Amicus Curiae Brief — Wilder v. Virginia Hospital Assn.

IN THE

Supreme Court of the United States

OCTOBER TERM, 1989

GERALD L. BALILBS, et al.,

Petitioners,

V.

THE VIRGINIA HOSPITAL ASSOCIATION,

Respondent.

On Writ of Certiorari to the United States

Court of Appeals for the Fourth Circuit

BRIEF OF THE

NATIONAL GOVERNORS’ ASSOCIATION,

NATIONAL ASSOCIATION OF COUNTIES,

COUNCIL OF STATE GOVERNMENTS,

U.S. CONFERENCE OF MAYORS,

INTERNATIONAL CITY MANAGEMENT ASSOCIATION,

NATIONAL CON “ERENCE OF STATE LEGISLATURES,

AND ?}. ATIONAL LEAGUE OF CITIES

AS AMICI CURIAE IN SUPPORT OF PETITIONERS

THOMAS M. REITER BENNA RUTH SOLOMON

JAMES E. SCHEUERMANN Chiet Counsel

KIRKPATRICK & LOCKHART STATE AND LOCAL LEGAL CENTER

1500 Oliver Building 444 North Capitol St., N.W.

Pittsburgh, PA 15222 Suite 349

(412) 355-6500 Washington, D.C. 20001

Of Counsel (202) 638-1445

Counsel of Record for the

Amici Curiae

WILSON - Eras Printing Co.. Inc. - 789-0096 - WasHincron, D.C. 20001

TABLE OF CONTENTS

QUESTION PRESEN yr

TABLE OF AUTHORrr nns

THE MEDICAID STATUTE GIVES RE-

SPONDENT NO SUBSTANTIVE FEDERAL

RIGHT TO REASONABLE AND ADEQUATE

REIMBURSEMENT ENFORCEABLE UN-

DER 42 U.S.C. § 19839888

A. Respondent’s Allegations Do Not Establish A

Violation Of A Federal Right Enforceable

Under Section 198888822

B. Assuming Arguendo That Respondent Has

A Substantive Right To Reasonable And

Adequate Rates Under The Medicaid Act, It

Is Not A Right Secured By Federal Law

C. The Federal And State Remedies Provided

For By The Medicaid Statute Are Suffi-

ciently Comprehensive To Foreclose Private

Actions Under Section 19883838388

D. If Adopted By This Court, Respondent’s

Position Would Have Profoundly Adverse

Consequences For Federal-State Relations

And The Federal Courts’ Caseload...

ä

Page

17

18

26

iv

TABLE OF AUTHORITIES

CASES: Page

Agi-Bluff Manor, Inc. v. Reagen, 718 F. Supp.

1535 (W. D. Mo. 1989) 27

Alabama Nursing Home Ass’n v. Harris, 617 F. 2d

388 (Sth Cir. 1980) cccccececceeeceeeeseceeees 11

Al- Charles, Inc. v. Heintz 620 F. Supp. 327 (D.

r A 27

Alexander v. Choate, 469 U.S. 287 (1985) passim

Amisub (PSL), Inc. v. Colorado Dep’t of Social

Services, 879 F.2d 789 (10th Cir. 1989)9 27

Arden House, Inc. v. Heintz, 612 F. Supp. 81 (D.

r . 27

Bethany Medical Center v. Harder, 1987 WL 47845

. 27

Blum v. Bacon, 457 U.S. 182 (1982) 12

Bowen v. Gilliard, 483 U.S. 587 (1987) 4 14

Cannon v. University of Chicago, 441 U.S. 677

11 —— 10

Case v. Weinberger, 523 F.2d 602 (2d Cir. 1975) 16

Charleston Memorial Hospital v. Conrad, 698 F. 2d

, ee, 20

Colorado Health Care Ass’n v. Colorado Dep't of

Social Services, 842 F.2d 1158 (10th Cir. 1988) 27

Coos Bay Care Center v. Oregon Dep’t of Human

Resources, 803 F.2d 1060 (9th Cir. 1986), cert.

granted, 481 U.S. 1036, vacated as moot, 484

ee 27

Edwards v. District of Columbia, 821 F.2d 651

. 13

Geriatrics, Inc. v. Harris, 640 F.2d 262 (10th

Cir.), cert. denied, 454 U.S. 832 (19817 16

Great American Federal Savings & Loan Ass’n v.

Novotny, 442 U.S. 366 (19799 19, 23

Green v. Cashman, 605 F.2d 945 (6th Cir. 1979) .. 16

Harris v. McRae, 448 U.S. 297 (1980) 11, 15, 26, 27, 28

Heckler v. Ringer, 466 U.S. 602 (1983) ee 28

Heckler v. Turner, 470 U.S. 184 (1985)... 14

Hervey v. City of Little Rock, 787 F.2d 1223 (8th

. ee 23

V

TABLE OF AUTHORITIES—Continued

Page

Irby v. Sullivan, 737 F.2d 1418 (5th Cir. 1984) 23

King v. Smith, 392 U.S. 309 (1968) 10, 27

Local 1325, Retail Clerks Int’l Ass’n v. NLRB,

414 F.2d 1194 (D.C. Cir. 1969) 24

Maine v. Thiboutot, 448 U.S. 1 (1980)· 6, 24, 28

Martinez v. California, 444 U.S. 277 (1980) 8,17

Mary Washington Hospital v. Fisher, 635 F. Supp.

III 4, 5, 27

Middlesex County Sewerage Authority v. National

Sea Clammers Ass’n, 453 U.S. 1 (1981). 8, 18, 23, 26

National Railroad Passenger Corp. v. National

Ass’n of Railroad Passengers, 414 U.S. 453

ccc 24

Nebraska Health Care Ass'n v. Dunning, 778 F. 2d

1291 (8th Cir. 1985), cert. denied, 479 U.S.

TI IIT ‘xin init == 27

Oberlander v. Perales, 740 F.2d 116 (2d Cir.

EE 18

Paul v. Davis, 424 U.S. 693 (1976) ....................... “ 18

Pennhurst State School & Hospital v. Halderman,

II „TTT passim

Pennhurst State School & Hospital v. Halderman,

1% pas Bet ili 28

Rose v. Rose, 481 U.S. 619 (1987) . 10

St. Tammany Parish Hospital Service District v.

Department of Health and Human Resources,

677 F. Supp. 455 (E.D. La. 1988) * 27

Samuels v. District of Columbia, 770 F.2d 184

. 8 14

Schweiker v. Hogan, 457 U.S. 569 (1982) 12, 14, 16

Silver v. Baggiano, 804 F.2d 1211 (11th Cir.

ccc 16

Smith v. Robinson, 468 U.S. 992 (19843) 19, 25, 26

Southeastern Community College v. Davis, 442

D ... 6, 10

Tennessee Valley Authority v. Hill, 437 U. 8. 153

eee e eee eee eee 8 25

United Hospital Center, Inc. v. Richardson, 757

F.2d 1445 (4th Cir. 1985) 1 27

vi

TABLE OF AUTHORITIES—Continued

Page

Vantage Healthcare Corp. v. Virginia Board of

Medical Assistance Services, 684 F. Supp. 1329

/ / 27

Virginia Hospital Ass'n v. Baliles, 830 F.2d 1308

. 5

West Virginia University Hospitals v. Casey, 885

ee 19, 27

Wright v. Roanoke Redevelopment & Housing Au-

thority, 479 U.S. 418 (19877 12, 14, 19

Yapalater v. Bates, 494 F. Supp. 1349 (S.D.N.Y.

