Almy v. Sebelius

• Decision Date: 26 April 2012
• Docket Number: No. 10–2241.,10–2241.
• Citation: 56 Bankr.Ct.Dec. 100,679 F.3d 297
• Parties: Monique D. ALMY, Chapter 7 Trustee for the Bankruptcy Estate of BioniCare Medical Technologies, Incorporated, Plaintiff–Appellant, v. Kathleen SEBELIUS, in her official capacity as Secretary, United States Department of Health and Human Services, Defendant–Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

679 F.3d 297

56 Bankr.Ct.Dec. 100

Monique D. ALMY, Chapter 7 Trustee for the Bankruptcy Estate of BioniCare Medical Technologies, Incorporated, Plaintiff–Appellant,

v.Kathleen SEBELIUS, in her official capacity as Secretary, United States Department of Health and Human Services, Defendant–Appellee.

No. 10–2241.

United States Court of Appeals,Fourth Circuit.

Argued: Jan. 26, 2012.

Decided: April 26, 2012.

ARGUED:Robert Lloyd Roth, Hooper, Lundy & Bookman, PC, Washington, D.C., for Appellant. Michael Raab, United States Department of Justice, Washington, D.C., for Appellee. ON BRIEF:Matthew W. Cheney, Crowell & Moring LLP, Washington, D.C., for Appellant. William B. Schultz, Acting General Counsel, Janice L. Hoffman, Associate General Counsel, Mark D. Polston, Deputy Associate General Counsel for Litigation, Brett Bierer, Janet Freeman, Gerard Keating, Department of Health & Human Services, Washington, D.C.; Tony West, Assistant Attorney General, Irene M. Solet, United States Department of Justice, Washington, D.C.; Rod J. Rosenstein, United States Attorney, Larry D. Adams, Assistant United States Attorney, Office of the United States Attorney, Baltimore, Maryland, for Appellee.

Before WILKINSON, GREGORY, and KEENAN, Circuit Judges.

Affirmed by published opinion. Judge WILKINSON wrote the opinion, in which Judge GREGORY and Judge KEENAN joined.

OPINION

WILKINSON, Circuit Judge:

Medicare Part B is a federal program that, among other things, subsidizes items of durable medical equipment for qualified recipients. Plaintiff Monique D. Almy, the Chapter 7 trustee for the bankruptcy estate of BioniCare Medical Technologies, Inc., contests determinations of the Medicare Appeals Council (MAC) refusing to provide coverage for the BIO–1000, a device to treat osteoarthritis of the knee. Almy alleges that the Secretary of Health and Human Services improperly used the adjudicative process to create a policy of denying coverage for the BIO–1000, that the MAC's decisions were not supported by substantial evidence, and that the MAC's decisions were arbitrary and capricious on account of a variety of procedural errors. We reject those contentions and affirm the judgment of the district court.

I.

A.

Medicare is a federal program providing subsidized health insurance for the aged and disabled. See42 U.S.C. § 1395 et seq. The Secretary of Health and Human Services (“the Secretary”), Kathleen Sebelius, is charged by Congress with administering the Medicare statute. Id. § 1395ff(a)(1).

Part B of the Medicare Act extends coverage to certain types of durable medical equipment (DME) for qualified recipients. 42 U.S.C. § 1395k(a); id. § 1395x(s)(6). Not all DME is guaranteed coverage under Medicare Part B, however. The Medicare statute explicitly provides that “no payment may be made under ... Part B of this subchapter for any expenses incurred for items ... [which] are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.” Id.§ 1395y(a)(1)(A).

Acting through her operating components, the Secretary can elect to determine the coverage of DME in one of three ways. First, she can make a “national coverage determination” (NCD) binding throughout the Medicare system and not subject to review by administrative law judges. Id. § 1395ff(f)(1)(B). Second, one of the private insurance carriers with whom the Secretary contracts to administer claims under Part B, see id. § 1395u(a), can issue a “local coverage determination” (LCD) “respecting whether or not a particular item or service is covered on an intermediary- or carrier-wide basis.” Id.§ 1395ff(f)(2)(B). Finally, if no NCD or LCD is in place, “contractors may make individual claim determinations,” including whether a particular DME meets the statutory requirement of being “reasonable and necessary.” 68 Fed.Reg. 63,693.

The Secretary has also developed guidance in the Medicare Program Integrity Manual (MPIM) for Medicare contractors applying the “reasonable and necessary” standard. Rather than create distinct criteria for individual claim determinations and LCDs, the Secretary has directed contractors to apply a uniform set of standards, providing that “[w]hen making individual claim determinations, ... [a] service may be covered by a contractor if it meets all of the conditions listed in [MPIM] § [1]3.5.1, Reasonable and Necessary Provisions in LCDs below.” ¹ MPIM § 13.3, Individual Claim Determinations. For a device to be considered “reasonable and necessary,” contractors must determine that the item is “safe and effective; not experimental or investigational ...; and appropriate” in terms of both “accepted medical practice” and “the patient's medical need.” MPIM § 13.5.1, Reasonable and Necessary Provisions in LCDs.

