Adventist Health System/SunBelt, Inc., et al. v. United States Department of Health and Human Services, et al.; United Network for Organ Sharing
No. 21-1589
United States Court of Appeals For the Eighth Circuit
November 8, 2021
Appeal from United States District Court for the Southern District of Iowa - Eastern
Submitted: June 17, 2021
Before LOKEN, KELLY, and ERICKSON, Circuit Judges.
The Organ Procurement and Transplantation Network (“OPTN“) is a private, non-profit entity established at the direction of Congress to perform essential functions in implementing the National Organ Transplant Act of 1984,
In December 2020, days before the new policy‘s scheduled implementation, plaintiffs -- adversely affected hospital systems and a patient on the kidney waitlist (collectively, the “Hospitals“) -- sued to enjoin the new policy as unlawful under the Transplant Act and the Administrative Procedure Act,
I. Background
Amending the Public Health Service Act, the Transplant Act codified a major federal public-private effort to reduce chronic shortages of donated organs urgently needed by patients awaiting transplants. The Act authorizes the Secretary of the Department of Health and Human Services (HHS) to provide grants and other payments to a national network of non-profit organizations tasked with acquiring, preserving, and transporting donated organs, and allocating each donated organ to the highest priority patient on the transplant waiting list for that organ. This is an incredibly complex effort, even for a single organ such as kidneys. And the scope of the Transplant Act is far broader -- the term “organ” includes “the human kidney, liver, heart, lung, pancreas, and any other human organ (other than corneas and eyes) specified by the Secretary by regulation,” including bone marrow.
In 1998, the Secretary promulgated regulations governing OPTN‘s operations, known as the “Final Rule.” See
At the local level, the Transplant Act authorizes the Secretary to certify qualified OPOs to receive federal grants.
B. The Transplant Act explicitly requires a qualified OPO to have a “defined service area” (DSA) and “effective agreements” with a substantial majority of the health care entities in its service area that “have facilities for organ donation.”
The Transplant Act initially acknowledged that existing DSA relationships would be the basis for allocating donated organs -- it provided that the OPTN shall “assist [OPOs] in the distribution of organs which cannot be placed within the service areas of the organizations.” Pub. L. 98-507, Tit. III, § 372(b)(2)(C), 98 Stat. 2344 (1984). Concerns about potential inequities inherent in a DSA-Region allocation model quickly surfaced. Congress responded by striking the italicized portion of this provision in 1988. Pub. L. 100-607, Tit. IV, § 403(a)(2), 102 Stat. 3115. The Senate Committee on Labor and Human Resources Report explained:
The bill would also clarify and refine two aspects of the existing responsibilities of the OPTN. The OPTN is currently required to assist OPOs in the distribution of organs “which cannot be placed within the service areas of the organizations.” This phrase is deleted, so as to remove any statutory bias respecting the important question of criteria for the proper distribution of organs among patients. . . . Patient welfare must be the paramount consideration. The Committee does not wish the statute to be read as establishing a preference for, or against, distribution within the service area of the OPO.
S. Rep. No. 100-310 at p.14, reprinted in 1988-6 U.S.C.C.A.N. 4236, 4241-42 (emphasis added). In 1990, Congress further clarified its nationwide focus on patient welfare and fairness by amending this provision to the language presently found in
Despite these warning signals from Congress and HHS, the OPTN board of directors stayed with an allocation model based on DSA and Region preferences. Cries for reform grew louder. ACOT and the American Medical Association argued that DSAs’ priority role in distributing organs resulted in geographic inequities and might violate the Final Rule‘s prohibition against prioritizing candidate location. OPTN data showed geographic disparities in transplant candidate wait times, with median times for kidney transplants varying widely across DSAs. Research indicated that differences in DSA composition and performance were the largest contributor to disparities in kidney allocation. OPTN further concluded that DSAs were “not a good proxy for geographic distance between donors and transplant candidates because [their] disparate sizes, shapes, and populations . . . are not rationally determined in a manner that can be consistently applied equally for all candidates,” and that Regions were ill-suited for organ distribution because they were designed for other purposes such as collecting public comments and allotting seats on the OPTN board.
