Concilio De Salud Integral De Loiza, Inc. v. Pérez-Perdomo

United States Court of Appeals
For the First Circuit

Nos. 07-2012; 07-2070; 07-2326; 07-2327

CONCILIO DE SALUD INTEGRAL DE LOIZA, INC.;
DR. JOSÉ S. BELAVAL, INC.,

Plaintiffs, Appellants/Cross-Appellees,

RIO GRANDE COMMUNITY HEALTH CENTER, INC.

Plaintiff,

v.

ROSA PÉREZ-PERDOMO,
Secretary, Department of Health of
the Commonwealth of Puerto Rico,

Defendant, Appellee/Cross-Appellant,

COMMONWEALTH OF PUERTO RICO; UNITED STATES DEPARTMENT OF HEALTH
AND HUMAN SERVICES; MICHAEL LEAVITT, Secretary, United States
Department of Health and Human Services,

Defendants.

APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

[Hon. Gustavo A. Gelpí, U.S. District Judge]

Before

Lynch, Chief Judge,
Selya and Boudin, Circuit Judges.

Robert A. Graham with whom James L. Feldesman, Feldesman
Tucker Leifer Fidell LLP, and Ignacio Fernandez de Lahongrais were
on brief for appellants/cross-appellees.
 Luis A. Rodríguez-Muñoz with whom Eduardo Vera-Ramírez, Eileen
Landrón-Guardiola, Landrón & Vera, LLP, Roberto Sánchez-Ramos,
Secretary of Justice, and Salvador Antonetti-Stutts, Solicitor
General, were on brief for appellee/cross-appellant.

December 15, 2008

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 LYNCH, Chief Judge. Federally-qualified health centers

("FQHCs") provide healthcare to medically underserved populations.

Federal Medicaid law obligates the Commonwealth of Puerto Rico to

make "wraparound" payments to FQHCs. 42 U.S.C. § 1396a(bb)(5).

The Commonwealth, through its Secretary of Health, has for many

years now not fulfilled this legal obligation, except under the

duress of injunctive orders.

In 2003, plaintiffs Concilio de Salud Integral de Loiza,

Inc. ("Loiza") and Dr. José S. Belaval, Inc. ("Belaval"), along

with one other FQHC, brought suit against the Secretary of Puerto

Rico's Department of Health under 42 U.S.C. § 1983 for failure to

make the required payments. The plaintiffs sought declaratory and

prospective injunctive relief.

This is the fourth appeal resulting from this litigation;

the background is set forth in our three earlier opinions. See Dr.

José S. Belaval, Inc. v. Pérez-Perdomo (Belaval III), 488 F.3d 11

(1st Cir. 2007) (reversing district court's dismissal, on the basis

of the unclean hands doctrine, of Belaval's claims to equitable

relief); Dr. José S. Belaval, Inc. v. Pérez-Perdomo (Belaval II),

465 F.3d 33 (1st Cir. 2006) (reinstating the preliminary injunction

that required payment to Belaval and that had been erroneously

modified); Rio Grande Cmty. Health Ctr., Inc. v. Rullan (Belaval

I), 397 F.3d 56 (1st Cir. 2005) (affirming an order of relief

requiring prospective payment to Loiza).

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 On March 27, 2007, the district court vacated the

preliminary injunction it had issued in 2004, after finding that

defendant had come into compliance with the statute. Subsequently,

the court dismissed plaintiffs' claims as moot and issued a final

judgment, along with a permanent injunctive order. The issue

before us is essentially whether the district court erred in

finding the Commonwealth had finally met its obligations and, on

this basis, dissolving the 2004 preliminary injunction which

required defendant to establish and implement a system of payments

in compliance with § 1396a(bb), and dismissing the case. The court

was in error, and we reverse and remand.

I.

We briefly recount the facts and procedural history

essential to this appeal.

FQHCs are entitled to receive payment for the services

they provide to Medicaid patients under 42 U.S.C. § 1396a(bb). If

a state employs a managed care approach to running its Medicaid

system, as the Commonwealth does,1 then its payment obligations are

controlled by § 1396a(bb)(5). In a managed care system, the state

Medicaid agency contracts with managed care organizations ("MCOs"),

which in turn contract with FQHCs to provide Medicaid services.

