Opinion ID: 654248
Heading Depth: 2
Heading Rank: 3

Heading: Violation of the Equal Access Provision

Text: 52 The Medicaid providers allege that DHS has violated their rights under 42 U.S.C. Sec. 1983 because DHS did not comply with the substantive requirements of the equal access provision. Specifically, the Medicaid providers contend that in cutting reimbursement rates to noninstitutional sources by 20%, DHS did not consider the relevant factors of equal access, efficiency, economy, and quality of care and thereby violated the statute. 53 The parties are in agreement that the challenged action involves state agency rate-making as opposed to adjudication. In reviewing DHS's rate-making decision, we must decide whether the action is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 414, 91 S.Ct. 814, 822, 28 L.Ed.2d 136 (1971). An agency acts arbitrarily and capriciously if it fails to consider whether the decision was based on a consideration of the relevant factors. Id. at 416, 91 S.Ct. at 824; American Paper Inst. v. American Elec. Power Serv. Corp., 461 U.S. 402, 413, 103 S.Ct. 1921, 1928, 76 L.Ed.2d 22 (1983). Review under the arbitrary and capricious standard is narrow, and a court may not substitute its judgment for that of the agency. Motor Vehicle Mfrs. Ass'n of the United States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 2866, 77 L.Ed.2d 443 (1983). While it is a deferential standard of review, the agency must still articulate a rational connection between the facts found and the choice made, Baltimore Gas & Elec. Co. v. Natural Resources Defense Council, Inc., 462 U.S. 87, 105, 103 S.Ct. 2246, 2256, 76 L.Ed.2d 437 (1983), and this court must engage in a substantial inquiry. Citizens to Preserve Overton Park, 401 U.S. at 415, 91 S.Ct. at 823. Our review of the state plan must include a determination whether the [state] plan complies with the requirements of federal law. Illinois Health Care Ass'n v. Bradley, 776 F.Supp. 411, 417 (N.D.Ill.1991) (citation omitted), aff'd, 983 F.2d 1460 (7th Cir.1993). 54 Again, we take direction from the Wilder decision to determine the relevant factors that DHS must consider. In Wilder, the Court found that the Boren Amendment contained a substantive requirement (the adoption of reimbursement rates that are reasonable and adequate to meet the costs of an efficiently and economically operated facility) which state agencies had to meet in order to submit a valid plan. Wilder, 496 U.S. at 510, 513-15, 110 S.Ct. at 2517, 251920. The relevant factors to consider, therefore, were whether the rates were reasonable and adequate as required by the statute. The Wilder Court determined that the Virginia agency had not acted to ensure reasonable and adequate rates. Many other federal courts have also found state plans that failed to meet the requirements outlined in the Boren Amendment to be invalid. See, e.g., Temple Univ. v. White, 941 F.2d 201 (3d Cir.1991), cert. denied, --- U.S. ----, 112 S.Ct. 873, 116 L.Ed.2d 778 (1992); AMISUB (PSL), Inc. v. Colorado Dep't of Social Servs., 879 F.2d 789 (10th Cir.1989), cert. denied, 496 U.S. 935, 110 S.Ct. 3212, 110 L.Ed.2d 660 (1990); Nebraska Health Care Ass'n, 778 F.2d 1291; Missouri Health Care Ass'n v. Stangler, 765 F.Supp. 1413 (W.D.Mo.1991). 55 We agree with the trial court's conclusion that the relevant factors that DHS is obliged to consider in its rate-making decisions are the factors outlined in 42 U.S.C. Sec. 1396a(a)(30)(A). As already discussed, the equal access provision provides an unambiguous and compulsory framework to guide substantive agency decisions regarding reimbursement rates for noninstitutional providers. The statute requires that the reimbursement rates are sufficient 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. Sec. 1396a(a)(30)(A). The purpose of this subsection is to ensure adequate access and quality of care in the context of noninstitutional Medicaid providers, just as the purpose of the Boren Amendment is to ensure adequate access and quality of care in the context of institutional providers. Moreover, the language in the two subsections closely parallel each other. Accordingly, DHS must consider the relevant factors of equal access, efficiency, economy, and quality of care as designated in the statute when setting reimbursement rates. 