Critics like ACOT and OPTN called for eliminating DSAs from organ allocation policy because they are not a “good proxy” for distance between donor and patient and lead to “geographic disparities in patient access to transplantation.” Two examples illustrate these disparities. The district court noted, quoting the Acting Secretary‘s response to the Hospitals’ critical comment, that under the DSA model a kidney donated in Minneapolis could be offered to a candidate in Bismarck (383 miles away) before a candidate in Des Moines (234 miles). The Eleventh Circuit noted an even more graphic example in Callahan v. U.S. Dep‘t of Health & Human Servs. Through Alex Azar II, 939 F.3d 1251, 1255 n.3 (11th Cir. 2019): “Under the current, DSA-based policy, if a liver becomes available in Charleston, South Carolina, it would be offered to a moderately ill patient in Memphis, Tennessee (600 miles away) before a critically ill patient in Atlanta, Georgia (266 miles away) -- and indeed, would have to be flown directly over Atlanta en route to Memphis.”
C. Despite this widespread criticism, the DSA-Region model persisted, supported by strong defenders among the OPTN membership such as the Hospitals. The current policy conflict and accompanying litigation began in May 2018 when the Health Resources and Services Administration (“HRSA“), the HHS agency that oversees the OPTN, received a well-researched critical comment on behalf of liver transplant candidates in New York. These candidates contended that the DSA-Region allocation model violates the Final Rule to their disadvantage by arbitrarily prioritizing geography at the expense of medical and other appropriate criteria enumerated in
In August 2018, as directed by UNOS, the OPTN Kidney and Pancreas Transplantation Committees formed a Kidney-Pancreas Workgroup to develop alternatives to the use of DSAs and Regions. In December, the Workgroup released for 60-day public comment a concept paper outlining five new policy variations of a “Fixed Circle Policy.” See
On December 1, 2020, the Hospitals submitted a critical comment to HRSA objecting to implementation of the Fixed Circle Policy. They argued an immediate change was ill-advised given the impact of COVID-19 on the transplant community. Procedurally, they argued Fixed Circle was a “significant” proposed policy and therefore HHS must refer it to ACOT and publish it in the Federal Register for public comment. See
On December 14, just before a hearing on the Hospitals’ motion, HRSA directed OPTN to stay implementation of the Fixed Circle Policy to allow the agency time to consider the Hospitals’ critical comment. HRSA ordered OPTN to provide its views on the critical comment. After OPTN explained why it concluded the Hospitals’ claims were unfounded, HHS rejected the critical comment and declined to rescind OPTN‘s Fixed Circle Policy. See
After expedited briefing, the district court denied the Hospitals’ motion for preliminary injunctive relief in a thorough, well-reasoned opinion. The court concluded that the Dataphase preliminary injunction factors weighed decisively against an injunction. The Hospitals appeal the denial of a preliminary injunction, which we have jurisdiction to review. See
II. Analysis
A party seeking a preliminary injunction bears the burden of satisfying
“The threshold inquiry [for preliminary injunctive relief] is whether the movant has shown the threat of irreparable injury.” Gelco Corp. v. Coniston Partners, 811 F.2d 414, 418 (8th Cir. 1987). Thus, in many cases, irreparable injury is the first Dataphase factor that is addressed. But here, the district court concluded, and we agree, that the Hospitals have shown injury in fact, but not irreparable injury warranting the preliminary injunctive relief they seek. Having shown at least some monetary injury, the Hospitals argue that HHS did not follow mandatory regulatory procedures, and therefore the district court erred in denying a preliminary injunction because the APA requires vacatur of an agency action taken “without observance of procedure required by law.”
A. Likelihood of Success on the Merits. The Hospitals argue they are likely to succeed on the merits of two claims -- that HHS violated the APA when it failed to comply with the procedural requirements of the Final Rule in
1. The APA Procedural Claim. Section 121.4(b) of the Final Rule prescribes the procedures the OPTN Board of Directors “shall” follow in developing policies within its statutory mission. Subsection 121.4(b)(1) requires the Board to provide its members and “other interested parties” an opportunity to comment on all proposed policies and requires the Board to take those comments into account in developing and adopting policies. Subsection 121.4(b)(2) provides that the OPTN Board will refer to the Secretary, at least 60 days prior to implementation, two types of proposed policies: those the Board “recommends to be enforceable under § 121.10,” and “proposed policies on such other matters as the Secretary directs.” At issue here is the following sentence in this lengthy subsection:
The Secretary will refer significant proposed policies to the [ACOT] established under
§ 121.12 and publish them in the FEDERAL REGISTER for public comment.
The Hospitals argue the Secretary‘s failure to follow those procedures before the kidney Fixed Circle Policy was implemented renders this an agency action taken “without observance of procedure required by law” that must be vacated under
More background is relevant to this issue. In April 2019, a group of hospitals and individual patients that included some of the plaintiff hospitals in this case, represented by mostly the same attorneys, commenced an action in the Northern District of Georgia seeking to enjoin implementation of OPTN‘s new liver allocation policy.