See Belaval I, 397 F.3d at 62. MCOs are also commonly referred to

1
Puerto Rico is a state for Medicaid purposes, and we
refer to it as such. Belaval I, 397 F.3d at 61 (citing 42 U.S.C.
§ 1301(a)(1)).

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as health maintenance organizations -- or HMOs. Section

1396a(bb)(5) requires the state regularly to make supplemental,

wraparound payments to cover the difference between what FQHCs are

paid under their MCO contracts and the total reimbursement to which

they would otherwise be entitled under the Medicaid statute. The

statute requires such payments to be made at least three times per

year. Belaval I, 397 F.3d at 62 (citing 42 U.S.C. § 1396a(bb)(5)).

Congress has created a detailed scheme for calculating

these wraparound payments. See id. at 61-62. Section

1396a(bb)(5)(A) provides:

[T]he State plan shall provide for payment to
the center or clinic by the State of a
supplemental payment equal to the amount (if
any) by which the amount determined under
paragraphs (2), (3), and (4) of this
subsection exceeds the amount of the payments
provided under the contract [between the FQHC
and the MCO].

Paragraphs (2), (3), and (4) of § 1396a(bb), in turn, provide the

methodology for calculating entitlements in non-managed care

systems; in the context of Puerto Rico's managed care system, this

number represents the FQHC's gross entitlement from which MCO

payments are deducted. Under this methodology, an FQHC's total

"reasonable" costs for providing Medicaid services in 1999 and 2000

are divided by the total number of visits by Medicaid patients in

those two years. For any year following fiscal year 2001, this per

visit average is multiplied by a standard measure of inflation and

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then multiplied by the number of visits in that year. See 42

U.S.C. § 1396a(bb)(2)-(3); Belaval I, 397 F.3d at 61-62. The

amount due to an FQHC in wraparound payments is then found by

subtracting from this number the "payments provided under the [MCO]

contract." 42 U.S.C. § 1396a(bb)(5)(A).

Congress created the wraparound requirement for FQHCs in

1997, and it made this particular statutory scheme -- known as the

prospective payment system ("PPS") -- effective after fiscal year

2000. Belaval I, 397 F.3d at 61, 62 n.3. Nonetheless, the

Commonwealth failed promptly to establish a PPS, and as of June

2003, when plaintiffs brought suit,2 the Commonwealth had not made

any wraparound payments. Id. at 62.

Loiza and Belaval moved for a preliminary injunction on

January 7, 2004. Loiza also filed a motion for a temporary

restraining order on March 1, 2004, seeking emergency relief due to

its precarious financial situation. On March 31, 2004, the

district court entered an order granting Loiza its requested

emergency relief. The order directed defendant to make the first

quarter 2004 payment to Loiza by April 7, 2004. For the purposes

of the injunction, defendant was instructed to calculate the

payments using the methodology suggested by the government's

2
The original defendant was Johnny Rullan, who served as
Secretary of Health at the commencement of the suit. He has since
been substituted as a defendant by Rosa Pérez-Perdomo, the current
Secretary.

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auditor, with the exception of a few court-ordered variations. See

Belaval I, 397 F.3d at 66. This "rough methodology" was intended

to be used until a permanent PPS was established. Id. at 76-77.

The court's decision to issue the March 31, 2004 order was upheld

in our first opinion in this case. See id. at 77.

On November 1, 2004, the court granted Loiza and

Belaval's motion for preliminary injunction. The injunction

ordered that:

i. Defendant shall, on or before November 30,
2004, fully implement its "wraparound" payment
system, so as to fully comply with the FQHC
requirements of the Medicaid statute, for the
purpose of providing such payments thereunder
to plaintiffs.
ii. The defendant shall certify to the Court
no later than November 30, 2004, that its
"wraparound" payment plan is in effect.
iii. On or before December 10, 2004,
defendant shall pay to the appearing
plaintiffs which are currently operating all
pending supplemental payments for 2004.

Defendant failed to comply, see Belaval III, 488 F.3d at 13, and

extended wrangling ensued over the amount that defendant was

required to pay plaintiffs under the injunction.

