Citizens v. Burwell, Civil Action No. 4:17-CV-16

Decision Date25 January 2017
Docket NumberCivil Action No. 4:17-CV-16
PartiesDIALYSIS PATIENT CITIZENS; U.S. RENAL CARE, INC.; DAVITA INC.; and FRESENIUS MEDICAL CARE HOLDINGS, INC. v. SYLVIA MATHEWS BURWELL, Secretary, United States Department of Health and Human Services; UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES; ANDY SLAVITT, Acting Administrator, Centers for Medicare and Medicaid Services; and CENTERS FOR MEDICARE AND MEDICAID SERVICES
CourtUnited States District Courts. 5th Circuit. United States District Court of Eastern District Texas

Judge Mazzant

MEMORANDUM OPINION AND ORDER

Pending before the Court is Plaintiffs' Emergency Motion for Temporary Restraining Order and Preliminary Injunction (Dkt. #3). On January 6, 2017, Plaintiffs filed this emergency motion to stop implementation of a new regulation promulgated by the Department of Health and Human Services ("HHS") that was set to go into effect on January 13, 2017. On January 12, 2017, the Court entered a temporary restraining order. The Court, having considered the pleadings and oral argument, finds the motion should be granted.

BACKGROUND

End-stage renal disease ("ESRD") is the last stage of chronic kidney disease. ESRD patients require either a kidney transplant or regular dialysis treatments to survive. Dialysis treatment is expensive and must be performed in specialized facilities three times per week to effectively clean the blood. Treatments last four hours. This limits ESRD patients' means to work full time, and the majority of patients cannot afford treatment without insurance.

Congress has long recognized the importance of dialysis treatment for ESRD patients and has afforded patients the opportunity to elect coverage that best serves their needs. In 1972, Congress amended the Social Security Act to allow ESRD patients to selectively enroll in Medicare regardless of their age so long as they met certain employment and citizenship requirements. See 42 U.S.C. § 426-1(a). For decades, ESRD patients have had the choice of selecting private insurance options over Medicare if those options better served their treatment needs. Private insurance is particularly attractive to ESRD patients with families because Medicare does not provide coverage for spouses and dependents.

Given the vulnerability of ESRD patients and the expense of treatment, charitable organizations provide premium assistance to eligible ESRD patients. These charities, such as the American Kidney Fund ("AKF"), often provide assistance to patients based on financial need, regardless of which insurer the ESRD patient has selected. Dialysis providers have long donated to these charities, which HHS has approved of and regulated. For example, in 1997, the Office of Inspector General ("OIG") of HHS published an advisory opinion affirming the legality of such donations and setting certain guidelines. See Advisory Opinion No. 97-1, Office of Inspector General, Dep't of Health & Human Servs., at 5 (1997). These guidelines seek to prohibit dialysis providers from (a) disclosing to ESRD patients that the provider makes charitable contributions or (b) suggesting to charities such as the AKF that any contribution should be directed to a particular group of beneficiaries. The new regulation Plaintiffs are challenging would require insurers to make the very disclosures that OIG guidelines prohibit.

On August 16, 2016, HHS issued a request for information ("RFI") regarding concerns that health care providers, who receive higher reimbursement from private insurers, were offering premium assistance to steer Medicare-eligible patients to private insurers. See Request for Information: Inappropriate Steering of Individuals Eligible for or Receiving Medicare and/or Medicaid Benefits to Individual Market Plans, 81 Fed. Reg. 57,554 (Aug. 23, 2016). The RFI sought information about all third-party premium and cost-sharing assistance, not just dialysis patients. HHS stated the RFI was for "information and planning purposes" only and did not propose a new rule. Id. at 57,555. Of the 829 responses HHS received, many ESRD patients; patient advocacy organizations; charities, including AKF; and dialysis providers supported premium assistance and explained the current system's controls to prevent steering and to comply with the OIG's guidance. Fifteen insurance companies responded, criticizing charitable premium assistance. Social workers' responses varied.

On December 14, 2016, HHS announced a new regulation: Interim Final Rule with Comment Period, Medicare Program; Conditions for Coverage for End-Stage Renal Disease Facilities—Third-Party Payment, 81 Fed. Reg. 90,211 (Dec. 14, 2016) (to be codified at 42 C.F.R. pt. 494) (the "Rule"). The Rule would require dialysis providers to disclose to patients that they are contributing to charities such as AKF. The Rule would also require dialysis providers to notify insurers which premiums will be paid for by charitable organizations. The dialysis providers would then have to "obtain assurance" from insurers that they will accept charitable premium assistance payments, and if such assurances are not provided, the dialysis providers would need to take "reasonable steps" to ensure such payments are not made. In effect, the Rule would allow insurers to refuse to insure ESRD patients who receive charitable premium assistance. The Rule was set to go into effect on January 13, 2017.

