42 C.F.R. SS 447.301, 447.331- .334 (2001).

Section 447.331(b), which applies to brand name drugs

duly certified by a physician to be medically necessary for

a particular recipient, is illustrative. This provision states

that a state agency's payments for such drugs

must not exceed in the aggregate, payment levels that

the agency has determined by applying the lower of the

--

(1)Estimate acquisition costs plus reasonable

dispensing fees established by the agency; or

(2)Providers' usual and customary charges to the

general public

These regulations do not assist the plaintiffs here for the

obvious reason that they merely set a ceiling, but no floor,

on what providers must be paid. Any payments below the

ceiling, no matter how low, would satisfy the regulation.

Accordingly, the regulations do not show that the Secretary

17

has interpreted Section 30(A) as intended to benefit

providers; nor can they be viewed as themselves intended to

benefit providers.17

In sum, we are convinced that Section 30(A) is not

intended to benefit providers and that therefore providers

may not assert a Section 30(A) claim under S 1983.

D.

Of the other courts of appeals that have considered the

question whether providers may assert a Section 30(A)

claim under S 1983, the Fifth Circuit's opinion contains the

most thorough analysis of the intended-to-benefit

requirement. See Evergreen Presbyterian Ministries, Inc. v.

Hood, 235 F.3d 908, 928-29 (5th Cir. 2000); see also

Walgreen Co. v. Hood, 275 F.3d 475 (5th Cir. 2001). In

Evergreen Presbyterian Ministries, the Fifth Circuit wrote:

Section 30(A) . . . focuses on recipients in that it is

directly keyed to the recipients' access to medical care,

and as a result, the recipients are the direct intended

beneficiaries of the section. . . . [I]n contrast to the

Boren Amendment, section 30(A) does not create an

individual entitlement in favor of any provider. The

section benefits recipients by ensuring there is an

adequate number of providers in the marketplace.

Therefore, it may be true that health care providers as

a group are indirectly benefitted by section 30(A)

because the section requires that the payments to

providers be sufficient to ensure that Medicaid

recipients have equal access to medical care. But it

cannot be said that section 30(A) necessarily confers

upon each provider an individual right to a particular

payment because the section does not focus directly on

providers.

235 F.3d at 928-29 (emphasis in the original). We agree

with the Fifth Circuit's analysis and holding.

_________________________________________________________________

17. In South Camden Citizens in Action v. New Jersey Dep't of Envtl.

Prot., 274 F.3d 771 (3d Cir. 2001), we held that a regulation may invoke

a private right of action that Congress created through statutory text but

may not create a new right.

18

Prior to the decision in Evergreen Presbyterian Ministries,

the First, Seventh, and Eighth Circuits had held that

providers may pursue a Section 30(A) action underS 1983,

but we decline to follow these decisions. See Visiting Nurse

Ass'n of North Shore, Inc. v. Bullen, 93 F.3d 997, 1004 (1st

Cir. 1996); Methodist Hosp., Inc. v. Sullivan , 91 F.3d 1026,

1029 (7th Cir. 1996); Arkansas Med. Soc'y, Inc. v. Reynolds,

6 F.3d 519, 526 (8th Cir. 1993).18

In Arkansas Medical Society, the Eighth Circuit reasoned

as follows:

The question of whether the Medicaid providers are

intended beneficiaries is . . . easily resolved. Wilder

concluded that institutional providers were intended

beneficiaries of the Boren Amendment because the

Amendment concerned their reimbursement. Wilder, 496

U.S. at 510, 110 S.Ct. at 2517. Similarly, the equal

access provision [of Section 30(A)] addresses payment

for "care and services" provided by noninstitutional

providers. The providers here are beneficiaries for the

same reason that the providers in Wilder were

beneficiaries.

6 F.3d at 526 (emphasis added).

This analysis pays little attention to the differing terms of

the Boren Amendment and Section 30(A) and is thus

inconsistent with the reminder in Suter to examine each

particular statutory provision "in detail." 503 U.S. at 357.

Arkansas Medical Society fails to note that the Boren

Amendment was keyed to providers' costs, whereas Section

30(A) focuses on the care and services available to

recipients. Moreover, while Arkansas Medical Society read

Wilder to mean that the Boren Amendment was intended to

benefit providers simply because it "concerned their

reimbursement," 6 F.3d at 526, Wilder actually relied on

the fact that the Boren Amendment "establishe[d] a system

_________________________________________________________________

18. In Orthopaedic Hosp. v. Belshe, 103 F.3d 1491 (9th Cir. 1997), the

Court held in favor of a hospital that appealed an adverse decision

regarding a Section 30(A) claim brought under S 1983. However, the

Court's opinion provides no indication that the hospital's right to

proceed

under S 1983 was challenged, and the Court did not address the issue.

19

for reimbursement of providers and [was] phrased in terms

benefitting health care providers." Wilder, 496 U.S. at 510

(emphasis added). As we have noted, the same cannot be

said of Section 30(A).

In Methodist Hosp., Inc. v. Sullivan, supra, the Seventh

Circuit held that Medicaid providers may assert Section

30(A) claims under S 1983, but the opinion provides no

indication that the Seventh Circuit was presented with the

question whether Section 30(A) was intended to benefit

providers. Instead, the opinion merely addresses-- and

rejects -- the district court's holding that providers could

not sue under Section 30(A) because the term "geographic

area"19 is so "vague and amorphous" that its enforcement

would strain judicial competence. Methodist Hosp. v.

Indiana Family and Social Services Admin., 860 F. Supp.

1309, 1331- 33 (N.D. In. 1994).

In Visiting Nurse Ass'n of North Shore, Inc. v. Bullen,

supra, the argument presented to the First Circuit

regarding the intended-to-benefit requirement was notably

different from the argument presented to us. In Visiting

Nurse Ass'n, it was argued that Section 30(A), unlike the

Boren Amendment, is not intended to benefit providers

because Section 30(A) "does not list specific categories of

health care providers (e.g., hospitals, nursing facilities, and

intermediate care facilities." 93 F.3d at 1004. The First

Circuit rejected this attempted distinction and wrote:

The Wilder Court first observed that the statute "is

phrased in terms benefitting health care providers,"

and leaves "little doubt that health care providers are

the intended beneficiaries," then proceeded to illustrate

how the plain language of the Boren Amendment

"establishes a system for reimbursement of providers"

through its listing of specific types of health care

providers. Nowhere did the Court indicate that the

more general term "providers" would not suffice,

however, or that a listing of specific types of providers

_________________________________________________________________

19. As previously noted, Section 30(A) requires that a plan assure that

"care and services are available under the plan at least to the extent

that

such care and services are available to the general population in the

geographic area." 42 U.S.C. S 1396a (30)(A)(emphasis added).

20

is a sine qua non without which a congressional intent

to benefit health care providers could not be inferred.

As long as the two statutory provisions evince a

congressional concern for preserving financial

incentives to providers--by ensuring adequate

reimbursement payment levels--providers are

appropriately considered intended beneficiaries. See

Arkansas Med. Soc'y, Inc., 6 F.3d at 526.

93 F.3d at 1004 (italics in quotations from Wilder added by

First Circuit). To the extent that the First Circuit rejected

the particular argument advanced to it, its decision has no

bearing on the issue we address here. And to the extent

that the First Circuit simply adopted the reasoning of

Arkansas Medical Society, we find that reasoning

unpersuasive for the reasons already explained.

After considering all of the decisions of other courts of

appeals on the question before us, we agree with the Fifth

Circuit's analysis in Evergreen Presbyterian Ministries, and

we respectfully decline to follow the contrary courts of

appeals decisions.

E.

