United States District Court, D. New Hampshire
Landya McCafferty United States District Judge.
Mary Hitchcock Memorial Hospital d/b/a Dartmouth-Hitchcock (“D-H”) brings suit against the Vermont Agency of Human Services, the United States Department of Health and Human Services (“HHS”), and the Centers for Medicare and Medicaid Services (“CMS”), challenging the rate of reimbursement to D-H for Medicaid covered services provided to Vermont patients and the decision not to make other Medicaid payments to D-H. The Vermont Agency of Human Services (“Vermont”) moves to dismiss D-H’s claims and moves for judicial notice of documents filed in support of the motion. HHS and CMS, the federal defendants, also move to dismiss the claims against them. D-H objects to the motion for judicial notice and both motions to dismiss.
I. Motion for Judicial Notice
Vermont filed a motion asking the court to take judicial notice, pursuant to Federal Rule of Evidence 201, of twenty-seven exhibits it relied on to support its motion to dismiss. In support, Vermont incorporates by reference a footnote in its memorandum in support of its motion to dismiss that addresses when extrinsic materials may be considered for purposes of deciding a motion to dismiss. D-H objects to the motion for judicial notice on the grounds that Vermont has not made the showing necessary under Rule 201 and asserts that D-H cannot adequately respond to the request. Vermont then filed a reply, long after the deadline, responding to the deficiencies in its motion with a general reference to its memorandum in support of the motion to dismiss.
Rule 201 permits the court to take judicial notice of an adjudicative fact if the fact “is generally known within the trial court’s territorial jurisdiction; or  can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b). If a party provides the court with necessary information, the court must take judicial notice of the asserted fact. Fed. R. Evid. 201(c)(2).
In its motion, Vermont does not ask for judicial notice of any adjudicative fact. Instead, Vermont appears to seek judicial notice that the twenty-seven documents it appended to the motion are official public records. Anticipating a positive response, Vermont relied on the documents in support of its motion to dismiss.
“On a motion to dismiss, a court ordinarily may only consider facts alleged in the complaint and exhibits attached thereto, or else convert the motion into one for summary judgment.” Freeman v. Town of Hudson, 714 F.3d 29, 35-36 (1st Cir. 2013) (internal citation omitted); see also Fed.R.Civ.P. 12(d). A narrow exception to that rule exists for “documents the authenticity of which are not disputed by the parties; official public records; documents central to plaintiffs’ claim; and documents sufficiently referred to in the complaint.” Freeman, 714 F.3d at 36 (alteration and internal quotation marks omitted). Official public records must satisfy the requirements of Rule 201 to be considered for purposes of a motion to dismiss. Id.
Vermont does not explain in its motion how the twenty-seven documents satisfy the requirements of Rule 201 or how they qualify as official public records. In its reply, Vermont suggests that D-H and the court review its memorandum in support of the motion to dismiss to glean the information required by Rule 201. As such, Vermont has not properly supported its motion to show that the documents are official public records, and the court declines to undertake that analysis based on Vermont’s general reference to the motion to dismiss memorandum. The motion is denied.
II. Motions to Dismiss
D-H brings claims under 42 U.S.C. § 1983 that Vermont is violating both the dormant Commerce Clause and the Equal Protection Clause by imposing, through amendments to the Vermont Medicaid Plan, a reimbursement and payment scheme that favors in-state hospitals and disadvantages out-of-state hospitals.D-H brings claims against the federal defendants that the amendments must be set aside under the Administrative Procedures Act (“APA”) 5 U.S.C. § 706(2)(A) and (B), because the federal defendants allowed Vermont to violate the dormant Commerce Clause, the Equal Protection Clause, and 42 C.F.R. § 431.52(b). Vermont moves to dismiss the claims against it, and the federal defendants move to dismiss the claims against them.
A. Standard of Review
In considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the court assumes the truth of the properly pleaded facts and takes all reasonable inferences from the facts that support the plaintiff’s claims. Mulero-Carrillo v. Roman-Hernandez, 790 F.3d 99, 104 (1st Cir. 2015). Conclusory statements in the complaint that merely provide the elements of a claim or a legal standard are not credited for purposes of a motion under Rule 12(b)(6). Lemelson v. U.S. Bank Nat’l Ass’n, 721 F.3d 18, 21 (1st Cir. 2013). Based on the properly pleaded facts, the court determines whether the plaintiff has stated “a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
In accord with the standard of review, the background information is summarized from the complaint, with a brief preliminary explanation of the Medicaid program.
1. Medicaid Program
“Congress created the Medicaid program in 1965 by adding Title XIX to the Social Security Act.” Pharm. Research & Mfrs. of Am. v. Walsh, 538 U.S. 644, 650 (2003). The Medicaid Act establishes a cooperative federal and state program to provide payment for medical services to the poor, elderly, and disabled. 42 U.S.C. § 1396, et. seq. A state that opts into the Medicaid program is required to submit a Medicaid Plan for review and approval. Wilder v. Virgina Hosp. Ass’n, 496 U.S. 498, 502 (1990).
