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Unity Service Coordination, Inc. v. Armstrong

March 20, 2010


The opinion of the court was delivered by: Honorable B. Lynn Winmill Chief U. S. District Judge


Before the Court is Plaintiffs' Motion for Preliminary Injunction (Docket No. 4). For the following reasons, the Court denies the motion.


Plaintiffs, six Idaho service coordination agencies, seek to enjoin Defendants Richard Armstrong, Director of Idaho Department of Health and Welfare ("IDHW"), and Leslie Clement, Administrator of IDHW's Medicaid Division, from continuing to implement a change in Medicaid reimbursement rates for service coordination benefits provided to developmentally disabled adults and children, which became effective on July 1, 2009. Pls.' Mot. Prelim. Inj. (Docket No. 4); Pls.' Mem. in Supp. Mot. Prelim. Inj. ("Pls.' Mem. in Supp."), p. 2 n.1 (Docket 4-1). Before July 1, 2009, IDHW reimbursed service coordination agencies that provided ongoing service coordination for developmentally disabled adults and children on a flat, monthly rate per Medicaid participant. Simnitt Aff., ¶ 10 (Docket No. 14). Beginning on July 1, 2009, IDHW now requires service coordination agencies to bill such clients on a fifteen-minute incremental basis, and IDHW reimburses agencies accordingly. Id. ¶ 11.

The 2009 rate change "was the result of a multi-year analysis and collaborative process that began in July, 2005 when Idaho Code § 56-118 became law." Pugatch Aff., ¶ 6 (Docket No. 15). Section 56-118 directs IDHW to "implement a methodology for reviewing and determining reimbursement rates" to service coordination agencies. Idaho Code Ann. § 56-118(1). In May 2005, Sheila Pugatch, the Principal Financial Specialist in IDHW's Office of Reimbursement Policy, was placed in charge of developing the methodology required by section 56-118. Pugatch Aff., ¶ 7.

IDHW took many steps over the course of a four-year period in order to develop a methodology for reviewing and determining reimbursement rates. For example, IDHW conducted cost studies each year from 2005 to 2009. See id. ¶¶ 8, 16, 20, 21. In 2006 and 2007, IDHW contracted with the consulting firm Johnston-Villegas-Grubbs and Associates, LLC (JVGA) to help develop surveys, compile date, analyze data, and develop a reimbursement methodology. Id. ¶¶ 9, 14. IDHW hired another consulting firm in 2006 to compare Idaho reimbursement rates with those of other states. Id. ¶ 12. IDHW prepared draft calculations in April 2008 and presented those calculations to service coordination agencies. Id. ¶ 20. After receiving feedback from agencies, IDHW added other cost categories into the calculation. Id. IDHW used the "data accumulated from the cost and other studies performed in 2005, 2006, 2007, 2008, and 2009" to establish the reimbursement method at issue.*fn1 Id. ¶ 23. IDHW then submitted State Plans Amendments regarding the new reimbursement methodology to the Centers for Medicare & Medicaid Services ("CMS")*fn2, which determined that the plans complied with federal regulations. Id. ¶24; see Simnitt Aff., Exh. D-20 (Docket No. 14-1) (CMS letters of approval), Exh. D-21 (Docket No. 14-1) (CMS letter to a service coordination agency stating that IDHW's "actions comply with federal regulatory requirements").

IDHW also went through the rulemaking process while developing its new reimbursement methodology. In March 2008, IDHW "published a 'Notice of Intent to Promulgate Rules -- Negotiated Rulemaking' with respect to 'Medicaid Enhanced Plan Benefits,' a part of which was the proposed amendment to change reimbursement for providers from a flat monthly rate to 15-minute increments." Simnitt Aff., ¶ 5; see id. Exh. D-16. In October 2008, IDHW published a "Notice of Rulemaking -- Proposed Rule" and a public hearing schedule. Id. ¶6; see id. Exh. D-17. The Idaho Senate approved the rules in January 2009, and the reimbursement rate change took effect on July 1, 2009. Id. ¶ 7.

