Case: 17-50282       Document: 00514800434        Page: 1   Date Filed: 01/17/2019




          IN THE UNITED STATES COURT OF APPEALS
                   FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                   Fifth Circuit

                                                                         FILED
                                                                     January 17, 2019
                                      No. 17-50282
                                                                      Lyle W. Cayce
                                                                           Clerk
PLANNED PARENTHOOD OF GREATER TEXAS FAMILY PLANNING
AND PREVENTATIVE HEALTH SERVICES, INC; PLANNED
PARENTHOOD SAN ANTONIO; PLANNED PARENTHOOD CAMERON
COUNTY; PLANNED PARENTHOOD GULF COAST, INC; PLANNED
PARENTHOOD SOUTH TEXAS SURGICAL CENTER; JANE DOE #1;
JANE DOE #2; JANE DOE #4; JANE DOE #7;
JANE DOE #9; JANE DOE #10; JANE DOE #11,

                Plaintiffs - Appellees

v.

CHARLES SMITH, in his official capacity as Executive Commissioner of
HHSC; SYLVIA HERNANDEZ KAUFFMAN, in her official capacity as
Acting Inspector General of HHSC,

                Defendants - Appellants




                    Appeal from the United States District Court
                         for the Western District of Texas


Before JOLLY, JONES, and HAYNES 1, Circuit Judges.
EDITH H. JONES, Circuit Judge:
      The Texas Health and Human Services Commission’s Office of Inspector
General (“OIG”) sought to terminate the Medicaid provider agreements of
Planned Parenthood affiliates throughout the state. The agency based this


      1   Judge Haynes concurs in the judgment only.
    Case: 17-50282    Document: 00514800434     Page: 2   Date Filed: 01/17/2019



                                 No. 17-50282

decision largely on undercover video footage of graphic discussions with
Planned Parenthood personnel concerning the prospective sale of liver,
thymus, and neural tissue from fetuses aborted during the second trimester of
pregnancy.     The videos justified terminating the affiliates’ provider
agreements, the agency contended, because they indicated noncompliance with
accepted medical and ethical standards. Three Planned Parenthood affiliates
(“Provider Plaintiffs”) and several Medicaid beneficiaries (“Individual
Plaintiffs”) sought a preliminary injunction against the termination decision.
The district court held that the Individual Plaintiffs possessed a private right
of action under the “qualified-provider” provision of the Medicaid Act,
42 U.S.C. § 1396a(a)(23), and issued a preliminary injunction preventing
Texas from terminating Medicaid funding to the Planned Parenthood facilities
statewide. The state agency has appealed.
      We are constrained to affirm the district court’s conclusion that the
plaintiffs possess a private right of action, as held by this court in Planned
Parenthood Gulf Coast v. Gee, 

(5th Cir. 2017) (hereafter, “Gee”)
(cert denied, 

). But Judge Jones, in a separate concurrence, urges
rehearing en banc on that issue, which has divided the appellate courts. We
vacate the preliminary injunction and remand for the district court to limit its
review to the agency record under an arbitrary-and-capricious standard.
                             I. BACKGROUND
      A. Planned Parenthood Affiliates
      The Provider Plaintiffs operate health centers and provide family
planning services to about 12,500 Medicaid patients and the general public.
Planned Parenthood Gulf Coast (“PPGC”) runs seven health centers in the
Houston area. Planned Parenthood Greater Texas (“PPGT”) and Planned



                                       2
     Case: 17-50282      Document: 00514800434         Page: 3    Date Filed: 01/17/2019



                                      No. 17-50282

Parenthood South Texas (“PPST”) 2 operate an additional 23 health centers. As
affiliates of Planned Parenthood Federation of America (“PPFA”), they must
adhere to various organizational standards to use the Planned Parenthood
name and trademark.
       Among the Provider Plaintiffs, only PPGC has sold fetal tissue for use in
outside research. 3 Melissa Farrell has served as PPGC’s Research Director
since 2006. In this role, she provides information about PPGC’s services to
outside researchers, develops budgets and contracts, and facilitates
Institutional Review Board (“IRB”) submissions.                  Ms. Farrell has been
involved in several outside studies involving fetal tissue research. In 2006,
PPGC participated in a first-trimester fetal tissue study. A second study,
conducted in conjunction with the University of Texas Medical Branch in
Galveston (“UTMB”), ran from 2010 to 2011 and concerned first-trimester
placental tissue.
       To facilitate these studies, Ms. Farrell stated that she would modify
certain clinical procedures and require consent from the abortion patients
whose procedures yielded fetal tissue. Both studies required that fetal tissue
be processed and packaged following the abortions.                   The UTMB study
additionally required PPGC to use a sterile process to collect the placental




       2  PPST is technically an umbrella organization comprising three other named
plaintiffs: Planned Parenthood Cameron County, Planned Parenthood San Antonio, and
Planned Parenthood South Texas Surgical Center.

       3PPGC itself does not technically provide abortions. But an affiliated entity—located
in the same building as PPGC’s headquarters and called Planned Parenthood Center For
Choice (“PPCFC”)—does provide abortions. PPGC’s own research department handles all of
PPCFC’s research agreements because PPCFC has no separate research department or
personnel of its own. The district court pretermitted the question whether PPGC and PPCFC
were effectively a single organization.
                                             3
    Case: 17-50282    Document: 00514800434     Page: 4   Date Filed: 01/17/2019



                                 No. 17-50282

tissue after the abortion. Dr. Regan Theiler, a researcher involved in the
UTMB project, also performed abortions at PPGC’s facility.
      Ms. Farrell communicated with Baylor College of Medicine regarding
another fetal tissue donation project from 2013 through 2015. They discussed
IRB approval, next steps, and draft contract terms, but no contract or budget
was finalized.
      B. Undercover Videos and Ensuing Investigations
      In 2015, the Center for Medical Progress (“CMP”), a pro-life organization,
released more than eight hours of undercover videos disclosing conversations
held at the PPGC headquarters. In the CMP videos, two individuals posed as
representatives from a fetal tissue procurement company. They claimed to be
interested in purchasing liver, thymus, and neural tissue from fetuses aborted
during the second trimester of pregnancy. Ms. Farrell features prominently in
the video, as she discusses the possibility of a research partnership, provides a
tour of PPGC’s surgical facilities, and displays tissue samples from recently
aborted fetuses.




Dr. Tram Nguyen, the director of PPGC’s abortion facility, confirmed many of
Ms. Farrell’s statements.

                                       4
     Case: 17-50282      Document: 00514800434         Page: 5    Date Filed: 01/17/2019



                                      No. 17-50282

       The release of these graphic videos prompted federal and state
investigations into numerous Planned Parenthood affiliates.                   The Harris
County District Attorney, the Texas Rangers, and the Houston Police
Department investigated but brought no charges.                   Likewise, the Texas
Attorney General’s Office, the Texas Department of State Health Services, and
the Texas Health and Human Services Commission conducted investigations.
       Additionally, the U.S. House of Representatives formed a Select
Investigative Panel (“Select Panel”) to investigate abortion providers’ medical
practices involving fetal tissue procurement.                 Representative Marsha
Blackburn of Tennessee, a Republican, was named Chair of the bipartisan
Select Panel.     In December 2016, Blackburn emailed the Texas Attorney
General Ken Paxton evidence the Select Panel had gathered about PPGC and
asked Texas to investigate possible violations of Tex. Penal Code § 48.02, which
prohibits the purchase and sale of human organs, and Tex. Penal Code § 37.08,
which prohibits making a false report to a law enforcement officer.
       C. Termination of Medicaid Provider Agreements
       As participants in the Texas Medicaid program, 4 the Provider Plaintiffs
and each of their related health centers signed Medicaid provider agreements
and agreed to comply with all Texas Medicaid policies and applicable state and
federal regulations. The Provider Plaintiffs received $3.4 million from Texas
Medicaid funds. 5 Texas Health and Human Services Commission Office of
Inspector General (“OIG” or “the agency”) oversees compliance with state




       Texas Medicaid only pays for abortions under narrow circumstances—specifically,
       4

when a woman’s life is in danger or for victims of rape and incest.

