NAT. ASS'N OF PATIENTS ON HEMODIALYSIS AND TRANSPLANTATION, INC. v. Heckler, Civ. A. No. 83-2210.

CourtUnited States District Courts. United States District Court (Columbia)
Writing for the CourtTheodore C. Hirt, Civ. Div., U.S. Department of Justice, Washington, D.C., for defendant
Citation588 F. Supp. 1108
PartiesNATIONAL ASSOCIATION OF PATIENTS ON HEMODIALYSIS AND TRANSPLANTATION, INC., et al., Plaintiffs, v. Margaret M. HECKLER, et al., Defendants.
Docket NumberCiv. A. No. 83-2210.
Decision Date11 June 1984

588 F. Supp. 1108

NATIONAL ASSOCIATION OF PATIENTS ON HEMODIALYSIS AND TRANSPLANTATION, INC., et al., Plaintiffs,
v.
Margaret M. HECKLER, et al., Defendants.

Civ. A. No. 83-2210.

United States District Court, District of Columbia.

June 11, 1984.


588 F. Supp. 1109
COPYRIGHT MATERIAL OMITTED
588 F. Supp. 1110
Joseph N. Onek, Peter E. Scheer, Paul M. Smith, Onek, Klein & Farr, Thomas W. Queen, Wiley, Johnson & Rein, Washington, D.C., Robert J. Pristave, Chicago, Ill., James L. Quarles, III, Hale & Dorr, Washington, D.C., for plaintiffs

Theodore C. Hirt, Civ. Div., U.S. Department of Justice, Washington, D.C., for defendant.

MEMORANDUM OPINION

JOYCE HENS GREEN, District Judge.

In this action for declaratory and injunctive relief, plaintiffs, the National Association

588 F. Supp. 1111
of Patients on Hemodialysis and Transplantation, Inc., a national non-profit organization of kidney dialysis and transplant patients; the Renal Physicians Association, a national non-profit organization of physicians specializing in the treatment of kidney disorders and whose members treat dialysis patients receiving Medicare benefits under the End-Stage Renal Disease program; and, Bio-Medical Applications of Vero Beach, Inc., an independent dialysis facility which provides outpatient services in Vero Beach, Florida, under the End-Stage Renal Disease program; challenge regulations promulgated by defendants, Margaret M. Heckler, Secretary of the Department of Health and Human Services (HHS), and Carolyne K. Davis, Administrator of the Health Care Financing Administration (HCFA)

In Count I of the complaint, plaintiffs seek to prevent implementation of the End-Stage Renal Disease program's "Prospective Reimbursement" regulations, 48 Fed. Reg. 21254 et seq. (May 11, 1983). In Count II plaintiffs seek to prevent implementation of the End-Stage Renal Disease program's "Secondary Payment" regulations, 48 Fed.Reg. 14802 et seq. (April 5, 1983). The matter is now before the Court on the parties' cross-motions for summary judgment as to each of the counts of the complaint.1

I. BACKGROUND

A. End-Stage Renal Disease2

End-stage renal disease, also called chronic renal failure or chronic uremia, is the permanent and irreversible breakdown of the capacity of the kidneys to carry on their function of the disposal of toxic wastes. Approximately 70,000 Americans suffer from this disease, which is fatal unless the patient receives a kidney transplant or commences regular dialysis.

The two basic types of dialysis treatment are hemodialysis and peritoneal dialysis. Hemodialysis is a treatment process in which the patient's blood is circulated through an artificial kidney machine that filters out toxic wastes before returning the blood to the body. Standard treatment requires the patient to be dialyzed for about four hours, three times a week. Peritoneal dialysis is a treatment process in which the patient's blood is filtered through the peritoneal membrane in the patient's abdominal cavity. Hemodialysis is the more common of the two methods; peritoneal dialysis is marked by a higher rate of infection, complications and resulting hospitalization.

Most patients begin dialysis on an inpatient basis while hospitalized for acute kidney failure. Once the patient's condition stabilizes, he or she may be treated as an outpatient. Outpatient dialysis may take place either at a hospital-based or independent outpatient dialysis facility, or at home. Approximately 83 percent of all dialysis patients receive maintenance dialysis in a facility. Of that 83 percent, 47 percent of in-facility dialysis takes place in hospitals and 53 percent in independent facilities which serve renal patients exclusively. The remaining 17 percent of all dialysis patients dialyze at home. Home dialysis is generally agreed to be substantially less expensive than in-facility dialysis.

