Fresenius Med. Care Holdings, Inc. v. Tucker

• Decision Date: 10 January 2013
• Docket Number: No. 11–14192.,11–14192.
• Citation: 704 F.3d 935
• Parties: FRESENIUS MEDICAL CARE HOLDINGS, INC., a Foreign Corporation d.b.a. Fresenius Medical Care North America, Davita, Inc., a Foreign Corporation, Plaintiffs–Appellants, DVA Renal Healthcare, Inc., a Foreign Corporation, Plaintiff, v. Elisabeth TUCKER, M.D., in her official capacity as Chair of the Florida Board of Medicine, M. Rony Francois, MD MPHS PhD, Mammen Zachariah, MD, Mark S. Avila, MD, H. Frank Farmer, Jr., MD, et al., Defendants–Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

704 F.3d 935

FRESENIUS MEDICAL CARE HOLDINGS, INC., a Foreign Corporation d.b.a. Fresenius Medical Care North America, Davita, Inc., a Foreign Corporation, Plaintiffs–Appellants,DVA Renal Healthcare, Inc., a Foreign Corporation, Plaintiff,

v.Elisabeth TUCKER, M.D., in her official capacity as Chair of the Florida Board of Medicine, M. Rony Francois, MD MPHS PhD, Mammen Zachariah, MD, Mark S. Avila, MD, H. Frank Farmer, Jr., MD, et al., Defendants–Appellees.

No. 11–14192.

United States Court of Appeals, Eleventh Circuit.

Jan. 10, 2013.

Suzanne Labrit, Janelle Alicia Weber, Shutts & Bowen, LLP, Tampa, FL, Kelly Ann O'Keefe, Berger Singerman, Tallahassee, FL, for Plaintiffs–Appellants.

Pam Bondi, Timothy David Osterhaus, Jonathan Alan Glogau, James A. Peters, Louis F. Hubener, III, Atty. Gen.'s Office, Tallahassee, FL, for Defendants–Appellees.

Appeal from the United States District Court for the Northern District of Florida.

Before DUBINA, Chief Judge, and CARNES and GILMAN,^* Circuit Judges.

DUBINA, Chief Judge:

This case involves a constitutional challenge to Florida's “Patient Self–Referral Act of 1992” (the “Florida Act”), Fla. Stat. § 456.053, which prohibits Florida physicians from referring their patients for services to business entities in which the referring physicians have a financial interest. Appellants Fresenius Medical Care Holdings, Inc., DVA Renal Healthcare, Inc., and Davita, Inc. (collectively “Appellants”) sued the Secretary of the Florida Department of Health, the members of the Florida Board of Medicine, and the members of the Florida Board of Osteopathic Medicine (collectively “Florida”) seeking declaratory and injunctive relief. Appellants allege that the Florida Act is unconstitutional because it is (1) preempted by federal law, (2) violative of the dormant Commerce Clause, and (3) violative of substantive due process. The district court found no constitutional violation and granted summary judgment in favor of Florida. After considering the parties' briefs and having the benefit of oral argument, we affirm the judgment of the district court.

I.

A. Statutory background

Federal Stark laws

In an effort to contain health care costs and reduce conflicts of interest, Congress passed legislation in 1989 and 1993 that prohibits physicians from referring their Medicare and Medicaid patients to business entities in which the physicians or their immediate family members have a financial interest. SeePub.L. No. 101–239, 103 Stat. 2106 (codified at 42 U.S.C. § 1395nn(a)); Pub.L. No. 103–66, 107 Stat. 312 (codified at 42 U.S.C. § 1395nn(a)). The laws are respectively known as “Stark I” and “Stark II,” and we collectively refer to them as “Stark.” In promulgating regulations to implement Stark, the Secretary of Health and Human Services (the “Secretary”) has created various exemptions from the physician self-referral ban, including two exemptions relevant to this case. First, Stark exempts physician referrals to associated entities for clinical laboratory services relatedto the treatment of end-stage renal disease (“ESRD”). See 42 C.F.R. § 411.351. Second, Stark allows physician referrals for designated health services, including laboratory services, to entities owned by a publicly traded company in which the referring physician is a shareholder, so long as the company has stockholder equity in excess of $75 million. See id. § 411.356(a). All Appellants benefit from the former exemption, and Davita and Fresenius also benefit from the latter.

The Florida Act

In 1992, the Florida Legislature enacted the challenged statute for reasons similar to Congress's reasons for enacting Stark, finding specifically that physician self-referral practices “may limit or eliminate competitive alternatives in the health care services market, may result in overutilization of health care services, may increase costs to the health care system, and may adversely affect the quality of health care.” Fla. Stat. § 456.053(2). Thus, the Florida Act essentially serves the same purpose as Stark by regulating physician self-referrals. The Florida Act makes unlawful (1) a physician's referral of a patient to a clinical laboratory service provider in which the physician has an ownership or other financial interest or (2) any presentation of a claim for payment for health care services rendered in violation of the Act. Id. § 456.053(5)(a), (c). The statute provides that violators are subject to disciplinary action by the State of Florida and a civil penalty of not more than $15,000 for knowing violations. Id. § 456.053(5)(e), (g). Originally, the Florida Act, like Stark, exempted physicians in the renal dialysis industry from the self-referral prohibition. See id. § 455.654(3)( o)3.h., 3. l. (2000).