1980), aff'd per curiam, 644 F.2d 131 (2d Cir.

1981), cert. denied, 455 U.S. 908 (1982) 27

STATUTES:

—— cisatcieesenneniaiiaisieieminneaneenditenes 28

FE . en 28

r . a Cee eRe eee 28

Ee ee ae 15

42 U.S.C. § 654 ............ e 28

1 — — 14, 16

42 U.S.C. § 1396 et seq. .......... — passim

e passim

42 U.S.C. § 1396a(a) (37) (() — 4, 5, 21, 25, 28

7 4, 20

r .. (.. ae passim

. eo eee ES 23

, 22222822. Ä 27

r,, . 10, 15

Va. Code Ann. § 9-6. 14:1 et seq. (1989977 22

Va. Code Ann. § 9-6.14:11 et seq. (19899 5, 22

Va. Code Ann. § 9-6.14:16 et seq. (198997 5

RULES AND REGULATIONS:

48 Fed. Reg. 56049 (1983) ................ — — 12

48 Fed. Reg. 56060 (1983) 13

48 Fed. Reg. 56051 (1983) a ee 20

e 22

48 Fed. Reg. 56056 (1983) „ 21

vii

TABLE OF AUTHORITIES—Continued

GG aie Be CD !ñꝙ

42 C. F. R. § 431.18(f) (1988).

42 C. F. R. 88 447.250-447.253 (1988)

42 C. F. R. § 447.253 (1988

42 C. F. R. § 447.253 (a)-(e) (1988)

42 C. F. R. § 447. 253 (e) (198)

42 C. F. R. § 447.256 (b) (1988) 1

e.,

45 C. F. R. § 201.6 (1988 ——. —ͤ8ʃ

nee

45 C. F. R. § 201.12 (1986) bee;

LEGISLATIVE MATERIALS:

H.R. Rep. No. 158, 97th Cong., Ist Sess. (1981)

H.R. Rep. No. 231, 92d Cong., Ist Sess. (1971)

S. Rep. No. 471, 96th Cong., Ist Sess. (1979) .........

S. Rep. No. 1240, 94th Cong., 2d Sess., reprinted

in 1976 U.S. Code Cong. & Admin. News 5648

MISCELLANEOUS:

Note, Comprehensive Remedies and Statutory Sec-

tion 1983 Actions: Context as a Guide to Pro-

cedural Fairness, 67 Tex. L. Rev. 627 (1989)

State Plan Under Title XIX of the Social Security

Sunstein, Section 1982 and the Private Enforce-

ment of Federal Law, 49 U. Chi. L. Rev. 394

EAA re

IN THE

Supreme Court of the United States

OCTOBER TERM, 1989

No. 88-2043

GERALD L. BALILES, et al.,

7 Petitioners,

THE VIRGINIA HOSPITAL ASSOCIATION,

Respondent.

On Writ of Certiorari to the United States

Court of Appeals for the Fourth Circuit

BRIEF OF THE

NATIONAL GOVERNORS’ ASSOCIATION,

NATIONAL ASSOCIATION OF COUNTIES,

COUNCIL OF STATE GOVERNMENTS,

U.S. CONFERENCE OF MAYORS,

INTERNATIONAL CITY MANAGEMENT ASSOCIATION,

NATIONAL CONFERENCE OF STATE LEGISLATURES,

AND NATIONAL LEAGUE OF CITIES

AS AMICI CURIAE IN SUPPORT OF PETITIONERS

INTEREST OF THE AMICI CURIAE

The amici are organizations whose members include

state, county, and municipal governments and officials

throughout the United States. Amici and their members

have a compelling interest in legal issues that affect

state and local governments.

This case is of importance to amici because it is an-

other example of the proliferation of actions filed under

42 U.S.C. § 1983 against States and their political sub-

divisions to vindicate alleged federal rights arising from

2

federal grant programs. Such litigation disrupts the

federal-state relationship under these programs and un-

dermines the States’ functions and prerogatives.

This case attacks Virginia’s plan for administering its

Medicaid program. Medicaid, a cooperative federal-state

program that provides funds for medical services for the

needy, leaves to each State the determination of eligibility

requirements and reimbursement rates for patients and

health care providers. The federal law and regulations

evidence two concerns: to provide adequate health care

to Medicaid recipients and to contain costs.

State plans are subject to review and approval by the

United States Department of Health and Human Serv-

ices (“HHS”). Virginia’s plan has been approved. None-

theless, respondent asserts that Virginia’s plan violates

its members’ rights under the federal Constitution, laws,

and regulations. Respondent’s specific claim is that Vir-

ginia’s plan yields reimbursement rates that do not con-

form to the requirements of the Medicaid Act in that

they do not reasonably and adequately meet the costs of

efficiently operated hospitals. But respondent can point

to no specific violations of ‘he detailed federal law and

regulations or of the Constitution.

Federal law requires each State to administer its plan

through a special state agency and to establish adminis-

trative hearing processes to resolve disputes. The ruling

below permits respondent to bypass those procedures in

order to assert in federal court purported rights that

exist only by virtue of state law. The decision permits,

indeed requires, a federal court to define, in the first

instance, a right that is a c

over, it turns every dispute a

administration of a federal-state

divisions to heavy potentia! financial liability, which Con-

gress itself chose not to impose. Finally, it denigrates the

State administrative procedures mandated by Congress

3

by making the federal courts the initial claims agency

for all dissatisfied Medicaid health care recipients and

providers. Thus, the decision below, in both its substan-

tive and procedural aspects, poses a threat to the inde-

pendence and integrity of the sovereign States in our

federal system.

Amici submit that the decision below is wrong. Be-

cause this Court’s decision will have a direct effect on

matters of prime importance to amici and their members,

amici submit this brief to assist the Court in its resolution

of the case.

STATEMENT

Respondent Virginia Hospital Association (“VHA”) is

a nonprofit organization whose members are public or

private Virginia health care providers. A portion of each

member’s revenues is derived from its participation in

the Medicaid Assistance Program, 42 U.S.C. § 1396 et

seq. (“Medicaid program”), administered by petitioner

Commonwealth of Virginia, Department of Medical As-

sistance Services (“DMAS”).* VHA believes that its

members are entitled to more money from DMAS.

Virginia, like every State, has citizens who cannot

afford adequate health care. In order to assist these

needy persons, Virginia chooses to participate in the

Medicaid program, a federal-state partnership designed

to provide health care services to the poor. See Alexander

v. Choate, 469 U.S. 287, 289 n.1 (1985). Under Medicaid,

the federal government provides the bulk of the funding

of medical care for the needy, while the States actually

develop, administer, and implement the program in ac-

cordance with their own state Medicaid plans, which

must be approved by the Secretary of HHS. Ibid. If

1 The parties’ letters of consent, pursuant to Rule 36 of the Rules

of this Court, have been filed with the Clerk of the Court.

2 Petitioners are officials of the Commonwealth of Virginia:

Gerald Baliles, the Governor; Eva S. Teig, Secretary of Human

Resources ; and twelve members of the Board of DMAS.

1

the terms or administration of the state plan do not con-

form to federal standards, the Secretary of HHS is au-

thorized to withhold all or part of the federal funding.

