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Key Med. Supply, Inc. v. Burwell

United States Court of Appeals, Eighth Circuit

August 25, 2014

Key Medical Supply, Inc., a Minnesota corporation, Plaintiff - Appellant
v.
Sylvia Matthews Burwell,[1] Secretary of the United States Department of Health and Human Services, in her official capacity; Marilyn Tavenner, [2] Acting Administrator of the Centers for Medicare and Medicaid Services, in her official capacity, Defendants - Appellees, Midwest Association of Medical Equipment Suppliers, Inc., Amicus on Behalf of Appellant(s)

Submitted May 14, 2014.

Appeal from United States District Court for the District of Minnesota - Minneapolis.

For Key Medical Supply, Inc., a Minnesota corporation, Plaintiff - Appellant: Lousene M. Hoppe, Samuel Orbovich, Fredrikson & Byron, Minneapolis, MN.

For Kathleen Sebelius, Secretary of the United States Department of Health and Human Services, in her official capacity, Marilyn Tavenner, Acting Administrator of the Centers for Medicare and Medicaid Services, in her official capacity, Defendants - Appellees: Gregory Dworkowitz, Michael Raab, Clifford Lee Reeves II, Benjamin M. Shultz, U.S. Department of Justice, Washington, DC; Dana Kaersvang, U.S. Department of Homeland Security, Washington, DC; Friedrich Anson Paul Siekert, Assistant U.S. Attorney, U.S. Attorney's Office, Minneapolis, MN.

For Midwest Association of Medical Equipment Suppliers, Inc., Amicus on Behalf of Appellant(s): Jonathan W. Lips, Ryan W. Wahlund, Natalie Ingraham Wyatt-Brown, Halleland & Habicht, Minneapolis, MN.

Before WOLLMAN, MELLOY, and BENTON, Circuit Judges.

OPINION

Page 956

MELLOY, Circuit Judge.

Key Medical Supply, Inc. (" Key Medical" ), a medical equipment provider in the Minneapolis-St. Paul area, alleges that the Department of Health and Human Services' Centers for Medicare and Medicaid Services (" CMS" or " the Agency" ) exceeded its statutory authority when implementing

Page 957

a competitive-bidding system for Medicare's pricing of medical equipment and supplies. Key Medical acknowledges that the governing statute contains a strongly worded ban on administrative and judicial review. Key Medical argues, however, that review should be available because the Agency acted in an ultra vires manner by: (1) imposing arbitrary and non-competitively-derived maximum bid caps for certain products; (2) grouping inexpensive commodity products with more expensive custom-fit products for bidding purposes; and (3) applying the competitive bidding program in a manner that interferes with the separate state/federal Medicaid system. Key Medical also argues that review should be available for constitutional claims asserting that the Agency's actions deprived Key Medical of due process and effected an unconstitutional taking of Key Medical's " business." The district court[3] rejected Key Medical's arguments and determined that the statutory bar on review precluded jurisdiction. We affirm.

I. Background

A. General Background: 42 U.S.C. § 1395w-3 Medicare Competitive Bidding System for Certain Items and Services

In 2003, Congress amended Medicare to control costs for durable medical equipment, prosthetics, orthotics, and supplies, based in part on a conclusion that Medicare and beneficiaries were overpaying substantially for such items. H.R. Rep. No. 108-178, pt. II, at 144 (2003) (" The Office of Inspector General has documented that taxpayers and Medicare beneficiaries are paying millions more for durable medical equipment than other programs, such as the Federal Employees Health Benefit Program (FEHBP)." ). The amendments required the Agency to phase in a competitive bidding system to replace an existing government-defined price schedule. Medicare Prescription Drug, Improvement, and Modernization Act, Pub. L. No. 108-173, title III, § 302(b)(1) (2003) (codified in part at 42 U.S.C. § 1395w-3). This change followed successful pilot studies in two cities and began with a first round of competitive bidding in ten large metropolitan areas. Balanced Budget Act of 1997, Pub. L. No. 105-33, § 4319 (authorizing pilot studies); 42 U.S.C. § 1395w-3(a)(1)(B)(i)(I) (requiring a limited area, first-round program in 2007). Congress then received feedback, issued further amendments, and provided by statute that the first round contracts were to be re-bid in a second round. Medicare Improvements for Patients and Providers Act of 2008, Pub. L. No. 110-275; see generally Texas Alliance ...


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