       5This amount is a smidgen of the three affiliates’ combined revenues of approximately
$57 million in 2013.
                                             5
    Case: 17-50282     Document: 00514800434       Page: 6   Date Filed: 01/17/2019



                                  No. 17-50282

Medicaid policies and may conduct investigations and terminate Medicaid
provider agreements for noncompliance.
        OIG may terminate a Medicaid provider agreement when “prima facie
evidence” establishes that a provider has committed a “program violation” or
is “affiliated with a person who commits a program violation.” 1 Tex. Admin.
Code § 371.1703(c), (c)(6)-(8). A “program violation” includes any violation of
federal law, state law, or the Texas Medicaid program policies. For instance,
as explained in the Texas Medicaid Provider Procedures Manual, a provider
violates Texas Medicaid rules if it fails to offer health services in accordance
with “accepted medical community standards.”           See 1 Tex. Admin. Code
§ 371.1659(2).
        In October 2015, OIG sent each Provider Plaintiff a Notice of
Termination, stating that each was “no longer capable of performing medical
services in a professionally competent, safe, and legal manner.” The Notice
listed the bases for termination and stated that, unless the Provider Plaintiffs
responded within 30 days, a Final Notice of Termination would issue.
        Instead of responding to the Notice and pursuing administrative and
state judicial avenues of relief, the Provider Plaintiffs sued in federal court to
block    the   termination.    The    Individual     Plaintiffs—Texas     Medicaid
beneficiaries who have received services from the Provider Plaintiffs—joined
in this challenge. On the state agency’s motion, the district court stayed the
proceedings for almost a year pending a Final Notice of Termination. OIG sent
the Final Notice on December 20, 2016.
        The Final Notice states that the Inspector General had determined that
the Provider Plaintiffs were “not qualified to provide medical services in a
professionally competent, safe, legal and ethical manner under the relevant
provisions of state and federal law pertaining to Medicaid providers.” The

                                        6
    Case: 17-50282     Document: 00514800434     Page: 7   Date Filed: 01/17/2019



                                  No. 17-50282

Final Notice bases this conclusion on the CMP videos and evidence provided
by the Select Panel.      The Final Notice states that the Inspector General
consulted with the Chief Medical Officer, who reviewed the evidence and
concluded that PPGC had violated “generally accepted medical standards, and
thus [was] not qualified to provide medical services.”
      The Final Notice then specifies the “numerous violations of generally
accepted standards of medical practice” established by the CMP video,
including “a history of deviating from accepted standards to procure samples
that meet researcher[s’] needs” and “a history of permitting staff physicians to
alter procedures to obtain targeted tissue samples needed for their specific
outside research.” The Final Notice also states that evidence establishes that
PPGC engaged in misrepresentations regarding fetal tissue procurement. The
Final Notice concludes that under OIG’s regulations, affiliates of a terminated
entity are also subject to termination. See 1 Tex. Admin. Code § 371.1703(c)(7).
      D. Court Proceedings
      After reviewing the Final Notice, the plaintiffs filed an amended
complaint and a new motion for a preliminary injunction. The district court
conducted a three-day evidentiary hearing, during which it reviewed the CMP
videos and heard testimony from medical and ethics experts on both sides. The
plaintiffs offered testimony of the Provider Plaintiffs’ CEOs, Ms. Farrell, and
PPGC’s Medical Director.      The agency offered testimony of the Inspector
General, OIG’s Chief Medical Officer, an expert in obstetrics and gynecology,
and a bioethics expert.
      Much of the evidentiary hearing consisted of review and analysis of clips
from the CMP videos. The agency focused on evidence that PPGC had violated
federal regulations relating to fetal tissue research by altering abortion
procedures for research purposes or allowing the researchers themselves to be

                                       7
    Case: 17-50282     Document: 00514800434     Page: 8   Date Filed: 01/17/2019



                                  No. 17-50282

involved in performing abortions to harvest their preferred tissue samples. See
42 U.S.C. § 289g-1(c)(4) (requiring researchers to certify that they “had no part
in any decisions as to the timing, method, or procedures used to terminate the
pregnancy made solely for the purposes of the research”); 45 C.F.R. § 46.204(i)
(for research involving pregnant         women or fetuses, requiring that
“[i]ndividuals engaged in the research will have no part in any decisions as to
the timing, method, or procedures used to terminate a pregnancy”); 42 U.S.C.
§ 289g-1(b)(2)(A)(ii) (requiring researchers to certify that “no alteration of the
timing, method, or procedures used to terminate the pregnancy was made
solely for the purposes of obtaining the tissue”). The plain purposes of the
regulations are to prevent conflicts of interest between the researcher and
patients and to eliminate any temptation to place research studies above the
patients’ medical needs. In addition to federal regulations, state regulations
authorize sanctions for providers who fail to adhere to “accepted medical
community standards.” See 1 Tex. Admin. Code § 371.1659(2).
      Various of Ms. Farrell’s statements were offered as evidence that PPGC
had violated or is willing to violate these standards. For example, at one point
in the video, Ms. Farrell responds to questions about whether PPGC has
“physicians who would be able to change the procedure a bit” for research
purposes, and Ms. Farrell says, “Yep.” She then adds:
      Yes. And it will depend. Obviously the change in the procedure
      will have to be where it’s not going to put the patient at more risk
      . . . prolong the procedure putting her at more risk, and altering
      the procedure where we leave content in the patient, which
      obviously we’re trying to get . . . and that’s something we’ll have to
      discuss, you know, with the docs . . . and see how they can do it.
      Because some of our[] doctors in the past have projects, and they’re
      collecting the specimens so they do it in a way that they get the
      best specimen. So I know it can happen.


                                        8
    Case: 17-50282    Document: 00514800434     Page: 9   Date Filed: 01/17/2019



                                 No. 17-50282

Later in the video, Ms. Farrell identifies Dr. Theiler, a participant in the
UTMB study, as someone who would be a good reference. She explains:
       Yeah. So she knows what’s involved in modifying what we need to
      do to get you the specimens that are intact because she’s done it.
      . . . And she was doing those here.
Dr. Nguyen confirmed that the PPGC abortion facility can obtain intact liver
and thymus.      The doctor stated, sarcastically, that while federal law
(prohibiting partial birth abortions) restricts a facility from intentionally
retrieving an intact fetus, PPGC can make it happen by signing a form that
they did not so “intend.” Nguyen also stated that obtaining intact specimens
of liver, thymus, and neural tissue depends upon the amount of cervical
dilation of the patient and the patient’s pain tolerance. The doctor noted risks
associated with fetal tissue procurement that PPGC is willing to take because
“it is for a good cause.” The doctor acknowledged that two particular PPGC
doctors can alter the abortion procedure to meet a researcher’s request.
Relying on these statements, others like them, and their expert testimony, OIG
sought to justify its termination decision.
      The plaintiffs’ live witnesses, on the other hand, denied that PPGC ever
altered abortion procedures for research purposes. Ms. Farrell herself testified
that, in the videos, she was actually discussing changes to clinical operations
and not changes to the abortion procedures themselves.
      Following the hearing, the district court issued a memorandum and
order granting the plaintiffs’ motion for a preliminary injunction. The district
court held that the Individual Plaintiffs possessed a private right of action to
challenge OIG’s termination decision. Analyzing OIG’s evidence of PPGC’s
program violations, the district court credited the plaintiffs’ self-justifying
explanations. The court found that even in the light most favorable to the
agency, the videotaped discussions were ambiguous and open to interpretation.
                                        9
    Case: 17-50282       Document: 00514800434         Page: 10     Date Filed: 01/17/2019



                                      No. 17-50282

The district court stated, inaccurately, that the CMP video had not been
authenticated and suggested that it may have been edited. 6 The district court
also noted that neither the Inspector General nor the Medical director had
expert knowledge concerning abortion procedures. And the court discounted
Ms. Farrell’s videotaped statements because she claimed on the witness stand
that she really had no personal knowledge of the medical aspects of abortion
procedures and had never even been in the room when an abortion was
performed.
       While the court felt free to credit all of the trial testimony from the
Provider Plaintiffs—none of which had been offered during the state
administrative      procedures—the        court    bound     the    IG    solely    to   the
administrative record and expressly refused to consider any support for
termination “not included in the Final Notice and not part of the Inspector
General’s termination decision.” Having thus narrowed the evidence, the court
concluded that OIG “did not have prima facie . . . evidence, or even a scintilla
of evidence, to conclude the bases of termination set forth in the Final Notice
merited finding the Plaintiff Providers were not qualified.” The agency timely
appealed.

