Strand Analytical Labs., LLC v. Burwell, 1:13-cv-00645-LJM-DKL

• Decision Date: 30 July 2015
• Docket Number: No. 1:14-cv-00427-LJM-DKL,No. 1:14-cv-00015-LJM-DKL,No. 1:13-cv-00645-LJM-DKL,1:13-cv-00645-LJM-DKL,1:14-cv-00015-LJM-DKL,1:14-cv-00427-LJM-DKL
• Court: U.S. District Court — Southern District of Indiana
• Parties: STRAND ANALYTICAL LABORATORIES, LLC, Plaintiff, v. SYLVIA MATHEWS BURWELL, Secretary United States Department of Health & Human Services, Defendant.

STRAND ANALYTICAL LABORATORIES, LLC, Plaintiff, v. SYLVIA MATHEWS BURWELL, Secretary United States Department of Health & Human Services, Defendant.

No. 1:13-cv-00645-LJM-DKL

No. 1:14-cv-00015-LJM-DKL

No. 1:14-cv-00427-LJM-DKL

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION

July 30, 2015

ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT

In these three cases, Plaintiff Strand Analytical Laboratories, Inc. ("Strand"), seeks judicial review of the decision by Defendant Sylvia Mathews Burwell, Secretary of the United States Department of Health & Human Services (the "Secretary"), to deny Medicare coverage for Strand's DNA Specimen Provenance Assay ("DSPA") test. The parties agree on the factual record in this case and both have moved for summary judgment in their favor. On April 22, 2015, the Court held a hearing on the motions primarily to clarify the proper statutory and analytical framework for the Court's decision.

Strand asserts three legal errors by the Medicare Appeals Counsel (the "MAC"), whose decisions became those of the Secretary: (1) the MAC contradicted a key provision of Medicare when it concluded that the DSPA test was excluded from coverage because it was not reasonable and necessary for the diagnosis or treatment of an illness; (2) the MAC's interpretation of its own regulation improperly nullifies the effective intent of the controlling statute; and (3) the MAC improperly imported a stringent requirementinto the controlling statute and regulation that is not required. Strand also asserts that the MAC's decision is unsupported by substantial evidence in the record. The Secretary asserts that the MAC properly interpreted and applied the relevant statutory and regulatory provisions to conclude that Strand's DSPA test is not covered by Medicare and that substantial evidence supports its conclusion.

The Court has carefully considered the parties' arguments and concludes that summary judgment in favor of the Secretary is appropriate because the Secretary's interpretation of the controlling statutes and regulations are reasonable and substantial evidence supports the MAC's conclusions.

I. STATUTORY & REGULATORY FRAMEWORK

Judicial review of a final decision by the Secretary is guided by 42 U.S.C. § 405(g). See 42 U.S.C. § 1395ff(b)(1)(A); Wood v. Thompson, 246 F.3d 1026, 1029 (7^th Cir. 2001). The standard under § 405(g) is a deferential one: factual "findings of the Secretary . . . if supported by substantial evidence, shall be conclusive, and where a claim has been denied by the Secretary . . . the [C]ourt shall review only the question of conformity with [the Secretary's] regulations and the validity of such regulations." Id. (quoting 42 U.S.C. § 405(g)).

In addition, the Secretary's decision may be set aside if the denial of coverage was based on legal error. Id. When reviewing such a question, the Court must follow the guidelines in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). See Wood, 246 F.3d at 1029. Under Chevron, first the Court must determine whether or not the intent of Congress is ambiguous. Id. (citing Chevron, 467 U.S. at 842). Next, "[i]f the meaning of the statute is clear, no deference is due an agency'sinterpretation. If the meaning of the statute is ambiguous, an agency's interpretation will be deferred to if it is reasonable." Id. (citing Chevron, 467 U.S. at 844).

Medicare, established under Title XVIII of the Social Security Act, 42 U.S.C. § 1395, et seq., is a federally funded and administered health insurance program for the elderly and disabled. See 42 U.S.C. § 1395c. Although the Medicare program is divided into three components, the component at issue here is Part B, which, among other things, provides coverage for outpatient physician services like diagnostic testing. See 42 U.S.C. §§ 1395j-1395w-5; 42 C.F.R. Pt. 410. The Secretary administers the program through agreements with private contractors to administer funds to providers on behalf of eligible beneficiaries. See 42 U.S.C. §§ 1395u(a), 1395kk-1. The contractors perform a variety of functions to ensure the accuracy of claim payments, which includes processing claims, making payments, and conducting post-payment reviews. See 42 U.S.C. § 1395kk-1(a)(4); 42 C.F.R. Pt. 421.

