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Providence Pediatric Medical Daycare, Inc., et al v. Poonam Alaigh

June 28, 2011

PROVIDENCE PEDIATRIC MEDICAL DAYCARE, INC., ET AL., PLAINTIFFS,
v.
POONAM ALAIGH, INDIVIDUALLY AND: AS COMMISSIONER OF THE NEW JERSEY DEPARTMENT OF HEALTH AND: SENIOR SERVICES, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hillman, District Judge

OPINION

The present matter comes before the Court by way of a complaint filed by Plaintiffs, Providence Pediatric Medical Daycare, Incorporated, and G.V., on behalf of her minor child, N.M., M.N., on behalf of her minor child, Z.N., T.P., on behalf of her minor child, J.M., A.B., on behalf of her minor child, T.B., D.L., on behalf of her minor child, J.B., and H.S., on behalf of her minor child, C.T (collectively, "Plaintiffs").*fn1

Named as defendants are Poonam Alaigh, individually and as Commissioner of the New Jersey Department of Health and Senior Services, the New Jersey Department of Health and Senior Services, Jennifer Velez, individually and as Commissioner of the New Jersey Department of Human Services, the New Jersey Department of Human Services, John Guhl, individually and as Director of the Division of Medical Assistance and Health Services, and the Division of Medical Assistance and Health Services (collectively, "Defendants").

Plaintiffs allege that Defendants have violated Medicaid statutory law and the United States Constitution by promulgating and enforcing regulations that circumscribe services provided by Providence and received by Plaintiff-children. In response to Plaintiffs' allegations, Defendants have moved to dismiss the complaint.

For the following reasons, Defendants' Motion to Dismiss is denied.

I. JURISDICTION

This Court has jurisdiction over Plaintiffs' federal claims under 28 U.S.C. § 1331.

II. BACKGROUND*fn2

Overseen by the New Jersey Department of Health and Senior Services ("DHSS"), pediatric medical day care ("PMDC") is a program that provides medically necessary services to children who are six years old or younger and are technology-dependent or medically unstable. PMDC facilities, licensed by the DHSS, offer comprehensive programs and services to assist those children with their medical, developmental, nutritional, psychological, social, and educational needs. Should they choose to participate and comply with certain regulations, PMDC facilities can receive reimbursement from Medicaid for their services.

Medicaid is a program jointly administered by federal and state governments in which federal funding is allocated to assist participating states in providing medical assistance to certain low-income individuals. A mandatory category of medical assistance that participating states must provide in order to qualify for Medicaid are early and periodic screening, diagnostic and treatment ("EPSDT") services for children. See 42 U.S.C. § 1396d(a)(4)(B), (r). Pursuant to its Medicaid program, the State of New Jersey furnishes EPSDT services to all Medicaid-eligible children under the age of twenty-one. There are multiple sources or providers of EPSDT services in New Jersey, among them being PMDC facilities.

For a child to be treated in a PMDC facility, the DHSS first determines whether that child satisfies the clinical eligibility requirements for the PMDC program. In or around November 2009, new regulations were adopted to evaluate clinical eligibility for PMDC services. See N.J.A.C. 8:87 et seq. By implementing stricter requirements, the regulations narrow the number and types of children eligible for services in PMDC facilities and do not set forth any specific period of time by which requisite authorizations and assessments must be completed. In addition, new regulations also required that PMDC providers staff their facilities with more specialized personnel and provide certain services above and beyond what was previously required. The regulations went into effect on April 1, 2010.

Providence Pediatric Medical Daycare, Incorporated ("Providence") operates three facilities in the State of New Jersey that provide PMDC services to children under the age of six years who are technology-dependent or medically unstable. Other plaintiffs in this matter, represented by their mothers, are six children, all four years old or younger at the commencement of this case, who are Medicaid recipients with health problems that receive medical day care services at Providence.

In 2003, Providence expanded the size of its facility in Camden, New Jersey so that it could accommodate the growing demand for PMDC services for children. By virtue of its expansion, of which the DHSS knew and approved, Providence's Camden facility could provide medical day care for a total of 114 children, eighty-four more children than it previously served. On September 24, 2003, the DHSS rejected and returned Providence's expansion license application, denying Providence the ability to serve more children. In November 2003, based on assurances from the DHSS, Providence resubmitted its application but sought only to increase its slots for children by forty, instead of its original request for eighty-four more slots. That same month, the DHSS again rejected and returned Providence's application, citing as the reason for its denial a moratorium dated November 3, 2003, which precluded the acceptance of applications for new PMDC facilities or the expansion of existing PMDC facilities.*fn3

Similarly, in 2003, Providence purchased a building in Berlin, New Jersey to serve as another PMDC facility. Providence submitted to the DHSS an application for a license with forty-three slots for children. Despite its involvement and ongoing approvals with respect to the new facility, the DHSS rejected and returned Providence's application in November 2003, grounding its denial on the November 3, 2003 moratorium. Though it denied Providence's requests, the DHSS allowed other providers to open or expand facilities in contravention of the moratorium.

In or around 2003, the DHSS also began to selectively enforce a New Jersey Medicaid regulation that caps the maximum daily census in any PMDC facility to twenty-seven children. By virtue of the regulation, the DHSS permitted some PMDC facilities to exceed the twenty-seven-child limitation while forcing others, such as Providence, to comply with it. The DHSS' enforcement of the cap did not account for a PMDC facility's size and licensed capacity to serve more than twenty-seven children at a time. Given that Medicaid limitation, the DHSS refuses to pay for medical services provided by Providence to several of the Plaintiff-children on those days in which the daily census exceeds twenty-seven children.

Plaintiffs believe that the decisions of Defendants, including selective enforcement of the moratorium and twenty-seven-child cap and the issuance and implementation of stricter eligibility and pre-authorization rules, curtail the services available to Medicaid-eligible children in exchange for cost savings. Plaintiffs allege that Defendants' decisions are arbitrary and capricious, unconstitutional, and were made without proper consideration of the needs of children who are technology-dependent or medically unstable or of the responsibilities and obligations of EPSDT service providers. Because of the recent changes in New Jersey Medicaid regulations, Plaintiffs allege that children who currently receive necessary medical services from Providence will be deprived of those services.

In or around June 2010, Plaintiffs filed suit against Defendants, alleging violations of federal statutory rights under the Medicaid program and of the federal constitutional rights to equal protection and due process. In October 2010, Defendants moved to dismiss Plaintiffs' claims.

III. DISCUSSION

A. Standard for Motion to Dismiss

When considering a motion to dismiss a complaint for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6), a court must accept all well-pleaded allegations in the complaint as true and view them in the light most favorable to the plaintiff. Evancho v. Fisher, 423 F.3d 347, 350 (3d Cir. 2005). It is well settled that a pleading is sufficient if it contains "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2).

A district court, in weighing a motion to dismiss, asks "'not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claim.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 563 n.8 (2007) (quoting Scheuer v. Rhoades, 416 U.S. 232, 236 (1974)); see also Ashcroft v. Iqbal, 129 S. Ct. 1937, 1953 (2009) ("Our decision in Twombly expounded the pleading standard for 'all civil actions[.]'" (citation omitted)). Under the Twombly/Iqbal standard, the Third Circuit has instructed a two-part analysis. First, a claim's factual and legal elements should be separated; a "district court must accept all of the ...


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