Opinions of the United
1999 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


11-30-1999

Childrens Seashore v Waldman
Precedential or Non-Precedential:

Docket 99-5024




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Recommended Citation
"Childrens Seashore v Waldman" (1999). 1999 Decisions. Paper 312.
http://digitalcommons.law.villanova.edu/thirdcircuit_1999/312


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Filed November 30, 1999

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 99-5024

CHILDREN'S SEASHORE HOUSE,
       Appellant

v.

WILLIAM WALDMAN, COMMISSIONER OF THE NEW
JERSEY DEPARTMENT OF HUMAN SERVICES; KAREN
SQUARRELL, ACTING DIRECTOR, OF THE NEW JERSEY
DEPARTMENT OF HUMAN SERVICES, DIVISION OF
MEDICAL ASSISTANCE

On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civ. No. 98-02377)
District Judge: Honorable Anne E. Thompson

Argued September 17, 1999

BEFORE: GREENBERG, SCIRICA, and RENDELL,
Circuit Judges

(Filed: November 30, 1999)
       Mark H. Gallant (argued)
       Kimberly A. Bane
       Cozen and O'Connor
       The Atrium
       1900 Market Street
       Philadelphia, PA 19103

        Attorneys for Appellant

       John J. Farmer, Jr.
       Attorney General of New Jersey
       Nancy Kaplen
       Assistant Attorney General
       Rhonda S. Berliner-Gold (argued)
       Mary A. Hurley
       Deputy Attorneys General
       R.J. Hughes Justice Complex
       P.O. Box 112
       Trenton, N.J. 08625

        Attorneys for Appellees

OPINION OF THE COURT

GREENBERG, Circuit Judge.

I. STATEMENT OF THE CASE

Appellant, Children's Seashore House ("CSH"), a
Philadelphia hospital that until 1990 had been located in
Atlantic City, New Jersey, provides acute medical
rehabilitation care to seriously injured or ill pediatric
patients. CSH brought this action in the district court on
May 8, 1998, seeking declaratory and injunctive relief to
compel the New Jersey Department of Human Services to
make disproportionate share hospital ("DSH") adjustments
on account of CSH's treatment of Medicaid enrollees from
New Jersey. In particular, CSH sued the commissioner of
the Department and the director of its Division of Medical
Assistance ("New Jersey") under 42 U.S.C.S 1983 in their
official capacities to challenge New Jersey's amendment to

                                  2
its Medicaid Plan effective September 20, 1996, which
provides for the denial of DSH payments to hospitals
located outside of New Jersey. CSH alleged that this policy
violated CSH's rights under Title XIX of the Social Security
Act, 42 U.S.C. SS 1396 et seq. ("Medicaid Act"), and the
Equal Protection Clause of the Fourteenth Amendment.
New Jersey asserts that it had made the DSH payments to
out-of-state hospitals until July 1, 1993, but that thereafter
while it was contemplating the amendment's adoption, it
discontinued the payments. CSH contends, however, that
New Jersey never made DSH payments to it after it moved
to Philadelphia.

On September 25, 1998, New Jersey filed a motion to
dismiss or in the alternative for summary judgment. On
November 9, 1998, CSH filed a motion, which the district
court referred to a magistrate judge, to amend its complaint
to assert a claim under the Commerce Clause. The district
court then decided the case in an opinion dated December
7, 1998, in which it indicated that in its discretion it was
determining the "matter as a motion to dismiss" which it
granted. Of course, the district court therefore did not make
a ruling on the motion for summary judgment, and neither
the magistrate judge nor the district court ever ruled on
CSH's motion to amend. CSH then appealed.

II. STATUTORY FRAMEWORK

In order that this matter be understood, we set forth the
statutory background of the case. Medicaid is a joint
federal-state program that provides for the payment of
medical services pursuant to the Medicaid Act to the poor,
elderly, and disabled. See Rite Aid of Pa., Inc. v. Houstoun,

, 845 (3d Cir. 1999). To participate, a state
must submit a State Plan to the Secretary of Health and
Human Services and obtain its approval of the plan
detailing how the state will disburse Medicaid money. Id. at
846. A state may change its plan by obtaining approval of
a State Plan Amendment. Id. The United States makes
contributions to a state's program provided its plan is
consistent with the applicable Medicaid Act provisions.

