STRAND ANALYTICAL LABORATORIES, LLC v. SEBELIUS

Filing 69

ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT. The Court GRANTS summary judgment in favor of Defendant Sylvia Mathews Burwell, Secretary of the U.S. Department of Health & Human Services on all of Plaintiff Strand Analytical Laboratories, LLC's, c laims against her; and DENIES Plaintiff Strand Analytical Laboratories, LLC's, cross-motion for summary judgment. The Court will enter judgment accordingly. SEE ORDER. Signed by Judge Larry J. McKinney on 7/30/2015. Order applies to cases 1:13-cv-00645-LJM-DKL, 1:14-cv-00015-LJM-DKL, and 1:14-cv-00427-LJM-DKL. (BGT)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION

STRAND ANALYTICAL LABORATORIES,
LLC,
Plaintiff,
vs.
SYLVIA MATHEWS BURWELL,
Secretary United States Department of
Health & Human Services,
Defendant.

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No. 1:13-cv-00645-LJM-DKL
No. 1:14-cv-00015-LJM-DKL
No. 1:14-cv-00427-LJM-DKL

ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT
In these three cases, Plaintiff Strand Analytical Laboratories, Inc. (“Strand”), seeks
judicial review of the decision by Defendant Sylvia Mathews Burwell, Secretary of the
United States Department of Health & Human Services (the “Secretary”), to deny
Medicare coverage for Strand’s DNA Specimen Provenance Assay (“DSPA”) test. The
parties agree on the factual record in this case and both have moved for summary
judgment in their favor. On April 22, 2015, the Court held a hearing on the motions
primarily to clarify the proper statutory and analytical framework for the Court’s decision.
Strand asserts three legal errors by the Medicare Appeals Counsel (the “MAC”),
whose decisions became those of the Secretary: (1) the MAC contradicted a key
provision of Medicare when it concluded that the DSPA test was excluded from coverage
because it was not reasonable and necessary for the diagnosis or treatment of an illness;
(2) the MAC’s interpretation of its own regulation improperly nullifies the effective intent
of the controlling statute; and (3) the MAC improperly imported a stringent requirement

into the controlling statute and regulation that is not required. Strand also asserts that the
MAC’s decision is unsupported by substantial evidence in the record. The Secretary
asserts that the MAC properly interpreted and applied the relevant statutory and
regulatory provisions to conclude that Strand’s DSPA test is not covered by Medicare and
that substantial evidence supports its conclusion.
The Court has carefully considered the parties’ arguments and concludes that
summary judgment in favor of the Secretary is appropriate because the Secretary’s
interpretation of the controlling statutes and regulations are reasonable and substantial
evidence supports the MAC’s conclusions.
I. STATUTORY & REGULATORY FRAMEWORK
Judicial review of a final decision by the Secretary is guided by 42 U.S.C. § 405(g).
See 42 U.S.C. § 1395ff(b)(1)(A); Wood v. Thompson, 246 F.3d 1026, 1029 (7th Cir. 2001).
The standard under § 405(g) is a deferential one: factual “findings of the Secretary . . . if
supported by substantial evidence, shall be conclusive, and where a claim has been
denied by the Secretary . . . the [C]ourt shall review only the question of conformity with
[the Secretary’s] regulations and the validity of such regulations.” Id. (quoting 42 U.S.C.
§ 405(g)).
In addition, the Secretary’s decision may be set aside if the denial of coverage was
based on legal error. Id. When reviewing such a question, the Court must follow the
guidelines in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S.
837 (1984). See Wood, 246 F.3d at 1029. Under Chevron, first the Court must determine
whether or not the intent of Congress is ambiguous. Id. (citing Chevron, 467 U.S. at 842).
Next, “[i]f the meaning of the statute is clear, no deference is due an agency’s

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interpretation. If the meaning of the statute is ambiguous, an agency’s interpretation will
be deferred to if it is reasonable.” Id. (citing Chevron, 467 U.S. at 844).
Medicare, established under Title XVIII of the Social Security Act, 42 U.S.C. §
1395, et seq., is a federally funded and administered health insurance program for the
elderly and disabled. See 42 U.S.C. § 1395c. Although the Medicare program is divided
into three components, the component at issue here is Part B, which, among other things,
provides coverage for outpatient physician services like diagnostic testing. See 42 U.S.C.
§§ 1395j-1395w-5; 42 C.F.R. Pt. 410. The Secretary administers the program through
agreements with private contractors to administer funds to providers on behalf of eligible
beneficiaries. See 42 U.S.C. §§ 1395u(a), 1395kk-1. The contractors perform a variety
of functions to ensure the accuracy of claim payments, which includes processing claims,
making payments, and conducting post-payment reviews. See 42 U.S.C. § 1395kk1(a)(4); 42 C.F.R. Pt. 421.
Medicare Part B covers “medical and other health services” only as generally
outlined in the Medicare Act. See 42 U.S.C. § 1395k. The burden is on the beneficiary
to show that an item is covered under Medicare. See 42 U.S.C. § 1395l(e); 42 C.F.R. §
424.5(a)(6). All Medicare coverage determinations are made in light of the section that
excludes certain items from coverage, 42 U.S.C. § 1395y(a)(1)(A). This section provides,
in pertinent part: “Notwithstanding any other provision of this subchapter, no payment
may be made under . . . part B of this subchapter for any expenses incurred for items or
services—(1)(A) which . . . are not reasonable and necessary for the diagnosis or
treatment of illness or injury or to improve the functioning of a malformed body member .
. . .” 42 U.S.C. § 1395y(a)(1)(A).

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Coverage determinations may be made in several ways. First, the Secretary may
issue binding guidance, such as a National Coverage Determination (“NCD”). See 42
U.S.C. §§ 1395y(l)(6)(A), 1395ff(a), 1395ff(f)(1)(B). Second, a Medicare contractor may
issue its own guidance, which is known as a Local Coverage Determination or “LCD;” an
LCD applies to a specific geographic region only. See 42 U.S.C. §§ 1395y(l)(6)(B),
1395ff(f)(2)(B). Third, if neither an NCD nor an LCD exists, a Medicare contractor makes
an individual determination on whether the service is covered by deciding whether it falls
within a Medicare benefit category and is “reasonable and necessary for the diagnosis or
treatment of illness or injury . . . .” 42 U.S.C. §§ 1395(u), 1395ff(a)(1)(A).
A Medicare contractor may use Medicare manuals for guidance to make a
coverage determination. Although an ALJ and the MAC are not bound by these manuals,
they must give “substantial deference” to them “if they are applicable to a particular case.”
42 C.F.R. § 405.1062(a). The manual at issue in this case is the Medicare Program
Integrity Manual (“MPIM”), which provides guidance on how to determine whether items
or services are “reasonable and necessary for the diagnosis or treatment of illness.”
MPIM, CMS Pub. No. 100-08, Ch.13, available at http://www.cms.gov/Regualtions-andGuidance/Manuals/Internet-Only-Manuals-IOMs.html. For individual claims, like the ones
at issue here, the MPIM provides, “An item or service may be covered . . . if it meets all
of the conditions listed in § 13.5.1, Reasonable and Necessary Provisions in LCDs.”
MPIM § 13.3. The MPIM also reminds the contractor and subsequent reviewers that an
item or service is covered by Medicare only if it comports with the statutory requirements
of 42 U.S.C. § 1395y(a)(1)(A). MPIM § 13.5.1. Specifically, the MPIM instructs:
. . . Contractors shall consider a service to be reasonable and necessary if
the contractor determines that the service is:
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·
·
·

Safe and effective;
Not experimental or investigational . . .; and
Appropriate, including the duration and frequency that is
considered appropriate for the service, in terms of whether it is:
o Furnished in accordance with accepted standards of medical
practice for the diagnosis or treatment of the patient’s
condition or to improve the function of a malformed body
member;
o Furnished in a setting appropriate to the patient’s medical
needs and condition;
o Ordered and furnished by qualified personnel;
o One that meets, but does not exceed, the patient’s medical
need; and
o At least as beneficial as an existing and available medically
appropriate alternative.

