Medicaid lawsuit

IN THE IOWA DISTRICT COURT IN AND FOR POLK COUNTY

Iowa Hospital Association; Kirk Norris, Iowa Hospital Association President, in his capacity as a member of the Hospital Health Care Access Trust Fund Board;CHI Health-Mercy Council Bluffs;Covenant Medical Center, Inc.; Fort Madison Community Hospital; Great River Medical Center; Mary Greeley Medical Center; Mercy Medical Center-Cedar Rapids; Mercy Medical Center-Clinton; Methodist Jennie Edmundson; Sartori Memorial Hospital, Inc.; Spencer Hospital;and St. Anthony Regional Hospital,

Plaintiffs,

v.

Charles Palmer, Director, Iowa Department of Human Services; Iowa Department of Human Services, a state agency,

Defendants.

LAW NO.

VERIFIED PETITION FOR DECLARATORY JUDGMENT,

INJUNCTIVE RELIEF, AND REQUEST FOR EXPEDITED HEARING

I. INTRODUCTION

COME NOW Plaintiffs and for their Complaint for Declaratory Judgment state

and allege that the Defendants in their implementation of the Iowa High Quality Health

Care Initiative ("IHQHCI"), which is also referred to as Medicaid Managed Care, have

entered into illegal contracts with four managed care organizations that violate the plain

language of Iowa Code Chapter 249M and invalidate existing programs and contracts

with Iowa Hospital Association ("IHA") member hospitals who reasonably relied on the

promises of the Iowa Department of Human Services ("DHS") to their detriment. For

E-FILED 2015 NOV 06 2:56 PM POLK - CLERK OF DISTRICT COURT

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their Complaint for Declaratory Judgment and Injunctive Relief, Plaintiffs state and

allege in full detail as follows:

II. THE PARTIES

1. The Iowa Hospital Association ("IHA") is a nonprofit organization

comprised of and representing Iowa hospitals and supporting them in achieving their

missions and goals.

2. Kirk Norris is the President of IHA and pursuant to Iowa Code §

249M.4(9)(4), a member of the Hospital Health Care Access Trust Fund Board charged

with oversight over all monies collected pursuant to Provider Assessment.

3. CHI Health-Mercy Council Bluffs is a hospital in Council Bluffs, Iowa and a

participant in Provider Assessment.

4. Covenant Medical Center is a hospital in Waterloo, Iowa and a participant

in Provider Assessment.

5. Fort Madison Community Hospital is a hospital in Fort Madison, Iowa and

a participant in Provider Assessment.

6. Great River Medical Center is a hospital in West Burlington, Iowa and a


7. Mary Greeley Medical Center is a hospital in Ames, Iowa and a participant

in Provider Assessment.


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8. Mercy Medical Center-Cedar Rapids is a hospital in Cedar Rapids, Iowa

and a participant in Provider Assessment.

9. Mercy Medical Center-Clinton is a hospital in Clinton, Iowa and a


10. Methodist Jennie Edmundson is a hospital in Council Bluffs, Iowa and a


11. Sartori Memorial Hospital is a hospital in Cedar Falls, Iowa and a


12. Spencer Hospital is a hospital in Spencer, Iowa and a participant in

Provider Assessment.

13. St. Anthony Regional Hospital is a hospital in Carroll, Iowa and a


14. Charles Palmer is the Director of the Iowa Department of Human

Services.

15. The Iowa Department of Human Services ("DHS") is the state agency with

statutory oversight over the Iowa Medicaid Enterprise ("IME").

III. PROCEDURAL BACKGROUND

16. On September 18, 2015, IHA, CHI Health-Mercy Council Bluffs; Covenant

Medical Center, Inc.; Fort Madison Community Hospital; Great River Medical Center;

Mary Greeley Medical Center; Mercy Medical Center-Cedar Rapids; Mercy Medical


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Center-Clinton; Methodist Jennie Edmundson; Sartori Memorial Hospital, Inc.; Spencer

Hospital; and St. Anthony Regional Hospital filed a Petition for Declaratory Order with

the Iowa Department of Human Services, a true and correct copy of which is attached

hereto as Exhibit A and incorporated herein by this reference.

17. On October 16, 2015, Palmer, in his capacity as the Director of DHS,

issued a ruling on the Petition for Declaratory Order in which he refused to issue any

declaratory order. The October 16, 2015, ruling implicitly denied the request for an

order staying the implementation of IHQHCI pending the issuance of a declaratory

order.