Our conclusion that providers may not assert Section

30(A) claims under S 1983 does not mean that Section

30(A)'s important "quality of care" and access requirements

will go unenforced. Not only is HHS responsible for

ensuring that state plans are administered in accordance

with these requirements, see 42 U.S.C. S 1396c, but

Medicaid recipients plainly satisfy the intended-to-benefit

requirement and are thus potential private plaintiffs. In

other parts of the country, recipients have sued to enforce

Section 30(A), and the other courts of appeals have

uniformly held that recipients may assert such claims

under S 1983. See Evergreen Presbyterian Ministries, 235

F.3d at 927; Visiting Nurses Ass'n, 93 F.3d at 1004 n.7;

Arkansas Medical Society, 6 F.3d at 526. If, as the plaintiffs

in this case allege, the rates set under the HealthChoices

program are so low that compliance with the "quality of

care" and access requirements is threatened, we see no

reason to believe that recipients in the affected area of the

21

Commonwealth will not seek legal redress to ensure that

these critical mandates are met.

IV.

For the reasons explained above, the order of the District

Court is affirmed.

22

BECKER, Chief Judge, dissenting, with whom Judges

Mansmann,* Scirica, McKee and Rendell join.

The focus of the majority opinion, quite properly, is on

whether Section 30(A) is intended to benefit the provider

plaintiffs. To reach the result that it was not, the majority

must distinguish the case central to the outcome, Wilder v.

Virginia Hospital Association, 496 U.S. 498 (1990), which

held that the Boren Amendment, a statute that by its

express terms required states to establish a scheme for

reimbursement of Medicaid healthcare providers, is

intended to benefit providers. The majority attempts to do

so by reasoning that the Boren Amendment and Section

30(A) "contrast[ ] sharply." Maj. Op. at 11. I disagree, for as

I will explain, the two statutes confer nearly identical rights

on providers. Hence this case is squarely controlled by

Wilder, which compels the conclusion that healthcare

providers may sue under S 1983 to enforce their rights

under Section 30(A). The clear majority of Circuits to

address the question whether healthcare providers may sue

under S 1983 to enforce their rights under Section 30(A)

have resolved that question in the affirmative, and my views

are in accord.

As the majority observes, the Boren Amendment and

Section 30(A) differ textually insofar as the Boren

Amendment's reference to provider costs in its definition of

reimbursement rates is absent from Section 30(A). The

rationale of Wilder, however, renders this difference

immaterial, since Wilder nowhere relied on the Boren

Amendment's reference to provider costs in concluding that

providers were intended beneficiaries of that statute.

Rather, Wilder clearly explained that the reason providers

were intended beneficiaries of the Boren Amendment is that

the provision by its express terms required states to

establish a scheme for provider reimbursement. See Wilder,

496 U.S. at 510. Similarly, Section 30(A) expressly requires

states to establish a system for reimbursing providers for

services rendered.

_________________________________________________________________

* The Honorable Carol Los Mansmann participated in the oral argument

and joined in this opinion, but died before the opinion could be filed.

23

Much of the majority opinion is devoted to explaining

why Medicaid recipients are among the intended

beneficiaries of Section 30(A). I agree, but a statute can

have more than one class of intended beneficiaries and

hence the mere fact that Congress intended Section 30(A) to

benefit Medicaid recipients has no bearing on whether

Congress also intended Section 30(A) to benefit Medicaid

providers. By its own terms, Section 30(A) is addressed to

both healthcare providers and Medicaid recipients, for, like

the Boren Amendment, it expressly requires states to

establish a scheme for provider reimbursement and

mandates minimum reimbursement rates defined by

reference to quality of care and recipients' access to care

and services. Hence, Wilder controls.

While this brief introduction sets up the analytical core of

this opinion, it is deficient to the extent that it lacks context

-- the dynamic of the real world of healthcare.

Unfortunately, so does the majority opinion, which, while

commendably terse, is short on "realpolitik." I will therefore

supply that broader context, which implicates the

relationship between provider costs and the availability of

services to Medicaid recipients. The background of this case

is the recent change in the Medicaid system in the five-

county Philadelphia metropolitan area from fee-for-service

to managed care. The plaintiffs have adduced evidence

designed to demonstrate that the HMOs, in administering

Medicaid, have squeezed the pharmacies and reduced

provider reimbursement rates to levels that, according to

the plaintiffs, are below any reasonable measure of the cost

of providing care and services. As a practical matter, if the

HMOs set provider reimbursement rates too low, providers

will simply refuse to render services to Medicaid recipients,

and recipients will go without adequate access. In fact, 50%

of the pharmacies that participated in Medicaid in the five

county area have dropped out since 1997. The plaintiffs

also produced evidence that no pharmacy within fifteen

contiguous zip codes in Bucks and Montgomery counties

participates in Medicaid, and that among those pharmacies

in the five-county area that continue to participate in

Medicaid, quality of care has suffered as a result of

inadequate reimbursement rates.

24

While the plaintiffs' submissions in this area are

contested, and failure to establish that the challenged

reimbursement rates violate Section 30(A)'s quality of care

and adequate access mandates would be fatal to their case,

they demonstrate a nexus between the interests of

providers and the interests of recipients, which is

recognized by the express terms of Section 30(A). Moreover,

given the financial straits of Medicaid recipients and

providers' access to information on the relationship between

reimbursement rates and provider participation in

Medicaid, healthcare providers may be better able to

enforce recipients' and providers' shared interest in

assuring that provider reimbursement rates comply with

the mandates of Section 30(A).

I thus respectfully dissent from the conclusion that

S 1983 does not grant providers a cause of action to sue for

violations of Section 30(A). Since the Court has not gone

beyond the threshold issue of whether S 1983 grants

providers a right of action to enforce Section 30(A), I would

reconstitute the original panel so that it may resolve the

merits of the Department's summary judgment motion,

which requires determining whether plaintiffs have

produced sufficient evidence for a reasonable jury to find

that the challenged reimbursement rates violate Section

30(A)'s quality of care and adequate access mandates, an

issue on which I express no opinion.

I.

The managed care program at issue is HealthChoices,

under which the Pennsylvania Department of Public

Welfare has contracted with four HMOs to administer the

Medicaid program in the five-county area. The Department

agrees to pay the HMOs on a per-person basis, and permits

the HMOs to set pharmacy reimbursement rates. The

plaintiffs allege that the pharmacy reimbursement rates set

by the HMOs are below any reasonable estimate of

pharmacies' costs, and that unless rates are at least

adequate to cover providers' costs, they cannot be

consistent with quality of care or sufficient to induce

enough pharmacies to participate in Medicaid so that

Medicaid recipients have the same access to pharmacies as

25

members of the general population, as is required by

Section 30(A).

In support of their claim that current rates are

inconsistent with quality of care, the plaintiff pharmacists

produced evidence that: (1) low reimbursement rates

prevent them from dispensing or stocking certain drugs; (2)

low reimbursement rates require them to cut back on

services provided to customers, such as counseling

customers about how to use their medication; (3)

administrative problems with the HealthChoices HMOs

prevent their customers from obtaining medication; (4)

HealthChoices HMOs force their customers to change

repeatedly their medication, causing delays and leading to

health problems when the new medication is ineffective; (5)

HealthChoices HMOs restrict the formularies that may be

used to fill customer prescriptions, causing delays in

customers' prescriptions being filled, often to the detriment

of customers' health; and (6) HealthChoices HMOs make

medical judgments on a daily basis over the phone and

deny medications that they know nothing about.

In support of their allegation that the reimbursement

rates fall below the minimum rates mandated by Section

30(A)'s access requirement, plaintiffs produced evidence

showing a precipitous drop in the number of pharmacies in

the five-county area who participate in Medicaid since the

inception of HealthChoices. In particular, 50% of the

pharmacies that participated in Medicaid have dropped out

since 1997. Plaintiffs also produced evidence that the

HealthChoices reimbursement rates are the lowest rates in

the five-county area, and that whereas the Blue Cross

network has 963 participating pharmacies in the five-

county area, the four HealthChoices HMOs have only 600,

635, 794, and 864 pharmacies each participating in their

networks. Moreover, there are no pharmacies that

participate in Medicaid in fifteen contiguous zip codes in

Bucks and Montgomery counties. Consequently, according

to the plaintiffs, Medicaid recipients lack access to

pharmacies to the same extent as the general population.

