Opinion ID: 3009724
Heading Depth: 3
Heading Rank: 1

Heading: Findings and Assurances

Text: While assurances must be based on findings, there is no absolute mandate as to what is required in terms of meeting the findings requirement. Logic dictates, however, that whatever methods a state uses in arriving at the procedurally required findings, such findings must be correct. Id. at 514. Our language in West Virginia University Hospitals is particularly applicable here: The three federal provisions . . . contain both a procedural and substantive dimension. The procedural dimension is explicit in the federal regulations implementing section 1396a(a)(13)(A). These federal regulations condition HCFA approval of a new state plan on the state's assurances that it has complied with the regulatory requirements. One of these regulatory requirements is that the State make findings in support of its change in medicaid plan. Essentially, the State is required to find that its new plan complies with the three substantive requirements . . . . 22 885 F.2d at 29 (citation omitted). In Temple University, we were critical of Pennsylvania's failure to make findings as to the reasonableness or adequacy of its rates to cover the costs of an efficiently and economically operated hospital. 941 F.2d at 210. In the present case, the district court noted the State's reasoning behind its selection of the median-plus 5% methodology: [I]t is reasonable to measure the efficiency of hospitals by comparing the costs they incur for delivering similar units of service . . . . [E]fficiency is defined or understood to mean the lowest possible cost per comparable inpatient admission. New Jersey Hosp. Ass'n, 1995 WL 465664 at . Thus, the State found that its new rate system implicitly identified efficient hospitals and therefore the costs they must incur. This was accomplished by concluding that efficient hospitals will keep their costs for each DRG at or below the statewide median with certain adjustments for inflation, indirect medical education, and area wage variation. Id. at . Thereafter, the State conducted empirical analyses to measure the effects of the payment program. This was accomplished by comparing the amounts the new methodology would have paid hospitals in 1993 to their actual Medicaid costs reported on their Medicare cost reports for 1993. Id. A health care consultant also was retained to review the new rate-setting methodology and the State's analyses of the new rates. Id. at . Additionally, the district court noted that various national indicators which evidenced inefficiency on the part of New Jersey 23 hospitals also played a role in the formulation process. Inefficiencies were noted in the areas of cost per discharge and average length of stay. Id. at . Based on the forgoing, the district court found that the use of 1988 hospital cost data, increased to present-day costs, represents sufficiently reliable cost data when used to identify efficiently and economically operated New Jersey hospitals. Id. at . We cannot say that this factual finding is clearly erroneous. Thus, in light of our holding with respect to the State's substantive compliance, we conclude, for purposes of disposing of the preliminary injunction request, NJHA has not shown that the State failed to meet the procedural requirements. We note, at a final hearing the burden of proof rests with NJHA to come forward with credible evidence that the State did not comply with the federal requirements of the Boren Amendment. See Colorado Health Care Ass'n v. Colorado Dep't of Social Servs., 842 F.2d 1158, 1164 (10th Cir. 1988). It is noteworthy that no discovery had been conducted prior to the hearing on the application for the preliminary injunction. Pending the district court's final decision on the merits, the findings of fact and conclusions of law made in conjunction with the preliminary injunction are indeed preliminary. As such, they do not foreclose any findings or conclusions to the contrary based on the record as developed at final hearing. See Oburn v. Shapp, 521 F.2d 142, 149 n.18 (3d Cir. 1975). The district court denied NJHA a preliminary injunction solely on the ground that it had not shown the likelihood that it 24 would prevail on the merits. Thus, it found it unnecessary to address the other factors to be considered when a preliminary injunction is sought. Based solely on the ground invoked by the district court, NJHA has not shown on this record the reasonable likelihood that it will prevail on the merits. The order of the district court denying a preliminary injunction will be affirmed.