The disputes centered on two issues related to the

interpretation of the statute's calculation methodology provisions,

which may be termed the "pure Medicaid" and the "phantom MCO

payment" issues. First, plaintiffs contested defendant's position

that, in calculating the number of patients served by an FQHC, only

"pure Medicaid" patients should be taken into account. Defendant

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maintained that the state's payment obligations extend only to

services rendered by FQHCs to the category of individuals whose

coverage is mandatory under the federal Medicaid statute and the

Commonwealth's state plan. Plaintiffs argued that their wraparound

reimbursements must account for services rendered to all

individuals eligible under the state plan. Plaintiffs say the

"pure Medicaid" modifier in defendant's formula would deprive them

of payments for approximately one-third of the Medicaid enrollees

assigned to them.

Second, the parties disagreed over the proper

interpretation of the phrase "payments provided under the contract"

in § 1396a(bb)(5). Defendant contended that this phrase allows her

to deduct the amount owed to an FQHC by its MCO under the terms of

the contract between those two entities. Plaintiffs countered that

the phrase takes into account only those payments actually received

by the FQHC, and that defendant's methodology allowed her

impermissibly to offset their entitlements by "phantom MCO

payments." Plaintiffs argued before the district court that the

payments actually made by MCOs often fall well short of the amounts

budgeted by contract. Defendant countered that this discrepancy is

the result of debts owed by plaintiffs to their MCOs, and that

there is no difference under the terms of the statute between

direct payments made by the MCOs to plaintiffs and payments made in

the form of credit to plaintiffs' debts; if plaintiffs are

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unsatisfied with these payments, defendant argued, they are free to

bring suit against the MCOs.

The deduction of "phantom MCO payments" would also have

a considerable effect on plaintiffs. For example, under

defendant's formula, the state's payment obligations to Belaval for

the third quarter of 2006 would have been offset by $814,182.52 in

budgeted capitation payments; according to Belaval, the deduction

should only have been $214,354.65 -- the actual MCO payment

reported in Belaval's invoices.

Each time a payment came due under the injunction,

defendant argued to the court that, according to her calculations,

plaintiffs were owed nothing under the statute. Employing the

"pure Medicaid" modifier and accounting for "phantom MCO payments,"

defendant presented calculations that consistently showed

plaintiffs' MCO payments exceeded their reimbursable costs for a

given period. Plaintiffs responded by arguing that there is no

basis in law for the "pure Medicaid" modifier and that the

deduction of MCO payments not actually received violates the terms

of § 1396a(bb)(5).

The district court resolved these disputes only in part.

It established that payments under the November 1, 2004 preliminary

injunction should be calculated using the same rough interim

methodology it had prescribed in its March 31, 2004 order. This

interim methodology was based primarily on the suggestions of the

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government's auditor, and so it did employ the "pure Medicaid"

modifier. However, at no point did the court reach any legal

conclusions as to whether the "pure Medicaid" modifier was mandated

or permitted under § 1396a(bb).3

As to the "phantom MCO payment" issue, the district court

did come to a legal conclusion: in an October 6, 2005 order, the

court held that § 1396a(bb)(5) barred the deduction of "phantom MCO

payments." It interpreted the phrase "payments provided under the

contract," 42 U.S.C. § 1396a(bb)(5)(A), to allow the deduction only

of amounts actually paid by the MCO to the FQHC.

Thus, at each point, the court rebuffed defendant's

protests and ordered defendant to make payments based on the

court's rough methodology; these payment were in amounts greater

than those derived from defendant's proposed methodology, but

presumably lower than what would have been derived from plaintiffs'

proposed methodology (which would have omitted the "pure Medicaid"

modifier). Under these orders, defendant made wraparound payments

to Loiza through the fourth quarter of 2006 and to Belaval through

the first quarter of 2007.

On June 29, 2006, defendant informed the district court

that the Commonwealth had established an Office for the Calculation

3
The court's decision to administer the injunction
according to these terms was based in part on a compromise offered
by Loiza after the parties had failed to reach an agreement over
the amounts owed under the injunction.

