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August 26, 1991

LOUIS W. SULLIVAN, M.D., et al., Defendants

The opinion of the court was delivered by: SPORKIN


 This matter is before the Court on the parties' cross-motions for summary judgment. Plaintiff American Society of Cataract and Refractive Surgery ("ASCRS") is a professional society of ophthalmologists who perform cataract surgery. Plaintiff Arthur Donaldson, M.D., is a Board-certified ophthalmologist with extensive experience in cataract surgery. Defendant Louis Sullivan is Secretary of the United States Department of Health and Human Services ("HHS"). Defendant Gail Wilensky is Administrator of the Health Care Financing Administration ("HCFA"), which is the division of HHS responsible for administering the Medicare program.

 Plaintiffs initiated this suit seeking to enjoin implementation of a rule promulgated by HCFA that restricts Medicare coverage of certain kinds of cataract surgery. On August 5, 1991, the Court held a hearing on plaintiffs' motion for a preliminary injunction and on defendants' motion to dismiss. At that hearing, the parties stipulated that no material issue of fact is in dispute, and they requested that the Court consider their respective motions as cross-motions for summary judgment. Since the hearing, the parties have supplemented the record with additional affidavits and exhibits, including the certified administrative record of the rulemaking. Because the rule lacks a rational basis, and because it is inconsistent with requirements established by Congress, judgment will be entered for the plaintiffs and implementation of the rule will be permanently enjoined.

 I. Background

 A cataract is a vision-impairing clouding of the eye's lens. Cataracts typically occur as a normal accompaniment of the aging process. Since 1949, physicians have treated cataracts by removing the clouded natural lens and replacing it with an artificial substitute, a clear plastic device known as an intraocular lens, or IOL. IOL implantation is now a standard medical procedure, and approximately 1.25 million people receive IOLs each year.

 Because most cataract patients are elderly, about 80% of IOL implants in the U.S. are paid for by the Medicare program. Medicare provides medical insurance for persons who are 65 years of age or older, or who are disabled. Medicare coverage of IOLs began in 1976. At that time, such coverage was an anomaly, because IOLs had not been approved for widespread use by the Food and Drug Administration (the "FDA"). HCFA ordinarily extends Medicare coverage only to devices and procedures that have been demonstrated to be safe and effective. Where applicable, it is HCFA's practice to rely on FDA approval processes in making determinations of safety and efficacy. If a device is subject to FDA regulation, and has not been approved for general use, HCFA considers the device to be "investigational" and therefore ineligible for Medicare coverage.

 In 1976, IOLs had not yet received FDA approval for general use, although they were under study by the FDA. Motivated by the prevailing acceptance of IOLs by the medical community, however, and by the tremendous utility and safety of these devices, Congress in the Medical Device Amendments of 1976 (the "MDA") directed HHS to make IOLs "reasonably available." 21 U.S.C. § 360j(1)(3)(D)(iii). In response to the MDA, and in light of the popularity of IOLs among both physicians and patients, HCFA revised Medicare policy to permit coverage of investigational IOLs, provided that the physicians implanting the IOLs met FDA standards for use of investigational devices.

 Under this policy, use of IOLs expanded rapidly, and medical suppliers developed ever more sophisticated and effective IOL devices. To date, the FDA has approved approximately 900 IOL models for general use. Many more models, now considered investigational, await full FDA approval.

 In May 1990, HCFA proposed to change its longstanding policy concerning IOLs. 55 Fed. Reg. 21250 (May 23, 1990). It published for review a proposed rule that would provide Medicare coverage only to devices with full FDA approval. Investigational IOLs, although often the most up-to-date, would no longer be covered. The comments HCFA received from the medical profession and the general public were unanimously negative. Ignoring completely these comments, in April 1991 HCFA adopted the proposed rule as a final rule, effective May 30, 1991. 56 Fed. Reg 19874 (April 30, 1991). Plaintiffs now seek to prevent implementation of this rule and to keep in place existing HCFA policy.

 Defendants have raised two jurisdictional challenges to plaintiffs' claim. Defendants contend both that plaintiffs lack standing to challenge the rule, and that they have failed to exhaust their administrative remedies. Both contentions must be rejected.

 A. Standing

 This Court's jurisdiction is founded on the Administrative Procedure Act, 5 U.S.C. §§ 551-706 (the "APA"). The APA provides that "[a] person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof." Id. at § 702. To establish standing to challenge an agency decision under the APA, a plaintiff must demonstrate that "the challenged action has caused him [or will cause him] injury in fact, economic or otherwise." Association of Data Processing Service Organizations v. Camp, 397 U.S. 150, 153, 25 L. Ed. 2d 184, 90 S. Ct. 827 (1970). Although the injury cannot be merely ideological, see United States v. Richardson, 418 U.S. 166, 41 L. Ed. 2d 678, 94 S. Ct. 2940 (1974), it need not be an outright deprivation of property or liberty. See Sierra Club v. Morton, 405 U.S. 727, 31 L. Ed. 2d 636, 92 S. Ct. 1361 (1972) (users of a national park have standing to challenge an agency's decision to permit development of the park).

 Both ASCRS and Dr. Donaldson have demonstrated the requisite injury in fact. Dr. Donaldson's medical practice would be affected by the challenged rule, and ASCRS has standing on behalf of its members, whose practices will be similarly affected. See Hunt v. Washington State Apple Advertising Commission, 432 U.S. 333, 343, 53 L. Ed. 2d 383, 97 S. Ct. 2434 (1977) (organizations have standing to challenge actions injurious to members). The rule would limit physicians' ability to prescribe for their patients the best available course of treatment. In cases where an investigational IOL is, in the professional judgment of a treating physician, the preferred device, economics would nonetheless dictate use of an inferior IOL. Patients would be able to obtain state-of-the-art treatment only if they are able and willing to pay for the new device themselves.

 In an analogous case, American Medical Association v. Mathews, 429 F. Supp. 1179 (N.D. Ill. 1977), the United States District Court for the Northern District of Illinois held that plaintiff physicians had standing to challenge a decision not to provide Medicare reimbursement for certain types of prescription medication. The Court in American Medical Association found that the defendant, through its reimbursement policy, exercised "'supervision or control' over plaintiffs' medical practice by effectively requiring them to prescribe only [approved] drugs," thereby inflicting "a distinctive and recognizable harm to an intangible interest." Id. at 1189, 1191. Similarly, plaintiffs in this case will be ...

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