                           II. STANDARD OF REVIEW
       “A preliminary injunction is an ‘extraordinary remedy.’” Texans for Free
Enter. v. Tex. Ethics Comm’n, 

, 536 (5th Cir. 2013) (quoting
Byrum v. Landreth, 

, 445 (5th Cir. 2009)). “To be entitled to a


       6 In fact, the record reflects that OIG had submitted a report from a forensic firm
concluding that the video was authentic and not deceptively edited. And the plaintiffs did
not identify any particular omission or addition in the video footage. Moreover, the district
court also suggested that there was no evidence that any of PPGC’s research was federally
funded, so the regulations relied on by OIG might be inapplicable. But the record actually
establishes that the UTMB study was funded by the National Institute of Health.

                                             10
    Case: 17-50282    Document: 00514800434      Page: 11   Date Filed: 01/17/2019



                                  No. 17-50282

preliminary injunction, the applicants must show (1) a substantial likelihood
that they will prevail on the merits, (2) a substantial threat that they will
suffer irreparable injury if the injunction is not granted, (3) their substantial
injury outweighs the threatened harm to the party whom they seek to enjoin,
and (4) granting the preliminary injunction will not disserve the public
interest.”   Tex. Med. Providers Performing Abortion Servs. v. Lakey,

, 574 (5th Cir. 2012) (brackets and citations omitted). The party
seeking preliminary injunctive relief must clearly carry the burden of
persuasion on all four elements.      

“review[s] a preliminary
injunction for abuse of discretion, reviewing findings of fact for clear error and
conclusions of law de novo.” Texans for Free 

. When a
court applies incorrect legal principles, it abuses its discretion.           See
Atchafalaya Basinkeeper v. United States Army Corps of Engineers, 

, 696 (5th Cir. 2018).
                             III. DISCUSSION
       The following discussion demonstrates that the district court erred in
evaluating the evidence de novo, in its peculiarly asymmetrical way, rather
than under the arbitrary and capricious standard, and in applying Gee’s
reasoning to its determination of a “qualified” provider in this context. For
those reasons, the court erred legally and Appellees are unable to show a
likelihood of success on the merits of their claim. Accordingly, it is unnecessary
for us to address the other elements of preliminary injunctive relief.
      The    Medicaid       program   exemplifies   cooperative    federalism—a
partnership between federal and state agencies to provide medical services to
needy individuals. The federal government shares the costs of funding the
program with participating states. Atkins v. Rivera, 

, 156–57,

, 2458–59 (1986). In exchange for federal funds, the states must


                                       11
    Case: 17-50282    Document: 00514800434      Page: 12   Date Filed: 01/17/2019



                                  No. 17-50282

“agree[] to spend them in accordance with congressionally imposed conditions.”
Armstrong v. Exceptional Child Ctr., Inc., 135 S Ct. 1378, 1382 (2015).
      Under the Medicaid Act’s “qualified-provider” provision, “[a] State plan
for medical assistance must . . . provide that [ ] any individual eligible for
medical assistance . . . may obtain such assistance from any institution . . .
qualified to perform the service or services required . . . who undertakes to
provide him such services.” 42 U.S.C. § 1396a(a)(23). The Supreme Court has
held that this provision “gives recipients the right to choose among a range of
qualified providers, without government interference.”       O’Bannon v. Town
Court Nursing Ctr., 

, 785, 

, 2475 (1980).
      Relying on this court’s decision in Gee, the district court concluded that
the “qualified-provider” provision grants the Individual Plaintiffs a right of
action to challenge OIG’s termination of the Provider Plaintiffs’ Medicaid
agreements. 

(5th Cir. 2017). The district court then issued a
preliminary injunction against the agency after holding that the plaintiffs met
the criteria for extraordinary relief.
      On appeal, OIG raises two principal arguments: the plaintiffs lack a
private right of action because Gee does not control this case; and the district
court abused its discretion in concluding that the plaintiffs were likely to
succeed on the merits of their challenge because, inter alia, the court
erroneously applied de novo review in evaluating OIG’s termination decision
instead of limiting its review to the agency record under the deferential
arbitrary-and-capricious standard.
      A. Private Right of Action
      In Gee, a divided panel of this court held that, under some circumstances,
42 U.S.C. § 1396a(a)(23) can afford Medicaid beneficiaries a private right of
action to challenge a state’s erroneous termination of Medicaid provider

                                         12
    Case: 17-50282       Document: 00514800434          Page: 13     Date Filed: 01/17/2019



                                       No. 17-50282

agreements.        This “free choice of provider” provision mandates that “any
individual eligible for medical assistance…may obtain such assistance from
any institution…or person, qualified to perform the service or services
required….” Gee involved a decision by the Louisiana Department of Health
and Hospitals (“LDHH”) to terminate the Medicaid provider agreements of two
PPGC-affiliated clinics operating in 

–52. Although
the OIG, as will be seen, attempts to distinguish Gee, we are constrained to
follow that decision as the law of this circuit.
       In Gee, LDHH advanced three reasons for terminating the provider
agreements: (1) PPGC’s settlement of several qui tam False Claims Act
lawsuits,     in    which     PPGC       disclaimed      all   liability;    (2) unspecified
misrepresentations by PPGC in its letters to LDHH; and (3) a pending
investigation of PPGC by LDHH and the Louisiana Office of Inspector General.
See 

As in this case, PPGC and several Medicaid beneficiaries
bypassed      state    administrative       procedures      and    sued     LDHH       under
42 U.S.C. § 1983, arguing that PPGC’s clinics were, in fact, “qualified” and that
LDHH had failed to identify any valid ground under federal or state law for
terminating the two clinics. The Gee majority agreed.
       The court held, joining the Sixth, Seventh, and Ninth Circuits, that
Section 1396a(a)(23) can provide Medicaid beneficiaries with a right of action
to challenge a state’s termination decision that is unrelated to a provider’s
qualifications. See 

7 The court relied on the definition of “qualified”


       7 See Planned Parenthood Ariz. Inc. v. Betlach, 

(9th Cir. 2013); Planned
Parenthood of Ind., Inc. v. Comm’r of Ind. State Dep’t of Health, 

(7th Cir. 2012);
Harris v. Olszewski, 

(6th Cir. 2006). After Gee was issued, the Eighth Circuit
held that Section 1396a(a)(23) does not afford a private right of action. See Planned
Parenthood of Ark. & E. Okla. v. Gillespie, 

(8th Cir. 2017). Then the Tenth
Circuit joined the circuit majority in affirming a private right of action. Planned Parenthood
of Kansas and Mid-Missouri v. Andersen, 

(10th Cir. 2018).
                                             13
    Case: 17-50282    Document: 00514800434       Page: 14    Date Filed: 01/17/2019



                                  No. 17-50282

cited by other circuits: “[t]o be ‘qualified’ in the relevant sense is to be capable
of performing the needed medical services in a professionally competent, safe,
legal, and ethical manner.” See 

(quoting Planned Parenthood of 

). The court then determined that none of LDHH’s asserted
justifications for terminating the Medicaid provider agreements implicated
whether the health clinics were “qualified” under this definition. See 

       OIG argues that Gee is distinguishable. Specifically, the agency suggests
that Gee must be narrowly construed to prevent conflict with the Supreme
Court’s decision in O’Bannon v. Town Court Nursing Center, 

,

(1980). In O’Bannon, the Supreme Court held that patients
lacked a private right of action under Section 1396a(a)(23) to challenge the
state agency’s termination of a nursing home’s Medicaid provider agreements
for failure to meet statutory and regulatory standards. The Court asserted
that the Medicaid Act “clearly does not confer a right on a recipient to enter an
unqualified home and demand a hearing to certify it, nor does it confer a right
on a recipient to continue to receive benefits for care in a home that has been
decertified.”    