42 U.S.C. §1396c. The Medicaid statute requires par-

ticipating States to “provide for procedures of prepay-

— ny — claims review.” 42 U.S.C. § 1396a

a :

Virginia’s Medicaid plan (“Virginia plan”) has both

a substantive and a procedural component. The substan-

tive component consists of the methodology whereby

DMAS sets prospective per diem rates for inpatient care

of Medicaid patients (the “reimbursement system”). In

brief, the reimbursement system establishes seven cate-

gories of hospitals (“peer groups”) based on geographical

location (urban/rural) and size (number of beds per

hospital). For each peer group, a baseline for reimburse-

ment rates is calculated using cost medians per patient

day derived from 1981 hospital cost reports. Further

rate adjustments are made for urban peer groups to allow

for wage variations between metropolitan areas. Wage

differentials are based upon labor costs in the Standard

Metropolitan Statistical Areas as developed by the federal

Office of Management and Budget. Once each peer group’s

median cost per day is thus established, that amount

functions as a quarterly ceiling on reimbursement rates

within that peer group, as increased periodically through

the use of an inflation index. Effective July 1, 1982, the

reimbursement system was approved by the Health Care

Financing Administration (“HFCA”), the agency of

HHS with the responsibility to ensure the compliance of

state reimbursement systems with the Medicaid Act and

its implementing regulations. In Mary Washington Hos-

pital v. Fisher, 635 F. Supp. 891 (E.D. Va. 1985), an ac-

tion brought by a member hospital of VHA, the district

court upheld the legality of the reimbursement system in

its entirety.*

% Subsequent changes made to the reimbursement system are

not relevant to this litigation. They include, for example, changes

in audit procedures and scope of Medicaid coverage.

The procedural component of Virginia’s plan consists

of regulations prescribing procedures for the filing and

processing of appeals by health care providers not satis-

fied with their prospective rates (the “appeals system”).

Under the appeals system, rate reimbursement disputes

are resolved by a three-level administrative review proc-

ess (informal conference, formal hearing, and agency head

decision). Va. Code Ann. 9-6.14:11 et seg. (1989). At

each stage, administrators are guided by comprehensive

regulations. A provider is entitled at each stage to intro-

duce a wide variety of evidence demonstrating that it

operates under unique conditions not shared by other

members of its peer group and that it is economically and

efficiently operated. See generally State Plan Under Title

XIX of the Social Security Act, Exhibit 1 of Respondent’s

Amended Complaint, J. A. 24-45. A provider dissatis-

fied with the administrative decision may appeal to the

Virginia circuit courts and to the Virginia Court of

Appeals. Thereafter, appeal to the Virginia Supreme

Court is available by writ. Va. Code Ann. § 9-6.14:16

et seq. (1989). This appeals system was approved by

the HCFA in March 1986 and was upheld by the local

federal district court.

Respondent, failing to avail itself of this congression-

ally mandated (42 U.S.C. § 1396a(a) (37) (B)) appeals

process, filed this federal court suit under, inter alia, 42

U.S.C. § 1983, seeking declaratory and injunctive relief.

Respondent alleged, inter alia, that the reimbursement

rates established under Virginia’s reimbursement system

do not conform to the requirements of the M

in that they do not reasonably and adequatel

costs of efficiently and economically opera

Amended Complaint * 1, 17, J. A. 3-4, 13.

that respondent was in privity with the plaintiff in

Mary Washington Hospital v. Fisher, 635 F. Supp. 891

(E.D. Va. 1985), the district court dismi the com-

plaint on grounds of collateral estoppel. The Fourth Cir-

cuit reversed and remanded. Virginia Hospital Ass'n v.

Baliles, 830 F.2d 1308 (4th Cir. 1987).

On remand, Virginia moved to dismiss the complaint on

eight jurisdictional grounds. The district court denied the

motion and certified the eight issues to the Fourth Circuit

for interlocutory appeal. The court of appeals affirmed,

holding, in part, that the respondent’s complaint stated a

cause of action under 42 U.S.C. § 1983. Relying on

Maine v. Thiboutot, 448 U.S. 1 (1980), and Pennhurst

State School & Hospital v. Halderman, 451 U.S. 1 (1981)

(“Pennhurst I”), the court of appeals held that: (1) the

language and legislative history of 42 U.S.C. § 1896a(a)

(13) (A) of the Medicaid Act reveal a congressional in-

tent both to allow providers a private right of action

against States for their failure to comply with the Medi-

caid Act“ and to ensure providers reimbursement rates

that are reasonable and adequate in fact, and (2) the en-

forcement mechanisms, including congressionally mandated

state administrative appeals and remedies, are not so

elaborate as to reveal a congressional intent to foreclose

private judicial redress against a State through a Sec-

tion 1983 proceeding. Pet. App. A-5 to A-12.

SUMMARY OF ARGUMENT

Title 42 U.S.C. § 1983 provides a remedy for the de-

privation of a right, privilege, or immunity secured by the

Constitution or by federal law, and only when Congress

has not indicated an intent to foreclose such a remedy.

Medicaid is a federal-state cooperative endeavor to

provide medical services for the needy. Federal law estab-

The court appears to have been confused about what issue it was

deciding. At one point it framed the issue as “whether the

Medicaid Act provides VHA with any substantive right.” Pet. App.

A-. Elsewhere the court framed the issue as “analyzing a claim

of an implied right of action.” Id. at A-10 n.7. These are two

distinct issues. The threshold inquiry is whether the statute con-

fers a substantive right. If it does, then the issue is whether there

is a private cause of action under the statute or Section 1983 to

enforce that right. See Pennhurst J, 451 U.S. at 28 n.21 (citing

Southeastern Community College v. Davis, 442 U.S. 397, 404 n.5

(1979) ).

guage from which rights can be inferred. Further, deci-

sions of this Court have made clear that an intended

benefit is not sufficient to create an enforceable right.

Finally, providers like members of VHA are not the hold-

ers of any “right” that the Medicaid Act might confer.

Even if respondent has a right to “reasonable and ade-

quate” reimbursement, state law so thoroughly gives

meaning and effect to this general standard that this

right cannot reasonably be said to be a federal right

secured by federal law. State law rights or rights se-

cured by state law are not enforceable under Section

1983.

In any event, whatever right respondent may derive

from the Medicaid law, the comprehensive remedies man-

dated by that statute indicate that Congress intended to

foreclose its enforcement under Section 1983. Primary

among these remedies are the congressionally mandated

state appeals systems. Virginia’s appeals procedures are

designed to, and in practice do, secure whatever rights

are granted by its reimbursement system. Federal over-

sight mechanisms compliment Virginia’s appeals system

in securing these rights. These remedies are sufficient to

secure whatever rights are granted by the Medicaid pro-

gram and Virginia's voluntary participation in it. More-

over, allowing respondent to engraft a Section 1983 remedy

onto the Medicaid Act would seriously impair the effective-

ness of Virginia’s reimbursement and appeals systems.

Respondent’s argument that the “reasonable and ade

quate” reimbursement standard in the Medicaid statute

is independent of Virginia’s plan would, if successful, re-

quire this Court to rewrite the Medicaid statute and

thereby nullify the carefully crafted scheme for state ad-

ministration of the Medicaid program in accordance with

state plans. This course would have profoundly adverse

consequences for federal-state relations and would swamp

the federal courts with similar suits.