Whether this evidence is sufficient to create a triable

issue of fact as to whether the current rates violate Section

30(A)'s quality of care and adequate access mandate is, of

26

course, disputed by the Department. My purpose in

summarizing this evidence is not to express a view as to

whether this evidence is sufficient for plaintiffs' claims to

survive summary judgment, but rather to provide concrete

evidence of the common interest shared by providers and

recipients in enforcing the provider reimbursement rates

mandated by Section 30(A).

On its face Section 30(A) is addressed to both healthcare

providers and Medicaid recipients, as it expressly requires

states to establish a scheme for provider reimbursement

and mandates minimum reimbursement rates defined by

reference to recipients' quality of care and access to care

and services. In particular, Section 30(A) requires states to

"provide . . . methods and procedures relating to. . . the

payment for[ ] care and services available under the plan"

and to reimburse providers at rates that are "consistent

with efficiency, economy, and quality of care and are

sufficient to enlist enough providers so that care and

services are available under the plan at least to the extent

that such care and services are available to the general

population in the geographic area."

The House Report on the 1989 amendment to Section

30(A) confirms Congress's recognition that because

healthcare providers' participation in Medicaid is voluntary,

Medicaid recipients' access to healthcare will suffer if

provider reimbursement rates are too low to induce a

sufficient number of providers to participate in Medicaid:

There is no doubt that Medicaid reimbursement rates

have not kept pace with average community rates. . ..

The Committee believes that, without adequate

payment levels, it is simply unrealistic to expect

physicians to participate in the program. . . .[T]he

Committee bill would require that Medicaid payments

for all practitioners be sufficient to enlist enough

providers so that care and service are available under

the plan at least to the extent that such care and

services are available to the general population in the

geographic area.

H.R. Rep. No. 101-247, at 390 (1989), reprinted in 1989

U.S.C.C.A.N. 2060, 2116. As the majority notes, Section

27

30(A)'s legislative history also indicates that Congress

intended Section 30(A) to be enforced through private

actions. See H.R. Rep. No. 158, at 312-13 (1981) ("[I]n

instances where the States or the Secretary fail to observe

these statutory requirements, the courts would be expected

to take appropriate remedial action.").

The evidence we have described illustrates the manner in

which the interests of healthcare providers and Medicaid

recipients are inextricably intertwined. As we noted in West

Virginia University Hospitals, Inc. v. Casey, 885 F.2d 11 (3d

Cir. 1989), aff 'd on other grounds, 499 U.S. 83 (1991):

We recognize, of course, that the primary purpose of

medicaid is to achieve the praiseworthy social objective

of granting health care coverage to those who cannot

afford it. It does not necessarily follow, however, that

Title XIX grants substantive rights only to medicaid

patients. Although the broad purpose of the Medicaid

Act as a whole is to help the poor attain medical care,

the specific purpose of section 1396a(a)(13)(A) is to

assure state compliance with some federal standard of

hospital reimbursement. The section sets up a plan for

the adequate and reasonable reimbursement of

hospitals which serve medicaid patients, and thus

hospitals are the section's "beneficiaries." Their

interests and the interests of medicaid patients are

bonded by a common goal, the delivery of adequate

health care by the hospitals to state medicaid patients

and the enjoyment of such care by the patients. The

interests of both are intertwined and hospitals have a

concrete stake in reimbursement in accordance with

the federal statute and regulations.

Id. at 20. Against this backdrop, I now turn to the doctrinal

question whether S 1983 grants healthcare providers a

cause of action to enforce Section 30(A).

II.

Until now, nearly every Circuit to consider the issue has

held that whether providers may bring actions under

S 1983 to enforce the mandates of Section 30(A) is squarely

controlled by the Supreme Court's decision in Wilder, which

28

of course remains binding on this Court unless the

Supreme Court overrules it. See State Oil Co. v. Khan, 522

U.S. 3, 20 (1997) ("[I]t is this Court's prerogative alone to

overrule one of its precedents."). The first Court of Appeals

to consider the issue was the Eighth Circuit in Arkansas

Medical Society, Inc. v. Reynolds, 6 F.3d 519 (8th Cir.

1993), which concluded that Section 30(A) is

indistinguishable from the Boren Amendment, which the

Supreme Court in Wilder held was enforceable by providers

under S 1983:

Our analysis in this case is greatly simplified by the

Wilder opinion. Although focusing on a different

subsection, Wilder addressed the same statute facing

us in this case. Suter urges a careful scrutiny of the

exact legislation at issue and Wilder has already done

that. . . . [T]he equal access provision is very analogous

to the Boren Amendment examined in Wilder; they are

similar not only in function but also in the specific

language employed.

Id. at 525. With regard to the particular question whether

providers are among the intended beneficiaries of Section

30(A), the Court determined that:

The question of whether the Medicaid providers are

intended beneficiaries is also easily resolved. Wilder

concluded that institutional providers were intended

beneficiaries of the Boren Amendment because the

Amendment concerned their reimbursement. Similarly,

the equal access provision [of Section 30(A)] addresses

payment for "care and services" provided by

noninstitutional providers. The providers here are

beneficiaries for the same reason that the providers in

Wilder were beneficiaries.

Id. at 526 (internal citations omitted).

The First Circuit and the Seventh Circuit have also easily

resolved the issue whether providers may bring S 1983

actions to enforce Section 30(A) by noting that the question

is squarely controlled by Wilder. In Visiting Nurse

Association of North Shore, Inc. v. Bullen, 93 F.3d 997 (1st

Cir. 1996), the First Circuit concluded that providers are

among the intended beneficiaries of Section 30(A) for the

29

same reason that the Supreme Court held that they were

among the intended beneficiaries of the Boren Amendment:

The Wilder Court first observed that the[Boren

Amendment] "is phrased in terms benefitting health

care providers," and leaves "little doubt that health

care providers are the intended beneficiaries," then

proceeded to illustrate how the plain language of the

Boren Amendment "establishes a system for

reimbursement of providers" . . . . As long as the two

statutory provisions evince a congressional concern for

preserving financial incentives to providers -- by

ensuring adequate reimbursement payment levels --

providers are appropriately considered intended

beneficiaries.

Id. at 1004 (emphasis and internal citations omitted).

Similarly, the Seventh Circuit observed that because Wilder

had not been overruled, "Wilder's holding binds us," and

consequently held that providers have a private right of

action under S 1983 to enforce Section 30(A). See Methodist

Hosps., Inc. v. Sullivan, 91 F.3d 1026, 1029 (7th Cir. 1996)

("We therefore . . . hold that providers of medical care have

a private right of action, derived through S 1983, to enforce

S 1396a(a)(30)."). Thus, most courts have found that

whether S 1983 grants providers a cause of action to

enforce Section 30(A) is an issue that is easily disposed of

by Wilder. Until now, the only Circuit to hold otherwise is

the Fifth Circuit in Evergreen Presbyterian Ministries, Inc. v.

Hood, 235 F.3d 908 (5th Cir. 2000), which I discuss in

Section IV, infra.

III.

A.

The majority holds that providers may not sue under

S 1983 to enforce Section 30(A) because they are not among

the provision's intended beneficiaries.1 Like most Courts of

_________________________________________________________________

1. I disagree with the majority's replacement of the requirement under

S 1983 that "Congress must have intended that the provision in question

30

Appeals to consider the issue, I believe that the inquiry into

whether providers are among the intended beneficiaries of

Section 30(A) begins and ends with Wilder.

The Boren Amendment, which was the statute that

providers sought to enforce in Wilder, provided, in relevant

part:

A State plan for medical assistance must . . . provide

. . . for payment . . . of hospital services, nursing

facilities, and services in an intermediate care facility

for the mentally retarded provided under the plan

through the use of rates . . . which the State finds. . .

are reasonable and adequate to meet the costs which

must be incurred by efficiently and economically

operated facilities in order to provide care and services

in conformity with applicable State and Federal laws,

regulations, and quality and safety standards and to

assure that individuals eligible for medical assistance

_________________________________________________________________

benefit the plaintiff," Blessing v. Freestone , 520 U.S. 329, 340 (1997),

with the stricter requirement, drawn from an implied right of action case,

that the statute must be "draft[ed] . . . with an unmistakable focus on

the benefitted class." Cannon v. Univ. of Chi., 441 U.S. 677, 691 (1979).