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and Management of the Prospective Payment System ("PPS Office"),

which would be responsible for calculating and paying future

reimbursements owed to FQHCs under the statute. In response, the

district court ordered the parties to "simultaneously show cause as

to why the preliminary injunction in this case should not be

converted to a permanent injunction at this time, and a special

master appointed to oversee compliance with all future wraparound

payments." On December 7, 2006, the district court held an

evidentiary hearing "to determine whether the Commonwealth's PPS

office duly complies with [§ 1396a(bb)]." At the hearing, the

court switched directions. Instead of considering whether a

special master should be appointed and the preliminary injunction

converted into a permanent injunction, the court announced that if

it found the PPS Office was fully functioning, it would vacate the

preliminary injunction.

On March 27, 2007, the district court issued an order

vacating the preliminary injunction. It found that the

establishment of a permanent PPS Office brought defendant into

"present compliance with the wraparound payment statute." It noted

that no challenge was raised as to "the contents of [the PPS

Office's] employee and FQHC manuals" or to "the qualifications of

[its] staff." More importantly, it found that the Office "[had] in

fact issued non-court-ordered wraparound payments" to other FQHCs.

Thus, it held there was no question that the Commonwealth had

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established a functioning PPS Office that could "readily and

properly calculate Loiza's wraparound due payments." Its

conclusion that the Office could "properly calculate" the payments

was made without any reference to or resolution of the two disputed

issues about methodology. Finally, the court rejected the concern

that the PPS Office would be unable to make payments in the future

due to the fact that, in contrast with other states, the

Commonwealth allegedly "receives but a fraction of Medicaid monies

from the federal government." This concern, the court said, was

speculative, and as far as Loiza and Belaval were concerned,

defendant had always been able to make the court-ordered payments.

After finding that defendant had come into compliance

with § 1396a(bb) and vacating the preliminary injunction, the

district court ruled that "[b]ecause all further relief sought in

the complaint has now become a moot matter, the case is hereby

closed." It entered final judgment. That judgment also enjoined

defendant to "continue using the 2001 baseline calculation data

adopted by the court" in its March 31, 2004 temporary restraining

order.4 Neither plaintiffs nor defendant had sought such an

injunction and all parties complain about it on appeal.

4
The court's March 27, 2007 order applied only to Loiza,
since the district court had previously dismissed Belaval as a
party to the case. Following our reversal of this decision, see
Belaval III, 488 F.3d at 17, the district court expanded its
judgment to include Belaval.

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 Both sides appealed. Plaintiffs appealed from the

district court's orders vacating the preliminary injunction and

dismissing the case and from the terms of the permanent injunction

entered. Defendant appealed from the permanent injunction.

Neither Loiza nor Belaval has received wraparound

payments for any period post-dating the dissolution of the

preliminary injunction. To put it another way, the only wraparound

payments defendant has ever made to plaintiffs were made as a

result of injunctive orders. The final payment that Loiza received

was for the fourth quarter of 2006; the final payment that Belaval

received was for the first quarter of 2007.5 Defendant admitted at

oral argument that no payments have been made to either plaintiff

for periods following the dissolution of the preliminary

injunction; the reason was that, according to her calculations and

on the basis of the information presently available to the PPS

Office, none were due.

5
The district court’s March 27, 2007 order stated that the
dissolution of the preliminary injunction would apply only
prospectively, such that the court would still enforce Loiza’s
previously filed request for payment, under the injunction, for the
third and fourth quarters of 2006. The court ordered defendant to
make this payment shortly thereafter, and defendant complied. When
Belaval’s claims were reinstated following our decision in Belaval
III, the court granted Belaval’s request for payments for the final
periods covered by the injunction.

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 II.

A. Dissolving the Preliminary Injunction

We review a district court's decision to dissolve a

preliminary injunction for abuse of discretion. See Naser

Jewelers, Inc. v. City of Concord, 513 F.3d 27, 32 (1st Cir. 2008)

("Appellate review of the denial of a preliminary injunction is for

abuse of discretion."); Knapp Shoes, Inc. v. Sylvania Shoe Mfg.

Corp., 15 F.3d 1222, 1228 (1st Cir. 1994) ("A decision to vacate an

existing preliminary injunction is . . . the effective equivalent

of a denial of a preliminary injunction . . . ."); see also Hoult

v. Hoult, 373 F.3d 47, 53 (1st Cir. 2004); Burlington N. & Santa Fe

Ry. Co. v. Bhd. of Locomotive Eng'rs, 367 F.3d 675, 678 (7th Cir.

