HELOMICS CORPORATION v. NOVITAS SOLUTIONS, INC

Filing 24

MEMORANDUM OPINION re 23 Order granting Defendant's Motion to Dismiss (Doc. 3 ) and denying as moot Plaintiff's Motion (Doc. 13 ) for a preliminary injunction. Contemporaneously herewith, the Court will enter judgment under Federal Rule of Civil Procedure 58. Signed by Judge Cathy Bissoon on 2/1/16. (dcd)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
HELOMICS CORPORATION,
Plaintiff,
v.
NOVITAS SOLUTIONS, INC,
Defendant.

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Civil Action No. 15-1667
Judge Cathy Bissoon

MEMORANDUM OPINION
In an Order dated January 28, 2016 (Doc. 23), the Court granted Defendant’s Motion to
Dismiss (Doc. 13) for failure to exhaust, and denied as moot Plaintiff’s motion for a preliminary
injunction (Doc. 3). See Doc. 23. The reasons are stated below. Given that time in this case has
been of the essence, the Court writes only for the benefit of the parties and their counsel.
In dismissing Plaintiff’s case for want of exhaustion, the Court does not reach Plaintiff’s
request for injunctive relief. The Court thinks it important to note, however, that the
circumstances surrounding Plaintiff’s claims are less supportive than its counsel have suggested.
Defendant’s briefing reveals, for example, that the same non-coverage proposal was initiated in
November 2012, and, in response to Plaintiff’s request for additional time, Defendant placed the
decision on hold for over two years. See Def.’s Br. (Doc. 14) at 11-12. Furthermore, Plaintiff’s
suggestion that another MAC, Palmetto, soon will be retained by Defendant to conduct a
reassessment, and that Palmetto may or will act as Plaintiff’s “white knight,” is rather
speculative, and seems a good bit of wishful thinking. See id. at 8 & n.9 (indicating that there is
no evidence of an agreement between Defendant and Palmetto, and that Palmetto has a history of
finding non-coverage for CSRA tests like Plaintiff’s).

In light of the foregoing, the non-coverage LCD hardly can be viewed as having come as
a surprise, nor is there a clear indication that a grant of Plaintiff’s presumedly modest request for
injunctive relief will result in a more favorable outcome. Under the circumstances, it seems
reasonably likely to conclude that Plaintiff’s business/litigation strategy is to avoid the noncoverage determination through whatever means, and for as long as is, possible. While Plaintiff
cannot be faulted for this approach, given how important Medicare coverage is to its business,
the Court believes that these considerations inevitably flavor both its request for injunctive relief,
specifically, and its decision to initiate this federal lawsuit, more generally.
These observations notwithstanding, the Court restricts its rulings and legal analyses to
Defendant’s Motion to Dismiss, which is well taken. In the absence of directly applicable Third
Circuit authority, the Court finds highly persuasive the decisions in Physician Hospitals of
America v. Sebelius, 691 F.3d 649 (5th Cir. 2012), National Athletic Trainers’ Association v.
HHS, 455 F.3d 500 (5th Cir. 2006) and, particularly, Vertos Medical, Inc. v. Novitas Solutions,
Inc., 2012 WL 5943542 (S.D. Tex. Nov. 27, 2012).1 All of these decisions recognize that a party
wishing to challenge a Medicare-related determination first must fulfill the “channeling
requirement” discussed in Illinois Council. Although there is an exception allowing immediate
federal-court review, it is a narrow one that applies only when administrative review “would
mean no review at all.” Physician Hospitals, 691 F.3d at 655 (references to cited and quoted
sources now, and hereafter, omitted). Such a narrow reading is necessitated by the nature of the
interests in balance:

Vertos Medical presented materially similar circumstances and legal issues, and Plaintiff’s
efforts to distinguish it are unavailing. To the extent that either party would wish for a more fullthroated discussion, the Court adopts and incorporates by reference the legal analyses in that
decision.
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Insofar as § 405(h) . . . demands the ‘channeling’ of virtually all legal attacks
through the agency, it assures the agency greater opportunity to apply, interpret,
or revise policies, regulations, or statutes without possibly premature interference
by different individual courts . . . . But this assurance comes at a price, namely,
occasional individual, delay-related hardship. In the context of a massive,
complex health and safety program such as Medicare, embodied in hundreds of
pages of statutes and thousands of pages of often interrelated regulations, any of
which may become the subject of a legal challenge in any of several different
courts, paying this price [is] justified [in the eyes of Congress and the Supreme
Court].
Illinois Council, 529 U.S. 1, 13 (2000).
It matters not whether Plaintiff has an individual right to further challenge the noncoverage LCD. So long as third parties have an aligned incentive, channeling is required.
Physician Hospitals, 691 F.3d at 658-59; National Athletic Trainers, 507-508; Vertos Medical,
2012 WL 5943542 at *6 (“the possibility of review is not completely precluded as long as third
parties, such as physicians or beneficiaries, have the ability and incentive to access . . .
administrative review”).2
Furthermore, any individual/financial hardship that Plaintiff may suffer, no matter how
purportedly extreme, does not qualify. See, e.g., Physician Hospitals (channeling required even
where administrative review would require plaintiff to “knock down two commercial buildings,
perfect financing, borrow tens of millions of dollars, finish the architectural and construction
plans, pay a contractor, take two years to build a new hospital, treat a patient in the expansion,

