(CONCORD) A ruling issued late last week by Federal Judge Stephen McAuliffe is mostly good news for the ten hospitals suing the State of New Hampshire over a series of cuts to Medicaid reimbursement rates. McAuliffe has ordered Health and Human Services Commissioner Nick Toumpas, the defendant in Dartmouth-Hitchcock v Toumpas, to provide public notice and a 15-day public comment period before requesting any further reductions to Medicaid reimbursement rates. The hospitals have filed suit claiming that a series of rate reductions going back to 2008 violated federal law because state officials did not give providers and patients fair warning, and did not take into account how cutting back on reimbursement rates would affect the quality and availability of Medicaid services.

Dartmouth-Hitchcock Manchester. Photo: Dartmouth-Hitchcock.org

While the injunction likely protects hospitals from any more cutbacks this year, McAuliffe’s 31-page order also contains some ominous signs for the future of the lawsuit. Citing the U.S. Supreme Court’s February decision to remand Douglas v. Independent Living Centers of Southern California back to the Ninth Circuit Courts of Appeals, McAuliffe wrote that New Hampshire officials were “highly likely” to have failed to live up to the standards of the Federal Medicaid Act. But he also noted that Congress did not give private citizens a “right of action” to sue in order to enforce these provisions, leaving that up the federal Secretary of Health and Human Services.

At issue is the plaintiffs argument under the Supremacy Clause that private citizens can sue to overturn state laws that conflict with federal requirements. California hospitals also raised the Supremacy Clause argument in Douglas, but the majority in the 5-4 decision avoided the question entirely, sending the case back to the Circuit Court for further deliberations. McAuliffe wrote that the ambiguity of the Douglas decision leaves him needing to gather more information.

Douglas simply raises too many critical factual, administrative, and legal questions left unaddressed in this record, and about which the parties are unlikely to agree.

The dispute stems from a series of cuts in Medicaid reimbursement rates paid to health care providers. Beginning in 2008, the Lynch Administration turned to the Medicaid program to help make up for plummeting state revenues and increased Medicaid caseloads. Toumpas sought approval from the Legislature Fiscal Committee to cut reimbursement rates several times, but did not issue public notices or seek federal approval beforehand. State officials admitted at the time that the cuts were made in order to bring state Medicaid spending down to the level appropriated by the Legislature. The plaintiff hospitals argue that the Medicaid Act requires public notice and federal approval of such changes to the program, and seeks repayment for years of illegally low rates.

The State argues that only federal officials can determine if New Hampshire is violating federal requirements, and that the state budget and Fiscal Committee process provided sufficient public notice under the Medicaid Act.

Should the hospitals ultimately succeed, not only would Medicaid reimbursement rates jump nearly 50% to their previous levels, but providers could receive up to $150 million to make up for the past four years of lower rates. McAuliffe’s injunction prevents Toumpas from seeking further rate reductions, but does not roll back any of the previous cuts. It also gives both sides 45 days to answer a series of five questions as to how Douglas impacts the New Hampshire case and other thorny legal issues.

McAuliffe Injunction
McAuliffe Order- Dartmouth-Hitchcock v Toumpas

McAuliffe Order
Dartmouth-Hitchcock v Toumpas 03-02-12 Order