Arizona Alliance For Community Health Centers, et al. v. Arizona Health Care Cost Containment System, et al.

• Court: District Court, D. Arizona
• Decided: June 12, 2026
• Docket: 4:19-cv-00517
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Arizona Alliance For Community Health No. CV-19-00517-TUC-JGZ Centers, et al., 10 ORDER Plaintiffs, 11 v. 12 Arizona Health Care Cost Containment 13 System, et al.,

14 Defendants. 15

16 On March 12, 2026, the Court granted judgment in favor of Plaintiffs.1 (Doc. 164.) 17 On April 8, 2026, Defendants2 filed a Motion to Stay the Judgment Pending Appeal. (Doc. 18 170.) On April 27, 2026, Plaintiffs filed a Motion for Award of Attorney’s Fees. (Doc. 19 172.) Defendants thereafter filed a Motion to Stay the Deadline to Respond to Plaintiffs’ 20 Motion for fees. (Doc. 177.) Both motions are fully briefed. (See Docs. 170, 171, 176; 21 Docs. 177, 178, 179.) For the reasons that follow, the Court will deny Defendants’ motions. 22 I. BACKGROUND 23 On September 2, 2022, the Ninth Circuit vacated in part and reversed in part this 24 Court’s Order granting Defendants’ Motion to Dismiss. See Arizona All. for Cmty. Health 25 Centers v. Arizona Health Care Cost Containment Sys., 47 F.4th 992 (9th Cir. 2022)

26 1 Plaintiffs are Arizona Alliance for Community Health Centers (AACHC), Arizona nonprofit organizations, members of AACHC, Section 330 health centers, and Federally 27 Qualified Heath Centers (FQHCs) participating in Arizona’s Medicaid program. 2 Defendants are Arizona Health Care Cost Containment System (“AHCCCS”) and its 28 director, Carmen Denise Heredia, (collectively, “Arizona”). 1 (hereafter “Ariz. All.”). The Ninth Circuit held that Arizona must cover each component of 2 the mandatory FQHC services benefit, although certain limitations may be permissible. Id. 3 at 1001. The court also concluded that Arizona’s categorical exclusion of adult chiropractic 4 services violated the Medicaid Act. Id. at 1001–02 (citing California Ass’n of Rural Health 5 Clinics v. Douglas, 738 F.3d 1007, 1010 (9th Cir. 2013)). In evaluating Arizona’s 6 limitations on podiatry, optometry, and dental services, the court examined whether CMS 7 had articulated reasons for approving the State Plan Amendments (“SPAs”) that Arizona 8 contends authorize those limitations on mandatory FQHC services benefits. Id. at 1002– 9 1005. The court found that “[t]he record lacks any evidence about CMS’s reasoning for 10 approving Arizona’s [Medicaid] plan and SPAs” and remanded the case so the parties 11 could further develop the record and this Court could “rule in the first instance on whether 12 Arizona’s limitations on adult dental, optometry, and podiatry services, which are 13 components of the mandatory benefit of ‘FQHC services,’ are entitled to Chevron 14 deference.” Id. at 1004–1005 (emphasis in original). 15 Following remand, the parties engaged in additional factfinding consistent with the 16 Ninth Circuit’s directive and filed cross-motions for summary judgment. (See Docs. 142, 17 145, 152, 154.) In a March 12, 2026 Order, this Court granted Plaintiffs’ Motion for 18 Summary Judgment and denied Defendants’ Cross-Motion for Summary Judgment, 19 concluding that Defendants violated 42 U.S.C. § 1396a(bb) by applying unapproved 20 limitations to mandatory FQHC services. (Doc. 164.) The Court found that CMS did not 21 approve Defendants’ interpretation of the State Plan and that the record contained no 22 evidence that CMS considered or authorized applying limitations from optional benefits to 23 mandatory FQHC dental, optometry, and podiatry services. The Court therefore 24 permanently enjoined Defendants from enforcing those limitations. 25 On March 31, 2026, Defendants timely filed a notice of appeal from the Court’s 26 March 12, 2026 Order (Doc. 164) and the Clerk’s Judgment (Doc. 165). 27 // 28 // 1 II. DISCUSSION 2 Defendants move to stay the Court’s March 12, 2026 Order and Judgment pending 3 appeal. They contend that a stay is warranted because they are likely to succeed on appeal, 4 will suffer irreparable harm absent a stay, and the balance of equities and public interest 5 favor maintaining the status quo. (Doc. 170-1.) Defendants also argue that a stay is 6 warranted because, on March 31, 2026, they filed a SPA with CMS expressly incorporating 7 the service limits applicable to other providers to FQHCs. (Id. at 5.) If approved, the SPA 8 would be effective retroactive to January 1, 2026. Plaintiffs oppose the motion, arguing 9 that Defendants have not met the stringent requirements for a stay pending appeal. (Doc. 10 171.) 11 A. Legal Standard 12 “A stay is not a matter of right, even if irreparable injury might otherwise result.” 