B. Statutory and Regulatory Scheme

In 1965, Congress established the Medicare Program, Title XVII of the Social Security

588 F. Supp. 1112
Act (Act), 42 U.S.C. §§ 1395-1395pp (1976), to provide funds for medical care for the aged and disabled. The program consists of two parts. Part A, 42 U.S.C. §§ 1395c-1395i, the hospital insurance program, pays for inpatient hospital services and related post-hospital services. Institutional "providers of services"3 under Part A have generally been reimbursed on the basis of "reasonable cost." 42 U.S.C. §§ 1395f(b), 1395x(v)(1). Part A covers all individuals eligible for monthly Social Security benefits and is funded by Social Security taxes. 42 U.S.C. §§ 1395c, 1395i. Part B, 42 U.S.C. §§ 1395j-1395w, is a voluntary supplemental insurance program in which beneficiaries enroll to establish entitlement to benefits. Part B generally pays for "reasonable charges" of physicians' services and other health services, such as x-rays and laboratory tests, subject to deductible and coinsurance requirements. 42 U.S.C. §§ 1395k, 1395l, 1395x(s).4 Part B is funded by monthly premiums paid by beneficiaries and matching federal contributions. 42 U.S.C. §§ 1395j, 1395r, 1395s. Part B benefits are administered by insurance carriers pursuant to contracts with HHS. 42 U.S.C. § 1395u. The carriers set reasonable charges for Part B services. Under the coinsurance feature, Medicare pays 80 percent of reasonable charges for covered services and the beneficiary pays the remaining 20 percent. 42 U.S.C. § 1395l(a)(1)

The End-Stage Renal Disease (ESRD) program was established by Section 2991 of the Social Security Amendments of 1972, 42 U.S.C. §§ 426(f), (g). That law extended Medicare coverage to individuals who suffer from permanent kidney failure, require dialysis or kidney transplantation, and meet certain other eligibility requirements. HHS established special reimbursement rules for the ESRD program within the general Medicare framework of reasonable cost reimbursement for providers and reasonable charge reimbursement for physicians and suppliers. 42 C.F.R. §§ 402(g), 405.502(e), 405.541-405.544. Under these rules, which were in effect until August 1, 1983, hospital dialysis facilities were paid 80 percent of the "reasonable cost" of providing dialysis treatment up to 80 percent of $138, the maximum amount available per treatment. Independent dialysis facilities were reimbursed 80 percent of the "reasonable charge" up to a maximum 80 percent of $138 per treatment.5 This system provided an economic incentive to independent facilities to minimize the costs of dialysis treatment. See Proposed Regulations Governing Reimbursement Under the End-Stage Renal Disease Program, Hearings before the Subcommittee on Oversight of the Committee on Ways and Means, House of Representatives, 97th Cong., 2d Sess. at 180-81 15, (Apr. 22, 1982) (Statement of Carolyne K. Davis). However, dialysis facilities could request reimbursement in excess of the maximum amount if they submitted documentation showing that their actual costs exceeded $138 per treatment.6

588 F. Supp. 1113

Beginning in 1973, the regulations provided for reimbursement to physicians for their services to dialysis patients, under the "Initial Method." Medicare reimbursed the facility for physicians' services to patients who dialyzed in the facility. The facility then paid the physician a privately negotiated fee. In 1974, a second payment method, the "Alternative Reimbursement Method," was established. Physicians could choose to be reimbursed directly by Medicare with a single monthly payment intended to cover all routine outpatient clinical services rendered to a dialysis patient during the month. 42 U.S.C. § 1395rr(b)(3); 42 C.F.R. § 405.542. The monthly payment was derived by multiplying the customary and prevailing local charge for a follow-up visit by a "conversion factor" selected to provide reimbursement for all standard physicians' services.

In response to the rising costs of the ESRD program, Congress enacted the End-Stage Renal Disease Program Amendments of 1978, Pub.L. No. 95-292, 42 U.S.C. § 1395rr(b)(2)(B). This legislation directed the Secretary to develop new methods and procedures to determine the costs incurred by dialysis facilities and to determine "on a cost related or other economical and equitable basis" the amount of payments to be made for services furnished by dialysis facilities. Congress also directed the Secretary to develop a system for classifying comparable providers and facilities and for the setting of prospective reimbursement rates. These amendments specifically authorized the Alternative Method of physician reimbursement and added a number of other provisions designed to encourage less expensive home dialysis treatments, and transplantation. See S.Rep. No. 714, 95th Cong., 2d Sess. 1-5 (1978), reprinted in 1978 U.S.Code Cong. & Ad.News 848-852.

