Case Name: AMERICAN ACADEMY OF OPHTHALMOLOGY, INC.; the Cleveland Ophthalmological Society, Plaintiffs-Appellants, Academy of Medicine of Cleveland, Plaintiff-Intervenor-Appellant, v. Louis SULLIVAN, M.D., Secretary, United States Department of Health and Human Services; and Gail R. Wilensky, Ph.D., Administrator, Health Care Financing Administration, United States Department of Health and Human Services, Defendants-Appellees
Court: United States Court of Appeals for the Sixth Circuit
Jurisdiction: United States
Decision Date: 1993-07-09
Citations: 998 F.2d 377
Docket Number: No. 92-3706
Parties: AMERICAN ACADEMY OF OPHTHALMOLOGY, INC.; the Cleveland Ophthalmological Society, Plaintiffs-Appellants, Academy of Medicine of Cleveland, Plaintiff-Intervenor-Appellant, v. Louis SULLIVAN, M.D., Secretary, United States Department of Health and Human Services; and Gail R. Wilensky, Ph.D., Administrator, Health Care Financing Administration, United States Department of Health and Human Services, Defendants-Appellees.
Judges: Before: KENNEDY and SILER, Circuit Judges, and CONTIE, Senior Circuit Judge.
Reporter: Federal Reporter 2d Series
Volume: 998
Pages: 377–390

Head Matter:
AMERICAN ACADEMY OF OPHTHALMOLOGY, INC.; the Cleveland Ophthalmological Society, Plaintiffs-Appellants, Academy of Medicine of Cleveland, Plaintiff-Intervenor-Appellant, v. Louis SULLIVAN, M.D., Secretary, United States Department of Health and Human Services; and Gail R. Wilensky, Ph.D., Administrator, Health Care Financing Administration, United States Department of Health and Human Services, Defendants-Appellees.
No. 92-3706.
United States Court of Appeals, Sixth Circuit.
Argued May 3, 1993.
Decided July 9, 1993.
Rehearing and Suggestion for Rehearing En Banc Denied Aug. 24, 1993.
Walter J. Rekstis, III, Lisa R. Battaglia, Squire, Sanders & Dempsey, Cleveland, OH, James H. Curtin (briefed), James B. Lynch (argued & briefed), Dorsey & Whitney, Minneapolis, MN, for plaintiffs-appellants.
Michael Anne Johnson, Asst. U.S. Atty., Cleveland, OH, Robert M. Loeb (argued & briefed), Barbara C. Biddle, U.S. Dept, of Justice, Appellate Staff, Civil Div., Washington, DC, Elaine Romberg, U.S. Dept, of Justice, Civil Div. Federal Programs Branch, Washington, DC, for defendants-appellees.
Before: KENNEDY and SILER, Circuit Judges, and CONTIE, Senior Circuit Judge.

Opinion:
CONTIE, Senior Circuit Judge.
The American Academy of Ophthalmology, Inc., The Cleveland Ophthalmological Society, and (intervenor) Academy of Medicine of Cleveland initiated this action seeking to enjoin the Department of Health and Human Services from conducting the "Medicare Cataract Surgery Alternate Payment Demonstration," a demonstration project designed to test an alternative method of paying for outpatient cataract surgery and related treatments. The plaintiffs-appellants contend that the demonstration project exceeds the Secretary's statutory authority and violates their constitutional rights to equal protection. Upon cross-motions for summary judgment, the district court rejected the plaintiffs-appellants' arguments and granted summary judgment to the government. We affirm the district court's Opinion and Order for the following reasons.
I.
In 1965, Congress enacted the "Federal Health Insurance for the Aged and Disabled" program, more commonly known as the Medicare Act. The Medicare program consists of two parts. Part A covers services furnished by hospitals and other institutional providers. 42 U.S.C. § 1395c-1395i-4. Part B provides supplemental medical insurance benefits for certain medical and health care services, including physician services. 42 U.S.C. § 1395j-1395w-4. Part B is administered through contracts with certain insurance companies who serve as local carriers. Part B covers eligible persons who voluntarily enroll and agree to pay monthly premiums. 42 U.S.C. § 1395j. These premiums, together with'federal government contributions, provide the fund for the payment of benefits. The Medicare Act is administered at the direction of the Secretary of Health and Human Services ("HHS"). The component of HHS that is primarily responsible for administering the Medicare program is the Health Care Financing Administration ("HCFA").
