J.K. BY AND THROUGH R.K. v. DILLENBERG No. CIV 91-261 TUC JMR.
836 F.Supp. 694 (1993)
J.K., a minor, By and Through R.K., et al., on behalf of themselves and all others similarly situated, Plaintiffs, v. Jack DILLENBERG, in his official capacity as Director of the Arizona Department of Health Services; Charles Carbone, in his official capacity as Director, Division of Behavioral Health Services, Arizona Department of Health Services; Mabel Chen, in her official capacity as Acting Director, Arizona Health Care Cost Containment System, Defendants.
United States District Court, D. Arizona.
October 7, 1993.
Logan T. Johnston, Margo L. Friedland and Catherine M. Dodd, Johnston, Maynard, Grant & Parker, Phoenix, AZ, for defendant Mabel Chen, M.D.
ROLL, District Judge.
The instant action challenges the sufficiency of behavioral health services provided eligible
Defendant Jack Dillenberg is Director of the Arizona Department of Health Services ("ADHS"). Defendant Charles Carbone is Deputy Director of ADHS's Division of Behavioral Health Services ("DBHS"). DBHS is responsible for providing mental health services for Title XIX children. Defendant Mabel Chen is Acting Director of the Arizona Health Care Cost Containment System ("AHCCCS"), the single state Medicaid agency responsible for the provision of Title XIX children's mental health services in Arizona. DBHS, by contract, provides Title XIX mandated mental health services to children through six regional behavioral health authorities ("REBHA") located throughout the state.
Currently before the Court are the parties' cross-motions for summary judgment and the Defendants' individual and joint motions to dismiss. For the following reasons, Plaintiffs' motion for summary judgment is granted in part. Defendants' various joint and individual motions are denied.
RELEVANT FEDERAL LAW
"In 1965, Congress established `Medicaid,' a cooperative federal state health benefits assistance program designed to provide necessary medical services to low income persons." Citizens Action League v. Kizer,
State participation in the Medicaid program is optional. If a state does elect to participate, it must comply with all provisions of the federal Medicaid statute and implementing regulations, except insofar as individual requirements may be waived by the federal government. Id.
States maintaining medical assistance plans approved by the Secretary of the United States Department of Health and Human Services receive federal financial assistance partly underwriting operation of their Medicaid program. 42 U.S.C. § 1396(b). These medical assistance plans designate services that the state will make available to eligible individuals. Arizona participates in the Medicaid program through its Arizona Health Care Cost Containment System ("AHCCCS"). A.R.S. § 36-2907.01. If a state chooses to participate, it stands to lose its federal funding if it fails to comply with the federal statute and regulations. Schweiker v. Gray Panthers,
State Medicaid plans must provide that the amount, duration, and scope of each covered service will remain sufficient or reasonably achieve the purpose of the service provided. 42 C.F.R. § 440.230(b). Federal regulations prohibit Defendants from denying or reducing the amount, duration or scope of the Title XIX covered services based on the diagnosis, type of illness or condition suffered. 42 C.F.R. § 440.230(c). States
The uncontroverted facts are as follows. The Arizona Department of Health Services entered into a contract with CODAMA, the REBHA serving Maricopa County, to provide behavioral health services to eligible children in that area. The contract recognizes and requires CODAMA to comply with all applicable state and federal laws. In January of 1993, CODAMA introduced a new policy, with certain exceptions,
As to the individual named Plaintiffs,
Plaintiff S.M. suffers from bi-polar disorder, post-traumatic stress syndrome, and has a history of abuse. She resides at a residential treatment center in Phoenix. Her residence was terminated through written notification. However, the letter does not explain the reasons for termination, procedures for appeal and retention of services pending appeal. S.M.'s treatment team recommends continued residential placement as medically necessary.
CROSS-MOTIONS FOR SUMMARY JUDGMENT
Class Plaintiffs move for summary judgment, requesting a ruling requiring Defendants to follow Medicaid statutory regulations mandating that treatment decisions be made on the basis of medical necessity, and that prior to termination or reduction of services, reasonable notice, including information regarding the patient's rights to and pending appeal, be given. Defendants cross-move arguing that Plaintiffs have no entitlement to prior notice, hearing, and continued services when there is a change in the amount or level of services.
Defendant Chen concedes that federal law requires notice of an action terminating, suspending, or reducing Medicaid eligibility or covered services, but that this requirement applies only to the state and not to independent contractors hired to perform certain services. In other words, it is Chen's position that the REBHAs are responsible for the decision making that Plaintiffs seek to enjoin, but that they function as private entities whose actions cannot be attributed to the state.
