Medicaid Lawsuit

E-FILED 2015 NOV 06 2:56 PM POLK - CLERK OF DISTRICT COURT
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,
LAW NO.
VERIFIED PETITION FOR

DECLARATORY JUDGMENT,
INJUNCTIVE RELIEF, AND REQUEST
FOR EXPEDITED HEARING
Plaintiffs,
v.
Charles Palmer, Director, Iowa
Department of Human Services; Iowa
Department of Human Services, a state
agency,
Defendants.
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
their Complaint for Declaratory Judgment and Injunctive Relief, Plaintiffs state and
allege in full detail as follows:
II.
1.
THE PARTIES
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.
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.
16.
PROCEDURAL BACKGROUND
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
3
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,
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.
Iowas 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.
27.
Iowas 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.
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 populations
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 Iowas
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.
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 Iowas 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.
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.
49.
The injustice can only be undone by enjoining the implementation of
IHQHCI and continuing the previous efficient method for implementing Iowas Medicaid
program.
D. Iowas 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 Iowas 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.
10
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
11
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.
Iowas 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 Iowas 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
12
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.
13
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 Violates
Express 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
14
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
Disbursement of Funds to Non-participating Hospitals.
83.
Chapter
249M
and
There are 118 hospitals in Iowa. Only 32 hospitals qualify as participating
hospitals under Iowa Code Chapter 249M.

15
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:
16
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).
17
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.
18
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, Iowas 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.
19
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 Iowas 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.
20
112.
The
Medicaid
population
is already well-served
by an
efficient
administrative system run by DHS with care managed and coordinated by Iowas
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 Iowas 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:
21
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
Iowas 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.
22
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.
23
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. Blecha
Kirk S. Blecha (NE# 14703)
ICIS #AT0000900
Lindsay K. Lundholm (NE# 22224)
ICIS #AT0009501
of BAIRD HOLM LLP
1700 Farnam Street
Suite 1500
Omaha, NE 68102-2068
Phone: 402-344-0500
and
F. Richard Lyford
ICIS #AT004814
Richard A. Malm
ICIS #AT004930
of DICKINSON LAW
699 Walnut Street
Suite 1600
Des Moines, IA 50309
Phone: 515-245-4514
Their Attorneys.
24
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Medicaid Lawsuit

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Medicaid Lawsuit

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

IN THE IOWA DISTRICT COURT IN AND FOR POLK COUNTY

VERIFIED PETITION FOR

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

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

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

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

participant in Provider Assessment.

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

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

a participant in Provider Assessment.

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

participant in Provider Assessment.

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

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

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

and a participant in Provider Assessment.

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

participant in Provider Assessment.

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

participant in Provider Assessment.

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

participant in Provider Assessment.

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

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

participant in Provider Assessment.

Charles Palmer is the Director of the Iowa Department of Human

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

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

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

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

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

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

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

Plaintiffs have exhausted all available administrative remedies and further,

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

FACTUAL AND LEGAL BACKGROUND

Iowas Medicaid Program.

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

health care services to qualifying individuals.

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

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

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

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

Iowas Medicaid program is extremely efficient, which is evident through

Providers, including the IHA member hospitals, have also achieved

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

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

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

The SIM process included gathering feedback from stakeholders from

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

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

Based on DHS actions in implementing the Iowa Health and Wellness

and focus on care coordination and improved health outcomes.

attributed to a DHS approved ACO.

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

The contracts between the ACOs and DHS required significant

information technology, documentation and reporting, additional extended provider

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

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

Iowa Hospitals' Reasonable Reliance on State Continuation of Plans.

IHA members and some Plaintiff hospitals reasonably relied on DHS

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