Yakima Valley Mem'l Hosp. v. Wash. State Dept. of Health
| Decision Date | 25 May 2010 |
| Docket Number | No. CV-09-3032-EFS,CV-09-3032-EFS |
| Citation | 717 F.Supp.2d 1159 |
| Parties | YAKIMA VALLEY MEMORIAL HOSPITAL, a Washington Nonprofit Corporation, Plaintiff, v. WASHINGTON STATE DEPARTMENT OF HEALTH; Mary C. Selecky, in her official capacity as Secretary of the Washington State Department of Health, Defendants. |
| Court | U.S. District Court — District of Washington |
James Lincoln Phillips, Miller Nash LLP, Seattle, WA, for Plaintiff.
Michael Steven Tribble, Richard Arthur McCartan, Office of the Attorney General, Olympia, WA, for Defendants.
ORDER GRANTING DEFENDANTS' MOTION FOR JUDGMENT ON THE PLEADINGS
A hearing occurred in the above-captioned matter on December 16, 2009 in Yakima. James L. Phillips appeared on Plaintiff Yakima Valley Memorial Hospital's ("YVMH") behalf; Michael S. Tribble appeared for Defendants Washington State Department of Health ("Department") and Secretary Mary C. Selecky. Before the Court was Defendants' Motion for Judgment on the Pleadings. (Ct. Rec. 31.) For the reasons given below, the Court grants Defendants' Motion and dismisses YVMH's claims.
YVMH sues to enjoin enforcement of the Department's Certificate of Need ("CON") regulations that restrict the number of hospitals that can perform elective percutaneous coronary intervention ("PCI"). The Department first issued the challenged regulations under a Washington statute that was passed in response to the National Health Planning and Resource Development Act ("NHPRDA").
In 1974, Congress passed the NHPRDA, which required states to enact CON laws in order to receive federal health care funding. Pub.L. No. 93-641, 88 Stat. 2225 § 1523 (1975). CON laws empower State health agencies to determine the need for certain health services in each geographic area and license only needed services. Specifically, CON laws "provide for the review of and determination of need for ... offerings of new institutional health services." North Carolina v. P.I.A. Asheville, Inc., 722 F.2d 59, 62 (4th Cir.1983). Congress's aim in passing the NHPRDA was to limit costs by preventing needless duplication of services and remedy uneven health care distribution. Id. at 61.1
This aim was not achieved. Congress repealed the NHPRDA in 1986. Pub.L. No. 99-660; 110 Stat. 3743, 3799 § 701 (1986). Repeal meant that states were no longer required to have CON laws in order to receive federal health care funding.
The Washington legislature passed a CON law in 1979, when the NHPRDA was still in effect. RCW 70.38. Washington's law required CON's for any "tertiary health service," or a "specialized service that meets complicated medical needs of people and requires sufficient patient volume to optimize provider effectiveness, quality of service, and improved outcomes of care." RCW 70.38.105(4)(f). This includes PCI. WAC 246-310-700. In response, the Department adopted PCI CON regulations, WAC 246-310-700-246-310-755, among which are the regulations that YVMH challenges.
PCI, commonly known as coronary angioplasty or more simply angioplasty, is a non-surgical treatment for coronary heart disease. PCI involves removing arterial plaque, thereby clearing out obstructed coronary arteries and ameliorating the effects of heart disease. The category includes several different procedures, but PCI always involves inserting some device into the coronary artery to remove plaque. Elective PCI's are performed when the patient is stable and no medical emergency requires immediate action.
Section 246-310-745 sets the standards for granting elective PCI CON licenses to hospitals. First, the Department must estimate the number of elective PCI procedures that will be performed each year in a geographic planning area. To do this, it determines the area's use rate, which is the number of PCI's performed on persons over fifteen years old per 1000 persons. The use rate is then multiplied by an estimate of the area's population in that area for each year five years into the future.
The Department grants a new CON license if the estimated future need is substantially greater than licensed providers' capacity to perform elective PCI's ("net need"). But the Department does not grant a new PCI CON just because there is a net need in the planning area. A new provider must perform a minimum of 300 PCI's per year. WAC 246-310-720. Therefore, the difference between current capacity and projected demand must exceed 300 for a new provider to receive a CON license. WAC 246-310-745(10) Step 4. If the difference is greater than 300, the Department divides the difference by 300 and rounds down to determine the additional need. WAC 246-310-745(10) Step 5. To illustrate, even if the difference is 575, or almost enough for two additional PCI programs, only one additional program will be licensed because 575 divided by 300 is not quite two.