See Maj. Op. at 9, 11. The Supreme Court has made clear that:

[Whether a cause of action exists under S 1983] is a different

inquiry

than that involved in determining whether a private right of action

can be implied from a particular statute. In implied right of

action

cases, we employ the four-factor Cort test to determine whether

Congress intended to create the private remedy asserted for the

violation of statutory rights. The test reflects a concern,

grounded in

separation of powers, that Congress rather than the courts controls

the availability of remedies for violations of statutes. Because S

1983

provides an alternative source of express congressional

authorization of private suits, these separation-of-powers concerns

are not present in a S 1983 case.

Wilder, 496 U.S. at 508 n.9 (internal quotations and citations omitted).

The Supreme Court has never held that to be enforceable under S 1983,

a provision must also be "draft[ed] . . . with an unmistakable focus on

the benefitted class," Cannon, 441 U.S. at 692, as the majority asserts.

Rather, in the S 1983 context, a plaintiff must simply show that the

provision in question was "intended to benefit" the plaintiff. Golden

State

Transit Corp. v. City of L.A., 493 U.S. 103, 106 (1989).

31

have reasonable access (taking into account geographic

location and reasonable travel time) to inpatient

hospital services of adequate quality . . . .

42 U.S.C. S 1396a(a)(13)(A) (repealed).

The text of Section 30(A) is strikingly similar. It provides,

in relevant part:

A State plan for medical assistance must . . . provide

such methods and procedures relating to the utilization

of, and the payment for, care and services available

under the plan . . . as may be necessary to safeguard

against unnecessary utilization of such care and

services and to assure that payments are consistent

with efficiency, economy, and quality of care and are

sufficient to enlist enough providers so that care and

services are available under the plan at least to the

extent that such care and services are available to the

general population in the geographic area . . . .

42 U.S.C. S 1396a(a)(30)(A). Comparing the two statutes, I

can find no principled basis for holding that providers are

intended beneficiaries of the Boren Amendment, as the

Supreme Court held in Wilder, but are not intended

beneficiaries of Section 30(A), as the majority holds today.

In particular, I cannot accept the majority's contention that

"[t]he language of Section 30(A) contrasts sharply with that

of the Boren Amendment." Maj. Op. at 11.

Both the Boren Amendment and Section 30(A) require

states to reimburse providers for services rendered. See

Boren Amendment ("A State plan for medical assistance

must . . . provide . . . for payment . . . of . . . services . . .

provided under the plan . . . ."); Section 30(A) ("A State plan

for medical assistance must . . . provide . . . methods and

procedures relating to . . . payment for, care and services

available under the plan . . . ."). And both the Boren

Amendment and Section 30(A) define reimbursement rates

by reference to efficiency and economy. See Boren

Amendment (defining rates by reference to "efficiently and

economically operated facilities"); Section 30(A) (requiring

states "to assure that payments are consistent with

efficiency [and] economy").

32

Both the Boren Amendment and Section 30(A) require

states to reimburse providers at rates that are sufficient to

ensure quality of care. See Boren Amendment (requiring

that reimbursement rates be "reasonable and adequate to

meet the costs which must be incurred . . . in order to

provide care and services in conformity with . . . quality

and safety standards"); Section 30(A) (requiring states "to

assure that payments are consistent with . . . quality of

care"). And both the Boren Amendment and Section 30(A)

require states to reimburse providers at rates that are

sufficient to guarantee Medicaid recipients adequate access

to healthcare. See Boren Amendment (requiring "rates . . .

which . . . are reasonable and adequate . . . to assure that

individuals eligible for medical assistance have reasonable

access . . . to inpatient hospital services"); Section 30(A)

(requiring states "to assure that payments are . . . sufficient

to enlist enough providers so that care and services are

available under the plan at least to the extent that such

care and services are available to the general population in

the geographic area").

Thus, far from "contrast[ing] sharply," as the majority

contends, see Maj. Op. at 11, the Boren Amendment and

Section 30(A) confer on providers nearly identical rights to

be reimbursed for services provided and to be reimbursed

at a minimum rate that is defined by reference to quality of

care and adequate access. See Ark. Med. Soc'y, Inc. v.

Reynolds, 6 F.3d 519, 525 (8th Cir. 1993) ("[T]he equal

access provision [of Section 30(A)] is very analogous to the

Boren Amendment examined in Wilder; they are similar not

only in function but also in the specific language

employed."). This case is therefore squarely controlled by

Wilder, and I would hold that healthcare providers may

bring S 1983 actions to enforce the rights conferred on

them by Section 30(A).2

_________________________________________________________________

2. I fully concur in the majority's distinction between "the question

whether a statute is intended to benefit particular plaintiffs" and "the

question whether the statute in fact benefits those plaintiffs." Maj. Op.

at

8. Similarly, I agree with the majority's observation that "lessors of

pharmacy premises, cleaning service firms retained by pharmacies, trash

collection companies retained by pharmacies, [and] private security firms

retained by pharmacies" may all benefit from Section 30(A). Maj. Op. at

33

B.

The majority's rationale relies heavily on the fact that

Section 30(A) is addressed in part to recipients, since it

defines provider reimbursement rates by reference to

quality of care and adequate access. See Maj. Op. at 11

("[Section 30(A)'s] directives to provide`quality of care' and

adequate access . . . . are drafted with an unmistakable

focus on Medicaid beneficiaries, not providers."); id. at 12

("[Section 30(A)] demands that payments be set at levels

that are sufficient to meet recipients' needs."); id. ("[T]he

adequacy of payments [under Section 30(A)] is measured in

relation to the health needs of recipients."); id. at 19

("Section 30(A) focuses on the care and services available to

recipients."); id. at 12 ("It is therefore apparent from the

statutory language that the intended beneficiaries of

Section 30(A) are recipients, not providers.").

To rely on the quality of care and adequate access

guarantees as a basis for holding that Section 30(A) was

not intended to benefit providers, however, would require

overruling Wilder, which squarely held that a statute that

defines provider reimbursement rates by reference to

Medicaid recipients' quality of care and Medicaid recipients'

access to care and services may nonetheless be intended to

benefit providers. Nowhere in Wilder did either the majority

or the dissent even hint that the Boren Amendment's

reference to quality of care and adequate access should give

the Court pause before concluding that the Boren

Amendment was intended to benefit providers. As such, for

purposes of determining whether providers are intended

beneficiaries of Section 30(A), Wilder renders irrelevant the

fact that Section 30(A) includes quality of care and

adequate access guarantees.

Inexplicably, then, the majority makes the adequate

access and quality of care guarantees that are found in

_________________________________________________________________

8. But I have little difficulty in concluding that these third parties are

not among the intended beneficiaries of Section 30(A), for the simple

reason that Section 30(A) expressly requires states to establish a scheme

for reimbursing those who provide healthcare services, not garbage

collection services or security services.

34

both the Boren Amendment and Section 30(A) the

cornerstone of its analysis in holding that providers are not

intended beneficiaries of Section 30(A). To be consistent

with Wilder, which held that providers are intended

beneficiaries of the Boren Amendment, however, a rationale

leading to the conclusion that providers are not intended

beneficiaries of Section 30(A) must rest not on similarities

between the Boren Amendment and Section 30(A), as does

the vast bulk of the majority opinion, but rather on

differences.

C.

The only difference between the Boren Amendment and

Section 30(A) that the majority relies on is the Boren

Amendment's reference to providers' costs, which is absent

from Section 30(A). For the reasons discussed below,

however, the reference to providers' costs in the Boren

Amendment and the absence of such a reference in Section

30(A) are immaterial for purposes of determining whether

providers are among the intended beneficiaries of Section

30(A).