Beginning in 1981, Congress provided additional
payments for disproportionate share hospitals, meaning

                               3
hospitals serving a high percentage of indigent patients.
The two provisions regarding DSH adjustments relevant to
this case are 42 U.S.C. S 1396a(a)(13)(A) ("a-13") and 42
U.S.C. S 1396r-4 ("r-4"). A-13 provides for a public process
through which a state determines and sets reimbursement
rates, while r-4 outlines the specifications regarding DSH
adjustments. As it now reads a-13 states in its entirety:

       A State plan for medical assistance must --

       (13) provide --

       (A) for a public process for determination of rates of
       payment under the plan for hospital services,
       nursing facility services, and services of intermediate
       care facilities for the mentally retarded under which
       --

        (i) proposed rates, the methodologies underlying
       the establishment of such rates, and justifications
       for the proposed rates are published,

        (ii) providers, beneficiaries and their
       representatives, and other concerned State
       residents are given a reasonable opportunity for
       review and comment on the proposed rates,
       methodologies, and justifications,

        (iii) final rates, the methodologies underlying the
       establishment of such rates, and justifications for
       such final rates are published, and

        (iv) in the case of hospitals, such rates take into
       account (in a manner consistent with [r-4]) the
       situation of hospitals which serve a
       disproportionate number of low-income patients
       with special needs . . . .

42 U.S.C. S 1396a(a)(13)(A) (emphasis added).

When Congress adopted the current version of a-13 in
the Balanced Budget Act of 1997 it repealed the following
language, commonly known as the Boren Amendment, that
stated:

       A State plan for medical assistance must --

       (13) provide --

                               4
       (A) for payment (except where the State agency is
       subject to an order under section 1396m of this title)
       of the hospital services, nursing facility services, and
       services in an intermediate care facility for the
       mentally retarded provided under the plan through
       the use of rates . . . which, in the case of hospitals
       . . . which serve a disproportionate number of low
       income patients with special needs . . . which the
       State finds, and makes assurances satisfactory to
       the Secretary, are reasonable and adequate to meet
       the costs which must be incurred by efficiently and
       economically operated facilities in order to provide
       care and services in conformity with applicable State
       and Federal laws, regulations, and quality and safety
       standards. . . .

42 U.S.C. S 1396a(a)(13)(A) (West 1992) (repealed)
(emphasis added).

Both the Boren Amendment and the 1997 amendment to
a-13 are cross referenced with r-4. Thus, while r-4
continues to set the parameters for a state's provision of
DSH adjustments, Congress in amending a-13 replaced the
Boren Amendment's language requiring a state to pay
"reasonable and adequate" rates with language mandating
that a state provide a "public process" by which rates are
determined in accordance with r-4. See Children's Hosp.
and Health Ctr. v. Belshe, 

, 1094 (9th Cir.
1999).

A State Plan must provide for payment for covered
services supplied by out-of-state hospitals to the state's
own Medicaid program enrollees. See 42 U.S.C.
S 1396a(a)(16); 42 C.F.R. S 431.52(b); West Virginia Univ.
Hosps. Inc. v. Casey, 

, 29 (3d Cir. 1989), aff'd
on other grounds, 

, 

 (1991).
Moreover, it is clear that if Congress had not repealed the
Boren Amendment in 1997, we would be bound to follow
the holdings in West Virginia v. Casey that a state cannot
set disproportionately low rates for out-of-state hospital
services rendered -- including DSH adjustments-- for its
Medicaid enrollees merely because the hospital is an out-of-
state provider and that the out-of-state hospitals can
enforce their rights to appropriate treatment. Id. at 17-22,

                                5
28-29; see also Wilder v. Virginia Hosp. Ass'n , 

, 

 (1990). But inasmuch as we based
West Virginia v. Casey on our conclusion that
 771Pennsylvania's denial of adjustments to out-of-state

hospitals violated the "reasonable and adequate"
requirement of a-13 as it then existed, see 885 F.2d at 29,
we now must determine whether Congress's removal of the
"reasonable and adequate" language from a-13 requires a
different result than that we reached in West Virginia v.
Casey. Inasmuch as we conclude that the repeal of the
Boren Amendment does require a result different from that
in West Virginia v. Casey so that CSH cannot prevail on its
direct statutory claim, we must decide whether its equal
protection claim should have survived New Jersey's motion
to dismiss.