The availability of administrative review by proxy renders moot Plaintiff’s grievances
regarding the alleged mishandling of its request for reconsideration under the Medicare Program
Integrity Manual (“MPIM”). Cf. Order dated Jan. 20, 2016 (Doc. 19) at 1 (soliciting Defendant’s
reply regarding consequences of its potentially having “conflat[ed] the concepts of a ‘final’ noncoverage LCD and the ‘effective date’ of a final non-coverage LCD”). Even assuming
Defendant misapplied the MPIM, moreover, there is no indication that a substantively-based
reconsideration should or must toll the implementation of Defendant’s non-coverage LCD.
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bill Medicare, appeal the denial of the payment administratively, receive a final denial of claim,
and file a suit in federal court”).
Plaintiff’s attempts to distinguish the above-decisions are unconvincing. Although the
Court is not entirely unsympathetic regarding Plaintiff’s claim that implementation of the
non-coverage LCD may result in the loss of over 100 local-jobs, the company’s putative
financial hardships are inadequate grounds for the Court to intervene. The “no review”
exception applies a more categorical approach, and it requires the Court to examine hardship
“as applied generally to those covered by a particular statutory provision,” rather than “in an
isolated, particular case.” Physician Hospitals at 657. The outcome cannot properly turn on the
particular levels of solvency, capitalization and/or diversification enjoyed by Plaintiff. Under the
applicable legal standards, the result should not be different if Plaintiff was a richly funded
multi-national conglomerate, as opposed to a small local company. Nor would the result
properly differ if Plaintiff derived only nominal revenue from Medicare payments. The job and
revenue-related matters raised by Plaintiff are insufficient, and the Court would be constrained
from considering them even if it wanted to. Cf., e.g., Physician Hospitals at 658 (highlighting
plaintiff’s failure to show absence of “physician-owned hospitals with a low enough Medicare
. . . case mix” to financially sustain administrative challenge).
The proper question is, are there mechanisms for administrative review available to
persons with similarly-aligned interests, and the answer undoubtedly is, yes. In addition to the
substantial input that Plaintiff and its surrogates enjoyed in the rule-making process, including its
successful delay of the non-coverage determination in 2012, its lawyers candidly admit that
patient-beneficiaries successfully have challenged past denials of coverage. See Pl.’s Br.
(Doc. 4) at 6. While Plaintiff attempts to distinguish Vertos Medical because in this case,

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unlike there, the procedure involves the treatment of a life-threatening disease (cancer),
Plaintiff has neither asserted nor shown the absence of individual patients who could pay for the
test “out-of-pocket” until administrative review is completed, whether on a claim-specific or
LCD-wide basis. Physician’s Hospitals, 691 F.3d at 657 (“[t]here certainly have been attendant
costs to the operation of Section 405(h) that have not caused courts to waive the requirement,”
such as where a patient might have to pay for “a desired surgery . . . out of pocket prior to
bringing an administrative claim”). While the Court undeniably has sympathy for the plight of
Plaintiff’s patient-base, acting on those feelings, in the face of contrary applicable law, would
equate to inappropriate judicial activism (not to mention, likely reversible error).3
Finally, for the same reasons explained in Vertos Medical, Plaintiff cannot cloak its
requests for relief under the rubric of “mandamus” and achieve a different result. As there,
“[t]he decision [Plaintiff] challenges -- whether to place [its] procedure in the non-coverage
category of items and services -- is one that has divided MACs and provoked disagreement
within the medical research community. It can hardly be described as a ministerial duty so

An example where channeling was the “practical equivalent” of a total denial can be found in
Council for Urological Interests v. Sebelius, 668 F.3d 704 (D.C. Cir. 2011) (“CUI”). There,
the denial of coverage allowed the plaintiff’s putative proxies, hospitals, to acquire expensive
medical equipment at “fire-sale prices,” and the court determined that the proxies had, for this
and other reasons, “little incentive” to pursue plaintiff’s non-coverage challenges. Id. at 713;
accord Physician Hospitals, 691 F.3d at 657 (describing putative proxies in CUI as
“categorically misaligned”). The instant case obviously is distinguishable, as was the CUI
court’s observation that history confirmed the plaintiff’s assertions. Compare CUI, 668 F.3d
at 713 (“[i]n the three years since the Secretary announced the regulations, not one of the 5,795
hospitals in the United States has brought an administrative challenge”) with discuss in text,
supra (noting Plaintiff’s acknowledgement that patients successfully have challenged noncoverage determinations).
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plainly prescribed as to be free from doubt, as required for mandamus to issue.” Id., 2012 WL
5943542 at *8.4
In conclusion, Plaintiff’s attempted invocation of this Court’s jurisdiction is materially
indistinguishable from the plaintiff in Vertos Medical. Although the stakes of the patients here
undoubtedly are higher, the Court finds insufficient grounds for deviating from this and other
well-reasoned opinions. While the Court is not entirely unmoved by the plight of Plaintiff or its
patients, Plaintiff and its financial-backers cannot have been naïve to the potential risks in their
marketplace. In positioning itself to be so heavily reliant on Medicare funds, Plaintiff must
accept the possibility that an adverse coverage determination one day may result. The existence
and parameters of due-process rights notwithstanding, it seems wise to appreciate, on some level,
that what the government giveth, it may well end up taking away.
For the reasons stated herein, Defendant’s Motion to Dismiss (Doc. 13) has been granted,
and Plaintiff’s motion for a preliminary injunction (Doc. 3) has been denied as moot.
Contemporaneously herewith, the Court will enter judgment under Federal Rule of Civil
Procedure 58.
IT IS SO ORDERED.

February 1, 2016

s\Cathy Bissoon
Cathy Bissoon
United States District Judge

cc (via ECF email notification):
All Counsel of Record

For the reasons explained in Defendant’s reply brief (Doc. 22), the unavailability of mandamus
relief extends to Plaintiff’s grievances under the MPIM. See id. at 2-3; see also generally Vertos
Medical at *7-8.
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