MPIM § 13.5.1.
The MPIM also instructs contractors to use the strongest evidence available and
provides a list of evidence in order of preference:
·
·

Published authoritative evidence derived from definitive randomized
clinical trials or other definitive studies, and
General acceptance by the medical community (standard of
practice), as supported by sound medical evidence based on:
o Scientific data or research studies published in peer-reviewed
medical journals;
o Consensus of expert medical opinion (i.e., recognized
authorities in the field); or
o Medical opinion derived from consultations with medical
associations or other health care experts.

MPIM § 13.7.1. The MPIM further provides:
Acceptance by individual health care providers, or even a limited group of
health care providers, normally does not indicate general acceptance by the
medical community. Testimonials indicating such limited acceptance, and
limited case studies distributed by sponsors with financial interest in the
outcome, are not sufficient evidence of general acceptance by the medical
community. The broad range of available evidence must be considered and
its quality shall be evaluated before a conclusion is reached.
Id. The MPIM cautions that determinations that “challenge the standard of practice in a
community and specify that an item or service is never reasonable and necessary shall
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be based on sufficient evidence to convincingly refute evidence presented in support of
coverage.”

Id.

“Less stringent evidence is needed when allowing for individual

consideration.” Id.
Diagnostic laboratory tests that are reasonable and necessary are covered under
Medicare Part B. 42 U.S.C. §§ 1395k(a), 1395x(s)(3), 1395y(a)(1(A); 42 C.F.R. §§
410.32(a) & (d). The regulation regarding diagnostic tests provides, in relevant part:
All . . . diagnostic laboratory tests, and other diagnostic tests must be
ordered by the physician who is treating the beneficiary, that is, the
physician who furnishes a consultation or treats a beneficiary for a specific
medical problem and who uses the results in the management of the
beneficiary’s specific medical problem.
42 C.F.R. § 410.32(a). Further, “[t]he physician . . . who orders the service must maintain
documentation of medical necessity in the beneficiary’s medical record.” 42 C.F.R. §
410.32(d)(2)(i). If documentation provided to CMS for the beneficiary’s claim does not
demonstrate that the service is reasonable and necessary, CMS reviews the claim and
will request additional information regarding medical necessity.

42 C.F.R. §

410.32(d)(3)(ii).
The Medicare Benefit Policy Manual (“MBPM”), which is available at
http://www.cms.gov/Regulations-and-Guidance/Duidance/Manuals/Internet-OnlyManuals-IOMs.html, also provides coverage guidance at the various levels of review of a
Medicare claim. With respect to clinical laboratory services, the MBPM provides the
following definition of services: “the biological, microbiological, serological, chemical,
immunohematological, hematological, biophysical, cytological, pathological, or other
examination of materials derived from the human body for the diagnosis, prevention, or
treatment of a disease or assessment of a medical condition.” MBPM Ch.15, § 80.1.

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In the ordinary course of processing a claim, a Medicare contractor is the first level
of review and it must determine whether the claim is covered under the statutes discussed
above. See 42 U.S.C. §§ 1395l, 1395u, 1395y(a)(1)(A); 42 C.F.R. Pt. 424. If the
Medicare contractor denies the claim, the supplier can challenge the denial through the
Medicare appeals process. 42 U.S.C. §§ 405(g), (h); 1395ff; 1395ii. The first level of
appeal is a request for redetermination by the Part B Medicare contractor. 42 U.S.C. §
1395ff(a)(3); 42 C.F.R. § 405.940. The redetermination is performed by a different
individual than the one who performed the initial review. 42 C.F.R. § 405.948.
If the redetermination is unsatisfactory to the supplier, it may seek reconsideration
by a qualified independent contractor (“QIC”).
405.960, 405.962.

42 U.S.C. § 1395f(c); 42 C.F.R. §§

The QIC independently reviews the evidence from the initial

determination and redetermination as well as any other evidence provided by the supplier
or the contractor or that the QIC obtains on its own. 42 C.F.R. § 405.968(a). The panel
members at the QIC level must have “sufficient medical, legal and other expertise,
including knowledge of the Medicare program.” 42 C.F.R. § 405.968(c)(1). Pursuant to
statute, the QIC review must “be based on applicable information, including clinical
experience (including the medical records of the individual involved) and medical,
technical, and scientific evidence.” 42 U.S.C. § 1395ff(c)(3)(B)(i). If there is no Medicare
coverage policy, the statutes require the QIC to render its decision “based on applicable
information, including clinical experience and medical, technical, and scientific evidence.”
42 U.S.C. § 1395ff(c)(3(B)(ii)(III).
If the QIC determination is adverse, the supplier may request a hearing before an
administrative law judge (“ALJ”), who is independent from CMS. 42 U.S.C. § 1395ff(d);

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42 C.F.R. §§ 405.1000-54. CMS may, but need not, participate or become a party at the
hearing stage; the ALJ is not allowed to draw an adverse inference if CMS fails to appear.
42 C.F.R. §§ 405.1010, 405.1028(a). The ALJ conducts a de novo review and considers
“all the issues brought out in the initial determination, redetermination, or reconsideration
that were not decided entirely in a party’s favor” and may consider other issues without
notice to the parties. 42 C.F.R. §§ 405.1000(d), 405.1032.
A supplier that receives an unfavorable decision may seek review with the
Medicare Appeals Council (the “MAC”). 42 U.S.C. § 1395ff(d)(2); 42 C.F.R. § 405.110030. Further, even if CMS did not participate in the hearing before an ALJ, CMS may refer
a case to the MAC so that the MAC can consider whether or not to review the ALJ decision
on its own motion. 42 C.F.R. §§ 1110(a) & (b). Specifically, “CMS . . . may refer a case
to the MAC if, in their view, the decision . . . contains an error of law material to the
outcome of the claim or presents a broad policy or procedural issue that may affect the
public interest.” 42 C.F.R. § 1110(b)(1). CMS may also make a referral if, “[i]n CMS’
view, the ALJ’s decision . . . is not supported by the preponderance of evidence in the
record or the ALJ abused his or her discretion.” Id.
Upon referral, in cases like these where CMS did not participate,
[t]he MAC will accept review if the decision or dismissal contains an error of
law material to the outcome of the case or represents a broad policy or
procedural issue that may affect the general public interest. In deciding
whether to accept review, the MAC will limit its consideration of the ALJ’s
action to those exceptions raised by CMS.
42 C.F.R. § 405.1110(c)(2). According to statute, however, once the MAC accepts
review, the standard is de novo. 42 U.S.C. § 1395ff(d)(2)(B). The MAC decision is the
final decision of the Secretary.

