D.C. Circuit Finds RPA Lacks Standing for Lawsuit Challenging Stark Safe Harbor Rule
July 10th, 2007
The Renal Physicians Association (RPA) lacks standing to challenge a Stark safe harbor provision because it has failed to show that the relief it seeks—invalidation of the provision—will redress its alleged injury, a federal appeals court held June 12.
Upholding a lower court’s dismissal of the case for lack of standing, the District of Columbia Circuit agreed that the RPA failed to meet the “redressability” requirement for establishing standing.
The appeals court explained that one of the exceptions to the Stark Law’s prohibition on referrals is for “personal service arrangements,” which covers market-rate, pay-for-service arrangements.
“In other words, if the physician’s only financial interest in the clinic is receipt of agreed-upon compensation at or below ‘fair market value’ for ‘reasonable and necessary’ services, then the physician may make referrals to the clinic without violating the law,” the court said.
In March 2004, CMS issued an interim final rule in which it created a safe harbor provision within the existing regulatory definition of “fair market value,” the appeals court explained. The safe harbor sets out two specific methods for showing that a physician’s hourly rate is at fair market value.
CMS emphasized at the time of issuing the interim rule the safe harbor was “entirely voluntary,” and that healthcare providers could continue to establish fair market value through other methods, the appeals court noted.
Plaintiff RPA, a national association whose membership consists of nephrologists, advance practice nurses, and physician assistants specializing in the treatment of patients with kidney disease, brought a lawsuit in district court, seeking to invalidate this safe-harbor provision.
The RPA’s complaint before the district court also contained several paragraphs directed at establishing RPA’s standing to bring its lawsuit, the appeals court said. The RPA alleged that dialysis facilities, in an effort to obtain protection of the safe harbor, would likely limit compensation for medical director services to the amount “allowed” under the safe harbor, and this would result in a significant number of RPA members experiencing a substantial reduction in their compensation.
“The fair market value safe harbor . . . poses the threat of imminent economic harm to RPA members and other medical directors of dialysis centers who will not be compensated at fair market value,” the RPA alleged in its complaint.
The district court dismissed the case for lack of standing, finding that “the RPA could not show its alleged injury would be in any way ameliorated by the relief it was seeking,” and therefore it failed to meet the redressability element required to establish standing.
In addition, the district court determined that the direct cause of the alleged injury to RPA was not the safe harbor, but rather the actions the dialysis facilities decided to take independently (i.e., to reduce medical directors’ compensation to safe-harbored levels).
The appeals court agreed, finding that the alleged impact of the safe harbor on RPA was indirect because such impact was the result of the actions of third parties.
“Although RPA alleges that its members were injured, and that the safe harbor was the cause, it does not allege facts showing that even a single hospital or dialysis center would pay a medical director more if the court held the safe-harbor provision invalid,” the appeals court said.
“In short, the word is already out, and therefore it is too late to reverse course,” the appeals court said. “Even if a court were to declare the safe harbor invalid, the same dialysis facilities that have opted to rely on the safe harbor will be likely to continue to rely on the safe-harbor method of proof, knowing with some assurance that the agency [CMS] will be likely to accept this proof as indicative of fair market value.”
“Indeed, the only way to prevent this result would be for a court not only to invalidate the safe harbor but also to repudiate the safe harbor as an acceptable method of proof,” the appeals court added. “[B]ut RPA does not suggest any legal basis for such relief, nor does it seek such relief.”
Entry Filed under: News