ARGUMENT

THE MEDICAID STATUTE GIVES RESPONDENT

NO SUBSTANTIVE FEDERAL RIGHT TO REA-

SONABLE AND ADEQUATE REIMBURSEMENT

ENFORCEABLE UNDER 42 U.S.C. § 1983.

A cognizable claim under 42 U.S.C. § 1983 has three

distinct predicates. The claim must (1) arise out of the

deprivation of an enforceable right (see Pennhurst J. 451

U.S. at 22 & n.16), (2) that is secured by federal law (see

— ey California, 444 U.S. 277, 285 1980, (3)

or ich Congress has not provided a comprehensive

remedy (see Middleser County Sewerage Authority v.

National Sea Clammers Ass'n, 453 U.S. 1, 20-21 (1981)

(“Sea Clammers”)). Because respondent has not satisfied

even one of these requirements, its action is not cog-

nizable under Section 1983.

A. Respondent’s Allegations Do Not Establish A Vio-

lation Of A Federal Right Enforceable Under Sec-

tion 1983.

Respondent alleges that the per diem reimbursement

rates established by the methods and standards of Vir-

ginia’s Medicaid plan violate the Medicaid Act and regu-

lations in that they “have not reasonably nor adequately

met the costs incurred by economically and efficiently op-

erated hospitals.” Amended Complaint 417, J.A. 13;

see also / 1, 35, 39, J. A. 3-4, 20, 21. By grounding

its cause of action in 42 U.S.C. 1983.“ respondent ap-

parently believes that DMAS’ refusal to pay VHA mem-

bers at a higher rate constitutes a violation of a right

secured to the VHA by federal law. But nowhere does

respondent identify any right that has been violated or

how DMAS’ refusal to pay VHA members at a higher

rate constitutes a violation of this unidentified right. Re-

spondent apparently seeks to assert a right to “reasonable

and adequate” reimbursement under 42 U.S.C. § 1396a

(a) (13) (A), commonly known as the Boren Amendment

to the Medicaid Act. But this purported right does not

have a basis in the plain language of the statute itself, its

legislative history (particularly the trend toward state

discretion), or the interpretation of the relevant federal

agency. Respondent’s interest in “reasonable and ade-

quate” reimbursement does not rise to the level of an

enforceable federal right.

The Boren Amendment provides that:

la] State plan for medica! assistance must . . . pro-

vide... for payment. . of . . . services provided

under the plan through the use of rates (determined

in accordance with methods and standards developed

by the State . ..) which the State finds, and makes

assurances satisfactory to the Secretary, are reason-

able and adequate to meet the costs which must be

5 See Amended Complaint, / 2, 35, 37, 39, J. A. 4, 20, 21.

10

incurred by efficiently and ’

facilities * economically operated

42 U.S.C. § 1398 (a) (13) (A) (emphasis added). This

language does not itself expressly confer on providers a

right to reasonable and adequate reimbursement. This

congressional silence is significant. Had Congress intended

to create such a right, it surely knew how to do so. See

Pennhurst I, 451 U.S. at 17-18, 27, citing King v. Smith,

392 U.S. 309, 333 (1968), and Southeastern Community

College v. Davis, 442 U.S. 397, 411 (1979). See also Rose

v. Rose, 481 U.S. 619, 628 (1987). The usual way for

Congress to confer such a right is through the explicit

use in the statute of “right- or duty-creating language”

that benefits a specific class of persons. Cannon v. Uni-

versity of Chicago, 441 U.S. 677, 690 n.13 (1979). There

is no such language in the Amendment or anywhere else

in the Medicaid Act. In fact, the Amendment speaks only

of a state Medicaid plan, and not of actual reimbursement

rates for providers. The Amendment does not require any

specific plan, but only that the State, if it wishes to par-

ticipate in Medicaid have a plan that is approved by the

Secretary of HHS. The focus is on the state system and

not on providers.“ Cf. Pennhurst I, 451 U.S. at 22 (rather

than conferring individual rights, Developmentally Dis-

abled Assistance and Bill of Rights Act has “systemic

focus”). The fact that Congress chose not to use explicit

language of rights and duties in the Boren Amendment

strongly suggests that it did not intend to create such

rights and duties through this Amendment.

The court of appeals recognized that the Boren Amend-

ment does not expressly confer any rights on providers

(Pet. App. A-5), but found in the Amendment an im-

Moreover, as this Court made clear in Pennhurst J, even the

use of explicit language of rights and duties is not dispositive as

to Congress's intent to confer rights. Congress’s use of such ex-

plicit language may simply be its way of “encouraging a specific

51 — — rather than “mandating it.“ Pennhurst J. 451

S. at 27.

11

plied substantive right on behalf of health care providers

to reasonable and adequate reimbursement rates. Its

analysis began with its view that the express purpose“

of this statute is to require reimbursement rates that

are reasonable and adequate to meet the costs . . . incurred

by efficiently and economically operated [providers

and to assure that [Medicaid patients] have reasonable

access . . to inpatient hospital services of adequate

quality.’” Pet. App. A-7, citing 42 U.S.C. § 1396a(a)

(13) (A) (ellipses and brackets in original). This inter-

pretation exhibits a fundamental misunderstanding of the

structure of federal-state relations established by the

Medicaid Act in general and the Boren Amendment in

particular.

Medicaid is a federal-state “cooperative endeavor.”

Harris v. McRae, 448 U.S. 297, 308 (1980). The federal

government approves plans submitted by each State for

funding medical services to the poor and subsidizes a

significant portion of the costs incurred by the States, but

each State administers the program in conformity with

its own plan. See Alexander v. Choate, 469 U.S. at 289

n. I.

Originally, the States had no choice in administering

Medicare but to reimburse health care facilities according

to the cost methodology used by the federal government.

But in 1972, concerned about escalating costs, Congress

adopted the reasonable cost related standard“ for re-

imbursement, thereby allowing States to make their own

reimbursement decisions and giving them flexibility in

achieving satisfactory payment arrangements with health

care facilities. H.R. Rep. No. 231, 92d Cong., Ist Sess.

101 (19710 In 1980, Congress was again concerned

7As the court observed in Alabama Nursing Home Ass'n v.

Harris, 617 F.2d 388, 392 (5th Cir. 1980) :

Congress intended that state authorities in developing

methodologies for reasonable cost related reimbursement have

great flexibility in the areas of cost-finding and rate-setting.

The legislative history indicates that states are to be free to

experiment with methods and standards for payment that

12

about the inflationary effect of the Medicaid reimburse-

ment standard. Accordingly, by the Boren Amendment,

Congress instituted the current reimbursement standard,

which requires reasonable and adequate rates as deter-

mined by methods and standards developed by the State.

Through the Boren Amendment Congress expanded, yet

again, the States’ discretion in developing and implement-

ing reimbursement methodologies.* Its plain language ex-

presses Congress’s clear intent that reimbursement rates

are to be determined in accordance with state, not fed-

eral, methods and standards. The executive branch,

through HCFA,” has acknowledged the “legislatively man-

dated flexibility” that the statute grants to the States in

determining reimbursement rates. 48 Fed. Reg. 56049

(1983). Accordingly, HCFA has specifically declined to

issue more “explicit criteria for Federal review of States’

methods and standards for establishing payment rates”

lest “such a list of criteria . . . be viewed as imposing

Federal standards for payment rates, an effect that would

would be simpler and less expensive than the complex Medicare

reasonable cost formula. See S. Rep. No. 92-1230, 92d Cong.,

2d Sess. 287 (1972). . Additionally, Congress intended

that states have freedom both to define allowable cost items

and to set a value on the reasonable cost of such items.