100 S. Ct at 2475.              Consequently, under
Section 1396a(a)(23), a patient “has no enforceable expectation of continued
benefits to pay for care in an institution that has been determined to be
unqualified.” 

100 S. Ct at 2476.
       Over a cogent dissent by Judge Owen, 

(Owen, J.,
dissenting), the Gee majority distinguished O’Bannon for two reasons. First,
the majority stated that O’Bannon involved a due process challenge whereas
the Gee plaintiffs “assert[ed] the violation of a substantive right.” 

Second, the majority asserted that, in O’Bannon, the state had “decertified”
the nursing center, whereas in Gee, “there was no decertification decision.” 

17-50282     Document: 00514800434     Page: 15   Date Filed: 01/17/2019



                                 No. 17-50282

at 461.   “When, as here, a state terminates only a Medicaid provider
agreement, independent of any action to enforce statutory and regulatory
standards, O’Bannon is inapposite.” 

on the majority’s second reason for distinguishing
O’Bannon—the absence of a “decertification decision” by LDHH.               OIG
emphasizes that LDHH had “conceded that [the clinics were] competent to
provide the relevant medical services” and had not sought to decertify the
health centers beyond ejecting them from the Medicaid program. 

Thus, LDHH admitted that its termination of the clinics’ Medicaid provider
agreements was “independent of any action to enforce statutory or regulatory

. Texas, however, has not conceded that the
Provider Plaintiffs are “qualified” in any way. Moreover, unlike LDHH, the
OIG’s termination action is predicated on specific findings that federal and
state statutory and regulatory standards have been violated. In other words,
the plaintiffs in this case are doing precisely what O’Bannon disallowed—
challenging the merits of a state agency’s decertification decision.
      The Gee majority indeed indicated several times that the plaintiffs were
not contesting the “the merits of [LDHH’s] decertification 

. But we are unpersuaded by the distinction urged by the state. The Gee
majority states that “it bears repeating that LDHH has conceded that PPGC is
competent to provide the relevant medical services to any and all non-Medicaid

(emphasis added). Although the Gee majority
acknowledged that LDHH’s justifications for termination “might well relate to
a provider’s qualifications,” the state had “taken no action to revoke PPGC’s




                                       15
    Case: 17-50282       Document: 00514800434         Page: 16     Date Filed: 01/17/2019



                                      No. 17-50282

license and has not called into question any qualification that enables PPGC
to offer medical care 

(emphasis in original). 8
       Here, there is far stronger evidence in support of OIG’s termination
decision than the justifications offered by LDHH, but there is also no evidence
that the state of Texas questions the competence of the Provider Plaintiffs or
that it has taken steps to prevent the Provider Plaintiffs from offering medical
care to non-Medicaid patients. In the end, the plaintiffs’ claim here is roughly
the same as it was in Gee: the state agency violated the “qualified provider”
provision by excluding them from the Medicaid program for reasons allegedly
unrelated to whether they are “capable of performing the needed medical
services in a professionally competent, safe, legal, and ethical manner.” OIG’s
attempt to distinguish Gee regarding an implied individual claim is unavailing.
       This does not mean, of course, that the agency’s O’Bannon-based
arguments are frivolous. Seven judges on this circuit joined a dissent from the
denial of rehearing en banc focused on the conflict with O’Bannon. See Planned
Parenthood of Gulf Coast, Inc. v. Gee, 

, 700 (5th Cir. 2017)
(Elrod, J., dissenting from denial of rehearing en banc) (explaining that Gee “is
directly at odds with the Supreme Court’s holding in O’Bannon”). But this
panel lacks authority to contradict the current law of the circuit.
       B. Likelihood of Success on the Merits
       Gee controls this appeal as to the plaintiffs’ right of action but the
plaintiffs, and to an extent the district court, suggest that this case is merely
Gee redux. That is incorrect. In Gee, the state agency’s purported justifications



       8 See 

–77 (Owen, J., dissenting) (characterizing the majority
opinion as holding, “whenever a State terminates a provider’s Medicaid agreement,
regardless of the grounds for termination, a patient may sue to contest the termination,
unless the State also precludes the provider from providing services or care to all patients,
not just Medicaid recipients.”).
                                             16
    Case: 17-50282     Document: 00514800434       Page: 17    Date Filed: 01/17/2019



                                   No. 17-50282

for termination were tantamount to contending that a provider can be excluded
“simply because state law says 

, or that a state can “simply
label[ ]   any   exclusionary    rule   as    a   ‘qualification’”   to   circumvent
Section 1396a(a)(23)’s requirements. 

(quoting Planned Parenthood
of 

). OIG, however, based its termination decision on,
inter alia, a record of incriminating admissions by PPGC’s own personnel that
show, the agency contends, a failure to comply with federal regulations or, at
the very least, a failure to comply with the ethical standards that Texas
requires of Medicaid providers.
      It is true that the district court purported to find “not . . . even a scintilla
of evidence” impugning PPGC’s qualifications. But this occurred only after the
district court credited the plaintiffs’ witnesses’ self-serving testimony about
their videotaped statements, while asymmetrically refusing to consider OIG’s
post-termination evidence. None of the plaintiffs’ evidence, moreover, was ever
presented to the agency through the standard administrative procedures or
judicial review required by the Medicaid statutes.
      OIG challenges the district court’s procedures as facially inequitable.
But the agency’s principal argument on appeal is that the district court abused
its discretion by reviewing the agency’s decision de novo instead of under the
deferential arbitrary-and-capricious standard required by this court’s decision
in Abbeville General Hospital v. Ramsey, 

(5th Cir. 1993). We agree
that Abbeville’s analysis applies here: a state agency’s decision terminating a
Medicaid provider agreement—and the agency’s determination that the
provider is not “qualified”—should be reviewed like any other administrative
case—on the record that was made before the agency and under the arbitrary-
and-capricious standard.



                                         17
     Case: 17-50282        Document: 00514800434      Page: 18   Date Filed: 01/17/2019



                                       No. 17-50282

       However, before explaining the appropriate standard of review, it is first
necessary to clarify how Gee’s analysis of the “qualified-provider” requirement
applies to state agencies like OIG. We then explain why the district court had
to review the agency’s decision under the more deferential standards.
          1. The meaning of “qualified”
       The Medicaid Act itself does not define what it means for a provider to
be    “qualified      to     perform     the    service   or     services   required.”
42 U.S.C. § 1396a(a)(23).        But “Medicaid regulations allow states to set
reasonable standards relating to the qualifications.” 

