American Medical Ass'n v. Weinberger, 75-1547

• Decision Date: 22 July 1975
• Docket Number: No. 75-1547,75-1547
• Citation: 522 F.2d 921
• Parties: AMERICAN MEDICAL ASSOCIATION, etc., et al., Plaintiffs-Appellees, v. Caspar W. WEINBERGER, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 921

522 F.2d 921

AMERICAN MEDICAL ASSOCIATION, etc., et al., Plaintiffs-Appellees, v. Caspar W. WEINBERGER, Defendant-Appellant.

No. 75-1547.

United States Court of Appeals Seventh Circuit.

Argued July 10, 1975.

Decided July 22, 1975.

Samuel K. Skinner, U. S. Atty., Gary L. Starkman, Asst. U. S. Atty., Chicago, Ill., Rex E. Lee, Asst. Atty. Gen., David M. Cohen, Atty., Civ. Div., Dept. of Justice, Washington, D. C., Stanton J. Price, Los Angeles, Cal., for defendant-appellant.

Newton N. Minow, Bernard D. Hirsh, Chicago, Ill., for plaintiffs-appellees.

Before FAIRCHILD, SWYGERT and BAUER, Circuit Judges.

BAUER, Circuit Judge.

This cause comes before the Court on the expedited appeal of defendant, Caspar W. Weinberger, the Secretary of the Department of Health, Education and Welfare. Plaintiffs, the American Medical Association and certain patients, beneficiaries of Medicare and Medicaid programs, sued H.E.W. seeking to enjoin the enforcement of certain changes in the regulation promulgated by the Secretary under the Medicaid ¹ and Medicare ² programs.

The new changes, which were scheduled to become effective on July 1, 1975, revise the system of utilization review, i. e., review of the need for hospitalization, utilized in the Medicare and Medicaid programs so as to provide for the review, by a committee composed of physicians and other professional personnel, within twenty-four hours of the admission to a hospital of a Medicare or Medicaid patient in order to determine whether the admission is medically necessary. If the committee decides that the admission is not necessary, the hospitalization may continue, but the Secretary will not reimburse the provider of services for the hospital stay beyond the third day after notification of the decision of the committee. If the committee decides that the hospitalization is necessary, the Secretary will reimburse the hospital, subject to later review, for the services rendered for so long as the beneficiary remains hospitalized. ³

After a hearing, the trial court issued a preliminary injunction enjoining the enforcement of the regulations on the ground that the regulations may be in excess of the Secretary's statutory authority and may unlawfully interfere with the doctor-patient relationship. The trial judge took the position that "the practical effect of the regulation is to deny admission, even if the terms of the regulations do not." The opinion concluded:

"The wiser exercise of this court's discretion is the issuance of a preliminary injunction pending disposition on the merits.

The risk of the irreparable injury to the health of patients outweighs any hardship to defendant."

Since an application for a preliminary injunction is addressed to the sound discretion of the trial court, appellate review is extremely limited. Hulburt Oil and Grease Co. v. Hulburt Oil and Grease Co., 346 F.2d 260 (7th Cir.), Cert. denied, 382 U.S. 835, 86 S.Ct. 78, 15 L.Ed.2d 77 (1965); Scherr v. Volpe, 466 F.2d 1027 (7th Cir. 1972).

Thus the only question before this tribunal is whether the trial court committed an abuse of discretion in issuing a preliminary injunction. In Particle Data Laboratories, Inc. v. Coulter Electronics, Inc., 420 F.2d 1174, 1178 (7th Cir. 1969), this Court articulated the standard for determining whether a trial judge had abused his discretion:

" 'Generally, an appellate court may set aside a trial court's exercise of discretion only if the exercise of such discretion could be said to be arbitrary.' '(D)iscretion is abused only where no reasonable man would take the view adopted by the trial court. If reasonable men could differ as to the propriety of the action taken by the trial court, then it cannot be said that the trial court abused its discretion' " (citations omitted).

