Center for Medicare Advocacy Inc v. Department of Health & Human Svcs

Filing 47

Ruling and ORDER denying 32 Motion for Summary Judgment; granting 24 Motion for Summary Judgment. Signed by Judge Mark R. Kravitz on 5/26/2011. (Falcone, K.)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT

THE CENTER FOR MEDICARE ADVOCACY,
INC.,
Plaintiff,
v.
U.S. DEPARTMENT OF HEALTH AND
HUMAN SERVICES,
Defendant.

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No. 3:10cv645 (MRK)

RULING AND ORDER
Plaintiff, the Center for Medicare Advocacy, Inc., filed this action under the Freedom of
Information Act ("FOIA"), 5 U.S.C. § 552, to obtain records related to the so-called
"improvement standard" that is allegedly used by Defendant Department of Health and Human
Services ("HHS"), and by insurers with which HHS contracts, to deny or terminate Medicare
coverage. Pending before the Court are Defendant's Motion for Summary Judgment [doc. # 24]
and Plaintiff's Cross-Motion for Summary Judgment [doc. # 32]. On May 17, 2011, the Court
heard oral argument on the parties' cross-motions. For the reasons that follow, the Court
GRANTS Defendant's Motion for Summary Judgment and DENIES Plaintiff's Cross-Motion for
Summary Judgment.
I.
The relevant facts in this case are undisputed. The Center for Medicare Advocacy ("the
Center") is a non-profit advocacy group that is currently litigating a case in the District of
Vermont, Jimmo v. Sebelius, No. 5:11cv16-cr (filed Jan. 18, 2011), regarding the legality of the
so-called "improvement standard" for determining eligibility for Medicare coverage. According

to the Center's own literature, the improvement standard requires Medicare beneficiaries to show
that treatments will improve their medical conditions – as opposed to simply maintaining them –
in order to qualify for coverage. Also according to the Center's own literature, the improvement
standard has the effect of denying Medicare coverage to people with chronic illnesses.
This case revolves around the Center's attempts to obtain documentation about the socalled improvement standard through FOIA requests. The Center sent the FOIA request at issue
in this case to the Centers for Medicare and Medicaid Services ("CMS") – the agency within
HHS that administers Medicare – on November 17, 2009. The Center requested documents
pertaining to the training that CMS provides to its employees regarding the improvement
standard; the training that CMS contractors under Medicare Parts A and B provide to their
employees regarding the improvement standard; and the training that Medicare Advantage Plans
which contract with CMS under Medicare's Part C provide to their employees regarding the
improvement standard.
Medicare benefits are divided into four "parts" under the governing statute – Part A, see
42 U.S.C. §§ 1395c to 1395i-5; Part B, see id. §§ 1395j to 1395w-4; Part C, see id. §§ 1395w-21
to 1395w-29; and Part D, see id. §§ 1395w-101 to 1395w-152. The Eleventh Circuit recently
summarized the distinctions among the four parts:
Part A provides hospital, skilled nursing, home health, and hospice care benefits.
Part B provides physician and other outpatient services. Part D provides
outpatient prescription drug benefits. The traditional Medicare structure allows
beneficiaries access to Parts A, B, and D as separate benefits. Part C provides
beneficiaries with an option to instead obtain the benefits available under Parts A
and B as well as some additional benefits through a health insurance plan, known
as a "Medicare Advantage Plan," administered by a private company.
Dial v. Healthspring of Ala., Inc., 541 F.3d 1044, 1046 (11th Cir. 2008) (citing Matthews v.
Leavitt, 452 F.3d 145, 147 n.1 (2d Cir. 2006)). CMS uses contractors to process and pay