(quoting 42 C.F.R. § 431.51(c)(2)). And Gee emphasized that “states retain
broad authority to define provider qualifications and exclude providers on that
basis.” 

see also Detgen ex rel. Detgen v. Janek, 

, 631
(5th Cir. 2014) (explaining that states possess “broad discretion to implement
the Medicaid Act”).         Nevertheless, Gee held that a state’s discretion is
“circumscribed by the meaning of ‘qualified’ in this 

.
       Rather than offer a comprehensive definition of what it means for a
provider to be “‘qualified’ in this context,” Gee instead relied on a general
definition used by several other circuits. See 

This definition of
“qualified,” which LDHH never challenged, is “capable of performing the
needed medical services in a professionally competent, safe, legal, and ethical
manner.” See 

(quoting Planned Parenthood of 

).
Absent further explanation, this broad statement could unduly circumscribe
an agency’s ability to “define provider qualifications and exclude providers on
that basis,” 

, and it conflicts with other Medicaid statutory
provisions and with the interpretation of federal funding statutes.
       First, the word “capable” must be construed with reference to the
limiting terms “competence,” “safety,” “legality,” and “ethics.” Being “capable

                                           18
    Case: 17-50282     Document: 00514800434      Page: 19    Date Filed: 01/17/2019



                                   No. 17-50282

of” providing health services is not the same as being “qualified” to do so. Being
“capable of” denotes merely the ability to perform a function. 9 In contrast,
being “qualified” means “[h]aving qualities or possessing accomplishments
which fit one for a certain . . . function” and, often, it means that this fitness is
“officially recognized.” 10   If being merely “capable” of providing health
services—say, safely—were the standard for being a “qualified” provider, a
Medicaid provider could challenge its termination by showing that it could
have acted safely—even if it seriously or frequently failed to do so. A state
agency should not have to show that a provider is incapable of operating
appropriately to hold a provider accountable under the “qualified-provider”
provision. None of the cases that have relied on the general definition of
“qualified” have indicated otherwise.
      Similarly, courts may not interpret Gee to hold that a Medicaid provider
must be considered “qualified” until the state has totally barred that provider
from serving the public. A literal understanding of “capable of performing the
needed medical services” could lead to that interpretation, as could several of
the Gee majority’s statements in dicta. See, e.g., 

(“While as a general
rule a state may terminate a provider’s Medicaid agreements for reasons
bearing on that provider’s general qualification to provide medical services, we
are not aware of any case that holds a state may do so while continuing to
license a provider’s authorization to offer those same services to non-Medicaid
patients.”). But any such requirement would hamstring state agencies like



      9   See The Oxford English Dictionary (online ed. 2018),          available   at
http://www.oed.com/view/Entry/27354?redirectedFrom=capable#eid.

      10  See The Oxford English Dictionary (online ed. 2017), available at
http://www.oed.com/view/Entry/155867?rskey=k2PgDU&result=1&isAdvanced=false#eid.

                                         19
    Case: 17-50282    Document: 00514800434      Page: 20    Date Filed: 01/17/2019



                                  No. 17-50282

OIG that have no authority to decertify health care providers generally. The
Provider Plaintiffs’ Texas medical licenses are regulated by the Texas Medical
Board, which is a separate agency operating under separate statutory
authority. See Tex. Occ. Code §§ 151.003(2), 152.001(a). And to the extent the
Provider Plaintiffs or their affiliated health clinics are abortion providers, they
are separately licensed by the Texas Department of State Health Services. See
25 Tex. Admin. Code § 139.1(a). Moreover, if Louisiana’s failure to revoke the
health clinics’ licenses were dispositive, the Gee majority would not have
needed to review LDHH’s justifications for termination at all. In sum, a state’s
decision to revoke a health care provider’s license may be sufficient, but it is
not necessary in order for a state to exclude a provider from the Medicaid
program.
      Second, requiring a state to decertify a provider entirely before
jettisoning it from the Medicaid program would also conflict with the Medicaid
Act’s provision of numerous grounds on which the Secretary of the Department
of Health and Human Services (“HHS”) or a state can or must exclude a
Medicaid provider from the program. See 42 U.S.C. §§ 1396a(p)(1) – (3), 1320a-
7. Indeed, the general exclusionary provision in Section 1396a(p)(1) authorizes
a state to disqualify a provider for many reasons unrelated to violations that
would require the provider to cease operating entirely.         Suspension from
another state health care program, for example, is one of many statutory bases
upon which the Medicaid Act allows a state to exclude a provider. See 

The applicable regulations amplify that “a State may exclude an
individual or entity . . . for any reason for which the Secretary could exclude
that individual or entity from participation in Federal health care programs”
and “[n]othing contained in this part should be construed to limit a State’s own
authority to exclude an individual or entity from Medicaid for any reason or

                                        20
    Case: 17-50282    Document: 00514800434      Page: 21   Date Filed: 01/17/2019



                                  No. 17-50282

period authorized by State law.” 42 C.F.R. § 1002.3(a)-(b). Gee also recognized
that “[s]tates undoubtedly must be able to terminate provider agreements in
cases of criminal activity, fraud and abuse, and other instances of

. The Medicaid Act’s comprehensive regulatory
framework nowhere suggests that a provider may only be disqualified once it
is deemed unfit to provide care for the general public.
      Third, because the Medicaid program transfers funds to states on
conditions, a “clear statement” of any mandatory condition is required by
Pennhurst State Sch. & Hosp. v. Halderman, 

, 17 (1981), and OIG’s
interpretation and implementation of the regulations is valid unless “plainly
prohibited” by the statute. Detgen ex rel. Detgen v. 

. As
noted above, states have definitional latitude, and there is no federal definition
of “qualified provider.”
      In light of this analysis, Gee’s holding that a state may not exclude a
Medicaid provider for “reasons unrelated to that provider’s 

(emphasis in original), is best read to mean that a state
agency’s justifications for terminating a provider must actually implicate
whether the provider operates in a “safe, legal, and ethical manner” under
state and federal law. A state cannot exclude a provider “for no reason at all.”

    Nor can a state “simply label[] any exclusionary rule a
‘qualification’” and then contend a provider is unqualified on that basis. 

(quoting Planned Parenthood of 

). Thus, the Seventh
and Ninth Circuits found violations of the “qualified-provider” requirement
where states excluded providers merely because they provided abortions. As
Gee explained, “a state may not exclude a provider simply based on the scope
of the services it 

.



                                       21
    Case: 17-50282   Document: 00514800434      Page: 22   Date Filed: 01/17/2019



                                 No. 17-50282

       To comply with Gee, a state agency undertaking to decide that a
Medicaid provider is not “qualified” should identify regulations concerning the
“safe, legal, and ethical manner” of furnishing healthcare services and point to
evidence of the provider’s violations.      As reflected in the Gee majority’s
analysis, this should be an easy standard for the state to meet in most cases.
See 

(“[W]e reiterate for emphasis the unique circumstances of the
instant case.”).
         2. Arbitrary and Capricious Review
      With the governing legal standard in mind, we turn to the proper
standard of judicial review.     OIG contends that the district court erred
procedurally by applying de novo review and allowing the plaintiffs to offer
evidence outside the administrative record, because this court held in Abbeville
that the “substantive adequacy and reasonableness” of a state agency’s
findings in administering the Medicaid Act should be reviewed by courts “using
the arbitrary and capricious standard of 

–04. Although
the district court did not specify the standard of judicial review, the court
clearly did not defer to OIG’s findings. Instead, the court distinguished the
state’s findings at every opportunity. And by considering and crediting the
plaintiffs’ post-termination evidence, while expressly discrediting the state’s
witnesses, the court did not limit its review to the agency record.         This
procedure violates Abbeville’s requirements.
      In Abbeville, this court held that the deferential arbitrary-and-capricious
standard applies to a state agency’s rate-setting action under the Medicaid
Act’s Boren Amendment.        

.     Federal courts are
accustomed to applying the “deferential” standard to the actions of federal
agencies under the Administrative Procedure Act. See Nat’l Ass’n of Home
Builders v. Defs. of Wildlife, 

, 658, 

, 2529 (2007);

                                       22
    Case: 17-50282        Document: 00514800434           Page: 23     Date Filed: 01/17/2019



                                        No. 17-50282

5 U.S.C. § 706(2)(A). Under this deferential standard, an agency’s finding may
only be overturned if it fails to satisfy “minimum standards of rationality.”
La. Envt’l Action Network v. U.S. E.P.A., 

, 582 (5th Cir. 2004).
Courts accordingly may consider only “whether the agency action ‘bears a
rational relationship to the statutory purposes’ and [whether] there [is]
‘substantial evidence in the record to support it.” 

