PROTESTANT MEMORIAL MEDICAL CENTER , INCORPORATED , doing business as MEMORIAL HOSPITAL v. Barry S. Maram

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 05-4193
P ROTESTANT M EMORIAL M EDICAL C ENTER ,
I NCORPORATED , doing business as
M EMORIAL H OSPITAL ,
Plaintiff-Appellant,
v.
B ARRY S. M ARAM , in his official
capacity as the Director of the
Illinois Department of Public
Aid and C ENTERS FOR M EDICARE AND
M EDICAID S ERVICES ,
Defendants-Appellees,
and,
C HILDREN ’S M EMORIAL H OSPITAL ,
I LLINOIS H OSPITAL A SSOCIATION ,
K ENNETH H ALL R EGIONAL H EALTH
C ENTER , et al.,
Intervenors-Appellees.
____________
Appeal from the United States District Court
for the Southern District of Illinois.
No. 05 C 3—David R. Herndon, Judge.
____________
A RGUED J UNE 7, 2006—D ECIDED D ECEMBER 6, 2006
____________

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2 No. 05-4193
Before E ASTERBROOK , Chief Judge, and R IPPLE and W OOD ,
Circuit Judges.
R IPPLE , Circuit Judge. Protestant Memorial Medical
Center, Inc., doing business as Memorial Hospital (“Me-
morial”), brought this action against Barry S. Maram, the
director of the Illinois Department of Public Aid (now
known as the Illinois Department of Healthcare and
Family Services) (“Department”) and a federal agency,
the Centers for Medicare and Medicaid Services (“CMS”).
The complaint alleged that the defendants had violated
the Constitution of the United States and the Medicaid
statutes, 42 U.S.C. § 1396 et seq., when they approved and
implemented a 2004 amendment to the State of Illinois’
Medicaid plan. For the reasons set forth in the following
opinion, we affirm the judgment of the district court.
I
BACKGROUND
A. Facts
Memorial is a hospital located in Belleville, Illinois. It is
licensed to provide health care services, including ser-
vices to Medicare and Medicaid patients. The Medicaid
program is a program jointly funded by the states and the
federal government. It provides medical assistance to
individuals and families whose resources are insufficient
to meet the costs of necessary medical services. See 42
U.S.C. § 1396 et seq. To qualify for federal matching funds,
a state must submit to the Secretary of Health and Human
Services (“Secretary”) a plan that describes the nature and
scope of the state Medicaid program. See id. § 1396a(a). If
a state’s plan satisfies the requirements of the federal

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No. 05-4193 3
statute and regulations, the Secretary “shall approve” the
state’s plan. See id. § 1396a(b). The Secretary has delegated
his authority to approve state Medicaid plans to the
regional administrators of CMS, but has retained the
final authority to disapprove a state’s plan. See 42 C.F.R.
§ 430.15(b) & (c).
In the late 1980s and early 1990s, states began to take
advantage of a “loophole” in the Medicaid program that
allowed states to gain extra federal matching funds with-
out spending more state money. States desiring to avail
themselves of this statutory loophole would make pay-
ments to hospitals and collect the federal matching
funds. The state would then recoup a portion of the state
funding from the hospital, often in the form of a “tax.” See
generally Ashley County Med. Ctr. v. Thompson, 205 F. Supp.
2d 1026, 1031-32 (E.D. Ark. 2002) (noting that “[t]he
result [of this] was that the state could draw additional
federal matching funds without having to contribute
additional state money”).
Congress addressed this problem in the Medicaid
Voluntary Contribution and Provider-Specific Tax Amend-
ments of 1991, Pub. L. No. 102-234, 105 Stat. 1793 (1991)
(codified at 42 U.S.C. § 1396b(w)). Through this legisla-
tion, Congress instructed the Secretary to reduce federal
matching funds to a state by the amount of any revenue
received from a health care related tax that “hold[s]
harmless” the health care provider upon whom the tax
falls. 42 U.S.C. § 1396b(w)(1)(A)(iii). States still may fund
their share of Medicaid expenses by assessing taxes on
health care related items, services or providers, as long as
the tax is uniform, i.e., “broad-based,” and the tax contains
no “hold harmless provision.” See id. § 1396b(w)(1)(A)(ii)-
(iii) & (4).

