Legacy Community Health Services, Inc. v. Charles Smith, Executive Commissioner, Texas Health and Human Services Commission

Section 330 of the Public Health Service Act provides federal grants for federally-qualified health centers (“FQHCs”) to provide primary medical care to Medicaid and other patients in medically underserved areas, regardless of a patient’s ability to pay. 42 U.S.C. § 254b. So that States do not divert those federal grants to subsidize their own Medicaid obligations, Congress provided in 42 U.S.C. §§ 1396a(bb)(1)-(5) that States must fully reimburse FQHCs for all services they provide to Medicaid beneficiaries—whether the FQHCs are in or out of the State’s Medicaid managedcare network. The First, Second, Third, Fourth, and Ninth Circuits hold that States cannot avoid the duty to fully reimburse FQHCs under 42 U.S.C. §§ 1396a(bb)(1)-(5), regardless of how they structure their managed-care network or whether an FQHC is in or out of that network. In the decision below, the Fifth Circuit held the opposite: that a State can structure its managed-care network so as to avoid its duty to fully reimburse FQHCs. The question presented is: Whether 42 U.S.C. §§ 1396a(bb)(1)-(5) impose an independent duty on States to fully reimburse FQHCs for all services they provide to Medicaid beneficiaries regardless of how a State structures its managed-care network or whether the FQHCs are in or out of that network.