YVMH challenges three aspects of the PCI CON regulations. First, it takes issue with the definition of current capacity as the sum of all PCI' s performed by providers that have CON approval. Defining current capacity in this way gives licensed hospitals a permanent franchise to perform elective PCI's. These hospitals can continue expanding their PCI capacity to ensure net need never arises in the planning area. Second, it challenges the calculation method for granting additional PCI's, which requires a full 300 additional net needed procedures before another CON will be granted in a planning area. Rounding down underestimates the need for PCI programs. Third, it asserts that the 300 annual PCI minimum volume requirement is arbitrary because cardiologists agree that the appropriate annual minimum is 200.
YVMH brings two claims against Defendants. First, YVMH claims that the regulations violate the Sherman Anti-trust Act because they restrain competition by limiting the number of PCI providers. This injures consumers and hinders commerce. YVMH alleges that the state does not monitor or actively supervise the operation of these regulations so they are not protected by the state immunity doctrine. (Ct. Rec. 1 at 7.) Second, according to YVMH, the CON regulations violate the dormant Commerce Clause under the test articulated in Pike v. Bruce Church, Inc., 397 U.S. 137, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970), because the regulations' burdens on interstate commerce outweigh their putative local benefits. (Ct. Rec. 1 at 6.)
A motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) is appropriate after the pleadings are closed. Although Defendants style their motion under Rules 12(b)(6) and 12(c), Defendants already filed an answer without asserting the defenses in this motion. Therefore, a Rule 12(b)(6) motion is barred in this case, and this is a motion for judgment on the pleadings under Rule 12(c). See Fed.R.Civ.P. 12(b).
In a motion for judgment on the pleadings, a court may consider only legal issues. Enron Oil Trading & Transp. Co. v. Walbrook Ins. Co., Ltd., 132 F.3d 526, 528 (9th Cir.1997). Material facts must be viewed in the light most favorable to the non-moving party, in this case, YVMH. McGann v. Ernst & Young, 102 F.3d 390, 392 (9th Cir.1996). The court will grant a motion for judgment on the pleadings if the moving party can show a clear right to judgment as a matter of law from the face of the pleadings. George v. Pacific-CSC Work Furlough, 91 F.3d 1227, 1229 (9th Cir.1996).
After this motion was argued and submitted, YVMH moved to supplement its response with two expert reports. The Court declines to consider those reports at this time for two reasons. First, it would prejudice Defendants to consider them without converting this motion into a motion for summary judgment. Fed.R.Civ.P. 12(d). Second, the Court does not find the expert reports helpful in clarifying the legal issues in the case. Although YVMH claims they explain the anti-trust and dormant commerce clause violations, they appear to assert policy arguments against PCI CON laws. YVMH's motion is denied.
YVMH asserts that the challenged regulations violate the Sherman Anti-trust Act by enabling hospitals that already have PCI CON licenses to perpetuate their elective PCI monopoly. Additionally, rounding down the estimated need serves no purpose other than to underestimate the number of required procedures, which artificially inflates prices. Finally, the regulation setting the minimum volume requirement at 300 is irrational and experts agree that the appropriate minimum volume requirement is 200 annual PCI's.
Defendants argue that the challenged regulations are actions of the State as sovereign, and as such are immune from anti-trust liability. Although the regulations have anti-competitive effects, Defendants say those effects are part of the State-designed system and the regulations delegate no market power to private parties.
Generally speaking, restraints of trade imposed directly by States are immune from anti-trust liability. See Parker v. Brown, 317 U.S. 341, 350-52, 63 S.Ct. 307, 87 L.Ed. 315 (1943) (). This immunity extends to the acts of the State executive branch, including administrative agencies such as the Department. Deak-Perera Hawaii, Inc. v. Dep't of Transp., 745 F.2d 1281, 1283 (9th Cir.1984).
State restraints of trade are divided into two categories: unilateral and hybrid. See Fisher v. City of Berkeley, 475 U.S. 260, 267-68, 106 S.Ct. 1045, 89 L.Ed.2d 206 (1986). Hybrid restraints are not immune from anti-trust liability. Restraints are hybrid when the State "merely enforces private marketing decisions,"thereby granting private actors "a degree of private regulatory power." 324 Liquor Corp. v. Duffy, 479 U.S. 335, 345 n. 8, 107 S.Ct. 720, 93 L.Ed.2d 667 (1987) (citations omitted); Fisher,...
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