13 Nken v. Holder, 556 U.S. 418, 433–34 (2009) (citation omitted). Rather, it is “an exercise 14 of judicial discretion,” and “the party requesting a stay bears the burden of showing that 15 the circumstances justify an exercise of that discretion.” Id. In deciding whether to grant a 16 stay, courts consider four factors: “(1) whether the stay applicant has made a strong 17 showing that he is likely to succeed on the merits; (2) whether the applicant will be 18 irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure 19 the other parties interested in the proceeding; and (4) where the public interest lies.” Id. at 20 426 (cleaned up). “The first two factors are the most critical; the last two are reached only 21 once an applicant satisfies the first two factors.” Al Otro Lado v. Wolf, 952 F.3d 999, 1007 22 (9th Cir. 2020) (cleaned up). 23 Under the Ninth Circuit’s sliding scale approach, “the elements of the [] test are 24 balanced, so that a stronger showing of one element may offset a weaker showing of 25 another.” Id. at 1007. When there is a weak irreparable harm showing, the applicant must 26 make a stronger showing of a likelihood of success on the merits. Id. at 1010. The Court 27 addresses the irreparable harm factor first because its resolution informs the showing 28 required on the “likelihood of success on the merits” element. 1 B. Defendants Have Not Shown Irreparable Harm 2 An applicant must show that a stay is necessary to avoid likely irreparable injury to 3 the applicant while an appeal is pending. Id. at 1007. A mere possibility is insufficient. Id. 4 The applicant’s irreparable harm burden “is higher than it is on the likelihood of success 5 prong, as [it] must show that an irreparable injury is the more probable or likely outcome.” 6 Id. “[A] stay may not issue” absent such a showing. Id. 7 Defendants contend they will suffer irreparable harm because the Court’s Order 8 requires immediate changes to Arizona’s Medicaid program, including revising capitation 9 rates and expending administrative resources that may later need to be undone if the Order 10 is reversed or CMS approves the pending SPA. (Doc. 170-1 at 13–14.) They also assert 11 that implementing the Order could disrupt the Medicaid provider network by shifting 12 utilization toward FQHCs and increasing program costs. (Id.) 13 Defendants cannot transform the burdens of complying with an injunction that 14 remedies a violation of federal law into irreparable injury. The Ninth Circuit has recognized 15 that the government “cannot suffer harm from an injunction that merely ends an unlawful 16 practice or reads a statute as required to avoid constitutional concerns.” Rodriguez v. 17 Robbins, 715 F.3d 1127, 1145 (9th Cir. 2013), rev’d on other grounds sub nom. Jennings 18 v. Rodriguez, 583 U.S. 281 (2018); see also Zepeda v. U.S. I.N.S., 753 F.2d 719, 727 (9th 19 Cir. 1983). That principle applies with full force to each harm Defendants identify. Injuries 20 consisting of compliance costs, administrative burdens, or expenditures of time and 21 resources are generally not irreparable. See Al Otro Lado, 952 F.3d at 1008 (“Mere injuries, 22 however substantial, in terms of money, time and energy necessarily expended . . . are not 23 enough.”). The specific harms Defendants identify—revising capitation rates, seeking 24 appropriations, issuing guidance, adjusting program administration, and expending 25 resources to comply with the Court’s Order—are precisely the kinds of compliance costs 26 and administrative burdens that do not constitute irreparable harm. Because the Court has 27 determined that Defendants’ current reimbursement practices violate federal law, the costs 28 of bringing Arizona’s Medicaid program into compliance do not rise to the level of 1 irreparable injury, however substantial those costs may be. 2 Defendants characterize these harms as distinct from ordinary compliance costs 3 because they may be required to implement the Court’s Order and later unwind those 4 programmatic changes if they prevail on appeal or if CMS approves the pending SPA. 5 (Doc. 176 at 6–7.) But that “implement and undo” theory does not transform compliance 6 with the Court’s Order into irreparable harm. These compliance costs and administrative 7 burdens do not become irreparable simply because Defendants may later need to reverse 8 them. The possibility that Defendants may later need to unwind those changes if the Ninth 9 Circuit reverses or if CMS approves the pending SPA remains contingent and does not 10 establish likely, imminent irreparable injury. 11 Defendants’ asserted provider-network harms are also contingent and speculative. 