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II. FACTUAL & PROCEDURAL BACKGROUND
The factual and procedural background in these cases is largely uncontested;
therefore, the Court has drawn much of the background directly from the parties’ briefs.
Citations to the record in Cause No. 1:13-cv-00645-LJM-DKL will be “Strand 1, R(page
number);” in Cause No. 1:14-cv-00015-LJM-DKL, “Strand 2, R(page number);” and in
Cause No. 1:14-cv-00427-LJM-DKL, “Strand 3, R(page number).”
Under conventional treatment, a treating physician who suspects a patient may
have prostate cancer will order a prostate biopsy to identify suspected cancerous cells
within the prostate. Strand 1, R2155-58. To perform the biopsy, a urologist will remove
multiple “cores” of prostate tissue to “map” different sections of the prostate gland. Id.
Each core is tested and assigned a “Gleason” score. Id. A higher Gleason score
represents a more aggressive and advanced cancer. Id. Based on the Gleason scores
of each core and the distribution of those scores through the prostate, the urologist will
render a diagnosis and develop a treatment plan for the patient. Strand 1, R2158.
Treatment may range from surveillance of the patient to more radical measures, such as
radiation or surgery. Strand 1, R2158-59.
The testing cycle for prostate cancer inherently involves the risk of specimen
transposition and contamination. Strand 1, R2147. Published studies have calculated
that up to 2% of all prostate biopsies contain such errors. Id. Strand’s DSPA test
eliminates this error and confirms that the cores that were tested belong to a particular
patient. Strand 1, R2145.
The MAC summarized how Strand’s test is used:
DSPA testing involves swabbing of the cheek of a patient to obtain a DNA
sample which is sent to a DNA-testing laboratory. At approximately the
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same time, a biopsy or other specimen is removed from the patient and sent
to a diagnostic laboratory to determine if the patient has cancer. If a positive
result of malignancy is obtained from the diagnostic laboratory specimen,
then pursuant to a physician’s order the DNA laboratory will then perform
DSPA testing of the swab of the same patient to confirm that the cancerpositive specimen belongs to the particular individual and was not
erroneously identified with an incorrect patient.
Strand 1, R11.
A. STRAND 1
In Strand 1, based on physician orders, Strand performed DSPA testing for 27
Medicare beneficiaries on various dates of service. Strand 1, R5. Strand subsequently
filed claims for reimbursement with National Government Services, Inc. (“NGS”), the
Medicare contractor for its region. Id. NGS initially paid the claims. Id. However, on
September 15, 2010, NGS notified Strand that it had performed a post-pay review of the
patients’ records and identified a potential overpayment. Strand 1, R1619-34; id. R76174. NGS requested that Strand submit documentation to support the medical necessity
of the DSPA testing. Id.
On October 11, 2010, Strand timely responded to NGS’ request for documentation.
Strand 1, R1615-18. Included in its response was a copy of Strand’s test reports,
documentation from treating physicians’ orders for the test performed showing a putative
finding of cancer, and pertinent patient medical records. Strand 1, R1650-2117.
In November 2010, NGS notified Strand that it had reopened the claims at issue,
informed Strand that the claims error rate was 100%, and the anticipated overpayment
amount. Strand 1, R761-73. Strand timely appealed NGS’ initial determination. 1 Strand

1

As the Court previously outline, when a claim has been denied, the supplier is entitled
to appeal under a five-part appeals process: (1) redetermination; (2) reconsideration; (3)
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1, R1563-600. On April 7, 2011, NGS issued an unfavorable redetermination decision
for all the claims. Strand 1, R338-55.
On September 20, 2011, Strand filed a request for reconsideration of NGS’
redetermination decision with the QIC, C2C Solutions, Inc. (“C2C”). Strand 1, R678-1539.
On November 19, 2011, C2C issued an unfavorable decision, which was reopened on
December 30, 2011. Strand 1, R393-95; 656-69. On February 24, 2012, C2C issued a
reopened, unfavorable decision. Strand 1, R400-526. In its decision, C2C determined
that the DSPA test “was rendered as a confirmation of specimen handling, not to provide
a diagnosis or treatment of the beneficiary’s condition,” and “did not meet the criteria to
be considered medically reasonable and necessary . . . .” Strand 1, R523-24.
On August 14, 2012, a telephonic administrative hearing was held before ALJ
William W. Cowan (“ALJ 1”). Strand 1, R2118-71. Strand had two expert witnesses
testify on its behalf and submitted a pre-hearing brief that appended journal articles and
studies to illustrate the medical necessity of DSPA testing, as well as written statements
from treating physicians who opined that DSPA testing is an integral component in the
diagnostic testing cycle for prostate cancer, and thus, directly impacts treatment options
for patients. Strand 1, R106-21; 123-367. Notably, Strand submitted evidence that
approximately 6% of all prostate biopsies nationally include Strand’s DSPA test as an
integral part of the biopsy test cycle. Strand 1, R13. CMS did not appear. Strand 1, R8794.
On September 20, 2012, ALJ 1 issued a decision reversing C2C and finding that

ALJ hearing; (4) MAC review; and (5) appeal to a Federal District Court. See, generally,
42 C.F.R. § 405.900.
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Strand’s DSPA tests were covered under Medicare. Strand 1, R84-104. ALJ 1 concluded
that “the testimony, studies and journal articles submitted by [Strand] demonstrate that
the DSPA testing fits the definition of diagnostic testing, as defined by Medicare.” Strand
1, R93. ALJ 1 further opined that the DSPA tests were “used by the physician to aid in
the assessment of a medical condition or the identification of a disease.” Id. In large part,
ALJ 1 adopted Strand’s argument that the DSPA tests “provide concordance that the
[beneficiaries’] specific cancer has been accurately characterized.” Strand 1, R92. Again,
adopting Strand’s argument, ALJ 1 analogized the DSPA tests to a “second opinion,
consultation, or special histopathology stain, all of which are covered by Medicare.”
Strand 1, R93. ALJ 1 concluded his opinion with the following:
[T]here is a fine line between diagnostic testing and quality control in the
context of an individual patient’s tissue samples. Here, I find that [Strand] .
. . demonstrated the diagnostic value of a test that seeks to confirm the
accuracy and correct identification of the sampling in individual cases, and
thus aids in the identification of treatment options. . . . [T]he record
establishes that the test was medically necessary for the individual patients.
Strand 1, R93-94.
On November 16, 2012, the Administrative Qualified Independent Contractor
(“AdQIC”) informed Strand that it intended to refer ALJ 1’s decision to the MAC for
possible review on the MAC’s own motion. Strand 1, R83.
On February 15, 2013, the MAC issued its decision, which reversed ALJ 1. Strand
1, R1-21. In its decision, the MAC explained that it “decided, on its own motion, to review
[ALJ 1’s] decision . . . because there is an error of law material to the outcome of the
claim.” Strand 1, R4 (citing 42 C.F.R. § 405.1110). After a de novo review of the record
evidence, the MAC concluded “that the DSPA tests at issue are not diagnostic laboratory
tests, do not otherwise fall within a Medicare benefit category, and are not covered by
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Medicare.” Strand 1, R4. The MAC explained, “[W]hile DSPA testing is very useful as a
tool for avoiding error and misidentification of a patient with cancer, these tests are not a
Medicare-covered service as they are not used directly for the diagnosis or treatment of
an illness or injury or for the assessment of a medical condition.” Strand 1, R11.
To make its decision, the MAC used the Medicare regulations for diagnostic test
coverage under Part B, 42 C.F.R. §§ 410.32; the MBPM; the statutory language for
exclusions, 42 U.S.C. § 1395y(a)(1)(A); and, in the absence of an LCD, the MPIM, Ch.
13, § 13.5.1 & 13.7.1. The MAC considered the physician testimony presented by Strand
at the ALJ hearing and noted that “the testimony regarding the usefulness of the testing -- a point not disputed by the Council --- is not the sole determinative factor in whether it
is covered by Medicare.” Strand 1, R14. It further stated that “such individual physician
opinions do not establish acceptance by the general medical community.” Id. With
respect to journal articles presented by Strand, the MAC rejected two of them outright
because they were unpublished. Strand 1, R14-15. The MAC reviewed the remaining
five articles and summarized them as presenting “the problem of misdiagnosis and offer
DSPA testing as a useful tool to prevent laboratory error.” Strand 1, R15-16. The MAC
acknowledged the truth of those statements, but stated that “there is no support that
DSPA testing is used to diagnose the beneficiary’s illness or injury or to determine the
‘Gleason scale,’ [the location and presence of cancer in a core sample that indicates the
severity of a beneficiary’s cancer], which dictates treatment options.” Strand 1, R15. In
other words, the MAC concluded there was no proof of “published authoritative evidence
derived from randomized clinical trials or other definitive studies . . . .” Id. It repeated that
it “did not find that DSPA testing directly diagnoses illness or injury; rather it confirms the