Medicare Part B covers "medical and other health services" only as generally outlined in the Medicare Act. See 42 U.S.C. § 1395k. The burden is on the beneficiary to show that an item is covered under Medicare. See 42 U.S.C. § 1395l(e); 42 C.F.R. § 424.5(a)(6). All Medicare coverage determinations are made in light of the section that excludes certain items from coverage, 42 U.S.C. § 1395y(a)(1)(A). This section provides, in pertinent part: "Notwithstanding any other provision of this subchapter, no payment may be made under . . . part B of this subchapter for any expenses incurred for items or services—(1)(A) which . . . are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member . . . ." 42 U.S.C. § 1395y(a)(1)(A).

Coverage determinations may be made in several ways. First, the Secretary may issue binding guidance, such as a National Coverage Determination ("NCD"). See 42 U.S.C. §§ 1395y(l)(6)(A), 1395ff(a), 1395ff(f)(1)(B). Second, a Medicare contractor may issue its own guidance, which is known as a Local Coverage Determination or "LCD;" an LCD applies to a specific geographic region only. See 42 U.S.C. §§ 1395y(l)(6)(B), 1395ff(f)(2)(B). Third, if neither an NCD nor an LCD exists, a Medicare contractor makes an individual determination on whether the service is covered by deciding whether it falls within a Medicare benefit category and is "reasonable and necessary for the diagnosis or treatment of illness or injury . . . ." 42 U.S.C. §§ 1395(u), 1395ff(a)(1)(A).

A Medicare contractor may use Medicare manuals for guidance to make a coverage determination. Although an ALJ and the MAC are not bound by these manuals, they must give "substantial deference" to them "if they are applicable to a particular case." 42 C.F.R. § 405.1062(a). The manual at issue in this case is the Medicare Program Integrity Manual ("MPIM"), which provides guidance on how to determine whether items or services are "reasonable and necessary for the diagnosis or treatment of illness." MPIM, CMS Pub. No. 100-08, Ch.13, available at http://www.cms.gov/Regualtions-and-Guidance/Manuals/Internet-Only-Manuals-IOMs.html. For individual claims, like the ones at issue here, the MPIM provides, "An item or service may be covered . . . if it meets all of the conditions listed in § 13.5.1, Reasonable and Necessary Provisions in LCDs." MPIM § 13.3. The MPIM also reminds the contractor and subsequent reviewers that an item or service is covered by Medicare only if it comports with the statutory requirements of 42 U.S.C. § 1395y(a)(1)(A). MPIM § 13.5.1. Specifically, the MPIM instructs:

. . . Contractors shall consider a service to be reasonable and necessary if the contractor determines that the service is:

• Safe and effective;

• Not experimental or investigational . . .; and

• Appropriate, including the duration and frequency that is considered appropriate for the service, in terms of whether it is:

o Furnished in accordance with accepted standards of medical practice for the diagnosis or treatment of the patient's condition or to improve the function of a malformed body member;

o Furnished in a setting appropriate to the patient's medical needs and condition;

o Ordered and furnished by qualified personnel;

o One that meets, but does not exceed, the patient's medical need; and

o At least as beneficial as an existing and available medically appropriate alternative.

MPIM § 13.5.1.

The MPIM also instructs contractors to use the strongest evidence available and provides a list of evidence in order of preference:

• Published authoritative evidence derived from definitive randomized clinical trials or other definitive studies, and

• General acceptance by the medical community (standard of practice), as supported by sound medical evidence based on:

o Scientific data or research studies published in peer-reviewed medical journals;

o Consensus of expert medical opinion (i.e., recognized authorities in the field); or

o Medical opinion derived from consultations with medical associations or other health care experts.

MPIM § 13.7.1. The MPIM further provides:

Acceptance by individual health care providers, or even a limited group of health care providers, normally does not indicate general acceptance by the medical community. Testimonials indicating such limited acceptance, and limited case studies distributed by sponsors with financial interest in the outcome, are not sufficient evidence of general acceptance by the medical community. The broad range of available evidence must be considered and its quality shall be evaluated before a conclusion is reached.

Id. The MPIM cautions that determinations that "challenge the standard of practice in a community and specify that an item or service is never reasonable and necessary shallbe based on sufficient evidence to convincingly refute evidence presented in support of coverage." Id. "Less stringent evidence is needed when allowing for individual consideration." Id.

Diagnostic laboratory tests that are reasonable and necessary are covered under Medicare Part B. 42 U.S.C. §§ 1395k(a), 1395x(s)(3), 1395y(a)(1(A); 42 C.F.R. §§ 410.32(a) & (d). The regulation regarding diagnostic tests provides, in relevant part:

All . . . diagnostic laboratory tests, and other diagnostic tests must be ordered by the physician who is treating the beneficiary, that is, the physician who furnishes a consultation or treats a beneficiary for a specific medical problem and who uses the results in the management of the beneficiary's specific medical problem.

42 C.F.R. § 410.32(a). Further, "[t]he physician . . . who orders the service must maintain...