12 Defendants have not shown that implementation of the Order is likely to destabilize 13 Arizona’s Medicaid provider network, as opposed to requiring administrative changes and 14 increased reimbursement for services the Court has determined must be covered as 15 mandatory FQHC services. Defendants’ argument depends on several contingencies, 16 including that beneficiaries will shift care to FQHCs; non-FQHC providers will reduce 17 Medicaid participation as a result; the Ninth Circuit will reverse this Court’s determination; 18 or CMS will approve the pending SPA. Defendants assert that if any of these contingencies 19 occur, they will then need to unwind programmatic changes or seek recoupment. 20 Although Defendants’ declaration expresses concern that implementation may 21 disrupt provider relationships and shift members toward FQHCs, Defendants submit no 22 data, expert analysis, non-FQHC provider declarations, or utilization projections showing 23 that those asserted network harms are likely to occur. (Doc. 170-3 ¶ 8.) Plaintiffs, on the 24 other hand, submit provider declaration evidence addressing that concern in the dental- 25 services context: according to Plaintiffs’ evidence, the relationship between FQHCs and 26 private dental practices is not primarily competitive, but instead often requires referrals 27 from private practices to FQHCs. (Doc. 171-2 ¶¶ 19–22.) That evidence cuts against 28 Defendants’ assertion that expanded FQHC reimbursement is likely to draw dental patients 1 away from non-FQHC providers Thus, Defendants’ contingent future harms do not satisfy 2 the requirement of a likely, imminent, and irreparable injury.3 See Nken, 556 U.S. at 434 3 (requiring more than a mere possibility of relief). 4 Because Defendants’ showing regarding irreparable harm is weak, Defendants must 5 make a strong showing of a likelihood of success on the merits in order to obtain a stay. 6 See Al Otro Lado, 952 F.3d at 1010. Defendants fail to do so. 7 C. Defendants Have Not Shown a Strong Likelihood of Success on the Merits 8 Defendants argue that they need not show they are more likely than not to prevail 9 on appeal and that it is sufficient to raise “a substantial case for relief on the merits.” (Doc. 10 170-1 at 10; Doc. 176 at 2–4.) They assert that three arguments they intend to raise on 11 appeal satisfy that standard: (1) the recent case of Medina v. Planned Parenthood S. Atl., 12 606 U.S. 357 (2025), undermines California Ass’n of Rural Health Clinics v. Douglas, 738 13 F.3d 1007, 1013 (9th Cir. 2013), which held that FQHCs may enforce 42 U.S.C. § 14 1396a(bb) through 42 U.S.C. § 1983; (2) after Loper Bright Enters. v. Raimondo, 603 U.S. 15 369 (2024), the relevant inquiry is whether Arizona’s interpretation complies with § 16 1396a(bb), not whether CMS approved the challenged limitations; and (3) this Court erred 17 in concluding that CMS did not approve the challenged limitations. (Docs. 170-1 at 10–12, 18 176 at 3–5.)4 The Court concludes that none of these issues presents “a substantial case for 19 relief on the merits.” 20 1. Medina Does Not Clearly Abrogate Binding Ninth Circuit Precedent 21 In Medina, the Supreme Court considered whether Medicaid’s “any-qualified- 22 3 Plaintiffs submit evidence that Arizona already maintains a reconciliation process 23 capable of implementing any recoupments that might be necessary if Defendants prevail on appeal, further undermining any claim that recoupment efforts would constitute 24 irreparable harm. (Doc. 171-1 ¶¶ 4–17.) Defendants acknowledge that any additional payments made pursuant to the Court’s Order may be recouped if they prevail on appeal. 25 (Doc. 170-1 at 14.) 4 Defendants incorrectly argue that the parties’ dispute over these issues is sufficient to 26 establish a substantial case for relief. (Doc. 176 at 1–2.) The mere existence of disputed legal issues does not, by itself, satisfy Defendants’ burden. Otherwise, every contested 27 appeal would satisfy the merits prong. Nken requires more than a “mere possibility” of relief, 556 U.S. at 434, and Leiva-Perez requires a substantial case for relief on the merits— 28 not merely a showing that the parties disagree. 640 F.3d at 967–68. 1 provider” provision, 42 U.S.C. § 1396a(a)(23)(A), created a privately enforceable right 2 under § 1983 for individual Medicaid beneficiaries. The court held that it did not because 3 the provision lacked “clear and unambiguous rights-creating language.” Medina, 606 U.S. 4 at 380. The court explained that § 1396a(a)(23)(A) “speaks to what a State must do to 5 participate in Medicaid” and appears within a subsection outlining “scores of things a state 6 plan must include to qualify for federal funding.” Id. at 377, 379. The court emphasized 7 that “[a]ll of § 1396a(a)’s requirements are directed to the Secretary of Health and Human 8 Services,” unlike the Federal Nursing Home Reform Act provisions at issue in Health & 9 Hosp. Corp. of Marion Cnty. v. Talevski, 599 U.S. 166 (2023), which expressly guaranteed 10 individual “rights.” Id. at 378–80. 