E-FILED 2015 DEC 31 1:24 PM POLK - CLERK OF DISTRICT COURT

IN THE IOWA DISTRICT COURT FOR POLK COUNTY

IOWA HOSPITAL ASSOCIATION; KIRK

NORRIS, IOWA HOSPITAL
ASSOCIATION 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 EDUNDSON;
SARTORI MEMORIAL HOSPITAL, INC.,
SPENCER HOSPITAL; AND ST.
ANTHONY REGIONAL HOSPITAL,

CASE NO. CVCV050830

RULING ON MOTION FOR

TEMPORARY INJUNCTION

Plaintiffs,
vs.
CHARLES PALMER, DIRECTOR, IOWA
DEPARTMENT OF HUMAN SERVICES;
IOWA DEPARTMENT OF HUMAN
SERVICES, A STATE AGENCY,
Defendants.

Plaintiffs Iowa Hospital Association (IHA), the above-named eleven member hospitals,
and Kirk Norris, CEO of the IHA, in his capacity as a member of the Hospital Health Care
Access Trust Fund Board (the Board) (collectively Plaintiffs), filed a Petition for
Declaratory Judgment, Injunctive Relief, and Request for Expedited Hearing against Defendants
Charles Palmer, Director of the Iowa Department of Human Services (the Director), and the
Department of Human Services (the Department) on November 6, 2015.
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The parties

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submitted extensive briefing on Plaintiffs request for a temporary injunction. This matter came
before the Court for a hearing on December 11, 2015.

Attorneys Kirk Blecha, Lindsay

Lundholm, and Bryan ONeill appeared for Plaintiffs. Iowa Solicitor General Jeffrey Thompson
and Special Assistant Attorney General Diane Stahle appeared for the Director and the
Department. Having reviewed the court file, considered the arguments of counsel for the parties,
and being otherwise fully informed in the premises, the Court now DENIES Plaintiffs request
for a temporary injunction because: (1) the controversy is not ripe and/or is moot; and (2)
notwithstanding ripeness or mootness, Plaintiffs have not demonstrated to the Courts
satisfaction that they are about to suffer irreparable harm for which there is no adequate legal
remedy.
I.

FACTUAL BACKGROUND
A. The Parties
Plaintiffs are: (1) the IHA, a nonprofit organization representing the interests of all 118

Iowa hospitals; (2) Kirk Norris, CEO of the IHA, in his capacity as a member of the Board; and
(3) eleven Iowa hospitals participating in the hospital assessment program under Iowa Code
chapter 249M and providing health care services to Iowa Medicaid beneficiaries. Defendants are
Charles Palmer, Director of the Iowa Department of Human Services, and the Iowa Department
of Human Services. The Department is the single state agency that operates Iowas Medicaid
program.
B. Description of Medicaid and Governor Terry Branstads Medicaid
Modernization Plan
Medicaid is a cooperative federal-state program through which the federal government
provides financial assistance to states so that they may furnish medical care to needy
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individuals. TLC Home Health Care, L.L.C. v. Iowa Dept of Human Servs., 638 N.W.2d 708,
711 (2002) (quoting Madrid Home for the Aging v. Iowa Dept of Human Servs., 507, 511 (Iowa
1996) (citing 42 U.S.C. 1396 (1994); Wilder v. Virginia Hosp. Assn, 496 U.S. 498, 502
(1990)). The federal governments share of the Iowa Medicaid budget is called the federal
medical assistance percentage (FMAP). Pl.s Br. 13. The Department is the single state
agency administering Iowas Medicaid program. See Iowa Code 249A.4 (2015); see also 42
C.F.R. 431.10 (2015). As required by federal regulations, the Department, as the single state
agency, has sole authority to [a]dminister or supervise the administration of the plan and
[m]ake rules and regulations that it follows in administering the plan or that are binding upon
local agencies that administer the plan. See 42 C.F.R. 431.10. Approximately 580,000
Iowans receive health care services through Medicaid, Healthy and Well Kids in Iowa (hawki), and the Iowa Health and Wellness Plan (IHAWP) (collectively Medicaid beneficiaries).
Def.s Br. 5.
Over the past decade, the State of Iowas Medicaid budget has grown 73%. Def.s Br. 5
(citing Slaybaugh Aff.). For state fiscal year (SFY) 2015, Iowas Medicaid program cost $4.9
billion; state tax dollars funded $1.6 billion, and the federal government funded the remainder.
Id. The Department characterizes the growth of the Medicaid budget as unsustainable. Id. In
January 2015, Iowa Governor Terry Branstad announced he would pursue major changes to the
States Medicaid program. Id.; see also Pl.s Br. 4. His main proposal was to convert the
program from a fee for services model to a managed care model. Def.s Br. 5; Pl.s Br. 4.
The Branstad administration calls this project Medicaid modernization. Def.s Br. 5.
From the beginning, the Branstad administration and the Department have intended the
transition to take place on January 1, 2016. Pl.s Br. 4. However, because Medicaid is a joint
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federal and state program, the federal Center for Medicare and Medicaid Services (CMS) must
approve the transition to a managed care model. Id. at 6. On December 17, 2015, CMS notified
the Department that it must delay implementation of the managed care model until March 1,
2016. Pl.s Ex. 30. While CMS expects to eventually approve the Departments new program,
the agencys review indicated that a January 1st transition date would result in inadequate care
for Iowa Medicaid beneficiaries. Id.
This transition to a managed care model is intended to integrate care and improve
quality outcomes and efficiencies across the health care delivery system, in turn decreasing costs
through the reduction of unnecessary, inappropriate, and duplicative services. Def.s Br. 5
(citing Slaybaugh Aff.).

In a managed care model, the Department sets a capitation rate by

which it pays managed care organizations (MCOs) a per-member, per-month fee for each
enrolled Iowa Medicaid beneficiary. Def.s Br. 5 (noting that MCOs are for-profit corporations).
Each MCO is then responsible for providing all medically necessary health care services to its
members (i.e., Iowa Medicaid beneficiaries), regardless of the costs. Id. CMS requires that the
capitation rates be actuarially sound, meaning that calculations used to develop capitation rates
do not violate state or federal law. Id. The Departments contracts with the for-profit MCOs
allow each corporation to keep up to 12% of the capitation rate for overhead and administrative
costs. Pl.s Br. 56 (noting the Department currently uses 96% of its Medicaid budget for
medical treatment, while the MCOs will be allowed to use as little as 88% for medical
treatment). The MCOs contract with Iowa health care providers for the provision of the actual
services to Medicaid beneficiaries. Def.s Br. 5. When it pushed back the implementation date,
CMS noted a concern about the low number of Iowa health care providers that have signed
contracts with the MCOs as of the CMS review. See Pl.s Ex. 30.
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On February 16, 2015, the Department issued a request for proposal (RFP) seeking 24
MCOs to provide health care services to Iowa Medicaid recipients. Id.; see also Pl.s Br. 45.
The program through which the MCOs will operate is known as IA Health Link. Pl.s Br. 4. On
August 17, 2015, after evaluating the proposals received through the RFP, the Department
announced its intention to negotiate contracts with four out-of-state corporations. Pl.s Br. 5. On
October 9, 2015, the Department announced the execution of contracts with the chosen MCOs:
Amerigroup Iowa, Inc., AmeriHealth Caritas Iowa, Inc., and UnitedHealthcare Plan of the River
Valley, Inc. Id. (Originally, there were four corporations chosen as MCOs, but one contract was
eliminated as a result of a legal challenge.); see also Def.s Br. 56. All the MCOs have been
working toward a January 1, 2016 implementation date, including leasing office space, hiring
and training staff, negotiating and entering into contracts with health care providers, and
enrolling members. Id. at 67.
For SFY 2016, the Iowa Legislature appropriated approximately $1.3 billion for the
Medicaid program. Def.s Br. 67. This figure included the Departments original projection of
$51 million in savings due to the transition to managed care, and the budget assumes a managed
care start date of January 1, 2016. Id. at 6 (citing Slaybaugh Aff.). (The Department has since
revised this figure down to $47 million in savings, and the delay in implementation is expected
to further reduce that figure by approximately $14.3 million. See William Petroski, Medicaid
Delay Will Reduce Iowa Savings by $14.3 million, Des Moines Register (December 18, 2015),
http://www.desmoinesregister.com/story/news/politics/2015/12/18/medicaid-delay-reduce-iowasavings-143-million/77574846/.)
C. Iowa Code Chapter 249M: Hospital Health Care Access Assessment
Program

