Bria Health Services, LLC v. Eagleson, No. 18-3076 (7th Cir. 2020)

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Justia Opinion Summary

Under the Medicaid program, 42 U.S.C. 1396, states must ensure that certain medical assistance is available to all eligible beneficiaries. Illinois administers its Medicaid program through HFS. For managed care programs, HFS contracts with Medicaid managed care organizations (MCOs), which a flat monthly fee per patient. The MCOs pay providers for services rendered to Medicaid beneficiaries. Plaintiffs, consultants who offer business services to Illinois nursing homes and supportive living facilities, sued on behalf of a class of nursing home residents entitled to Medicaid benefits, alleging violations of Title XIX of the Social Security Act, the Americans with Disabilities Act, the Rehabilitation Act, and the Due Process and Equal Protection Clauses. They alleged that the MCOs failed to process timely payments for claims submitted by nursing homes—the plaintiff‐consultants’ clients—to the MCOs, putting the resident‐beneficiaries at risk of being discharged from the facilities. The Seventh Circuit affirmed the dismissal of the case for lack of subject matter jurisdiction. The regulation cited by plaintiffs does not permit authorized representatives to bring civil lawsuits on behalf of Medicaid beneficiaries so the plaintiffs lacked standing. The residents would be unlikely to benefit if the plaintiffs won; they apparently filed suit in an effort to push the state to pay outstanding bills owed to the consultants’ clients.

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In the United States Court of Appeals For the Seventh Circuit ____________________ No. 18 3076 BRIA HEALTH SERVICES, LLC, et al., as authorized representa tives of Winnie Boykin, et al., Plaintiffs Appellants, v. THERESA A. EAGLESON, in her official capacity as the Director of the Illinois Department of Healthcare and Family Services, et al., Defendants Appellees. ____________________ Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:17 cv 8920 — Charles R. Norgle, Judge. ____________________ ARGUED SEPTEMBER 19, 2019 — DECIDED FEBRUARY 11, 2020 ____________________ Before SYKES, HAMILTON, and BRENNAN, Circuit Judges. HAMILTON, Circuit Judge. Plainti s are consultants who provide services to nursing homes and long term care facili ties. They say they are bringing this suit on behalf of seriously ill nursing home residents receiving care under Medicaid. The residents, however, are not parties to this suit, and it seems 2 No. 18 3076 unlikely that they would benefit at all if plainti s win. By all appearances, plainti s have brought this suit in an e ort to push the State of Illinois and its Medicaid contractors to pay outstanding bills owed to the consultants’ clients. Third parties can bring claims on behalf of others under some circumstances. Guardians, next friends, and associa tions, for example, can have representative standing. This case does not involve such established standing doctrines. In stead, plainti s rely on a Medicaid regulation. As we read that regulation, however, it does not permit authorized represent atives to bring civil lawsuits on behalf of Medicaid beneficiar ies. We a rm the district court’s dismissal for lack of standing and thus lack of subject matter jurisdiction. I. Facts and Procedural Background The Medicaid program—established under Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq.—is a coopera tive arrangement in which the federal government gives fi nancial assistance to states to provide medical services to poor residents. See, e.g., National Federation of Independent Business v. Sebelius, 567 U.S. 519, 541–42 (2012). To participate in the program, states must comply with detailed statutory and reg ulatory requirements. Among these requirements, states must “provide that all individuals wishing to make application for medical assistance under the plan shall have opportunity to do so, and that such assistance shall be furnished with reason able promptness to all eligible individuals.” 