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Unity Service Coordination, Inc., A Referral and Information Service LLC v. Richard Armstrong

March 10, 2011


The opinion of the court was delivered by: B. Lynn Winmill Chief Judge United States District Court


Before the Court are Plaintiffs' Motion for Summary Judgment (Dkt. 36) and Defendants' Cross Motion for Summary Judgment (Dkt. 40). The Court heard oral argument on January 26, 2011. Being familiar with the record and pleadings, and counsels' arguments at hearing, the Court will grant Plaintiffs' motion, deny Defendant's motion, and set the matter for hearing as to an appropriate remedy.


The factual background of this case was detailed in the Court's Order on Motion for Preliminary Injunction (Dkt. 32), but will be largely repeated here:

Plaintiffs are six Idaho service coordination agencies. In this action, Plaintiffs 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. This change in reimbursement rates became effective on July 1, 2009. Compl.,Dkt. 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., Dkt. 14, ¶10. Since July 1, 2009, IDHW requires service coordination agencies to bill such clients in fifteen-minute increments. 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., Dkt. 15, ¶ 6. Section 56-118 directs IDHW to "implement a methodology for reviewing and determining reimbursement rates" to service coordination agencies. I.C. § 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.

From 2005 to 2009, IDHW took steps to develop a methodology for reviewing and determining reimbursement rates, including conducting its own annual cost studies. See id. ¶¶ 8, 16, 20, 21. IDHW also contracted with the consulting firm Johnston-Villegas- Grubbs and Associates, LLC (JVGA) to develop surveys, compile date, analyze data, and develop a reimbursement methodology. Id. ¶¶ 9,14. IDHW hired another consulting firm to compare Idaho reimbursement rates with those of other states. Id. ¶ 12. In April 2008, IDHW prepared draft calculations and sought and used feedback from service coordination agencies to amend the calculations. Id. ¶ 20.

Despite its efforts, IDHW ultimately used little if any of the cost studies in revising reimbursement rates, due at least in part to the small sample size of providers who responded to its surveys. Instead, IDHW used data from the Bureau of Labor Statistics (BLS) for Idaho professional and para-professional wages; for general and administrative costs, IDHW used the maximum percentage allowed (10%) without further supporting data, noting that there was insufficient data to justify using a different percentage. Id. ¶ 23. IDHW submitted State Plan Amendments for the new reimbursement rates to the Centers for Medicare & Medicaid Services (CMS)*fn1 , which determined that the plans complied with federal regulations. Id. ¶ 24; see Simnitt Aff., Dkt. 14-1, Exhs. D-20 and D-21.

In December 2010, shortly after filing this suit, Plaintiffs moved for a preliminary injunction to prevent Defendants from continuing to implement the reimbursement rate. The court considered the parties' pleadings, without oral argument, and issued its

Memorandum Decision and Order denying the preliminary injunction (Dkt. 32) in March 2010. In its decision, the Court determined that Plaintiffs were unlikely to prevail on the merits. Although Plaintiffs demonstrated they would suffer harm absent preliminary relief, the Court found that the balance of equities tipped in favor of Defendant, and that an injunction was not in the public interest. An order enjoining IDHW from employing the reimbursement rate would require IDHW to violate its approved State Plan, placing Idaho's federal funding for Medicaid benefits recipients at risk. The Court now considers the parties' respective requests for summary judgment.


One of the principal purposes of the summary judgment "is to isolate and dispose of factually unsupported claims . . . ." Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). It is "not a disfavored procedural shortcut," but is instead the "principal tool[ ] by which factually insufficient claims or defenses [can] be isolated and prevented from going to trial with the attendant unwarranted consumption of public and private resources." Id. at 327. "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).

The evidence must be viewed in the light most favorable to the non-moving party, and the Court must not make credibility findings. Id. at 255. Direct testimony of the non-movant must be believed, however implausible. Leslie v. Grupo ICA, 198 F.3d 1152, 1159 (9th Cir. 1999). On the other hand, the Court is not required to adopt unreasonable inferences from circumstantial evidence. McLaughlin v. Liu, 849 F.2d 1205, 1208 (9th Cir. 1988).

The Court must be "guided by the substantive evidentiary standards that apply to the case." Liberty Lobby, 477 U.S. at 255. If a claim requires clear and convincing evidence, the issue on summary judgment is whether a reasonable jury could conclude that clear and convincing evidence supports the claim. Id.

The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir. 2001)(en banc). To carry this burden, the moving party need not introduce any affirmative evidence (such as affidavits or deposition excerpts) but may simply point out the absence of evidence to support the ...

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