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At the center of this proceeding is the Hospital Health Care Access Assessment Program
(hospital assessment). The hospital assessment is codified at Iowa Code chapter 249M and
addresses specific taxes and financing for Iowa hospitals. See Iowa Code ch. 249M (2015).
Designated hospitals contribute to a trust fund 1.26% of net patient revenue as measured by the
individual hospitals fiscal year 2008 Medicare cost report. Def.s Br. 7 (noting that measuring
the assessment amount against a fixed point in time keeps the assessment amount even year-toyear). The hospital assessment was created in 2010 because the State was facing a significant
budget shortfall and wanted to avoid concomitant reductions in Medicaid benefits. Pl.s Br. 13.
The Iowa Legislature worked in conjunction with Plaintiffs and other IHA member hospitals to
design a program to draw additional federal funding for Iowas Medicaid program. Id. At the
time chapter 249M was enacted, Iowa Medicaid payment rates to hospitals were among the
lowest in the country, and chapter 249M was intended to increase such payments to participating
hospitals. Id. The statute excludes state-owned hospitals, out-of-state hospitals, and designated
critical care access hospitals from participation in the trust fund. Def.s Br. 7; see also Iowa
Code 249M.2(6), .3(2). The hospital assessment collects over $34 million annually from
participating hospitals. Pl.s Br. 13. The federal government matches the assessment funds at a
ratio determined by the annual FMAP formula. Id.
Section 249M.4(3) of chapter 249M provides that funds collected in the hospital
assessment are stored in 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

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except as specifically provided for under chapter 249M. Pl.s Br. 14; Iowa Code 249M.4(3).
Section 249M.4(3) further mandates that interest or earnings on moneys deposited in the trust
fund shall be credited to the trust fund. Iowa Code 249M.4(3).
The state treasurer holds the trust fund, the Legislature controls appropriation of the
funds, and the Department is responsible for administration of the fund including
reimbursements and expenditures. See Iowa Code 249M.4(1), (2), (4). During the first year
of the assessment, the Department used the appropriated funds to increase the base rate paid to
hospitals for certain services in an amount equal to the Medicare upper limit payment for the
fiscal year beginning July 1, 2010, calculated as of July 31, 2010. Iowa Code 249M.4(5)(a)
(defining Medicare upper limit payment as the federally imposed ceiling on Medicaid
payments for inpatient and outpatient hospital services, which is the maximum reimbursement
for like services under Medicare); see also 42 C.F.R. 447.272(b), 447.321(b).

The

Legislature also appropriated money for the rebasing of reimbursement rates for inpatient and
outpatient services for the participating hospitals in 2012 and 2013. Iowa Code 249M.4(7).
Section 249M.4(9) also created the Hospital Health Care Access Trust Fund Board,
which is 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
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 national
and state consumer advocacy group. Iowa Code 249M.4(9). The Board is responsible for
overseeing the trust fund, making recommendations regarding the hospital assessment, its
calculations and payments, and uses of the trust fund moneys, and submitting an annual report to
the governor and general assembly. Id. at 249M.4(9)(b). Since its creation, the Board has

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never been convened.

The statute instructs, [t]he department shall provide administrative

assistance to the board but is silent with regard to any mechanism for convening the board. See
id.
D. Plaintiffs Request for Declaratory and Injunctive Relief
Plaintiffs Verified Petition requests a declaratory order and temporary and permanent
injunctive relief.

Pet. 1.

Plaintiffs ask the Court to find: (1) the Departments Medicaid

modernization plan is contrary to Iowa and federal law[;] (2) the Department is without legal
authority to pay hospital assessment funds to anyone other than participating hospitals, including
the managed care organizations; (3) Defendants actions violate the separation of powers, are
ultra vires, unreasonable, capricious, and contrary to law[;] and (4) the contracts awarded to the
MCOs through the RFP process are null and void because the Department is without authority to
contract in this capacity. Id. at 2123. Plaintiffs ask the Court to: (1) enjoin Defendants from
implementing the Medicaid modernization plan; (2) require that any implementation [of the
managed care model] occur through an RFP process that does not violate Iowa or federal law[,]
including use of hospital assessment funds; (3) require Defendants to cease and desist
implementation of the managed care model until all legal issues are resolved; (4) enjoin
Defendants from disbursing any hospital assessment funds other than to participating hospitals as
defined under Iowa Code section 249M.4(2); and (5) require Defendants to convene the
Hospital Health Care Access Trust Fund Board for a meeting to oversee the trust fund as
required by law. Id. Plaintiffs assert they are entitled to a temporary injunction to maintain the
status quo during this litigation. Pl.s Br. 7.
II.

LEGAL STANDARDS FOR STANDING, RIPENESS & MOOTNESS, JUDICIAL

REVIEW OF AGENCY ACTION, AND INJUNCTIVE RELIEF
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A. Standing
Standing to sue means a party must have sufficient stake in an otherwise justiciable
controversy to obtain judicial resolution on that controversy. Alons v. Iowa Dist. Court for
Woodbury Cty., 698 N.W.2d 858, 86364 (Iowa 2005) (internal quotation marks omitted)
(quoting Citizens for Responsible Choices v. City of Shenandoah, 686 N.W.2d 470, 475 (Iowa
2004) (citations omitted)). In standing, the focus is on the party, not the claim. Id. Iowa law
requires that a complaining party must (1) have a specific personal or legal interest in the
litigation and (2) be injuriously affected. Id. These two criteria are separate requirements for
standing. Id. Federal law sets out three criteria for standing:
(1) the plaintiff must have suffered an injury in factan invasion of a legally
protected interest which is (a) concrete and particularized, and (b) actual or
imminent, not conjectural or hypothetical[;] (2) there must be a causal
connection between the injury and the conduct complained of[;] and (3) it must
be likely, as opposed to merely speculative, that the injury will be redressed by a
favorable decision.
Lujan v. Defenders of Wildlife, 504 U.S. 555, 56061 (1992) (internal quotation marks and
citations omitted). The Iowa Supreme Court has recognized, the federal test for standing is not
dissimilar from our own test . . . [w]e therefore consider the federal authority persuasive on the
standing issue. Alons, 698 N.W.2d at 869.
The doctrine of standing
ensures that courts are deciding actual, specific controversies and not abstract
questions or moot issues. Standing is a rule of judicial self-restraint based on the
principle that courts should not resolve abstract questions or issue advisory
opinions; the fundamental question raised by an objection to standing is whether
the litigant is a proper party to seek adjudication of a particular issue.
59 Am. Jur. 2d Parties 29 (2015) (citations omitted); see also Hawkeye Bancorporation v.
Iowa Coll. Aid Commn, 360 N.W.2d 798, 802 (Iowa 1985) (standing is a self-imposed rule of
restraint). The doctrine guards against advisory opinions because it requires the court to
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dispose of only those issues that affect the rights of the parties present. 59 Am. Jur. 2d Parties
29.
An association may have standing to represent its members views. Iowa-Illinois Gas
and Elec. Co. v. Iowa State Commerce Commn, 347 N.W.2d 423, 42627 (Iowa 1984) (citing
Iowa Bankers Assn v. Iowa Credit Union Dept, 335 N.W.2d 439, 445 (Iowa 1983)).
Associational standing in Iowa requires: (1) affirmative demonstration of a specific, personal,
and legal interest in the subject matter as distinguished from the general interest shared by and
common to all members of the community, and (2) affirmative establishment of specific injury to
this interest by the decision. Northbrook Residents Assn v. Iowa State Dept of Health Office
for Health Planning and Dev., 298 N.W.2d 330, 332 (Iowa 1980).

