984 F.2d 979 (9th Cir. 1992), 91-15422, Dexter v. Kirschner

Docket Nº:91-15422, 91-15062 and 91-15409.
Citation:984 F.2d 979
Party Name:Sheri H. DEXTER, Plaintiff-Appellee, v. Leonard J. KIRSCHNER, Director of the Arizona Health Care Cost Containment System, Defendant, and Arizona Physicians, IPA, Inc., Defendant-Appellant. Sheri H. DEXTER, Plaintiff-Appellee, Leukemia Society of America, Arizona Chapter, Intervenor-Appellee, v. Leonard J. KIRSCHNER, Director of the Arizona Health
Case Date:August 18, 1992
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

Page 979

984 F.2d 979 (9th Cir. 1992)

Sheri H. DEXTER, Plaintiff-Appellee,

v.

Leonard J. KIRSCHNER, Director of the Arizona Health Care

Cost Containment System, Defendant,

and

Arizona Physicians, IPA, Inc., Defendant-Appellant.

Sheri H. DEXTER, Plaintiff-Appellee,

Leukemia Society of America, Arizona Chapter, Intervenor-Appellee,

v.

Leonard J. KIRSCHNER, Director of the Arizona Health Care

Cost Containment System, Defendant-Appellant,

and

Arizona Physicians, IPA, Inc., Defendant.

Sheri H. DEXTER, Plaintiff-Appellee,

Leukemia Society of America, Arizona Chapter, Intervenor-Appellee,

v.

Leonard J. KIRSCHNER, Director of the Arizona Health Care

Cost Containment System, Defendant-Appellant.

Nos. 91-15422, 91-15062 and 91-15409.

United States Court of Appeals, Ninth Circuit

August 18, 1992

Argued and Submitted April 17, 1992.

As Amended on Denial of Rehearing and Rehearing En Banc Jan. 29, 1993.

Page 980

Michael D. Curran and Logan T. Johnston, Johnston, Maynard, Grant & Parker, Phoenix, AZ, for defendant-appellant.

David K. Duncan, Meyer, Hendricks, Victor, Osborn & Maledon, P.A., Phoenix, AZ, for defendant-appellant Arizona Physicians IPA, Inc.

Heidi L. McNeil, Snell & Wilmer, Phoenix, AZ, for intervenor-appellee.

Appeal from the United States District Court for the District of Arizona.

Before: SCHROEDER, LEAVY, and RYMER, Circuit Judges.

ORDER

The opinion filed on August 18, 1992, is amended as follows: footnote 2 on page 9863 of the slip opinion is replaced with the following:

With this amendment, Judges Leavy and Rymer have voted to deny the petition for rehearing. Judge Schroeder has voted to grant the petition for rehearing. The panel has voted to reject the suggestion for rehearing en banc.

The full court has been advised of the en banc suggestion and no judge of the court has requested a vote on it.

Page 981

The petition for rehearing is DENIED and the suggestion for rehearing en banc is REJECTED.

OPINION

LEAVY, Circuit Judge:

FACTS AND PROCEEDINGS BELOW

We must decide whether the State of Arizona may, under Medicaid regulations and the Equal Protection Clause of the Fourteenth Amendment, choose to fund one type of bone marrow transplant but not another.

The facts are undisputed. Sheri Dexter, now deceased, suffered from leukemia. She qualified for benefits under Arizona's Medicaid program, 1 administered by the Arizona Health Care Cost Containment System (AHCCCS). One of the appellants, Dr. Leonard J. Kirschner, is the director of AHCCCS. The other appellant, Arizona Physicians IPA, Inc., is the health plan governed by AHCCCS in which Ms. Dexter was enrolled as a member. After Sheri Dexter's death, we granted the unopposed motion of the Leukemia Society of America, Arizona Chapter, to intervene as appellee.

The disease Sheri Dexter had is known as chronic myelogenous leukemia. The death rate is approximately 100% for individuals who are untreated. The required treatment is chemotherapy so extensive that it kills not only the cancer but also the patient's bone marrow. Therefore, a bone marrow transplant is a necessary part of the cure.

The only effective and proven transplant for chronic myelogenous leukemia is an allogeneic bone marrow transplant in which a matched donor's marrow is infused into the patient. An allogeneic bone marrow transplant is the standard of care for the treatment and cure of chronic myelogenous leukemia; it is not experimental. Dexter's physicians estimated that with an allogeneic bone marrow transplant, she had a 60% to 90% chance of long-term, disease-free survival.