Congress delegated the process of Medicaid Plan approval to the Secretary of HHS. 42 U.S.C. § 1396a(b). CMS administers the provisions of the Medicaid Act on behalf of HHS, including reviewing Medicaid Plans. Mayhew v. Burwell, 772 F.3d 80, 82 (1st Cir. 2014). A Plan must include, among other things, “‘a scheme for reimbursing health care providers for the medical services provided to needy individuals.’” New Hampshire Hosp. Ass’n v. Burwell, No. 15-cv-460, 2016 WL 1048023, *1 (D.N.H. Mar. 11, 2016) (quoting Wilder, 496 U.S. at 502). A state may later change the Plan by submitting an amendment to CMS for approval. Mayhew, 772 F.3d at 82.
2. Factual Background
D-H is located in Lebanon, New Hampshire, less than ten miles from the Vermont border. Because of its location, D-H provides medical services to Vermont residents, including Vermont Medicaid patients. D-H participates in Vermont’s Medicaid program and is the second largest volume provider of services to Vermont Medicaid patients, with the University of Vermont Medical Center being first.
D-H operates an academic medical center, a children’s hospital, and a cancer center. D-H includes a Level I Trauma Center, serves as a tertiary care provider, and qualifies as a “sole community hospital.” D-H provides the same or similar levels of care and services to Vermont Medicaid and uninsured patients as are provided by Vermont hospitals, including the University of Vermont Medical Center.
Through its Department of Vermont Health Access (“DVHA”), Vermont reimburses D-H for hospital services provided to Vermont Medicaid patients. Since November of 2013, DVHA has reimbursed the University of Vermont Medical Center for inpatient hospital services at the base rate of $7, 611.45. During the same period, DVHA has reimbursed D-H at the base rate of $5, 224.80. The low base rate paid by DVHA for inpatient services has caused D-H a yearly shortfall of approximately $7, 000, 000.00. Outpatient treatment rates for out-of-state hospitals are also lower than the rates for Vermont hospitals.
Vermont’s Medicaid Plan precludes certain other payments to out-of-state hospitals. While DVHA makes Disproportionate Share Hospital (“DSH”) payments to Vermont hospitals, it does not make those payments to D-H. In addition, DVHA makes teaching hospital payments to the University of Vermont Medical Center but does not make those payments to D-H, although D-H is also a teaching hospital.
CMS has approved the Vermont Medicaid Plan and amendments that provide lower reimbursement rates and preclude certain other payments to out-of-state hospitals.
D-H’s claims against Vermont are brought under § 1983 and allege that the amendments to Vermont’s Medicaid Plan that impose the reimbursement and payment scheme violate the dormant Commerce Clause and the Equal Protection Clause. D-H’s claims against the federal defendants, HHS and CMS, are brought under the APA and seek to set aside the approvals of the amendments that impose the reimbursement and payment scheme. D-H alleges that through approving the amendments, the federal defendants have violated 5 U.S.C. § 706(2)(A) and (B) by allowing Vermont to violate a Medicaid implementing regulation, 42 C.F.R. § 431.52(b), the dormant Commerce Clause, and the Equal Protection Clause.
The defendants acknowledge that Vermont’s reimbursement and payment scheme pays less to out-of-state hospitals, including D-H, than is paid to Vermont hospitals. Vermont moves to dismiss D-H’s claims on the grounds that, although discriminatory, the reimbursement and payment scheme does not violate the dormant Commerce Clause or the Equal Protection Clause. The federal defendants move to dismiss, arguing that their approval of the amendments to Vermont’s Plan, which impose the discriminatory scheme, did not allow Vermont to violate § 431.52(b), the dormant Commerce Clause, or the Equal Protection Clause.
The defendants’ motions to dismiss both address D-H’s claims that Vermont’s reimbursement and payment scheme violates the dormant Commerce Clause and the Equal Protection Clause. To avoid unnecessary repetition, those shared issues are addressed together. The federal defendants also raise additional grounds in support of their motion, which are addressed separately.
1. Dormant Commerce Clause
The Constitution’s Commerce Clause gives Congress the power to regulate commerce among the states. U.S. Const. art. I, § 8, cl. 3. The Commerce Clause also includes “a further, negative command, known as the dormant Commerce Clause.” Comptroller of Treasury of Md. v. Wynne, 135 S.Ct. 1787, 1794 (2015). “[T]he dormant Commerce Clause precludes States from discriminating between transactions on the basis of some interstate element.” Id. (alteration and internal quotation marks omitted). “The Dormant Commerce Clause does not, however, apply to state or local regulations directly authorized by Congress.” United Egg Producers v. Dep’t of Agric. of P.R., 77 F.3d 567, 570 (1st Cir. 1996). “Thus, state or local jurisdictions operating under ‘Congressional consent’ are free to enact laws burdening interstate commerce.” Id.
The Medicaid Act does not expressly allow states to adopt reimbursement and payment schemes that are less favorable to out-of-state providers of Medicaid services. Vermont contends, nevertheless, that Congress has consented to its Medicaid hospital reimbursement and payment scheme by granting states flexibility in developing reimbursement and payment rates and through CMS’s approval of Vermont’s Plan and amendments. The federal defendants also contend that the approval process shows Congressional consent to Vermont’s scheme. D-H argues that neither the legislative history Vermont cites nor the approval process demonstrates the Congressional consent that is necessary to avoid the dormant Commerce Clause.
Although states may enact laws that burden interstate commerce and that would otherwise be barred by the dormant Commerce Clause when Congress consents to interstate regulation by the state, the standard for showing Congressional consent is high. United Egg, 77 F.3d at 570. To avoid the dormant Commerce Clause, a state must show that Congress “expressly stated” its consent to the contested law or made ...