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4 No. 05-4193
A health care related tax is either a tax that treats provid-
ers or purchasers of health care items or services differ-
ently from other individuals on whom the tax falls, or it
is a tax in which at least eighty-five percent of the tax
burden falls on those who provide or purchase health care
items or services. See 42 U.S.C. § 1396b(w)(3)(A). A health
care related tax contains a “hold harmless provision”
when it provides some sort of payment to the taxpayer
that is tied to the amount of the health related tax paid. See
id. § 1396b(w)(4). One way a health care related tax will
include a “hold harmless provision” is if the tax provides
a direct payment to the taxpayer based on either the
amount of the tax paid or the difference between the
amount of the tax paid and the amount the taxpayer
receives as payments under the state’s Medicaid plan. See
id. § 1396b(w)(4)(A). A health care related tax also will
include a “hold harmless provision” if payments that the
taxpayer receives under the state’s Medicaid program are
tied to the total health care related tax paid. See id.
§ 1396b(w)(4)(B). Lastly, if the state promises to hold the
taxpayer harmless for a portion of the cost of the tax
through a direct payment or exemption from the tax, that
promise also constitutes a “hold harmless provision.” See
id. § 1396b(w)(4)(C).
On February 3, 2004, the Illinois General Assembly
approved legislation that amended the state Medicaid
program to impose a tax on health care providers. Under
this legislation, hospitals were charged a tax equal to the
product of $84.19 times the hospital’s “occupied bed days,”
i.e., the total number of days each hospital bed was occu-
pied by a patient during calendar year 2001. See 305 ILCS
5/5A-1, 5/5A-2(a) (West 2004). Another part of this
legislation provided adjustments to payments from Illi-

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No. 05-4193 5
nois to certain hospitals. See 305 ILCS 5/5A-12 (West 2004).
These adjustments provided payments to the hospitals
above the basic rate for inpatient hospital services, includ-
ing a “Medicaid inpatient utilization rate adjustment.” See
id. These payments were to be funded through the new
tax imposed by the legislation.
On February 6, 2004, the Department submitted for
approval to CMS a proposed amendment to its state
Medicaid plan (“2004 plan amendment”). The object of
the amendment was to permit Illinois to receive match-
ing federal funds for the increased payments to certain
hospitals anticipated by the 2004 legislation. The Depart-
ment argued that the payments did not constitute a “hold
harmless provision” for the new “occupied bed days” tax
under the Medicaid statutes. The net effect of the legisla-
tion and the 2004 plan amendment would be to permit
Illinois to collect the new tax imposed by the legislation
while receiving full federal matching funds for its own
increased payments. By its terms, the plan amendment
would expire on June 30, 2005.
CMS approved the 2004 plan amendment on December
21, 2004 to cover retroactively the period from May 9, 2004
until June 30, 2005. Under this plan, Memorial would
receive payment of $6.6 million, which exceeds the
amount of tax it paid to the State of Illinois by $474,308. All
payments under the 2004 plan amendment were distrib-
uted by April 15, 2005. As noted earlier, the 2004 plan
amendment expired by its own terms on June 30, 2005.
B. District Court Proceedings
On January 5, 2005, Memorial filed this action against
CMS and Barry S. Maram, Director of the Department

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6 No. 05-4193
1 Memorial first filed suit against the then-titled Illinois
Department of Public Aid. The Department later was dis-
missed as a defendant and Barry S. Maram replaced it as a
defendant in his official capacity as Director. See R.72. The
defendants include the Director, CMS and the intervenor-
defendants, a group consisting of the Illinois Hospital Associa-
tion as well as a number of individual hospitals located in
Illinois. See R.27.
2 Sections 1092 and 1923 of the Social Security Act of 1935 are
codified at 42 U.S.C. §§ 1396a and 1396r-4, respectively.
(“Director”). 1 It sought to block implementation of the
2004 plan amendment. The Second Amended Complaint,
the operative pleading, alleges a number of claims. Memo-
rial asserts that the 2004 plan amendment violates the
“hold harmless” prohibitions of 42 U.S.C. § 1396a and 42
C.F.R. § 433.68(f) because the payments made to hospitals
are correlated positively to the amount of tax paid by
the hospitals. See R.39 at 5, 10. Memorial further asserts
that the 2004 plan amendment provides: payments to
hospitals to pay for services to non-Medicaid patients, in
violation of 42 U.S.C. §§ 1396a and 1396b; payments to
hospitals in excess of their Medicaid costs plus uninsured
costs, in violation of 42 U.S.C. § 1396r; and some low-
utilization Medicaid hospitals higher payments than
high-volume hospitals, in violation of 42 U.S.C.
§§ 1396(a)(13)(A), 1396r and sections 1092 and 1923 of the
Social Security Act. 2 Id. at 10-13. Memorial further alleges
violations of its rights to substantive due process, proce-
dural due process and equal protection. Id. at 13-16.
Memorial also claims that the Department and CMS
had violated Memorial’s Eleventh Amendment rights by
failing to follow applicable federal statutes and regula-
tions when the 2004 plan amendments were submitted