The average cost of an allogeneic bone marrow transplant at the University Medical Center in Tucson, Arizona, is $170,000. Dexter was denied Medicaid coverage because Arizona's Medicaid statute does not cover allogeneic bone marrow transplants.

The statute does, however, cover autologous bone marrow transplants. In an autologous bone marrow transplant, the patient's own bone marrow is removed and later readministered after chemotherapy. Patients with chronic myelogenous leukemia cannot be treated effectively with an autologous bone marrow transplant because their disease never goes into complete remission so that healthy bone marrow may be withdrawn. Thus, if reinjected with their own diseased marrow, the cancer would simply spread again.

Ms. Dexter filed this action seeking declaratory and injunctive relief. She alleged that the appellants' failure to approve Medicaid payment for an allogeneic bone marrow transplant violated various provisions of Title XIX and its implementing regulations, 42 C.F.R. § 430.00 et seq. The district court granted preliminary injunctive relief. The parties stipulated that the preliminary injunction be permanent and the district court entered a Final Judgment and Decree of Permanent Injunction.

Among other things, the court decreed that A.R.S. § 36-2907.F, the Arizona statute providing that autologous bone marrow transplants be covered by Medicaid, violates 42 U.S.C. § 1396 et seq. and is unconstitutional as applied to Ms. Dexter and others similarly situated. 2 In a separate order, the court awarded attorneys' fees of $25,000 and costs of $139.55 to Ms. Dexter.

Page 982

On appeal, the appellants argue that the district court erred in finding A.R.S. § 36-2907.F unconstitutional and that the award of attorney fees should be reversed.

Standard of Review

A district court's grant of permanent injunctive relief is reviewed for an abuse of discretion or application of erroneous legal principles. Guadamuz v. Bowen, 859 F.2d 762, 766 (9th Cir.1988); Tollis Inc. v. San Bernardino County, 827 F.2d 1329, 1331 (9th Cir.1987).

"Although the decision to grant or deny declaratory relief under the Declaratory Judgment Act, 28 U.S.C. § 2201, is a matter initially committed to the discretion of the district court, on appeal we exercise our own 'sound discretion' to determine the propriety of the district court's grant or denial of declaratory relief. In effect, then, we review de novo the district court's ruling below." Fireman's Fund Ins. Co. v. Ignacio, 860 F.2d 353, 354 (9th Cir.1988) (citations omitted).

DISCUSSION

I. Whether The District Court Erred In Deciding A.R.S. § 36-2907.F Is Unconstitutional As Applied And Violates Federal Law

Two Arizona statutes, A.R.S. §§ 36-2907.A.12 and 36-2907.F, make it clear that Arizona covers autologous but not allogeneic bone marrow transplants. A.R.S. § 36-2907.A.12 provides in relevant part:

[T]he following health and medical services shall be provided pursuant to provider contracts awarded under this article:

....

Medically necessary kidney, cornea and bone transplants 3 and immunosuppressant medications for these transplants ... and, beginning October 1, 1988, medically necessary liver transplants and immunosuppressant medications for these transplants.... No other organ transplants may be covered by the system unless specifically required by federal law [.]

(Emphasis added).

A.R.S. § 36-2907.F, which the district court found unconstitutional, provides that:

Notwithstanding subsection A of this section [of which A.R.S. § 36-2907.A.12 is a part], beginning October 1, 1989, the director shall provide medically necessary autologous bone marrow transplants to a person defined as eligible[.]

The appellants argue the district court clearly erred in finding A.R.S. § 36-2907.F unconstitutional as applied and in violation

Page 983

of federal law since (1) Dr. Kirschner had no discretion at all in this case and (2) federal law does not require coverage of the allogeneic bone marrow transplant. They claim that Dr. Kirschner did not act arbitrarily or unreasonably in denying Medicaid to Sheri Dexter; rather, he simply obeyed a valid state law.

"Medically Necessary" and A State's Discretion

Once a state elects to participate in the Medicaid program, it must comply with federal requirements. See 42 U.S.C. § 1396a(a). Arizona participates in the Medicaid program through the AHCCCS. Pursuant to Medicaid, AHCCCS must provide assistance to pay for medically necessary inpatient hospital and physician's services for eligible persons. See 42 U.S.C. §§ 1396a(a)(10), 1396d(a)(1)-(5).

Sheri Dexter argued before the district court that her allogeneic bone marrow transplant was medically necessary and therefore, the denial of Medicaid coverage was in violation of federal Medicaid laws. The appellants argued that the "medically necessary" standard does not apply to organ transplants because under certain 1987 Congressional amendments the states were given...

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