First, the language of the Boren Amendment did not

create any independent right on the part of providers to be

reimbursed for their costs without reference to quality of

care, as the majority maintains. The majority repeatedly

quotes the language in the Boren Amendment requiring

payments to be "reasonable and adequate to meet the costs

which must be incurred by efficiently and economically

operated facilities," Maj. Op. at 10, 11, but neglects to

quote the remainder of the clause, which goes on to

expressly define costs in terms of quality of care. In fact,

the Boren Amendment required payment for "the costs

which must be incurred by efficiently and economically

operated facilities in order to provide care and services in

conformity with applicable State and Federal laws,

regulations, and quality and safety standards ." (emphases

added). The plain language of the Boren Amendment thus

explicitly defined "costs" by reference to quality of care, and

created no independent right of providers to be reimbursed

for their costs beyond that conferred by the quality of care

requirement, such as exists in Section 30(A).

35

I acknowledge that quality of care guarantees in the two

statutes are not completely identical -- the Boren

Amendment requires rates that "meet the costs which must

be incurred . . . to provide care and services in conformity

with . . . quality and safety standards," while Section 30(A)

requires rates that "are consistent with . . . quality of care."

I cannot agree with the majority's conclusion, however, that

this difference is so significant that quality of care "played

a decidedly secondary role in the Boren Amendment," but

"is a primary benchmark" in Section 30(A). Maj. Op. at 14.

Indeed, the majority never explains how a reimbursement

rate could be so low that it violates the Boren Amendment's

requirement that rates meet "the costs which must be

incurred by efficiently and economically operated facilities

in order to provide care and services in conformity with

applicable State and Federal laws, regulations, and quality

and safety standards," yet nonetheless be "consistent with

. . . quality of care," as mandated by Section 30(A).

Even assuming, arguendo, that the majority is correct

that the Boren Amendment created an independent right on

the part of providers to be reimbursed for their costs

without reference to quality of care, the plaintiffs in Wilder

were suing to enforce both their right to be reimbursed at

rates that covered their costs, as well as their independent

right under the Boren Amendment to be reimbursed at

rates that are sufficient to ensure adequate access. See

Wilder, 496 U.S. at 503 ("Respondent contends that

Virginia's Plan for reimbursement violates the Act because

the rates are not reasonable and adequate to meet the

economically and efficiently incurred cost of providing care

to Medicaid patients in hospitals and do not assure access

to inpatient care.") (emphasis added and internal quotation

marks omitted). Had Wilder's holding rested on the Boren

Amendment's reference to provider costs, as the majority

contends, then the Court would have permitted the

providers to sue under S 1983 to enforce only their right to

be reimbursed for their costs, and not their additional right

under the Boren Amendment to be reimbursed at rates

sufficient to ensure recipients adequate access to care and

services.

The plain language of S 1983 creates a cause of action

not for a violation of a statute as an undifferentiated whole,

36

but rather for a violation of a "right[ ] . . . secured by the

Constitution or laws" of the United States. See Blessing v.

Freestone, 520 U.S. 329, 340 (1997) ("In order to seek

redress through S 1983, . . . a plaintiff must assert the

violation of a federal right, not merely a violation of federal

law."); id. at 342 ("It was incumbent upon the respondents

to identify with particularity the rights they claimed, since

it is impossible to determine whether Title IV-D, as an

undifferentiated whole, gives rise to undefined`rights.' "). By

permitting the providers' suit to proceed, the Supreme

Court necessarily held that providers are among the

intended beneficiaries of not only the Boren Amendment's

requirement that reimbursement rates be sufficient to cover

provider costs, but also the Boren Amendment's

requirement that reimbursement rates be sufficient to

ensure recipients' adequate access to care and services.

Finally, and most importantly, the Supreme Court's

rationale in Wilder made clear that in concluding that

providers were intended beneficiaries of Section 30(A), it

was relying not on the Boren Amendment's reference to

providers' costs, as the majority asserts, but rather on the

Boren Amendment's express requirement that states

establish a scheme to reimburse providers for services

rendered. In attempting to distinguish Section 30(A) from

the Boren Amendment, the majority repeatedly quotes

Wilder's conclusion that the Boren Amendment"was

phrased in terms benefitting health care providers," see

Maj. Op. at 10, 12, 20, but conspicuously omits the rest of

the sentence, in which the Wilder Court explained why it

concluded that the Boren Amendment "was phrased in

terms benefitting health care providers." The remainder of

the sentence, which the majority never fully quotes, makes

clear what particular statutory language in the Boren

Amendment the Court in Wilder was in fact relying on in

concluding that the Boren Amendment was "phrased in

terms benefitting providers":

There can be little doubt that health care providers are

the intended beneficiaries of the Boren Amendment.

The provision establishes a system for reimbursement

of providers and is phrased in terms benefitting health

care providers: It requires a state plan to provide for

37

"payment of the hospital services, nursing facility

services, and services in an intermediate care facility for

the mentally retarded provided under the plan." 42

U.S.C. S 1396a(a)(13)(A) (1982 ed., Supp. V)

Wilder, 496 U.S. at 510 (internal alterations omitted)

(emphasis added).

The majority is "convinced," Maj. Op. at 12, that when

the Wilder Court stated that the Boren Amendment "is

phrased in terms benefitting health care providers: It

requires a state plan to provide for `payment of the hospital

services, nursing facility services, and services in an

intermediate care facility for the mentally retarded provided

under the plan,' " the Court was relying on language in the

Boren Amendment other than the language it directly

quoted. It is difficult to imagine how a judicial opinion

could be more clear about what particular statutory

language it is relying on to establish a given proposition

than by expressly quoting that language immediately

following the proposition, as the Supreme Court did in

Wilder. The majority's conclusion that the Court quoted

only a portion of the statutory language that it relied on in

concluding that the Boren Amendment was "phrased in

terms benefitting health care providers" is particularly

puzzling given that, according to the majority, that portion

of the Boren Amendment that the Court actually quoted in

the passage above was insufficient to establish the

proposition for which it was cited, while that portion of the

Boren Amendment that the Court neglected to quote (the

Boren Amendment's reference to provider costs) was,

according to the majority, "plainly a boon for providers,"

and "an unmistakable sign of a congressional desire to

benefit providers." Maj. Op. at 14.

Indeed, by the majority's reasoning, it is hard to see why

the Wilder majority, in concluding the Boren Amendment

was "phrased in terms benefitting health care providers,"

would even bother to quote the particular language in the

Boren Amendment requiring "payment of the hospital

services, nursing facility services, and services in an

intermediate care facility for the mentally retarded provided

under the plan," given that, according to the majority, the

nearly identical language in Section 30(A) requiring

38

"payment for[ ] care and services available under the plan,"

"manifests concern solely for the well-being of recipients."

Maj. Op. at 12 (emphasis added).3

_________________________________________________________________

3. The majority attempts to overcome the obvious difficulty posed by the

Wilder Court's quotation of the particular language in the Boren

Amendment that it was relying on by invoking the canon of construction

that a statute should be construed to avoid rendering any part of it

superfluous. According to the majority, if the reason that Wilder

concluded that the Boren Amendment was "phrased in terms benefitting

health care providers" was that it required a state plan to provide for

"payment of the hospital services, nursing facility services, and services

in an intermediate care facility for the mentally retarded provided under

the plan" (the language in the Boren Amendment that the Wilder

majority relied on), then the Supreme Court's "full [sic] sentence (`The

provision establishes a system for reimbursement of providers and is

phrased in terms benefitting health care providers') would say exactly the

same thing twice . . . ." Maj. Op. at 12.