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Medicare Part A and Part B claims on its behalf. See Def.'s Supplemental Local R. 56(a)1
Statement [doc. # 38-1] ¶ 30; 42 U.S.C. §§ 1395h, 1395u. The insurers with which CMS
contracts under Medicare Part C provide qualified individuals with almost all of the benefits that
would be available under Parts A and B "in exchange for monthly payments . . . from the
government." Matthews, 452 F.3d at 147 n.1 (citations omitted); see 42 U.S.C. § 1395w-23.
During late February 2010 and again in late May 2010, the Center for Medicare ("CM") –
which is the successor to CMS following a reorganization of certain components of HHS –
provided the HHS FOIA Group with records responsive to the Center's FOIA request. All
responsive records in the program area, totaling 140 pages, were fully released to the Center. CM
also informed the FOIA Group that it had forwarded the requests to two other HHS components.
Those components ultimately informed the FOIA Group that they did not possess any responsive
records. After the Center's attorney voiced concerns that the volume of documents provided was
not commensurate with the historical importance of the subject matter of the request, the CMS
FOIA office voluntarily initiated an additional supplemental search, requesting that CMS's
Medicare Administrative Contractors and legacy contractors, which pay both Part A and Part B
Medicare claims, search for responsive records. As a result of that request, five of those
contractors provided records, many of which were excerpts from publicly available CMS
manuals and other known resources. Those records were released to the Center in two responses
in October and November 2010, totaling 1,892 pages of hard copy records and a CD containing
71 electronic files. Other contractors responded stating that they did not possess responsive
records, or that they relied on CMS's publicly available manuals and other materials. CMS's
supplemental search was directed only to, and limited to the records of, contractors for Medicare

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Parts A and B. It did not extend to the records of Medicare Part C contractors – that is, the
Medicare Advantage Plans.
II.
Since the parties agree that the materials submitted to the Court "show[] that there is no
genuine issue as to any material fact," one of the cross-movants must be entitled to judgment as a
matter of law. Fed. R. Civ. P. 56(a). In this case, the legal question is whether CMS's search of
its records in response to the Center's FOIA request was adequate. The Center argues that CMS's
search of its records in response to the Center's request for records of training provided to
employees of the Medicare Advantage Plans – the Medicare Part C contractors – was inadequate
because CMS did not seek out records held by the Medicare Part C contractors themselves. HHS
argues that "the legal authority governing [HHS's] FOIA response delineates Part A and Part B
contractors, but not Medicare Advantage/Part C plans, as part of HHS for FOIA purposes."
Mem. in Opp'n to Pl.'s Cross-Mot. for Summary J. [doc. # 37] at 4. Therefore, HHS argues, CMS
was not required to seek out the Part C contractors' records in response to the Center's FOIA
request. The Court agrees with HHS that FOIA does not obligate the agency to seek out the
records of sponsors of Medicare Advantage Plans under Medicare Part C.
A.
Under FOIA, an agency is required only to conduct a search of "agency records." FOIA
defines "agency" as an "authority of the Government of the United States," 5 U.S.C. § 551(1),
including "any executive department, military department, Government corporation, Government
controlled corporation, or other establishment in the executive branch of the Government . . ., or
any independent regulatory agency." Id. § 552(f)(1). Information constitutes a "record" subject to
disclosure under FOIA only if it is "maintained by an agency in [some] format, including an

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electronic format," or "maintained for an agency by an entity under Government contract, for the
purposes of records management." Id. § 552(f)(2). The Supreme Court has held that "[f]or
requested materials to qualify as 'agency records,' two requirements must be satisfied: (i) an
agency must either create or obtain the requested materials, and (ii) the agency must be in control
of the requested materials at the time the FOIA request is made." Grand Cent. P'ship., Inc. v.
Cuomo, 166 F.3d 473, 479 (2d Cir. 1999) (quoting United States DOJ v. Tax Analysts, 492 U.S.
136, 145 (1989)) (quotation marks omitted). HHS's own rule defining "agency" for FOIA
purposes states that "[a] private organization is not an agency even if it is performing work under
contract with the Government." 45 C.F.R. § 5.5. The definition specifies that "contractor records
are not subject to FOIA unless they are in the possession or under the control of HHS or its
agents." Id. Since the Supreme Court has stated that materials only qualify as "agency records" if
they both were obtained or created by the agency and are under the control of the agency, the
Court interprets this last provision of HHS's rule to emphasize that even when contractor records
were originally created or obtained by HHS, those records are not "agency records" for FOIA
purposes unless they remain in the possession or under the control of HHS.
According to a 1987 regulation, Medicare Part A and Medicare Part B contractors are
treated as part of HHS for FOIA purposes. See 45 C.F.R. § 5.5. Specifically, HHS is defined as
"includ[ing] Medicare health insurance carriers and intermediaries to the extent they are
performing functions under agreements entered into under sections 1816 and 1842 of the Social
Security Act, 42 U.S.C. 1395h, 1395u." Those two sections provide for the administration of
Medicare Parts A and B, respectively. See 42 U.S.C. §§ 1395h, 1395u. There is no regulation
that defines Medicare Part C contractors as part of HHS for FOIA purposes.