The central issue in this litigation is not the principle of utilization review ⁴ per se. Indeed, plaintiffs' principal witness admitted that a decision by a utilization review committee made after a retrospective review, a review which occurs at some point (days, weeks, or months) after admission, does not affect a doctor's practice of medicine or interfere with the doctor-patient relationship. Plaintiffs recognize that some form of review is necessary to prevent unscrupulous doctors from admitting patients who do not require hospitalization. ⁵ However plaintiffs contend that the new regulations which mandate immediate review of the doctor's decision to admit a patient have the effect of allowing H.E.W. to interfere with a function and duty traditionally reserved to qualified medical professionals. Defendant responds by stating that the procedures by which the federal government determines whether or not it will make reimbursement do not result in an interference with the practice of medicine. As a general principle the Secretary is correct in making such an argument. See Johnson's Professional Nursing Home v. Weinberger, 490 F.2d 841 (5th Cir. 1974); Association of American Physicians & Surgeons v. Weinberger, 395 F.Supp. 125 (N.D.Ill.), decided May 8, 1975 (three judge court). Yet these new regulations may have the effect of directly influencing a doctor's decision on what type of medical treatment will be provided, thus directly interfering with the practice of medicine. Whether or not the regulations have such an impact, which would be in violation of the various statutes ⁶, and, perhaps amount to unconstitutional conduct ⁷, is not a question for us to decide at this time. Our decision now is simply based on examining the record to see if the trial court properly exercised its discretion in balancing the following factors: the likelihood of irreparable harm to plaintiffs if an injunction does not issue; the probability of success or failure of the suit; the potential for damage or inconvenience in light of the public interest. ⁸

The record in this case reveals that a decision not to issue a preliminary injunction may have resulted in irreparable injury to patients and physicians. The testimony of appellees' witnesses, Dr. Frank Jirka and Dr. Risher Watts, indicates that the challenged regulations may cause physicians to refrain from hospitalizing patients who they believe should be hospitalized to the detriment of the health of such patients. Appellant's witnesses admitted that the regulations at issue would affect medical judgments made by attending physicians. All medical witnesses testified that it was frequently impossible to develop sufficient diagnostic data within twenty-four hours to justify hospital admissions. The only evidence which appellant presented in support of his position was statements by two physicians, neither of whom regularly treat patients, that the regulations might be enforced in a manner consistent with their views of proper medical care and health administration.

On this point the district court found:

"There is no indication that an over-65 indigent recipient of Medicare or Medicaid, if not admitted under these programs, could otherwise pay for the hospitalization prescribed by the attending doctor. If a patient who cannot pay cannot as a result of the regulations be hospitalized when diagnosis is unclear, the potential injury to the patient's health may be irreparable."

The regulations might also harm physicians whose ability to provide effective treatment will be severely handicapped by the loss of patient confidence which must inevitably accompany a communication, within twenty-four hours, to a hospitalized patient that, contrary to what his attending physician had said, hospitalization is unnecessary.

In contrast to the substantial risk of irreparable injury to appellees posed by the challenged regulations, the damage to appellant from the preliminary injunction is minimal. Medicare and Medicaid have been law since 1965. In this ten-year period, these programs have functioned without the drastic, across-the-board, twenty-four hour admission review system mandated by the challenged regulations. It can hardly be said, therefore, that appellant will suffer irreparable harm in the period that the preliminary injunction is in effect to preserve the status quo until the complex issues raised by this case can be disposed of in an orderly and judicious fashion.

These regulations were first issued as proposals in January of 1974. They were studied for nearly eleven months until November 29, 1974, when they were finalized. At that time, they were to become effective on February 1, 1975. Subsequently, the Secretary voluntarily postponed their effective date until July 1, 1975. In effect, the preliminary injunction continues the postponement voluntarily effected by appellant. In these circumstances it hardly behooves the Secretary to claim that the preliminary injunction is causing him irreparable injury.

Indeed if the Secretary believed that a delay in the implementation of the regulations would cause serious harm he could have accepted the trial court's offer to hold a full trial on the merits as soon as possible.

There is no doubt that there is a substantial public interest question involved in this litigation. The regulations play an integral and critical role in two nationwide programs of substantial magnitude. The regulations were adopted only after the most serious study, including consideration of thousands of comments submitted by plaintiffs and other interested parties. The injunction places in limbo the efforts of H.E.W. to foster the establishment of Professional Service Review Organizations (PSRO's) across the country. Nevertheless we think the trial court correctly understood these factors when the judge stated in his opinion that:

"A preliminary injunction will . . . prevent the expenditure now of federal funds on a program that ultimately may be declared invalid. And if the Secretary should prevail on the merits, he can thereafter proceed to enforce the regulations with confidence in their validity."

Furthermore,...