I believe that this reasoning errs by "minutely parsing phrases, and

seeking shades of meaning in the interstices of sentences and words, as

though a discursive judicial opinion were a statute." Schlup v. Delo, 513

U.S. 298, 343 (1995) (Scalia, J., dissenting). Even if the majority were

correct that my reading of Wilder renders a portion of a sentence in the

opinion redundant, it would be neither the first nor the last time that a

judicial opinion sought clarity at risk of redundancy. Whatever

redundancy might exist in the sentence at issue in Wilder, I nonetheless

believe that the Court was relying on the statutory language that it

quoted when it stated that the Boren Amendment "is phrased in terms

benefitting health care providers: It requires a state plan to provide for

`payment of the hospital services, nursing facility services, and services

in an intermediate care facility for the mentally retarded provided under

the plan.' "

At all events, the Supreme Court's statement that the Boren

Amendment "establishes a system for reimbursement of providers" and

the Supreme Court's conclusion that the Boren Amendment "is phrased

in terms benefitting health care providers" because it "requires a state

plan to provide for `payment of the hospital services, nursing facility

services, and services in an intermediate care facility for the mentally

retarded provided under the plan' " do not amount to "say[ing] exactly

the same thing twice." Maj. Op. at 12. The first statement is addressed

to the substance of the Boren Amendment (the Boren Amendment

"establishes a system for reimbursement of providers," 496 U.S. at 510);

the second statement is addressed to the Boren Amendment's text (the

Boren Amendment "is phrased in terms benefitting health care providers:

39

Given that the excerpt quoted above contains the Wilder

Court's entire discussion of whether providers were

intended beneficiaries of the Boren Amendment, the

majority is plainly incorrect when it asserts that"the

Supreme Court [in Wilder] stressed the Boren Amendment's

cost-reimbursement language," and that "the Court relied

on language in the Boren Amendment that measured the

adequacy of payments in relation to the economics of

providers, i.e., their need to cover their reasonable costs."

Maj. Op. at 10 (emphases added). Nowhere in its analysis

did the Court rely on the Boren Amendment's reference to

provider costs, much less "stress" such language, as the

majority contends. And whatever this Court may think

about the breadth of the Supreme Court's rationale, it is

not our function to rewrite a Supreme Court opinion to

narrow its holding by imputing to the Court reliance on a

fact that played no role in the Court's rationale. Rather, the

scope of the Wilder Court's holding must be determined by

reference to the Wilder Court's ratio decidendi as articulated

by the Wilder Court.

As is readily apparent from the analysis quoted above,

the Wilder Court made perfectly clear that in concluding

that "there can be little doubt that healthcare providers are

the intended beneficiaries of the Boren Amendment," it was

relying on the language in the Boren Amendment requiring

a state plan to provide for "payment of the hospital services,

nursing facility services, and services in an intermediate

care facility for the mentally retarded provided under the

plan." See Ark. Med. Soc'y, Inc. v. Reynolds , 6 F.3d 519,

526 (8th Cir. 1993) ("Wilder concluded that institutional

providers were intended beneficiaries of the Boren

_________________________________________________________________

It requires a state plan to provide for `payment of the hospital services,

nursing facility services, and services in an intermediate care facility

for

the mentally retarded provided under the plan.' " 496 U.S. at 510). See

Maj. Op. at 9 (commenting on "the importance of the particular phrasing

of a statute in this regard"); Maj. Op. at 16 ("[T]he inquiry mandated by

Wilder and Blessing -- whether Congress intended for Section 30(A) to

benefit providers as opposed to simply knowing that providers would be

benefitted -- calls for us . . . to take into account the precise

statutory

language adopted by Congress.").

40

Amendment because the Amendment concerned their

reimbursement."); see also Evergreen Presbyterian

Ministries, Inc. v. Hood, 235 F.3d 908, 925 (5th Cir. 2000)

("[T]he [Wilder] Court concluded that there was little doubt

that the providers were the intended beneficiaries of the

Boren Amendment because it established a system for

reimbursement of providers and was phrased in terms

benefitting health care providers, in that it required a state

plan to provide for their payment.") (internal quotations and

alterations omitted); Visiting Nurse Ass'n of N. Shore, Inc. v.

Bullen, 93 F.3d 997, 1004 (1st Cir. 1996) ("The Wilder

Court . . . observed that the statute `is phrased in terms

benefitting health care providers,' and . . . then proceeded

to illustrate how the plain language of the Boren

Amendment `establishes a system for reimbursement of

providers.' ") (emphasis omitted).

Thus, for the same reason that the Wilder Court

concluded that the Boren Amendment was "phrased in

terms benefitting health care providers: It requires a state

plan to provide for `payment of the hospital services,

nursing facility services, and services in an intermediate

care facility for the mentally retarded provided under the

plan,' " 496 U.S. at 510 (quoting the Boren Amendment), I

would conclude that Section 30(A) is phrased in terms

benefitting health care providers: It requires a state plan to

provide for "payment for[ ] care and services available under

the plan." See Ark. Med. Soc'y, 6 F.3d at 526 ("[T]he equal

access provision [of Section 30(A)] addresses payment for

`care and services' provided by noninstitutional providers.

The providers here are beneficiaries for the same reason

that the providers in Wilder were beneficiaries."); Visiting

Nurse Ass'n, 93 F.3d at 1004 (1st Cir. 1996) ("As long as

the two statutory provisions evince a congressional concern

for preserving financial incentives to providers-- by

ensuring adequate reimbursement payment levels --

providers are appropriately considered intended

beneficiaries.").4

(Text continued on page 43)

_________________________________________________________________

4. One further point needs to be made -- that the majority's departure

from Wilder creates serious line-drawing problems. Whereas Wilder held

that any statute that expressly requires states to pay providers is

41

intended to benefit providers, the majority holds that whether such a

statute is intended to benefit providers depends on how the statute

defines the minimum payment rate. But the majority never offers an

analytically sound explanation of how we are to distinguish those

payment floors that are intended to benefit providers from those

payment floors that are not.

At times, the majority appears to rely on the fact that the payment

floor mandated by Section 30(A) is not expressly defined by reference to

provider costs or provider economics. See Maj. Op. 12 (distinguishing

Wilder on the ground that the Boren Amendment"measured the

sufficiency of payments by reference to the economics of providers"); Id.

at 12 ("Unlike the Boren Amendment, [Section 30(A)] evinces no direct

concern for the economic situation of providers."). But if the majority's

test of whether providers are intended beneficiaries of a statute

requiring

states to pay providers some minimum amount turns on whether the

language of the statute expressly defines the minimum reimbursement

rate by reference to provider costs or provider economics, then providers

would not be among the intended beneficiaries of a statute that required

states to pay pharmacies $2,500 each time they dispense a given dosage

of a particular prescription drug, but would be among the intended

beneficiaries of a statute that required states to pay providers 1% of

their

costs each time they dispensed a drug. In my view, this taxonomy is

unreasonable.

Elsewhere, the majority appears to rely on the fact that the text of

Section 30(A) defines the minimum reimbursement rates solely by

reference to the health needs of recipients. See Maj. Op. at 12

(observing

that under Section 30(A), "the adequacy of payments is measured in

relation to the health needs of recipients"). But if the majority's test

of

whether providers are intended beneficiaries of a statute requiring states

to pay providers is whether the statute's language expressly defines

reimbursement rates solely by reference to the health needs of

recipients, then that test too, produces unreasonable results. Under

such a test, providers would not be among the intended beneficiaries of

a statute whose language expressly required states to pay providers ten

times the rate needed to ensure Medicaid recipients quality of care and

adequate access, but providers would be intended beneficiaries of a

statute whose language expressly required states to pay providers a

dollar every time they filled a Medicaid prescription.

Finally, it may be that the minimum reimbursement rates actually

mandated by the Boren Amendment were lower than the actual

minimum rates mandated by Section 30(A). For example, the Boren

42

In sum, although there are differences between the

specific language of the Boren Amendment and the specific

language of Section 30(A), as there inevitably will be

between any two statutes, these differences are immaterial

in light of Wilder's rationale, and the Supreme Court in

Wilder gave no indication that its rationale was"good for

this day and train only." County of Washington v. Gunther,

452 U.S. 161, 183 (1981) (Rehnquist, J., dissenting).

IV.

Until now, the only Court of Appeals to hold that

providers may not bring S 1983 actions to enforce their

rights under Section 30(A) was the Fifth Circuit in

Evergreen Presbyterian Ministries, Inc. v. Hood, 235 F.3d

908 (5th Cir. 2000), which I would decline to follow. In

holding that providers are not among the intended

beneficiaries of Section 30(A), the Fifth Circuit in Evergreen

relied heavily on the Supreme Court's decision in Blessing

v. Freestone, 520 U.S. 329, 340 (1997), which held that a

plaintiff may sue under S 1983 for a violation of a federal

statute only if the statute creates an individual entitlement,

and not simply a systemwide guarantee. Id. at 343. In

Blessing, the plaintiffs were mothers whose children were

eligible to receive child support services from the state

pursuant to Title IV-D of the Social Security Act. Id. at 332.

