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Michael T. v. Crouch

United States District Court, S.D. West Virginia, Charleston Division

March 26, 2018

MICHAEL T., et al., Plaintiffs,
v.
BILL J. CROUCH, in his official capacity as Secretary of the WEST VIRGINIA DEPARTMENT OF HEALTH AND HUMAN RESOURCES, Defendant.

          MEMORANDUM OPINION AND ORDER

          THOMAS E. JOHNSTON, CHIEF JUDGE

         Pending before the Court is Defendant's Motion to Vacate or Modify Preliminary Injunction Order. (ECF No. 155.) For the reasons stated herein, the Court GRANTS IN PART the motion to the extent Defendant requests that the Court modify its previous memorandum opinion and order entered on September 13, 2016, to lift the injunction and allow DHHR to begin implementing the proposed service authorization system as to the named Plaintiffs.

         I. BACKGROUND [1]

         Plaintiffs in this case are recipients of West Virginia's Intellectual/Developmental Disability Home and Community Based Services waiver program (“I/DD Waiver Program”) and are challenging reductions in their benefits beginning in 2015. Within West Virginia's Medicaid plan, administered by the West Virginia Department of Health and Human Resources' (“DHHR”) Bureau for Medical Services (“BMS”), the “intermediate care level services for individuals with intellectual/developmental disabilities” program (“ICF/IDD Program”) is an included program from the federally recognized optional services. (ECF No. 14 at 36 ¶ 225.) The ICF/IDD Program provides for individuals with intellectual disabilities institutions that offer residential, health, and rehabilitative services. (Id. at 36-37 ¶ 226; ECF No. 54 at 9.) See also 42 U.S.C. § 1396d(d). In part because West Virginia has capped participation in the ICF/IDD Program at 509 individuals since 1989, (ECF No. 54 at 9), the state implements an alternative option for individuals otherwise eligible for the ICF/IDD Program to receive home and community based services instead. This alternative program-the I/DD Waiver Program-is the subject of the current litigation.

         The I/DD Waiver Program provides “an array of . . . services that an individual needs to avoid institutionalization.” 42 C.F.R. § 441.300. (See also ECF No. 54 at 10.) Many of the individuals enrolled in the program live with family members in their homes while others live in an “[i]ntensively [s]upported [s]etting, ” which involves one to four program members living together in a residential or group home. (See Id. at 11; ECF No. 115 at 76.) The I/DD Waiver Program currently provides open slots for 4, 534 eligible West Virginians and has a waiting list of over 1, 100 eligible individuals. (ECF No. 14 at 38-39 ¶¶ 238-239; see also ECF No. 155-2 at 2 ¶ 2.) BMS, as the program's administrator, contracts with APS Healthcare Inc. (“APS”)[2] to help administer the I/DD Waiver Program. (ECF No. 54 at 10-11.) BMS delegates various tasks to APS, including “monitoring the member's health and safety, ” (id. at 11), “[e]nsuring each [I/DD Waiver Program] participant's medical eligibility is initially established and reestablished on an annual basis, ” and conducting an “annual assessment of each program participant's abilities and needs, ” (ECF No. 28-3 at 7). Contracted local service provider agencies ultimately provide individual recipients with their waiver services. (ECF No. 14 at 41 ¶ 252.)

         At the time the Court issued the current injunction in this case, an I/DD Waiver Program recipient's annual service authorization began with a calculation of their individual “budget” by APS. (ECF No. 54 at 14.) APS would conduct an “annual assessment” for participants, which included, in part, an interview with program members, their legal representatives, their case managers, and other interested parties, (see ECF No. 38-3 at 73), and a compilation of data regarding each participant's “abilities, strengths, and support needs, ” (id. at 7; see also ECF No. 54 at 14-15). APS applied a proprietary algorithm to the assessment's results, producing an individual budget from a multi-variable statistical analysis. (ECF No. 54 at 15; see also ECF No. 14 at 43 ¶ 265.) Due to the proprietary nature of the algorithm, “the exact factors it consider[ed], the weight it accord[ed] to each factor, and its overall methodology in determining each member's budget [were] not publicly available information.” (ECF No. 122 at 5 (citing ECF No. 115 at 145- 50).) After a recipient's individual budget was determined, APS would send a letter to that member notifying him or her of the budget amount without explanation as to how that number was determined. (ECF No. 54 at 15; see, e.g., ECF No. 108, Exs. 3, 4, 9, 13, 14, 20.)