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No. 05-4193 7
3 It is unclear what rights Memorial claims be conferred upon
it by the Eleventh Amendment. The Eleventh Amendment has
not been understood to confer any rights on private entities,
such as Memorial. The Eleventh Amendment is understood to
confirm the proposition that states, as sovereigns in our fed-
eral system, will not be held amenable to suit in federal court
without their consent. See Seminole Tribe of Fla. v. Florida, 517 U.S.
44, 54 (1996).
and approved. 3 Finally, Memorial alleges a violation of
42 U.S.C. § 1983 against both CMS and the Director. Id.
at 17-18.
For each of these alleged violations, Memorial requested
the following relief: an order declaring that the 2004 plan
amendment submitted by the Department was invalid
and void; an order declaring that CMS’ approval of the
2004 plan amendment was invalid and void; an injunction
preventing the Director from making payments under
the amendment; an order that Memorial recover attor-
ney’s costs and fees; and “any further orders and relief
which the Court deems just and proper.” Id. at 10-18.
CMS, the Director and the intervenor-defendants moved
to dismiss Memorial’s complaint for lack of subject matter
jurisdiction and, in the alternative, failure to state a
claim upon which relief may be granted. R.84 at 1-2. The
district court first addressed the defendants’ claim that
Memorial lacked subject matter jurisdiction. The district
court first focused on the mootness doctrine. It noted
that the relief requested by Memorial in its complaint
included an order declaring that the 2004 plan amend-
ment is invalid and void, an order declaring that CMS’
approval of the 2004 plan amendment is invalid and
void, and an injunction preventing the Director from

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8 No. 05-4193
making payments pursuant to the 2004 plan amendment.
Id. at 6-7. The district court concluded that these “requests
are moot” because the 2004 plan amendment is no longer
in effect. Furthermore, because the Director already had
distributed all the funds under the 2004 plan amendment,
an injunction prohibiting distribution would be of no effect.
Id. at 7.
Next, the district court determined that Memorial lacked
standing because it had not alleged a “distinct and palpa-
ble injury sufficient” to grant jurisdiction. Id. at 8. The
district court stated that the 2004 plan amendment im-
proved Memorial’s economic condition and that any
2004 plan amendment that would provide more of an
economic benefit to Memorial “exists purely in the hypo-
thetical,” which is not sufficient to grant jurisdiction. Id.
at 9.
In the alternative, the district court held that Memorial
had failed to state a claim upon which relief could be
granted under Federal Rule of Civil Procedure 12(b)(6). The
court held that no right was conferred upon Memorial
by the Medicaid Act. Therefore, Memorial could not
bring a claim under § 1983. Id. at 10-12 (distinguishing
Wilder v. Virginia Hospital Ass’n, 496 U.S. 498 (1990), and
Methodist Hospitals, Inc. v. Sullivan, 91 F.3d 1026 (7th Cir.
1996)).
The court next examined whether the Eleventh Amend-
ment barred a claim against the Director in his official
capacity. The court noted that the relief sought by Memo-
rial, although characterized as “prospective” relief enjoin-
ing the Director from making payments to health care
providers under the approved plan, actually would not
be “prospective” because those payments already had
been made. Id. at 12-13. Because the relief sought “cannot

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No. 05-4193 9
properly be characterized as prospective,” the exception
to the Eleventh Amendment found in Ex Parte Young, 209
U.S. 123 (1908), was inapplicable. Id. at 13. The court
therefore held that claims against the Director should be
dismissed for failure to state a claim because of the State’s
sovereign immunity.
The court also held that CMS was immune from Memo-
rial’s suit. The district court recognized that a § 1983 action
cannot be brought against federal actors acting under
the color of federal law. Such an action can only be
brought if the federal actor is found to have acted under
the color of state law. Id. The district court recognized
that Memorial’s theory was that CMS “conspired” with
Illinois officials to pass the 2004 plan amendment, and thus
acted under the color of state law. Id. at 14. However, the
court stated that CMS undertook its process of approving
the 2004 plan amendment under federal regulations and
did not act under state law even when acting jointly
with state officials. Id. Additionally, there was no sugges-
tion that CMS conspired with Illinois to “deny [Plaintiff of
its] constitutional rights.” Id. (brackets in original). There-
fore, the court held that CMS could not be sued under
§ 1983 and that Memorial’s claims against CMS should be
dismissed for failure to state a claim upon which relief
can be granted.
II
DISCUSSION
The defendants submit that Memorial lacks standing
or, in the alternative, that the case is moot. Both standing
and mootness are aspects of the concept of justiciability. See
Smith v. Boyle, 144 F.3d 1060, 1063 (7th Cir. 1998). Because