III. THE DISTRICT COURT OPINION

As we stated above, the district court dismissed CSH's
complaint on New Jersey's motion to dismiss pursuant to
Rule 12(b)(6).1 The court held that CSH lacks standing to
bring its statutory claim because Congress intended to
foreclose private enforcement of DSH adjustment payments
when it repealed the Boren Amendment in 1997, and
because r-4 itself did not confer standing on CSH. Applying
the test the Supreme Court set forth in Blessing v.
Freestone, 

, 

 (1997), the court
recognized that hospitals like CSH are the intended
beneficiaries of r-4. The court reasoned, however, that while
r-4 mandates that a state's Medicaid plan provide for an
appropriate increase in Medicaid payments to DSHs based
on specific rate adjustment procedures, unlike the Boren
Amendment r-4 "does not mandate actual payment."
Accordingly, the court held that r-4 "does not impose a
binding obligation on New Jersey to actually afford CSH
_________________________________________________________________

1. New Jersey indicated that it was moving to dismiss pursuant to Fed.
R. Civ. P. 12(c). Rule 12(c), however, deals with motions for judgment on
the pleadings. As a practical matter, however, in the context of this case
there is no real distinction between the two types of motions. See
Churchill v. Star Enter., 

, 190 n.5 (3d Cir. 1999). Thus,
inasmuch as the district court treated the motion under Rule 12(b)(6)
standards, we will as well.

                                  6
payment, such that CSH has a federal right to payment
under S 1983." Moreover, the court found that Congress's
repeal of the Boren Amendment supported this conclusion
as Congress eliminated the statutory provision mandating
"reasonable and adequate" payment that had been regarded
as conferring standing upon plaintiffs in the past. The court
found its conclusions buttressed by statements of
congressional intent to eliminate causes of action for
hospitals and nursing facilities challenging the adequacy of
the rates they receive.2

When the court addressed CSH's equal protection claim,
it held that CSH could not maintain a valid claim because
(1) the Medicaid Act does not "specifically" require states to
fund out-of-state DSHs; (2) New Jersey was not treating
CSH differently than it treated any other out-of-state
hospital; and (3) the federal government had approved New
Jersey's current Medicaid plan, including its policy not to
provide for DSH adjustments to out-of-state hospitals, as
conforming with Medicaid's requirements. Nevertheless, the
court believed that its ruling was in tension with our
rejection of what it called "Pennsylvania's alleged rational
basis for excluding out of state hospitals from its Medicaid
program" in West Virginia v. Casey, 885 F.2d at 29. But the
court distinguished that case by pointing out that while
"the West Virginia hospital which brought suit served an
extremely high number of Pennsylvania residents," "[CSH's]
complaint makes no such [equivalent] allegation. . . ."
Accordingly, the court dismissed CSH's equal protection
claim in addition to its statutory claim to enforce the
Medicaid Act.

IV. DISCUSSION

CSH argues that the district court failed to recognize that
r-4 authorizes actions to enforce DSH adjustments because
r-4 delineates rights established by Congress for the
specific benefit of DSHs and obligates the states to make
supplemental payments to these hospitals. CSH contends
_________________________________________________________________

2. The court also held that Medicaid's public notice provisions do not
confer standing because they "are less than specific, mandatory
requirements." CSH does not challenge this conclusion on this appeal.

                               7
that, in repealing the Boren Amendment, Congress did not
repeal the requirement in r-4 mandating payment of
adjustments to DSHs, but actually fortified the states'
obligations to these providers. According to CSH, the
court's assessment of the legislative history was erroneous,
as the court relied upon statements concerning versions of
the 1997 amendment to the Medicaid Act that Congress
later changed and in any case did not address enforcement
of the DSH provisions.

Additionally, CSH asserts that it has alleged a viable 42
U.S.C. S 1983 claim under the Equal Protection and
Commerce Clauses. CSH contends that if viewed under
either heightened or rational-basis scrutiny, the denial of
benefits to hospitals based upon their domiciles violates
both clauses. Finally, CSH contends that the district court's
reliance on federal approval of New Jersey's plan cannot
support its result.

We will affirm the district court's order dismissing CSH's
statutory claim seeking to enforce the Medicaid Act with
respect to DSH payments in light of the passage of the
Balanced Budget Act of 1997 amending a-13. We, however,
will reverse the order of dismissal to the extent that it
dismissed the equal protection claim and will remand the
case to the district court for further consideration of that
claim as well as CSH's motion for leave to amend its
complaint to assert a Commerce Clause claim.