         Once notification of an individual's budget was received, the member's “interdisciplinary team” (“IDT”), consisting of the member, a representative from the provider agency, and possibly “the member's guardian(s) and health care professionals, ” met to create an “Individualized Program Plan” (“IPP”). (ECF No. 51-1 at 8 ¶ 19; ECF No. 54 at 15.) The IPP detailed “each type of service needed to meet that recipient's individually-assessed safety, health, and care needs.” (ECF No. 14 at 42 ¶ 257; see also ECF No. 54 at 15.) APS reviewed the completed IPP to ensure compliance with BMS policies, and if the costs of the requested services fell within the APS-calculated budget and complied with BMS policies, then “APS [would] approve service authorization requests consistent with the [IPP].” (ECF No. 54 at 16.)

         If an IPP determined that necessary services cost in excess of the APS-determined budget, however, then “the service coordinator submit[ted] requests for authorization of services to APS . . . .” (ECF No. 51-1 at 9 ¶ 21.) Before September 2014, “APS made independent determinations to grant or deny these requests for funds in excess of the budget and ‘routinely approved' such ‘service authorization requests.'” (ECF No. 122 at 6 (citing ECF No. 51-1 at 9- 10 ¶ 22; ECF No. 14 at 44 ¶ 272).) Once BMS discovered in September 2014 that the I/DD Waiver Program was exceeding its budget and that APS was “approving” IPPs “with service costs in excess of the budgets, ” (ECF No. 115 at 94-96; ECF No. 51-1 at 9 ¶ 22), BMS instructed APS to “cease unilaterally approving” IPPs that included service costs in excess of the APS-calculated budget. (See ECF No. 51-1 at 9 ¶ 22.) Thereafter, requests for funding in excess of the APS-calculated budget required approval by BMS through a “second[-]level negotiation.” (Id. ¶ 21.) This second-level negotiation involved BMS employees reviewing the recipient's file, attached materials, and an APS recommendation, as well as, if requested, meeting with the recipient and interested parties before deciding whether to grant or deny the funding request.[3] (ECF No. 115 at 88-89.)

         Upon denial of a request for funding in excess of the APS-calculated budget via the second-level negotiation, BMS sent the member a notice containing appeal rights. (ECF No. 54 at 16.) To exercise his or her right to appeal the second-level denial, the member could request a fair hearing before West Virginia's Board of Review. (ECF No. 115 at 91-92; see also ECF No. 54 at 16.) The BMS and I/DD Waiver Program member could present arguments at the fair hearing as well as any supporting documentation. (See ECF No. 115 at 92-94.) The Board of Review then issued its decision affirming or reversing the second-level determination by BMS. (Id. at 94.) If dissatisfied with that decision, the member retained the option of filing a final direct appeal to a state circuit court. (Id.)

         II. CURRENT INJUNCTION

          Before addressing the legal standard under which Defendant's motion must be analyzed, the Court first will reflect on the current injunction's purpose and the injustice that it was intended to prevent. This Court's memorandum opinion and order entered on September 13, 2016, granted Plaintiffs' request for a preliminary injunction and ordered Defendant “to reinstate the named Plaintiffs' individualized I/DD Waiver Program budgets to the amounts Plaintiffs received in 2014, but only for those Plaintiffs that received a reduction in their individualized budgets after 2014.” (ECF No. 122 at 32.) In that memorandum opinion's discussion, the Court found that each of the Winter factors weighed in favor of granting the preliminary injunction.[4] (See Id. at 14-32.) For the purposes of the first Winter factor related to whether Plaintiffs were likely to succeed on the merits, the Court focused on “Plaintiffs' claim under 42 U.S.C. § 1983 that Defendant violated Plaintiffs' procedural due process rights by employing the APS Algorithm when determining Plaintiffs' benefits.” (Id. at 14.) The Court found that Plaintiffs have a protected property interest in continuing to receive benefits from the I/DD Waiver Program and that “the procedures currently employed by Defendant present a serious risk of erroneous deprivations of Plaintiffs' interest in their benefits.” (See Id. at 17-20.)