11 The Supreme Court instructed lower courts to apply the framework articulated in 12 Gonzaga Univ. v. Doe, 536 U.S. 273 (2002), and Talevski when evaluating whether 13 Spending Clause statutes create privately enforceable rights under § 1983. Medina, 606 14 U.S. at 367–69, 375–76. Specifically, the court explained that “[t]o prove that a statute 15 secures an enforceable right, privilege, or immunity, and does not just provide a benefit or 16 protect an interest, a plaintiff must show that the law in question clearly and unambiguously 17 uses rights-creating terms” and “display[s] an unmistakable focus on individuals like the 18 plaintiff.” Id. at 368 (internal quotation marks and brackets omitted) (quoting Gonzaga 19 Univ., 536 U.S. at 284, 290). The court also emphasized that “spending-power statutes like 20 Medicaid are especially unlikely” to satisfy this “stringent” and “demanding” standard. 21 Medina, 606 U.S. at 368–69. 22 Defendants assert Medina casts doubt on whether 42 U.S.C. § 1396a(bb) creates an 23 enforceable right under 42 U.S.C. § 1983, as the Ninth Circuit held in California Ass’n of 24 Rural Health Clinics v. Douglas, 738 F.3d 1007, 1013 (9th Cir. 2013), and may require 25 dismissal of this action. (Docs. 170-1 at 10–11, 176 at 2–5.) Defendants argue that “in light 26 of Medina’s clarification of the standard for evaluating whether a statute passed pursuant 27 to Congress’s spending power confers a privately enforceable cause of action, it is an open 28 question whether Douglas remains good law.” (Doc. 176 at 4.) This argument is not 1 persuasive because Douglas applied the standard identified in Medina. 2 Intervening Supreme Court authority must be “clearly irreconcilable” with Ninth 3 Circuit precedent to overrule it. Miller v. Gammie, 335 F.3d 889, 900 (9th Cir. 2003) (en 4 banc). Defendants’ Medina argument does not show a likelihood of success on appeal or 5 present a substantial case for relief because Medina does not “undercut the theory or 6 reasoning underlying [Douglas] in such a way that the cases are clearly irreconcilable.” Id. 7 Douglas applied the same Gonzaga framework identified in Medina, but to a materially 8 different statutory provision. In Douglas, the Ninth Circuit held that § 1396a(bb) reflects 9 Congress’s intent to “create new rights enforceable under § 1983 . . . in clear and 10 unambiguous terms.” Douglas, 738 F.3d at 1013 (quoting Gonzaga Univ., 536 U.S. at 290). 11 The court explained that § 1396a(bb)(1) specifically identifies Federally Qualified Health 12 Centers and Rural Health Clinics as named beneficiaries and provides that state Medicaid 13 plans “shall provide for payment for services” furnished by those entities. Id. The court 14 concluded the statutory right to payment “is neither vague nor amorphous,” that the statute 15 imposes a mandatory obligation on states, and that the provision “is not general or 16 administrative but contains specific rights-creating language.” Id. That analysis satisfies 17 the standard Medina reaffirmed. 18 Unlike the provision at issue in Medina—which appeared within a list of 19 administrative state plan requirements directed at the Secretary of HHS and “makes perfect 20 sense if it speaks only to a State’s duties to the federal government,” Medina, 606 U.S. at 21 379—§ 1396a(bb) uses specific payment language directed at an identifiable class of 22 named beneficiaries. Medina did not address § 1396a(bb), the FQHC reimbursement 23 framework, or Douglas, and did not hold that Medicaid provisions are categorically 24 unenforceable under § 1983. Moreover, every circuit to have considered the issue— 25 whether § 1396a(bb) is enforceable through § 1983—has concluded that it is. See Douglas, 26 738 F.3d at 1012 n.1; see also Family Health Ctrs. of Sw. Fla., Inc. v. Secretary, Fla. 27 Agency for Health Care Admin., No. 23-10992, 2025 WL 1171609 (11th Cir. Apr. 22, 28 2025) (applying § 1396a(bb) without questioning enforceability); Legacy Cmty. Health 1 Servs., Inc. v. Smith, 881 F.3d 358, 371 n.13 (5th Cir. 2018) (collecting cases from First, 2 Third, and Fourth Circuits holding § 1396a(bb) enforceable under § 1983). 3 2. Defendants’ Limitations Violate § 1396a(bb) Both for Lack of CMS 4 Approval and on Their Merits 5 Defendants argue that, after Loper Bright, the Court should have independently 6 determined whether § 1396a(bb) permits Arizona to apply the challenged limitations to 7 FQHC services, without regard to CMS’s understanding or interpretation of the limitations 8 and how they were applied to FQHCs. (Docs. 170-1 at 11–12; 176 at 4–5.) Defendants 9 assert their appeal presents a substantial case for relief on the merits by asking the Ninth 10 Circuit to itself interpret and apply the statutory requirements as required by Loper Bright. 