Columbia United Providers, Inc. v. Washington, Health Care Auth.

COLUMBIA UNITED PROVIDERS, INC., et al., Plaintiffs,

v.STATE OF WASHINGTON, HEALTH CARE AUTHORITY, Defendant.

CASE NO. C12-5174BHS

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT TACOMA

Dated: April 25, 2012

ORDER DENYING MOTION FOR PRELIMINARY INJUNCTION

This matter comes before the Court on Plaintiffs' motion for preliminary injunction (Dkt. 17). The Court has considered the pleadings filed in support of and in opposition to the motion and the remainder of the file and hereby denies the motion for the reasons stated herein.

As an initial matter, the Court notes that the findings of fact, conclusions of law, and discussion of issues below, are based on the record presently before the Court and solely for the purposes of deciding the instant motion for preliminary injunction.

I. FACTUAL BACKGROUND

This action arises out of a dispute between Plaintiffs, two managed care organizations, Columbia United Providers, Inc. ("CUP") and Community Health Plan of Washington ("CHPW"), and Defendant Washington State Health Care Authority ("HCA"). Though HCA has previously contracted with Plaintiffs to provide managed care services to Washington Medicaid, Disability Lifeline, Children's Health Insurance Program, and Basic Health Plan (collectively, "Medicaid and Basic Health") beneficiaries in several counties, their current contracts expire on June 30, 2012. Dkt. 17 at 1. In accordance with a directive from the legislature, HCA recently concluded a bid procurement that consolidates Medicaid managed care and Basic Health. The Requests for Proposal were issued on September 15, 2011, and bids were due by December 2, 2011. Following the bid process, HCA selected five managed care organizations ("MCOs") as the successful bidders. The contracts are to take effect on July 1, 2012. Id. at 3.

A. Parties

CUP is a Washington corporation that operates a community-based health plan. Dkt. 4 at 3. CUP is located in Vancouver, Washington, and employs eighty staff in private sector wage positions. Id. CUP has served Medicaid and Basic Health beneficiaries in Washington for eighteen years. Id. CUP currently serves over 88% of Clark County residents enrolled in various health programs including Basic Health. Id. CUP currently serves the third largest enrollment in the state's public health insuranceprograms, providing access to health care services in communities where it maintains provider networks and coordinates care. Id.

CHPW is a not-for-profit health care services contractor that is closely affiliated with nineteen community health centers in Washington. Id. CHPW operates as a health service contractor providing for managed care services throughout the state. Id. at 4. It is the sixth largest insurer in Washington and specializes in serving low income patients, including those enrolled in Healthy Options, CHIP, Basic Health, and Medicare managed care plans. Id.

HCA is an agency of the state of Washington and is responsible for administering the state's Medicaid plan pursuant to 42 U.S.C. § 1396a(a)(5), and administers the Basic Health Plan. Id.

B. Overview of Plaintiffs' Allegations

Plaintiffs assert that HCA procured the contractual agreements in violation of its own Request for Proposal ("RFP"), and that these contracts violate state and federal laws pertaining to Medicaid and the services provided to Medicaid and Basic Health beneficiaries. Dkt. 17 at 1-2. Plaintiffs contend that the way in which HCA awarded the contracts violated the RFP in that HCA ignored requirements intended to make the bidding process fair, ensure the adequacy of the provider networks of the selected bidders, and that the contracts violate federal and state regulations created by legislators to protect the beneficiaries who will depend on the services provided by the selected contractors. Id. at 4. HCA asserts that it did not award CUP any contracts because CUP's bid was incomplete and was substantially more expensive than the winning bids.Dkt. 25 at 3. HCA selected CHPW as the successful bidder for twenty-eight of the thirty-two counties for which it submitted bids. Dkt. 24 at 2.

C. The Recent Bid Procurement

HCA recently concluded a joint procurement that consolidates the purchasing of healthcare services for two health plans: Healthy Options and Basic Health. Dkt. 30 at 2; see generally, Dkt. 30-1. The RFP was issued on September 15, 2011, and the bids were due by December 2, 2011. Dkt. 31 at 11-12. HCA asserts that the expected benefits of the consolidation will be improved care, reduced costs, and expansion of managed care coverage. Dkt. 30 at 2.