A. Standard of Review

We exercise plenary review over the district court's order
granting the motion to dismiss. See McClintock v.
Eichelberger, 

, 816 (3d Cir.), cert. denied, 

 (1999). Furthermore, we must consider all factual
allegations pled in the complaint as true and can affirm the
district court's order of dismissal only if we are certain that
CSH cannot prove any set of facts in support of its claim
that would entitle it to relief. Moreover, regarding CSH's
equal protection claim, "[s]ince this is aS 1983 action, [CSH
is] entitled to relief if [its] complaint sufficiently alleges
deprivation of any right secured by the Constitution. In
considering a Rule 12(b)(6) motion, we do not inquire

                               8
whether [CSH] will ultimately prevail, only whether [it is]
entitled to offer evidence to support [its] claims." Nami v.
Fauver, 

, 65 (3d Cir. 1996) (citations omitted).

B. CHS's Statutory Claim to Enforce the Disproportionate
Share Adjustments

CSH argues that even if Congress's passage of the
Balanced Budget Act of 1997 eliminated its ability under a-
13 to enforce the DSH adjustments, nevertheless a court
can enforce the adjustments under r-4. As noted above, the
district court rejected this argument because it reasoned
that r-4 does not impose a binding obligation on states to
pay the adjustments. A-13 now mandates that a state
provide for "a public process" for determination of rates.
The process requires publication of the proposed rates
together with the methodologies and justifications used to
establish to those rates. Providers, beneficiaries, and other
concerned state residents must be given a reasonable
opportunity for review of and comment on the proposed
rates, methodologies and justifications. Then thefinal rates,
as well as methodologies and justifications for the rates,
must be published. Finally, the rates must take into
account the situation of DSHs in a manner consistent with
r-4. See 42 U.S.C. S 1396a(a)(13)(A).

In Blessing v. Freestone, 520 U.S. at 340-41, 117 S.Ct. at
1359 (citations omitted), the Supreme Court said that a
federal statute gives rise to a privately enforceable right if a
court finds all three of the following circumstances present:

       First, Congress must have intended that the provision
       in question benefit the plaintiff. Second, the plaintiff
       must demonstrate that the right assertedly protected
       by the statute is not so `vague and amorphous' that its
       enforcement would strain judicial competence. Third,
       the statute must unambiguously impose a binding
       obligation on the States.

We think it is clear that by amending a-13 in 1997,
Congress eliminated the Boren Amendment's requirement
that a state must provide for and assure the Secretary of
Health and Human Services that its rates are "reasonable
and adequate." As we recognized in Rite Aid v. Houstoun,

                               9
the Boren Amendment set procedural and substantive
requirements: "The Boren Amendment instructed state
agencies to make findings and assurances that their
Medicaid reimbursement rates promote economy, efficiency,
quality of care, and equal access. . . ." 171 F.3d at 852. Yet,
by replacing the Boren Amendment with a requirement that
a state establish a public process by which its rates would
be determined, Congress has removed a party's ability to
enforce any substantive right. See HCMF Corp. v. Gilmore,

, 880 (W.D. Va. 1998) ("With the repeal
of the Boren Amendment nothing remains that remotely
resembles a federal right to reasonable and adequate rates.
There is no federal statutory language to parse. There is
only a state standard. It follows that there can be no
prospective relief under S 1396a(a)(13). . . .").

The legislative history confirms this reading of the
statute. H.R. Conf. Rep. No. 105-217 (1997), reprinted in
1997 U.S.C.C.A.N. 176, 488, begins its discussion of the
proposed change to a-13 with this description of the law
under the Boren Amendment:

       Under so-called Boren amendments, states are
       required to pay hospitals, nursing facilities, and
       intermediate care facilities for the mentally retarded
       (ICFs/MR) rates that are `reasonable and adequate' to
       cover the costs which must be incurred by `efficiently
       and economically operated facilities.' A number of
       courts found that state systems failed to meet the test
       of `reasonableness' and some states have had to
       increase payments to these providers.

The conference agreement, which became the new a-13,
according to the report "[r]epeals the Boren amendments
and establishes a public process under which proposed
rates, methodologies underlying the rates and the
justifications for such rates are published and subject to
public review and comment, and final rates are published
with underlying methodologies and justifications." Id. at
489.

