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Ansley v. Banner Health Network - 3/12/2019

Arizona Court of Appeals Division One holds that injunctive and declaratory relief are generally available for a claim that federal law preempts the enforcement of a state-law created right.

Arizona’s Medicaid agency, AHCCCS, pays for the medical treatment of low-income patients.  Under federal law, hospitals that contract with AHCCCS to treat patients must generally accept the amounts paid by AHCCCS as “payment in full,” even if the hospital customarily charges a higher rate.  42 C.F.R. § 447.15.

Under Arizona statute, a hospital that treats a patient’s injury may, to ensure reimbursement, impose a lien on any tort recovery that the patient receives for the injury.  A.R.S. §§ 33-931(A), 36-2903.01(G)(4).  Relying on these statutes, some hospitals recorded liens on the tort recoveries of patients for whom AHCCCS had already paid, in an attempt to recover the balance between what AHCCCS paid and what the hospital customarily charged for the treatment.

A group of patients sought declaratory and injunctive relief against this practice, arguing that the federal regulation requiring hospitals to accept AHCCCS payments as “payment in full” preempts any state-law right of hospitals to seize a patient’s tort recovery beyond what AHCCCS already paid.  The Court of Appeals agreed in an opinion last year.

The hospitals moved for reconsideration, arguing that the patients could not seek equitable relief for their preemption claims in light of Armstrong v. Exceptional Child Center., Inc., 135 S. Ct. 1378 (2015).  The Court of Appeals rejected this argument in a new opinion, reasoning as follows.

Courts have power to grant equitable relief for a claim based on federal preemption, but that power is subject to express and implied statutory limitations.  A claim for equitable relief based on federal preemption is not cognizable if Congress has precluded private enforcement of the federal law at issue or otherwise has displaced the equitable relief that is traditionally available to enforce federal law.

In Armstrong, plaintiffs claimed that a state’s Medicaid plan conflicted with a provision of the federal Medicaid Act.  The Supreme Court held that plaintiffs could not seek equitable relief for this preemption claim because Congress intended to foreclose equitable relief with respect to the federal provision at issue.  There were two indicia of Congress’s intent.  First, the Medicaid Act already expressly provided a different remedy for failure to comply with its requirements.  Second, the specific Medicaid Act provision at issue had such broad language that enforcing it would be judicially unadministrable.

Here, the patients’ claim presents neither of these concerns.  Congress has not expressly provided a remedy for the hospitals’ failure to comply with the federal regulation at issue.  Nor is the federal regulation so broad that enforcing it would be judicially unadministrable.  Thus, equitable relief is available for the patients’ preemption claim.

Judge Johnsen delivered the opinion; Judges Cattani and Perkins joined.

Posted by: Josh Whitaker

Posted On: 4/1/2019