18. Pursuant to Iowa Code § 17A.19, the agency has "decline[d] to issue . . . a

declaratory order after receipt of a petition therefor" and accordingly "any administrative

remedy available under section 17A.9 shall be deemed inadequate or exhausted."

19. Plaintiffs have exhausted all available administrative remedies and further,

no existing administrative remedy is adequate to remedy the violations of law set forth

above and contemplated by Defendants.

20. DHS has failed to convene the Hospital Health Care Access Board, which

provides oversight for the Hospital Provider Assessment trust fund, even despite

specific request that it comply with law and exercise its authority to do so.

21. Any possible effort at further administrative review of the issues set forth in

this petition would be futile. No further review by DHS could provide any remedy to

Plaintiffs, as DHS and Director Palmer have specifically notified Plaintiffs, repeatedly,

that despite their knowledge of the legal requirements set forth in Chapter 249M,


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Defendants intend to violate the law through their planned diversion of trust fund monies

to the MCOs and other plans to proceed with the illegal acts set forth in this Petition.

IV. FACTUAL AND LEGAL BACKGROUND

A. Iowa’s Medicaid Program.

22. The Medicaid program is a joint federal and state program to provide

health care services to qualifying individuals.

23. States are not required to participate in Medicaid, but if they choose to do

so, they must comply with federal statutes and regulations governing the program or

receive approvals for waivers of the requirements from the Secretary of the United

States Department of Health and Human Services (HHS) and the Centers for Medicare

and Medicaid Services (CMS).

24. The State of Iowa indicated its intention to participate in the joint state and

federal Medicaid program when it filed a State Plan Amendment with HHS.

25. The Medicaid program is funded through contributions from both the state

and federal governments. The federal government's share of a state's Medicaid budget

is called the federal medical assistance percentage (FMAP).

B. Iowa's History of Efficient and Innovative Administration of Medicaid.

26. The State of Iowa has worked to ensure the Medicaid program is

administratively efficient with coordinated care by IHA members and other health care

providers for Medicaid beneficiaries to improve outcomes.


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27. Iowa’s Medicaid program is extremely efficient, which is evident through

its low administrative costs, which are only 4 percent of the overall Medicaid budget.

Iowa historically and currently pays out 96 percent of the Medicaid budget on actual

necessary medical expenditures.

28. Providers, including the IHA member hospitals, have also achieved

efficiencies. For example, the Primary Care Health Home and Integrated Health Homes

programs are Medicaid programs that began in July 2012 with the intention of meeting

the needs of Medicaid Members. The goal was to target members with chronic mental

and physical conditions, engage them in their health, coordinate their care and show

improvement in the health of these population.

29. Providers, including IHA member hospitals, who are part of the Primary

Care Health Homes and Integrated Health Homes programs entered into contracts with

DHS and were awarded care coordination payments and quality incentive bonuses

based on the number of Medicaid beneficiaries assigned to each health home and the

outcomes achieved.

30. The University of Iowa Public Policy Center released a report in March of

2015 showing the Primary Care Health Homes program had generated $11 million in

Medicaid savings in its first 18 months.

31. As of July 2015, 61 health home entities were operational spanning across

36 Iowa counties with 101 locations and serving a total of nearly 7,000 Medicaid

beneficiaries.


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32. DHS and IME have also been awarded two State Innovation Model

("SIM") grants from CMS. The first grant was for developing a plan for achieving cost

efficiencies and better coordinated care across Iowa. The second SIM grant was

awarded in December 2014 for implementation of the work plan developed under the

first grant.

33. The SIM process included gathering feedback from stakeholders from

2013 through 2014 from across the health care spectrum to ensure issues were

addressed and implementation could be achieved for the entire Medicaid population’s

transition to the accountable care organization ("ACO") model.

34. There was significant agreement among IHA members and others that the

direction in which the SIM was moving would be appropriate and beneficial to Iowa’s

Medicaid beneficiaries.

35. In January 2014, pursuant to legislation approved by the 2013 Iowa

Legislature and signed by Governor Terry Branstad, the Iowa Health and Wellness Plan

was created to expand Medicaid to cover additional eligible individuals as allowed in the

Affordable Care Act.

36. The State of Iowa, through DHS, petitioned HHS and received approvals

for waivers of federal statutory and regulatory requirements to implement the Iowa

Health and Wellness Plan, beginning January 2014.