         Specifically, the Court emphasized the most significant due process concerns related to the APS Algorithm in the following passage:

The Court concludes that the APS Algorithm used by Defendant when determining Plaintiffs' individualized budgets does not employ ascertainable standards. The record provides no information as to what factors are incorporated into the APS Algorithm, how each factor is weighted, or the overarching methodology APS utilizes in the APS Algorithm to create each I/DD Waiver Program member's individualized budget. In short, there is simply no way to determine how the APS Algorithm generates each waiver recipient's individualized budget. Further, absent some indication of the basis for each Plaintiff['s] benefits determination, Plaintiffs cannot meaningfully challenge this determination. Indeed, in the letters APS sends to recipients notifying them of their individualized budget, APS provides only the budget amounts and does not include any individualized rationale for the recipient's budget allocation. Thus, Plaintiffs have a high likelihood of success in demonstrating that these budget determinations by APS present a serious risk of resulting in erroneous determinations and deprivations of Plaintiffs' property interest in their benefits.

(Id. at 20.) Beyond the secrecy surrounding the APS Algorithm and its inputs, the Court also addressed concerns with the way BMS handled a recipient's challenge to his or her budget determination. (See Id. at 20-24 (“This evidence indicates that-regardless of whether Defendant has a stated policy to increase benefits at the second-level review stage to keep individuals safe and healthy in the community-Defendant nonetheless eschews this policy in favor of affirming the recipient's budget, as determined by the APS algorithm.”).) Ultimately, the Court found that “the lack of transparency surrounding the proprietary APS Algorithm renders Defendant's individualized budget determinations potentially-if not effectively-standardless.” (Id. at 23-24.)

         After finding that the procedure used by Defendant presented substantial due process concerns, the Court went on to find little evidence “that Defendant would face any form of undue burden by employing ascertainable standards when determining each waiver recipient's budget” and that Defendant did not have a legitimate interest in further use of the APS Algorithm. (Id. at 24.) As to the remaining Winter factors, the Court found that (1) Plaintiffs were likely to suffer irreparable harm in the absence of an injunction, (2) “the harm to Plaintiffs' health and safety outweigh[ed] West Virginia's financial concerns, ” and (3) “the public interest in safeguarding Plaintiff[s'] access to healthcare and needed services outweigh[ed] West Virginia's fiscal considerations” and federalism interests. (See Id. 25-32.) Thus, Plaintiffs adequately demonstrated a need for the preliminary injunction, and the Court ordered the extraordinary equitable relief. (Id. at 31-32.)

         Defendant filed the current motion on May 12, 2017, based on a change in circumstances after developing a new service authorization system. (ECF No. 155.) Plaintiffs responded on May 31, 2017, pursuant to a Court order extending the deadline to file a response, (ECF No. 163), and Defendant filed his reply brief on June 7, 2017, (ECF No. 167). As such, the motion is fully briefed and ripe for adjudication.