(quoting Tex. Oil
& Gas Ass’n v. U.S. E.P.A., 

, 934 (5th Cir. 1998) (quoting Mercy
Hosp. of Laredo v. Heckler, 

, 1031 (5th Cir.1985))). Arbitrary and
capricious review is conducted on the basis of the agency record alone.
Luminant Generation Co. v. U.S. EPA, 

, 925 (5th Cir. 2012)
(internal citation omitted).
       Abbeville’s application of this deferential standard to a state agency was
not novel; indeed, the court referred to the applicability of this standard as an
“indisputable proposition” supported by a “litany of cases.” See 

& n.6 (citing cases); see also Miss. Hosp. Ass’n, Inc. v. Heckler,

, 517 (5th Cir. 1983) (reviewing state agency’s Medicaid
reimbursement plan under the arbitrary-and-capricious standard). Abbeville
clarified that whether a state had complied with the Medicaid Act’s procedural
requirements was subject to de novo review. 

11 However, once a
state agency complies with any required Medicaid procedures, “a presumption
of regularity and [a] deferential standard attaches” to the agency’s decision.

       11In Abbeville, itself, the state agency “admit[ted] . . . that it conducted no studies and
made no efforts to” make the required findings. 

For this reason, the court reversed
the agency’s reimbursement plan for procedural noncompliance without applying arbitrary
and capricious review. 

                                               23
    Case: 17-50282      Document: 00514800434        Page: 24    Date Filed: 01/17/2019



                                    No. 17-50282

      The plaintiffs argue that Abbeville is inapposite because the instant case
does not actually involve the appeal of an agency decision; rather, it is “a
statutory claim under the Medicaid Act giving rise to a right of action in federal
court under §[ ]1983.”      The plaintiffs contend that there is “no case law
imposing arbitrary-and-capricious review on such a claim.” The plaintiffs are
mistaken. Abbeville itself involved a Section 1983 action seeking to enforce
statutory rights. See 

(“The Hospitals filed a § 1983
action against the Secretary of LDHH and other agency officials, claiming their
actions deprived them of rights secured under the Boren Amendment.”). 12
Other courts have likewise concluded that the review of state Medicaid
decisions as applied to individual plaintiffs in Section 1983 cases is governed
by the arbitrary and capricious standard. See Smith v. Rasmussen, 

, 760 (8th Cir. 2001); Brown v. Day, 

, 1041 (D. Kan.
2006).
      Contrary to the plaintiffs’ assertion, moreover, this case plainly involves
judicial review of an agency action. Here, OIG, the state agency empowered to
investigate violations of the Medicaid program and terminate providers for
noncompliance, decided to exclude the Provider Plaintiffs after finding
evidence that they had violated various medical and ethical standards. The
plaintiffs have sought judicial review of that termination decision.                The
plaintiffs’ challenge is functionally equivalent to any other appeal of an agency
decision. To hold that the plaintiffs’ challenge could receive review in federal
court without the deference due in a case brought by the Provider Plaintiffs
directly would be to elevate patients’ rights beyond the complex federal-state
cooperative and enforcement structure of the Medicaid statute itself. Put


      12 Similarly, Miss. Hosp. Ass’n. does not cite Section 1983 but must also have been
brought to enforce federal law under that provision.
                                           24
    Case: 17-50282      Document: 00514800434       Page: 25    Date Filed: 01/17/2019



                                    No. 17-50282

otherwise, had the Secretary of HHS excluded the Provider Plaintiffs, there is
no question that its decision would be subject to arbitrary and capricious
review. 13   And put otherwise again, the result the Individual Plaintiffs
obtained goes far beyond their personal claims to be treated by the Provider
Plaintiffs, as it prevents the state from denying millions in state funds to those
entities; this result cannot be proportional to the litigation of an individual
claim, but must arise from wholesale review of agency action toward the
Providers.
      The plaintiffs next contend that Gee precludes the application of
arbitrary-and-capricious review in this context because Gee reviewed LDHH’s
termination decision de novo. Had Gee addressed this question and applied de
novo review, we might be bound to do likewise. But Gee never addressed nor
was it required to or even asked to address the applicable standard of review.
LDHH’s grounds for terminating the health clinics amounted to no more than
unsupported suspicions of misconduct. Unlike in this case, LDHH had done
no factfinding and conceded that the providers were “qualified.”                 Thus,
although Gee did not address Abbeville, it is consistent with the prior decision’s
requirements: as in Abbeville, the lack of findings rendered the LDHH decision
subject to de novo review. This stands in stark contrast to the present case in
which OIG made findings.
      Further, not one of the circuits that have recognized a private right of
action under Section 1396a(a)(23) has intimated that an arbitrary-and-
capricious standard would be inappropriate.             In Planned Parenthood of
Indiana and Betlach, the Seventh and Ninth Circuits had no need to address


      13 See 5 U.S.C. § 706(2)(A); see also Nursing Ctr. v. U.S. Dep’t of Health & Human
Servs., 606 F. App’x 164, 167 (5th Cir. 2015) (reviewing whether Secretary’s decision
imposing sanctions on Medicaid provider was arbitrary and capricious).

                                          25
    Case: 17-50282       Document: 00514800434          Page: 26     Date Filed: 01/17/2019



                                       No. 17-50282

this question because they dealt only with state laws, not agency decisions,
that blocked Medicaid funding for abortion providers. 

;
727 F.3d at 962.        Likewise, the underlying issue in the Sixth Circuit’s
Olszewski decision was whether HHS reasonably construed the Medicaid Act’s
phrase “medical devices” to include “incontinence 

. 14
The state agency’s determination was not properly at issue. Additionally, the
Tenth Circuit’s decision in Andersen largely parrots Gee in its rejection of a
state agency’s termination decision and likewise does not discuss the standard
of 

.
       The plaintiffs next argue that the deferential standard is inappropriate
because the Individual Plaintiffs, as Medicaid beneficiaries, have no
administrative remedy and thus cannot develop the administrative record. 15
The plaintiffs also point out that Gee held that the plaintiffs “are not subject to
. . . any administrative exhaustion requirement.” 

. That
is true. But the absence of an exhaustion requirement does not mean there
can be no consequences for the provider’s decision to ignore the prescribed
administrative process. The absence of an exhaustion requirement does not
entitle plaintiffs to de novo review of OIG’s factual findings and conclusions.
       Indeed, it is a feature—not a bug—of the arbitrary-and-capricious
standard that it incentivizes providers to use the state administrative appeal
process required by the Medicaid Act itself.               See 42 U.S.C. § 1396a(a)(4);


        The court applied Chevron deference to HHS’s construction of the act and found it
       14

reasonable. 

       15The Individual Plaintiffs, of course, serve here as the Providers’ litigation proxies,
and the Providers had ample opportunity to develop the administrative record. If this
deficiency ultimately operates to the detriment of the Individual Plaintiffs, O’Bannon
recognized that Medicaid beneficiaries might well have a cause of action against their
Providers for becoming 

, 100 S. Ct. at 2476.

                                             26
    Case: 17-50282       Document: 00514800434          Page: 27     Date Filed: 01/17/2019



                                       No. 17-50282

42 C.F.R. § 1002.213 (“Before imposing an exclusion under § 1002.210, the
State agency must give the individual or entity the opportunity to submit
documents and written argument against the exclusion.”). It is highly doubtful
that Congress intended a loophole whereby providers could use patients as
litigation proxies to avoid the state’s remedial procedures and develop
separate, potentially conflicting judicial standards of compliance. Requiring
arbitrary and capricious review that is limited to the administrative record
encourages Medicaid providers to pursue a state’s administrative-hearing
procedures in order to develop the administrative record in their favor. 16
       In an effort to apply rather than distinguish Abbeville, the plaintiffs
alternatively contend that the district court did no more than the federal court
in that case and simply disregarded OIG findings that were not “bona fide” or
“supported     by    some     minimum        quantum       of   evidence.”        

, 805.      As explained above, however, Abbeville was reviewing
LDHH’s procedural compliance with Medicaid standards, not its substantive
compliance.
       In any event, there is no question that the OIG here made factual
findings after viewing the videos and related evidence. On the basis of the
administrative record—not the post hoc justifications offered by plaintiffs’
witnesses in the district court—the OIG determined that video discussions
“centered on clinic processes and tissue packaging rather than the abortion
procedure itself; the video featured repeated discussion about the position of


       16In this way, requiring the deferential standard of review could ameliorate what
some members of this court saw as negative consequences of the Gee decision. See 

(Elrod, J., dissenting from denial of rehearing en banc) (“Disqualified
providers can now circumvent state law because the panel majority opinion deems it
unnecessary to have a final administrative determination so long as there are patients to join
a lawsuit filed in federal court.”).

