D.C. District Court Upholds CMS’s 2020 Organ Procurement Rule

It’s been about a month since the U.S. District Court for the Middle District of Florida upheld the Centers for Medicare and Medicaid’s (CMS) final rule governing organ procurement organizations (OPM). (See our previous Client Alert here.) The U.S. District Court for the District of Columbia followed suit. In contrast to the Florida decision, the D.C. decision was brief and to the point. The rule establishes a competitive model for classifying OPOs under the following three tiers. 

• • Tier 1 refers to the highest-performing OPOs. Their donation and transplantation rates meet or exceed the top 25% rate of all 55 OPOs spanning the country. Tier 1 OPOs are automatically recertified for another four-year cycle.  
  • Tier 2 represents OPOs that do not meet the 25% threshold but meet the median. The OPO is required to recompete to retain their designated service area (DSA) or acquire another. If it is not successful in its competition, the OPO will not be renewed, but it will have an opportunity to compete for another DSA at the end of the following certification cycle. If an OPO is not successful in this subsequent competition, it will be decertified.  
  • Tier 3 refers to OPOs that do not meet the median in their DSA. This results in decertification at the end of the certification cycle following exhaustion of available appeal rights. 

There are no appeal rights to challenge CMS’s competition requirement, selection of a “winner” from that competition, or nonrenewal.  

CMS did not exceed its statutory authority 

The court rejected plaintiffs’ assertion that CMS’s new model established a zero-sum or “Hunger Games competition,” stating that “no OPO’s recertification depends upon another OPO being decertified.” The geographic exclusivity that results from OPOs assigned to specific DSAs “does not preclude accountability,” the court noted. The court further held that CMS did not exceed its authority in forcing Tier 2 OPOs to compete to retain their DSAs. “Given that the statute allows for competition over a DSA when an OPO is decertified, it follows that CMS may allow for competition over a DSA where an incumbent Tier 2 OPO is not recertified” because “CMS is simply applying its unchallenged authority for decertified OPOs to non-renewed Tier 2 OPOs.”   

In response to plaintiffs’ argument that hospitals must seek waivers to work with an OPO outside their DSA, the court stated that the hospital waiver process is “unrelated to the OPO certification process” and “says nothing about whether CMS can open DSAs to competition through the certification process.” The court also rejected plaintiffs’ argument that the absence of appeal rights for Tier 2 OPOs is contrary to statute in that non-renewals are “functionally equivalent” to a decertification. Tier 2 OPOs are not the equivalent of Tier 3 OPOs because Tier 2 OPOs can still compete to retain their DSAs. 

CMS’s rule did not violate the spending clause 

The court summarily disposed of what it refers to as plaintiffs’ “last-ditch attempt to set aside the 2020 rule.” Plaintiffs argued that CMS’s rule placed retroactive conditions on them that constitute a major change in violation of the Spending Clause insofar as they were not told they could be forced to compete against other OPOs to maintain federal funding. The court first disagreed that the rule made retroactive changes, stating that it only impacts “prospective cycles” and therefore “prospective funding.” It also denounced the contention that the rule constitutes a “major change” to the system governing OPOs. Again, the court stated that CMS had statutory authority to change its certification process to “incentivize” OPOs to meet “ambitious outcome measures.” The statute does not insulate OPOs from all competition in the certification process. 

The rule is not arbitrary and capricious 

CMS presented a “reasonable explanation” for using death-certificate data. The agency said a death certificate is superior to the prior self-reported eligible death data. This is supported by a peer-reviewed study that concluded death certificates were the “best and most comprehensive source for estimating donor potential” at the time. CMS was also justified in relying on only 12 months of data. The agency addressed concerns that the shorter period of data would lead to more variance by incorporating statistical confidence intervals to reduce data variability.  

Moreover, though plaintiffs may disagree with CMS’s decision not to include more demographic factors in its outcome measures, the agency “undoubtedly acted within the ‘zone of reasonableness’ in deciding that additional risk adjustments “would not be helpful,” the court said. CMS’s use of confidence intervals was “eminently reasonable.” 

Finally, CMS selected the 25% threshold to achieve the agency’s goal of doubling the number of kidney transplants by 2030. While CMS considered other thresholds, it rejected these alternatives because they would not adequately incentivize OPOs. The court also stated that CMS reasonably explained why the expected number of decertifications would not be “particularly disruptive.”  

Conclusion 

This second court decision paves the way for CMS’s full implementation of its 2020 Final Rule and precedes CMS’s promulgation of another Final Rule that further cements CMS’s new model for measuring OPO compliance, which we discuss in our November 9 Client Alert. While there are still several lawsuits pending, including an appeal of the Middle District of Florida decision, it seems unlikely at this point that OPOs will obtain relief as the end of the certification cycle nears.

Our legal team is ready and available to help health care entities navigate this unprecedented period. For further details or clarification, please contact the author of this alert or your preferred Crowell & Moring lawyer.