Health Law Daily Virginia’s reduced Medicaid reimbursement rates apply to emergency rooms and hospital readmissions
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Friday, October 9, 2020

Virginia’s reduced Medicaid reimbursement rates apply to emergency rooms and hospital readmissions

By Elena Eyber, J.D.

Health care providers’ takings and preemption claims seeking to enjoin Virginia Medicaid agency from enforcing reduced budget legislation were dismissed for lack of standing.

A federal district court in Virginia granted Virginia Medicaid agency’s motion to dismiss the health care providers’ Fifth Amendment takings claim and preemption claims due to lack of standing. The health care providers sought to enjoin Virginia Medicaid agency from enforcing legislation that approved a reduced budget including two measures affecting reimbursement for hospital services provided to the beneficiaries of Virginia’s Medicaid program: (1) the Downcoding Provision; and (2) the Readmission Provision. The court dismissed the health care providers’ takings claim holding that the health care providers were foreclosed from seeking injunctive relief because they could bring an action seeking just compensation. Lastly, the health care providers lacked standing to bring their preemption claims because their injury was not redressable by the court when the preemption claims stated no basis for a private cause of action (Virginia Hospital & Healthcare Association v. Kimsey, October 7, 2020, Hudson, H.).

Procedural history. The health care providers alleged three causes of action in their complaint: a violation of the Takings Clause of the Fifth Amendment; preemption under 42 U.S.C.§1396a(a)(30)(A); and preemption under 42 U.S.C. §1396u-2(b)(2) and 42C.F.R. §438.114(c)(1). The health care providers contended that the Downcoding Provision constituted a taking because emergency room providers could treat a patient for a more severe condition, expending time and resources, but if that same patient eventually is actually diagnosed with a less severe condition, the providers would only be reimbursed as if they provided a lower level of care. The Readmission Provision reduced reimbursement rates by fifty percent for certain readmissions considered potentially preventable between five and thirty days after discharge. The health care providers alleged that this provision similarly violated the Takings Clause by disrupting providers’ investment-backed expectations and appropriating providers’ services and resources without just compensation. Finally, the health care providers argued that both provisions were in violation of federal Medicaid laws and were thus preempted.

The Medicaid agency asserted that all three of the health care providers’ claims should be dismissed because the court lacked subject matter jurisdiction and the complaint failed to state a claim upon which relief could be granted. First, the Medicaid agency argued that the health care providers’ takings claim failed to state a claim upon which relief could be granted because prospective injunctive relief was unavailable for a takings claim. In the alternative, the Medicaid agency contended that the health care providers failed to state a takings claim because they had not identified any constitutionally protected property interest subject to a taking. Finally, the Medicaid agency claimed that, even if the health care providers had a constitutionally protected property interest, no taking occurred. Regarding the health care providers preemption claims, the Medicaid agency argued that no statute cited by the health care providers created a private right of action.

Fifth Amendment takings claim. The health care providers claimed that the Downcoding Provision and the Readmission Provision violated the Takings Clause of the Fifth Amendment, which prohibits the government from taking "private property" for public use, "without just compensation." The health care providers sought injunctive relief to prevent an unconstitutional taking of the economic value of hospitals’ and doctors’ services and supplies for the public’s own use and benefit without paying just compensation. The court granted the Medicaid agency’s motion to dismiss the health care providers’ takings claim. The court held that the health care providers were foreclosed from seeking injunctive relief because they could bring an action seeking just compensation. As long as just compensation remedies were available, injunctive relief was foreclosed.

Preemption claims. The health care providers alleged that the Downcoding Provision and the Readmission Provision were preempted by 42 U.S.C. §1396a(a)(30)(A), and that the Downcoding Provision was preempted by 42 U.S.C. §1396u-2(b)(2) and 42 C.F.R. §438.114(c)(1). The health care providers’ complaint invoked the Supremacy Clause and claimed that the Downcoding Provision and the Readmission Provision were preempted by the cited federal statutes. The providers also argued that these statutes conferred rights upon the providers that were enforceable under §1983. However, the court found that neither the Supremacy Clause nor §1983 alone created a private cause of action. Therefore, the health care providers were unable to use the Supremacy Clause or §1983 to create a private right of action under the statutes. Accordingly, the court held that the health care providers lacked standing to bring their preemption claims because the providers’ alleged injury was not redressable by the court when the providers cited no statute or other authority that created a private cause of action.

The case is No. 3:20-cv-00587-HEH.

Attorneys: Matthew Allyn Waring (McDermott Will & Emery LLP) for Virginia Hospital & Healthcare Association, Medical Society of Virginia and Virginia College of Emergency Physicians. Calvin Cameron Brown, Office of the Attorney General, for Karen Kimsey.

Companies: Virginia Hospital & Healthcare Association; Medical Society of Virginia; Virginia College of Emergency Physicians

MainStory: TopStory CaseDecisions CMSNews BillingNews MedicaidNews MedicaidPaymentNews PreemptionNews VirginiaNews

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