Prior to 1992, reimbursement for physician services to Medicare beneficiaries under Part B was based entirely on the "reasonable charge" for such services. 42 U.S.C. § 1395u. The reasonable charge was defined as the lowest of the actual charge, the physician's customary charge for the service, or the prevailing charge for the service in the community, subject to limitations on annual increases determined by the Medicare economic index. 42 U.S.C. § 1395u(b)(3). Beginning in 1992, however, HHS and HCFA started to phase in a new system for payment of physician services based on a resource-based relative value scale, or fee schedule, instead of the "reasonable charge" method in use prior to 1992. 42 U.S.C. § 1395w-4. The fee schedule is based on the government's evaluation of the resources a physician devotes to a particular service or procedure.
Physicians have two options for receiving payment for the services they provide to Medicare beneficiaries. A physician may accept the beneficiary's assignment of Medicare benefits, in which case the physician agrees to accept the established Medicare fee schedule amount as full payment for all covered services provided to Medicare beneficiaries. Medicare, through the local carrier, directly pays the physician 80% of the fee schedule amount. The beneficiary is required to pay the remaining 20% (the coinsurance amount). Beneficiaries must also pay an annual deductible of $100.
Alternatively, a physician may decline to accept assignment. In such cases, Medicare pays 80% of the fee schedule amount, and the beneficiary pays the coinsurance amount plus any difference between the physician's charge and the fee schedule amount.
Physicians have two options when dealing with the Medicare program. A physician may become a "participating physician," in which case the physician agrees to accept assignment of Medicare benefits for all Part B services that the physician provides. 42 U.S.C. § 1395u(h). Alternatively, a physician may decline to become a "participating physician," in which case the physician may accept or decline the assignment of Medicare benefits on a case-by-case basis.
A cataract is a condition of the eye in which the eye's natural crystalline lens becomes clouded and impairs vision. In cataract surgery, the ophthalmologist removes the opacified portion of the lens and replaces it with a clear plastic intraocular lens ("IOL"). The care required for patients who undergo cataract surgery with IOL implantation varies. • Many patients are able to undergo the surgery on an outpatient basis. Other patients, however, are at higher risk for complications and must undergo cataract surgery on an inpatient basis, or may require additional preoperative or postoperative care. Cataract surgeries are performed on Medicare beneficiaries more often than any other outpatient procedure, and a majority of the patients who undergo cataract surgery are Medicare beneficiaries. The HCFA estimated that in 1991 approximately one million cataract procedures were performed on Medicare beneficiaries at a cost of more than three billion dollars.
Under the Part B insurance payment scheme, HCFA pays for each item and service provided to a patient in connection with outpatient cataract surgery on a separate fee basis. In a typical cataract surgery episode, HCFA may separately pay for: a preoperative examination to determine the presence of the cataract; a comprehensive physical; presurgical diagnostic tests; a preoperative surgical evaluation; surgery (including separate payments for the services of the ophthalmologist and the anesthetist); pathology of the removed lens; the surgery center fee; final refraction of the patient's post-surgical vision; and, a long-term follow-up examination.
The Medicare Act ("Act") authorizes the Secretary of HHS to "develop and engage in experiments and demonstration projects," 42 U.S.C. § 1395b-1(a)(1),
to determine whether, and if so which, changes in methods of payment or reimbursement ., including a change to methods based on negotiated rates, would have the effect of increasing the efficiency and economy of health services . without adversely affecting the quality of such services.
42 U.S.C. § 1395b-1(a)(1)(A). Moreover, when conducting an experiment or demonstration project, the Secretary:
may waive compliance with the requirements of [the Medicare Act] . insofar as such requirements relate to reimbursement or payment on the basis of reasonable cost, or (in the case of physicians) on the basis of reasonable charge, or to reimbursement or payment only for such services or items as may be specified in the experiment; and costs incurred in such experiment or demonstration project in excess of the costs which would otherwise be reimbursed or paid [under the Medicare Act] may be reimbursed or paid to the extent that such waiver applies to them (with such excess being borne by the Secretary).