42 U.S.C. § 1396a(a)(8). States must also ensure that certain medical as sistance is available to all eligible beneficiaries. § 1396a(a)(10). Illinois administers its Medicaid program through its De partment of Healthcare and Family Services (HFS). At issue No. 18 3076 3 here are the State’s managed care programs, in which HFS contracts with Medicaid managed care organizations (MCOs) to deliver Medicaid health benefits to beneficiaries. The State pays the MCOs a flat fee per patient per month, and the MCOs pay providers for services rendered to Medicaid beneficiaries. See generally 305 ILCS 5/5 30.1. Plainti s in this case are consultants who o er financial and business services to nursing home and supportive living facilities in Illinois. They have sued HFS, the HFS director, and a number of MCOs. Plainti s say they are bringing these claims on behalf of a class of nursing home residents entitled to Medicaid benefits. They seek various forms of relief for al leged violations of Title XIX of the Social Security Act; Title II of the Americans with Disabilities Act, 42 U.S.C. § 12132 et seq.; the Rehabilitation Act of 1973, 29 U.S.C. § 794; and the Due Process and Equal Protection Clauses of the Fourteenth Amendment to the United States Constitution. Plainti s allege that the MCOs have failed to process timely payments for claims submitted by the nursing homes—the plainti consultants’ clients—to the MCOs. This, the consultants argue, constitutes a failure to provide the medical assistance required by 42 U.S.C. § 1396a(a)(10).1 Be cause the nursing homes have not been paid for services ren dered, the consultants say, the resident beneficiaries are at risk of being discharged from the facilities. This jeopardizes the resident beneficiaries’ health, safety, and well being, and 1 The statutory definitions of some Medicaid terms differ from their everyday meanings. “Medical assistance” is defined by statute as “pay ment of part or all of the cost of [covered] care and services or the care and services themselves, or both.” 42 U.S.C. § 1396d(a). 4 No. 18 3076 causes mental anguish. The consultants’ claims under the ADA, the Rehabilitation Act, and the Constitution are all based on the same alleged denial of benefits. The plainti consultants say that they have been author ized to bring these claims by Medicaid beneficiaries residing in their clients’ nursing homes. Each resident has allegedly filled out a form designating a consultant as authorized rep resentative, authorizing “action as necessary to establish [] el igibility for Medicaid,” agreeing that legal proceedings brought in regard to Medicaid eligibility may be brought in the name of the resident or in that of the facility, and waiving “potential or actual conflicts of interest.”2 The district court dismissed the case under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdic tion. It determined that the regulation cited by plainti s does not permit authorized representatives to bring civil lawsuits on behalf of Medicaid beneficiaries so that the consultant plainti s lacked standing. II. Analysis We review de novo a district court’s dismissal for lack of standing when standing is not challenged on factual grounds. Remijas v. Neiman Marcus Group, LLC, 794 F.3d 688, 691 (7th Cir. 2015). We “accept as true all material allegations of the complaint, drawing all reasonable inferences therefrom in the plainti ’s favor unless standing is challenged as a factual 2 The complaint does not allege that the residents completed authori zation forms, but plaintiffs state in their briefing that all plaintiffs have signed forms conferring the same authority as the “Designation of Au thorized Representative” form in the plaintiffs’ appendix. We proceed as if this were alleged in the complaint. No. 18 3076 5 matter.” Id., quoting Reid L. v. Illinois State Bd. of Education, 358 F.3d 511, 515 (7th Cir. 2004). The plainti s bear the burden of establishing standing. Id. Article III of the Constitution limits the power of federal courts to deciding “cases” and “controversies.” To meet this constitutional requirement, a plainti must establish that she has standing. She must allege and prove (1) a concrete and particularized injury, (2) caused by the actions of the defend ant, (3) that would likely be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992). The consultant plainti s do not claim to have standing themselves. Instead, they say they are invoking the rights of the residents of the facilities whose Medicaid reimbursements are allegedly being withheld. Plainti s argue that because they have been granted authorization pursuant to regulation to sue on behalf of the residents—and because the residents themselves have standing—they may invoke the residents’ standing. This adds a second component to the standing in quiry. In addition to establishing that the residents have standing under Article III, plainti s must also show that they are entitled to invoke the residents’ standing. A. Scope of the Medicaid Regulation Plainti s identify 42 C.F.R. § 435.923, promulgated by the Secretary of Health and Human Services pursuant to 42 U.S.C. § 1302(a), as the source of their authority to sue on be half of the residents. Here