Plaintiffs brought a S 1983 action seeking to enforce 42

_________________________________________________________________

Amendment's access requirement mandated that rates be sufficient to

ensure only that "individuals eligible for medical assistance have

reasonable access," whereas Section 30(A) requires equal access -- rates

must be "sufficient to enlist enough providers so that care and services

are available under the plan at least to the extent that such care and

services are available to the general population in the geographic area."

Fortunately, Wilder avoided the problem of distinguishing those

mandatory payment floors that are intended to benefit the payee from

those that are not. While how high the statute sets the payment floor will

determine the magnitude of the intended benefit (a low minimum

reimbursement rate obviously does not benefit providers as much as a

high minimum reimbursement rate), under Wilder as long as the statute

expressly requires states to pay providers, providers are intended

beneficiaries.

43

U.S.C. S 609, which authorizes the Secretary of the

Department of Health and Human Services to penalize a

state if it is not in "substantial compliance" with Title IV-D.

Id. at 335.

The Blessing Court held that S 609(a)(8) does not create

an individual right, enforceable under S 1983, to have

states achieve substantial compliance with Title IV-D. First,

the Court noted that the plaintiffs had failed to identify a

particular provision of Title IV-D that grants them an

individual entitlement, and may not simply sue to enforce

substantial compliance with Title IV-D as a whole. See

Blessing, 520 U.S. at 342 ("It was incumbent upon

respondents to identify with particularity the rights they

claimed, since it is impossible to determine whether Title

IV-D, as an undifferentiated whole, gives rise to undefined

`rights.' "). Second, the Court reasoned that because

S 609(a)(8)'s "substantial compliance" requirement would be

satisfied if the state provided the mandated services in only

75% of the cases reviewed during the federal audit period,

"even when a State is in `substantial compliance' with Title

IV-D, any individual plaintiff might still be among the 10 or

25 percent of persons whose needs ultimately go unmet."

Id. at 344. Thus, "[f]ar from creating an individual

entitlement to services, the standard [which plaintiffs seek

to enforce under S 1983] is simply a yardstick for the

Secretary to measure the systemwide performance of a

State's Title IV-D program." Id. at 343.

In view of the Supreme Court's rationale in Blessing,

plaintiffs' claims in this case are easily distinguishable from

plaintiffs' claims in Blessing. First, unlike the plaintiffs in

Blessing, the plaintiffs in this case have identified with

particularity the right claimed, since they allege that the

reimbursement rates violate Section 30(A)'s quality of care

and adequate access mandates. Cf. Blessing, 520 U.S. at

342 (distinguishing Wilder on the ground that "in Wilder,

we held that health care providers had an enforceable right

to reimbursement . . . as required by a particular provision

in the Medicaid statute") (emphasis added). This case is

therefore distinguishable from Blessing for the same reason

that the Blessing Court concluded that Wilder was

distinguishable from Blessing.

44

Blessing is further distinguishable on the ground that in

that case, the plaintiffs would not necessarily have obtained

any benefit had they succeeded on the merits of their claim,

since the provision that they sought to enforce under

S 1983 required only "substantial compliance" with Title IV-

D. See Blessing, 520 U.S. at 344 ("[E]ven when a State is in

`substantial compliance' with Title IV-D, any individual

plaintiff might still be among the 10 or 25 percent of

persons whose needs ultimately go unmet."). By contrast,

in this case each individual plaintiff will necessarily benefit

if they succeed on the merits, since they would each be

individually entitled to reimbursement at higher rates.

I therefore disagree with Evergreen's reliance on Blessing

in concluding that Section 30(A) creates only a system-wide

guarantee, not an individual entitlement on the part of

providers. The Fifth Circuit in Evergreen illustrated its

reasoning with the following example:

Assume we have a nursing home in Baton Rouge with

150 residents, which, following the [rate reduction at

issue], is forced into bankruptcy and then liquidation.

Assume further that the district court decides that the

relevant geographic market to measure the access of

recipients is the Baton Rouge market for nursing home

care and also that the district court concludes that the

recipients are entitled to the same access to nursing

home care in Baton Rouge as that of non-Medicaid

recipients. Finally, assume that, once the nursing

home closes, all 150 residents are able to fill vacant

beds in other facilities in Baton Rouge. Under this

scenario, there is no violation of the recipients' equal

access rights, despite the fact that the bankrupt

nursing home was put out of business.

From this example, it is apparent that while

recipients have an individual entitlement to equal

access to medical care, any benefit to healthcare

providers is indirect at best. The statute does not

confer any direct right upon the individual provider

because, as the above example illustrates, even if an

individual provider is forced to liquidate, the recipients'

right to access is not necessarily violated.

45

235 F.3d at 929. I find this reasoning unpersuasive.

First, the Fifth Circuit put the rabbit in the hat when it

reasoned from a hypothetical example in which Section

30(A) is not violated. See Evergreen, 235 F.3d at 929

("Under this scenario, there is no violation of the recipients'

equal access rights . . . ."). Of course providers will have no

individual entitlement under Section 30(A) to increased

reimbursement rates under a factual scenario in which

Section 30(A) is not violated. But in a factual scenario

where reimbursement rates are so low that Section 30(A)'s

adequate access guarantee is violated, every provider who

participates in Medicaid would be individually entitled to

reimbursement at the higher rate mandated by Section

30(A).

Second, Evergreen incorrectly assumed that unless a

statute requiring providers to be reimbursed at a given rate

ensures that no providers will ever be put out of business,

the statute does not create any direct right on the part of

providers. See Evergreen, 235 F.3d at 929 ("The statute

does not confer any direct right upon the individual

provider because, as the above example illustrates, even if

an individual provider is forced to liquidate, the recipients'

right to access is not necessarily violated."). Under any

statute addressed to provider reimbursement, however, it

will almost always be the case that some providers may go

out of business notwithstanding the statute. But this

possibility does not mean that the statute creates no

individual entitlement on the part of providers.

Consider, for example, a statute that expressly requires

states to reimburse pharmacies at least $25 each time they

dispense a given dosage of a particular prescription drug to

a Medicaid recipient. A $25 reimbursement rate might force

certain providers out of business, but it is hard to imagine

a statute that more directly confers an individual

entitlement on providers. Similarly, there was no guarantee

in the Boren Amendment that no provider would ever be

put out of business, but the Court in Wilder nonetheless

held that the Boren Amendment conferred on providers

rights that are enforceable under S 1983.

Finally, the Evergreen Court mistakenly reasoned that

because the minimum reimbursement rate mandated by

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Section 30(A) is defined by reference to the market-wide

criterion of Medicaid recipients' access to healthcare, it

does not confer an individual entitlement on providers. See

Evergreen, 235 F.3d at 928 ("Section 30(A) does not create

an individual entitlement in favor of any provider. The

section benefits recipients by ensuring there is an adequate

number of providers in the market place."). That Section

30(A) defines the mandatory minimum provider

reimbursement rate by reference to the number of providers

in the market place, however, does not make the rate any

less mandatory or any less of a minimum. As long as a

statute expressly requires providers to be reimbursed at

rates that are at least equal to a defined minimum, then

the statute creates an individual entitlement on the part of

every provider to be reimbursed at that minimum,

regardless whether the minimum is defined by reference to

providers' costs, recipients' access, quality of care, market

rates, or a fixed sum.

Thus, contrary to the Fifth Circuit's conclusion that "it

cannot be said that section 30(A) necessarily confers upon

each provider an individual right to a particular payment,"

Section 30(A) clearly does confer upon each provider an

individual right to be paid at rates that are at least equal to

the statutory minimum. See Wilder, 496 U.S. at 510

("There can be little doubt that health care providers are

the intended beneficiaries of the Boren Amendment. The

provision establishes a system for reimbursement of

providers and is phrased in terms benefitting health care

providers: It requires a state plan to provide for `payment of

the hospital services, nursing facility services, and services

in an intermediate care facility for the mentally retarded

provided under the plan.' ") (internal alterations omitted).