[T]he significant-proposed-policies sentence‘s [ACOT] referral and publication requirements are triggered only in the two circumstances specified in § 121.4(b)(2)‘s opening clauses: (1) when the policy at issue is one that the OPTN‘s Board “recommends to be enforceable . . . or (2) when the policy at issue is one that relates to “such other matters as the Secretary directs . . . .”
Id. at 1258-59. As it was “undisputed that neither of those two conditions obtained,” the Court upheld the district court‘s ruling that plaintiffs failed to demonstrate a substantial likelihood of success on the merits of this APA procedural claim. Id. at 1258, 1265.4
In this case, the Hospitals, no doubt correctly anticipating we would agree with the Eleventh Circuit‘s careful textual analysis of
Subsection 121.8(a) enumerates criteria to guide OPTN‘s Board of Directors in developing allocation policies. For example, it specifies that policies “[s]hall be designed to avoid wasting organs, to avoid futile transplants, to promote patient access to transplantation, and to promote the efficient management of organ placement.”
The OPTN‘s transmittal to the Secretary of proposed allocation policies and performance indicators shall include such supporting material, including the results of model-based computer simulations, as the Secretary may require to assess the likely effects of policy changes and as are necessary to demonstrate that the proposed policies comply with the performance indicators and transition procedures of paragraphs (c) and (d) of this section.
The Hospitals argue that, because
policy has ever gone through. If HHS intended in the Final Rule that all proposed organ allocation policies be subject to
The Hospitals argue the district court‘s interpretation of the Final Rule creates a “no-review vacuum” for proposed organ allocation policies. But as the district court and the decision in Callahan both noted, the Secretary has discretion under
The district court did not err in concluding that the Hospitals failed to show that their procedural APA claim is likely to succeed on the merits.
2. Substantive Challenges to the Fixed Circle Policy. The Hospitals argue that defendants acted arbitrarily and capriciously throughout the Fixed Circle Policy‘s development process, violating the Transplant Act and
The Hospitals attack the OPTN and HHS procedures and analysis as well as the merits of the Fixed Circle Policy on multiple grounds. On appeal, they emphasize their contention that the agency action was arbitrary and capricious because the policy development process began with its conclusion “that the use of DSAs and Regions in all . . . organ allocation policies has not been and cannot be justified under the OPTN final rule,” quoting the HRSA Administrator‘s July 31, 2018 letter to OPTN. Thus, the Hospitals argue, the long-followed DSAs and Regions option “was taken off the table from the outset, Defendants never even considered it.” As the Brief for Government Appellees did not directly respond to this argument -- indeed the APA was not even cited in their Brief -- we think the argument requires specific attention.
It is essential to recall the context for the July 2018 letter. In December 2017, the OPTN Board published a new liver allocation policy recognizing that “[r]egional and donation service area (DSA) boundaries determine current liver distribution” but adding a “150-nautical mile radius proximity circle around the donor hospital.” As recounted above, New York objectors submitted a May 30, 2018 critical comment complaining that Congress, the Final Rule, ACOT, and the OPTN itself had been arguing for decades that OPO regions and DSAs are arbitrary geographic boundaries that violate the Final Rule. The comment explained why the new liver policy did not comply with the law and asked that the Secretary, acting under
Consistent with
The Hospitals further argue that, even if Defendants were not arbitrary and capricious in beginning from the premise that the DSA model must be replaced, they were arbitrary and capricious in ignoring the fact that the SRTR modeling data on which they relied then established that the Fixed Circle Policy produced a worse result. To avoid this bad news, the Hospitals argue, Defendants “fudged” their analysis of SRTR data to fit their predetermined result, then ignored the fact that even this
Statistical modeling was conducted and analyzed by SRTR. The Kidney Committee issued extensive and detailed concept papers to the transplant community and to the public. Public comments were received and taken under consideration. And the OPTN received thorough briefing papers explaining the scientific basis for the proposed policy revision. The disagreements advanced by [the Hospitals] were adequately addressed by SRTR‘s data modeling and OPTN‘s briefing papers, upon which the Acting Secretary relied.
Based on the OPTN‘s expertise in the area of transplant organ allocation, HHS reasonably concluded the Fixed Circle Policy will not result in significantly fewer kidney transplants.