Federal law recognizes an

associations standing to bring suit on behalf of its members when, (a) its members would
otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane
to the organizations purpose; and (c) neither the claim asserted nor the relief requested requires
the participation of individual members in the lawsuit. United Food and Commercial Workers
Union Local 751 v. Brown Group, Inc., 432 U.S. 544, 55253 (1996) (quoting Hunt v.
Washington State Apple Advert. Commn, 432 U.S. 333, 34142 (1977)).
B. Ripeness & Mootness
Ripeness and mootness are closely related but distinct doctrines that function to ensure
courts consider cases and controversies at the proper moment in time.

Ripeness governs

justiciability for cases that may become appropriate for a court to hear, while mootness applies to
cases that are no longer appropriate for a court to adjudicate. Both are at issue in the present
case.

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Ripeness, like standing and mootness, is a jurisdictional requirement, and if a claim is not
ripe, the court must dismiss it. See Iowa Coal Min. Co., Inc., v. Monroe Cty., 555 N.W.2d 418,
432 (Iowa 1996) (citing Triple G. Landfills, Inc., v. Board of Commrs, 977 F.2d 287, 28889
(7th Cir. 1992); Iowa Coal I, 494 N.W.2d 664, 671672 (Iowa 1996); Bakken v. City of Council
Bluffs, 740 N.W.2d 34, 37 (Iowa 1991)). The Triple G court described the ripeness doctrine
thus:
The ripeness doctrine deals with the time, if any, at which a party may seek preenforcement review of a statute or regulation. It seeks to avoid the premature
adjudication of cases when the issues posed are not fully formed, or when the
nature and extent of the statutes applications are not certain.
Triple G. Landfills, 977 F.2d at 28889. The rationale for the doctrine is two-fold. First, it
prevents courts from entangling themselves in abstract disagreements, and in the case of
regulatory action, it protect[s the parties] from judicial interference until [the agency decisions]
effects [are] felt in a concrete way by the challenged parties. Iowa Coal, 555 N.W.2d at 432
(citing Abbott Labs v. Gardner, 387 U.S. 136, 14849 (1967)). Ripeness questions require
courts to ask two questions: (1) are the relevant issues sufficiently focused so as to permit
judicial resolution without further factual development? and (2) would the parties suffer any
hardship by the postponement of judicial action? Id. (citing Triple G. Landfills, 977 F.2d at
288).
The doctrine of mootness prevents courts from adjudicating claims in which the formerly
live controversy has become resolved in some way. A moot case is one that no longer presents
a justiciable controversy because the issues involved have become academic or nonexistent.
Martin-Trigona v. Baxter, 435 N.W.2d 744, 745 (Iowa 1989) (citing Junkins v. Branstad, 421
N.W.2d 130, 133 (Iowa 1988)). The test is whether a judgment, if rendered, would have any
practical effect upon the existing controversy. Id. Mootness, like standing, is a question of
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judicial restraint. Rush v. Ray, 332 N.W.2d 325, 326 (Iowa 1983) (citing City of Des Moines v.
Public Empt Relations Bd., 275 N.W.2d 753, 759 (Iowa 1979)).
There is, however, a public interest exception to the mootness doctrine that allows
consideration of moot questions when (1) they are of great public importance and (2) are likely
to recur. Id. (citing City of Des Moines, 275 N.W.2d at 758). The first prong has sometimes
been divided in two parts, resulting in a not different but more illustrative test that should
be preferred to the two-prong test. Id. at 32627. The complete test, then, considers, (1) the
public or private nature of the question presented, (2) desirability of an authoritative adjudication
for future guidance of public officials, and (3) likelihood of future recurrence of the same or
similar problem. Id. (citing Bd. of Dirs. of Indep. Sch. Dist. of Waterloo v. Green, 147 N.W.2d
854, 856 (Iowa 1967); City of Des Moines, 275 N.W.2d at 758).
C. Judicial Review of Agency Actions
Iowa Code section 17A.19(1) authorizes judicial review of administrative agency
decisions. Iowa Code 17A.19(1) (2015). Essentially, the district court acts in appellate
capacity and may only interfere with the [agencys] decision if it is erroneous under one of the
grounds enumerated in the statute, and a partys substantial rights have been prejudiced. Meyer
v. IBP, Inc., 710 N.W.2d 213, 218 (Iowa 2006); see also Iowa Code 17A.19(10). If the court
determines that the substantial rights of the person seeking judicial relief have been prejudiced
by the agency action, [it] shall reverse, modify, or grant other appropriate relief from agency
action, equitable or legal and including declaratory relief[.] Iowa Code 17A.19(10). The
fourteen ways in which agency action can be prejudicial and the accompanying standards of
review are detailed in section 17A.19(10) of the Iowa Code. Id. at (a)(n). The standard of

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review depends on the aspect of the agencys decision that forms the basis of the petition for
judicial review. Burton v. Hilltop Care Ctr., 813 N.W.2d 250, 256 (Iowa 2012). Much depends
on the authority with which the agency is vested by its enabling statute and whether the issues on
appeal are factual, legal, or mixed questions of fact and law (i.e., a challenge to the agencys
ultimate conclusion). See Meyer, 710 N.W.2d at 219. Because there are divergent methods of
analysis, it is essential . . . to search for and pinpoint the precise claim of error on appeal rather
than lumping the fact, law, and application questions together within the umbrella of a
substantial-evidence issue. Id.
D. Injunctive Relief
Iowa Rule of Civil Procedure 1.1502 (formerly Rule 321) provides:
A temporary injunction may be allowed under any of the following
circumstances:
(1) When the petition, supported by affidavit, shows the plaintiff is
entitled to relief which includes restraining the commission or continuance
of some act which would greatly or irreparably injure the plaintiff.
(2) Where, during the litigation, it appears that a party is doing, procuring
or suffering to be done, or threatens or is about to do, an act violating the
other partys right respecting the subject of the action and tending to make
the judgment ineffectual.
(3) In any case specially authorized by statute.
Iowa R. Civ. P. 1.1502. The Iowa Supreme Court has provided comprehensive guidance
on the interpretation of Rule 1.1502.
Generally, the issuance of an injunction invokes the equitable powers of
the court and courts apply equitable principles. The standards considered
in granting temporary injunctions are similar to those for permanent
injunctions, except temporary injunctions require a showing of the
likelihood of success on the merits instead of actual success. These
traditional equitable principles are reflected in subsections (1) and (2) of
rule 1.1502. In applying these principles to temporary injunctions, courts
consider the circumstances confronting the parties and balance the harm
that a temporary injunction may prevent against the harm that may result
from its issuance.
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Max 100 L.C. v. Iowa Realty Co., Inc., 621 N.W.2d 178, 181 (Iowa 2001) (internal citations,
quotations, and brackets omitted).
One requirement for the issuance of a temporary injunction is a showing of the
likelihood or probability of success on the merits of the underlying claim. Lewis Invs., Inc. v.
City of Iowa City, 703 N.W.2d 180, 184 (Iowa 2005). A party seeking a temporary injunction
must also establish an invasion or threatened invasion of a right; that substantial injury or
damages will result unless an injunction is granted; and that no adequate legal remedy is
available. See In re Estate of Hurt, 681 N.W.2d 591, 595 (Iowa 2004); Max 100 L.C., 621
N.W.2d at 180; Iowa Pub. Serv. Co. v. Parsons, 272 N.W. 613, 617 (Iowa 1937).
A temporary injunction is not mandated where adequate redress can be afforded by a
monetary award, even though the [harm] is clearly shown to exist. Kriener v. Turkey Valley
Comm. Sch. Dist., 212 N.W.2d 526, 536 (Iowa 1973). Therefore, even if plaintiffs establish a
technical right to injunctive relief, the court should deny a temporary injunction where it would
cause serious loss to the defendant, while the injury to the plaintiffs can readily be compensated
through damages. This is known as the balance of convenience or relative hardship standard
under which the Court exercises its power with a view to the relative amount of injury to be
suffered by the parties. Id. In addition, some courts have held that the determination as to
whether a temporary injunction should issue involves consideration of the public interest. See
Dataphase Systems, Inc., v. CL Systems, Inc., 640 F.2d. 109, 113 (8th Cir. 1981) (listing the socalled Dataphase factors for evaluating a temporary injunction motion).
In sum, to issue a temporary injunction, a court must consider (1) the threat of
irreparable harm to the movant; (2) the state of balance between this harm and the injury that
granting the injunction will inflict on other parties litigant; (3) the probability that movant will
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succeed on the merits; and (4) the public interest. Id. at 11314 (Courts often address the third
Dataphase factor first as it is usually the most lengthy and complex factor.). An injunction is
an extraordinary remedy that is granted with caution and only when required to avoid
irreparable damage. Skow v. Goforth, 618 N.W.2d 275, 27778 (Iowa 2000); see Lewis Invs.,
Inc., 703 N.W.2d at 185. [T]he decision to issue or refuse a temporary injunction rests largely
within the sound discretion of the trial court. Max 100 L.C., 621 N.W.2d at 180 (internal
quotations and brackets omitted). [A] temporary injunction is a delicate matter, and the
exercise of judicial power to issue or refuse a temporary injunction requires great caution,
deliberation, and sound discretion. Id. (internal quotations omitted).
III.

