• Federally Qualified Health Centers Cannot Sue the State in Federal Court for Inadequate Reimbursement
  • July 1, 2011
  • Law Firm: Wilson Elser Moskowitz Edelman Dicker LLP - New York Office
  • In a recent court decision, a federal court in New York State dismissed a lawsuit that was brought by federally qualified health centers (FQHCs) and their trade association to challenge New York’s methodology for paying FQHCs under the federal Medicaid law. In Community Healthcare Association v. New York State Department of Health, the FQHCs and the association alleged in their complaint that New York was violating a federal Medicaid law that requires states to fully reimburse FQHCs for their costs. The plaintiffs asked the court to declare that the state’s conduct was unlawful under the federal Medicaid law and to issue an injunction prohibiting the state from continuing to violate the federal law.

    The court did not, however, reach the merits of the plaintiffs’ claims. Instead, the court dismissed the case based on sovereign immunity grounds. Specifically, the court ruled that the Eleventh Amendment of the United States Constitution barred the plaintiffs from suing the State of New York in federal court. The Eleventh Amendment provides, in brief, that a federal court’s jurisdiction “shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.”

    In arguing that their claims fell within an exception to the Eleventh Amendment that applies to claims that the federal government may assert against a state, the plaintiffs contended that the FQHCs were acting as trustees of federal funds to which they were entitled under federal law and thus “standing in the shoes” of the federal government. The court summarily rejected that argument as there was no indication that the federal government authorized the FQHCs to stand in its shoes. The court also rejected the plaintiffs’ position that the federal Medicaid law authorized FQHCs to sue states. The court explained that, even if that were true, the federal Medicaid statute could not abrogate a constitutional provision. Finally, the plaintiffs argued that despite sovereign immunity, persons may sue states for illegally seized property. The court disposed of that point, too, since it found that the dispute in the case involved the adequacy of the state’s reimbursement formula and not the return of property that was actually seized by the state.