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37. DHS designed a bonus program in the early years of the SIM which

included care coordination payments and quality bonuses to providers serving the Iowa

Wellness Plan population.

38. Based on DHS’ actions in implementing the Iowa Health and Wellness

Plan and the SIM process, providers, including IHA member hospitals, entered into

ACO agreements with several health care organizations throughout Iowa.

39. The ACOs serve the Iowa Health and Wellness Plan member population

and focus on care coordination and improved health outcomes.

40. In 2014, close to 30,000 Iowa Health and Wellness Plan members were

attributed to a DHS approved ACO.

41. Five ACOs signed an agreement with DHS as of April 2015.

42. The contracts between the ACOs and DHS required significant

investments into necessary infrastructure including increased staffing, health

information technology, documentation and reporting, additional extended provider

hours, and member outreach efforts.

43. Until the announcement in February 2015 by DHS that it would transition

virtually all of Iowa’s Medicaid population into managed care coordinated by MCOs,

which are separate and distinct from ACOs, DHS continued to promote Iowa hospitals’

and other providers’ involvement and ongoing investment in Primary Care Health

Homes, Integrated Health Homes and ACOs.


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C. Iowa Hospitals' Reasonable Reliance on State Continuation of Plans.

44. DHS made a clear and definite promise to Plaintiff hospitals that it would

continue the Primary Care Health Homes, Integrated Health Homes, and ACOs through

its contracts and ongoing communications with the providers.

45. DHS knew that providers would want and need some guarantees that the

programs would continue before altering their operations and infrastructure to invest in

the continuation of the Iowa Health and Wellness Program adopted by the legislature

and approved by HHS and the SIM process approved by DHS and HHS.

46. IHA members and some Plaintiff hospitals reasonably relied on DHS’

promise regarding the implementation and continuation of Primary Care Health Homes,

Integrated Health Homes, the Iowa Health and Wellness Plan, the SIM, and ACOs to

their detriment.

47. The payment and incentive structure of the Primary Care Health Homes

and Integrated Health Homes will be re-designed or, more likely, eliminated under the

IHQHCI, resulting in losses to the Plaintiff hospitals and IHA member hospitals of both

the anticipated and promised payments, but also the investments made by participating

providers in creating and ramping up compliant programs.

48. The SIM has not yet been allowed to be fully executed and the entire

vision of the SIM has now been altered due to the managed care proposal leading to

IHA members' lost initial investment and lost future potential incentive payments and

benefits.


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49. The injustice can only be undone by enjoining the implementation of

IHQHCI and continuing the previous efficient method for implementing Iowa’s Medicaid

program.

D. Iowa’s Hospital Health Care Access Assessment Program: Iowa Code

Chapter 249M.

50. Chapter 249M of the Iowa Code provides for a Medicaid provider

assessment pursuant to the "Hospital Health Care Access Assessment Program",

referred to herein as "Provider Assessment".

51. Chapter 249M was enacted in 2010, under Senate File 2388, as a solution

to draw down additional federal funding for Iowa’s Medicaid program and to increase

the Medicaid rates paid to Iowa hospitals, which were among the lowest in the country.

52. As expressly stated in Iowa Code § 249M.3(2), Provider Assessment

funds are collected from every "participating hospital" based upon each hospital's net

patient revenue from fiscal year 2008 as reported in its 2008 cost report.

53. There are extensive penalties under Iowa Code 249M.3(10) for a

participating hospital that fails to make its quarterly assessment payment.

54. A “participating hospital” under Iowa Code 249M.2(6) means “a nonstate-

owned hospital licensed under chapter 135B that is paid on a prospective payment

system basis by Medicare and the medical assistance program for inpatient and

outpatient services.”


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55. Certain IHA members, including but not limited to all of the hospitals

named as Plaintiffs, are participating hospitals in Provider Assessment.

56. Pursuant to Iowa Code § 249M.4(3), funds collected from hospitals

pursuant to Provider Assessment must go into a trust fund that "shall be separate from

the general fund of the state and shall not be considered part of the general fund. The

moneys in the trust fund shall not be considered revenue of the state, but rather shall be

funds of the hospital health care access assessment program. The moneys deposited

in the trust fund …shall not be transferred, used, obligated, appropriated, or

otherwise encumbered" except as specifically provided for under 249M. (emphasis

added).