»The legislative history behind the 1981 amendment extending

the Boren Amendment to hospitals as well as other long-term care

facilities indicates that

[iin eliminating the current requirement that States pay hos-

pitals on a Medicare “reasonable cost” basis for inpatient

services under Medicaid, the Committee recognizes the infla-

tionary nature of the current cost reimbursement system and

intends to give States greater latitude in developing and

implementing alternative reimbursement methodologies that

promote the efficient and economical delivery of such services.

H.R. Rep. No. 158, 97th Cong., Ist Sess. 293 (1981).

„ HCFA, an agency of HHS, must approve reimbursement rates

set by state Medicaid plans. Its opinion is entitled to deference.

Wright v. Roanoke Redevelopment & Housing Auth., 479 U.S. 418.

430 (1987); Schweiker v. Hogan, 457 U.S. 569, 588 (1982); Blum

v. Bacon, 457 U.S. 132, 141 (1982).

13

be contrary to the legislative intent.” 48 Fed. Reg. 56050

(1983). In short, Congress’s purpose in enacting the 1972

“reasonable cost related standard” and the Boren Amend-

ment was to control costs by departing from a federal

reimbursement standard and allowing the States to adopt

their own standards.

Once the court of appeals improperly inferred the “ex-

press” purpose of the Boren Amendment, it concluded that

the Amendment “reveals an unambiguous intent to assure

reimbursement rates that are reasonable and adequate in

fact.” Pet. App. A-7. Assuming, arguendo, that this con-

clusion is correct,“ it still does not follow that the Boren

Amendment creates a substantive right to such a level of

reimbursement.

This crucial and dispositive point merits extended dis-

cussion. This Court has held that federal statutes imply

substantive rights that can be enforced through Section

1983 when the statute contains unambiguous and specific

language that effectively imposes binding obligations on

the States. Pennhurst I, 451 U.S. at 17, 24-27. Federal

statutes imply substantive rights through “specific lan-

guage of obligation [that] narrowly cabins the discretion

of officials” (Edwards v. District of Columbia, 821 F.2d

651, 656 (D.C. Cir. 1987)), or through “language [that]

10 There is good reason to believe that this conclusion is wrong.

Most important, it assumes that there is an objective standard

(“in fact“) by which to judge what rates are reasonable and

adequate. But “reasonableness” and “adequacy” are relative to

what other providers are spending. Congress found that when it

operated on the assumption of objectively reasonable rates prior

to the enactment of the Boren Amendment, its cost reimbursement

system was inherently inflationary. See nn. 7 & 8, supra. That is,

the prior “reasonable” cost standard gave providers collectively an

incentive to spend more so as to raise the rate of “reasonable”

reimbursement. Respondent is asking this Court to read out of

the Boren Amendment the mechanism that Congress explicitly

adopted to minimize this inflationary effect, namely, the state

plans. In our view, this request should be directed to Congress,

not to the courts.

14

is unequivocally specific and mandatory.” Samuels v. Dis-

trict of Columbia, 770 F.2d 184, 197 (D.C. Cir. 1985).

See also Alexander v. Choate, 469 U.S. at 307-08 n.32.

The Medicaid Act contains no specific obligation-imposing

language that would give substance to the “right” to “rea-

sonable and adequate” reimbursement. Thus there is no

basis for inferring such a right from the Medicaid Act

or its implementing regulations. See, e.g., 42 C. F. R.

58 447.250-447.253 (1988) (repeating the general lan-

guage of the Boren Amendment Especially significant

in this regard is the Act’s express statement of its pur-

pose as that “of enabling each State, as far as practicable

under the conditions in such State, to furnish . . . medical

assistance on behalf of families . . . or disabled individuals

... and... to help such families and individuals.” 42

U.S.C. § 1396; see also Schweiker v. Hogan, 457 U.S. 569,

571 (1982). This is not the sort of language from which

substantive rights can be inferred. Congress framed the

statute in terms of “enabling” the States to aid the needy,

rather than “obligating” them to do so.

This statement of purpose also serves to make clear

that Congress intended the Medicaid program to benefit

certain individuals. But simply because Congress intends

to benefit a class of persons through a statute does not

mean it intends to create for them a right to the benefit

conferred. See Bowen v. Gilliard, 483 U.S. 587, 604-09

(1987); Heckler v. Turner, 470 U.S. 184, 189-90 & n.3

(1985).

11 The generality and vagueness of the “reasonable and adequate”

standard of the Boren Amendment and its implementing regula-

tions distinguish the present case from Wright v. Roanoke Re-

development. In Wright, the Court found that the Brooke Amend-

ment “could not be clearer” in imposing a specific “mandatory

limitation” on rent charges. 479 U.S. at 430. On the basis of this

specific language the Court concluded that [t Ihe intent to benefit

tenants is undeniable.” bid. No such specific language is to be

found in the present case, and hence there is no basis from which

to infer an intent to confer rights on providers.

15

Pennhurst I illustrates this distinction. Pennhurst I

dealt with the Developmentally Disabled Assistance and

Bill of Rights Act, 42 U.S.C. § 6000 et seg., which the

Court recognized was intended to benefit the develop-

mentally disabled. See Pennhurst J, 451 U.S. at 11. Yet

the Court, with specific reference to Medicaid, the very

statute involved in this case, stated:

In sum, nothing suggests that Congress intended the

Act to be something other than a typical funding

statute. Far from requiring the States to fund newly

declared inaividual rights, the Act has a systematic

focus, seeking to improve care to individuals by en-

couraging better state planning, coordination, and

demonstration projects. Much like the Medicaid

statute . . . the Act at issue here “was designed as

a cooperative program of shared responsibilit{ies],

not as a device for the Federal Government to compel

a State to provide services that Congress itself is

unwilling to fund.”

Id. at 22 (quoting Harris v. McRae, 448 U.S. at 309).

Similarly, in Alexander v. Choate, the Court rejected

the contention by a class of handicapped persons that

Tennessee’s Medicaid plan, which imposed a limit of

fourteen days of inpatient hospital care per year, consti-

tuted discrimination under Section 504 of the Rehabilita-

tion Act of 1973, 29 U.S.C. § 794. Writing for a unani-

—— Justice Marshall explained (469 U.S. at

Medicaid programs do not guarantee that each re-

cipient will receive that level of health care precisely

tailored to his or her particular needs. Instead, the

benefit provided through Medicaid is a particular

package of health care services, such as 14 days of

inpatient coverage. That package of services has the

general aim of assuring that individuals will receive

necessary medical care, but the benefit provided re-

mains the individual services offered—not “adequate

health care.”

guage is conspicuous in its failure to mention the in-

terests of providers at all. Medicaid was created to aid

participating States in “the funding of medical services

for the needy” (Alexander v. Choate, 469 U.S. at 289

n.1), not for providers.”

In sum, there is no support in any of the sources of

12 As the Second Circuit has observed: “That a particular nurs-

ing facility cannot survive without Medicaid participation was

certainly not Congress’ foremost consideration in its creation of

the Medicaid program The benefits to a nursing home from

its participetion in Medicaid reimbursement results from nothing

more than a statutory business relationship.” Case v. Wemberver,

523 F.2d 602. 607 (2d Cir. 1975) (footnote omitted). See Schweiker

v. Hogan, 457 U.S. 569 (1982) (health care recipient may bring

an action under the Medicaid Act); Geriatrics, Inc. v. Harris, 640

F.2d 262, 265 (10th Cir.), cert. denied, 454 US. 832 (1981);

Green v. Cashman, 605 F.2d 945, 946 (6th Cir. 1979); see also

Silver ». Baggiano, 804 F.2d 1211, 1216 n3 (11th Cir. 1986).

