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December 7, 2005.

MICHAEL O. LEAVITT, Secretary United States Department of Health and Human Services, and MARK B. McCLELLAN, Administrator, Centers for Medicare and Medicaid Services, Defendants.

The opinion of the court was delivered by: REGGIE WALTON, District Judge


The plaintiff, Power Mobility Coalition (the "Coalition"), "is a national, non-profit association whose membership includes manufacturers and suppliers of motorized scooters and power wheelchairs." Complaint for Declaratory and Injunctive Relief ("Compl.") ¶ 4. On behalf of its memberships, the plaintiff request that this Court issue a preliminary injunction that would enjoin the enforcement of the new regulations promulgated by the Department of Health and Human Services ("HHS") through its Interim Final Rule entitled Conditions for Payment of Power Mobility Devices, Including Power Wheelchairs and Power-Operated Vehicles, ("PMD payment rule"), 70 Fed. Reg. 50,940, and adopted on August 26, 2005 (to be codified at 42 C.F.R. pt. 410). Plaintiff's Motion for Preliminary Injunctive Relief ("Pl.'s Mot."), [D.E. # 3] at 1; Compl. at 1. The plaintiff's jurisdictional basis for filing this action in this Court are 28 U.S.C. §§ 1331, 1361, 2201-2202 (2000) and the Administrative Procedure Act, 5 U.S.C. §§ 701-706 (2000). Compl. at 2. The plaintiff alleges that the Interim Final Rule, which became effective on October 25, 2005, was issued without notice and the opportunity for comment, and will radically change the procedures for obtaining reimbursement for motorized wheelchairs and scooters (known as power mobility devices or PMDs) under the Medicare program. Pl.'s Mot. at 1; Compl. at 2. The plaintiff also contends that the rule is arbitrary, capricious, and not in accordance with law in violation of the Administrative Procedure Act, 5 U.S.C. §§ 553, 706, and the Medicare Act, 42 U.S.C. §§ 1395hh(b), 1395(m)(j)(2) (2000). Compl. at 1-2.

Specifically, the plaintiff proclaims that "[u]nder current Medicare procedures, which reflect specific congressional direction, claimants submit a standardized form to HHS that contains information tailored to identify whether a beneficiary's motorized wheelchair or scooter is reimbursable under the program." Pl.'s Mot. at 1-2. However, according to the plaintiff, the new regulations eliminate this standardization approach and establish a highly discretionary, and much more costly system, in which the plaintiff's members are required to collect and review patients' medical records to determine whether the records establish eligibility for the use of PMDs to the satisfaction of HHS. Id. at 2.

  On the other hand, the defendants opine that "[t]he new rule is not defective because it has been first issued as an interim final rule with a comment period rather than as a notice of proposed rulemaking." Defendants' Memorandum in Opposition to Plaintiff's Motion for Preliminary Injunction ("Defs.' Opp'n") at 2-3. They contend that "[the rule] is exempt from the notice and comment requirements of the APA because portions of it merely conform agency regulations to Congressional commands. . . ." Id. Moreover, argues the defendants, "the Secretary properly found that good cause justified issuing the balance, which is needed to combat fraud and protect the integrity of the Medicare program." Id. at 3. In addition, the defendants' contend that the "[p]laintiff's claim that the rule is arbitrary and capricious is also meritless . . . [because] the rule is entirely consistent with the Medicare Act." Id. at 3.

  For the reasons discussed below, the plaintiff's motion is denied.

  I. Background

  The Medicare Act was established under Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395-1395hhh, and provides for the payment of covered medical care services, equipment, and supplies provided to eligible aged and disabled persons. Defs.' Opp'n at 3. The statute consists of three main parts; however, this case involves only Part B, as the plaintiff is an association that represents durable medical equipment ("DME") "suppliers." Id. (citing 42 U.S.C. § 1395x(d); 42 C.F.R. § 400.202.). Part B of the Medicare Act provides supplementary medical insurance for covered medical services, such as doctors' visits, diagnostic testing, and covered medical supplies, such as DME. Id. (citing 42 U.S.C. §§ 1395j to 1395w-4, 42 C.F.R. Part 410.)*fn2 In administering Part B, the Administrator of the Center for Medicare and Medicaid Services ("CMS") acts through private fiscal agents called "carriers." Id. at 1; 4 (citing 42 U.S.C. § 1395u; 42 C.F.R. Part 421, Subparts A and C, and 42 C.F.R. § 421.5(b)). Carriers are private entities, generally insurance companies, that contract with the Secretary of Health and Human Services ("the Secretary") to perform a variety of functions, such as making coverage determinations in accordance with the Medicare Act, applicable regulations, the Medicare Part B Supplier Manual, the publicly available Program Integrity Manual ("PIM"), the regional Durable Medical Equipment Regional Carriers ("DMERCs," "DMER carriers," or "carriers") manual, and other guidance materials. Id. Carriers also determine reimbursement rates and allowable payments, conduct audits of the claims submitted for payment, and adjust payments and payment requests. Id. Once a carrier receives a claim for services rendered, the carrier pays the Medicare beneficiary on the basis of an itemized bill, and pays the Medicare supplier based on an assignment of benefits executed by the beneficiary. Id. (citing 42 U.S.C. § 1395u(b)(3)(B)). These carrier functions are prescribed by regulation, i.e., 42 C.F.R. § 421.200. Id. at 4. DMER carriers process claims for DME (including PMDs) payments within designated regions of the country.*fn3

  As indicated, Part B coverage extends to DME products, including wheelchairs used in the patient's "home," which includes institutions other than hospitals or skilled nursing facilities. Id. at 7 (internal citations omitted). Customized wheelchairs are covered so long as they are "uniquely constructed or substantially modified for a specific beneficiary according to the description and orders of a physician." Id. (quoting 42 C.F.R. § 414.224(a)). All Medicare coverage is limited to services that are medically "reasonable and necessary" for the diagnosis or treatment of illness. Id. (quoting 42 U.S.C. § 1395y(a)(1)(A), 42 C.F.R. § 411.15(k)(1)).