Thus, unless r-4 establishes an enforceable right on its
own, CSH does not have an enforceable statutory claim.
Yet, r-4 imposes neither procedural nor substantive

                                10
requirements on a state that provide a basis for CSH to
press its claims. Rather, r-4 is a definitional provision that
describes certain procedures that a state must satisfy, such
as submitting a qualifying plan to the Secretary of Health
and Human Services by a certain date to establish an
adequate state disproportionate share hospital adjustment
plan. 42 U.S.C. S 1396r-4(a). Moreover, r-4 sets the
parameters of what is a DSH, what constitutes an adequate
payment adjustment, and what limits are placed on federal
financial participation and on state allotments for each
year. We are satisfied that CSH cannot predicate its claim
on these provisions. For this reason, we will affirm the
district court's dismissal of CSH's section 1983 statutory
claim and its finding that CSH cannot successfully
maintain an action to enforce the Medicaid Act with respect
to DSH adjustments.3

C. Equal Protection

CSH claims that New Jersey's policy discriminates on its
face against out-of-state hospitals in favor of domestic
enterprises.4 The Supreme Court has held that according to
equal protection jurisprudence, "whatever the extent of a
State's authority to exclude foreign corporations from doing
business within its boundaries, that authority does not
_________________________________________________________________

3. CSH cites Orthopaedic Hospital v. Belshe , 

 (9th Cir.
1997), cert. denied, 

 (1998), Rite Aid v. Houstoun, 

, and Doe v. Chiles, 

 (11th Cir. 1998), for the
proposition that "[t]he Boren Amendment is only one of several
provisions of the Medicaid Act on which providers have based S 1983
claims." Brief at 14. While this is true, none of these cases was
predicated upon the current version of a-13 or upon r-4. Moreover, these
cases are all distinguishable from the current situation because each of
them rested upon different provisions of the Medicaid Act that "unlike r-
4" have a substantive or procedural requirement.

4. CSH argues that this denial rises to the level of burdening a
fundamental right and is therefore subject to strict scrutiny. However,
inasmuch as CSH concentrates its argument upon a rational basis
model of equal protection, we will as well. In any event, we have no need
at this time to determine whether this is a strict scrutiny case because
CSH's complaint survives a motion to dismiss in which only a rational
basis justification is implicated.

                               11
justify imposition of more onerous taxes or other burdens
on foreign corporations than those imposed on domestic
corporations, unless the discrimination between foreign and
domestic corporations bears a rational relation to a
legitimate state purpose." Metropolitan Life Ins. Co. v. Ward,

, 875, 

, 1680 (1985) (internal
quotation marks omitted).5

As we noted above, the district court rested its rejection
of CSH's equal protection claim upon its belief that federal
law does not require New Jersey to pay out-of-state
hospitals because of federal approval of New Jersey's
Medicaid plan including New Jersey's express statement
that it would not provide for adjustments to out-of-state
providers, and because the "current Medicaid statute does
not specifically require States to fund DSH facilities outside
their own borders." The court distinguished West Virginia v.
Casey on the ground that "the West Virginia hospital which
brought suit served an extremely high number of
Pennsylvania residents." Moreover, the court thought that it
was significant that New Jersey was not treating CSH
differently than other hospitals outside of that state.

New Jersey in a supplemental letter brief urges that we
affirm the district court's order dismissing the equal
protection claim for the following reasons:

       First, New Jersey does not have sufficient information
       and data with which to determine whether an out-of-
       state hospital is entitled to DSH payments under the
       varying rules for making the determination. Indeed, as
       set forth in the State's main brief, any state can treat
       any hospital as a DSH hospital. Second, it would be an
       onerous task for New Jersey to monitor whether an
       out-of-state hospital has already been fully
       compensated by either its home state or other states 6 in
_________________________________________________________________

5. Likewise, the courts consider discriminatory treatment based upon a
citizen's state of residence a potential violation of the Privileges and
Immunities Clause. See Lunding v. New York Tax Appeals Tribunal, 

, 774 (1998) ("Where nonresidents are subject to different
treatment, there must be reasonable ground for . . . diversity of
treatment.") (internal quotation marks omitted).

6. This assumes that if all states were required to make DSH payments
to out-of-state hospitals, other states may also be obligated to make DSH

                               12
       accordance with 42 U.S.C. S 1396r-4(g), which limits
       the amount of DSH payments an individual hospital is
       entitled to receive.