The state action inquiry divides along several broad lines. The first looks at whether the private actor was engaging in a
In a second category of cases, state action is based on the relationship between the government and activities of the alleged wrongdoer. State action will be found where the wrongdoer has been commanded or encouraged by government to engage in the activity which has harmed the aggrieved party. The decision is made ad hoc by "sifting facts and weighing circumstances." Burton v. Wilmington Parking Authority,
Alternatively, state action may be found in situations in which the private enterprise has multiple contacts with the government. Courts look to see if a "symbiotic relationship" between the public and private entities has been formed. Id. at 725, 81 S.Ct. at 861. State action may be present in those cases in which the government provides subsidies or aid. Gilmore v. City of Montgomery,
The pivotal authority in this area is Blum v. Yaretsky,
Superficially, Blum would appear to govern and answer the state action question in the negative. However, numerous and significant facts distinguish this case from the nursing home involved in Blum. Plaintiffs herein are not complaining about the actions of a private provider but of a private entity that has been assigned the entire responsibility for a state-created service. REBHAs are exclusively devoted to those patients who can claim an entitlement to state support. In Plaintiffs' words, "[r]eference to state legislation confirms that the REBHAs are creatures of the sovereign will, conceived as vehicles for execution of evolving public policy on the mental health needs of the population." See Arnold v. Arizona Department of Health Services,
Moreover, the private providers in Blum were not executing state responsibilities but were independent actors doing business with the state. Conversely, the state of Arizona has delegated the entire responsibility for its mandated health care duties to the REBHAs as its means of carrying out its public duties. Also, unlike the Blum situation, the REBHAs are subject to extensive state involvement. According to its contract, each REBHA is required to "comply with all Federal, State, and local laws, rules, regulations,
In sum, the Court finds that Class Plaintiffs are entitled to a declaration that the actions undertaken by CODAMA, to the extent that are later proven to be an impermissible reduction of services, were effected on behalf of the government and constitute state action.
Along a similar line, Defendants Dillenberg and Carbone argue that the REBHAs are independent contractors and therefore cannot be deemed to maintain an agency relationship with the state, rendering the state immune from Plaintiffs' complaints. "An independent contractor is a person who contracts with another to do something for [the other] but who is not controlled by the other nor subject to the other's right to control with respect to [the] physical conduct in the performance of the undertaking. [S]he may or may not be an agent." Restatement (Second) of Agency § 2(3) (1958). The existence of an agency relationship is determined by looking at the parties' intent. Salt River Valley Water Users' Association v. Giglio,
As framed by Defendants, for an agency relationship to exist it must be "because the principal ha[s] the authority to issue orders that the contracting party, like CODAMA, could not ignore." Clearly, Defendants have exerted and continue to exert a great deal of control over the REBHAs. See Plaintiffs' Exhibit 19 (letter to CODAMA CEO from Defendant Carbone, ordering CODAMA to follow acceptable procedures during the pendency of this lawsuit, illustrating that they not only have the authority to exercise such control, they have actually exercised it). Additionally, the contract itself, not an insubstantial document, reserves numerous areas of control for the state.
Even assuming the REBHAs to be independent contractors, certain duties are non-delegable. See Cooke v. Berlin,
The public policy implications of Defendants' position, if accepted, would be devastating. It is patently unreasonable to presume that Congress would permit a state to disclaim federal responsibilities by contracting away its obligations to a private entity. See Cowan v. Myers,
Plaintiffs next ask that the Defendants be ordered to make all decisions to terminate or reduce services to class members based on a determination of medical necessity, provide prior notices of any reduction, termination, or suspension of services including discharge from residential treatment or group home, and follow procedures for reasonable notice and fair hearing.
Defendants counter that the relevant federal regulations cover an individual's initial and continued eligibility only, and not the type of determinations made herein. They characterize the procedures at issue here as "utilization review" and merely concern decisions regarding level of care. Defendants further distinguish the reduction or termination of a program-wide benefit from a change in the level of services, and allege that latter does not prompt due process concerns. See Banks v. Secretary of the Indian Family and Social Services Administration,
On the record before it, the Court must conclude that neither side is entitled to summary judgment on these claims. The documents Plaintiffs produced speak of devising a course of treatment so that the patient may be released into a less restrictive environment within ninety days of admission to a restrictive facility. On its face, the discharge policy implicates only discretionary decisions as to how the REBHAs are to execute their contractual obligations, not a policy effecting entitlements.
Likewise, Defendants have not met their corresponding burden of proving that the actions taken in this case constitute individual treatment decisions exempt from due process concerns. Defendants have raised unanswered questions of fact and thus summary judgment is inappropriate.
DEFENDANTS' MOTIONS TO DISMISS
In addition to the parties' cross-motions for summary judgment, Defendants have filed individual motions to dismiss. All Defendants insist that the Plaintiffs have no claim because they have suffered no deprivation of services. They further complain that Plaintiffs have been vague in their allegations and there is little before the Court that supports the class allegation that medically necessary services have been denied.
In considering a motion to dismiss for failure to state a claim, the complaint is liberally construed and viewed in the light most favorable to the non-moving party. Scheuer v. Rhodes,
Plaintiffs will ultimately bear the burden of proving that they have been denied medically necessary services. However, they have sufficiently alleged that they are in danger of suffering future harm due to Defendants'
Defendants Dillenberg and Carbone raise the additional argument that this Court's jurisdiction is limited to deciding whether the agency's action was arbitrary, capricious, an abuse of discretion or otherwise not in accordance with the law. Defendants' argument does not command dismissal. Indeed, the Court has been called on to determine whether the agency's actions are "in accordance with the law." Defendants have not shown that they are entitled to judgment.
Plaintiffs' "Motion for Partial Summary Judgment" is
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