  Under the prior regulation that the new regulation replaces, suppliers had to submit a form, known as a Certificate of Medical Necessity ("CMN"), to the regional Medicare DMER carriers for payment for certain DME items. Id. at 7 (citing 42 U.S.C. § 1395m(j)(2)(B) (defining the CMN)). In addition to the CMN, the Secretary has always required suppliers to furnish information sufficient to support payments authorized under Medicare Part B. Id. at 7-8 (citing 42 U.S.C. § 1395l (e) 2000). This requirement continues under the new rule. Id. at 7. "Consistent with these mandates, the Secretary — through the regional carriers — issued several directives advising suppliers that they were required in some instances to provide medical documentation in addition to the CMNs in order to substantiate compliance with the `reasonable and necessary' requirement of the Act." Id. at 8 (citing Declaration of John F. Warren ("Warren Decl.") dated October 25, 2005, Exhibit ("Ex.") A (DMERCs' instructions to carriers)).*fn4

  "In 2003, Congress enacted the Medicare Prescription Drug, Improvement, and Modernization Act of 2003," ("Medicare Modernization Act" or"MMA"), id. at 9, which is codified in 42 U.S.C. § 1395m(a)1(E). Title III of that Act, entitled "Combatting Waste, Fraud, and Abuse," seeks to address and ameliorate fraud related to, inter alia, Medicare claims for PMDs. H.R. Conf. Rep. 108-391 at 575, reprinted in 2003 U.S.C.C.A.N. 1808, 1944 (discussing "`those covered items for which there has been a proliferation of use, consistent findings of charges for covered items that are not delivered, or consistent findings of falsification of documentation to provide for payment of such covered items' (emphasis in original))."*fn5 Defs.' Opp'n at 10. In pertinent part, the Act provides: E) Clinical conditions for coverage

  (I) In general

The Secretary shall establish standards for clinical conditions for payment for covered items under this subsection.
. . . .
(ii) Requirements
The standards established under clause (i) shall include the specification of types or classes of covered items that require, as a condition of payment under this subsection, a face-to-face examination of the individual by a physician (as defined in section 1395x®) (1) of this title, a physician assistant, nurse practitioner, or a clinical nurse specialist (as those terms are defined in section 1395x(aa)(5)) of this title and a prescription for the item.
(iii) Priority of establishment of standards
In establishing the standards under this subparagraph, the Secretary shall first establish standards for those covered items for which the Secretary determines there has been a proliferation of use, consistent findings of charges for covered items that are not delivered, or consistent findings of falsification of documentation to provide for payment of such covered items under this part.
(iv) Standards for power wheelchairs
Effective on the date of the enactment of this subparagraph, in the case of a covered item consisting of a motorized or power wheelchair for an individual, payment may not be made for such covered item unless a physician (as defined in section 1395x®) (1)), a physician assistant, nurse practitioner, or a clinical nurse specialist (as those terms are defined in section 1395x(aa)(5)) has conducted a face-to-face examination of the individual and written a prescription for the item.
(v) Limitation on payment for covered items
  Payment may not be made for a covered item under this subsection unless the item meets any standards established under this subparagraph for clinical condition of coverage. 42 U.S.C.A. § 1395m(a)(1)(E) (West Supp. 2005).*fn6 In response to the enactment of the Medicare Modernization Act ("MMA"), on August 26, 2005, the CMS adopted the Interim Final Rule, which is being challenged in this action. Defs. Opp'n at 11. The rule had a 90 day comment period that expired on November 25, 2005, at 5:00 p.m. Id. at 11. The rule is an attempt to conform the CMS's regulations to 42 U.S.C. § 1395m(a)(1)(E) of the MMA. Id. at 11-12. The rule imposes two requirements. First, "a face-to-face examination of the [beneficiary] must be conducted by a physician, a physician assistant, a nurse practitioner or a clinical nurse specialist." Id. at 12. Second, "payment may not be made for a power wheelchair unless the physician or treating practitioner has written a prescription for the item." Id. Additionally, "[u]nder the new system envisioned by the PMD payment rule, physicians and treating practitioners will be compensated for the required face-to-face examination, and for the additional work necessary to complete a written prescription and prepare pertinent parts of the medical record." Id. (citing PMD payment rule, 70 Fed. Reg. at 50,941).*fn7 According to the defendants, "the PMD payment rule commits to regulation [the] CMS's longstanding requirement that, as part of a medical review, a supplier is required to produce documentation from the beneficiary's medical record that demonstrates the medical necessity of an item or service." Id. Although "the rule eliminates the requirement of a CMN [it does] require[] a written prescription, and also requires a supplier have the supporting documentation before submitting a claim." Id. "The PMD payment rule does nothing, however, to alter the administrative review procedures . . . that are available to a supplier dissatisfied with a claim denial or other decision of the Secretary." Id. at 12-13.

  II. Analysis

  A. Preliminary ...

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