17

cepted by the Secretary. See also 42 C. F. R. § 447.253

(1988) (state Medicaid agencies are only required to

make . findings” that their rates are “reasonable and

adequate”). If this standard gives content to a

:

1

1

1

determines what rates are reasonable and adequa

imbursement to health care providers generally.

over, assuming that a State chooses to participate

Medicaid program, this “right” is violated only if

(1) the State does not have a plan, (2) the rates set

not in accord with the methods and standards in the

or (3) the methods and standards in the plan have

been accepted by the Secretary. None of these ci

stances exists in the present case, and respondent

not allege that any does.

B. Assuming Arguendo That Respondent Has A Sub-

stantive Right To Reasonable And Adequate Rates

Under the Medicaid Act, It Is Not “ Right Secured

By Federal Law.

Section 1983 affords relief only to a plaintiff deprived

of a right, privilege, or immunity secured by the Consti-

tution or federal law. See Martinez v. California, 444

U.S. at 285. That predicate is lacking in this case.

Even assuming that respondent has a right to “rea-

sonable and adequate” reimbursement under the Boren

Amendment, it is not a federal right in any meaningful

sense. The state plans so thoroughly give meaning and

effect to this “amorphous objective” of “reasonable and

adequate” reimbursement rates that the “right” to such

a rate is a federal right only in the most formalistic sense,

namely, that these words appear in a federal statute.

Rather, the Medicaid Act, specifically, the Boren Amend-

ment, and its regulations are designed so that the States

are to provide whatever specific obligation-imposing and

See

777

1

gE

1

8 Alezander v. Choate, 469 U.S. at 303 (using this phrase to

describe “adequate health care“

83

5

5

4

i

:

7

law merely by virtue of its inclusion in

required by federal law”). As we discuss

Seg TERE.

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AGERE

heir

425275

sired

2885 f

C. The Federal And State Remedies Provided For By

The Medicaid Statute Are Sufficiently Comprehen-

sive to Foreclose Private Actions Under Section

1983.

This Court has held that Ihen the remedial devices

provided in a particular Act are sufficiently comprehen-

sive, they may suffice to demonstrate congressional intent

to preclude the remedy of suits under § 1983.” Sea Clam-

mers, 453 U.S. at 20. The general rule to be derived from

this Court’s applications of the Sea Clammers test is that

a remedial scheme is sufficiently comprehensive if it con-

tains all of those remedial procedures that are jointly

and sufficient to secure the substantive rights

by the statute."* As a corollary to this rule,

if the Section 1983 remedy impairs the effectiveness of

1% See Note, Comprehensive Remedies and Statutory Section 1982

Actions: Context as a Guide to Procedural Fairness, 67 Tex. .

Rev. 627, 636 (1989) (“The Court's decisions indicate that

a section 1983 remedy is permissible only when the substantive

statute fails to provide procedural remedies necessary to accomplish

the underlying congressional purposes [of the statute)}.”)

19

the Medicaid Act’s reimbursement or appeals systems i

securing the substantive rights conferred by the Act,

then Section 1983 ought not to be used to enforce these

substantive rights. See Wright v. Roanoke

ment & Howsing Authority, 479 U.S. 418, 423 (1987)

(reading Smith v. Robinson, 468 U.S. 992, 1012 (1984),

to hold that allowing a plaintiff to circumvent the Edu-

cation of the Handicapped Act’s administrative remedies

would be inconsistent with Congress’s carefully tailored

scheme, which itself allowed private parties to seek reme-

dies for violating federal law); see also Great Ameri-

can Federal Savings & Loan Ass’n v. Novotny, 442 U.S.

366, 378 (1979) (“Unimpaired effectiveness can be given

to the plan put together by Congress in Title VII only

by holding that deprivation of a right created by Title

VII cannot be the basis for a cause of action under

§ 1985(3).”).

The analysis must begin by defining the “right” to be

protected by the remedies under examination. As we

able and adequate reimbursement rates conferred by the

Boren Amendment is a state right, not a federal right.

The remedial devices that Congress has mandated under

the Medicaid Act reinforce this proposition. Consistent

with the limited scope of these “rights” and their ground-

ing in state law, the primary remedial devices under the

ment of the state rights created by the state plans to the

state appeals systems. In doing so, Congress manifested

its intent to foreclose a Section 1983 remedy.

In enacting the Boren Amendment, Congress had two

closely related goals: first.] to contain the spiraling

costs of inpatient hospital services and second,] to re-

duce potentially stifling and expensive federal oversight

of state methodologies.” West Virginia University Hos-

pitals v. Casey, 885 F.2d 11, 23 (3d Cir. 1989). Con-

gress implemented these goals by establishing the state

plans as linchpins of the Medicaid program,” and di-

recting the Secretary of HHS to “keep regulatory and

other requirements to that minimum necessary to assure

proper accountability.” S. Rep. No. 471, 96th Cong., Ist

Sess. 28, 29 (1979). For example, Congress intended that

a State’s assurances made to the Secretary will be satis-

factory unless by a formal finding the Secretary finds

to the contrary. Ibid.; see also 42 C.F.R. § 447.256(b)

(1988)."* It is difficult to imagine that in reducing the

15 The central role intended for state Medicaid plans is evidenced

by the statute’s framework. The detailed requirements found

throughout the statute are all phrased in terms of what a state

plan must provide. See 42 U.S.C. § 1396 et seq.; see also Alexander

v. Choate, 469 U.S. at 289 n.1.

1% Although reduced, federal oversigh: of state Medicaid plans

is still significant. Once approved, the plan is subject to continued

scrutiny by the Secretary of HHS to ensure that federal require-

ments are satisfied. Charleston Memorial Hosp. v. Conrad, 6%

F.2d 324, 327 (4th Cir. 1982). The Department of HHS, through

its Audit Agency, conducts audits annually or as appropriate of

the state Medicaid agency's operations. 45 C.F.R. § 201.12 (1988).

The Social and Rehabilitation Service of HHS is authorized to

conduct a review to ensure that the State is complying with fed-

eral administrative requirements. 45 C. F. R. § 201.10 (1988). State

Medicaid agencies must, under 42 C.F.R. §§ 431.17, 431.18(f)

(1988), maintain records and make program policy materials avail-

able to providers who wish them. 48 Fed. Reg. 56051 (1983). If the

Secretary of HHS determines that the State is improperly imple-

menting its plan or not following a new federal requirement, he

may either completely cut off federal funding (42 U.S.C. § 139%6c;

45 C.F.R. § 201.6 (1988)) or “in his discretion” limit payments to

“categories under or parts of the te plan not affected by such

failure.” 42 U.S.C. §1296c. Finally, whenever a state Medicaid

agency makes a change in its reimbursement methods and stand-

ards, and in any event at least once anaually, the agency must

make assurances to HCFA that it has found that its reimburve-

ment rates are reasonable and adequate and that these rates ensure

that recipients have reasonable access to providers. 42 C. F. R.