HCA selected five organizations as the apparently successful bidders ("ASBs"). Dkt. 30 at 3; Dkt. 31 at 2-3. The RFP outlines a process by which HCA reviews bids and selects bidders, and HCA asserts that throughout the most recent bid selection process, it at all times abided by the RFP. Dkt. 30 at 2, 5. In its review process, HCA created evaluation teams to evaluate and score the "major sections of the bidders' proposals." Dkt. 24 at 8, Dkt. 20 at 5. There were seven separate teams with completely different members. Id. Each person reviewed the proposals independently before the team met as a group, at which point the group would discuss proposals and arrive at a consensus score. Dkt. 30 at 5. It is unclear exactly how each team finalized the proposals' scores, but HCA maintains that the bid responses were the only materials considered by the teams. Id. HCA identified seven major areas of emphasis for the bid review, and a different team evaluated each area: Quality Assurance and Performance, Access to Care and Provider Network, Care Management, Utilization Management Program andAuthorization of Services and Grievance Systems, Program Integrity, Integrated Care and Understanding the Changing Landscape of Managed Care, and Rates. Id. HCA claims that CHPW was not a successful bidder in four counties because its proposed rates were too high. Dkt. 25 at 3. CUP was not a successful bidder because (1) its proposed rates were too high and (2) it underperformed in Quality Assurance, Integrated Care Management, and Understanding the Changing Landscape of Managed Care. Id.

D. Rate Determination

Before beginning the bid procurement, HCA retained Milliman, an actuarial consulting firm that provides services to the healthcare industry, to determine rates to current Healthy Options contractors by geographical service area. Dkt. 26 at 2. Milliman determined that the rates paid to Clark County MCOs "would require a greater adjustment than the rates paid to such organizations in other service areas." Id. The selected bidders in Clark County submitted bids at the "low end of the rate ranges." Dkt. 17 at 54; Dkt. 24 at 11. HCA attributes the difference in rates to the level of reimbursement paid to providers within the networks of the MCOs. Dkt. 26 at 2. CUP's bid was at the high end of the Clark County rate range. Id.

E. Contracts Awarded

HCA sent draft contracts to the successful bidders on March 2, 2012, and the parties signed the contracts within the following eleven days. Dkt. 30 at 4-5. HCA is now awaiting federal approval of the contract terms. Dkt. 32 at 2-3. HCA included what it calls a "checklist" for the federal government wherein HCA explains how the contract satisfies federal Medicaid requirements. Id.; see Dkts. 32-1 & 32-2. In addition, HCA isconducting an ongoing network analysis which will conclude on May 16, 2012, on which date a final decision about network adequacy will be made. Dkt. 25 at 3.

II. PROCEDURAL HISTORY

On February 29, 2012, Plaintiffs filed a complaint in Clark County Superior Court alleging claims against HCA for violations of the Supremacy Clause of the United States Constitution and Washington law and seeking injunctive and declaratory relief. Dkt. 1-1 at 2-33. Included with the complaint was a motion for temporary restraining order ("TRO"). Dkt. 1-1 at 38-54. On the same day, HCA removed the action to this Court. Dkt. 1. On March 1, 2012, Plaintiffs filed a motion for TRO in this Court. Dkt. 4. On March 5, 2012, the Court held a hearing on the motion and denied the TRO. Dkt. 12. At the hearing, the Court set an accelerated briefing schedule for Plaintiffs' motion for preliminary injunction. Id.

On March 27, 2012, Plaintiffs filed their motion for preliminary injunction. Dkt. 17. On April 3, 2012, HCA responded to the motion (Dkt. 24) and on April 5, 2012, Plaintiffs replied (Dkt. 34). On April 9, 2012, the Court held a hearing on Plaintiffs' motion. Dkt. 42.

III. DISCUSSION

Plaintiffs seek a preliminary injunction to enjoin HCA from implementing contracts it entered into with five MCOs ("successful bidders"). HCA maintains that the injunction must be denied because Plaintiffs have failed to show a likelihood of success on, or even raise serious questions going to, the merits of their arguments regardingHCA's contracts with the successful bidders and the process that was used to award them.

A. Standard

The court may issue a preliminary injunction where a party establishes (1) a likelihood of success on the merits, that (2) it is likely to suffer irreparable harm in the absence of preliminary relief, that (3) the balance of hardships tips in its favor, and (4) that the public interest favors an injunction. Winter v. Natural Resources Defense Council, 555 U.S. 7, 20 (2008). A party can also satisfy the first and third elements of the test by raising serious questions going to the merits of its case and a balance of hardships that tips sharply in its favor. Alliance for the Wild Rockies v. Cotrell, 632 F.3d 1127, 1135, 632 F.3d at 1135 (9th Cir. 2011) (holding that the Ninth Circuit's "sliding scale" approach continues to be valid following the Winter decision).

B. Merits of the Case

1. Claims Brought as Unsuccessful Bidders

"Washington courts have given bidders a limited remedy to sue for injunctive relief before a contract is signed." McCandlish Elec., Inc. v. Will Const. Co., Inc., 107 Wn....