are the key provisions of § 435.923: (a)(1) The agency must permit applicants and beneficiaries to designate an individual or or ganization to act responsibly on their behalf in assisting with the individual’s application and 6 No. 18 3076 renewal of eligibility and other ongoing com munications with the agency. … (b) Applicants and beneficiaries may authorize their representatives to— (1) Sign an application on the applicant’s be half; (2) Complete and submit a renewal form; (3) Receive copies of the applicant or benefi ciary’s notices and other communications from the agency; (4) Act on behalf of the applicant or benefi ciary in all other matters with the agency. The regulation thus requires state Medicaid agencies to al low Medicaid participants to designate representatives to act on their behalf and describes the scope of possible represen tation. The regulation describes the scope of representation using three specific provisions and one general provision. The general provision in (b)(4) describes the scope of representa tion in superficially broad terms, allowing representatives to “Act on behalf of the applicant or beneficiary in all other mat ters with the agency.” Plainti s argue that the general provision allows benefi ciaries to authorize representatives to sue HFS and the MCOs. The key phrase here is “matters with the agency.” Plainti s say that phrase reaches anything having to do with the agency, including civil litigation. The same basic rules that apply to statutory interpretation apply to regulatory interpretation. Exelon Generation Co. v. Lo cal 15, International Brotherhood of Electrical Workers, AFL CIO, No. 18 3076 7 676 F.3d 566, 570 (7th Cir. 2012); see generally Kisor v. Wilkie, 139 S. Ct. 2400, 2414–18 (2019). We ask first “whether the lan guage at issue has a plain and unambiguous meaning with regard to the particular dispute in the case.” Exelon Generation, 676 F.3d at 570, quoting Io e v. Skokie Motor Sales, Inc., 414 F.3d 708, 710 (7th Cir. 2005). This inquiry looks to the entire text of the regulation, its purpose and context, and precedents or au thorities that can inform the analysis. See River Road Hotel Partners, LLC v. Amalgamated Bank, 651 F.3d 642, 649 (7th Cir. 2011). If the language is ambiguous, we may consult the rule making record. Exelon Generation, 676 F.3d at 570. In this case, the text of the regulation, the broader regula tory context and purpose, and the comments during rulemak ing all indicate that “matters with the agency” relate only to communication and document processing in interactions with the agency and do not reach civil litigation against it. First, the general provision in (b)(4) should be read in light of the preceding specific elements in the list to encompass only those interactions with the agency akin to submitting ap plications, renewing eligibility, and receiving agency commu nications. A general provision following a list of specific pro visions should be interpreted considering those other provi sions. Hall St. Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576, 586 (2008) (canon of ejusdem generis teaches that “when a statute sets out a series of specific items ending with a general term, that general term is confined to covering subjects comparable to the specifics it follows”). Here, “other matters with the agency” most naturally encompasses only document pro cessing and communication with the agency. Second, the agency facing character of the regulation sup ports this interpretation. The regulation requires agencies to 8 No. 18 3076 permit Medicaid participants to authorize representatives to “assist[] with the individual’s application and renewal of eli gibility and other ongoing communications with the agency.” 42 C.F.R. § 435.923(a)(1). This agency requirement and the ap plicant/beneficiary right of authorization are two sides of the same coin. The agency must allow a certain kind of authori zation, and beneficiaries may exercise the corresponding right of authorization. The possible scope of authorization that ben eficiaries may give should be read as equivalent to the scope of representative activities that agencies are required to ac cept, encompassing only “the individual’s application and re newal of eligibility and other ongoing communications.” Id. (emphasis added). Third, the purpose provision for the relevant Part of the Medicaid regulations and the broader regulatory context con firm that the scope of authorization is limited to agency ap plicant communications and does not reach civil lawsuits. See Schlaf v. Safeguard Property, LLC, 899 F.3d 459, 465 (7th Cir. 2018) (observing that “We must interpret