2004); Sprint Commc'ns Co. v. CAT Communc'ns Int'l, Inc., 335 F.3d

235, 241 (3d Cir. 2003); 16 Wright, Miller & Cooper, Federal

Practice and Procedure § 3924.2 (2d ed. 1996). This standard is

deferential, see Waterproofing Sys., Inc. v. Hydro-Stop, Inc., 440

F.3d 24, 28 (1st Cir. 2006); Burlington, 367 F.3d at 678, and

"[t]he fact that the court that issued an injunction has been

persuaded to modify or dissolve it . . . is weighty evidence of

sufficient cause," 16 Wright, Miller & Cooper, supra, § 3924.2.

Yet deference has its limits: we review issues of law

underlying such a decision de novo. See O'Brien v. Mass. Bay

Transp. Auth., 162 F.3d 40, 42-44 (1st Cir. 1998); Knapp, 15 F.3d

at 1225-27; see also P.R. Hosp. Supply, Inc. v. Boston Scientific

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Corp., 426 F.3d 503, 505 (1st Cir. 2005); Hoult, 373 F.3d at 53;

Burlington, 367 F.3d at 678; Sprint, 335 F.3d at 242 n.7. Findings

of fact are reviewed for clear error. See P.R. Hosp. Supply, 426

F.3d at 505; Hoult, 373 F.3d at 53; Burlington, 367 F.3d at 678;

Sprint, 335 F.3d at 242 n.7.

It is true that when we held in 2006 that the district

court had erred in modifying the November 1, 2004 preliminary

injunction in 2005, we also noted that the district court could

modify the injunction under Fed. R. Civ. P. 60(b)(5) if defendant

could "show that 'it is no longer equitable that the judgment

should have prospective application,' and that there has been the

kind of 'significant change' in circumstances that the Rule

requires." Belaval II, 465 F.3d at 38. A change in operative fact

may serve as a basis for vacating a preliminary injunction. See

Agostini v. Felton, 521 U.S. 203, 215 (1997) ("[I]t is appropriate

to grant a Rule 60(b)(5) motion when the party seeking relief from

an injunction . . . can show a 'significant change either in

factual conditions or in law.'" (quoting Rufo v. Inmates of

Suffolk County Jail, 502 U.S. 367, 384 (1992)); Sprint, 335 F.3d at

242 ("[T]he standard that the district court must apply when

considering a motion to dissolve [a preliminary] injunction is

whether the movant has made a showing that changed circumstances

warrant the discontinuation of the order." (quoting Twp. of

Franklin Sewerage Auth. v. Middlesex County Utils. Auth., 787 F.2d

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117, 121 (3d Cir. 1986)) (internal quotation marks omitted)); 11A

Wright, Miller & Kane, Federal Practice and Procedure § 2961 (2d

ed. 1995).

The district court determined in its March 27, 2007 order

that vacatur of the preliminary injunction was appropriate because

defendant had come into full compliance with the Medicaid statute.6

The district court held, and defendant now maintains, that setting

up an office for making wraparound payments was sufficient for

compliance under § 1396a(bb)(5) and that this was the only issue

the court needed to consider. That is, defendant argues that by

creating a PPS Office that is capable of issuing payments, she had

completely fulfilled her obligations under the law, such that

6
While compliance by the enjoined party may constitute a
significant change in operative fact, see Fortin v. Comm’r of the
Mass. Dep’t of Pub. Welfare, 692 F.2d 790, 800 n.13 (1st Cir.
1982); 11A Wright, Miller & Kane, supra, § 2961, compliance is not
always sufficient to warrant vacatur of an injunction. "When
dissolution [of an injunction] would reinstate the harm prohibited
by the decree, . . . the decree may persist even in the face of
compliance." Fortin, 692 F.2d at 800 n.13. Notwithstanding the
creation of the new PPS Office, defendant had never made any
payments to Loiza or Belaval except under court order. Further, in
2004, defendant argued to the court that an "Office of Medical
Assistance" had been set up to fulfill the Commonwealth's
obligations under § 1396a(bb). Plaintiffs allege this office had
substantially the same powers and duties as the PPS Office and that
it never followed through on its obligations. Given this track
record, plaintiffs argue that there was no reason for the district
court to think that defendant would comply without continued
judicial oversight. Plaintiffs' arguments are not unreasonable in
light of subsequent developments: defendant in fact made no
payments for periods following the dissolution of the injunction.
Because we reverse on other grounds, we need not reach the question
of whether the court’s decision in this regard was an abuse of
discretion.