11 (Doc. 170-1 at 12.) This argument fails for two reasons. 12 First, Loper Bright does not eliminate the statutory and regulatory requirement that 13 a state Medicaid plan, and any material amendment to that plan, be approved by CMS 14 before it may be enforced. See 42 U.S.C. § 1396a(b); 42 C.F.R. § 430.12(c). That approval 15 requirement exists independently of Chevron deference because it derives from the 16 Medicaid Act and its implementing regulations, not from judicial deference to CMS’s 17 interpretation. Loper Bright requires courts to exercise independent judgment when 18 interpreting federal statutes and eliminates Chevron deference to agency interpretations. 19 Loper Bright, 603 U.S. at 412. Thus, even after Loper Bright, Arizona may not enforce 20 limitations on the mandatory FQHC services benefit unless those limitations are approved 21 as part of the State Plan and comply with the Medicaid Act. The Court’s March 12, 2026 22 Order did not apply Chevron deference. Rather, the Court determined, based on the fully 23 developed record, that Defendants violated § 1396a(bb) by applying limitations to 24 mandatory FQHC services that CMS did not approve and that were not authorized by 25 Arizona’s State Plan. (Doc. 164.) Defendants have not shown that Loper Bright undermines 26 that conclusion. 27 Second, setting aside the absence of CMS approval, Defendants have not shown that 28 their proposed limitations would comply with § 1396a(bb)’s substantive requirements even 1 if CMS had approved or were to approve the limitations, which independently diminishes 2 their argument that they would likely succeed on appeal.5 Defendants are correct that states 3 have “discretion to impose limitations to eligibility for and the extent of medical services.” 4 (Doc. 176 at 5.) The Supreme Court has recognized that the Medicaid Act “gives the States 5 substantial discretion to choose the proper mix of amount, scope, and duration limitations 6 on coverage, as long as care and services are provided in ‘the best interest of the 7 recipients.’” Pharm. Rsch. & Mfrs. of Am. v. Walsh, 538 U.S. 644, 665 (2003) (quoting 8 Alexander v. Choate, 469 U.S. 287, 303 (1985)). Federal regulations likewise permit states 9 to impose appropriate limits based on medical necessity or utilization-control procedures. 10 42 C.F.R. § 440.230(d). 11 But that discretion is not unlimited. While states have considerable discretion to 12 design and administer their Medicaid programs, that discretion exists only so long as the 13 state plan complies with federal Medicaid requirements. Alaska Dep’t of Health & Soc. 14 Servs. v. Ctrs. for Medicare & Medicaid Servs., 424 F.3d 931, 935 (9th Cir. 2005) (citing 15 Lewis v. Hegstrom, 767 F.2d 1371, 1373 (9th Cir. 1985)). A covered service must be 16 “sufficient in amount, duration, and scope to reasonably achieve its purpose.” 42 C.F.R. § 17 440.230(b). As the Ninth Circuit explained in this case, although states have discretion to 18 impose limitations on eligibility for and the extent of medical services, exclusions of 19 covered FQHC services, “even if only for adults,” are “more akin to impermissible 20 categorical exclusions than mere limitations.” Ariz. All., 47 F.4th at 1001. 21 The Ninth Circuit has held that FQHC services are a standalone mandatory 22 Medicaid benefit and include services furnished by dentists, podiatrists, optometrists, and 23 chiropractors. Id. at 995; Douglas, 738 F.3d at 1014–16. Thus, the relevant question is not 24 merely whether Arizona may impose some limits; it is whether Arizona’s proposed limits

25 5 The March 12 Order concluded that Defendants violated § 1396a(bb) by applying limitations to mandatory FQHC dental, optometry, and podiatry services that CMS had not 26 approved. (Doc. 164.) That conclusion was sufficient to resolve the parties’ cross-motions for summary judgment. Defendants’ stay briefing raises a related issue: whether the 27 challenged limitations, even if expressly approved by CMS through the pending SPA, would themselves comply with the Medicaid Act. (Doc. 170-1 at 11–12.) The Court 28 addresses that issue here for purposes of assessing Defendants’ likelihood of success on appeal and the effect of potential CMS approval. 1 preserve the mandatory FQHC services benefit required by § 1396a(bb) and leave those 2 services sufficient in amount, duration, and scope to reasonably achieve their purpose. See 3 42 C.F.R. § 440.230(b), (d). Defendants have not made that showing. 