The Secretary has also instructed contractors as to the type of evidence to be used in making these technical determinations. Such decisions should be based on either “published authoritative evidence” such as “definitive randomized clinical trials” or “general acceptance by the medical community,” with the caveat that “[a]cceptance by individual health care providers” and “limited case studies distributed by sponsors with a financial interest in the outcome[ ] are not sufficient evidence of general acceptance by the medical community.” MPIM § 13.7.1, Evidence Supporting LCDs.

The Medicare statute and accompanying regulations create a five-step appeals process for claimants dissatisfied with the initial determination of the Medicare contractor. First, the party can seek redetermination from the initial contractor. 42 U.S.C. § 1395ff(b)(1)(A). Second, the claimant can seek “re-consideration” of the contractor's determinations by a “qualified independent contractor” (QIC). Id. § 1395ff(c). If no applicable NCD or LCD governs claims for a particular device, the QIC is instructed by statute to “make a decision with respect to the reconsideration based on applicable information, including clinical experience and medical, technical, and scientific evidence.” Id. § 1395ff(c)(3)(B)(ii)(III). Third, a claimant can request “a hearing on a decision of a qualified independent contractor” before an administrative law judge. Id. § 1395ff(d)(1). Fourth, a party's final administrative appeal within the Department of Health and Human Services is to the Medicare Appeals Council (MAC), a part of the Departmental Appeals Board. Id. § 1935ff(d)(2). The statute specifically provides that “the Departmental Appeals Board shall review the case de novo.” Id. § 1395ff(d)(2)(B). Lastly, a party can bring a civil action in federal court to review a final decision of the Secretary (through the Medicare Appeals Council). Id. § 1395ff(b)(1)(A); § 405(g). The statute there prescribes that the Secretary's findings, “if supported by substantial evidence, shall be conclusive” in the judicial proceeding. Id.§ 405(g).

B.

The DME at issue in this case is the BioniCare Stimulator System, Model 1000 (BIO–1000), a medical device used to treat osteoarthritis of the knee by delivering electrical pulses to the joint. The device was originally developed by Murray Electronics, which sought approval from the Food and Drug Administration (FDA) under the Federal Food, Drug, and Cosmetic Act to market the device. The BIO–1000 was originally submitted for “Pre–Market Approval” (PMA), the most stringent review under the Act, which requires sophisticated proof of the safety and effectiveness of the device. See21 U.S.C. § 360c et seq. In 1997, however, Murray Electronics notified the FDA of its intent to market the BIO–1000 pursuant to a less-rigorous provision of the statute, known as the “510(k) process.” See21 U.S.C. § 360c(f)(1)(A)(ii).

Section 510(k) allows a device to be marketed based not on independent clinical trials of the device itself, but instead because the device is “substantially equivalent to another device” that is already on the market. Id. FDA regulations require that for a device to receive 510(k) approval, the device must have “the same intended use as the predicate device” and the sponsor must “demonstrate[ ] that the device is as safe and as effective as a legally marketed device.” 21 C.F.R. § 807.100(b)(ii)(B). In July 1997, the FDA issued approval under 510(k) for the BIO–1000 to be marketed, finding that it was substantially equivalent to the Transcutaneous Electric Nerve Stimulator (TENS) device that was already on the market.

Since that time, BioniCare has distributed the BIO–1000 to thousands of patients and submitted numerous Medicare claims. While some contractors have provided Medicare coverage for the BIO–1000, others have frequently refused to cover the device. At issue in this appeal are eight groups of claims denying coverage, which were appealed through the entire administrative process to the MAC. In seven of those cases, the Secretary, through the MAC, determined that the BIO–1000 was not “reasonable and necessary” and was therefore excluded from the statutory coverage of Medicare Part B. All seven cases relied on BioniCare's failure to provide evidence in accordance with MPIM § 13.7.1 that demonstrated that the device was “safe and effective.” Appellant's Br. at 21–27 (describing the 535, 310, 208, 891, 852, 259, and 781 Decisions). In the eighth case, BioniCare did not appeal the ALJ's determination that the device was “reasonable and necessary,” and so the MAC did not address that question. Instead, the MAC merely affirmed a payment calculation based on a local fee schedule that was unfavorable to BioniCare. Appellant's Br. at 27–28 (describing 191 Decision).

Plaintiff Monique D. Almy, the Chapter 7 trustee for the bankruptcy estate of BioniCare, filed this lawsuit in May 2008, seeking a reversal of the MAC decisions. Both Almy and the Secretary moved for summary judgment, and on September 3, 2010, the district court granted the Secretary's motion in full. This appeal followed.

II.

A brief...