§ 447.253(a)-(c) (1988); 45 C.F.R. § 201.3 (1988). If this over-

sight was intended to secure any right, it is at best the “right” of

providers to an approved state plan that provides for methods and

standards by which the State determines what reimbursement rates

are reasonable and adequate. See Part A, supra.

|

:

!

i

to expand again the role of the federal gov-

ernment in the program.

Consistent with the key role played bythe state plans

in the Medicaid program, Congress intended that the

primary remedial measures under Medicaid be at the

state level. Each State is required by the Medicaid Act

and regulations to provide an appeals system in which

prepayment and postpayment claims are reviewed. 42

U.S.C. § 1396a(a) (37) (B. A State must provide writ-

ten assurances that this “essential” element of its reim-

56056 (1983). The

procedure that allows individual providers an opportunity

evidence and receive prompt admin-

istrative review.” 42 C.F.R. § 447.253(c) (1988). Thus,

state administrative review must be both comprehensive

and quick. .

Medicaid regulations require only that the state Medi-

caid agency provide an appeals procedure “with respect

to such issues as the [state] agency determines appropri-

ate.” 42 C. F. R. 47.253 % (1988). This regulation

was promulgated pursuant to Congress's directive that

Rep. No. 1240, 94th Cong., 2d Sess. reprinted in 1976

U.S. Code Cong. & Admin. News 5648, 5649-51. Through

an executive agency and directly ‘in 42 U.S.C. § 1396a

(a) (37) (B)), Congress left the decision as to the par-

ticulars of each State’s appeals system to the State. As

HCFA recognized, this decision permits each State to

tailor its appeals system to its particular reimbursement

system so as best to effectuate that system and secure

whatever rights if any) it confers:

111

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12

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27

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1

i

il

111

i

;

Despite Congress’s requirement that each State estab-

lish an appeals system that best serves its particular re-

system, and despite Virginia’s compliance

that mandate, respondent alleges (/ 32 of the

Amended Complaint, J.A. 18-20), that Virginia’s appeals

system is not “meaningful” because, inter alia, it makes

certain issues (e.g., the establishment of peer groups and

the inflation index used) non-appealable. Under Sea

Clammers, 453 U.S. at 20, however, a remedial scheme can

be “sufficiently comprehensive” even if it does not allow

for plenary review of all conceivable statutory violations

or, what may amount to the same thing, even if it does

not allow review and remedies that are as extensive as

those provided for in Section 1983. In a related context,

this Court held in Great American Federal Savings &

Loan Ass’n v. Novotny, 442 U.S. at 373-76, that reme-

dies under Title VII of the 1964 Civil Rights Act were

sufficient to bar the plaintiff’s 42 U.S.C. § 1985(3) rem-

edy even though the Title VII remedies were significantly

narrower than those of Section 1985 (3). In short, the

criterion of sufficiency under Sea Clammers is not whether

the remedial mechanisms of the statute are as broad as

they conceivably could be or as broad as those of some

other statute (e.g., Section 1983); rather, the test is

whether the remedial mechanisms mandated by the stat-

|

and certainly in combination with federal oversight mech-

anisms, satisfies this test.

The corollary to the “sufficiently comprehensive” test,

namely, whether a Section 1983 remedy would impair

the effectiveness of the Medicaid Act, also shows Vir-

ginia’s appeals system to be sufficiently comprehensive.

Permitting a Section 1983 action would impair the ef-

18 See also Hervey v. City of Little Rock, 787 F.2d 1223, 1233

(8th Cir. 1986) (applying Novotny to find statutory foreclosure

of a Section 1983 suit); Jrby v. Sullivan, 737 F.2d 1418, 1428-29

(5th Cir. 1984) (same).

24

fectiveness of Virginia’s and other States’ reimbursement

and appeals systems by moving the forum for rate reim-

bursement challenges from the States, where they belong,

to the federal courthouse, where they do not. Medicaid

reimbursement decisions, based as they are on extensive

technical data, simply are not conducive to efficient re-

view by federal courts.“ By contrast, administrative ap-

peals procedures tailored to local conditions are designed

to make precisely the sort of prompt, highly factual de-

terminations inherent in rate reimbursement review.

Thus it is reasonable to conclude that when Congress

established vague standards for lawful conduct such as

“reasonableness” and “adequacy” and also mandated ad-

ministrative mechanisms to interpret and apply the stand-

ards, Congress intended to foreclose a Section 1983

remedy.”

The right urged by respondents and accepted by the

court below must be seen for what it is: a license to con-

test in federal court under Section 1983 every reimburse-

ment term in a provider contract and every reimburse-

% Maine v. Thiboutot, 448 U.S. 1 (1980), stand. in sharp con-

trast. In that case, the issue was whether, in computing Aid to

Families with Dependent Children benefits (to which a father was

entitled for his three children by a previous marriage), allowance

should be made for money spent to support his five children by a

current marriage. The claim was based on specific provisions of

the federal statute and was a purely legal dispute, not requiring the

technical, factual expertise demanded by Medicaid rate reimburse-

ment challenges. Moreover, the claimant had pursued the State’s

administrative remedies and judicial review procedures.

20 See Sunstein, Section 1983 and the Private Enforcement of

Federal Law, 49 U. Chi. L. Rev. 394, 414, 428-29 (1982): see also

Local 1325, Retail Clerks Int'l Ass'n v. NLRB, 414 F.2d 1194,

1199-1200 (D.C. Cir. 1969) (vagueness of statutory standard indi-

cates that Congress intended to give NLRB responsibility to define

what collective bargaining units are appropriate“); cf. National

Railroad Passenger Corp. v. National Ass'n of Railroad Passengers,

414 U.S. 453, 461-64 (1974) (private suits for injunctions against

discontinuance of passenger rail service would undermine orc ly

administrative procedures prescribed by Amtrak Act).

* 25

ment rate decision made by a state Medicaid agency. If

this license is granted, the sure guidance furnished to

States, recipients, and providers by written state reim-

bursement plans will give way to the vagaries of case-by-

case adjudication. The federal courts will become glori-

fied Medicaid claims adjusters, reviewing countless highly

technical, individual reimbursement decisions. The state

reimbursement systems, rather than being central to

the Medicaid program, will be reduced to nothing more

than one piece of evidence used by litigants and the

courts in contests over the reasonableness and adequacy

of the States’ reimbursement rates. Moreover, a decision

of this Court authorizing dissatisfied providers to pro-

ceed directly into federal court would render the state

administrative appeals procedures superfluous and the

congressional mandate for them (42 U.S.C. § 1396a

(a) (37) (B)) meaningless. See Smith v. Robinson, 468

U.S. at 1012 (precluding Section 1983 action for viola-

tion of the Education of the Handicapped Act in part

because such a result would render provisions in the stat-

ute superfluous).

In sum, this Court has refused to assume that Congress

intended to condition federal funds upon the States’ incur-

ring “largely indeterminate” obligations such as pro-

viding “reasonable and adequate” reimbursement rates.

This principle has special applicability where, as here,

Congress has mandated the type and scope of remedy

that the States must provide for rate reimbursement

challenges, and States, including Virginia, have expended

funds to meet this requirement. See Tennessee Valley

Authority v. Hill, 437 U.S. 153, 188 (1978) (applying

maxim of expressio unius est exclusio allerius). Because

imposing a Section 1983 remedy on the sufficiently com-

prehensive and congressionally mandated state remedies

would impair the effectiveness of such remedies, this

21 Pennhurst I, 451 U.S. at 24-25 (using this phrase to describe

the terms “appropriate treatment” and “least restrictive” setting).