ARGUMENTS OF THE PARTIES

A. Plaintiffs Arguments
Plaintiffs argue that they are entitled to an injunction under each of the three potential

grounds in Iowa Rule of Civil Procedure 1.1502. Pl.s Br. 8. Plaintiffs further state that for all
three grounds, the Court should follow the same basic analysis, with the exception that
subsection (2) does not require a showing of irreparable harm. Id. at 89. Plaintiffs also make
extensive reference to Iowa Code section 17A.19, which governs district court appellate review
of agency decisions. See Iowa Code 17A.19(10); Pl.s Br. 911. Plaintiffs use section 17A.19
to present their argument regarding the factors the Court should use to analyze their injunction
request. Id. at 1011. Because the present action is not appellate review of an agency decision,
discussion of section 17A.19 is superfluous and inapposite, and the Court will use the traditional
Dataphase factors to analyze Plaintiffs motion for a temporary injunction.
1. Likelihood of Success on the Merits

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Plaintiffs argue they will succeed on the merits of their claim because: (1) Defendants
proposed use of hospital assessment funds violates the plain, unambiguous language of Iowa
Code chapter 249M; (2) the Department has no legal authority to change the plain language of
Iowa Code chapter 249M; (3) implementation of the managed care model is an ultra vires
encroachment upon the legislative power; and (4) IHA and its member hospitals reasonably and
detrimentally relied on the Departments misrepresentation. Pls Br. 1231. Plaintiffs also argue
that the Department has had notice from the Iowa Court of Appeals that it [is] required to take
affirmative steps to enforce a legislative directive or its actions [will] be without legal authority.
Id. at 22. Thus, the Department should be on notice that it is required to adopt administrative
rules to implement to hospital assessment in accordance with Iowa Code chapter 249M. Id.
Plaintiffs first argument is that IA Health Link wrongfully diverts hospital assessment
funds to the MCOs rather than to the participating providers, violating the plain,
unambiguous language of Iowa Code chapter 249M. Pl.s Br. 14. In Plaintiffs view, the Iowa
Code provision explicitly instructs the Department to use hospital assessment funds only to
reimburse participating hospitals. Id.; see also Iowa Code 249M.4(2). Plaintiffs argue the
hospital assessment is to be used only to ensure that participating hospitals are reimbursed for
Medicaid services at the upper payment limit for inpatient and outpatient health care services.
Id. Thus, any diversion of hospital assessment funds or routing of such funds through entities
other than the participating hospitals violates the statutory language. Id.
Further, Plaintiffs argue that the Departments contracts with the MCOs use hospital
assessment funds to pay capitation rates in direct conflict with the statutory limitation. Pl.s Br.
15. Specifically, Plaintiffs argue: (1) the contracts are silent as to the mechanism by which the
MCOs or the Department will reimburse the hospitals as required by Iowa Code chapter 249M;
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(2) the contracts give the MCOs complete discretion as to how to use the hospital assessment
funds; and (3) their reimbursement will change from the upper limit under chapter 249M to the
floor under the MCO scheme. Id. Plaintiffs rely on language present in the Departments RFP
and the subsequent MCO contracts:
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.
Id.
Plaintiffs second and third arguments are related. The second argument is that statutory
and regulatory changes are required to facilitate the legal implementation of the managed care
model, and the Department is without power to implement the program prior to enactment of
those changes by the Legislature. Pl.s Br. 24. The third argument is that because of the
necessity of legislative action, implementation of the managed care model by Defendants is an
encroachment on legislative responsibilities in violation of the separation of powers. Id. As
such, contracting to pay the MCOs a capitation rate using hospital assessment funds amounts to
an illegal raiding of the trust fund, and the associated contracts are null and void. Id. at 2425.
Plaintiffs argue during the 2015 appropriations process, the Legislature passed language
governing the Departments obligations with regard to the transition to managed care. Id. The
Legislature directed that the Department:
1. The department of human services shall include in any Medicaid managed care
contract entered into on or after July 1, 2015, a mechanism by which the capitated
payment received by the managed care contractor reflects the amount necessary to
continue reimbursement of participating hospitals by managed care contractors in
accordance with the provisions of chapter 249M. Such reimbursement shall
preferably be provided through lump sum payments to participating hospitals.
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Notwithstanding any provisions of chapter 249M to the contrary, the department

may make administrative modifications to the hospital health care access
assessment program to comply with this section. The department of human
services shall work with participating providers, including health systems and the
Iowa hospital association, to effectuate this section.
2. The department of human services shall submit recommendations for any
changes in statute or rules regarding the hospital health care access assessment
program necessitated by the transition to managed care to the individuals
identified in this Act for submission of reports by December 15, 2015.
2015 Iowa Acts ch. 137 115. Plaintiffs argue that the Department has not followed these
directives. Pl.s Br. 2024. Because the Department is unable to modify chapter 249M by itself,
it must wait for the Legislature to do so before implementing the managed care program. Id. at
24.
Plaintiffs final argument regarding their likelihood of success on the merits is a
promissory estoppel claim. Pl.s Br. 27. Plaintiffs outline an extensive period of cooperation
between the IHA, the Department, the Legislature, and the Branstad administration during the
years immediately prior to 2015. Id. at 2728. During this period, all parties worked to create
mutually beneficial Medicaid delivery programs pursuant to the Patient Protection and
Affordable Care Act. Id. at 27 (citing Patient Protection and Affordable Care Act, 42 U.S.C.
18001 (2010)). Plaintiffs assert that they significantly invested in necessary infrastructure
including increased staffing, health information technology, documentation and reporting,
additional extended provider hours, and member outreach efforts to implement the program
designed by the group. Id. at 28. They allege that Defendants were aware as early as January
2014 that such investments would be rendered meaningless by the transition to a managed care
model during 2015, and that the Department duplicitously took steps to conceal that reality from
Plaintiffs.