the plain language of the statute in light of its placement in the overall text of the statute” and looking to enacted statement of purpose); see also Jarrod Shobe, Enacted Legislative Findings and Purposes, 86 U. Chi. L. Rev. 669, 712–15 (2019) (describing value of enacted statements of purpose in determining meaning of other stat utory provisions). The applicable purpose provision, 42 C.F.R. § 435.2, says that the Part sets forth eligibility require ments for state Medicaid programs and establishes “require ments and procedures that the Medicaid agency must use in determining and redetermining eligibility, and requirements it may not use.” Id. § 435.2(c). In line with this stated purpose, the surrounding regulations in the subpart all pertain to agency policies and procedures. See 42 C.F.R. §§ 435.900– No. 18 3076 9 435.965. The regulation allowing authorized representatives to deal with the agency is best understood congruent with this purpose as setting out the procedures that the Medicaid agency must itself use when determining the eligibility of an applicant. Read in context, the regulation limits the scope of permis sible representation to communication with the agency re garding eligibility and like matters. The responses of the De partment of Health and Human Services to comments in the rulemaking process further indicate that the regulation is lim ited to communication with the agency, without any indica tion that it would extend to litigation against it. In issuing the final version of the rule, the Department wrote that it “pro posed to define the term ‘authorized representative’ as an in dividual or organization that acts responsibly on behalf of an applicant or beneficiary in assisting with the individual s ap plication and renewal of eligibility and other ongoing com munications with the Medicaid or CHIP agency.” 78 Fed. Reg. 42174 (July 15, 2013). The Department clarified that the regu lations were “intended to be consistent with current state pol icy and practice, regarding the definition, designation, and re sponsibilities of ‘authorized representatives.’” Id. Plainti s do not suggest that authorized representatives have ever sued on behalf of Medicaid beneficiaries as plainti s seek to do here, and we have no reason to believe otherwise. The regulation in question—and even the authorization agreement presented by the plainti s—extends only to eligi bility applications and determinations. These are not at issue in this case. According to the complaint, the residents have all been approved to receive Medicaid benefits. So even if the 10 No. 18 3076 authorization were permitted by the regulation, it would not allow for this suit. B. Regulations and Representative Standing We must o er one cautionary clarification to our analysis. Because the regulation does not authorize plainti s to bring civil claims on behalf of others, we do not need to decide whether a regulation can ever confer by itself the right to bring a claim on behalf of another and to invoke that person’s Article III standing. Our reliance on interpretation of the Med icaid regulation should not be taken as an implied endorse ment of plainti s’ novel standing theory derived solely from a regulation. The general rule is that plainti s must allege their own in juries to establish standing. See Hollingsworth v. Perry, 570 U.S. 693, 710 (2013) (“mere authorization to represent a third party’s interests” will not confer standing to a party with no injuries of her own). Well established exceptions to this rule allow a plainti to bring a claim on behalf of another. Guard ians have standing when they sue on behalf of minors. E.g., Sherman v. Community Consolidated School District 21 of Wheel ing Township, 980 F.2d 437, 441 (7th Cir. 1992); see also Fed. R. Civ. P. 17(a) (allowing guardians and similar representatives to bring claims on behalf of others). A “next friend” may have standing to bring a habeas corpus petition if she has a “signif icant relationship” with the real party in interest and the real party in interest is somehow disabled. See Whitmore v. Arkan sas, 495 U.S. 149, 162 (1990). A similar next friend doctrine al lows third parties to sue on behalf of minors and incompetent persons. See Fed. R. Civ. P. 17(c). An association can also have standing to sue on behalf of its members. United Food & Com mercial Workers Union Local 751 v. Brown Group, Inc., 517 U.S. No. 18 3076 11 544, 546 (1996). And in Hollingsworth v. Perry, the Supreme Court suggested that an agency relationship combined with authorization by the principal could establish representative standing. 