Court should hold that respondent has no right of action

under Section 1983 against Virginia.

Obviously, respondent, like the plaintiffs in Smith v.

Robinson and Sea Clammers, would prefer to bring a

Section 1983 action to remedy alleged violations of a fed-

eral statute and regulations rather than to seek relief

through the review procedures required by the federal

statute. The determinative inquiry, however, is not the

wish of the plaintiff but the intention of Congress. See

Smith v. Robinson, 468 U.S. at 1012 (“The crucial con-

sideration is what Congress intended.”). Virginia’s fed-

erally mandated appeals system, together with the exist-

ing federal oversight of its state plan, is sufficiently com-

prehensive to evince a congressional intent to secure what-

ever rights are granted by the Medicaid Act through these

remedial devices and to foreclose a Section 1983 remedy.

D. If Adopted By This Court, Respondent’s Position

Would Have Profoundly Adverse Consequences For

Federal-State Relations And The Federal Courts’

Caseload.

Respondent contends that, notwithstanding the provi-

sions of the contract that it signed with DMAS, it is en-

titled to more money from Virginia because Virginia’s

rates are not “reasonable and adequate.” Respondent’s

position is sufficient to ground a Section 1983 action

only if this Court effectively rewrites the Medicaid Act,

making the state plans, so carefully conceived as the

linchpins of the Medicaid system, almost irrelevant. Sev-

eral consequences would follow from such action by the

Court. Most important, nearly every federal-state “ ‘co-

operative program of shared responsibilities]! [will be-

come] a device for the Federal Government to compel. . .

State|s] to provide services that Congress itself is un-

willing to fund.“ Pennhurst J. 451 U.S. at 22, citing

Harris v. McRae, 448 U.S. at 309 (describing the Medi-

caid program). But Congress did not intend “coopera-

27

tive federalism” to become federal co-option of the

States’ sovereignty.

If the judgment below is affirmed, it is readily foresee-

able that a large number of providers dissatisfied with

reimbursement rates will follow the path of the VHA to

the perceived haven of the federal district court—par-

ticularly with the vision of 42 U.S.C. § 1988 attorney’s

fees ahead. The resulting burden on limited state re-

sources and crowded federal dockets would be further

compounded because rate reimbursement decisions are not

one-time events. The current number of such cases, itself

impressive, would be just the beginning.“ These cases,

22 Harris v. McRae, 448 U.S. at 308 (quoting King v. Smith, 392

U.S. at 316).

23 In addition to this case, there are at least twenty-three pending

cases challenging state reimbursement rates or appeals systems

under Section 1983. These cases are listed in Appendix B of the

amicus brief submitted by thirty-seven States in support of Vir-

ginia’s petition for certiorari. Two of the cases cited in Appendix

B as pending have now been decided: West Virginia Hosps., Inc.

v. Casey, 885 F.2d 11 (3d Cir. 1989); Amisub (PSL), Inc. v. Colo-

rado Dep't of Social Servs., 879 F.2d 789 (10th Cir. 1989). In

addition to these two cases, at least twelve other identical or similar

cases have also already been decided: Colorado Health Care Ass'n

v. Colorado Dep't of Social Servs., 842 F.2d 1158 (10th Cir. 1988) ;

Coos Bay Care Center v. Oregon Dep't of Human Resources, 803

F.2d 1060 (9th Cir. 1986), cert. granted, 481 U.S. 1036, vacated as

moot, 484 U.S. 806 (1987); Nebraska Health Care Ass'n v. Dunning,

778 F.2d 1291 (8th Cir. 1985), cert. denied, 479 U.S. 1063 (1987) ;

United Hosp. Center, Inc. v. Richardson, 757 F.2d 1445 (4th Cir.

1985); Agi-Bluff Manor, Inc. v. Reagen, 713 F. Supp. 1535 (W..

Mo. 1989); Vantage Healthcare Corp. v. Virginia Bd. of Medical

Assistance Servs., 684 F. Supp. 1329 (E.D. Va. 1988); St. Tam-

many Parish Hosp. Serv. Dist. v. Department of Health and

Human Resources, 677 F. Supp. 455 (E.D. La. 1988); Mary Wash-

ington Hosp. v. Fisher, 635 F. Supp. 891 (EN. Va. 1985); Al-

Charles, Inc. v. Heintz, 620 F. Supp 327 (D. Conn. 1985); Arden

House, Inc. v. Heintz, 612 F. Supp. 81 (D. Conn. 1985); Yapalater

v. Bates, 494 F. Supp. 1349 (S.D.N.Y. 1980), aff'd per curiam,

644 F.2d 131 (2d Cir. 1981), cert. denied, 455 U.S. 908 (1982);

Bethany Medical Center v. Harder, 1987 WL 47845 (D. Ks. 1987).

moreover, will not be limited to Medicaid disputes. Nu-

merous federal-state cooperative endeavors provide fed-

eral funds to the States for programs that are contained

in state plans approved by a federal agency.“ Federal

courts would be inundated with Section 1983 claims

brought by businesses and individuals participating in

federally funded programs with complaints about the

States’ implementation of their own regulations.“

The policy rationale for preventing respondents from

bypassing state procedural structures flows from the sys-

tem of “cooperative federalism” of which Medicaid is a

part. See Harris v. McRae, 448 U.S. at 308. Pursuant

to 42 U.S.C. § 1396a(a)(37)(B), Congress placed the

responsibility for reviewing reimbursement decisions upon

the States because they are best able to determine a

schedule of rates. Through the technical expertise of ad-

ministrative tribunals and their knowledge of local con-

ditions and concerns, States are particularly suited to

provide the type of fast, efficient review that serves the

interests of providers as well as state Medicaid agencies.”

20 See, e ., 16 U.S.C. § 4601-8(d) (Land and Water Conservation

Fund program); 20 U.S.C. § 1205 (Adult Education program) ;

20 U.S.C. $1413 (Education of the Handicapped program); 42

U.S.C. § 654 (Child Support Enforcement program). See Maine v.

Thiboutot, 448 U.S. at 34-37 (Powell, J., dissenting) (appendix)

for a more complete list of such programs.

25 Thus. in addition to its deficiencies in stating a cause of action

under Section 1983. respondent’s complaint raises serious Eleventh

Amendment questions. See Pennhurst State School & Hospital v.

Halderman, 465 U.S. 89 (1984) (“Pennhurst Il”).

26 In the closely related context of Medicare reimbursement, this

Court held that, in light of Congress's intent that administrative

procedures be used, the dissatisfied program participants before

the Court had to avail themselves of their administrative remedies

before proceeding into federal court. See Heckler v. Ringer, 466

U.S. 602 (1984). In deferring to Congress, the Court explained in

words equally applicable to Medicaid reimbursement (id. at 627)

(footnote omitted

Congress must have felt that cases of individual hardship re-

sulting from delays in the administrative process had to be

CONCLUSION

should be reversed.

:

1500 Oliver Building 444 North Capitol St. N.W

Pittsburgh, PA 15222 Suite 349

(412) 355-6500 Washington, D.C. 20001

Of Counsel (202) 638-1445

Counsel of Record for the

November 16, 1989 Amici Curiae

literally millions of claims every year. If the balance is to be

struck anew, the decision must come from Congress and not

from this Court.