On January 6, 2017, Plaintiffs filed an Emergency Motion for Temporary Restraining Order and Preliminary Injunction (Dkt. #3). On January 11, 2017, Defendants filed their Response in Opposition (Dkt. #29). On January 12, 2017, the Court issued a temporary restraining order (Dkt. #33). On January 18, 2017, the Court held oral argument on the request for a preliminary injunction.

LEGAL STANDARD

The Fifth Circuit set out the requirements for a preliminary injunction in Canal Authority of the State of Florida v. Callaway, 489 F.2d 567, 572 (5th Cir. 1974). To prevail on a preliminary injunction, the movant must show: (1) a substantial likelihood that the movant will ultimately prevail on the merits; (2) a substantial threat that the movant will suffer irreparable injury if the injunction is not granted; (3) the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) granting the injunction is not adverse to the public interest. Id.; see also Nichols v. Alcatel USA, Inc., 532 F.3d 364, 372 (5th Cir. 2008).

To qualify for a preliminary injunction, the movant must clearly carry the burden of persuasion with respect to all four requirements. Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 335 F.3d 357, 363 (5th Cir. 2003). If the movant fails to establish any one of the four requirements for injunctive relief, relief will not be granted. See Women's Med. Ctr. of Nw. Hous. v. Bell, 248 F.3d 411, 419 n.15 (5th Cir. 2001). A movant who obtains a preliminary injunction must post a bond as security any wrongful damages the non-movant suffers as a result of the injunction. Fed. R. Civ. P. 65(c).

The decision to grant or deny preliminary injunctive relief is left to the sound discretion of the district court. Miss. Power & Light Co. v. United Gas Pipe Line Co., 760 F.2d 618, 621 (5th Cir. 1985) (citing Canal, 489 F.2d at 572). A preliminary injunction "is an extraordinary anddrastic remedy, not to be granted routinely, but only when the movant, by a clear showing, carries the burden of persuasion." White v. Carlucci, 862 F.2d 1209, 1211 (5th Cir. 1989) (quoting Holland Am. Ins. Co. v. Succession of Roy, 777 F.2d 992, 997 (5th Cir. 1985)). Even when a movant satisfies each of the four Canal factors, the decision whether to grant or deny a preliminary injunction remains discretionary with the district court. Miss. Power & Light Co., 760 F.2d at 621. The decision to grant a preliminary injunction is treated as the exception rather than the rule. Id.

ANALYSIS

Plaintiffs argue that Defendants violated the Administrative Procedures Act ("APA") and the Medicare Act because the Rule was unlawfully promulgated without notice and comment, and the Rule's disclosure requirements are arbitrary, capricious, and contrary to law.

Defendants assert that Plaintiffs are not entitled to a preliminary injunction because: (1) HHS articulated a reasonable explanation for the Rule; (2) HHS's good cause determination was not arbitrary and capricious; (3) Defendants' procedural errors were harmless and did not violate the APA; and (4) an injunction would harm ESRD patients.

The first consideration is whether Plaintiffs have shown a substantial likelihood of success on the merits for their claims. Plaintiffs claim that they have shown a substantial likelihood that they will prevail on the merits because Defendants have violated the APA by (1) circumventing the notice and comment process and (2) issuing final agency action that is contrary to law. To satisfy the element of substantial likelihood of success, a plaintiff need not prove their case with absolute certainty. See Lakedreams v. Taylor, 932 F.2d 1103, 1109 n.11 (5th Cir. 1991). "A reasonable probability of success, not an overwhelming likelihood, is all that need be shown for preliminary injunctive relief." Casarez v. Val Verde Cty., 957 F. Supp. 847, 858 (W.D. Tex. 1997).

Plaintiffs have shown a reasonable probability of success by showing Defendants likely violated the procedures of the APA. The APA requires courts to "hold unlawful and set aside agency action" that is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706. The APA requires an agency seeking to promulgate a substantive rule to do so through notice and comment procedures. 5 U.S.C. § 553. Plaintiffs contend that HHS's failure to comply with § 553 constitutes a reasonable probability of success on the merits of their claim. HHS admits a "technical departure from the requirements of § 553(b)" but argues the August 2016 RFI was...

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