Smith v. Office of Civilian Health and Medical Program of Uniformed Services

• Court: U.S. Court of Appeals — Seventh Circuit
• Writing for the Court: Before ESCHBACH, FLAUM, and MANION; MANION; ESCHBACH
• Citation: Smith v. Office of Civilian Health and Medical Program of Uniformed Services, 97 F.3d 950 (7th Cir. 1996)
• Decision Date: 04 October 1996
• Docket Number: No. 94-3744,94-3744
• Parties: , 20 Employee Benefits Cas. 2204 Erin C. SMITH, Plaintiff-Appellee, v. OFFICE OF CIVILIAN HEALTH AND MEDICAL PROGRAM OF THE UNIFORMED SERVICES, a subdivision of the Department of Defense of the United States of America; William Perry, in his official capacity as the Secretary of Defense for the United States of America, Defendants-Appellants.

Page 950

97 F.3d 950

65 USLW 2247, 20 Employee Benefits Cas. 2204

Erin C. SMITH, Plaintiff-Appellee, v. OFFICE OF CIVILIAN HEALTH AND MEDICAL PROGRAM OF THE UNIFORMED SERVICES, a subdivision of the Department of Defense of the United States of America; William Perry, in his official capacity as the Secretary of Defense for the United States of America, Defendants-Appellants.

No. 94-3744.

United States Court of Appeals Seventh Circuit.

Argued May 9, 1995.

Reargued Feb. 8, 1996.

Decided Oct. 4, 1996. ¹

Steven J. Cohen, David D. Becsey (argued), Zeigler, Carter, Cohen & Koch, Indianapolis, IN, for Plaintiff-Appellee.

John P. Schnitker, Department of Justice, Civil Division, Appellate Section, Lowell Sturgill (argued), Washington, DC, for Defendant-Appellant Office of Civilian Health and Medical Program of the Uniformed Services.

John P. Schnitker, Department of Justice, Civil Division, Appellate Section, Washington, DC, for Defendant-Appellant William Perry.

Before ESCHBACH, FLAUM, and MANION, Circuit Judges.

MANION, Circuit Judge.

Erin Smith brought this action for declaratory and injunctive relief against the Office of Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) and William Perry, in his official capacity as the Secretary of Defense, challenging their refusal to pay for certain procedures recommended by Smith's doctors as treatment for her breast cancer. The district court declared that the recommended procedures were covered by CHAMPUS, held that defendants had acted arbitrarily and capriciously in concluding otherwise, and entered a permanent injunction enjoining defendants from denying Smith coverage. We reverse the district court's judgment and remand for the district court to enter an appropriate order affirming CHAMPUS' initial determination.

I.

At the time of her complaint, Erin Smith was a forty-year-old woman diagnosed with advanced breast cancer. Smith's doctors advised her that the cancer had spread to her local lymph nodes and that high-dosage chemotherapy (HDC) coupled with peripheral stem cell rescue would give her the best chance of survival. However, neither Smith's doctors nor St. Vincent Hospital in Indianapolis where the treatment was to be administered would commence treatment until they received assurances that Smith had the means to cover the costs.

HDC involves administering the chemotherapeutic agents used in standard chemotherapy, but at higher dosages. While HDC is more effective at killing the cancer, it is also more likely to kill the patient's stem cells, the cells which generate white blood cells, the primary component of the body's immune system. To mitigate the potential damage to the patient's immune system, doctors extract (the technical term is "harvest") some of the patient's stem cells prior to administering HDC. This harvesting process, referred to as autologous stem cell rescue (ASCR), is accomplished by one of two methods: autologous bone marrow transplant support (ABMT), in which the stem cells are harvested from the patient's bone marrow, and peripheral stem cell rescue (PSCR), in which stem cells are harvested from the patient's blood stream. Under either procedure, the harvested stem cells are frozen and stored until the HDC is complete, at which time the stem cells are reintroduced into the patient. Although Smith suggests otherwise, CHAMPUS maintains that HDC/PSCR and HDC/ABMT are essentially of equal medical value in treating breast cancer. Our review of the record supports CHAMPUS's position. ²

Married to an Air Force retiree, Smith receives her primary health care coverage through CHAMPUS. CHAMPUS was established by Congress pursuant to the Dependents' Medical Care Act, 10 U.S.C. § 1071 et seq., to provide medical and dental benefits to dependents of present and former members of the military. CHAMPUS is not an insurance program where the insurer guarantees indemnification in return for a premium. CHAMPUS beneficiaries pay no premiums. Rather, CHAMPUS is funded by annual Congressional appropriations. Another unique feature of CHAMPUS is that it is an "at risk" program, meaning that unlike traditional health insurance programs, where beneficiaries usually know whether a treatment is covered beforehand, CHAMPUS beneficiaries typically receive medical care first and then submit a claim to CHAMPUS officials for an after-the-fact ruling on coverage. The beneficiary is "at risk" in the sense that the medical services received may not qualify for payment under CHAMPUS. Coverage determinations, as well as the other day-to-day administrative duties of CHAMPUS, are charged by statute to the Secretary of Defense who has delegated these responsibilities to the Director of the Office of CHAMPUS. 32 C.F.R. §§ 199.5, 199.7.

