The National Association of Community Health Centers has quietly dropped its lawsuit against the federal government over its granting of waivers to states that want to overhaul their Medicaid programs.
The Washington-based trade group voluntarily dismissed its lawsuit last month. The association signed the agreement to drop its case on Oct. 4, the U.S. Justice Department signed the agreement on Oct. 9, and the U.S. District Court in Washington approved the agreement on Oct. 11.
At that time, none of the parties made any public announcement of the agreement.
The NACHC released a statement confirming its actions last week after an inquiry from MODERN HEALTHCARE. It offered no specific explanation for withdrawing the lawsuit.
The low-key atmosphere is in sharp contrast to the publicity that surrounded the lawsuit when it was filed more than two years ago. The case grabbed headlines across the country as an example of an organization battling overly cost-conscious federal and state healthcare officials who want to cut back on indigent care.
The NACHC, which represents 700 community health centers, sued HHS in June 1994, claiming that the granting of Section 1115 waivers to states violates federal Medicaid laws aimed at protecting Medicaid beneficiaries.
Such five-year waivers give states the authority to restructure their Medicaid programs by setting aside certain requirements like guaranteeing beneficiaries the right to choose their own physicians.
Fifteen states have obtained waivers to convert their programs from traditional financing and delivery systems to managed-care-based systems (Nov. 11, p. 77). Ten states have waiver applications pending with HHS.
The NACHC challenged the waiver process on both legal and substantive grounds. First, it said HHS has no authority to grant waivers, and it accused HHS of grabbing that authority without going through proper regulatory channels. More importantly, it said HHS is illegally stripping Medicaid beneficiaries of certain protections of their healthcare rights under federal law.
"Medicaid patients not only are losing their rights to choose healthcare providers, but they are being forced to enroll in managed-care plans that are under no compulsion to meet federal safeguards designed to ensure access, services and quality control," the NACHC said at the time.
The NACHC also was concerned that states that moved to managed-care systems would reduce Medicaid payments to community health centers.
The NACHC wanted a federal court order barring HHS from granting additional waivers, and it wanted an order stopping the implementation of Medicaid managed-care programs in states that had already obtained waivers from HHS at the time of the lawsuit.
A month after the NACHC filed suit, eight states with waivers or pending waiver applications joined the lawsuit as co-defendants with HHS.
At the time, the NACHC said it expected a hearing on the merits of its lawsuit by the fall of 1994. But that apparently never happened.
James Feldesman, an attorney with Feldesman, Tucker, Leifer, Fidell & Bank in Washington, declined to comment on why the case failed to progress and why the NACHC voluntarily withdrew the lawsuit from federal court. Feldesman, who represented the NACHC, said the withdrawal doesn't prevent the association from filing a similar lawsuit in the future.
A spokesman for the U.S. Justice Department, which defended the case for HHS, said the agency had no idea why the association dropped the lawsuit.
"They came to us and said they wanted to withdraw. There was no settlement," the spokesman said.