42 U.S.C. § 1395b-1(b).
Recognizing the inefficiency of the current cataract surgery payment system, HCFA awarded a contract to a private consulting firm in 1989 to assist in the design and evaluation of a demonstration project to test the feasibility and effectiveness of an alternative pricing arrangement for cataract surgeries. In September 1990, HCFA proposed a demonstration project, the "Medicare Cataract Surgery Alternate Payment Demonstration," to examine the feasibility of paying for cataract surgeries and all related tests, services and examinations with one single negotiated fee.
On March 19, 1991, HHS and the HCFA announced that Cleveland, Ohio was chosen as one of three sites for the Cataract Demonstration. Participation in the demonstration is purely voluntary for both providers and beneficiaries. Ophthalmologists and facilities interested in becoming demonstration providers were required to submit a letter of interest and a completed pre-application form. Invitations to submit Final Applications for participation in the Cataract Demonstration were extended only to those providers who submitted the pre-application and letter of interest. Providers not participating in the demonstration will continue to operate under the ordinary Part B payment scheme, and beneficiaries will remain free to select the health care provider of their choice. Though the appellees anticipated that the three-year demonstration would begin January 1, 1992, the demonstration project has not yet begun.
Under the proposed demonstration project, HCFA would waive the present payment methodology applicable to the various services included in a typical cataract surgery episode for those participating in the project. HCFA and the participating facility would negotiate for a single "bundled" fee that would cover pre-operative tests and evaluations, surgery services (including the surgeon's and anesthesiologist's services, the intraocular lens, and the pathology of the removed lens), and post-operative examinations and final refraction. The negotiated fee would not cover diagnostic tests or exams to determine the need for surgery, the general physical exam and medical release necessary for surgery, inpatient cataract surgeries, or complicated out-patient surgeries.
On May 1,1991, the American Academy of Ophthalmology ("American Academy") and the Cleveland Ophthalmologieal Society ("Cleveland Society") initiated this action against Louis Sullivan, M.D., Secretary of HHS, and Gail R. Wilensky, Ph.D., Administrator of HCFA (collectively the "appellees"), seeking declaratory and injunctive relief to prevent the Secretary from implementing the demonstration project. The plaintiffs-appellants alleged that the proposed demonstration project violates numerous provisions of the Medicare Act: § 1395b — 1(b) (the demonstration project waiver provision); § 1320a-7b (the anti-fraud provision); § 1395a (the freedom of choice provision); and, § 1395 (prohibiting the Secretary from exercising control or supervision over the practice of medicine). Moreover, the plaintiffs-appellants alleged that the demonstration project violates their equal protection rights.
On June 10, 1992, the district court granted summary judgment to the defendants. The district court rejected plaintiffs' contention that the demonstration project exceeds the Secretary's authority under 42 U.S.C. § 1395b-1(a). The court explained that "Congress has provided the Secretary with the authority to develop experiments in an effort to increase Medicare's efficiency, and the Cataract Demonstration is just such an experiment, limited in duration and location, as well as being vastly restricted in scope and application." District Court's Memorandum of Opinion and Order Granting Defendants' Motion For Summary Judgment and Overruling Plaintiffs' Motion For Partial Summary Judgment ("District Court's Opinion and Order") at 17, 1992 WL 227769.
The district court further held that the Secretary's decisions to waive the usual payment system, and to waive the beneficiary's copayment, were well within the Secretary's waiver powers under 42 U.S.C. § 1395b-1(b). The court rejected plaintiffs' argument that the Secretary's waiver power is limited to payment and reimbursement schemes based upon a "reasonable cost/charge" payment system and explained that the Secretary may waive certain statutory requirements where these requirements relate to reimbursement or payment for such services or items "as may be specified in the experiment," District Court's Opinion and Order at 15, adding that "the Secretary has specified the services and items for which the statutory requirements pertaining to reimbursement or payment will be waived; accordingly the Secretary has stayed within his statutory authority." Id.
