A federal appeals court on Friday ordered a new hearing for Arizona community health centers that claim the state’s Medicaid system improperly denies reimbursement for chiropractic, dental, optometry and podiatry care.
A three-judge panel of the 9th U.S. Circuit Court of Appeals overturned a lower court ruling that dismissed the Arizona Alliance for Community Health Centers’ lawsuit against the Arizona Health Care Cost Containment System, the state’s Medicaid provider.
In his opinion, Circuit Judge Richard R. Clifton praised the district court judge and attorneys on both sides “for their skillful handling of the unusually complex issues presented by this case.” But he said the decision to dismiss the case was wrong and ordered the case back to the district court for a new trial.
An attorney for the health centers declined to comment on the case Friday until he can speak with his clients. AHCCCS officials said they were still studying the decision and would not be able to comment until next week.
The lawsuit was filed in 2019 by the Health Centers, a federally qualified health center that said it had an “enforceable federal right to reimbursement for the FQHC’s services, which include the services of its dentists, orthopedists, optometrists, and chiropractors (among other others)’.
They said AHCCCS “categorically excludes” chiropractors from coverage and improperly limits reimbursement for dental, podiatric and optometric services for adults, all of which they say are mandated under Medicaid and the state’s Medicaid plan.
But lawyers for AHCCCS argued that the agency “does not, as the plaintiffs claim, ‘categorically exclude’ any dental, podiatry, optometry or chiropractic services” — it includes those services, the agency said, but only “covers those services with limitations.” .
The district court judge agreed with the health centers that AHCCCS could not cut off those services, but she said the law did not prohibit it from limiting coverage. And she rejected the claim that chiropractors were excluded, noting that coverage of services for patients under 21 is included in the state plan.
She dismissed the case, prompting the health centers’ appeal.
The appeals panel disagreed with the district court judge, finding that Arizona’s “categorical exclusion of chiropractic services for adults violates the … Medicare Act.” Clifton’s opinion went on to reject AHCCCS’s interpretation of the Medicare Act, which he said, “would allow the state to flatly exclude all coverage for all FQHC services.”
Finally, the appeals court said the lower court incorrectly applied “Chevron deference” to the case, a legal principle that requires courts generally to defer to an administrative agency’s interpretation of the regulations it enforces.
AHCCCS claims its restrictions have been approved by the regional administrator of the Centers for Medicare and Medicaid Services (CMS), the federal office that oversees states’ Medicaid plans and their implementation of those plans.
But the appeals court said that in order for Chevron to apply, there must be a clear record of the decision-making that went into the approval. Clifton said the record “lacks any evidence as to CMS’s reasoning” about the Arizona rules.
“We conclude that the record before us does not establish that Chevron deference applies to Arizona’s restrictions on dental, optometric, and podiatric services for adults,” Clifton wrote.
While the Supreme Court “has long held that “nothing in the (Medicaid) statute implies that participating states are required to fund every medical procedure” included in the mandatory categories, CMS must justify the reason for the decision to exclude coverage. Clifton said it wasn’t.
The case was remanded to the district court to consider, among other things, whether there was sufficient evidence for the Chevron doctrine to apply in this case.