         III. LEGAL STANDARD

         The prospective features of an injunction entered by a district court may be modified under Federal Rule of Civil Procedure 60(b).[5] See, e.g., Rufo v. Inmates of Suffolk Cty. Jail, 502 U.S. 367, 380-93 (1992); see also Dombrowski v. Pfister, 380 U.S. 479, 492 (1965) (citations omitted) (“[T]he settled rule of our cases is that district courts retain power to modify injunctions in light of changed circumstances.”); Thompson v. U.S. Dep't of Hous. & Urban Dev., 404 F.3d 821, 825- 26, 830 (4th Cir. 2005). Pursuant to Rule 60(b)(5), which encompasses courts' “inherent authority to modify a consent decree or other injunction, ”[6] see Thompson, 404 F.3d at 826, 830, a court may find that the injunction's purpose and prospective application may no longer be equitable given a “significant change in circumstances, ” whether those be factual or legal changes. Rufo, 502 U.S. at 380, 383 (noting that this standard is “less stringent” and “more flexible” than the Court's previous iterations of the rule for modifying injunctions). The Fourth Circuit has long held that “an injunctive order may be modified or dissolved in the discretion of the court when conditions have so changed that it is no longer needed or as to render it inequitable.” Tobin v. Alma Mills, 192 F.2d 133, 136 (4th Cir. 1951) (citations omitted); see also Alexander v. Britt, 89 F.3d 194, 197 (4th Cir. 1996) (“[A] district court's task is to determine whether it remains equitable for the judgment at issue to apply prospectively and, if not, to relieve the parties of some or all of the burdens of that judgment on ‘such terms as are just.'”). “A court errs when it refuses to modify an injunction or consent decree in light of such changes.” Agostini v. Felton, 521 U.S. 203, 215 (1997) (citation omitted); see also Nelson v. Collins, 700 F.2d 145, 146-47 (4th Cir. 1983) (citations omitted) (“Because the district court substantially modified the original injunction without finding that any change had occurred, we must vacate its order . . . . If the state fails to prove such changes, the original injunction may not be disturbed.”).

         Determining a change in circumstances necessitating relief from an existing injunction involves a flexible test, and the party seeking relief bears the burden of showing such a change. See Horne v. Flores, 557 U.S. 433, 450 (2009). District courts consider several factors when deciding whether to modify or dissolve an injunction, including the following:

(1) the circumstances leading to entry of the injunction and the nature of the conduct sought to be prevented; (2) the length of time since entry of the injunction; (3) whether the party subject to its terms has complied or attempted to comply in good faith with the injunction; (4) the likelihood that the conduct or conditions sought to be prevented will recur absent the injunction; (5) whether the moving party can demonstrate a significant, unforeseen change in the facts or law and whether such changed circumstances have made compliance substantially more onerous or have made the decree unworkable; and (6) whether the objective of the decree has been achieved and whether continued enforcement would be detrimental to the public interest.

Crutchfield v. U.S. Army Corps. of Eng'rs, 175 F.Supp.2d 835, 844 (E.D. Va. 2001) (citing Alexander, 89 F.3d at 197; Bldg. & Constr. Trades Council of Phila. & Vicinity v. NLRB, 64 F.3d 880, 888 (3d Cir. 1995); 42 Am. Jur. 2d § 312 (Injunctions); 12 James Wm. Moore et al., Moore's Federal Practice § 60.47[2][c] (3d ed. 1999)). The consideration of public interest may be heightened in cases of public institutional reform. See Rufo, 502 U.S. at 392; see also Horne, 557 U.S. at 448 (“Such litigation commonly involves areas of core state responsibility . . . . Federalism concerns are heightened when, as in these cases, a federal court decree has the effect of dictating state or local budget priorities.”). While some courts have emphasized the importance of judgment finality, most agree that this is more important in private litigation than institutional reform cases. See 12 James Wm. Moore et al., Moore's Federal Practice § 60.47[2][c] (3d ed. 2017) (collecting cases); see also Rufo, 502 U.S. at 381 (noting that “the public interest is a particularly significant reason for applying a flexible modification standard in institutional reform litigation because such decrees reach beyond the parties involved directly in the suit and impact on the public's right to the sound and efficient operation of its institutions”).