Id. at 29.

Plaintiffs argue that because they reasonably relied on Defendants

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misrepresentations to their detriment, Defendants should be estopped from implementing the

managed care program. Id. at 27.
Plaintiffs acknowledge that asserting promissory estoppel against a government actor is
rare because of the concern that such a claim may negatively impact the governments ability to
enforce the law, which would in turn have a negative impact on the entire citizenry. Pl.s Br. 30.
However, they argue that there is no outright rule against asserting promissory estoppel against
a state actor; instead, such claims are held to a higher legal standard. Id. Plaintiffs argue
promissory estoppel may be asserted against a state actor when the interest of a party under
standards of decency, honor, and reliability in their dealings with a government body outweighs
the governments right to enforce the law. Id. In this case, Plaintiffs assert: (1) that Defendants
behavior was so egregious as to fall below standards of decency, honor and reliability,
facilitating the promissory estoppel claim; and (2) because implementation of the managed care
program is contrary to the law, the standard concern regarding preventing government
enforcement of the law is not present in this situation. Id. at 31. Therefore, Defendants should
be estopped from implementing the managed care program. Id.
2. Irreparable Harm
Plaintiffs allege that a conflict between federal and state law will lead to irreparable
financial injury to them. Pl.s Br. 3136. First, Plaintiffs argue that payment of hospital
assessment funds to MCOs violates state law because chapter 249M limits payment of hospital
assessment funds to participating hospitals only. Id. According to Plaintiffs, the illegal
disbursement of funds to which they are entitled under Iowa law represents an irreparable harm
in and of itself. See id. at 3334. However, Plaintiffs second argument compounds the alleged

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irreparable harm.

Id. At 3136.

Plaintiffs argue that once hospital assessment funds are

disbursed to the MCOs through the capitation rates, federal law (specifically 42 C.F.R. 438.60)
will prevent any recovery of illegally disbursed hospital funds. Id. Plaintiffs argue the federal
regulation prohibits the Department from making payments to any entity outside the corporations
with which it has contracted for services available under the contract.

Id.

In Plaintiffs

estimation, the interplay between these two laws puts them between the proverbial rock and a
hard placestate law requires hospital assessment funds be disbursed in a specific manner but
federal law prevents the recovery of those funds (via a lawsuit) even if the Department violates
the state law by disbursing the funds to the MCOs.

Id. As such, Plaintiffs argue that if

Defendants are allowed to use hospital assessment funds to pay capitation rates to the MCOs,
Plaintiffs will have no legal remedy available to recoup the funds lost. Id. Third, they argue that
MCOs are not under any obligation to repay hospital assessment funds to Plaintiffs because their
contracts with the Department are silent on the issue. Id. Finally, they argue that because the
lack of readiness for the transition to managed care will result in an inadequate network of health
care providers, Medicaid patients will be driven to seek treatment in Plaintiffs emergency
rooms, which may result in insufficient payments to Plaintiffs if the visits do not qualify as
emergencies under the relevant legal standard. Id.
Plaintiffs acknowledge that financial harm is not normally a sufficiently irreparable
injury to justify the issuance of a temporary injunction. Pl.s Br. 32. However, they argue that
extreme circumstances of financial loss, even if recoverable, could amount to irreparable
injury under certain circumstances. Id. (citing Grinnell College v. Osborn, 751 N.W.2d 396,
402 (Iowa 2008) (citing Wisconsin Gas Co. v. Fed. Energy Regulatory Commn, 758 F.2d 669,

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674 (D.C.Cir. 1985)). Finally, Plaintiffs argue that under Rule 1.1502(2), they do not need to
show irreparable harm.
3. Balance of Harms
Plaintiffs argue the Department will not suffer any harm if the injunction is granted
because the Department is not prepared or able to implement the managed care program on
January 1, 2016. Pl.s Br. 37. Plaintiffs argue that because the Departments projected $47
million in savings is without basis or fact, there can be no financial harm to the State if the
managed care program is delayed. Id. Plaintiffs argue that even if there were financial harm due
to the loss in projected savings, the States $935 million Cash Reserve and Economic Emergency
Funds could cover the potential loss handily. Id. at 40.
4. The Public Interest
Plaintiffs argue that it is in the publics best interest for the Court to enjoin the
implementation of the Medicaid modernization plan. Pl.s Br. 4245. Plaintiffs state that given
the Departments poor state of readiness, the injunction will protect the most vulnerable Iowans
from potential gaps in coverage of critical medical services. Id. Furthermore, Plaintiffs argue
that even if the Department were ready to move forward with implementation, the program is
detrimental to the publics interest because it decreases the efficiency of Iowas Medicaid
program, as evidenced by the increase from 4% administrative costs to 12% administrative costs,
without a proven, corresponding increase in efficiency or better outcomes. Id.
B. Defendants Arguments

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Defendants argue that Plaintiffs are not entitled to injunctive relief or the requested legal
findings. Def.s Br. 2. Regarding the appropriate legal standard to apply to Plaintiffs Motion
for a Temporary Injunction, Defendants correctly state that any discussion of Iowa Code section
17A.19 is inapplicable to this case because this is not judicial review of agency action. Id. at 2
n.1.

Further, Defendants argue that because Plaintiffs allege an irreparable harm, only

subsection (1) of Rule 1.1502 is relevant. Id.

1. Likelihood of Success on the Merits
Defendants characterize Plaintiffs arguments on the merits as two-fold: (1) Plaintiffs
argue the Department promised that the Medicaid program would be administered in a certain
way and that there can be no change; and (2) Plaintiffs argue that the move to managed care will
result in an illegal disbursement of the provider assessment funds and thus the contracts with the
MCOs are void. Def.s Br. 9. In turn, Defendants argue Plaintiffs cannot succeed on the merits
of either argument because: (1) the promissory estoppel claim fails as a matter of law; (2) the
promissory estoppel claim fails factually; and (2) the Legislature has legally directed the
Department to transfer the provider assessment funds to the MCOs for payment to the
participating hospitals. Id. at 911.
First, Defendants argue sovereign immunity prevents assertion of promissory estoppel
against the State. Def.s Br. 11. See also Hawkeye By-Products, Inc., v. State, 419 N.W.2d 410,
412 (Iowa 1998) (denying recovery against the State based on a theory of promissory estoppel);
In re McAllisters Estate, 214 N.W.2d 142, 146 (Iowa 1974) (holding that the closely-related
doctrine of equitable estoppel [i]s not generally invoked against the state even when an
injustice will result without its application).

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Second, Defendants argue that the promissory estoppel argument lacks factual merit
because the key components of Iowas current Medicaid delivery system will continue to exist
under the new managed care model. Def.s Br. 11 (mentioning health homes, Accountable Care
Organizations (ACOs), and the general principles behind relevant grants). Defendants state
that the MCOs are contractually required to provide all services that are currently available to
Medicaid beneficiaries, specifically including health homes and integrated health homes. Def.s
Br. 1112.