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B.
At oral argument, the Center's counsel confirmed that the Center wants to obtain the
training materials with regard to the improvement standard used by each private insurer under
Medicare Part C.
It is clear that the Medicare Advantage Plan records sought by the Center were not
created or obtained by HHS and are not in the control of HHS. Under Supreme Court precedent,
an agency is "in control" of the records "if the materials have come into the agency's possession
in the legitimate conduct of its official duties." Tax Analysts, 492 U.S. at 145. Moreover, with
regard to the "created or obtained" prong of the standard, "FOIA applies to records which have in
fact been obtained" or created. Forsham v. Harris, 445 U.S. 169, 186 (1980) (emphasis in
original). The Center does not allege that the information it seeks from the Medicare Part C
contractors came into HHS's possession at any point – let alone "in the legitimate conduct of
[HHS's] official duties." Tax Analysts, 492 U.S. at 145.
The D.C. Circuit has held that it is possible for an agency to constructively obtain and
control records for FOIA purposes. See Burka v. United States HHS, 87 F.3d 508, 515 (D.C. Cir.
1996). That rule has not been adopted by the Second Circuit, and it is arguably in tension with
the Supreme Court's statements in Tax Analysts and Forsham. See Bloomberg L.P. v. Bd. of
Governors of the Fed. Reserve Sys., 649 F. Supp. 2d 262, 275 (S.D.N.Y. 2009) ("The Supreme
Court's teachings in Tax Analysts, Forsham, and Kissinger [v. Reporters Commission for
Freedom of the Press, 445 U.S. 136 (1980),] certainly do not compel adoption of the
constructive obtainment and control theory . . . ."). Although the Center did not cite Burka or
invoke the D.C. Circuit's constructive obtainment/control standard, the Court notes that even
under that standard, the documents held by the Part C contractors would not be deemed "agency

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records," since there is no allegation that the agency exercised "extensive supervision and
control" over the production of the records, Burka, 87 F.3d at 515 (discussing constructive
obtainment); and the Center has offered no evidence that the Part C contractors intended to
relinquish control over the records to HHS, that HHS had the ability to use and dispose of the
records as it saw fit, that HHS personnel read or relied on the records, or that the records were in
any way integrated into HHS's record system or files. See id. (describing the D.C. Circuit's fourfactor control test).
Indeed, the Center does not argue that CMS or any other division of HHS created or
obtained those records, or that any division of HHS is in control of the records. Instead, the
Center suggests that to the extent that the Medicare Advantage Plans administer Medicare
benefits under Medicare Part C, the Medicare Advantage Plans are part of HHS for FOIA
purposes, such that any document created or obtained by a Part C private insurer and controlled
by a Part C private insurer is by definition created or obtained by HHS and controlled by HHS.
See Mem. in Supp. of Pl.'s Cross-Mot. for Summary J. [doc. # 35] at 2 ("Plaintiff's dispute is
with the parameters that defendant set for the search. . . . It is plaintiff's position that the [Part C]
plans are sufficiently entwined with HHS within the meaning and purpose of FOIA that the
relevant documents must be searched and produced.").
The Center can point to no language in FOIA itself that supports its contention that CMS
was required to seek out records from the Part C private insurers. Rather, the Center relies on
HHS's regulation defining HHS to include Part A and Part B contractors for purposes of FOIA.
See 45 C.F.R. § 5.5. Specifically, the Center argues that Part A, Part B, and Part C contractors
are all "state actors" for the purposes of Medicare, that any of those contractors' training
materials with regard to the improvement standard are thus "agency records," and that "[t]he