         The factors considered by a district court may vary depending on whether the relief sought is a complete dissolution of the injunction or only a modification of the injunction. See 12 James Wm. Moore et al., Moore's Federal Practice § 60.47[2][c] (3d ed. 2017). For example, if a party is seeking modification of an injunction, relief may be justified on a wide variety of circumstances and should be “tailored to resolve the problems created by the change in circumstances.” Rufo, 502 U.S. at 391. Otherwise, if a party is seeking to set aside an injunction, then it must show that the decree has served its purpose and that there is no longer any need for the injunction. See Bd. of Educ. v. Dowell, 498 U.S. 237, 247 (1991) (noting that a finding that the school district “was being operated in compliance with the commands of the Equal Protection Clause . . . and that it was unlikely that the school board would return to its former ways” meant that the litigation's purposes “had been fully achieved”). Notably, simple compliance with an injunction's terms, even for an extended period, is not alone sufficient to justify the injunction's termination. See SEC v. Coldicutt, 258 F.3d 939, 941-45 (9th Cir. 2001) (finding that nine years of full compliance with the injunction coupled with evidence that the defendant's trading licenses expired and that she had left the securities field did not amount to a change in circumstances requiring relief from the district court's injunction).

         In addition to the standard set forth in subsection (5) of Rule 60(b), subsection (6) provides that the Court may grant relief for “any other reason that justifies relief.” This catchall provision “may be invoked in only ‘extraordinary circumstances' when the reason for relief from judgment does not fall within the list of enumerated reasons given in Rule 60(b)(1)-(5).” Aikens v. Ingram, 652 F.3d 496, 500 (4th Cir. 2011) (citing Liljeberg v. Health Servs. Acquisition Corp., 486 U.S. 847, 863 n.11 (1988)). “[I]t provides the court with a grand reservoir of equitable power to do justice in a particular case and vests power in courts adequate to enable them to vacate judgments whenever such action is appropriate to accomplish justice where relief might not be available under any other clause in 60(b).” Compton v. Alton S.S. Co., Inc., 608 F.2d 96, 106-07 (4th Cir. 1979).

         Pursuant to this standard, the question before the Court becomes whether the injunction entered on September 13, 2016, has outlasted its efficacy and purpose. In other words, the Court must determine whether DHHR's proposed authorization system, which the agency is prepared to begin implementing, removes the necessity for the previously ordered immediate and equitable relief.

         IV. DISCUSSION

         A. Defendant's New Proposal

         Defendant has notified the Court and carefully explained in Exhibit One attached to the current motion that DHHR developed a “new service authorization system” set for implementation that it believes satisfies the Court's concerns expressed in the previous memorandum opinion and order granting the preliminary injunction. (See ECF No. 155-1; ECF No. 156 at 6-12.) The changes to the service authorization system include replacement of the proprietary algorithm with matrices employing a number of clearly identified variables based on a combination of a member's living situation and answers to specific questions during the member's annual assessment. (See ECF No. 156 at 7.) In addition to the development of this matrix model, Defendant avers that individual members will be able to review and check the accuracy of answers used in calculating where they fall within the “budget matrix.” (See Id. at 8.) Further, DHHR has updated its Budget Letter that informs members of an “individualized rationale for the recipient's budget allocation.” (Id.) If the member believes there is a mistake in how the budget matrix was applied, then he or she may challenge the calculation first “by bringing the error to DHHR's attention, ” and further “by requesting a Medicaid Fair Hearing.” (Id. at 9.) Moreover, Defendant provides that DHHR has created “a new Exceptions Process designed to evaluate and accommodate requests from individuals who believe they require services beyond what can be purchased within the budget.” (Id.) Lastly, Defendant states that “DHHR has revised and will further clarify its policies to make clear that services in excess of the budget can be authorized when necessary to avoid a heightened risk of institutionalization.” (Id. at 11 (citing ECF No. 155-1 at 10-11).)

         Defendant states that the newly developed service authorization process, which he insists is transparent, clear, and accurate, is based on an annual assessment conducted for each I/DD Waiver Program member. (See ECF No. 155-1 at 2-3.) Kepro, formerly known as APS, will meet with a member's IDT to complete an Inventory for Client and Agency Planning (“ICAP”) assessment related to the member's “health, functionality, and behavior.” (Id. at 3.) That meeting will also involve the completion of an Adaptive Behavior Assessment System II (“ABAS II”) form and a “[s]tructured [i]nterview” ...


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