Id. at 30 (citations omitted). After careful review, for the reasons stated by the district court, we agree that the Hospitals failed to demonstrate they are likely to succeed on the merits of their claim that adoption of the Fixed Circle Policy was arbitrary and capricious agency action.
B. Irreparable Harm. At the initial hearing on the Hospitals’ motion for a temporary restraining order, the district court observed that the Hospitals’ long delay in bringing suit was a “tough hurdle” and it expected them “to pay a great deal of attention to that particular issue.” True to its word, the district court denied the Hospitals a preliminary injunction based in part on the fact that their delay in bringing suit until one year after Fixed Circle‘s adoption, and fewer than five days before its scheduled implementation, undercut their allegations of irreparable harm. Without question, “[a] long delay by plaintiff after learning of the threatened harm . . . may be taken as an indication that the harm would not be serious enough to justify a preliminary injunction.” Wright & Miller, 11A Fed. Prac. & Proc., § 2948.1 & n.13 (3d ed. 2013); see Hubbard Feeds, Inc. v. Animal Feed Supplement, Inc., 182 F.3d 598, 603 (8th Cir. 1999). “[A] party requesting a preliminary injunction must generally show reasonable diligence.” Benisek v. Lamone, 138 S. Ct. 1942, 1944 (2018).
On appeal, the Hospitals argue, without direct supporting authority, that they sought to enjoin the Fixed Circle Policy before it took effect, and “[d]elay bears on irreparable harm only where the plaintiff delays despite suffering the harm.” we reject this implausible assertion of law. Moreover, at least in this case, it would be outweighed by the third Dataphase factor, “that the balance of equities tips in [the Hospitals‘] favor.” Wise, 943 F.3d at 1165, quoting Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). The record establishes that, in the year after the Fixed Circle Policy was adopted but before implementation, OPTN engaged in extensive outreach efforts to prepare the transplant community for the coming changes, working with OPOs and transplant centers to run simulated previews of the Policy. Knowing of
The Hospitals further argue that claims of delay are overblown because OPTN only announced the Fixed Circle Policy implementation date in October 2020, and they promptly filed a critical comment in early December. This contention is factually unpersuasive. OPTN communicated its intention to eliminate DSAs and Regions from its kidney allocation policy in August 2018. Plaintiffs in Callahan commenced their action to enjoin the new liver allocation policy in April 2019. The Hospitals submitted adverse public comments to the proposed kidney policy later in 2019. OPTN adopted the Fixed Circle Policy in December 2019 and consistently maintained it would be implemented by the end of 2020, notwithstanding COVID-19‘s impact on healthcare.
Highly relevant in our view was the Hospitals’ delay in submitting a critical comment until a mere two weeks before the Policy‘s implementation. The Transplant Act and Final Rule require OPTN and HHS to solicit and respond to public comments to optimize final adopted policies. See
In these circumstances, the district court did not abuse its discretion in concluding that the Hospitals’ one-year delay refuted their allegations of irreparable harm. See Novus Franchising, Inc. v. Dawson, 725 F.3d 885, 889, 894 (8th Cir. 2013) (seventeen-month delay); Tough Traveler, Ltd. v. Outbound Prods., 60 F.3d 964, 968 (2d Cir. 1995) (nine months), cert. denied, 527 U.S. 1036 (1999); cf. Hubbard Feeds, 182 F.3d at 602 (nine years). The failure to show irreparable harm is an “independently sufficient basis upon which to deny a preliminary injunction.” Sessler v. City of Davenport, 990 F.3d 1150, 1156 (8th Cir. 2021), quoting Watkins Inc. v. Lewis, 346 F.3d 841, 844 (8th Cir. 2003).
C. Balance of Equities and Public Interest. As we explained in Part II.B., the Hospitals’ unreasonable delay in submitting an adverse public comment and filing this lawsuit means that the balance of equities favors the denial of a preliminary injunction, as in Benisek, 138 S. Ct. at 1944. As for the public interest, the Fixed Circle Policy has been in effect since mid-March of this year, so forcing the transplant community to revert to the DSA model would disrupt, not preserve, the status quo of a program intended by Congress to increase the number of kidneys donated for transplant and to equitably allocate donated kidneys to the highest priority patients on a nationwide basis. We agree with the district court that the public interest weighs in favor of denying the requested preliminary injunction because “allowing the Fixed Circle Policy to proceed as-planned maintains the status quo for every other interested party that has prepared for it.” Order at p.44; see Benisek, 138 S. Ct. at 1945.
III. Conclusion
The district court‘s March 12, 2021 Order denying the Hospitals’ Motion for