Key Medical Supply, Inc. v. Kathleen Sebelius
764 F.3d 955
8th Cir.2014Background
- Key Medical challenges CMS's competitive bidding system for Medicare durable medical equipment as ultra vires and potentially unconstitutional; district court dismissed under the statutory bar on review.
- Congress amended Medicare in 2003 and later, with a second-round implementation in Minneapolis–St. Paul; the program aims to establish competitive acquisition areas for priced items and services.
- 42 U.S.C. § 1395w-3(b)(11) broadly bars administrative or judicial review of actions including establishment of payment amounts, awarding contracts, selection of items for competitive acquisition, and the bidding structure.
- Key Medical relies on enteral nutrition supplies, especially low-profile feeding tubes, and explains interdependence with Minnesota Medicaid for dual-eligible patients (Medicare first, then Medicaid).
- CMS allegedly used pre-existing government price schedules as maximum bid caps and required ‘bona fide bids,’ with a bidding site that hindered differentiation among tube types.
- The court ultimately held there was no ultra vires violation and that the constitutional claims were meritless, upholding the district court’s dismissal with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does § 1395w-3(b)(11) bar review of CMS bidding actions? | Key Medical argues the bar should not preclude review for ultra vires or unconstitutional actions. | CMS contends the bar is broad and encompasses review of bidding decisions and related actions. | Bar precludes review of CMS bidding actions. |
| Were CMS actions ultra vires in light of statutory interpretation? | Key Medical claims max bid caps, item grouping, and bona fide bid requirements exceed authority. | Agency actions are within broad statutory discretion and not plain departures from mandate. | No plain violation; actions fall within statutory interpretation and discretion. |
| Do the constitutional claims (takings/due process) overcome the review bar? | Key Medical asserts a constitutional taking of its business and due process deprivation. | No protected property or liberty interest; claims are meritless and do not overcome the bar. | Constitutional claims fail; bar remains applicable. |
Key Cases Cited
- Texas Alliance for Home Care Servs. v. Sebelius, 681 F.3d 402 (D.C. Cir. 2012) (no-review bar applicable to initial administrative processes)
- Nebraska State Legisl. Bd. v. United Transp. Union, 245 F.3d 656 (8th Cir. 2001) (ultra vires exception narrow; plain violation required)
- American Airlines, Inc. v. Herman, 176 F.3d 283 (5th Cir. 1999) (ultra vires requires plain departure from statutory mandate)
- Leedom v. Kyne, 358 U.S. 184 (1958) (example of ultra vires action for express statutory limit violation)
- Amgen, Inc. v. Smith, 357 F.3d 103 (D.C. Cir. 2004) (preclusion clause clarity affects ultra vires review)
- Minnesota Ass'n of Health Care Facilities v. Minnesota Dept. of Public Welfare, 742 F.2d 442 (8th Cir. 1984) (voluntariness of Medicaid participation defeats takings claim)
- Am. Soc'y of Cataract & Refractive Surgery v. Thompson, 279 F.3d 447 (7th Cir. 2002) (no substantial constitutional issues overcoming Medicare bar)
- McNary v. Haitian Refugee Ctr., Inc., 498 U.S. 479 (1991) (constitutional claims may be restrained by statutory bar in some contexts)