Further, the ACOs that were created following the enactment of the Patient

Protection and Affordable Care Act will be integrated into the managed care programthe MCO
contracts require that at least 40% of MCO members are served by a value-based purchasing
organization by 2018. Def.s Br. 13 (explaining the ACO concept and its integration into the
managed care model). Finally, Defendants argue that Plaintiffs real complaint is not with the
continuation of the services they are providing, but with the payment they will receive in the
future for providing those services. Def.s Br. 14.
Third, Defendants argue that the Legislature has legally directed them to transfer the
hospital assessment funds to the MCOs for payment to the participating hospitals. Def.s Br. 9.
During the 2015 legislative session, the Legislature passed S.F. 505, and Governor Branstad
signed the bill into law on July 2, 2015. Id. It contains the following language:
Sec. 115. HOSPITAL HEALTH CARE ACCESS ASSESSMENT PROGRAM
TRANSITION TO MANAGED CARE.
1. The department of human services shall include in any Medicaid managed care
contract entered into on or after July 1, 2015, a mechanism by which the
capitated payment received by the managed care contractor reflects the amount
necessary to continue reimbursement of participating hospitals by managed care
contractors in accordance with the provisions of Chapter 249M. Such
reimbursement shall preferably be provided through lump sum payments to
participating hospitals. Notwithstanding any provisions of 249M to the contrary,
the department may make administrative modifications to the hospital health care
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access assessment program to comply with this section. The department of

human services shall work with participating providers, including health systems
and the Iowa hospital association, to effectuate this section.
2. The department of human services shall submit recommendations for any
changes in statute or rules regarding the hospital health care access assessment
program necessitated by the transition to managed care to the individuals
identified in this Act for submission of reports by December 15, 2015.
2015 Iowa Acts, ch. 137, 115 (emphasis added). Defendants also point out that during the
2015 session, the Legislature appropriated the money in the hospital assessment fund to the
Department. 2015 Iowa Acts, ch. 137, 6.
Defendants argue that the Department, through its actuary, has included the amount of
the hospital assessment in the capitation rates that will be paid to the MCOs. Def.s Br. 10
(citing Slaybaugh Aff.). Further, Defendants argue that the MCOs are contractually bound to
reimburse the hospitals in the same amount they were being paid on October 1, 2015. Id. (citing
Def.s Ex. 1, p. 107 of 257). According to Defendants, once managed care is implemented,
hospitals will submit their claims to the MCOs rather than to the Department and will be
reimbursed in the same amount they would have had they submitted identical claims to the
Department. Id. Critically, chapter 249M is set to expire on June 30, 2016. Id.; see Iowa Code
249M.5. Defendants argue that no non-participating hospitals will receive hospital assessment
funds. Def.s Br. 10 11. Finally, Defendants argue that Plaintiffs request of the Court amounts
to asking the Court to overturn a legislative directive and clear legislative intent. Id. at 11.
2. Threat of Irreparable Harm
Defendants also argue Plaintiffs will not suffer an irreparable harm if managed care is
implemented as scheduled. Def.s Br. 14. It has long been generally recognized that loss of
revenue does not constitute an irreparable injury, at least in part because legal remedies are
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available for recovering damages. Def.s Br. 14 (citing Teleconnect Co. v. Iowa State Commerce
Commn, 366 N.W.2d 511, 514 (Iowa 1985); IES Utils., Inc., v. Iowa Dept of Revenue & Fin.,
545 N.W.2d 536, 541 (Iowa 1996) (citing Salsbury Lab v. Iowa Dept of Envtl. Quality, 276
N.W.2d 830, 837 (Iowa 1979)); Virginia Petroleum Jobbers Assn v. Fed. Power Commn, 259
F.2d 921, 925 (U.S. D.C. 1958) (mere injuries, however substantial, in terms of money, time
and energy necessarily expended in the absence of a stay, are not enough.)). Defendants argue
that Plaintiffs have not alleged any non-financial injury. Def.s Br. 14 (citing Pet. 98).
3. Balance of Harms Between the Parties
Defendants argue that the Department, the State, the MCOs, and hundreds of thousands
of Medicaid beneficiaries will suffer irreparable injury if the injunction is granted. Def.s Br. 15.
The State, the Department, and the MCOs will suffer injury because each has put substantial
effort into preparing for a January 1, 2016 start date, and [t]o put a stop to this extensive effort
at this late date would create an untenable situation. Id. at 1516. Further, the delay in
implementation would create a multi-million dollar budget deficient for the Department due to
the loss in projected savings. Id. at 16. The Medicaid beneficiaries will suffer injury because the
period of transition, and its accompanying uncertainty, will be extended.

See id. at 15.

Defendants argue that when the harms are weighed against each other, the potential injury to the
Department, the State, the MCOs, and Medicaid beneficiaries outweighs the financial injury
claimed by Plaintiffs. Id. at 1718.
4. Public Interest
Finally, Defendants argue that an injunction is not in the publics best interest. Def.s Br.
18. Defendants argue: (1) additional delay would cause public confusion and delay for Medicaid
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beneficiaries and providers; (2) the significant budgetary impact on the Department would cause
financial ripples through the entire State government; and (3) an injunction would cause a major
portion of Iowas health care system to be indefinitely stuck in limbo.

Id. at 1819.

Defendants argue that it is inappropriate to grant an injunction because the public should not
have to suffer these detrimental impacts so that Plaintiffs may maintain their financial interest in
Iowas Medicaid delivery system. Id. at 19.
IV.

ANALYSIS
This case presents procedural questions regarding standing, ripeness, and mootness. The

Court will consider the procedural matters before discussing the merits of Plaintiffs application
for a temporary injunction. The Court notes that the bases of its ruling relating to standing,
ripeness, and mootness are limited to the motion for a temporary injunction and do not extend to
the entire lawsuit.
A. Standing
In their brief, Defendants argue that both the IHA and Kirk Norris, named in his capacity
as a member of the Board, do not have standing to sue for the relief specified. Def.s Br. 20 (In
this case, neither the Iowa Hospital Association nor Kirk Norris have a legally cognizable injury.
They are not among those who will be impacted by the manner in which the hospital assessment
is paid and can thus suffer no possible harm.). Defendants do not challenge the individual
hospital Plaintiffs standing. See id. The Court concludes that the IHA does have associational
standing to sue, but Norris does not.
The IHA has associational standing to sue under Iowa requirements. First, the IHA has
the requisite specific, personal, and legal interest in the Medicaid modernization plan as
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distinguished from that of the general community. The shift to a managed care model will
radically change the way Medicaid services are administered and delivered in Iowa. Even if the
IHA and its member hospitals are not injured financially by the transition, they must still adapt to
a new business model that will impact information technology systems, infrastructure, physical
facilities, and personnel levels, training, and retention. Such a switch will require the investment
of both money and time. Iowans general interest in the Medicaid transition is limited to the way
in which an efficient, well-run Medicaid system ensures the most vulnerable citizens receive
adequate medical care and promotes the responsible use of tax dollars for the public good.
Second, Plaintiffs are injuriously affected by the transition to a managed care model. While
Plaintiffs may not have shown the type of irreparable injury that warrants an injunction, they
have certainly demonstrated that the transition will disrupt multiple aspects of their business and
change the amount and manner of their reimbursement. Especially after the enactment of the
Affordable Care Act, Medicaid is a central pillar of the health care industry in every state. The
shift from a fee for services model to a managed care model will necessarily entail changes of
many if not all actors in the marketplace. At the very least, the IHA and its members must
change their organizations to function within the new model; at worst, member hospitals stand to
lose significant reimbursement dollars.
The IHA also has standing to sue for a temporary injunction under federal associational
standing requirements. First, IHA members have standing to sue in their own right. As discussed
immediately above, the member hospitals meet Iowa standing requirements because they have a
specific personal and legal interest in the litigation, and they are injuriously affected. The
member hospitals also meet federal standing requirements. As outlined in Plaintiffs brief, their
injury is concrete, particularized, and actual (the injury is far from conjectural or hypothetical).
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See Pl.s Br. 16, 1920 (Although Plaintiffs face both ripeness and mootness issues, federal law
requires that the injury be actual or imminent, not both. While not imminent, the injury is
actual.). There is a clear causal connection between the managed care implementation and the
injury. Further, now and at the time of filing, an injunction would redress member hospitals
injury by preventing the transition from taking place. Second, the IHA exists to represent the
interests of all 118 Iowa hospitals, and in this suit, it seeks to protect those interests as they relate
to the administration and delivery of Medicaid benefits in Iowa. The interests the IHA is seeking
to protect are germane to the organizations purpose. Third, while eleven member hospitals are
participating in this suit, neither the claims asserted nor the relief requested require the
participation of the individual members of the IHA.
Kirk Norris is named as a plaintiff in his capacity as a member of the Board. Both Iowa
and federal law require some type of injury for standing, and Norris does not allege a sufficient
injury. Norris argument is essentially that by refusing to call a meeting of the Board, the
Department is depriving him of his statutory right to participate in the administration and
governance of the hospital assessment trust fund under chapter 249M. While Norris status as a
member of the Board provides him with the necessary specific personal or legal interest in the
litigation, it is doubtful that he is injuriously affected under Iowa or federal law.
First, Norris and the Board have played no role in the administration and governance of
the hospital assessment trust fund even though they could have done so at any time since the
inception of the Board. The Board was created in 2010, and until the current conflict, neither
Norris nor any other actor has attempted to convene the Board. It is difficult to argue that a
concrete, particularized, actual and/or imminent injury has arisen from behavior that has not
changed and was unobjectionable for years prior to this conflict. Second, the statute does not
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confer responsibility for convening the Board on any specific person or entity, nor does it
prevent Norris or any other actor from convening the Board. The Departments only statutory
responsibility with regard to the Board is to provide administrative assistance. See Iowa Code
249M.4(9)(c). Third, the Department is correct in its assertion that Norris cannot claim a
financial injury from the shift to managed care because in his capacity as a member of the Board,
he is not injured by a change in the manner the hospital assessment is distributed. Finally, while
a court order to convene the Board would redress Norris alleged injury, it is worth noting that so
would an independent decision from the Board members to meet and fulfill their statutory
responsibilities.