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identity of the individual who has already been diagnosed through other (generally
Medicare-covered) diagnostic testing.” Id.
The MAC reviewed the remainder of Strand’s evidence and rejected it because
none of it showed that the DSPA test was used “to directly diagnose the presence of
cancer,” or “to diagnose the presence of cancer itself,” or “to diagnose or treat a
beneficiary,” or “for the diagnosis, prevention, or treatment of a disease or assessment of
a medical condition.” Strand 1, R16-17. Rather, the MAC opined that the evidence
showed that the test was used “to verify that a cancer diagnosis was assigned to the
correct beneficiary,” or as “a valuable tool in preventing misdiagnosis and subsequent
unnecessary treatment when used to accompany subjective histopathology,” or “to
prevent laboratory identification error.” Strand 1, R17.
B. STRAND 2
In Strand 2, based on physician orders, Strand performed DSPA testing for 19
Medicare beneficiaries on various dates of service between October 4, 2011, and March
1, 2012. Strand 2, R98. Subsequently, Strand filed claims for reimbursement with NGS;
instead of reimbursement, Strand received Additional Document Request (“ADR”) letters
from NGS. Strand 2, R2258-76, 2290-305, 2319-48, 2362-77, 2391-465, 2480-95, 251030, 2546-61, 2575-90, 2605-20, 2636-56, 2671-700, 2714-34, 2748-63, 2777-92, 280621, 2835-50, 2867-909, 2929-54. By letters dated May 21, 22, 24, and 29, 2012, NGS
notified Strand that it had reopened the claims for the 19 beneficiaries and that it had
denied the claims. Strand 2, R988-97, 1298-307, 1634-44, 1947-55.
Strand sought redetermination of these claims, which the NGS denied in decisions
dated July 13 and 14, 2012. Strand 2, R979-1288, 1289-623, 1624-938, 1939-2245, 644-

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801, 2247-55, 2279-87, 2308-16, 2351-59, 2380-88, 2469-77, 2498-506, 2534-42, 256472, 2593-601, 2625-33, 2660-68, 2703-11, 2737-45, 2766-74, 2795-803, 2824-32, 285364, 2912-20. In each decision NGS concluded that no diagnostic service was provided
and that DSPA testing was a “quality assurance” activity; therefore, it is not separately
reimbursable. Id.
On September 6, 2012, Strand submitted a request for reconsideration with C2C,
the QIC. Strand 2, R636-967. On November 9, 2012, C2C issued an unfavorable
decision. Strand 2, R553-609. C2C determined that the DSPA test “was rendered as a
confirmation of specimen handling, not to provide a diagnosis or treatment of the
beneficiary’s condition;” therefore, it was not medically reasonable and necessary as
required. Strand 2, R557.
Strand appealed C2C’s decision by requesting an ALJ hearing. Strand 2, R202551. On June 6, 2013, a hearing was held before ALJ James O’Leary (“ALJ 2 ). Strand
2, R2957-3008. Like it had in Strand 1, Strand presented testimony from its Chief
Financial Officer regarding billing and utilization of DSPA testing and two expert
witnesses. Strand 2, R2957-3008. Strand also submitted a pre-hearing brief with journal
articles and studies regarding the necessity for DSPA testing, and written statements from
physicians that opined that DSPA testing was an integral component in the diagnostic
testing cycle for prostate cancer. Strand 2, R202-551. Neither NGS nor CMS appeared
as a party or participated in the hearing. Id.
On June 18, 2013, ALJ 2 issued his decision in which he reversed C2C and
concluded that the DSPA tests at issue were fully reimbursable. Strand 2, R110-47. Like
ALJ 1, ALJ 2 adopted Strand’s argument that “DSPA testing is similar to a second opinion

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and is medically reasonable and necessary for the diagnosis and treatment of the 19
Beneficiaries, because it ensures that the treatment undertaken by the treating physician
is not more invasive than needed.” Strand 2, R138. ALJ 2 also concluded that based on
the expert testimony, it is the “standard of practice for urologists to get the results of DSPA
testing . . . before discussing prostate cancer management, including various treatment
options, with a patient . . . .” Id.
The AdQIC filed a Referral for Own Motion Review with the MAC. Strand 2, R96109. The AdQIC asserted that ALJ 2’s decision contained three errors of law material to
the outcome of the claims: (a) ALJ 2 erred in finding that the DSPA test is a separately
reimbursable diagnostic test; (b) the DSPA test did not diagnose or treat an illness or
injury, nor could its results be used to manage a specific medical problem; and (c)
Strand’s documentation did not support the conclusion that the services were reasonable
and necessary for each patient. Strand 2, R97.
Strand filed exceptions to the AdQIC memorandum arguing that ALJ 2’s decision
was consistent with the unchallenged record developed at the hearing, as well as all
applicable Medicare rules and regulations. Strand 2, R24-59, 60-95. Strand argued that
the AdQIC misinterpreted the Medicare and Clinical Lab Improvement Amendments
(“CLIA”) statutes and regulations when it claimed that DSPA testing was not reimbursable
as quality assurance activity. Strand 2, R28-35, 65-72. Strand also argued that the
administrative record demonstrated that DSPA testing is medically necessary,
reasonable and payable by Medicare because it aids in the diagnosis and treatment of
patients on an individual basis. Strand 2, R35-46, 72-83. Strand further asserted that the
claims were property documented; it also objected to additional documents presented by