                                             27
    Case: 17-50282       Document: 00514800434          Page: 28     Date Filed: 01/17/2019



                                       No. 17-50282

the fetus in the uterus, the risk to the patient, and the patient’s pain tolerance.”
The OIG further concluded, based on the videos, that the Provider Plaintiffs at
a minimum violated federal standards regarding fetal tissue research and
standards of medical ethics by allowing doctors to alter abortion procedures to
retrieve tissue for research purposes or allowing the researchers themselves to
perform the procedures. The plaintiffs’ briefing with regard to the substance
of the discussions contained in the videos (as opposed to their trial witnesses’
post hoc justifications) is curiously silent.
       The plaintiffs finally insinuate that arbitrary and capricious review
should not apply because OIG has insufficient expertise to determine the
qualifications of abortion providers. On this point, the district court was also
dismissive, suggesting that the Inspector General and OIG’s Chief Medical
Officer were insufficiently informed regarding how to perform abortions. We
reject this argument. OIG is the agency that the state of Texas has empowered
to investigate and penalize Medicaid program violations. The agency is in the
business of saying when providers are qualified and when they are not. That
the Chief Medical Officer is a surgeon—and not himself an abortion provider—
does not mean that he deserves no deference when deciding whether a provider
has failed to meet the medical and ethical standards the state requires. 17 It is
even odder to claim that federal judges, who have no experience in the



       17Here, it seems necessary to consider the appropriate deference owed to OIG outside
the abortion context. It is certainly inappropriate “to bend the rules when any effort to limit
abortion, or even to speak in opposition to abortion, is at issue.” Whole Woman’s Health v.
Hellerstedt, 

, 2321 (2016) (Thomas, J., dissenting) (quoting Stenberg v.
Carhart, 

, 954, 

, 2621 (2000) (Scalia, J., dissenting)). To bend the
rules here would be particularly imprudent. Had OIG terminated the Medicaid provider
agreements of any other type of health care provider, the incongruity of allowing that
provider to use patient litigation proxies to avoid administrative review and receive de novo
review in federal court would be obvious and unacceptable.

                                             28
    Case: 17-50282       Document: 00514800434         Page: 29     Date Filed: 01/17/2019



                                      No. 17-50282

regulations and ethics applicable to Medicaid or medical practice, much less in
regard to harvesting fetal organs for research, should claim superior expertise.
       In sum, the district court erred by giving no deference to OIG’s factual
findings and by accepting evidence beyond the agency record. The arbitrary
and capricious standard applies to review of the record alone.            18


                              CONCLUSION
       For these reasons, we must affirm that the Individual Plaintiffs possess
a private right of action.       However, because the district court apparently
conducted de novo review of the OIG’s decision, and its procedure was
incompatible with the proper standard, the basis for its preliminary injunction
cannot be sustained. Whether plaintiffs might establish a likelihood of success
on the merits depends on application of the arbitrary and capricious standard
to the administrative record alone.
       We VACATE the preliminary injunction and REMAND for the district
court to limit its review to the agency record under an arbitrary-and-capricious
standard.




       18  A separate issue raised by Planned Parenthood is whether OIG could terminate
Medicaid funding for all of the Provider Plaintiffs where only one, PPGC, has engaged in or
contemplated fetal tissue research. State regulations authorizing action against “affiliates”
of a provider are at issue. This issue becomes relevant and must be reconsidered by the
district court if, on remand, it upholds the OIG’s termination decision against PPGC.
                                             29
    Case: 17-50282    Document: 00514800434       Page: 30   Date Filed: 01/17/2019



                                  No. 17-50282
EDITH H. JONES, Circuit Judge, concurring:
      The panel agrees that the Gee decision is binding law for our circuit at
present, but I urge reconsideration en banc.           Gee is inconsistent with
O'Bannon, and it makes no practical sense to hold that a Medicare provider
charged with misfeasance by state regulating authorities may simply bypass
state procedures, which are required by the Medicaid statute, and use patients
as stalking horses for federal court review of its status. That the arbitrary and
capricious standard of review governs such review in federal court is a second-
best solution to the legal necessity of aligning our precedent with the Supreme
Court’s holding. Finally, despite being litigated with the trappings of the
abortion debate, this is fundamentally a statutory construction case, not an
abortion case. Gee v. Planned Parenthood of Gulf Coast, Inc., 

,
409 (2018) (dissenting from denial of certioriari).
      Prudential     and   practical    objections    may    be   made    to   this
recommendation. From a prudential standpoint, the Supreme Court denied
certiorari in Gee in the past month, and this court rejected en banc
reconsideration of the decision in 2017. Therefore, it would follow, the states
of this circuit should be bound by judicial inertia to a plainly incorrect statutory
interpretation. Pragmatically, there is no harm, no foul, because the nature of
arbitrary and capricious review ought ordinarily shield the decisions of state
authorities who claim evidentiary and legal support when attempting to
sanction or terminate provider status. In my view, none of these rationales
suffices.
      Start with this evenly divided court's denial of en banc reconsideration.
See Planned Parenthood of Gulf Coast v. Gee, 

(5th Cir. 2017)
(Elrod, J., dissenting). At the time of that denial, the Gee decision claimed
support from three other circuits, but the Eighth Circuit had rejected the
                                        30
    Case: 17-50282      Document: 00514800434     Page: 31     Date Filed: 01/17/2019



                                   No. 17-50282
creation     of   a   patient’s   implied    private   right    of   action    under
Section 1396a(a)(23). Compare Planned Parenthood of Ariz., Inc. v. Betlach,

(9th Cir. 2013); Planned Parenthood of Ind., Inc. v. Comm’r of
Ind. State Dep’t of Health, 

(7th Cir. 2012); Harris v. Olszewski,

(6th Cir. 2006) (all finding a private right of action), with Does v.
Gillespie, 

(8th Cir. 2017) (rejecting a private right of action).
Importantly, however, this court’s even split indicated our recognition that the
statutory interpretation issue posed in Gee is seriously debatable. A refusal to
vote a case en banc under such circumstances is a victory of sorts for the panel
decision, but it reflects no endorsement by the majority of active judges.
Reconsidering the en banc decision, especially in light of the Supreme Court’s
recent action, would secure a clear majority decision on this surely recurring
issue.
         In December 2018, the Supreme Court declined certiorari in Gee and the
Tenth Circuit’s Andersen decision, both of which implied a patient’s private
right of action to challenge Medicaid providers’ regulatory terminations. See
Planned Parenthood of Kansas v. Andersen, 

(2018). A conflict
exists with the Eighth Circuit’s contrary holding, yet the Supreme Court left
in place the circuit conflict. It is a fair bet that the Court’s avoidance indicates
considerable uncertainty about the statutory issue. To restore the uniformity
of federal law, the conflict must eventually be addressed. Until that happens,
three different courses of action are afforded to Medicaid providers in different
states. In states where no circuit court decision has approved private plaintiffs’
ability to challenge the providers’ sanctions, the providers must repair to
Medicaid-required state administrative and judicial procedures. In the Tenth
Circuit, providers may use private plaintiffs’ federal court suits, level of federal
review undetermined, as an alternative to undergoing state-crafted
                                        31
   Case: 17-50282     Document: 00514800434      Page: 32    Date Filed: 01/17/2019