On Smith's behalf, the oncology department at St. Vincent's Hospital filed a claim with CHAMPUS outlining the particulars of Smith's case and requesting a pre-treatment determination of whether HDC/PSCR would be covered. On August 2, 1994, Dr. David Bogner, CHAMPUS's medical director, issued an initial determination that CHAMPUS would not cover the prescribed HDC/PSCR treatment. By letter he explained that under the terms of its Congressional mandate, CHAMPUS cannot cover treatments or procedures that are considered experimental or investigational. Based on his review, HDC/PSCR fell into that category:

After careful consideration of the documents you supplied, and following review of facts presented by our oncology consultants, technology assessment panels, and the current Phase III refereed medical literature, CHAMPUS finds that it is unable to offer benefits for high dose chemotherapy and autologous stem cell rescue in the treatment of breast carcinoma.

According to Dr. Bogner, the medical literature lacked sufficient evidence of the effectiveness of HDC/PSCR for the treatment of Smith's condition:

CHAMPUS continuously reviews the current literature for outcomes of Phase III trials regarding high dose chemotherapy with autologous stem cell rescue. In the case of breast carcinoma, we have been unable to find sufficient evidence of this nature to date.

In light of this, Dr. Bogner concluded that "CHAMPUS must continue to consider this therapy as investigational for the treatment of breast carcinoma."

Yet despite referencing specific reasons for rejection, in particular the lack of Phase III trials, Dr. Bogner remained open to any documented evidence of HDC/PSCR's general acceptance as a treatment for breast cancer:

If you disagree with this CHAMPUS benefit determination, we invite you to submit pertinent documentation to support the position that high-dose chemotherapy with autologous stem cell treatment of breast carcinoma does, in fact, meet the generally accepted standards of usual professional medical practice in the general medical community.

However, he cautioned that "[w]hile personal opinions are valued, we must give the greatest weight to well-designed, Phase III, outcome based studies which have been published in refereed medical journals." ³ (Emphasis added.)

A month later, Smith's attorney filed a request for reconsideration. Acting on Dr. Bogner's invitation, counsel submitted affidavits from two of Smith's oncologists along with one from a third doctor familiar with Smith's case. Each expressed the opinion that HDC/PSCR was generally accepted in the medical community and not considered experimental for the treatment of breast cancer. Counsel also submitted two other bases for reconsideration: an article suggesting that most private insurance companies eventually approve coverage for HDC treatment and a reference to three recent district court decisions enjoining CHAMPUS from denying coverage. See Gripkey v. Mail Handlers Benefit Plan, No. 3:94-378-0, 1994 WL 276265 (D.S.C. Feb.14, 1994) (unpublished), Hawkins v. Mail Handlers Benefit Plan, No. 1:94CV6, 1994 WL 214262 (W.D.N.C. Jan.28, 1994) (unpublished), and Wheeler v. Dynamic Engineering, Inc., 850 F.Supp. 459 (E.D.Va.1994), aff'd, 62 F.3d 634 (4th Cir.1995). ⁴ Two of these, Gripkey and Hawkins, involved similar determinations by Dr. Bogner denying coverage for HDC/PSCR for the treatment of breast cancer. Significantly, counsel did not supply references to clinical studies indicating that HDC/PSCR was generally accepted in the medical community for the treatment of breast cancer.

After reviewing the additional documentation, on September 14, 1994, Dr. Bogner denied the request for reconsideration. The denial noted counsel's failure to produce evidence of favorable Phase III trials or any other "medical literature references upon which CHAMPUS could consider adoption of the benefit you have requested." Without convincing evidence to the contrary, Dr. Bogner stated that it remained CHAMPUS's position that HDC/PSCR for the treatment of breast cancer "has not become a national medical standard of practice, and is, therefore, not a CHAMPUS benefit."

Smith responded by filing a complaint in the district court seeking a declaration that HDC/PSCR was covered under CHAMPUS and an injunction prohibiting CHAMPUS from denying coverage. The Secretary moved for summary judgment on the grounds that the decision to deny coverage was supported by the administrative record and was not arbitrary and capricious. See 5 U.S.C. § 706(2)(A) (arbitrary and capricious standard). Following expedited proceedings, the district court entered judgment for Smith. The principal basis for its ruling was that CHAMPUS had relied on outdated medical studies in making its determination. The court held these outdated studies could not defeat the affidavits submitted by Smith's oncologists stating that HDC/PSCR was generally accepted for the treatment of breast cancer. The district court concluded that CHAMPUS's actions were arbitrary and capricious and accordingly entered an order permanently enjoining the Secretary from denying coverage for Smith's treatment. ⁵ The...