National Kidney Patients Ass'n v. Bowen, Civ. A. No. 88-3251 SS.
| Decision Date | 17 January 1991 |
| Docket Number | Civ. A. No. 88-3251 SS. |
| Citation | 754 F. Supp. 900 |
| Parties | NATIONAL KIDNEY PATIENTS ASSOCIATION, et al., Plaintiffs, v. Otis R. BOWEN, Secretary, Department of Health and Human Services, et al., Defendants. |
| Court | U.S. District Court — District of Columbia |
Nathan Lewin, Miller, Cassidy, Larroca & Lewin, Washington, D.C., for plaintiffs.
Richard G. Lepley, U.S. Dept. of Justice, Washington, D.C., for defendants.
This case is now before the Court after a protracted series of proceedings. The plaintiffs filed suit in 1988 seeking to prevent the Health Care Financing Association ("HCFA") from lowering reimbursement rates for certain services covered by Medicare. On December 22, 1988, this Court issued a preliminary order enjoining the rate reduction. The Court of Appeals subsequently vacated the preliminary injunction after Congress passed a law that rendered the injunction moot. The sole issue remaining before the Court is the disposition of a $750,000 surety bond posted by plaintiff Home Intensive Care, Inc. ("HIC") in connection with the preliminary injunction. Because the injunction was not erroneously granted, and in any event because the balance of equitable factors favors the plaintiffs, the bond will be returned to HIC.
Plaintiffs in this case are individual patients suffering from end stage renal disease, the National Kidney Patients Association, which represents such patients, and HIC, a company that provides at-home renal dialysis treatments to such patients. End stage renal disease—the permanent breakdown of the kidneys' disposal function—is invariably fatal unless the patient receives regular renal dialysis treatments. To help defray the enormous expense of dialysis, Congress in 1972 extended Medicare Part B coverage to dialysis treatments. See 42 U.S.C. § 1395rr. Medicare Part B is administered by HCFA, which is part of the Department of Health and Human Services ("HHS"). HCFA is authorized, however, to contract with private insurers to actually perform reimbursement services. Under 42 C.F.R. § 405.502(a)(7), these private carriers are authorized to reduce a provider's requested reimbursement if it is "inherently unreasonable." Defendants are the Secretary of HHS, the Administrator of HCFA, and one of these private carriers.
The Medicare statute provides two methods for calculating the reimbursement rate for dialysis treatments. Method I is used for treatments in clinics or hospitals. Under Method I, HCFA establishes a "composite rate" based on the average regional cost of dialysis treatments for patients receiving care in clinics. See 42 U.S.C. § 1395rr(b)(3). All clinics within each region receive reimbursement at this composite Method I rate.
Method II is used for dialysis treatments administered in the patient's home. See 42 U.S.C. §§ 1395rr(b)(7). At the time this suit was initiated, Method II called for reimbursement to individual home dialysis patients of the "reasonable" cost of purchasing dialysis equipment and supplies. Historically, Method II provided benefits more generous than those available under Method I.
Most end stage renal disease patients receive dialysis treatments at clinics, which are reimbursed according to Method I. Home dialysis, accompanied by the higher Method II reimbursement rate, has traditionally been provided only to patients with extraordinary medical necessity. In 1985, HIC began to provide home dialysis on a routine commercial basis. While the home treatments provided by HIC were more costly than clinic-based dialysis, HIC was able to use the higher Method II payments to pay for medical technicians and equipment, and still earn a profit. HIC's system became an immediate success. At an evidentiary hearing on plaintiffs' motion for a preliminary injunction, plaintiffs introduced overwhelming evidence that home dialysis is less risky and less disruptive for patients than treatment in clinics, and that home dialysis enables patients to lead more productive lives.
Nonetheless, HCFA disapproved of the HIC system, taking the position that home dialysis is too costly and should be reserved for extraordinary cases. To reduce costs, HCFA issued Transmittal 1237 to Medicare carriers. Transmittal 1237 in effect limited reimbursements for home dialysis treatments to the Method I level, unless special medical circumstances mandated home dialysis. HCFA's stated rationale for this limitation was that all dialysis charges above the Method I level were unreasonable.