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10 No. 05-4193
the nature and scope of these doctrines are issues of law,
our review is de novo. See Wisconsin Right to Life, Inc. v.
Schober, 366 F.3d 485, 489 (7th Cir. 2004).
Mootness is one of the concepts that comprise the
threshold issue of justiciability. See Wernsing v. Thompson,
423 F.3d 732, 745 (7th Cir. 2005). Mootness ensures that
the federal courts remain faithful to the case or contro-
versy limitation imposed by Article III of the Constitution
by refraining from pronouncements on legal questions
that do not affect existing controversies between parties
before the court. As we have stated, “federal courts may
not give opinions upon moot questions or abstract proposi-
tions.” Id. at 744 (quoting Worldwide St. Preachers’ Fellowship
v. Peterson, 388 F.3d 555, 558 (7th Cir. 2004)). For the
reasons that we shall elaborate in the following para-
graphs, Memorial’s claims are barred by the doctrine of
mootness.
The 2004 plan amendment has now expired; all funds
under the 2004 plan amendment have been distributed.
Memorial’s complaint sought only declaratory relief that
the 2004 plan amendment was unlawful and an injunc-
tion barring the Director from distributing funds under
the plan amendment. It sought no affirmative relief
requiring that the district court order the state to develop
a new plan.
This case, therefore, is similar to James Luterbach Construc-
tion Co., Inc. v. Adamkus, 781 F.2d 599 (7th Cir. 1986). In that
case, a construction company sought only a declaratory
judgment that a municipality improperly granted a con-
struction contract to build a wastewater treatment plant
to its competitor and an injunction barring the award of
the contract and payment to the competitor. While the
case was pending, construction on the treatment plant

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No. 05-4193 11
was completed. This court noted that, in light of that
completion, “[b]ecause a declaratory judgment and an
injunction cannot afford [the plaintiff] relief . . . [its] suit is
moot.” Id. at 602. The construction company, like Memo-
rial, did not seek monetary relief before the district court.
Without such a request for monetary relief, “[t]he relief
plaintiff[] seek[s] is valueless at this . . . stage of proceed-
ings.” S. E. Lake View Neighbors v. Dep’t of Hous. & Urban
Dev., 685 F.2d 1027, 1037 (7th Cir. 1982).
Memorial nevertheless submits that its claim is not moot
because of an exception to the mootness doctrine for
cases that are “capable of repetition, yet evading review.”
This exception permits federal courts to adjudicate cases
that would otherwise be moot if two conditions are pres-
ent: “(1) the challenged action [is] in its duration too
short to be fully litigated prior to its cessation or expira-
tion, and (2) there [is] a reasonable expectation that the
same complaining party will be subjected to the same
action again.” See Lewis v. Cont’l Bank Corp., 494 U.S. 472,
481 (1990) (quoting Murphy v. Hunt, 455 U.S. 478, 482 (1982)
(per curiam)).
With respect to the first prong of the exception, Memorial
points to the limited time frame in which it could seek
review of the 2004 plan amendment. CMS approved the
2004 plan amendment retroactively on December 21, 2004,
approving the plan for the period from May 9, 2004 until
June 30, 2005. Therefore, Memorial would only have the
period between December 21 and June 30, approximately
six months, in which to seek review before the plan
amendment expired and all funds were distributed.
Although six months is a rather short period of time,
Memorial’s claim is not one that, by its nature, necessarily
is incapable of review. In one sense, Memorial did act

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12 No. 05-4193
promptly; it filed this action within two weeks of CMS’
approval of the 2004 plan amendment. Memorial then
sought expedited discovery; in its motion for such dis-
covery, it stated that it would “seek a preliminary injunc-
tion at the appropriate time.” R.11 at 2. Memorial therefore
appeared to recognize that the case must move quickly;
indeed, in requesting expedited discovery, it explicitly
pointed out to the district court that “[o]nce the funds are
dispersed, it will be almost impossible to challenge the [2004 plan
amendment], as all the funds will have been dispersed.” R.24
at 5 (emphasis in original).
Although Memorial recognized that a preliminary
injunction could be sought in this case, it never actually
requested such relief. If it had done so, judicial review
well might have been possible before all of the funds
were distributed. We have declined to determine that a
controversy falls under the “capable of repetition, yet
evading review” exception when it is the plaintiff’s proce-
dural missteps that prevent judicial review. See Tobin for
Governor v. Illinois State Bd. of Elections, 268 F.3d 517, 529
(7th Cir. 2001). In Adamkus we held that a claim does not
fall under the “capable of repetition, yet evading review”
standard, when the plaintiff failed to seek a preliminary
injunction halting construction of a wastewater plant
while disputing the award of the construction bid to build
the plant. Adamkus, 781 F.2d at 602-03. We declined to
“excuse [the plaintiff] from failing to take any action at
any time during the year and a half when the plant was be-
ing built” to seek preliminary relief, id. at 603, and found
that the “capable of repetition, yet evading review” excep-