16

the AdQIC that were not presented to ALJ 2. Strand 2, R46-52, 83-89.
On January 16, 2014, the MAC issued its decision, which reversed ALJ 2. Strand
2, R1-22. Similarly to Strand 1, in Strand 2, the MAC decided to review ALJ 2’s decision
on its own motion “because there is an error of law material to the outcome of the claim.”
Strand 2, R5.
After setting forth the regulations applicable to its decision, Strand 2, R8-11, the
MAC addressed evidentiary issues. Strand 2, R11-12. The MAC then evaluated whether
or not the evidence Strand had admitted was sufficient to establish that the DSPA tests
were reasonable and necessary. Strand 2, R12. The MAC concluded
that while DSPA testing is very useful as a tool for avoiding error and
misidentification of a patient with cancer, these tests are not a Medicarecovered service as they are not used directly for the diagnosis or treatment
of an illness or injury or for the assessment of a medical condition.
Id. First, the MAC noted that DSPA tests are not statutorily excluded; however, the MAC
stated that the Medicare statutes gave the Secretary the authority to make coverage
decisions. Strand 2, R14.
Second, the MAC evaluated Strand’s testimonial and evidentiary submissions.
Strand 2, R14-18. With respect to acceptance in the medical community, the MAC
reviewed the written correspondence from five oncology physicians and the two expert
witnesses who testified at the ALJ hearing. Strand 2, R14-15. However, it concluded
that the testimonials showed “that DSPA testing plays a useful role by ensuring that the
sample tested is associated with the correct beneficiary.” Strand 2, R15. The MAC stated
further that “individual opinions do not establish acceptance by the general medical
community.” Strand 2, R15-16 (quoting MPIM, Ch. 13, § 13.7.1). With respect to Strand’s
journal articles, the MAC considered seven articles that all, in the MAC’s words,
17

“consider[] the problem of misidentification and/or contamination of pathology specimens
and supports the use of DSPA testing to prevent such errors.” Strand 2, R17. The MAC
concluded that “the articles do not support a conclusion that DSPA testing is used to
diagnose the beneficiary’s illness or injury or to determine the ‘Gleason scale,’ [the
location and presence of core sample that indicates the severity of a beneficiary’s cancer],
which dictates treatment options.” Id. Ultimately, like in Strand 1, the MAC rejected the
articles because they did not “support a conclusion that DSPA testing directly diagnoses
illness or injury; rather, it confirms the identity of the individual who has already been
diagnosed through other (generally Medicare-covered) diagnostic testing.” Strand 2,
R18.
The MAC then turned to objective evidence to support a conclusion that DSPA
testing is used to treat cancer. Strand 2, R18-19. It concluded:
[T]here is no objective evidence in the record that DSPA testing is used to
directly diagnose the presence of cancer. Instead, the record evidence
establishes that DSPA testing is used in conjunction with subjective
histopathology (e.g. the initial diagnostic test) to confirm that the specimen
is indeed that of the beneficiary tested.
Strand 2, R18. The MAC relied in part on Strand’s own description of DSPA testing as a
mere identifying test to conclude “that the testing is not used to diagnose the presence of
cancer itself, but to verify that a cancer diagnosis was assigned to the correct beneficiary.”
Id. Similarly, the MAC rejected Strand’s argument that DSPA results are used to direct
treatment options stating that Strand offered evidence that treatment options were based
on the Gleason scale, not DSPA test results. Id. Moreover, the MAC
acknowledge[d] that the physicians find DSPA testing to be a valuable tool
in preventing misdiagnosis and subsequent unnecessary treatment when
used to accompany subjective histopathology. However, the Council
[found] that the treating physicians and medical experts confirmed that
18

DSPA testing is used not to diagnose or treat a beneficiary but to verify that
the specimen used to diagnose the beneficiary originated with the identified
beneficiary.
Strand 2, R18-19.
Based on these finding, the MAC concluded that DSPA tests did not meet the
definition of diagnostic laboratory tests for coverage under Medicare. Strand 2, R19.
Finally, the MAC addressed whether or not DSPA testing was a separately payable
diagnostic test under CLIA. Strand 2, R19-20. Similarly to its conclusion in Strand 1, the
MAC decided that it was unclear as to whether or not DSPA testing would be classified
as quality assurance and found merit to both Strand’s and CMS’ arguments. Strand 2,
R20. However, based on its prior analysis, the MAC concluded
that DSPA testing is not covered because it does not directly diagnose or
treat an illness or injury, nor does it assess a medical condition. . . . It is
simply not covered by Medicare under the limited definition of a medically
reasonable and necessary laboratory test for the diagnosis, treatment or
assessment of an illness or injury.
Id.
The MAC summarized its decision as follows:
[T]he DSPA tests at issue are not for the diagnosis or treatment of a disease
or for the assessment of a medical condition, and thus do not meet the
definition of a diagnostic laboratory test for Medicare coverage purposes. .
. . Similarly, had the tests been part of the diagnostic laboratory test
Medicare benefit, the tests are neither medically reasonable nor necessary
because they are not for the diagnosis and treatment of illness or injury or
to improve the functioning of a malformed body member, but to prevent
laboratory identification error.
Strand 2, R21 (citations omitted).
C. STRAND 3
Strand 3 involves a single beneficiary. Strand 3, R5. On December 14, 2011,
Strand submitted a claim for payment for a DSPA test to NGS. Id. On January 2012,
19

Strand received an ADR letter from NGS for the claim, to which Strand timely responded.
Strand 3, R576-605, 608-09, 638-71. NGS denied payment of the claim because it
determined that the services provided were not medically necessary. Strand 3, R612.
On March 23, 2012, NGS denied Strand’s request for redetermination. Strand 3,
R617-37.

Specifically, NGS found that “[t]he routine use of [the] DNA Specimen

Provenance Assignment test indicates a concern with the quality of the personnel
obtaining and labeling biopsy specimens and the laboratory performing the pathology
results” and that “[r]outine DSPA testing would not be medically necessary.” Strand 3,
R611. See also id. at 610-16.
On April 16, 2012, the beneficiary submitted a request for reconsideration to C2C.
Strand, R565-68. On June 13, 2012, C2C issued an unfavorable decision. Strand 3,
R552-60.
On July 26, 2012, Strand requested a hearing before an ALJ. Strand 3, R533-51.
ALJ Tony Smith (“ALJ 3”) held a telephonic hearing on August 14, 2013. Strand 3, R94294. Strand had the same witnesses testify and offered the same evidence to ALJ 3 as it
did in the Strand 2 hearing. Strand 3, R375-522. Neither C2C nor anyone from CMS
appeared or participated in the Strand 3 hearing. Strand 3, R942-94.
On August 22, 2013, ALJ 3 issued a decision in Strand’s favor. Strand 3, R35157. Based on the testimony of Strand’s experts, ALJ 3 determined that Strand’s DSPA
testing “is provided not as routine testing, but for proper diagnosis. The testing provides
the aggressiveness of the tumor and determines type of treatment, as well as helps lessen
occult errors.” Strand 3, R.352. He also concluded that, with respect to this beneficiary,
“the tests performed were necessary to establish the proper diagnosis and treatment for

