L.S. v. Delia

L.S., a minor child, by and through his father and next friend, Ron S.; K.C. a minor child, by and through his mother and next friend, Africa H.; ALLISON TAYLOR JOHNS; and D.C., a minor child, by his mother and next friend, Penny C.; Plaintiffs M.S., a minor child, through his parent and natural guardian, Rachelle S., Intervenor Plaintiff, v. ALBERT A. DELIA,¹ in his official capacity as Secretary of the Department of Health and Human Services; PAMELA SHIPMAN, in her official capacity as Area Director of Piedmont Behavioral Health Care Area Mental Health, Developmental Disabilities, and Substance Abuse Authority and PIEDMONT BEHAVIORAL HEALTHCARE AREA MENTAL HEALTH, DEVELOPMENTAL DISABILITIES AND SUBSTANCE ABUSE AUTHORITY doing business as PBH, Defendants.

NO. 5:11-CV-354-FL

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA WESTERN DIVISION

Dated: March 29, 2012

ORDER

This matter comes before the court on plaintiffs' motion for preliminary injunction (DE # 31) and first motion to certify class (DE # 34). Defendant Albert A. Delia ("defendant Delia") filed response in opposition and defendants Pamela Shipman ("defendant Shipman") and defendant PBH also filed response in opposition. Plaintiff filed separate replies to both responses. On March 7, 2012, plaintiffs were granted leave to file supplemental declarations. Defendants were also granted leave to supplement their filings accordingly. Plaintiffs filed a second reply. In this posture, the issues raised are ripe for ruling. For the following reasons the court grants plaintiffs' motions.

STATEMENT OF THE CASE

Plaintiffs filed complaint as putative class action on July 5, 2011 against defendants. Plaintiffs allege violation of due process protections with respect to alteration of Medicaid benefits and seek preliminary and permanent injunctions. On July 12, 2011, the court entered order denying plaintiffs' motion for temporary restraining order, which motion was lodged in the complaint. On August 24, 2011, plaintiffs filed the instant motion for preliminary injunction. On August 29, 2011, plaintiffs filed the instant motion to certify class.

On September 6, 2011, the court stayed the time for defendants to file responses to the motions for preliminary injunction and class certification pending ruling on plaintiffs' motion to disqualify counsel, filed August 23, 2011.

On October 20, 2011, plaintiff intervenor M.S. filed motion to intervene and complaint in intervention, which motion the court allowed on December 5, 2011, in order lodged on the docket at entry 67.

Plaintiffs filed second motion for temporary restraining order on December 20, 2011, which motion was denied on December 28, 2011. On January 6, 2012, the court held administrativetelephonic conference with the parties (excepting former counsel for defendants Shipman and PBH from Womble Carlyle). Briefing schedule for the instant motions was memorialized and deadlines were set, including date for oral argument.

Upon review of the briefs filed in support of the instant motions, however, the court entered order on March 7, 2012, dispensing with oral argument. In same order, the court granted plaintiffs' motions for leave to filed supplemental declarations in support of the instant motions, and allowed defendants seven days to supplement their own responses, which they did. Plaintiffs filed second reply. The court has considered all of the filings in its determination of the instant motions.

BACKGROUND

The named plaintiffs are Medicaid recipients, four minors and one adult, who have chronic and disabling conditions. Although plaintiffs' conditions are serious enough to qualify them for institutional placement, they can thrive in stable home environments with adequate support. The North Carolina Innovations Waiver ("Innovations Waiver") is a Home and Community Based Waiver, approved under 42 U.S.C. § 1396n of the Medicaid Act, that offers Medicaid services to individuals like plaintiffs with developmental disabilities who would otherwise qualify for services in an institutional facility. The program is called a waiver because the federal Medicaid agency has given North Carolina permission to ignore certain otherwise mandatory provisions of the Medicaid Act. All members of the putative class are consumers of services under the Innovations Waiver. The Innovations Waiver currently has approximately 675 total participants. Pls.' Mem. Supp. Mot. Prelim. Inj. 5.

The North Carolina Department of Health and Human Services ("NCDHHS") is the single state agency designated to administer or supervise the administration of the state's Medicaidprogram under Title XIX of the Social Security Act. 42 U.S.C. § 1396a(a)(5); N.C. Gen. Stat. § 108A-54. The NCDHHS's division of medical assistance ("DMA") is responsible for the day to day administration of the Medicaid program. Defendant Delia is the head of the NCDHHS.