57. Provider Assessment collects $34,668,207.84 annually from the

participating hospitals. This amount is matched by federal dollars, the amount of which

is determined by the annual FMAP formula.

58. Section 249M.4(3) further mandates that "interest or earnings on moneys

deposited in the trust fund shall be credited to the trust fund".

59. Medicaid historically and actually does not reimburse providers in an

amount necessary to cover the cost of caring for Medicaid beneficiaries. Providers,

including the Plaintiff hospitals and IHA member hospitals, lose significant amounts of

money on care provided to Medicaid beneficiaries.

60. Pursuant to Iowa Code § 249M.4(2), Provider Assessment funds in the

trust fund are to be used "to reimburse participating hospitals the medical assistance


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program upper payment limit for inpatient and outpatient hospital services… ." The

upper payment limit represents the maximum amounts providers may be paid for

services under Medicaid. Thus, the intent of Provider Assessment is to offset and

mitigate some of the losses incurred by participating hospitals in providing needed,

quality care to Medicaid beneficiaries.

61. Iowa Code § 249M.4(2) explicitly instructs DHS to use Provider

Assessment funds to reimburse "participating hospitals." This reimbursement directive

requires direct payment to "participating hospitals". The reimbursement does not allow

payment of Provider Assessment funds to any other entity other than participating

hospitals.

E. Iowa’s Transition Away from Legislatively Approved Iowa Health and Wellness Program to Executive Action toward Managed Care.

62. Without legislative approval of any changes to the Iowa Health and

Wellness Plan and other Medicaid programs, DHS, by and through IME, is now in the

process of attempting to implement IHQHCI -- a managed care initiative for Iowa

Medicaid.

63. IHQHCI involves, in relevant part, contracts with four large, out-of-state,

MCOs for the administration of the Medicaid program and payment of services provided

by Iowa’s health care providers for Iowa Medicaid, Iowa Health and Wellness Plan, and

Healthy and Well Kids in Iowa (hawk-i) programs.

64. DHS's stated purpose for IHQHCI is to enroll the majority of the Iowa

Medicaid and Children's Health Insurance Program ("CHIP") populations into managed


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care and also provide managed care to individuals qualifying for Iowa Department of

Public Health ("IDPH") funded substance abuse services.

65. On or about February 16, 2015, DHS released a Request for Proposal

("RFP") and began the RFP process for the selection of MCOs. This was the first

indication that DHS made that it would abandon the previous plan for ensuring

efficiency and coordinated care under the Primary Care Health Homes and the ACO

model.

66. On or about August 17, 2015, DHS announced the award of contracts

through the RFP process to the following out-of-state MCOs: Amerigroup Iowa, Inc.;

AmeriHealth Caritas Iowa, Inc.; UnitedHealthcare Plan of the River Valley, Inc.; and

WellCare of Iowa, Inc.

67. On or about October 9, 2015, DHS announced that contracts had been

executed with the four MCOs.

68. The contracts with the MCOs allow the MCOs to keep as much as 12

percent of the contracted capitation rates for “administration”. This means the four

MCOs will only be utilizing 88 percent of the Medicaid budget on actual necessary

medical expenditures, in contrast to DHS’ previous experience utilizing 96 percent of the

Medicaid budget for the same.

69. The DHS timeline for the implementation of IHQHCI is January 1, 2016,

with the transition of nearly 100 percent of almost 560,000 Iowans into a managed care

program. This will impact one out of every five Iowans.


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70. DHS must still receive approval from HHS for its seven waiver applications

to implement the changes to the Medicaid program. A significant issue in that approval

process will be the determination whether DHS’ capitation rates are actuarially sound.

71. Actuarially sound rates require that the funds used to make capitation

rates to the MCOs are not taken or used in violation of state and/or federal law, which

DHS will not be able to establish in this case because of the illegal use of Provider

Assessment funds.

F. Disbursement of Provider Assessment Funds to MCOs ViolatesExpress Statutory Limitations of Disbursement under 249M.

72. The RFP issued by DHS provided, in part, the following:

The Agency has established assessment fees for Hospitals, Nursing Facilities, and Intermediate Care Facilities for the Intellectually Disabled. Capitation rates will include allowance for these assessment fees. Awarded Contractors are required to cooperate with the Agency and facilities impacted by assessment fees to ensure payments by the Contractor to the facilities appropriately account for assessment fees to be paid by the facilities. 1

73. DHS issued supplemental answers to bidder questions regarding the RFP

that similarly describe DHS's plan to distribute fees assessed from hospitals, nursing

facilities, and intermediate care facilities to MCOs.