Under the new billing and reimbursement method, it is unclear whether service coordination agencies must provide eight minutes of continuous service to a client before being able to bill a fifteen-minute unit for that service. On June 3, 2009, IDHW issued "Information Release 2009-11," which informed service coordination agencies of the new reimbursement rules. Bills Decl., Exh. 1 (Docket No. 4-3). According to Information Release 2009-11, "a single 15-minute unit of service delivery can be billed if it is equal to or greater than eight minutes." Id. The Information Release referred service coordination agencies to the Idaho Medicaid Provider Handbook for further explanation about billing in fifteen-minute increments. Id. In turn, the Idaho Medicaid Provider Handbook appears to allow service coordination agencies to aggregate minutes spent over the course of a day providing services to a particular client. Id. at Exh. 3, pp. 3-3 to 3-4 ("It does not imply that any minute until the eighth minute should be excluded from the total count as the timing of active treatment includes all time."). Additionally, the Idaho State Plan Amendments that IDHW submitted to CMS state that "[m]inutes of service provided to a specific individual can be accrued over one calendar day."

Id. at Exh. 4, p. 32. In contrast, an e-mail sent by David Simnitt, an IDHW Program Manager, appears to prohibit the aggregation of minutes in order to reach the eight-minute threshold for billing purposes.*fn3 Service coordination agencies have been instructed that, under the new reimbursement method, aggregation is not permitted. Bills Decl., ¶ 4; Hansen Decl., ¶ 6 (Docket No. 4-5); Kotts Decl., ¶ 6 (Docket No. 4-6); Meads Decl., ¶ 10 (Docket No. 4-7); Butler Decl., ¶ 7 (Docket No. 29-1).

Plaintiffs assert that "the effect [of the new reimbursement] rate combined with the '8-minute' rule has been a major reduction in reimbursement to Service Coordination Agencies for performing the same services they performed prior to July 1, 2009." Pls.' Mem. in Supp., p. 8. Plaintiffs and owners of other service coordination agencies claim that the new reimbursement method has reduced their revenues anywhere from twenty to sixty-five percent; increased non-billable time; caused some agencies to discontinue service to clients in rural areas and cut employee benefits; and, in one case, caused an agency to cease doing business as of January 2010. See Beck Decl., ¶¶ 4, 6, 7 (Docket No. 4-2); Bills Decl., ¶¶ 5, 6, 7, 9, 10; Brinegar Decl., ¶¶ 6--8 (Docket No. 4-4); Hansen Decl., ¶¶ 5--9; Kotts Decl., ¶¶ 6--8; Meads Decl., ¶¶ 6, 7, 10; Straughan Decl., ¶ 5 (Docket No. 4-8); Butler Decl., ¶¶ 3--7; Short Decl., ¶¶ 4--5 (Docket No. 29-2) (stating that Lloyd Brinegar & Short Associates, LLC went out of business in January 2010 because it could "no[t] afford to stay in business under the new rate structure").


"A plaintiff seeking a preliminary injunction must establish that [1] he is likely to succeed on the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an injunction is in the public interest." Winter v. Natural Res. Def. Council, Inc., - U.S. -, -, 129 S.Ct. 365, 374 (2008). "A preliminary injunction is an extraordinary remedy never awarded as of right." Id. at 376 (citation omitted). "In each case, courts must balance the competing claims of injury and must consider the effect on each party of the granting or withholding of the requested relief." Id. (internal quotation marks and citation omitted). "In exercising their sound discretion, courts of equity should pay particular regard for the public consequences in employing the extraordinary remedy of injunction." Id. at 376--77 (internal quotation marks and citation omitted).

Here, Plaintiffs have failed to show that they are likely to succeed on the merits of their claim, that the balance of equities tips in their favor, and that ...

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