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Court should not accord any credit to HHS'[s] failure to update its regulation [to include Part C
plans]." Mem. in Supp. of Pl.'s Cross-Mot. for Summary J. [doc. # 35] at 7-8. For several
reasons, the Court finds that position unpersuasive.
First, because agency records include only records that both were created or obtained by
the agency and are under the agency's control, it is not immediately clear that FOIA itself would
obligate HHS to search for records held by any health insurance carriers and intermediaries that
contract with HHS, whether those entities were contractors under Medicare Part A, Medicare
Part B, or Medicare Part C. The 1987 regulation that defines HHS to include Part A and Part B
contractors for FOIA purposes, 45 C.F.R. § 5.5, represents HHS's interpretation and application
of 5 U.S.C. § 552(f)(1), the FOIA definition of "agency." Nothing indicates that the regulation
codified a general principle that any private entity that contracts with an agency to administer the
agency's programs is part of the agency for the purposes of FOIA. To the contrary, the regulation
states:
Agency means [the FOIA definition of agency at 5 U.S.C. § 552(f)(1)].
Thus, HHS is an agency. A private organization is not an agency even if it is
performing work under contract with the Government or is receiving Federal
financial assistance. Grantee and contractor records are not subject to FOIA
unless they are in the possession or under the control of HHS or its agents, such
as Medicare health insurance carriers or intermediaries. . . .
Department or HHS means Department of Health and Human Services. It
includes Medicare health insurance carriers and intermediaries to the extent they
are performing functions under agreements entered into under [Medicare Parts A
and B].
45 C.F.R. § 5.5 (emphasis added). Indeed, the Center admits that the regulation defines HHS to
include Medicare Part A and Part B contractors, and does not define HHS to include Part C
contractors. See Mem. in Supp. of Pl.'s Cross-Mot. for Summary J. [doc. # 35] at 7-8 (arguing
that the Court "should not accord any credit" to the agency' "failure to update its regulation"). Of

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course, HHS is free to interpret the FOIA's definition of "agency" to mean that Part C plans are
included within HHS for FOIA purposes. But HHS has not done so.1
Second, the Center relies heavily on the fact that the regulation that defines HHS to
include Part A and Part B contractors for FOIA purposes was enacted before Medicare Part C
was created. In fact, the Center argues that the only reason that the regulation does not include
Part C as well is because it was promulgated in 1987, and Part C was not enacted until 1997.
However, Part C has now existed for over thirteen years. HHS changes its regulations frequently,
and the Court sees no reason why the agency would not have amended the 1987 regulation if it
believed that Part C contractors should be treated like Part A and Part B contractors for FOIA
purposes. Moreover, as HHS notes, there is a separate, detailed set of regulations that sets forth
requirements regarding information that Part C contractors must disclose to insured parties and
CMS. Compare 42 C.F.R. § 401.101(a) (stating that CMS's FOIA rules apply to "information
obtained by Medicare intermediaries or carriers in the course of carrying out agreements under
[Medicare Part A and Part B]," as well as to information obtained by CMS itself), with 42 C.F.R.
§ 504(b), (d)-(f) (requiring each Part C contractor to have the capacity to communicate with
CMS electronically, and setting forth rules for Medicare Part C contractors' maintenance of
records, provision of access to records, and disclosure of information).
The most logical explanation for the lack of any statute or regulation defining Part C
plans as part of HHS for FOIA purposes is that neither Congress nor the agency believes that
Part C plans are a part of HHS for FOIA purposes. As the Center's counsel acknowledged at oral
argument, Medicare Part C functions differently from Medicare Parts A and B. Whether or not

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At oral argument, the Center's counsel admitted he had not thought of the possibility of
attempting to persuade HHS to amend its FOIA regulations.
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the exclusion of Part C contractors is the best policy, there is no basis for the Center's claim that
distinguishing Part C contractors from Part A and Part B contractors for FOIA purposes is
"irrational." Mem. in Supp. of Pl.'s Cross-Mot. for Summary J. [doc. # 35] at 7.
Third, the Center's argument is based on the unsupported and legally confused premise
that Part A and Part B contractors are incorporated into HHS for FOIA purposes under 45 C.F.R.
§ 5.5 because they are "state actors." See id. at 8. The state action doctrine developed in the
context of constitutional law, in particular in the Fourteenth Amendment context. See, e.g.,
Erwin Chemerinsky, Rethinking State Action, 80 Nw. U.L. Rev. 503, 507-09 (1985) (discussing
the origins of the doctrine in the principle that "the Constitution offers no shield against private
conduct" (quotation marks and citation omitted)). Indeed, the "state action" cases that the Center
relies on involved alleged violations of constitutional rights, including rights under the Takings
Clause of the Fifth and Fourteenth Amendments and the Commerce Clause of Article I, see
Tancredi v. Metro. Life Ins. Co., 316 F.3d 308, 311 (2d Cir. 2003); and procedural due process
rights, see, e.g., Kraemer v. Heckler, 737 F.2d 214, 221-22 (2d Cir. 1984); Catanzano v.
Dowling, 60 F.3d 113, 117 (2d Cir. 1995); Grijalva v. Shalala, 946 F. Supp. 747, 750-51 (D.
Ariz. 1996), aff'd 156 F.3d 1115 (9th Cir. 1998), vacated and remanded 526 U.S. 1096 (1999).
The state action doctrine is applicable, for example, in cases brought pursuant to 42 U.S.C.
§ 1983. See Georgia v. McCollum, 505 U.S. 42, 65 (1992) (deeming "the [§ 1983] 'under color of
state law' requirement . . . identical to the Fourteenth Amendment's state action requirement"). At
oral argument, the Center's counsel admitted that he knew of no other effort to use state action
analysis in the FOIA context, and he could cite no case standing for the proposition that FOIA
requires an agency to gather records from any contractor that would be deemed a "state actor" for