The district court further noted that if there was "some ambiguity in the statute," id. at 16, then the court "must defer to [the Secretary's] construction even if it may not be the only or even the most reasonable one." Id. The district court concluded that the Secretary's construction was entirely reasonable, if not compelled, by the plain language of the statute. Id.
The district court also rejected plaintiffs' argument that the demonstration project's payment methodology, under which HCFA may pay as much as 100 percent of the price for the medical services rendered, violates the Medicare Act's fraud and abuse statute, 42 U.S.C. § 1320a-7b(b)(1), which bars a physician from regularly waiving his patients' 20 percent copayments.
The district court also rejected plaintiffs' claims that the demonstration project violated the Medicare "freedom of choice" provision, 42 U.S.C. § 1395a, and the Medicare provision regarding the exercise of supervision and control over the practice of medicine, 42 U.S.C. § 1395. The court determined that the demonstration project does not violate a patient's freedom of choice because, under the project, a patient remains free to choose a health care provider who is not participating in the project. Moreover, the district court explained that in deciding to bundle cataract surgery services the Secretary is "not exercising control and supervision over the practice of medicine, but rather [is] making policy decisions in an effort to regulate Medicare coverage." District Court's Opinion and Order at 25.
Finally, the district court held that the cataract demonstration project does not violate the plaintiffs' constitutional equal protection rights because "there is a legitimate governmental purpose — testing alternative payment methodologies — underlying the Cataract Demonstration and . the Demonstration is rationally related to that legitimate purpose." Id. at 27.
The plaintiffs timely filed their notice of appeal on July 10, 1992.
II.
Standard of Review
Summary judgment is appropriate where "there is.no genuine issue as to any material fact and . the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56. A district court's grant of summary judgment is reviewed de novo. Pinney Dock & Transp. Co. v. Penn Cent. Corp., 838 F.2d 1445, 1472 (6th Cir.), cert. denied, 488 U.S. 880, 109 S.Ct. 196, 102 L.Ed.2d 166 (1988). In its review, this court must view all facts and inferences drawn therefrom in the light most favorable to the nonmoving party. 60 Ivy St. Corp. v. Alexander, 822 F.2d 1432, 1435 (6th Cir.1987).
The moving party has the burden of conclusively showing that no genuine issue of material fact exists. Id. Nevertheless, in the face of a summary judgment motion, the nonmoving party cannot rest on its pleadings but must come forward with some probative evidence to support its claim. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986); 60 Ivy St. Corp., 822 F.2d at 1435.
"By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986) (emphasis in original). The dispute must be genuine and the facts must be such that if they were proven at trial, a reasonable jury could return a verdict for the nonmoving party. 60 Ivy St. Corp., 822 F.2d at 1435. If the disputed evidence "is merely colorable or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50, 106 S.Ct. at 2511 (citations omitted).
Waiver of Medicare Reimbursement Requirements
Appellants contend that the Secretary lacks the authority to waive the customary Medicare payment and reimbursement requirements. The appellees maintain that the plain language of the Medicare Act provides the Secretary with such authority. The Act provides:
(b) Waiver of certain payment or reimbursement requirements; advice and recommendations of specialists preceding experiments and demonstration projects In the ease of any experiment or demonstration project under subsection (a) of this section, the Secretary may waive compliance with the requirements of this sub-chapter and subchapter XIX of this chapter insofar as such requirements relate to reimbursement or payment on the basis of reasonable cost, or (in the case of physicians) on the basis of reasonable charge, or to reimbursement or payment only for such services or items as may be specified in the experiment; and costs incurred in such experiment or demonstration project in excess of the costs which would otherwise be reimbursed or paid under such subchapters may be reimbursed or paid to the extent that such waiver applies to them (with such excess being borne by the Secretary).
42 U.S.C. § 1395b-1(b). The parties agree that the waiver in the instant action pertains only to items and services specified in the cataract demonstration.