Most ESRD patients in Florida are covered by Medicare or Medicaid,¹ and most qualify for benefits under Medicare's ESRD program that reimburses dialysis clinics for laboratory services through a bundled rate that includes payment for dialysis care and laboratory services. Apparently, the single rate reimbursement strongly reduces the risk of fraud or excessive costs to patients or the government. For this reason, the Florida House of Representatives Committee on Health Regulation in 2001 recommended against removing the physician self-referral exemption for Florida doctors serving ESRD patients. Nevertheless, the Florida Legislature amended the Florida Act in 2002 to repeal the ESRD exemption.

B. Facts and district court proceedings

Appellants are out-of-state corporations providing renal dialysis services in Florida, both directly and through subsidiary corporations, to patients suffering from ESRD. Appellants wish to use a vertically integrated business model in Florida, referring all their ESRD patients' blood work to associated laboratories after providing the patients with dialysis treatment at their clinics. They contend that this business model is more efficient and better for ESRD patients than a non-integrated system where providers refer patients to independent laboratories for blood work. However, keeping laboratory blood work within Appellants' network would require its employee-physicians to violate the Florida Act, as they have financial interests in Appellants' laboratories. According to the record and the briefs, Appellants' only competitor providing laboratory services to ESRD patients is a Florida business that is not vertically integrated, and thus, it is unaffected by the Florida Act. Appellants claim that the Florida Legislature passed the 2002 Amendments to the Florida Act to benefit their competitor.

In 2003, after passage of the 2002 Amendments, Appellants sued for declaratory and injunctive relief pursuant to 42 U.S.C. § 1983, requesting a declaration that the Florida Act is unconstitutional. The complaint alleges that: (1) the Florida Act is preempted by federal law; (2) the Florida Act violates the dormant Commerce Clause because it is protectionist and discriminatory against only out-of-state renal dialysis providers with vertically integrated business models; and (3) the Florida Act violates substantive due process because it was not enacted with a legitimate purpose and because it is not rationally related to the Florida Legislature's stated purposes for enacting the Florida Act. The district court stayed this case until 2006. In 2007, Appellants moved for summary judgment, and Florida filed a cross-motion for summary judgment. Four years later, the district court entered summary judgment in Florida's favor. Following the denial of Appellants' motion for reconsideration, Appellants timely appealed to this court.

II.

We review the grant of summary judgment de novo, drawing all inferences and reviewing all the evidence in the light most favorable to the non-moving party. Curves, LLC v. Spalding Cnty., Ga., 685 F.3d 1284, 1289 (11th Cir.2012) (per curiam). We also review de novo the constitutionality of a challenged statute. Id.

III.

A. Preemption

The Constitution provides that “the Laws of the United States ... shall be the supreme Law of the Land ... any Thing in the ... Laws of any State to the Contrary notwithstanding.” U.S. Const. art. VI., cl. 2. Consequently, federal law may preempt state law expressly or by implication. Arizona v. United States, ––– U.S. ––––, 132 S.Ct. 2492, 2500–01, 183 L.Ed.2d 351 (2012). Although Congress's “express statement on pre-emption is always preferable, the lack of such a statement does not end [the] inquiry.” PLIVA, Inc. v. Mensing, ––– U.S. ––––, 131 S.Ct. 2567, 2577 n. 5, 180 L.Ed.2d 580 (2011). State law can be impliedly preempted by federal law in cases of field preemption and conflict preemption. Field preemption exists where Congress determines that a certain field must be regulated exclusively by the federal government. Arizona, 132 S.Ct. at 2501–02.² Conflict preemption, however, arises in instances where (1) “compliance with both federal and state regulations is a physical impossibility,” or (2) “the challenged state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Id. at 2501 (internal citations and quotation marks omitted). We use our judgment to determine when state law creates an unconstitutional obstacle to federal law, and “this judgment is informed by examining the federal statute as a whole and identifying its purpose and intended effects.” Ga. Latino Alliance for Human Rights v. Governor of Ga., 691 F.3d 1250, 1263 (11th Cir.2012) (internal quotation marks omitted) (quoting Crosby v. Nat'l Foreign Trade Council, 530 U.S. 363, 373, 120 S.Ct. 2288, 2294, 147 L.Ed.2d 352 (2000)).

Moreover, in conducting preemption analysis, we “should assume that the historic police powers of the States are not superseded unless that was the clear and manifest purpose of Congress.” Arizona, 132 S.Ct. at 2501 (internal quotation marks omitted); see also Wyeth v. Levine, 555 U.S. 555, 565, 129 S.Ct....