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constitutional or § 1983 purposes.2 The Court rejects the Center's attempt to graft the Fourteenth
Amendment's "state action" requirement onto the standard for determining whether a document
is an "agency record" under FOIA.
It also should be noted that the Center could point to only one case suggesting that
Medicare Part C contractors should be regarded as state actors in any context. See Grijalva v.
Shalala, 946 F. Supp. 747. That case did not actually involve contractors under Medicare Part C,
but rather dealt with denials of services by Health Maintenance Organizations (HMOs) that
dispensed coverage of medical care under a different section of the Medicare statute, 42 U.S.C.
§ 1395mm. See id. at 750. According to the Center, those HMOs were the "predecessors to Part
C plans." Mem. in Supp. of Pl.'s Cross-Mot. for Summary J. [doc. # 35] at 10. In addition,
although the Grijalva district court found that the HMOs were state actors and thus bound by the
Due Process Clause, see Grijalva, 946 F. Supp. at 754, and the district court's decision was
affirmed by the Ninth Circuit, see 152 F.3d 1115, the Ninth Circuit's affirmance was vacated and
remanded in light of American Manufacturers Mutual Insurance Co. v. Sullivan, 526 U.S. 40
(1999), which held that a workers' compensation insurer's decision to withhold payment for
disputed medical expenses was not "state action" under the Fourteenth Amendment. Id. at 57-58;
see Shalala v. Grijelva, 526 U.S. 1096 (1999). The parties in Grijalva settled before the district
court had an opportunity to reconsider the case in light of Sullivan. See Order Approving
Settlement, Grijalva v. Shalala, No. 4:93-cv-00711-ACM (D. Ariz. Dec. 5, 2000), ECF No. 200.

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In its initial Memorandum in Support of its Cross-Motion for Summary Judgment, the Center
also made the argument that "Part C plans are 'Government controlled corporations' for purposes
of FOIA." Mem. in Supp. of Pl.'s Cross-Mot. for Summary J. [doc. # 35] at 12; see 5 U.S.C.
§ 552(f) (defining "agency" to include any "Government controlled corporation"). At oral
argument, however, the Center's counsel indicated that the Center had abandoned that argument.
Regardless, even if the sponsors of Part C plans qualified as "Government controlled
corporations" – which the Court does not concede – that would only mean that those insurers are
subject to FOIA, not necessarily that HHS is required to seek out records from Part C plans.
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Regardless, even if the Court were to find the Grijalva district court's analysis persuasive, that
analysis is not applicable to the facts of this case.
III.
For foregoing reasons, the Court concludes that the parameters that CMS set for the
searches it conducted in response to the Center's request for records did not violate FOIA. CMS
properly only searched for records that were both obtained or created by HHS and under the
control of that agency, according to the FOIA definition of "agency" and HHS's FOIA
regulations. The Court therefore GRANTS HHS's Motion for Summary Judgment [doc. # 24]
and DENIES the Center's Cross-Motion for Summary Judgment [doc. # 32]. The Clerk is
directed to enter judgment for the Defendant and to close this file.

IT IS SO ORDERED.

/s/

Mark R. Kravitz______
United States District Judge

Dated at New Haven, Connecticut: May 26, 2011.

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