4 The pending SPA does not appear to create limitations tailored to the mandatory 5 FQHC services benefit. Instead, Defendants represent that the SPA “expressly 6 incorporat[es] the service limits applicable to other providers to federally qualified health 7 centers.” (Doc. 170-1 at 5.) But the Ninth Circuit has already rejected Arizona’s 8 interpretation of § 1396d(a)(2)(C), which would have required states to cover “only those 9 FQHC services that the state chooses to include in the state Medicaid plan.” Ariz. All., 47 10 F.4th at 998–99. The Ninth Circuit explained that such an interpretation “would enable a 11 state to categorically exclude all coverage for all FQHC services” and “is contrary to the 12 plain language and purpose of the statute.” Id. at 999. Thus, Defendants’ proposed SPA, 13 which merely imports limitations from other provider or benefit categories, would not, 14 without more, establish that Arizona has preserved the mandatory FQHC services benefits 15 required by § 1396a(bb). 16 Nor have Defendants shown that the proposed limitations would leave the relevant 17 FQHC services sufficient in amount, duration, and scope to reasonably achieve their 18 purpose. Arizona’s adult dental limitation restricts coverage to emergency dental services, 19 such as medically necessary extractions or treatment for acute infections, up to $1,000 per 20 year, with limited non-emergency dental coverage for elderly and developmentally 21 disabled beneficiaries in long-term care facilities. Ariz. All., 47 F.4th at 996–97. Its adult 22 optometry limitation covers examination and treatment of medical conditions of the eye 23 and prescriptive lenses only when used as the sole prosthetic device following cataract 24 surgery. Id. at 997. Its podiatry limitation covers adult podiatry services only when ordered 25 by a primary care provider and documented in the medical record. Id. at 996–97. Some of 26 these restrictions may be permissible utilization controls in the abstract. But Defendants 27 have not shown that, as applied to the mandatory FQHC services benefits, they preserve 28 the covered FQHC dental, optometry, and podiatry services required by § 1396a(bb), or 1 that they leave those services sufficient in amount, duration, and scope to achieve their 2 purpose. See 42 C.F.R. § 440.230(b), (d). Thus, the possibility of future CMS approval of 3 the limitations does not establish a strong likelihood of success on appeal or a substantial 4 case for relief. 5 3. Disagreement with the Court’s Factual and Legal Conclusions Does 6 Not Establish a Substantial Case for Relief 7 Defendants’ third argument does not present a substantial case for relief. Defendants 8 disagree with the Court’s conclusion that CMS did not approve Arizona’s application of 9 optional-benefit limitations to mandatory FQHC services, but they identify no factual error, 10 newly discovered evidence, or intervening legal authority that would call that conclusion 11 into question. The Court’s March 12 Order rested on the expanded record developed after 12 remand, including the absence of express language in the State Plan applying optional- 13 benefit limitations to mandatory FQHC Services and Defendants’ reliance on Arizona’s 14 longstanding interpretation of SPA 99-04 rather than any SPA or CMS communication 15 showing approval of that interpretation. (Doc. 164 at 4, 6, 8–9.) Defendants’ disagreement 16 with the Court’s application of those facts to the governing legal standard does not establish 17 a substantial case for relief on appeal. A stay is not warranted simply because a party seeks 18 appellate review of a decision with which it disagrees. See Nken, 556 U.S. at 433–34. 19 D. A Stay Would Substantially Injure Plaintiffs 20 Because Defendants fail to establish the first two Nken factors, the Court need not 21 address the remaining two factors. See Al Otro Lado, 952 F.3d at 1007 (“The first two 22 factors are the most critical; the last two are reached only once an applicant satisfies the 23 first two factors.”) (cleaned up). Even so, factors three and four also do not support 24 Defendants’ request to stay. 25 The third factor considers “whether issuance of the stay will substantially injure the 26 other parties interested in the proceeding.” Nken, 556 U.S. at 434. Defendants argue that a 27 stay will not substantially injure Plaintiffs because they have historically operated under 28 the existing reimbursement limitations and any delay would result only in reduced 1 payments. (Doc. 170-1 at 15.) Defendants also contend that, if CMS approves the pending 2 SPA with retroactive effect, Plaintiffs will ultimately be subject to the same limitations 3 regardless. (Id.) Plaintiffs respond that a stay would delay their receipt of statutorily 4 required reimbursement for FQHC services and impair their ability to provide care to 5 Medicaid beneficiaries. (Doc. 171 at 17–19.) Plaintiffs also argue that because FQHCs 6 must provide primary health care and related services to patients regardless of ability to 7 pay, unreimbursed Medicaid services force them to subsidize Arizona’s Medicaid program 8 with Section 330 grant funds. (Id. at 17–18.) Plaintiffs submit evidence that continued 9 underpayment has caused millions of dollars in unreimbursed costs, staffing reductions, 10 underused dental facilities, and risk of further service cuts affecting Medicaid beneficiaries. 