570 U.S. at 713–14.3 An uninjured plainti suing on behalf of another is nor mally required to identify one of these existing doctrines— most of which have deep common law roots and all of which are limited in scope to ensure that the dispute is actually an Article III “case” or “controversy”—to establish representa tive standing. Plainti s do not have representative standing on any of these grounds. Their entire theory of the case as sumes that a regulation can su ce, but they provide no sup port for that position. We need not reach that broader asser tion, however, because even if in theory a regulation could confer representative standing on the mere basis of authori zation, plainti s would not prevail under this regulation. 3 This issue is distinct from that of third party standing. The third party standing doctrine applies only when a plaintiff has suffered an in jury in fact. The plaintiff must herself have Article III standing, and must meet an extra condition to invoke the rights of a non party in seeking re dress for that injury. See, e.g., Craig v. Boren, 429 U.S. 190, 194–96 (1976); see also 13A Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 3531.9.3 (3d ed. 2019). Cf. Lexmark International, Inc. v. Static Control Components, Inc., 572 U.S. 118, 127 & n.3 (2014) (reframing “pru dential standing” doctrine as constitutional or statutory but observing that “limitations on third party standing are harder to classify [than zone of interests analysis] …. [C]onsideration of that doctrine’s proper place in the standing firmament can await another day.”). The problem of third party standing is different from the one here. In this case, plaintiffs have not suffered an injury and cannot themselves establish Article III standing. In stead, they are suing on behalf of others. 12 No. 18 3076 C. Underlying Standing of the Residents The underlying standing of the residents—which plain ti s’ standing relies upon—is also disputed. Because plain ti s’ standing is derivative of the residents’ standing, they must show that the residents have su ered an injury or that one is imminent. A plainti may establish Article III standing by showing that harm is “certainly impending,” but it is not enough to allege “possible future injury.” Remijas v. Neiman Marcus Group, LLC, 794 F.3d 688, 692 (7th Cir. 2015), quoting Clapper v. Amnesty International USA, 568 U.S. 398, 409 (2013). Plainti s allege that the residents are at risk of being dis charged from the long term care facilities where they are re ceiving nursing services and medical care. But plainti s con ceded at oral argument that residents were not threatened with discharge and are presently receiving medical care. Dis charging residents because of nonpayment to their care giv ers would, in fact, violate federal law. See 42 C.F.R. § 483.15(c)(1)(E) (permitting discharge of a resident for non payment only where resident has not submitted paperwork for third party payment or where Medicaid denies the claim and the resident refuses to pay). Suing state o cials on the theory that one’s clients may or will soon violate federal law is not a promising theory. We are hesitant to resolve this case based on the residents’ standing because they have not, by all appearances, been in volved in the litigation. We have no reason to believe that their interests are being represented. Because the regulation does not give plainti s the right to sue on behalf of the residents, we need not reach this broader issue either. * * * No. 18 3076 13 None of this means, of course, that third parties may not bring claims on behalf of Medicaid beneficiaries. If a state does not comply with its Medicaid obligations and vulnerable populations do not receive timely notice of eligibility deter minations or do not receive services, they may be entitled to remedies in court. Given the severe medical conditions that many of these people face, it may be di cult for them to assert their own rights. But there are established processes for bring ing claims on behalf of others that—unlike the system read into the regulation by the consultants—contain safeguards and ensure that the interests of vulnerable individuals are represented. If a beneficiary lacks capacity, a guardian or next friend may sue on her behalf. These consultant plainti s, however, do not have standing. The judgment of the district court is AFFIRMED.
Primary Holding
Consultants who offer financial and business services to Illinois nursing homes and supportive living facilities lack standing to file suit on behalf of Medicaid beneficiaries who reside in those facilities, based on the state's failure to pay the facilities.

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