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plaintiffs could have no further claims for relief. Not so. The

district court’s conclusion that defendant’s actions were

sufficient to bring her into "present compliance with the

wraparound payment statute" was legal error.

Federal law, 42 U.S.C. § 1396a(bb)(5), requires not only

that the Commonwealth set up a system for making wraparound

payments but that these payments be properly calculated and made.

Defendant cannot be in compliance with the statute unless the

system she has implemented employs an appropriate methodology for

calculating wraparound payments. Plaintiffs have consistently

alleged that the formula used by defendant to calculate the amounts

due to them in wraparound payments violates the terms of

§ 1396a(bb). That defendant now maintains, as she had at numerous

points while the injunction was still in place, that no payment is

due under her formula means that a live and unresolved material

controversy exists, one which has been part of the case from the

start.

The district court, however, did not rule on whether the

formula adopted by the PPS Office was in compliance with the

methodology provisions of § 1396a(bb), nor did it fully determine

what constitutes compliance under these provisions. It made no

conclusions as to the legality of the "pure Medicaid" modifier and

no factual findings as to whether defendant had complied with its

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2005 ruling rejecting defendant's "phantom MCO payments" argument.7

The district court erred in refusing to consider and resolve these

issues before vacating the preliminary injunction and dismissing on

grounds of mootness.

B. Defendant's Arguments Based on § 1983 and the Eleventh
Amendment

Defendant argues that, regardless of what § 1396a(bb)

requires, plaintiffs’ claims regarding the alleged deficiency of

the PPS Office’s methodology were beyond the power of the district

court to adjudicate by grant of injunctive relief under 42 U.S.C.

§ 1983, primarily because such injunctive claims would be barred by

the Eleventh Amendment. We disagree.

A cause of action exists under § 1983 for the relief

sought here. In the original 2005 appeal in this matter, we held

that "a private action can be brought by an FQHC under [§] 1983 to

enforce 42 U.S.C. § 1396a(bb)." Belaval I, 397 F.3d at 75. We

focused on the language in paragraph (5) requiring the state to

make payments, rather than on the language providing the

methodology for calculating those payments found elsewhere in that

paragraph and in paragraphs (2), (3), and (4). An FQHC suing under

§ 1983 may enforce not only its right to receive wraparound

7
The propriety of the district court’s October 2005 legal
conclusion regarding "phantom MCO payments" is not before us.
Defendant has not contested that portion of the order on appeal.
Neither this issue nor the "pure Medicaid" issue were addressed in
our 2005 opinion. See Belaval I, 397 F.3d at 75.

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payments but also its right to have those payments properly

calculated.

The precise federal statutory language that forms the

basis of plaintiffs' claims regarding methodology, like the portion

of the statute discussed in our 2005 opinion, is "rights-creating

language because it is mandatory and has a clear focus on the

benefitted FQHCs, rather than the regulated states." Belaval I,

397 F.3d at 74. Paragraph (5) specifies that the state plan "shall

provide for payment to the center . . . of a supplemental payment

equal to the amount . . . by which the amount determined under

paragraphs (2), (3), and (4) of this subsection exceeds the amount

of the payments provided under the [MCO] contract." 42 U.S.C.

§ 1396a(bb)(5)(A). Similarly, in paragraphs (2), (3), and (4), the

explanations of how the state should calculate the amount it must

pay an FQHC for its services are uniformly preceded by the

declaration that the state plan "shall provide for payment" for

such services in that amount. Id. § 1396a(bb)(2)-(4). These

explanations are "highly specific," Belaval I, 397 F.3d at 75, and

are written in "individualistic terms, rather than at the aggregate

level of institutional policy or practice," id. at 74.