74. On or about September 15, 2015, DHS responded to questions from IHA

about the implementation of IHQHCI and specifically informed IHA that fees assessed

from hospitals, nursing facilities, and intermediate care facilities will be provided to

MCOs.

1

Iowa Dept. of Human Services, RFP – Iowa High Quality Healthcare Initiative, pg. 4, available at: http://bidopportunities.iowa.gov/?pgname=viewrfp&rfp_id=11140


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75. DHS intends, as set forth in the RFP, related documents, and a letter to

IHA, and the contracts with the MCOS, to make payment from Provider Assessment

trust fund directly to MCOs through an increase in the capitation rates.

76. DHS has entered into contracts with four MCOs that provide for the

transfer of all of the funds in the trust fund to the four MCOs. DHS will cause the trust

fund monies to be directed to MCOs instead of being reimbursed to "participating

hospitals" as required by statute.

77. Payment of Provider Assessment funds to any party other than a

"participating hospital" is directly contrary to Iowa law.

78. Disbursement of interest or earnings on trust fund dollars to any party

other than a participating hospital is contrary to Iowa law.

79. DHS has nonetheless entered into illegal contracts providing for the

transfer of Provider Assessment trust fund monies to the MCOs.

80. DHS has entered into illegal contracts providing for the disbursement of

the interest and earnings on Provider Assessment trust fund dollars to MCOs.

81. Accordingly, the proposed implementation of IHQHCI violates Iowa Code

Chapter § 249M by virtue of the payment of Provider Assessment funds to MCOs.

82. The proposed Medicaid managed care payment methodology and

contracts with MCOs violate Iowa law, and the capitation rates are not actuarially sound

because they are based on violation of state law.

G. Provider Assessment under Iowa Code Chapter 249M and Disbursement of Funds to Non-participating Hospitals.

83. There are 118 hospitals in Iowa. Only 32 hospitals qualify as “participating

hospitals” under Iowa Code Chapter 249M.


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84. Critical access hospitals, for instance, are cost reimbursed and are not

paid on a prospective payment system basis. Accordingly, they do not qualify as

"participating hospitals" under Provider Assessment and are not qualified to receive

payments from the Provider Assessment trust fund.

85. As stated above, MCOs will be receiving a capitation rate that includes

Provider Assessment funds. MCOs will be using the capitation payments received to

pay for health care services received by Medicaid beneficiaries from hospitals and other

health care providers.

86. MCOs will be entering into participating provider agreements with

hospitals and other health care providers throughout Iowa, regardless of whether they

are paid upon a prospective payment system basis or are cost reimbursed.

87. Nothing exists to indicate that MCOs will differentiate payments to any

provider based on whether they qualify as "participating hospitals" under Provider

Assessment.

88. Accordingly, the proposed implementation of IHQHCI violates Iowa Code

§ 249M because the co-mingling of Provider Assessment funds with other funds paid to

the MCOs in their capitation rates means Provider Assessment funds will be paid to

non-participating hospitals and other providers.

H. Medicaid Managed Care Restrictions on Direct Payments Under Federal Regulations.

89. Any DHS plan for implementing Medicaid managed care that would

comply with Iowa Code Chapter 249M will violate federal law.

90. 42 C.F.R. § 438.60, which applies to Medicaid managed care programs,

requires that:


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no payment [be] made to a provider other than the MCO . . . for services available under the contract between the State and the MCO . . . except when these payments are provided for in title XIX of the Act, in 42 CFR, or when the State agency has adjusted the capitation rates paid under the contract, in accordance with §438.6(c)(5)(v), to make payments for graduate medical education.

91. None of the exceptions apply to Provider Assessment nor has DHS

sought a waiver of this requirement from HHS. Accordingly, any payment of Provider

Assessment funds made directly to a participating hospital outside of the MCO contracts

violates Federal law.

I. Failure to Appoint and Convene Hospital Health Care Access Board.

92. Section 249M(9) creates the Hospital Health Care Access Trust Fund

Board ("Board") which is to be comprised of: 1) the co-chairpersons and the ranking

members of the joint appropriations subcommittee on health and human services; 2) the

Iowa medical assistance program director; 3) two hospital executives representing the

two largest private health care systems in the state; 4) the president of the Iowa hospital

association; and 5) a representative of a consumer advocacy group, involved in both

state and national initiatives, that provides data on key indicators of well-being for

children and families in order to inform policymakers to help children and families

succeed.