20

the [b]eneficiary” and, therefore, were “medically reasonable and necessary according to
the Medicare regulations.” Strand 3, R356. ALJ 3 further stated that the DSPA test was
medically reasonable and necessary as a matter of law and concluded that Medicare
coverage was proper. Id.
On October 18, 2013, the AdQIC, Q2Administrators, LLC (the “AdQIC”), filed a
Referral for Own Motion Review with the MAC. Strand 3, R125-45. The AdQIC asserted
that ALJ 3’s decision contained an error of law material to the outcome of the claim.
Strand 3, R126. Specifically, the AdQIC argued that ALJ 3 erred when he: (a) determined
that the DSPA test is a separately reimbursable diagnostic test; (b) determined that the
DSPA test was reasonable and necessary because it diagnosed and/or treated an illness
or injury; and (c) concluded that Strand had provided enough supporting documentation
from the treating physician to support the medical necessity of the test. Id.
On November 5, 2013, Strand filed an exception to the AdQIC’s memorandum
arguing, as it had in Strand 1 and Strand 2, that ALJ 3’s decision was consistent with the
testimony and evidence presented at the hearing. Strand 3, R147-317, 318-50. Strand
also noted that the AdQIC had misinterpreted CLIA. Strand 3, R151-58. Further, Strand
asserted that the record demonstrated that DSPA testing is medically necessary and
reasonable because it aids in the diagnosis and treatment of individual patients with a
positive diagnosis of cancer.

Strand 3, R158-70.

Strand also argued that the

documentation was adequate. Strand 3, R170-77.
On January 16, 2014, the MAC issued its decision reversing ALJ 3. Strand 2, R423. Similarly to its decision in Strand 1, in Strand 3 the MAC decided, on its own motion,
to review ALJ 3’s decision “because there are errors of law . . . material to the outcome

21

of the claim at issue . . . .” Strand 3, R4. The MAC concluded:
[T]he ALJ erred as a matter of law in his decision by ordering reimbursement
for the DSPA test as a diagnostic test without fully applying the coverage
criteria for diagnostic testing. The ALJ also did not consider other relevant
criteria for assessing the medical reasonableness and necessity of the
DSPA test. We conclude that the criteria for coverage has not been
satisfied and, as such, Medicare does not cover the test.
Strand 3, R5.
To make its decision, the MAC used the same sources as it did in Strand 1: the
Medicare regulations for diagnostic test coverage under Part B, 42 C.F.R. § 410.32; the
MBPM; the statutory language for exclusions, 42 U.S.C. § 1395y(a)(1)(A); and, in the
absence of an LCD, the MPIM, Ch.13, §§ 13.5.1 & 13.7.1. Strand 3, R8-11. The MAC
first noted that answering the legal question of whether the tests were covered involved
mixed issues of law and fact that were inextricably intertwined. Strand 3, R13. It then
turned to the question of whether or not the DSPA test qualified as a diagnostic test,
stating that ALJ 3 had not addressed the issue. Strand 3, R14. The MAC concluded “that
the purpose of DSPA testing is for it to be used in conjunction with an initial diagnostic
test for cancer, in order to confirm that the specimen tested is indeed that of the patient
(preventing misdiagnosis and subsequent unnecessary treatment).”

Id.

The MAC

reasoned that the DSPA testing is not used to diagnose, assess or treat the cancer itself
and there was no medical documentation that the physicians who ordered the tests used
the results for that purpose. Id. It further concluded that “while DSPA testing may be a
useful tool for avoiding error and misidentification of a patient with cancer, these tests are
not a Medicare-covered service as they are not used directly for the diagnosis or
treatment of an illness or injury or for the assessment of a medical condition.” Id.
The MAC also assessed Strand’s evidence that treating physicians testified or
22

opined that the test was medically necessary. Strand 3, R16-17. However, the MAC
stated “that there is no objective evidence in the record that DSPA testing is used to
directly diagnose the presence of cancer . . . .” Strand 3, R16. Rather, the MAC
concluded that “the record evidence establishes that DSPA testing is used in conjunction
with subjective histopathology (e.g. the initial diagnostic test) to confirm that the specimen
is indeed that of the beneficiary tested.” Id. This conclusion, the MAC stated, was
supported by the physicians and medical experts that provided testimony and/or
statements on behalf of Strand. Strand 3, R16-17. For these reasons, the MAC stated
that the DSPA tests did “not meet the definition of diagnostic tests for Medicare coverage
purposes.” Strand 3, R17.
The MAC then assessed whether or not the DSPA test met the criteria in the MPIM
to be “medically reasonable and necessary under § 1395y(a)(1)(A).” Id. Again, the MAC
concluded that there was insufficient evidence to support Strand’s assertion that “DSPA
testing is safe and effective, not experimental or investigational, and appropriate for
diagnosis and treatment of cancer . . . .” Id. The MAC considered seven journal articles
submitted by Strand, but rejected them because they did not support the notion that
“DSPA testing is used specifically to diagnose cancer or that it directly dictates treatment
(or determines a Gleason score).” Strand 3, R17-18. The MAC also considered and
rejected written submissions and expert statements from physicians because they did not
constitute “published authoritative evidence.” Strand 3, R18. Applying the rule in MPIM,
ch.13, § 13.7.1, the MAC concluded that these “individual opinions do not establish
acceptance by, or the opinion of, the general medical community.” Strand 3, R18. The
MAC emphasized that the DSPA test was used by the physicians and/or experts “to

23

confirm that the sample was obtained from the correct patient . . . [it] was not otherwise
used in any manner to diagnose or treat the underlying disease process.” Strand 3, R1819.
The MAC also concluded that the ALJ had erred because “he did not address,
explicitly, whether the submitted documentation showed that the results were used by the
ordering physician.” Strand 3, R19. The record only established that the physician
ordered the tests and received the results, but it did “not indicate how [the physician] used
the test results or how they otherwise affected his treatment of the beneficiary’s
condition.” Id.
The MAC further addressed whether or not DSPA testing is a separately payable
diagnostic test as a quality assurance program. Strand 3, R19-20. Although the MAC
found merit to both CMS’s and Strand’s arguments on the subject, it was not convinced
that DSPA testing would be classified as quality assurance under CLIA. Strand 3, R20.
It concluded that it was not necessary to address the issue because the DSPA test is “not
covered because it does not directly diagnose or treat an illness or injury, nor does it
assess a medical condition.” Id.
Moreover, the MAC rejected Strand’s assertion that the ALJ did not err because
there are other favorable decisions issued in other cases. Strand 3, R20-21.
The MAC summarized its conclusions as follows:
[T]he DSPA tests at issue are not for the diagnosis or treatment of a disease
or for the assessment of a medical condition, and thus do not meet the
definition of a diagnostic laboratory test for Medicare coverage purposes. .
. . Similarly, had the tests been part of the diagnostic laboratory test
Medicare benefit, the tests are neither medically reasonable nor necessary
because they are not for the diagnosis or treatment of illness or injury or to
improve the functioning of a malformed body member, but to prevent or
avert laboratory identification error.
24

Strand 3, R22 (citations omitted).
III. ANALYSIS
A. STANDARDS OF REVIEW
In Strand 1, Strand argued that both § 405(g) and the Administrative Procedures
Act (the “APA”), 5 U.S.C. §§ 701, et seq., provides the proper procedure for review in this
Court. Dkt. No. 39 at 15-16. At the hearing, Strand appeared to concede that § 405(g)
provided the proper standard, but even if it did not, the Court concludes that § 405(g)
applies. Section 1395ff of Title 42, United States Code, provides the scheme under which
the Secretary makes decisions under Medicare Part B. See 42 U.S.C. §§ 1395ff(a)(1) &
(b)(1)(A).