Norris has not alleged an injury sufficient to have standing to sue for a

temporary injunction.
B. Ripeness & Mootness
A temporary injunction is a preventative remedy to maintain the status quo of the
parties prior to final judgment and to protect the subject of the litigation. Lewis Investments,
Inc. vs. City of Iowa City, 703 N.W. 2nd 180, 184 (Iowa 2005). The issuance of a temporary
injunction presumes that there is an emergency or other special reason for such an order before
the case can be regularly heard. 42 Am. Jur. 2d Injunctions, Sec. 8 (2000).

While the

application for a temporary injunction may have been ripe when Plaintiffs filed suit, it is no
longer ripe. There is no longer any present need for some extraordinary remedy to maintain the
status quo of the parties prior to final judgment or to protect the subject of this litigation. There
is no longer any present emergency. CMS ordered Iowa to delay implementation of the managed
care model until March 1, 2016. Pl.s Ex. 30. The 2016 Iowa legislative session begins on
January 11, 2016. See 86th Iowa General Assembly, 2016 Iowa Legislature Session Timetable,
Legislative Services Agency, available at https://www.legis.iowa.gov/. At the core of Plaintiffs
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argument is the assertion that various Iowa statutes and administrative regulations prohibit the
legal implementation of the managed care model. Because the Department cannot implement the
new program until March 1st, the Legislature has approximately six weeks to bring Iowa statutes
and regulations in compliance with the managed care model. This case is not ripe because
further factual development could significantly impact judicial resolution of the controversy.
Additionally, neither party will suffer any hardship by the postponement of judicial action
because CMS has already delayed the implementation for sixty days.
In conjunction with the ripeness discussion, the Court notes Plaintiffs argument
regarding Exceptional Persons v. Iowa Dept of Human Servs., 2015 WL 5970332 (Iowa App.
Oct. 14, 2015). While Exceptional Persons is currently pending further review by the Iowa
Supreme Court, Plaintiffs correctly characterize the Iowa Court of Appeals holding: the case
demonstrates that [the Department] has had notice during this period that it was required to take
affirmative steps to enforce a legislative directive or its action would be without legal authority.
Pl.s Br. 22. However, because CMS delayed implementation of the managed care model until
March 1, 2016, both the Legislature and the Department now have additional time to bring Iowa
statutes and administrative regulations into compliance with Governor Branstads vision for
Medicaid modernization. There is too much potential for the factual situation to change for the
controversy to be ripe at this time.
The case is also, at this point in time, moot. Regardless of whether the Court denies or
grants the temporary injunction, the Department cannot implement the managed care model until
March 1, 2016, at the earliest. This Courts judgment on the merits would have no immediate
practical effect upon the existing controversy. Because this issue will likely recur, the Court will
discuss whether the case falls into the public interest exception to the mootness doctrine. The
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case presents a public question of great importance that is likely to recur in the same or a very
similar format. However, for the same reasons supporting the Courts conclusion that the matter
isnt ripe, the Court is presently unable to say that its adjudication would be desirable or that the
same or similar problems are likely to recur. The factual situation is likely to change between
now and March 1, 2016the Legislature may change the laws, the Department will become
more prepared for the transition, and courts will continue to adjudicate the numerous legal
challenges to the Governors Medicaid modernization plan. For these reasons, this case does not
fall into the public interest exception to the mootness doctrine.
C. Judicial Review of Agency Action
Once the Department fully denied Plaintiffs request for declaratory relief, Plaintiffs had
two options for further legal action. See Def.s Br. 2 n.1. They could either file for judicial
review of the agency action or they could file a new, original lawsuit. See Campbell v. Iowa
Beer and Liquor Control, 366 N.W.2d 574, 576 (Iowa 1985). The two types of action are
mutually exclusive by definitiona judicial review action requires the court to act in an
appellate capacity, which it cannot do while exercising original jurisdiction over a new lawsuit.
See id. (noting an original action may not be piggy backed onto a judicial review proceeding)
(citing Black v. Univ. of Iowa, 362 N.W.2d 459, 464 (Iowa 1985)). As Defendants correctly
note, Plaintiffs have not complied with the requirements of Iowa Code section 17A.19 to bring
this as a judicial review action. See Def.s Br. 2 n.1. This case is not before the Court on appeal
from action by an administrative agency, so the Court is not acting in an appellate capacity for
judicial review.