56 Two recent decisions from other jurisdictions confirm that these are the relevant factors. In Ohio Hosp. Ass'n v. Ohio Dep't of Human Servs., the Supreme Court of Ohio affirmed a lower court ruling that the ODHS violated the statute by adopting the rule due to its own budgetary constraints and by failing to consider the rule's effect on efficiency, economy, and the quality of care. Ohio Hosp. Ass'n, 579 N.E.2d at 697. The court also acknowledged the influence of the Wilder decision by stating: The same reasons relied on by the United States Supreme Court in Wilder support a decision that ODHS violated section 1396a(a)(30)(A) by basing its decision solely on budgetary concerns. Id. 579 N.E.2d at 698. Similarly, in Orthopaedic Hosp. v. Kizer, the court treated efficiency, economy, and quality of care as the relevant factors and then asked whether the relevant factors were considered in the agency decision-making. Orthopaedic Hosp., 1992 WL 345652 at  3. The district court concluded that Medicaid rate-setting methodology at issue violated 42 U.S.C. Sec. 1396a(a)(30)(A) because it largely failed to consider the relevant factors. Id. at  12-13. 57 Our examination of the record in this case yields the same conclusion as these two precedents. DHS has offered no evidence to show that the relevant factors have been considered. DHS argues that it followed the requirements of the Arkansas Administrative Procedures Act, but such procedural compliance is not the same as substantive adherence to the requirements of the Medicaid statute. DHS contends that it considered reimbursement rates for providers in other states. DHS has not shown, however, how such a comparison has any bearing on equal access, efficiency, economy, and quality of care in Arkansas. Furthermore, DHS admitted in a letter dated July 6, 1992, that [a]ny studies in regard to the cuts on providers that goes into effect July 1 for example, the effect cuts will have on accessibility ... [do] not exist according to our records. Pl.'s Ex. 57. The only evidence offered during the hearings regarding the rate cuts' effect on accessibility was purely speculative and could only be confirmed by historical data accumulated after the cuts were made. Tr. of Nov. 30, 1992, Hr'g at 364-68. 58 Indeed, there is ample evidence suggesting that the reimbursement rate reductions were overwhelmingly based on budgetary concerns. The public explanation for the rate cuts was exclusively budgetary. The press release announcing the cuts stated explicitly: The proposed change in reimbursement rates is due to budgetary constraints. Pl.'s Ex. 55. Moreover, the director of the DHS Division of Economic and Medical Services testified that the cuts were for budgetary reasons. Tr. of July 20, 1992, Hr'g at 40, 337, 340. In its own brief, DHS admitted that it would not have made the reduction in rates but for the need to balance the budget. Def.'s Reply to Pl.'s Posttrial Br. at 14. 59 Abundant persuasive precedent supports the proposition that budgetary considerations cannot be the conclusive factor in decisions regarding Medicaid. See, e.g., AMISUB, 879 F.2d at 800-01; Alabama Nursing Ass'n v. Harris, 617 F.2d 388, 396 (5th Cir.1980); Friedman v. Perales, 668 F.Supp. 216, 221 (S.D.N.Y.1987), aff'd, 841 F.2d 47 (2d Cir.1988); Michigan Hosp. Ass'n v. Babcock, 736 F.Supp. 759, 764 (W.D.Mich.1990); Illinois Hosp. Ass'n v. Illinois Dep't of Pub. Aid, 576 F.Supp. 360, 368 (N.D.Ill.1983); Thomas v. Johnston, 557 F.Supp. 879, 914 (W.D.Tex.1983). DHS may take state budget factors into consideration when setting its reimbursement methodology. See Illinois Hosp. Ass'n, 576 F.Supp. at 371. However, the state may not ignore the Medicaid Act's requirements in order to suit budgetary needs. Id. (citing Alabama Nursing Ass'n, 617 F.2d 396). Given all the evidence, we must agree with the district court's conclusion that budgetary reasons were the guiding force and the relevant factors did not in any way form the basis for DHS's rate-making decision. Because it failed to consider the rate reduction's impact on equality of access, efficiency, economy, and quality of care, DHS's decision violated the requirements of 42 U.S.C. Sec. 1396a(a)(30)(A).