11 (Doc. 171-2 ¶¶ 8–10; Doc. 171-3 ¶¶ 14–15; Doc. 171 at 17–19.) 12 The third factor weighs against a stay. The Court has determined that Defendants’ 13 current reimbursement practices violate federal law. A stay would delay enforcement of 14 that determination, postpone payments to which Plaintiffs have been found entitled under 15 federal law and for which they will not otherwise get reimbursed, and require Plaintiffs to 16 continue operating under reimbursement levels that the Court has determined are 17 inconsistent with the Medicaid Act. Plaintiffs are FQHCs that rely on reimbursement for 18 mandatory services under the Medicaid Act. Plaintiffs have shown that continued 19 underpayment has affected and will continue to affect their ability to provide services, 20 including through impacts on staffing, service availability, and access to care for Medicaid 21 beneficiaries. Accordingly, a stay would result in more than minimal injury to Plaintiffs 22 and the populations they serve. 23 E. The Public Interest Weighs Against a Stay 24 Defendants argue that the public interest favors a stay because implementing the 25 Court’s Order would destabilize Arizona’s Medicaid provider network and require 26 significant administrative adjustments. (Doc. 170-1 at 15–16.) They contend that a stay 27 would preserve the status quo pending appeal. (Id.) 28 As discussed in Section II.B., Defendants’ asserted provider-network harms are 1 speculative, and Defendants have not submitted data, expert analysis, non-FQHC provider 2 declarations, or utilization projections showing that those asserted network harms are likely 3 to occur. In addition, although the Court recognizes Defendants’ asserted administrative 4 and budgetary concerns, those concerns do not outweigh the public interest in enforcing 5 federal Medicaid requirements and ensuring access to covered services for Medicaid 6 beneficiaries. See M.R. v. Dreyfus, 697 F.3d 706, 737–38 (9th Cir. 2012). The public 7 interest does not favor preserving an unlawful status quo to spare a state the costs of 8 compliance with federal law. 9 This principle applies with particular force here. As the Court has determined, 10 Defendants’ current reimbursement practices violate the Medicaid Act. A stay would delay 11 prospective compliance with the Court’s injunction and allow Defendants to continue 12 enforcing reimbursement limitations the Court has found unlawful. The public interest 13 therefore favors implementation of the Court’s Order, not continued enforcement of 14 unlawful limitations on mandatory FQHC services. 15 F. Defendants Have Not Justified an Unsecured Stay 16 Plaintiffs argue that Defendants’ motion is procedurally deficient because 17 Defendants have not proposed a bond, alternative security, or other terms that would secure 18 Plaintiffs’ rights while the appeal is pending. (Doc. 171 at 3–4.) Defendants respond that 19 Rule 62(d) gives the Court discretion to enter a stay without requiring a bond or other 20 security. (Doc. 176 at 7–8.) 21 Rule 62(d) permits a court to stay an injunction “on terms for bond or other terms 22 that secure the opposing party’s rights.” Fed. R. Civ. P. 62(d). Courts have discretion to 23 accept security in forms other than a bond. See Townsend v. Holman Consulting Corp., 929 24 F.2d 1358, 1367 (9th Cir. 1990); Int’l Telemeter Corp. v. Hamlin Int’l Corp., 754 F.2d 25 1492, 1495 (9th Cir. 1985). Where no security is posted, the grant or denial of a stay strictly 26 rests within the district court’s discretion. See Matter of Combined Metals Reduction Co., 27 557 F.2d 179, 193 (9th Cir. 1977). Defendants request an unconditional stay. They have 28 proposed no bond, no alternative security, and no other terms designed to protect Plaintiffs’ 1 rights while the appeal is pending. 