93. The Board is tasked with oversight of the trust fund, making

recommendations regarding Provider Assessment and its calculations, payments to

participating hospitals, and the use of the monies in the trust fund pursuant to Iowa

Code § 249M(9)(b).


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94. At least a quorum of the members of the Board are identified by specific

office in Iowa Code § 249M.9 and thus serve ex officio. The remaining members have

not been appointed by any appointing authority.

95. DHS is required to provide administrative assistance to the Board by Iowa

Code § 249M.9(c).

96. Director Palmer and DHS have neglected and refused to convene the

board, despite demand. Palmer and DHS' failure and refusal to convene the board is

contrary to the plain language of the statute, which specifically provides for Board

oversight over the trust fund.

J. Harm to Participants in Provider Assessment.

97. A number of IHA member hospitals -- including but not limited to each of

the hospitals named as Plaintiffs herein -- are participating hospitals in Provider

Assessment and they will suffer significant harm if IHQHCI is implemented in direct

violation of the plain language of Iowa Code Chapter 249M as described in this Petition.

98. The IHA member hospitals who participate in Provider Assessment will

each suffer significant financial harm, as will each of the Medicaid beneficiaries they

serve, if the additional funds owed to each of them under Provider Assessment are

instead illegally funneled to the four MCOs.

99. The illegal diversion of future reimbursements away from participating

hospitals and instead to the MCOs will cause immediate financial harm to the Plaintiff

hospitals and the membership of the IHA.


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100. If the funds from the Provider Assessment trust fund are transferred to the

MCOs before the issue of the illegal use of these funds by DHS is resolved, the

participating hospitals will have no remedy.

101. Further, Iowa’s hospitals and other health care providers, including but not

limited to the participating hospitals, are being strong-armed into signing contracts with

the MCOs immediately, or be faced with an automatic 10% reduction of payments for

the services provided to Medicaid beneficiaries. DHS, however, is still in the process of

determining the hospitals’ rates, so hospitals will not even have information regarding

what their contract rate will be until well after January 1. So, hospitals are being forced

to sign a contract without information regarding an essential term of the contract.

K. Lack of Harm to State

102. There is no harm to the State if the implementation of IHQHCI is delayed.

The basic foundational requirements for good governance of Medicaid under IHQHCI

(or any other State-run program) are not currently in place.

103. MCOs do not yet have networks in place as the State approved the

provider contracts on or about October 27, 2015.

104. DHS has failed to complete the rebasing process, which will substantially

alter the payment rates for “participating hospitals”, which means the State is not even

able to publish the rate floor by which MCOs must comply when negotiating provider

agreements. Based upon the length of time required for the rebasing process in the

past, it will not be possible for rebasing to occur on or before January 1, 2016. With

rebasing not completed, it is not possible for hospitals and MCOs to negotiate material

contract terms.


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105. Contracts are contingent on waivers approved by the federal government,

so there is no expectation that the contracts will be implemented immediately if the

federal government does not meet DHS’ January 1 deadline.

106. No payments have yet been made to the MCOs.

107. No shift in networks and service availability has yet been implemented

impacting Iowa’s Medicaid population.

108. The Defendants have not provided any evidence, expert opinions, or

research to indicate how the transition to managed care will create what the Defendants

have claimed will be savings of "$51 million in the first 6 months" despite repeatedly

alleging such program savings will occur.

109. No evidence supports any claim that the transition to managed care will

achieve the stated goal of reduced costs to Iowa and improved health outcomes for

Medicaid beneficiaries. Research indicates a significant association between the

implementation of managed care and sudden negative impacts on the ability of

Medicaid enrollees to access health care services, as well as the ability of providers to

be adequately compensated for services provided.

L. Likelihood of Harm to Medicaid Beneficiaries.

110. Medicaid beneficiaries in the State of Iowa, who the IHA member hospitals

serve, will suffer significant harm if IHQHCI is implemented in the illegal manner

described in this Petition through the illegal diversion of trust fund monies to MCOs.

111. The transition of almost 560,000 Iowans to managed care on or before

January 1, 2016, is an unreasonably rapid timeline that will cause significant harm to the

Plaintiffs and to Medicaid beneficiaries.