Notably, other circuits have held that the calculation

methodology provisions of § 1396a(bb) are enforceable under § 1983.

See Pee Dee Health Care, P.A. v. Sanford, 509 F.3d 204, 209-12 (4th

Cir. 2007) (holding that a healthcare provider in a non-managed

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care system may sue under § 1983 to enforce its claim that the

formula used by the state agency to calculate its reimbursements

was improper under § 1396a(bb)); Cmty. Health Ctr. v. Wilson-Coker,

311 F.3d 132, 136, 140 (2d Cir. 2002) (allowing a healthcare

provider to pursue a § 1983 claim alleging that the formula used to

calculate its reimbursements was improper under § 1396a(bb)(2));

see also Chase Brexton Health Servs., Inc. v. Maryland, 411 F.3d

457, 461, 467 (4th Cir. 2005). Defendant has offered no citation

to the contrary.

Plaintiffs' continuing claims for injunctive relief with

regard to the payment methodology are not barred by the Eleventh

Amendment.8 Defendant argues that once the PPS Office was

established, the only possible dispute that could arise would be

over whether the Office, after having reviewed the relevant data

for an FQHC in a given pay period, had arrived at the right number;

thus, plaintiffs’ arguments could only amount to impermissible

claims for money damages against the Commonwealth. This argument

mischaracterizes plaintiffs’ claims. Plaintiffs’ complaints are

over how the amounts due to them should be calculated in the

future. Their consistent arguments that defendant has adopted a

methodology that contravenes the terms of § 1396a(bb) constitute

allegations of an ongoing violation of federal law. See Verizon

8
Any claims for past non-compliance with the district
court's preliminary injunction, though claims for monies due, are
also not barred by the Eleventh Amendment.

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Md., Inc. v. Pub. Serv. Comm’n, 535 U.S. 635, 645-46 (2002). To

remedy this alleged violation, plaintiffs seek, as they have since

2003, prospective injunctive and declaratory relief of the sort

permissible under Ex parte Young, 209 U.S. 123 (1908). See Edelman

v. Jordan, 415 U.S. 651, 667-68 (1974) (recognizing that Ex parte

Young allows claims that would have "an ancillary effect on the

state treasury" where such an effect is "the necessary result of

compliance with decrees which by their terms were prospective in

nature"). The claims at issue here are thus permissible under the

Eleventh Amendment.

C. Dismissing the Case and Issuing the Permanent Injunction

Both sides object to the permanent injunction. The

district court's decision to enter a permanent injunction was also

erroneous. A live dispute exists as to plaintiffs' argument that

defendant's payment methodology violates § 1396a(bb).

Plaintiffs' claims clearly were not moot, and plaintiffs

could seek further relief under the statute. Defendant also has

raised a dispute about the methodology embodied in the permanent

injunction, which has not been resolved. The court could not

properly enter a final judgment or grant permanent injunctive

relief.

D. Appointing a Special Master

Before dissolving the preliminary injunction, the

district court had considered appointing a special master. In

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addressing the complex Medicaid issues presented in this case, the

district court may be well-advised to do so, within the bounds of

Fed. R. Civ. P. 53. See In re Pearson, 990 F.2d 653, 659-60 (1st

Cir. 1993) (discussing "some exceptional condition[s]" that could

warrant appointment of a special master); United States v. Horton,

622 F.2d 144, 148-49 (5th Cir. 1980) (upholding the appointment of

a special master in a Medicare reimbursement case presenting

complex legal issues); see also Nat'l Org. for the Reform of

Marijuana Laws v. Mullen, 828 F.2d 536, 542 (9th Cir. 1987)

(holding that "the prospect of noncompliance [with a preliminary

injunction] is an 'exceptional condition' that justifies reference

to a master"); 9C Wright & Miller, Federal Practice and Procedure

§§ 2603-05 (3d ed. 2008). It might also consider invoking its

inherent power to appoint a technical advisor. See Reilly v.

United States, 863 F.2d 149, 154-61 (1st Cir. 1988).

III.

The district court's orders vacating the preliminary

injunction, entering final judgment, and issuing permanent

injunctive relief are reversed. The case is remanded for further

proceedings consistent with this opinion. Costs are awarded to

Loiza and Belaval.

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