       Third, as now codified at 42 U.S.C. S 1396r-4(f),
       states' DSH allotments were changed so that set
       amounts are provided for each year beginning with
       Fiscal Year 1998. Clearly Congress reached a decision
       about how much each individual state was entitled to
       receive and there is no evidence that it considered, in
       its calculation, that a state may be required to give
       away significant portions of its DSH allotment to other
       states, particularly given the significant lobbying by the
       states which occurred prior to the final figures being
       enacted into law.

       Fourth, this calculation is further complicated
       because it is not possible for New Jersey to anticipate
       where its residents may ultimately receive care. The
       statute either applies to out-of-state hospitals or it does
       not; there is no basis to limit DSH payments only to
       `border' hospitals.

       Fifth, once a hospital qualifies for a DSH payment,
       the hospital can use that money for any purpose, even
       non-medical purposes, because DSH payments are not
       payments for services provided. Nor would the hospital
       be required to even use the money received from New
       Jersey on New Jersey patients.

       Lastly, out-of-state hospitals already receive DSH
       payments from the home state covering care provided
       to out-of-state residents. The home state is required to
       take into account treatment of out-of-state indigent
       patients when determining whether a hospital qualifies
       for DSH payments and how much DSH that hospital is
       entitled to receive.

       Section 1923(b)(2) of the Act bases the Medicaid
       utilization rate on a formula that includes patient
_________________________________________________________________

payments to a particular hospital. For example, a hospital could claim a
DSH payment from any state as long as it treated at least one resident
from that state. [This footnote is quoted from the letter brief.]

                               13
       days furnished to patients eligible for Medicaid
       . . . [t]he State must consider the total number of
       patient days attributable to Medicaid recipients
       regardless of which state would be responsible for
       payment for the service. This is to ensure that each
       hospital that meets the . . . [DSH] requirement[s] is
       accorded disproportionate share status regardless of
       the origin of those patients. Id. [55 Fed. Reg. at
       10079 (emphasis added)].

       It is unreasonable to conclude that Congress intended
       to have both other states and the home state count the
       same patient days, and reimburse for the same patient
       days. These six reasons for New Jersey's denial of out-
       of-state DSH payments more than satisfies the rational
       relationship test.

In our view, the district court's rationales cannot support
a dismissal of the action. The absence of a provision in the
Medicaid Act requiring that states fund DSH facilities
outside their borders does not mean that a state
constitutionally can differentiate between in-state and out-
of-state facilities. Rather, it means simply that there is no
statutory requirement for equal treatment. Furthermore,
federal approval of the amendment to the plan at most
could foreclose a statutory argument challenging the denial
of DSH payments. Moreover, the fact that New Jersey treats
all out-of-state facilities equally by denying them DSH
payments does not address the issue CSH raises as it is
complaining about its treatment as compared to treatment
of New Jersey facilities, not as compared to treatment of
other out-of-state facilities. In the circumstances, we
cannot uphold the district court's reasoning on why CSH
has failed to allege a claim on which relief can be granted
on the equal protection claim.

Additionally, we cannot uphold the Rule 12(b)(6)
dismissal on the basis of New Jersey's arguments that we
quote above, as its contentions introduce matters into the
case that go far beyond the complaint and even the
pleadings as a whole and introduce factual questions which
we cannot address at this time.7 In short, we are not
_________________________________________________________________

7. We realize that a court on a motion to dismiss can consider matters
of public record, see Churchill v. Star Enter., 

, 190 n.5 (3d
Cir. 1999), but New Jersey's contentions go beyond that record.

                               14
satisfied from the complaint or even all the pleadings that
CSH will not be able to prove any set of facts that will
entitle it to relief.

Accordingly, while we express no view on whether CSH
ultimately will prevail on the equal protection claim, we
think that the claim should have survived New Jersey's
motion to dismiss. See also West Virginia v. Casey, 885
F.2d at 29 ("Pennsylvania's excuse of administrative burden
does not, in this case, provide a rational basis for[the
hospital's] grossly diminished reimbursement rates.").
Therefore, we will remand the case to the district court for
further proceedings on that claim. On the remand CSH may
renew its motion to amend to assert its Commerce Clause
claim.

V. CONCLUSION

For the foregoing reasons we will affirm the order of
December 7, 1998, to the extent that it dismissed CSH's
statutory claims but will reverse it to the extent that it
dismissed the equal protection claim. We will remand the
matter to the district court for further proceedings
consistent with this decision. The parties will bear their
own costs on this appeal.

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

                                15