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From Health Law Daily, January 26, 2017

HHS Rule to prevent inappropriate ‘steering’ of dialysis patients preliminarily enjoined

By Joseph Arshawsky, J.D.

The HHS Interim Final rule that was supposed to go into effect on January 13, 2017, and was designed to prevent inappropriate ‘steering’ of dialysis patients was preliminarily enjoined by a federal court in Texas, in a suit brought by the leading dialysis providers. Among other issues, the court found that there was no reason to forgo the notice and comment period required by the Administrative Procedures Act (APA) (P.L. 79–404) (Dialysis Patient Citizens v. Burwell, January 25, 2017, Mazzant, A.).

ESRD donations. In 1972, Congress amended the Social Security Act to allow End Stage Renal Disease (ESRD) patients to selectively enroll in Medicare regardless of their age so long as they met certain employment and citizenship requirements. Given the vulnerability of ESRD patients and the expense of treatment, charitable organizations provide premium assistance to eligible ESRD patients, often based on financial need, regardless of whether the insurer selected by the ESRD patient was public (Medicare) or private. Dialysis providers have long donated to these charities, and in 1997 the Office of Inspector General (OIG) of HHS published an advisory opinion affirming the legality of such donations. These guidelines prohibited dialysis providers from (1) disclosing to ESRD patients that the provider made charitable contributions, or (2) suggesting to charities that any contribution be directed to a particular group of beneficiaries. The challenged regulation would require insurers to make the very disclosures that these OIG guidelines prohibit.

The Rule. On December 14, 2016, HHS announced an Interim Final Rule with Comment Period (81 FR 90211) (the rule) to require dialysis providers to disclose to patients when they are contributing to charities that pay for insurance premiums. The rule would also require dialysis providers to notify insurers which premiums would be paid by charitable organizations. The dialysis providers would then have to “obtain insurance” from insurers that will accept charitable premium assistance payments, and, if such assurances are not provided, the dialysis providers would need to take “reasonable steps” to ensure such payments are not made. In effect, the rule would allow insurers to refuse to insure ESRD patients who receive charitable premium assistance. The rule was to go into effect on January 13, 2017 (see Inappropriate ‘steering’ of dialysis patients leads to new facility coverage standards, December 14, 2016). On January 12, the court issued a temporary restraining order against the rule. By this decision, the court has granted a preliminary injunction against the rule.

Preliminary injunction. The dialysis providers who sought the injunction argued that HHS violated the APA and the Medicare Act because the rule was unlawfully promulgated without notice and comment, and the rule’s disclosure requires are arbitrary, capricious, and contrary to law. The court agreed.

Likelihood of success on the merits. The dialysis providers showed a reasonable probability of success by showing that HHS likely violated the procedures of the APA. The court found there was no good cause for the agency to depart from the notice and comment procedures. The court rejected HHS’ contention that notice and comment would be “contrary to public interest.” The court found that notice and comment should only be disposed of where “announcement of a proposed rule would enable the sort of . . . manipulation the rule sought to prevent.” HHS did not provide a single example of a patient denied a kidney transplant because of charitable assistance. Speculation that some patients will not have foresight to arrange for alternative coverage does not provide good cause to bypass notice and comment. Finally, the rule effectively provides insurers the means to stop paying for dialysis treatment once the insurer discovers the patient received charitable premium assistance. Thus, the rule would cause the very mid-year disruptions it sought to prevent.

The rule is not simply an amended rule that followed an original, APA-compliant Proposed rule, which might have permitted the court to determine that HHS substantially complied with the requirements of the APA. HHS was unable to identify any emergency that justified publishing a rule without notice and comment. The court was also not persuaded that the procedural violations were harmless. HHS claim that the August 2016 request for information (RFI) was sufficient to give the dialysis providers adequate notice and make any “technical departures from § 553(b)” harmless. The RFI (1) did not give the dialysis providers notice that HHS was considering promulgating a rule; (2) was not specific to ESRD; (3) disclosed no information regarding the provisions that made the rule so damaging; and (4) was “[t]oo open-ended to allow for meaningful comment” on key aspects of the rule actually adopted. In fact, when combined with the shortcomings and deficiencies of the rule itself, the court found the dialysis providers were clearly prejudiced by HHS’s decision to violate the procedures of the APA. The court determined that HHS did not have good cause to bypass notice and comment; thus, the rule was vacated.

Independent of this determination, the dialysis providers were likely to succeed on the merits because the rule is arbitrary and capricious. HHS failed to consider the benefits of private qualified health plans and ignored the disadvantages of the rule. HHS has long accepted the practice of charitable premium assistance, and the rule neither addressed that HHS was changing its position nor provided a reasoned explanation for why the rule violated OIG guidance.

Irreparable injury. One of the dialysis providers showed that up to six of its Texas facilities would likely close if ESRD patients were forced off of private insurance plans, which reimburse at a much higher rate than Medicare. ESRD patients would also suffer irreparable injury were the rule to go into effect, because it would deny them needed medical care or “the legal right to the qualified provider of their choice.” Therefore, some ESRD patients and their families could lose access to their health care providers or even lose insurance coverage altogether.

Other factors. The balance of equities weighed in favor of granting a preliminary injunction because HHS would suffer no comparable harm if the rule’s implementation were delayed while the court addressed the merits of the challenge to the rule. Granting injunctive relief also serves the public interest because the status quo ensures that ESRD patients have the choice to select private or public insurance options based on their health care needs and financial means.

The case is No. 4:17-cv-00016-ALM.

Attorneys: Jay B. Angoff (Mehri & Skalet, PLLC) for Dialysis Patient Citizens. Stuart S. Kurlander (Latham & Watkins, LLP) for U.S. Renal Care, Inc. David W. Ogden (Wilmer Cutler Pickering Hale & Dorr) for DaVita, Inc. Lynn E. Calkins (Holland & Knight, LLP) for Fresenius Medical Care Holdings, Inc. Brian G. Kennedy, U.S. Department of Justice, for Sylvia Mathews Burwell, Secretary, U.S. Department of Health and Human Services, and Centers for Medicare and Medicaid Services.

Companies: Dialysis Patient Citizens; U.S. Rendal Care, Inc.; DaVita, Inc.; Fresenius Medical Care Holdings, Inc.; U.S. Department of Health and Human Services; Centers for Medicare and Medicaid Services

MainStory: TopStory CMSNews ESRDNews PartBNews ProgramIntegrityNews ProviderNews QualityNews TexasNews

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