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112. The Medicaid population is already well-served by an efficient

administrative system run by DHS with care managed and coordinated by Iowa’s

hospitals and other health care providers through the Primary Care Health Homes and

Integrated Health Homes programs and ACO contracts.

113. Delaying the implementation of managed care in Iowa during these

proceedings will not harm Iowa’s public. A delay would allow DHS the necessary time

to review the Medicaid managed care plan. This would require review of what can be

done lawfully and allow for input from the legislature, health care provider community at

large, the Medicaid population affected and the general public.

114. If IHQHCI continues on its current collision course, substantial harm will

result, specifically to the Medicaid population, through significant interruption of critical

medical care and the loss of the efficiencies created by Iowa law related to Medicaid.

REQUEST FOR DECLARATORY ORDER, TEMPORARY AND PERMANENT INJUNCTION, AND EXPEDITED HEARING

115. Plaintiffs adopt and incorporate Paragraphs 1 through 114 as if fully set

forth herein.

WHEREFORE, time is of the essence with DHS’ planned implementation of

January 1, 2016, so Plaintiffs request the Court set this matter for hearing on an

expedited basis.

WHEREFORE, Plaintiffs request the Court to issue a declaratory order and

temporary and permanent injunction finding and ordering as follows:


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A. Finding that IHQHCI, as implemented through the RFP process and

pending contracts with MCOs, is contrary to Iowa and federal law and,

specifically, is contrary to Provider Assessment as provided for under Iowa Code

Chapter 249M.

B. Enjoining DHS and Palmer from implementing IHQHCI, which is in direct

conflict with the promises of the administration of the Medicaid program made to

Iowa’s providers who reasonably relied upon DHS to their detriment.

C. Finding that DHS is without legal authority to pay Provider Assessment

funds to parties other than "participating hospitals" and is without legal authority

to pay Provider Assessment funds to MCOs.

D. Finding that the Director and DHS's actions violate the separation of

powers, are ultra vires, unreasonable, arbitrary, capricious, and contrary to law.

E. Requiring that any implementation of IHQHCI occur through an RFP

process that does not violate Iowa or federal law and, specifically, does not

provide for the payment of Provider Assessment funds to MCOs.

F. Finding that the contracts purportedly awarded through the RFP process

to Amerigroup Iowa, Inc.; AmeriHealth Caritas Iowa, Inc.; UnitedHealthcare Plan

of the River Valley, Inc.; and WellCare of Iowa, Inc. are contrary to Iowa and

federal law and accordingly, are null and void on their face, because DHS lacks

the legal power to enter into contracts with the terms described in the RFP and

contracts which provide for the illegal disbursement of Provider Assessment

funds to MCOs.


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G. Requiring DHS and Palmer to immediately cease and desist all

implementation of IHQHCI unless and until the legal issues set forth in this

Petition are fully resolved.

H. Requiring DHS and Palmer to cease and desist any commitment of, or

disbursement of funds from the trust fund other than the ministerial payments to

Participating Hospital as specified by Iowa Code § 249M.4(2).

I. Requiring DHS and Palmer to convene the Hospital Health Care Access

Trust Fund Board for a meeting to oversee the trust fund as required by law.


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Dated this 6th day of November, 2015

IOWA HOSPITAL ASSOCIATION, KIRK NORRIS, CHI HEALTH-MERCY COUNCIL BLUFFS, COVENANT MEDICAL CENTER, FORT MADISON COMMUNITY HOSPITAL, GREAT RIVER MEDICAL CENTER, MARY GREELEY MEDICAL CENTER, MERCY MEDICAL CENTER-CEDAR RAPIDS, MERCY MEDICAL CENTER – CLINTON, METHODIST JENNIE EDMUNDSON, SARTORI MEMORIAL HOSPITAL, INC., SPENCER HOSPITAL, AND ST. ANTHONY REGIONAL HOSPITAL,

PLAINTIFFS

By: /s/Kirk S. BlechaKirk S. Blecha (NE# 14703)ICIS #AT0000900Lindsay K. Lundholm (NE# 22224)ICIS #AT0009501of BAIRD HOLM LLP1700 Farnam StreetSuite 1500Omaha, NE 68102-2068Phone: 402-344-0500

and

F. Richard Lyford ICIS #AT004814Richard A. MalmICIS #AT004930of DICKINSON LAW699 Walnut StreetSuite 1600Des Moines, IA 50309Phone: 515-245-4514

Their Attorneys.




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Medicaid lawsuit