                                  No. 17-50282
procedures. And in this circuit, providers have alternative recourse to private
plaintiffs’ suits under the arbitrary and capricious standard of review. Tens of
thousands of provider entities are subject to the Medicaid program’s detailed
scheme of integrated federal and state regulation.
      That Planned Parenthood providers achieved recognition of implied
private plaintiffs’ actions should not detract from the program-wide
uncertainty spawned by this circuit conflict. Equally to the point, the lower
courts remain obliged to undertake careful statutory review while the issue is
undecided, especially if the statute, properly construed, offers providers no
alternative federal court remedy. The Court’s denial of certiorari, in other
words, strengthens the propriety of this court’s reconsidering Gee en banc.
      The pragmatic argument for denying en banc relief would seem to
include two parts.    This court’s adoption of the deferential arbitrary and
capricious standard means that state authorities will ordinarily be able to
defend their program termination decisions successfully in federal court,
reducing   the    friction   between   federal   courts     and   state   Medicaid
administrators.    Thus, it would be argued, the cost of reconsidering Gee,
especially if Gee was correctly decided, is higher than the cost of federal
litigation pending a definitive Supreme Court decision. But there is a second
wrinkle here in that whether to apply an arbitrary and capricious standard is
a res nova decision by this panel made necessary by Gee.               The parties
strenuously disputed the standard of review. As long as a circuit split persists,
other courts weighing in on the standard of review may disagree with this
panel’s decision. Following the Gee case thus entails ongoing legal uncertainty.
      Another     pragmatic     consideration,   however,     favors      en   banc
reconsideration: the complexity and cost to state agencies that administer and
regulate Medicaid.     The program is already one of the most expensive
                                       32
    Case: 17-50282    Document: 00514800434       Page: 33   Date Filed: 01/17/2019



                                  No. 17-50282
components of state budgets. Regulating providers comprises comprehensive
federal and state medical, and ethical dictates as well as parameters for
facilities that provide patient care.      Authorizing lawsuits by patients to
challenge their providers’ terminations burdens state agencies with redundant
and intrusive oversight while the high cost of federal litigation displaces more
efficient uses of state resources. As Justice Thomas also noted in his dissent
from denial of cert., “the looming potential for complex litigation inevitably will
dissuade state officials from making decisions that they believe to be in the
public 

. State courts, moreover, are well suited to
handle these cases based on their more intimate familiarity with the agencies,
the regulation of the practice of medicine, and state administrative law—as
was contemplated in the Medicaid statutes’ prescription of coordinate state
responsibilities for the program. If Gee is incorrect, these practical costs will be
avoided.
      Having explained why there should be no impediment to our rehearing
this case en banc in order to reconsider Gee, I repeat briefly the arguments that
others have fulsomely developed. Gee is inconsistent with the Supreme Court’s
decision in O’Bannon and in tension with numerous other provisions of the
Medicaid statute.
      Judge Owen, dissenting in Gee, argued that O’Bannon precluded the
individual plaintiffs’ assertion of a private right of action to challenge LDHH’s
termination decision. 

(Owen, J., dissenting). The majority
opinion asserted that in O’Bannon, “the patient-plaintiffs’ injuries were alleged
to stem from a deprivation of due process rights,” and “[i]n contrast, the
Individual [Gee] Plaintiffs here assert the violation of a substantive right.” 

omitted). Judge Owen pointed out the fundamental logical
flaw with this reasoning: the majority “fail[s] to appreciate that there is no
                                        33
   Case: 17-50282     Document: 00514800434     Page: 34   Date Filed: 01/17/2019



                                 No. 17-50282
right to due process unless there is a substantive right that may be vindicated
if adequate process is 

. The majority completely
missed the dissent’s primary point that O’Bannon rejected the notion that
Section 1396a(a)(23) creates any substantive liberty or property right. 

       Judge Owen criticized the majority’s broad assertion that only a total
termination of a Medicaid provider from all medical services would render the
provider “unqualified” for purposes of Section 1396a(a)(23). She cited, inter
alia, Section 1396a(p)(1), a provision that authorizes a state to “exclude
any…entity [from Medicaid] for any reason for which the Secretary could
exclude the…entity from participation in [several federal programs listed].”
And she referenced multiple other reasons justifying state termination
decisions under the Medicaid statute itself. 

       Judge Owen also rebutted the majority’s claim that in O’Bannon, the
state had “totally” decertified the nursing center, whereas in Gee, “there was
no decertification decision.” 

The majority concluded, “[w]hen, as
here, a state terminates only a Medicaid provider agreement, independent of
any action to enforce statutory and regulatory standards, O’Bannon is
inapposite.” 

error was a “shaky” basis for distinguishing
the Supreme Court precedent, according to Judge Owen, because the Court
never specified that the nursing home had been totally decertified by the 

.
       Six other judges on this circuit found Judge Owen’s dissent sufficiently
persuasive to join a dissent from the denial of rehearing en banc. See Planned
Parenthood of Gulf Coast, Inc. v. Gee, 

, 700 (5th Cir. 2017)
(Elrod, J., dissenting from denial of rehearing en banc) (explaining that Gee “is
directly at odds with the Supreme Court’s holding in O’Bannon”). And Judge
                                       34
    Case: 17-50282       Document: 00514800434        Page: 35     Date Filed: 01/17/2019



                                      No. 17-50282
Elrod’s dissent added that “the panel majority opinion’s reasoning is not only
at odds with O’Bannon but also with the entirety of the statutory framework
in 42 U.S.C. Section 

.
       There are other reasons for rejecting Gee. The Eighth Circuit held in
even more detail, albeit in a split decision, that Section 1396a(a)(23) confers no
private right of action on patients concerning the termination of a Medicaid
provider’s state agreement, because to do so would place that provision in
conflict with related Medicaid provisions. See Does v. Gillespie, 

,
1041–1043 (8th Cir. 2017) (referring to the lack of an individual entitlement
conferred by the provision itself and 82 related provisions governing State
duties to the federal program; the availability of other means to enforce the
State’s obligations under the Medicaid Act and the resulting likelihood of
conflict between the implied individual remedy and a provider’s administrative
and state judicial remedies; and the “aggregate” or “substantial compliance”
nature of the federal government’s oversight duties). All of these structural
indications, Judge Colloton explained, conflict with the requirement set out in
Gonzaga v. Doe, that a plaintiff relying on federal law to underpin a
Section 1983 case must show that “Congress clearly intended to create an
enforceable federal right.” 

(citing Gonzaga Univ. v. Doe,

, 283, 

(2002)). 1
       In   Andersen,     Judge     Bacharach       dissented     on   the    basis   that
Section 1396a(a)(23) does not “unambiguously” provide an implied private
right of action, contrary to Gonzaga, because any “right” conferred on patients
in that provision conflicts with the state’s broad rights under Medicaid “to


       1  Judge Shepherd, concurring in the Eighth Circuit decision, echoed Judge Owen’s
sentiments about O’Bannon as an independent ground for rejecting plaintiffs’ implied private
right of action.
                                            35
    Case: 17-50282    Document: 00514800434        Page: 36   Date Filed: 01/17/2019



                                    No. 17-50282
exclude an individual or entity from Medicaid for any reason or period
authorized by State law.”          42 C.F.R. § 1002.3(b), interpreting 42 U.S.C.
§ 1396a(p)(1).     Andersen, 

, 1243–45 (10th Cir. 2018).
Judge Bacharach would accordingly distinguish between situations where a
state attempted to prohibit all Medicaid funding to abortion providers
(contrary to law) and situations like that in Andersen, and in this case, where
neutral regulations were violated by the providers.
      Finally, Justice Thomas and two colleagues noted the “significant
implications” of the question “whether Medicaid recipients have a private right
of action to challenge a State’s determination of ‘qualified’ Medicaid providers”
under Section 1396a(a)(23) and Section 1983.            

.
Justice Thomas noted the threats to state administration of Medicaid
programs, not only from the financial burdens of litigation and deterrence of
sound management decisions, but also because private patients’ suits “give
Medicaid providers ‘an end run around the administrative exhaustion
requirements in [the] state’s statutory scheme.’” 

(Elrod, J., dissenting)).
      Given the still-unsettled state of the law and the absence of precedential
or pragmatic disincentives to rehearing en banc, these persuasive arguments
deserve the attention of our full court. I respectfully request rehearing en banc
to reconsider whether Section 1396a(a)(23) creates a private right of action on
behalf of Medicaid patients to challenge the termination of their providers’
contracts by the States.




                                         36