Section 1395ff(b)(1)(A) specifically delineates that judicial review of the

Secretary’s decision “is provided in section 405(g) of this title.”
In addition, also in Strand 1, Strand argued that the MAC erred when it conducted
a de novo review of the evidence when it made its determination because CMS had not
participated in the hearing. Dkt. No. 39 at 16-17. Again, at the hearing, Strand appeared
to concede that de novo review was proper and focused on errors of law made by the
MAC. Regardless of whether or not Strand made such an acknowledgement at the
hearing, the Court concludes that, once it accepts review of a case on its own motion, the
statutory scheme requires the MAC to conduct a de novo review of the issues. 42 U.S.C.
§ 1395ff(d)(2)(B).
Further, to the extent that Strand also argues that the MAC erred when it made its
determination to review the cases on its own motion, the Court disagrees. In each case,
the MAC specifically stated that it decided to perform a review because each ALJ had
made an error of law material to the outcome of the case, which was the reason in each
25

case that CMS sought review. Strand 1, R4; Strand 2, R5; Strand 3, R4. Once it made
that decision in each case, the Medicare statutes required the MAC to make a de novo
coverage decision. 42 U.S.C. § 1395ff(d)(2)(B). On a de novo review, the MAC was
entitled to consider additional evidence and the Court sees no error in the MAC’s
determinations in this regard in any of the three cases. In addition, the MAC’s reliance
on new evidence to make its determinations is minimal compared to its substantial
treatment and discussion of the evidence Strand presented to the ALJ and to the MAC
itself.
For these reasons, the Court will apply the standard in § 405(g) to analyze Strand’s
claims and the Court disagrees with Strand that the MAC used the wrong standard of
review once it decided to take the review on its own motion.
B. STRAND’S SUBSTANTIVE ARGUMENTS
Strand’s first argument is that the MAC contradicted the key statutory provision, 42
U.S.C. § 1395y(a)(1)(A), when it ruled that the DSPA test is not reasonable and necessary
for the diagnosis or treatment of illness. Strand asserts that the MAC improperly required
the test to “directly” diagnose an illness, but Congress intended for the statute to have a
broader meaning. Strand alleged at the hearing that the MAC improperly stated this
requirement ten times in the three decisions at issue here. For example, in Strand 2, the
MAC said, “We conclude that while DSPA testing is very useful as a tool for avoiding error
and misidentification of a patient with cancer, these tests are not a Medicare-covered
service, as they are not used directly for the diagnosis or treatment of an illness.” Strand
2, R12.
Further, Strand asserts that the plain language of the statute does not require that

26

the test “directly” diagnose or treat an illness. It argues that the legislative history supports
a broader interpretation for the statute. The Senate report issued at the time the statute
was passed explained that items and services “would only be covered where they
contribute meaningfully to the treatment of an illness.” S. Rep. No. 89-404 (1965),
reprinted in 1965 U.S.C.C.A.N. 1943, 1990. In other words, so long as the service
contributes meaningfully to the diagnosis or treatment of an illness, it is reasonable and
necessary. Strand 2, Dkt. No. 41 at 31 (citing MBPM Ch. 15, § 80.1). Strand asserts that
the “uncontroverted evidence” is that the DSPA test impacts treatment options and assists
the staging of a specific prostate cancer; therefore, it meets the “contributes meaningfully”
intention of the statute.
The Secretary argues that 42 U.S.C. § 1395y(a)(1)(A) has gone for fifty years
without a statutory or regulatory definition for “the diagnosis or treatment of an illness,”
therefore, it must have a plain meaning. According to the Secretary, the dictionary, as a
source for the plain meaning, provides an amalgamated definition of “for the diagnosis or
treatment” as follows: “the purpose of either identifying a disease from its signs and
symptoms or treating a patient medically or surgically.” Strand 2, Dkt. No. 46 at 4. The
Secretary asserts that the DSPA test, a forensic DNA test, does not identify a disease or
treat a patient; it matches samples to patients.
Further, the Secretary avers that § 1395y(a)(1)(A) is an exclusionary provision and
that Strand’s interpretation would read that function out of the statute. Strand 2, Dkt. No.
46, at 5. At the hearing, the Secretary stated that the provision cannot be interpreted
broadly because when Congress intends for Medicare to cover something that would be
excluded under § 1395y(a)(1)(A), such as screening tests, inoculations or vaccines, it

27

must expressly make an exception to the exclusionary rule. Moreover, the Secretary
claims that the legislative history makes clear what Congress meant: if it does not
diagnose or treat an illness, Medicare does not pay. Strand 2, Dkt. No. 46, at 5-6 (citing,
inter alia, S. Rep. No. 89-404 (1965), reprinted in 1965 U.S.C.C.A.N. 1943, 1990).
The Court agrees with the Secretary that the plain meaning of the “for the diagnosis
or treatment of a disease” language of § 1395y(a)(1)(A) requires that the service either
diagnose or treat an illness or disease; the “contribute meaningfully” language is outside
the scope of the plain meaning.

According to Stedman’s Medical Dictionary

(“Stedman’s”), “diagnosis” means, “[t]he determination of the nature of a disease, injury,
or congenital defect.” Thomas Lanthrop Stedman, STEDMAN’S MED. DICTIONARY 531
(Lippincott Williams & Wilkins eds., 28th ed. 2006) (hereinafter, “STEDMAN’S”). See also
DORLAND’S

MED.

DICTIONARY,

www.dorlands.com,

Word

Search

“diagnosis,”

http://dorlands.com/index.jsp (last visited July 22, 2015) (hereinafter, “DORLAND’S”)
(defining “diagnosis” as “the determination of the nature of a case of disease” or “the art
of distinguishing one disease from another”).

Therefore, under § 1395y(a)(1)(A), a

service is for “the diagnosis . . . of an illness” if it determines the nature of it.
Also according to Stedman’s, “treatment” means “[m]edical or surgical
management of a patient.” STEDMAN’S, at 2022. See also DORLAND’S, Word Search
“treatment” (defining “treatment” as “the management and care of a patient for the
purpose of combating disease or disorder”). Therefore, under § 1395y(a)(1)(A), a service
is for “the . . . treatment of an illness” when it is for the medical or surgical management
of a patient. There is nothing in the plain meaning of the statute that allows for something
that “contributes meaningfully to the medical . . . management of a patient” to be included.