The appellants' contention that the ordinary Medicare payment rules cannot be replaced by a negotiated bundled payment scheme is contradicted by the Act's plain language. The Act expressly allows the Secretary to carry out demonstration projects to test whether changes in the methods of payment and reimbursement, including changes based upon the use of "negotiated rates, would have the effect of increasing the efficiency and economy of health services . without adversely affecting the quality of such services." 42 U.S.C. § 1395b-1(a)(1)(A).
When a court reviews an agency's interpretation of a statute which the agency administers, the court must undertake a two-step inquiry. Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-44, 104 S.Ct. 2778, 2781-83, 81 L.Ed.2d 694 (1984). If Congress has directly spoken on the "precise question at issue," the court "must give effect to the unambiguously expressed intent of Congress." Id. at 842-43, 104 S.Ct. at 2781-82. If the statute is silent or ambiguous with respect to the precise question at issue, the court may not simply impose its own construction. Id. at 843, 104 S.Ct. at 2782. Rather, the court must determine "whether the agency's answer is based on a permissible construction of the statute." Id. Simply stated, "a court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency." Id. at 844, 104 S.Ct. at 2782. See also National R.R. Passenger Corp. v. Boston & Maine Corp., — U.S.-,-, 112 S.Ct. 1394, 1401, 118 L.Ed.2d 52 (1992) ("Judicial deference to reasonable interpretations by an agency of a statute that it administers is a dominant, well settled principle of federal law . [i]f the agency interpretation is not in conflict with the plain language of the statute."); Wayside Farm, Inc. v. HHS, 863 F.2d 447, 451-52 (6th Cir.1988) (a court must uphold the Secretary's construction of the Medicare Act unless the Secretary's construction is plainly unreasonable).
Accordingly, even if 42 U.S.C. § 1395b-1(b) was deemed ambiguous, the inquiry is not how appellants would prefer to construe this statute, but whether the agency's construction of the statute is permissible.
The district court rejected the plaintiffs-appellants' claim that the Act does not permit the Secretary to implement the Cataract Demonstration:
The Court finds that the Cataract Demonstration does not exceed the Secretary's waiver authority under 42 U.S.C. § 1395b-1(b). Section 1395b-1(b) provides, in relevant part, that the Secretary may waive compliance with deductible and coinsurance requirements insofar as such requirements relate to: (1) reimbursement or payment on the basis of reasonable cost, or (in the case of physicians) on the basis of reasonable charge; or (2) reimbursement or payment only for such services or items as may be specified in the experiment. The plaintiffs have focused their arguments on limitation (1); however, the Court finds that provision (2) permits the Secretary to waive certain statutory requirements where these requirements relate to reimbursement or payment only for such services or items as may be specified in the experiment. The Court finds that the defendants have adhered to this provision in designing and implementing the Cataract Demonstration, i.e., the Secretary is authorized to conduct the Cataract Demonstration which will test whether a change from existing payment methods to one based on "negotiated rates" is advisable, so long as the Secretary "specifie[s] in the experiment" the "services or items" for which the statutory requirements pertaining to reimbursement or payment would be waived during the course of the demonstration. In the Cataract Demonstration, the Secretary has specified the services and items for which the statutory requirements pertaining to reimbursement or payment will be waived; accordingly, the Secretary has stayed within his statutory authority.
The Court further finds that Congress has directly spoken to the precise question at issue. As such, the Court must give effect to the unambiguously expressed intent of Congress. Accordingly, the defendants have not exceeded their authority to waive deductible and coinsurance requirements under the Cataract Demonstration.
Even if the Court agreed with the plaintiffs that there was some ambiguity in the statute or that the statute was silent on the issue, the Court does not simply impose its own construction on the statute as would be necessary in the absence of an administrative interpretation. Under these circumstances, where the agency's construction is reasonable, the Court must defer to that construction even if it may not be the only or even most reasonable one. Accordingly, the Court finds that the Secretary's construction is reasonable, and that the Cataract Demonstration does not exceed the defendants' waiver authority for Medicare experiments and demonstration projects under 42 U.S.C. § 1395b-1. The Court further finds that the defendants' actions in this regard are not arbitrary, capricious, nor an abuse of discretion.