Cf. W. Va. Univ. Hosps., Inc. v. Casey, 885 F.2d 11, 21 (3d

Cir. 1989), aff 'd on other grounds, 499 U.S. 83 (1991)

("Who else is more aggrieved by the absence of an adequate

or reasonable hospital reimbursement rate than a

disadvantaged hospital and who has a more compelling

interest to press for a correction?").

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V.

Finally, although one can find isolated instances of

Medicaid recipients suing to enforce Section 30(A), see, e.g.,

Evergreen Presbyterian Ministries, Inc. v. Hood, 235 F.3d

908, 931-32 (5th Cir. 2000); Ark. Med. Soc'y, Inc. v.

Reynolds, 6 F.3d 519, 522 (8th Cir. 1993), I do not share

the majority's optimism that lawsuits brought by Medicaid

recipients will provide sufficient private enforcement. See

Maj. Op. at 21-22 ("If, as the plaintiffs in this case allege,

the rates set under the HealthChoices program are so low

that compliance with the `quality of care' and access

requirements is threatened, we see no reason to believe

that recipients in the affected area of the Commonwealth

will not seek legal redress to ensure that these critical

mandates are met."). Medicaid recipients are, by definition,

people facing severe financial hardship, and therefore are

unlikely to have the same access to legal services as

healthcare providers.5

Moreover, Section 30(A), by its express terms, uses

provider reimbursement rates as the means of ensuring

recipients' quality of care and adequate access, and

healthcare providers are more likely than Medicaid

recipients to possess information about the relationship

between current provider reimbursement rates and

recipients' quality of care and access to care and services.

Indeed, few if any Medicaid recipients will even be aware of

current provider reimbursement rates, much less have an

idea of how a particular rate compares with provider costs

_________________________________________________________________

5. To be sure, attorney's fees are available to a successful S 1983

plaintiff. See 42 U.S.C. S 1988 ("In any action or proceeding to enforce a

provision of section[ ] . . . 1983 . . . of this title, . . . the court,

in its

discretion, may allow the prevailing party . . . a reasonable attorney's

fee

as part of the costs . . . ."). Awards of attorney's fees may be

inadequate

to induce attorneys to represent Medicaid recipients in Section 30(A)

cases, however, since such attorneys would assume the risk of earning

no fees if the lawsuit is unsuccessful. See City of Burlington v. Dague,

505 U.S. 557 (1992) (holding that in determining the reasonableness of

attorney's fees under federal fee shifting statutes, courts may not

enhance the fee award above the "lodestar" amount to compensate

attorneys for assuming the risk of receiving no payment for their services

if the lawsuit failed).

48

and the reimbursement rates offered by non-Medicaid

healthcare plans. Nor are Medicaid recipients likely to have

ready access to statistical information on the extent to

which healthcare is available to the general public, for

purposes of determining whether current reimbursement

rates comply with Section 30(A)'s adequate access mandate.

By contrast, professional associations such as the

pharmacists association plaintiff in this case are more

likely to possess the market data necessary to determine

whether a colorable claim under Section 30(A) exists.

In sum, because Section 30(A) is expressly addressed to

the financial incentives of healthcare providers to

participate in Medicaid, healthcare providers are well-

situated to vindicate recipients' and providers' shared

interest in ensuring that provider reimbursement rates are

consistent with quality of care and sufficient to guarantee

Medicaid recipients access to care and services to the same

extent as the general public. These practical considerations

further support the result compelled by Wilder .

VI.

Because I believe that the question whether providers

may bring S 1983 actions to enforce Section 30(A) is

squarely controlled by Wilder, I would decline to follow

Evergreen Presbyterian Ministries, Inc. v. Hood, 235 F.3d

908 (5th Cir. 2000), and would join those Circuits that,

relying on Wilder, have permitted providers to bring such

claims. See Visiting Nurse Ass'n of N. Shore, Inc. v. Bullen,

93 F.3d 997, 1005 (1st Cir. 1996) ("[W]e conclude that

plaintiffs possess standing . . . to enforce section

1396a(a)(30) . . . ."); Methodist Hosps., Inc. v. Sullivan, 91

F.3d 1026, 1029 (7th Cir. 1996) ("We therefore . . . hold

that providers of medical care have a private right of action,

derived through S 1983, to enforce S 1396a(a)(30)."); Ark.

Med. Soc'y, Inc. v. Reynolds, 6 F.3d 519, 528 (8th Cir.

1993) ("[T]he equal access provision [of Section 30(A)] may

be enforced by Medicaid recipients and providers using 42

U.S.C. S 1983."). I thus respectfully dissent.

To hold as have these other Courts would not of course

be the end of the case, for the plaintiffs would still have

49

significant hurdles in the next phase. In particular,

plaintiffs would have to demonstrate that they have

produced sufficient evidence for a reasonable jury to find

that the current reimbursement rates are so low that they

violate either the quality of care or adequate access

mandate contained in Section 30(A), a question on which I

express no opinion here. Since the Court has not gone

beyond the threshold issue of whether S 1983 grants

providers a right of action to enforce Section 30(A), I would

reconstitute the original panel so that it may resolve the

merits of the Department's summary judgment motion,

which requires determining whether plaintiffs have

produced sufficient evidence for a reasonable jury to find

that the challenged reimbursement rates violate Section

30(A)'s quality of care and adequate access mandates.

50

RENDELL, Circuit Judge, dissenting, with whom Chief

Judge BECKER joins:

I join in Chief Judge Becker's thoughtful dissenting

opinion and write separately only to offer a permissible

reading of the statutory language different from that urged

by the majority. The majority terms the language"complex"

and "breaks it down." However, I see it as fairly straight-

forward -- at least regarding what we need to decide --

when properly parsed. If we were to "parse" the statute at

issue in grammarian fashion, we would note that the"state

plan" is the noun, "must provide," the verb, and "methods

and procedures," the object. Then comes the descriptive

phrase "relating to the utilization of, and payment for, care

and services available under the plan." The methods and

procedures must relate to the use of care and services -- by

individual recipients -- and the payment-- to providers --

for care and services.

What then follows in the statute -- preceded by"as may

be necessary . . ." -- is no more than a further descriptive

phrase setting forth the barometer or standard against

which the utilization and payment methods and procedures

are to be measured. Why should only the users be able to

challenge a plan that must pass muster not only in terms

of the methods and procedures for "utilization," but also the

methods and procedures for "payment?"

I think it eminently reasonable to conclude that both

aspects -- use and payment -- are foci, and that both

constituencies can speak to whether the statutory

requirement ("as may be necessary to . . .") has been

fulfilled, and both should have the right to complain that in

fact it has not.

Also, in response to the majority's footnote 15, I submit

that I am not ignoring the second part of the provision, and

I do not view the provision as hopelessly vague. Rather, I

see no need to mention it because it sets forth a standard

that is quite susceptible to proof. I have little difficulty

imagining the gist of the testimony of recipients, providers,

and state administrators as to how the procedures in place

impact the sufficiency of payment and quality of service, so

that judicial decision making can be exercised. I do,

51

however, continue to have difficulty in understanding why

there cannot be two intended beneficiaries, especially if the

statute is designed to benefit one (the providers) in order to

provide the desired level of services to the other (the

recipients).

Further, I suggest that the fact that the language post-

repeal of Boren continues to reference "rates" is actually

quite insignificant. In repealing Boren, Congress replaced

the standard for the rates ("reasonable and adequate") with

the requirement that the state provide for a public process

for determination of rates. What is significant, however, is

the fact that the Boren Amendment language that had been

held to afford a cause of action required that rates be

"reasonable and adequate," and the language we are

quibbling over similarly describes a standard for payments

to providers. I see no meaningful distinction between the

two and therefore respectfully dissent.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

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