In the Omnibus Budget Reconciliation Act of 1981, Pub.L. No. 97-35, 42 U.S.C. § 1395rr(b)(3)(7), Congress again amended the law to direct the Secretary to develop a method of prospective reimbursement that would encourage the use of home dialysis. Specifically, Congress provided that such a system must either reimburse home dialysis and in-facility dialysis under composite rates that combined payment for home and in-facility dialysis, or use some other method that would be determined to be more efficient and would promote home dialysis more effectively.7 Congress assumed that under such a composite rate system facilities would have a greater economic incentive to treat patients at home. The provisions governing reimbursement for physicians' services were also amended to promote

588 F. Supp. 1114
efficient delivery of dialysis services and to provide incentives for the increased use of home dialysis. 42 U.S.C. § 1395rr(b)(3)

Another section of the Omnibus Budget Reconciliation Act of 1981 amended portions of the Social Security Act to provide that Medicare benefits based solely on the ESRD program are secondary to benefits payable under...

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  • NATIONAL COM. TO PRESERVE SOCIAL SEC. v. Bowen, Civ. A. No. 88-0974.
    • United States
    • United States District Courts. United States District Court (Columbia)
    • March 9, 1990
    ...by the Secretary on a claim for benefits. See National Association of Patients on Hemodialysis and Transplantation, Inc. v. Heckler, 588 F.Supp. 1108, 1117 (D.D.C. 1984) (§ 205(h) inapplicable to bar suit where plaintiff's challenge involved no findings of fact or any decision by Secretary ......
  • Stieberger v. Heckler, No. 84 CIV 1302 (LBS).
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • August 19, 1985
    ...voluntary supplemental insurance program); and National Association of Patients on Hemodialysis and Transplantation, Inc. v. Heckler, 588 F.Supp. 1108, 1115-18 (D.D.C.1984) (§ 1331 jurisdiction exists over associations' statutory challenge to Secretary's regulations concerning reimbursement......
  • U.S. v. Baxter Intern., Inc., No. 01-16782.
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    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • September 15, 2003
    ...of [medical] equipment, supplies or services."); see also Nat'l Ass'n of Patients on Hemodialysis & Transplantation, Inc. v. Heckler, 588 F.Supp. 1108, 1128 (D.D.C.1984) (explaining that Congress' decision to allow Medicare to pay conditionally when group health plan was not expected to ren......
  • United States v. Baxter International, Incorporated; Baxter Healthcare Corporation, No. 01-16782.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • September 15, 2003
    ...of [medical] equipment, supplies or services."); see also Nat'l Ass'n of Patients on Hemodialysis & Transplantation, Inc. v. Heckler, 588 F.Supp. 1108, 1128 (D.D.C. 1984) (explaining that Congress' decision to allow Medicare to pay conditionally when group health plan was not expected to re......
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10 cases
  • U.S. v. Baxter Intern., Inc., No. 01-16782.
    • United States
    • U.S. Court of Appeals — Eleventh Circuit
    • September 15, 2003
    ...of [medical] equipment, supplies or services."); see also Nat'l Ass'n of Patients on Hemodialysis & Transplantation, Inc. v. Heckler, 588 F.Supp. 1108, 1128 (D.D.C.1984) (explaining that Congress' decision to allow Medicare to pay conditionally when group health plan was not expected to ren......
  • NATIONAL COM. TO PRESERVE SOCIAL SEC. v. Bowen, Civ. A. No. 88-0974.
    • United States
    • United States District Courts. United States District Court (Columbia)
    • March 9, 1990
    ...by the Secretary on a claim for benefits. See National Association of Patients on Hemodialysis and Transplantation, Inc. v. Heckler, 588 F.Supp. 1108, 1117 (D.D.C. 1984) (§ 205(h) inapplicable to bar suit where plaintiff's challenge involved no findings of fact or any decision by Secretary ......
  • Stieberger v. Heckler, No. 84 CIV 1302 (LBS).
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • August 19, 1985
    ...voluntary supplemental insurance program); and National Association of Patients on Hemodialysis and Transplantation, Inc. v. Heckler, 588 F.Supp. 1108, 1115-18 (D.D.C.1984) (§ 1331 jurisdiction exists over associations' statutory challenge to Secretary's regulations concerning reimbursement......
  • United States v. Baxter International, Incorporated; Baxter Healthcare Corporation, No. 01-16782.
    • United States
    • U.S. Court of Appeals — Eleventh Circuit
    • September 15, 2003
    ...of [medical] equipment, supplies or services."); see also Nat'l Ass'n of Patients on Hemodialysis & Transplantation, Inc. v. Heckler, 588 F.Supp. 1108, 1128 (D.D.C. 1984) (explaining that Congress' decision to allow Medicare to pay conditionally when group health plan was not expected to re......
  • Request a trial to view additional results

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