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Because this is not a judicial review action, the Court will not analyze any claims by legal
standards related to administrative appeals. This includes both any argument under Iowa Code
section 17A.19 and Plaintiffs argument that Grinnell Coll. v. Osborn justifies the use of
financial harm as an irreparable injury. See Iowa Code 17A.19(10); 751 N.W.2d 396 (Iowa
2008). First, the Iowa Supreme Courts holdings in Grinnell College were within the context of
judicial review of workers compensation action under Iowa Code section 17A.19 , so the
holdings are inapplicable to this case. Id. at 40203. Second, even if Grinnell College were
applicable, the situation is not analogous enough to transform Plaintiffs financial harms into an
irreparable injury. In Grinnell College, the absence of an injunction during the pendency of the
litigation was likely to deprive one party of its ability to recover the money in issue should that
party prevail at the end of the litigation. Id. Here, no such concern exists. As Plaintiffs stated,
the State of Iowa is financially healthy and has cash reserves and emergency funds from which to
draw any damages Plaintiffs may recover in the future.
D. Merits of Plaintiffs Application for Injunctive Relief
Because Plaintiffs claims are both unripe and/or moot, it is not necessary for the Court to
reach the merits of their motion for a temporary injunction. However, even if the claims were
ripe and/or not moot, the Court would deny the motion for a temporary injunction because
Plaintiffs have not demonstrated irreparable harm.
1. Irreparable Harm Is Required Under Both Subsections (1) and (2)
of Iowa Rule of Civil Procedure 1.1502
In their Petition, Plaintiffs ask the Court to permanently enjoin the Department from
implementing Governor Branstads Medicaid modernization plan. Pl.s Pet. 21, 22(B). In the
interim, Plaintiffs ask the Court to issue a temporary injunction to preserve the status quo during
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the pending litigation. Id. at 21. In Max 100 L.C. v. Iowa Realty Co., Inc., the Iowa Supreme
Court comprehensively discussed the issuance of temporary injunctions under Iowa Rule of Civil
Procedure 321 (now Iowa Rule of Civil Procedure 1.1502). See 621 N.W.2d 178, 181 (Iowa
2001). However, it is well-settled that the issuance of temporary injunctions is largely within the
sound discretion of the trial court, and the rule is only the starting point of the analysis. Id. at
180. The Rule identifies three potential circumstances under which a temporary injunction may
be appropriate: (1) an act causing great or irreparable harm[;] (2) the violation of a right
tending to make the judgment ineffectual[;] and (3) [i]n any case specially authorized by
statute. Iowa R. Civ. P. 1.1502.
After presenting the rule, the Iowa Supreme Court stated, the issuance of an injunction
invokes the equitable powers of the court and courts apply equitable principles. Max 100, 621
N.W.2d at 181. Notably, the Iowa Supreme Court said, [t]hese traditional equitable principles
are reflected in subsections (a) and (b) of rule 321. Id. (corresponding to subsections (1) and (2)
of the rule today). The Court only deviated from traditional equitable principles when
analyzing claims under subsection (c), because when the Legislature imposes a duty to grant an
injunction via statute, the conditions specified in the statute supersede the traditional equitable
principles. Id. (Again, because this is not a judicial review action, Iowa Code section 17A.19
cannot justify the granting of a temporary or permanent injunction in this case.) Under
traditional equitable principles, temporary injunctions require a showing of a likelihood of
success on the merits of the underlying claim. Id. at 181. Here, the underlying claim is a request
for a permanent injunction. Pl.s Pet. 2123. Because their ultimate request is for a permanent
injunction, the equitable factors Plaintiffs must satisfy include demonstrating irreparable harm.
See Max 100, 621 N.W.2d at 178.
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Irreparable harm is the most important requirement for issuance of a permanent

injunction, and it must be likely (not merely possible) and substantial. Winter v. Natural Res.
Def. Council, Inc., 555 U.S. 7, 2021 (2008); see also 42 Am. Jur. 2d Injunctions 35 (2015).
Whether or not the party has another opportunity for legal relief is an important consideration in
whether or not harm is irreparable. See Johnson v. Pattison, 185 N.W.2d 790, 79798 (Iowa
1971). Because permanent injunctive relief is extraordinary, it is only granted when there is no
other way to avoid irreparable injury to the plaintiff. Lewis Investments, Inc. v. City of Iowa
City, 703 N.W.2d 180, 185 (Iowa 2005) (citing Planned Parenthood of Mid-Iowa v. Maki, 478
N.W.2d 637, 639 (Iowa 1991); Myers v. Caple, 258 N.W.2d 301, 30405 (Iowa 1977)).
Therefore, if Plaintiffs have an adequate remedy at law, injunctive relief is not available. Id.
(citing Opat v. Ludeking, 666 N.W.2d 597, 603 (Iowa 2003); Sergeant BluffLuton Sch. Dist. v.
City of Sioux City, 562 N.W.2d 154, 156 (Iowa 1997)).
In their Brief, Plaintiffs argue that they are entitled to an injunction under all three
subsections of Iowa Rule of Civil Procedure 1.1502. In particular, they argue that under
subsection (2) of the Rule, they do not need to show irreparable injury. Plaintiffs cite no legal
authority for this proposition. Even if their intention was to somehow bolster this hypothesis
with reference to Iowa Code section 17A.19, any authority related to section 17A.19 is
unconnected to this case because this is not a judicial review action.
Because Plaintiffs underlying claim is for a permanent injunction, and a permanent
injunction requires a showing of irreparable harm for success on the merits, Plaintiffs must show
an irreparable injury to succeed even under subsection (2) of the Rule. See Max 100, 621
N.W.2d at 178.

Even if 1.1502(2) removes the explicit irreparable injury requirement at the

first stage of analysis (i.e. in relation to the Rule itself), because Iowa courts subsequently apply
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traditional equitable principles when evaluating whether there is a likelihood of success on the
merits of the application for a permanent injunction, the irreparable injury requirement is revived
for the second stage of analysis. See id.
2. Plaintiffs Have Not Demonstrated Irreparable Harm
Plaintiffs are unlikely to succeed on the merits of their application for a permanent
injunction because they have failed to demonstrate any irreparable harm. All of Plaintiffs
alleged individual and collective harms are financial in nature. It is axiomatic that financial harm
can be rectified through suits at law for damages. See General Motors Corp. v. Harry Browns,
L.L.C., 563 F.3d 312, 31819 (8th Cir. 2009) (Irreparable harm occurs when a party has no
adequate remedy at law, typically because its injuries cannot be fully compensated through an
award of damages.).

If the Department transitions from the current model of Medicaid

administration to a managed care model, much about the flow of money through Iowas health
care marketplace will change. Due to the nature of the managed care model, Plaintiffs will no
longer be working with Iowas government to provide health care to vulnerable Iowansthey
will be working with private, for-profit corporations that the Department has endowed with
significant powers of negotiation and contracting. The manner and rate of reimbursement will
likely change, as will the needed infrastructure and business organization. The CMS-mandated
delay of the implementation means that Plaintiffs will not experience any injury due to the
transition and alterations in the marketplace until at least March 1, 2016. However, even if
financial injury does occur after implementation, the harm is simply not irreparable because
Plaintiffs could be made fully whole through an action for damages.
Plaintiffs themselves note that the State of Iowa has ample cash reserves and an economic
hardship fund. If Plaintiffs are injured financially, they have a readily available remedy at law
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through a suit for damages. Even if Plaintiffs argument that there is no legal way to recover the
hospital assessment funds once the funds are disbursed to the MCOs is true, damages for such a
transgression could be paid from the States cash reserve or economic hardship funds.
Regardless of how the remaining factors may balance between the parties, Plaintiffs cannot
prevail on their applications for a temporary or permanent injunction because they have not
shown any irreparable harm.
V.

JUDGMENT
A. CONCLUSION
Considering the arguments of the parties and evidence submitted at hearing, Plaintiffs

claims are not ripe and/or are moot. Further, even if Plaintiffs claims are ripe and/or not moot,
Plaintiffs have not established the elements necessary for the Court to grant a temporary
injunction; in particular, Plaintiffs have not demonstrated any irreparable harm.
B. JUDGMENT
IT IS THEREFORE THE ORDER OF THIS COURT that Plaintiffs Application for
Temporary Injunction is DENIED.
DATED: December 31, 2015
______________________________
ROBERT B. HANSON, District Judge
Fifth Judicial District of Iowa

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Copies to:
Jeffrey S. Thompson, Solicitor Gen. of Iowa
Diane M. Stahle, Special Asst. Attorney Gen.
Hoover Building, Second Floor
1305 East Walnut Street
Des Moines, Iowa 50319
Kirk S. Blecha
Linsday K. Lundholm
Baird Holm LLP
1700 Farnam Street, Suite 1500
Omaha, Nebraska 68102-2068
F. Richard Lyford
Richard A. Malm
Dickinson Law
699 Walnut Street, Suite 1600
Des Moines, Iowa 50309

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State of Iowa Courts

Type:

OTHER ORDER

Case Number
CVCV050830

Case Title
IOWA HOSPITAL ASSOCIATION ET AL V CHARLES PALMER
So Ordered

Electronically signed on 2015-12-31 13:24:55

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