International Rehabilitative Sciences Inc. v. Sebelius
688 F.3d 994
9th Cir.2012Background
- DHHS Medicare denied coverage for the BIO-1000 knee device; RS Medical supplied the BIO-1000 and pursued coverage for over 1,000 claims on behalf of 400+ beneficiaries.
- Medicare Appeals Council (MAC) denied coverage in four decisions, holding the device not reasonable and necessary and not adequately supported by evidence.
- District Court reversed MAC, concluding the MAC denials were arbitrary and not supported by substantial evidence, and did not defer to MAC.
- The district court remanded for consideration of limited liability indemnification and beneficiary-notice issues; the Fourth Circuit later joined a related ruling upholding MAC denials.
- The appellate panel ultimately holds the MAC denials were supported by substantial evidence and consistent with governing standards; case is remanded for factual determinations on limited liability issues.
- The opinion analyzes the Medicare statutory framework, the burden on the supplier, the role of FDA clearance, and the distinction between coverage standards and FDA safety/efficacy determinations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether MAC denials were arbitrary and supported by substantial evidence | RS Medical argues MAC denials were arbitrary and not supported by substantial evidence | Sebelius argues MAC properly denied coverage based on evidence deficiencies | Yes; MAC denials were not arbitrary and were supported by substantial evidence |
| Whether district court erred by comparing MAC denials to lower-level grants | RS Medical contends district court erred by discounting lower-level grants | Secretary argues inconsistency at lower levels does not render MAC decisions arbitrary | Yes; district court erred in its inconsistency analysis; MAC decisions stand on independent basis |
| Impact of FDA clearance on Medicare coverage decision | FDA clearance should weigh more toward general acceptance of BIO-1000 | FDA clearance is informative but not controlling for coverage; general acceptance requires scientific data and consensus | FDA clearance is informative but not determinative; MAC adequately discounted the studies and acceptance evidence |
| Remand issues for indemnification and beneficiary notices | Remand should address liability shifting provisions for unforeseen denials | Remand should determine indemnification and beneficiary-notice sufficiency | Remand to address limited liability issues on remand; not resolved here |
Key Cases Cited
- Almy v. Sebelius, 679 F.3d 297 (4th Cir. 2012) (MAC denials upheld; studies flawed; lower-level grants not binding on MAC)
- Marmolejo-Campos v. Holder, 558 F.3d 903 (9th Cir. 2009) (inconsistency must be unexplained to be arbitrary; agency explanation needed for policy shifts)
- Sandgathe v. Chater, 108 F.3d 978 (9th Cir. 1997) (substantial evidence standard explanation quoted)
- Heckler v. Ringer, 466 U.S. 602 (1984) (Secretary discretion in using adjudication vs. rulemaking)
- Riegel v. Medtronic, Inc., 552 U.S. 312 (2008) (FDA clearance versus broader punitive safety review; 510(k) vs PMA distinctions)