Defendant PBH is a multi-county area mental health, developmental disabilities, and substance abuse authority. Defendant Delia contracts with defendant PBH to perform certain functions in operating the Innovations Waiver. Defendant PBH is a local management entity ("LME"), which is defined by statute as a local political subdivision of the states. See N.C. Gen. Stat. § 122C-116(a). Defendant PBH is the LME for Davison, Rowan, Cabarrus, Union, and Stanley counties.² Defendant PBH operates as a managed care organization ("MCO") under the Medicaid regulations, and defendant Pamela Shipman is its chief executive officer.

The DMA entered into a contract with defendant PBH to arrange for and manage the delivery of services and perform other waiver operational functions through its prepaid inpatient health plan ("PIHP") for Medicaid recipients in its area. Defendant PBH manages the PIHP through which all mental health, developmental disabilities and substance abuse services are authorized for Medicaid. Def. Delia's Resp. Opp'n Mot. Prelim. Inj. 4.

Under the Innovations Waiver, participants meet with a PBH employee, called a care coordinator, once every twelve (12) months to develop a service plan of care, which specifies the services requested to be authorized for the next twelve (12) month period. The plan is then submitted to a PBH employee in the Utilization Management section for approval or denial. Once approved, the participants twelve-month plan takes effect on the first day of the participant's month of birth. Services under the waiver are authorized by PBH for one year when the annual plan of careis approved, although mid-year modifications can be requested if a participant's needs change.

Of particular importance is the process defendant PBH has used and is using to impose reductions to certain participants' budgets. As part of the Innovations Waiver approved by the Centers for Medicare and Medicaid Service ("CMS"), there was a change in the method used by defendant PBH to assess the needs of program participants. The new program utilized a model called the support needs matrix ("SNM"). Under the SNM, employees of defendant PBH conducted evaluations using a "support intensity scale" ("SIS"). Defendants contend that the SIS is a valid way to assess a participant's support needs.³ The SNM establishes funding categories for participants. The categories are based on various factors, including where a participant lives, his or her age, his or her assessed support needs, and safety risk. Within the SNM, there are different groupings based on where a participant lives (at home or in an institution), which also factor into the base budget. The SNM groupings and categories into which a participant falls determine the specific dollar amount of that participant's base budget. A participant can also receive non-base budget services in a year. The combination of base budget and non-base budget services cannot exceed $135,000 per year. PBH procedure permits an individual to ask for the SIS assessment to be amended within ninety (90) days of the assessment.

In March 2011, defendant PBH issued undated form letters to plaintiffs and other participants, informing them that they had been assigned to one of twenty-eight (28) categories of need using the SNM system, a score based primarily on scores determined by the SIS assessment. The March 2011 letter informed that the assignment to a category would result in new, maximumdollar limits for the individual's services. For some participants, the letter informed that the new budget limit would be in effect beginning July 1, 2011. The letter instructed each participant to contact his or her PBH care coordinator to revise the already approved plan of care, in most cases before July 1, 2011, to reduce or modify services to make them fit within the new budget limit.

The March 2011 letter contained no information about the right to appeal defendant PBH's decision. Penny C. Decl. Exh. B; Holzlohner Decl. Ex A. Plaintiffs also contend that defendant PBH's care coordinators repeatedly informed plaintiffs and others that the SIS scores and resulting assigned SNM categories and new budgets could not be challenged or appealed. See, e.g., Penny C. Decl. ¶ 31, Ron S. Decl. ¶¶ 16, 31; Supp. Decl. of Rachelle S. ¶ 8. Defendants dispute this, contending that care coordinators informed participants of their options, including the option of seeking an intensive review. Decl. of Nicole Cote ¶¶ 10-13.

Plaintiffs contend that the summary mailed to participants did not include an explanation of the scoring system or an adequate explanation of the import of the score and what it meant for a participant's services. The March 2011 letter was accompanied by a booklet of general information. Pages 11 to 13 of the booklet include a description of a process by which a Innovations Waiver participant could request an "intensive review." Defendants describe intensive review as a process for participants who "believe that they have support needs which make them outliers as opposed to...