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No. 05-4193 13
4 A situation similar to this case was confronted in Kansas Health
Care Ass’n, Inc. v. Kansas Department of Social & Rehabilitation
Services, 794 F. Supp. 356 (D. Kan. 1992), when a group of Kansas
nursing facilities filed suit alleging that a Medicaid state plan
amendment was unlawful. The challenged plan amendments
expired before judicial review was completed by the district
court, but the nursing facilities argued that a pending plan
amendment would harm them in ways similar to the then-
expired plan amendments. Id. at 357-58.
The court held that the action was moot after the expiration of
the contested plan amendments, stating that, if the court
reached the merits, it “would be issuing an advisory opinion
regarding State Plan Amendments which have not been chal-
lenged and are not now before the court.” Id. at 359. The
court declined to apply the “capable of repetition, yet evading
review” exception because the plaintiffs could have gotten
timely review of their claim had they followed proper proce-
dures in seeking a preliminary injunction. Id.
tion was inapplicable, id. at 604. 4 Therefore, even though
Memorial’s claim “evaded review” in this case, the claim
may not have evaded review had Memorial sought a
preliminary injunction.
Memorial also has not established the second prong
of this exception. There is no reasonable expectation that
Memorial will be subjected to the same action in the next
plan amendment. Our cases require that there must be
a “ ‘reasonable expectation’ or a ‘demonstrable probability’
that the same controversy will recur involving the same
parties.” Holstein v. City of Chicago, 29 F.3d 1145, 1148 (7th
Cir. 1994) (quoting Jones v. Sullivan, 938 F.2d 801, 807 (7th
Cir. 1991)). “The mere physical or theoretical possibility” of
the injury being repeated “is insufficient to satisfy this
prong.” Id.

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14 No. 05-4193
In an attempt to meet this requirement, Memorial claims
that the next plan amendment, which is now pending
approval by CMS, also will injure it. Memorial claims that
the new plan amendment “presents similar issues and
controversies as complained of in the instant suit.” Appel-
lant’s Br. at 19. However, at oral argument, Memorial
indicated that the new plan is different from the 2004 plan
amendment because it employs a different formula to
calculate payments to hospitals. Nevertheless, Memorial
continued to maintain that the new plan will injure it
because the new plan also awards funds to the hospitals
on a basis other than Medicaid utilization.
The record is devoid of any evidence about the details
of the new plan amendment. In short, while it is clear that
Memorial will be subject to a new plan amendment,
it admits that the pending plan awards payments to
hospitals in a different manner than the 2004 plan. It
simply is unclear just how that plan amendment will
impact Memorial. We have declined to apply the “capable
of repetition, yet evading review” exception when the
plaintiff “fail[s] to demonstrate that it necessarily will be
subjected . . . to precisely the same treatment” that it
received in the earlier controversy. Worldwide Street Preach-
ers’ Fellowship v. Peterson, 388 F.3d 555, 559 (7th Cir. 2004);
see also Feit v. Ward, 886 F.2d 848, 858 (7th Cir. 1989)
(holding that “pure speculation” as to future injury is not
sufficient to meet the exception to mootness). Here, Memo-
rial has not established that it will even be injured by the
pending plan amendment; it has admitted that it will
not receive “precisely the same treatment” under the
pending plan amendment as it did under the 2004 plan
amendment. Therefore, we cannot apply the “capable of
repetition, yet evading review” exception to the moot-
ness doctrine.

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No. 05-4193 15
5 Because we affirm the district court’s determination that the
case is moot, we need not decide whether Memorial had the
requisite standing to maintain the action; nor do we express
any view on the merits of Memorial’s claims.
USCA-02-C-0072—12-6-06
Conclusion
The district court properly decided that the case was
moot and therefore beyond the limitations of its jurisdic-
tion. 5 Accordingly, its judgment is affirmed.
A FFIRMED
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit

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