Plaintiffs instituted this action to challenge HCFA's issuance of Transmittal 1237 and the carriers' implementation of it. They argued that Transmittal 1237 was arbitrary and capricious, that it was contrary to the Medicare statute, that its issuance suffered from procedural defects, and that the carriers lacked authority to implement it. After an extended evidentiary hearing, this Court on December 22, 1988, entered a preliminary injunction prohibiting HCFA and the carriers "from reducing the rate of reimbursement under Medicare, Part B, Method II for Home Hemodialysis." Upon the defendants' motion, the Court required HIC to post a surety bond in the amount of $1,000.
Defendants appealed both the preliminary injunction and the bond. In a one-page, per curiam order dated December 8, 1989, the Court of Appeals held that the HIC bond was "`insufficient to protect its adversary from loss in the event that future proceedings prove that the injunction issued wrongfully'" (quoting Edgar v. Mite Corp., 457 U.S. 624, 649, 102 S.Ct. 2629, 2644, 73 L.Ed.2d 269 (1982) (Stevens, J., concurring)). On remand from the Court of Appeals, this Court set HIC's bond at $750,000.
While defendants' appeal of the preliminary injunction was pending before the Court of Appeals, Congress enacted the Omnibus Budget Reconciliation Act of 1989 ("OBRA"), Pub.L. No. 101-239. Section 6203(b)(1) of this statute amended 42 U.S.C. § 1395rr(b)(7) to provide that Medicare reimbursement for home dialysis treatments "may not exceed the amount ... of the median payment that would have been made under the formula for hospital-based facilities." This provision reduced Method II payments to the Method I level. Congress effected by statute precisely what HCFA had sought to accomplish with its Transmittal 1237. Subsequently, the Court of Appeals dismissed defendants' appeal as moot, vacated the preliminary injunction, and remanded the case to this Court. National Kidney Patients Association v. Sullivan, 902 F.2d 51 (D.C.Cir.1990).
Plaintiffs' complaint is now moot. The enactment of OBRA obviated Transmittal 1237. Plaintiffs' challenge to Transmittal 1237 no longer presents this Court with anything to decide. Plaintiffs' objections to the reimbursement schedule effected by Transmittal 1237 were based on statutory and procedural grounds. Because Congress passed a statute that in effect enacted Transmittal 1237 into law, these objections are no longer tenable. Congress' action has precluded plaintiffs from obtaining the relief they originally sought. Plaintiffs themselves concede that they have no basis upon which to request any future relief. See Memorandum of Points and Authorities in Support of Plaintiffs' Motion for Summary Judgment at 2. Plaintiffs' action has been rendered moot and their complaint will be dismissed.
The dismissal of plaintiffs' complaint leaves one issue remaining in the case: whether the government is entitled to recover from plaintiffs damages for the wrongful issuance of an injunction. Defendants have made a claim for $18 million which they assert represents the amount HCFA was forced to spend on home dialysis reimbursements above the Method I level during the life of the preliminary injunction. Defendants cannot recover damages, however, in excess of the surety bond posted by plaintiffs. See W.R. Grace & Co. v. Local Union 759, 461 U.S. 757, 770, 103 S.Ct. 2177, 2185, 76 L.Ed.2d 298 (1983) (); Matek v. Murat, 862 F.2d 720, 733 (9th Cir.1988) (). The issue before the Court, then, is the disposition of HIC's $750,000 bond.
The Court ordered plaintiffs to post a bond pursuant to Fed.R.Civ.Pro. 65(c), which provides:
No restraining order or preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the court deems proper, for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained.
See also Monzillo v. Biller, 735 F.2d 1456, 1461 (D.C.Cir.1984) (). This provision does not entitle defendants to the bond proceeds. The preliminary injunction in this case was not wrongfully granted. Even if it was, equitable considerations militate against forfeiture.
Defendants may recover a Rule 65(c) bond only after a showing that the underlying injunction was improper. The government has argued, both in its initial opposition to the plaintiffs' motion for a preliminary injunction and again in support of its claim to the bond, that this Court had no jurisdiction to grant the plaintiffs injunctive relief. But when this Court issued the injunction, it held explicitly that it did have jurisdiction to hear plaintiffs' claims. See Bench Opinion delivered on December 22, 1988, at 740-41 hereinafter Bench Opinion. That holding remains the law of this case. The Court of Appeals vacated the preliminary injunction not because it determined that the...
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National Kidney Patients Ass'n v. Sullivan
...held that HHS could recover neither the $750,000 covered by bond nor any other payments under the injunction. National Kidney Patients Ass'n v. Bowen, 754 F.Supp. 900 (D.D.C.1991). The court stated that its initial ruling granting the injunction was correct as to both jurisdiction and the m......
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