28

As suggested by the Secretary, such a broad interpretation is against the whole purpose
of § 1395y(a)(1)(A) as an exclusionary measure that limits Medicare coverage.
Turning to Strand’s second legal argument, even if the Court considered the
“diagnosis or treatment” language of § 1395y(a)(1)(A) to be ambiguous, the MAC did not
err when it required the DSPA test to either diagnose prostate cancer or be used to direct
treatment options for the patient. Strand contends that, if the statute is ambiguous, the
MAC interpreted its own regulation governing diagnostic tests to nullify its intent. Section
410.32(a) of the Medicare regulations provides, in part, that the treating physician must
“use[] the results in the management of the beneficiary’s specific medical problem.” 42
C.F.R. § 410.32(a). Strand argues that the MAC’s decisions improperly contradict this
regulation because they fail to consider the evidence that doctors use the results of the
DSPA test to help determine treatment options for patients who have been diagnosed
with prostate cancer. Strand 2, Dkt. No. 41, at 2-3. In other words, the MAC contradicted
the Secretary’s own regulation when it concluded that the DSPA, which assists in the
management of prostate cancer, is not for the diagnosis or treatment of a disease.
The Secretary asserts that 42 C.F.R. § 410.32(a) is not definitional, rather, it
imposes additional restrictions on coverage of tests that have already been deemed a
diagnostic test. Strand 2, Dkt. No. 43 at 32. Further, the Secretary argues, the regulation
includes the stipulation that laboratory services be reasonable and necessary for the
diagnosis or treatment of an illness, which necessarily defines the scope of coverage
under the controlling statute, § 1395y(a)(1)(A). Id. at 32-33 (citing, inter alia, 42 C.F.R. §
410.32(d)).
The Court concludes that the Secretary applied the correct standard to Strand’s

29

DSPA test, which is the standard in both the regulation and the statute – the test must be
for the diagnosis or treatment of an illness. The Court agrees with the Secretary that 42
C.F.R. § 410.32(a) is not definitional, rather it sets additional conditions for coverage for
services that have already been deemed a diagnostic test.

In addition, another

subsection of this regulation specifically alerts a provider that a service must be
“reasonable and necessary” or CMS will review it to make a coverage determination. 42
C.F.R. § 410.32(d). Further, 42 C.F.R. § 410.32(a) explicitly incorporates by reference
the standard in 42 C.F.R. § 411.15(k), which is another exclusionary provision that
expressly excludes services that are not reasonable and necessary for “the diagnosis or
treatment of an illness . . . .” See 42 C.F.R. §§ 410.32(a) & 411.15(k)(1).
In addition, the Secretary may not construe regulations more broadly than the
statute and the Secretary has considered her own language and that of the statute to be
narrower. The plain meaning of the words diagnose and treat do not include the broader
concept of “contribute meaningfully.” Rather, the terms “diagnose” or “treat” convey that
the service must determine a disease or illness, which the DSPA test admittedly does
not; or medically or surgically manage an illness, which the Secretary concluded the
DSPA test did not do. The latter conclusion is supported by substantial evidence in the
record because the doctors’ testimony and/or letters as well as the studies reflect that the
DSPA test is used to confirm that a biopsy sample belongs to a particular patient (a fact
that Strand does not contest), it does not medically or surgically manage a disease. See
Strand 1, R13; Strand 2, R14-15; Strand 3, R16-17.

Strand’s expert Dr. Kapoor

conceded that Gleason scores determine treatment, and the DSPA test is used to confirm
that the core samples belong to a particular patient. See, e.g., Strand 1, R 16 (citing, inter

30

alia, Dr. Kapoor’s hearing testimony); Strand 2, R2995.

Moreover, Strand’s own

statements reflect that the test is not used to determine if a patient has prostate cancer;
rather it is used to connect a positive biopsy to a particular beneficiary. See Strand 3,
R16 (citing, “Process Overview for the Laboratory,” at http://knowerror.com/processoverview/for-the-laboratory). Strand’s evidence at the Strand 3 hearing also confirmed
that treatment options are based on the Gleason scores and their distribution within the
core samples, not on DSPA testing. See Strand 3, at 16 (citing Hr’g CD at 2:21-2:24).
Strand’s reliance on the MBPM ch. 6, § 20.4.1 is also unavailing. That section
advises that a diagnostic test is one performed to “obtain information to aid in the
assessment of a medical condition or the identification of a disease.” MBPM ch. 6, §
20.4.1. The DSPA test does neither: the DSPA test confirms that tissue samples belong
to a particular person, it does not “aid in the assessment of a medical condition,” such as
determine a Gleason score distribution of a core sample; or identify a disease, such as
determine the Gleason score itself. The Court cannot conclude that the Secretary’s
construction of the statute or its own guidelines is unreasonable or that her decision was
unsupported by the evidence in the record. The DSPA test matches patients to tissue
samples and thus aids in the identification of samples, not the identification of a disease
or illness.
Strand’s third legal argument, that the MAC’s flawed analysis of the diagnosis or
treatment element fatally flawed its decision that the DSPA test is not reasonable and
necessary, is equally unavailing. Strand 2, Dkt. No. 44 at 17-18. As discussed at length
above, the Court cannot agree that the Secretary erred in her decision that the DSPA test
is not for the diagnosis or treatment of an illness. Therefore, Strand’s argument that the

31

Secretary’s reliance on that finding to support her conclusion that the DSPA test is not
reasonable or necessary cannot stand.
Further, the Secretary’s decisions also conclude that the tests are not reasonable
or necessary because they are not generally accepted in the medical community. See,
e.g., Strand 2, R15-16 (discussing the requirements in MPIM § 13.7.1). The MAC
provided multiple legitimate reasons for this conclusion including the lack of significant
use in the relevant medical community and Strand’s reliance on individual physician
opinions, which the MAC is not required to accept as definitive evidence. See id.; see
also Strand 1, R13-14 (discussing acceptance in the legal community including
correspondence and expert testimony about estimate error rates in sample identification);
Strand 3, R17-19 (discussing journal articles, written submissions, and expert testimony
as well as the requirements of MPIM § 13.7.1). The MAC also assessed the articles
Strand presented and reasonably concluded that they did not support Strand’s assertion
that the DSPA test is generally accepted in the medical community as a tool for the
diagnosis or treatment of prostate cancer; however, the tool is used to prevent misidentification of a tissue samples. See Strand 1, R14-16; Strand 2, R16-18; Strand 3,
R17-18.
For these reasons, the Secretary’s decision is consistent with the law and
supported by substantial evidence in the record.
IV. CONCLUSION
For the reasons stated herein, the Court GRANTS summary judgment in favor of
Defendant Sylvia Mathews Burwell, Secretary of the U.S. Department of Health & Human
Services on all of Plaintiff Strand Analytical Laboratories, LLC’s, claims against her; and

32

DENIES Plaintiff Strand Analytical Laboratories, LLC’s, cross-motion for summary
judgment. The Court will enter judgment accordingly.
IT IS SO ORDERED this 30th day of July, 2015.

________________________________
LARRY J. McKINNEY, JUDGE
United States District Court
Southern District of Indiana

Distribution:
Jenny R. Buchheit
ICE MILLER LLP
[e-mail]
Myra Consetta Selby
ICE MILLER LLP
[e-mail]
Jill Z. Julian
UNITED STATES ATTORNEY'S OFFICE
[e-mail]
Andrew Brian Wachler
WACHLER & ASSOCIATES, P.C.
[e-mail]
Michael David Bossenbroek
WACHLER & ASSOCIATES, P.C.
[e-mail]

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