2 Defendants argue that security is unnecessary because Arizona is a solvent 3 sovereign. (Doc. 176 at 7–8.) But Plaintiffs do not seek only to protect the collectability of 4 a money judgment. Plaintiffs seek prospective enforcement of an injunction requiring 5 Defendants to stop applying reimbursement limitations the Court has found unlawful. A 6 stay would delay that prospective compliance and require Plaintiffs to continue providing 7 mandatory FQHC services under reimbursement practices the Court has determined are 8 inconsistent with the Medicaid Act. Arizona’s solvency does not address those harms or 9 explain why an unconditional stay would adequately protect Plaintiffs’ interests during the 10 appeal. 11 Defendants further contend that, if the pending SPA is approved retroactive to 12 January 1, 2026, Plaintiffs will not be entitled to additional reimbursement regardless of 13 the appeal’s outcome, making any security unnecessary. (Doc. 176 at 8.) But as the Court 14 has explained, Defendants have not shown that the pending SPA would comply with the 15 Medicaid Act’s substantive requirements even if CMS approves it. See supra Section C.2. 16 The SPA therefore cannot be assumed to eliminate Plaintiffs’ interest in prospective 17 compliance with the Court’s Order. Defendants have proposed nothing to protect Plaintiffs’ 18 rights while the appeal is pending. Their failure to propose any terms that would secure 19 Plaintiffs’ rights provides an additional basis to deny the motion. 20 III. Motion to Stay Consideration of Plaintiffs’ Motion for Attorney’s Fees 21 Defendants’ motion to stay their deadline to respond to Plaintiffs’ motion for 22 attorney’s fees rests on the same arguments presented in their motion to stay the judgment 23 pending appeal—that the appeal raises serious legal questions with significant potential to 24 affect this Court’s consideration of fees. (Doc. 177-1 at 4.) 25 The Court has concluded that Defendants have not shown a substantial case for 26 relief on the merits of their appeal. That conclusion undermines the principal premise on 27 which the fee-stay motion rests. Therefore, the Court will deny the motion. 28 Independent of that conclusion, judicial economy favors resolving Plaintiffs’ fee 1 request now. This case has been pending since 2019. Both Fed. R. Civ. P. 54(d)(2)(B) and 2 LRCiv 54.2(b)(2) favor prompt resolution of timely fee requests, and the Ninth Circuit has 3 recognized that a district court retains jurisdiction to consider and award attorneys’ fees 4 while a merits appeal is pending. Masalosalo v. Stonewall Ins. Co., 718 F.2d 955, 956–57 5 (9th Cir. 1983). Plaintiffs are presently prevailing parties by virtue of the March 12, 2026 6 Order. The only question remaining is the reasonableness of the fees Plaintiffs incurred— 7 a determination this Court is well-positioned to make while the litigation is fresh in mind. 8 Deferral would serve neither efficiency nor fairness. 9 IV. CONCLUSION 10 Defendants have not met their burden of demonstrating that a stay pending appeal 11 is warranted. Their irreparable harm showing is weak: the harms they identify are 12 compliance costs, administrative burdens, and speculative network disruptions that do not 13 rise to the level of likely, imminent irreparable injury. Because that showing is weak, 14 Defendants must make a strong showing of likelihood of success on the merits. They have 15 not done so. Medina does not clearly abrogate Douglas; Loper Bright does not eliminate 16 the statutory requirement of CMS approval; and the pending SPA does not alter the analysis 17 because it has not been approved and, even if approved, would not itself establish that 18 Defendants’ limitations comply with the Medicaid Act. Defendants’ disagreement with this 19 factual and legal conclusions does not establish a substantial case for relief. Under the 20 Ninth Circuit’s sliding-scale approach, the weakness of both showings reinforces the 21 conclusion that a stay is unwarranted. See Al Otro Lado, 952 F.3d at 1010. The remaining 22 Nken factors—substantial injury to other parties and the public interest—independently 23 weigh against a stay: Plaintiffs face concrete harm from continued underpayment and 24 delayed enforcement of the Court’s injunction, and the public interest lies in enforcing 25 federal law, not preserving a status quo this Court has determined is unlawful. 26 // 27 // 28 // 1 Accordingly, 2 IT IS ORDERED Defendants’ Motion to Stay Order and Judgment (Doc. 170) and || Motion To Stay the Deadline to Respond to Plaintiffs’ Motion for Attorney’s Fees (Doc. 4|| 177) are DENIED. 5 IT IS FURTHER ORDERED Defendants must file a response to Plaintiffs’ 6 || Motion for Attorneys’ Fees no later than fourteen days from the date this Order is filed in || accordance with LRCiv 54.2 and this Court’s Scheduling Order. (Doc. 98 at 14.) 8 Dated this 12th day of June, 2026. 9

I] Jennifer G. Zips 12 Chief United States District Judge 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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