Appeals from orders denying preliminary injunctions to plaintiffs as a class in the United States District Court, Southern District of New York, Thomas P. Griesa, Judge. Appeals dismissed for lack of appellate jurisdiction.
Clark, Associate Justice,*fn* Anderson and Mulligan, Circuit Judges.
In these two actions the respective plaintiffs contest the validity of the medicaid reimbursement formula established on September 30, 1976 for residential health care facilities under regulations promulgated by the Commissioner of Health of the State of New York, 10 New York Code of Rules and Regulations (N.Y.C.R.R.) Part 86-2, pursuant to Chapter 76 of the New York Session Laws of 1976, which added § 2807(2)(e) to the New York Public Health Law. The medicaid reimbursements of approximately 60% of the residential health care facilities in the State have been reduced as a result of these new regulations.*fn1 Both cases are claimed class actions in which each group of plaintiffs seeks a declaratory judgment that reimbursement under Part 86-2 is in violation of various state and federal statutory provisions and of the Due Process Clause of the federal Constitution for failure to give adequate notice and an opportunity to be heard prior to the reduction in benefits. Plaintiffs also seek to enjoin the application of the rates calculated in accordance with Part 86-2 and to compel the promulgation of new rates which they assert are necessary to comply with the applicable state and federal statutes. Plaintiffs in both actions sought preliminary injunctive relief, on a class basis, to prohibit the implementation of Part 86-2 and to maintain the reimbursement levels in effect prior to the adoption of the new rates until the resolution of their claims on the merits.
In case No. 77-7102 the named plaintiffs, two medical facility associations and five residential health care facilities, seek to represent all nonprofit residential health care facilities in New York that provide services to medicaid sponsored patients. The thrust of plaintiffs' complaint, filed November 16, 1976, is that the new reimbursement rates are invalid under the governing federal statute, 42 U.S.C. § 1396a(a)(13)(E), in that they do not provide for a "reasonable cost related basis" in determining appropriate reimbursement. Plaintiffs also assert that the rates were promulgated in violation of various federal and state procedural requirements, including notice and hearing provisions, and a federal regulation (45 C.F.R. § 246.10(a)(3)) which provides that a medical care advisory committee have an opportunity to participate in the administration of the state's medicare program. After several hearings were held in December and January on the plaintiffs' motion for a preliminary injunction, the district court ruled from the bench on February 9, 1977, that because of the disparity in the effect of the new computation of reimbursement upon the individual members of the purported class of nursing homes, preliminary injunctive relief on a class basis was not appropriate. The court clearly stated that it was denying the requested relief only because of the class nature of the action and not with respect to the claims by individual homes. It offered separate members of the alleged class the opportunity to present evidence of the irreparable harm, suffered by an individual member, on a case-by-case basis.*fn2
The nursing homes have appealed the district court's denial of preliminary injunctive relief on a class basis. The questions of whether this action is maintainable as a class action and whether the named plaintiffs are appropriate representatives of the purported class under Rule 23(c)(1) Fed. R. Civ. P. have not yet been ruled upon.
In No. 77-7114, an action commenced February 1, 1977, eight medicaid sponsored patients residing in nursing homes in New York, seek to represent the class of all medicaid sponsored patients in New York whose nursing care and benefits have been reduced as a result of the promulgation of the new medicaid reimbursement levels for residential health care facilities. Plaintiffs assert that the across-the-board adoption of new rates without granting the medicaid sponsored patients notice and a fair hearing, violates their right to procedural due process, the federal regulations guaranteeing notice and a hearing prior to the reduction of medicaid benefits, 45 C.F.R. §§ 205.10(a)(4), (a)(5), (a)(6), and various state regulations governing the procedures to be followed.
At a hearing held on February 28, 1977 on plaintiffs' request for preliminary injunctive relief, the district court refused the relief sought on a class basis for the reasons stated from the bench in No. 77-7102 on February 9, 1977. The district court told the professed class representatives that medicaid patients at individual nursing homes could seek to prove that irreparable harm was caused them by the reductions in nursing care brought about by the lower reimbursement. Plaintiffs appeal from this ruling. The district court and this court have denied motions made by plaintiffs in both actions to stay the application of the new rates of reimbursement, pending resolution of this appeal.
Extensive hearings were held during December and January on the nursing homes' motion for a preliminary injunction in case No. 77-7102. The district court indicated concern over the manner in which the State had adopted the new reimbursement rates, but it never reached the issue of whether the claims of the individual nursing homes were sufficiently serious or meritorious to justify a preliminary injunction. The hearings concentrated upon plaintiffs' allegations that as a result of the new reimbursement rates the nursing homes, generally, were suffering irreparable harm and were having to cut back on essential services and that several facilities were on the verge of ceasing operations. During the course of the hearings in December, 1976, the State announced that effective January 1, 1977, the reimbursement rates would be increased to offset inflation. The district court, therefore, delayed consideration of the necessity for preliminary injunctive relief for the period after January 1st, pending plaintiffs' analysis of the effect of the increase upon the financial conditions at the homes.
This left for the court's consideration whether the reimbursement rates in effect during November and December, 1976 should be preliminarily enjoined. On December 22, 1976, the court decided that before it could rule upon the issue of irreparable harm, the State should expedite the process of administrative appeals by the homes contesting their classification and the Health Department's recommendations concerning the curtailment in services.*fn3 Its reasoning was that if the homes could procure relief from the State through the administrative process, the court would not be placed in the position of adding to the State's fiscal woes by compelling the payment of higher rates pending a resolution of the case on the merits.
On February 4, 1977, plaintiffs renewed their motion for a preliminary injunction. The nursing homes asserted that the expedited state administrative proceedings had not resulted in significant relief and that the increase of January 1, 1977, designed to compensate for inflation, was insufficient to prevent the ongoing hardships suffered by a large portion of the homes in the class. On February 9th, plaintiffs presented witnesses from three nursing homes, who testified extensively as to the amount of the reduction on the reimbursement rate and its effect upon each individual home. Plaintiffs also attempted to show that the administrative appeals and the claimed offset for inflation did not alleviate their financial problems. At the conclusion of the hearing, the court denied the motion for a preliminary injunction on a class basis stating:
"Then I will tell you right here and now that I will deny the motion for preliminary injunction on a class basis. I do so on the basis of the record that demonstrates to me that when the facts are gone into as to the individual homes, there is a wide and substantial discrepancy as to the issues as to each individual home.
The record amply demonstrates that there are differences in the rates granted to the homes. . . . There are differences with respect to the procedures engaged in by the Department of Health and the Department of the Budget with respect to these homes. There are differences, substantial differences, in the financial condition of the different homes. There are substantial differences in the effect of the various rates."
Although the district court offered to establish a procedure whereby those homes seriously affected could have the issue of irreparable harm and the appropriateness of preliminary injunctive relief adjudicated on a case-by-case basis, it is not apparent from ...