The defendants have designed the Cataract Demonstration to test the feasibility of an alternate pricing arrangement for episodes of cataract surgery. The Demonstration is an experimental program limited in duration and location. The Demonstration shall run for three years. At the end of the three years, the project shall be terminated, and a final evaluation report shall be made. Also, the Demonstration shall be limited to three geographic areas — Cleveland, Ohio and Dallas-Ft. Worth, Texas. The third area was Albany, New York, which has been dropped from the Demonstration due to lack of interest, and a new location is now being considered.
The Demonstration does not alter or modify the whole Medicare program; it does not affect Medicare's coverage of all medical services, medical items, and health care providers. Instead, the Demonstration touches only cataract surgeries and, in fact, only specified varieties of cataract surgeries. Further, patient as well as health care provider participation is strictly voluntary in the Demonstration. The remainder of the Medicare program, namely, health care providers and patients, will continue to operate on the traditional fee-for-service payment methodology and will be unaffected by the Demonstration. Congress has provided the Secretary with the authority to develop experiments in an effort to increase Medicare's efficiency, and the Cataract Demonstration is just such an experiment, limited in duration and location, as well as being vastly restricted in scope and application.
District Court's Memorandum of Opinion and Order at 14-17.
The statute expressly allows demonstration projects to test the use of "negotiated rates," and permits the waiver of payment and reimbursement rules "for such services or items as may be specified" in the project. 42 U.S.C. § 1395b-1. Accordingly, it is reasonable to construe § 1395b-1 to allow the Secretary to waive the payment and reimbursement rules otherwise applicable to the items and services specified in the cataract alternative payment demonstration project, and to permit the payment of a negotiated fee rate instead.
Though the Act allows.for the waiver of reimbursement and payment rules for "such services or items as may be specified" in the demonstration project, 42 U.S.C. § 1395b-1(b), the appellants contend that the waiver provision should be read to permit waiver only of items and services that are otherwise paid on a "reasonable cost" or "reasonable charge" basis. Prior to 1972, 42 U.S.C. § 1395b-1(b) provided that, when conducting an experiment, the Secretary could waive the requirements of the Medicare Act "insofar as such requirements relate to reimbursement or payment on the basis of reasonable cost, or (in the case of physicians) on the basis of reasonable charge." In , 1972, Congress amended this language to expand the Secretary's waiver authority to the current text in order to permit a wider variety of demonstration projects to test alternative payment schemes, including payment schemes based upon negotiated rates. Specifically, Congress added the following language (italicized) to the 1968 waiver provision:
[S]uch requirements relate to reimbursement or payment on the basis of reasonable cost, or (in the case of physicians) on the basis of reasonable charge, or to reimbursement or payment only for such services or items as may be specified in the experiment.
Pub.L. No. 92-603, § 222(b)(2), 86 Stat. 1393 (1972).
Pursuant to the 1972 amendment, it is reasonable to construe section 1395b-1(b) to allow the Secretary to establish a demonstration project to test a negotiated rate system of reimbursement so long as the items and services covered by the experimental rate system are specified in the project.
Though the appellants assert that the parenthetical in the 1972 amendment restricts the Secretary's authority to waive reimbursement and payment rules for physician services that are based upon a "reasonable charge" only, the appellants' construction of § 1395b-1(b) would emasculate the Secretary's waiver power because physician services are now based upon fee schedules, not upon a "rea sonable charge" methodology. 42 U.S.C. § 1395W-4.
Because the statutory language supports the Secretary's power to establish a demonstration project to test a negotiated rate payment system, and grants the Secretary authority to waive the payment and reimbursement rules for the services specified in the project, we reject the appellants' claim that the demonstration project violates section 1395b-1.
Medicare's Anti-Fratid and Freedom of Choice Provisions
A. Anti-Fraud
The cataract demonstration requires that HCFA and interested participants negotiate a bundled rate to cover the cost of an ordinary cataract surgery episode. In theory, the negotiated rate agreed to by HCFA and the participant could provide for HCFA paying 100 percent of the agreed costs. If HCFA agreed to pay 100 percent, then the patient would not have to pay the ordinary 20 percent copayment. HCFA's payment could be as low as the standard 80 percent, however, with the beneficiary responsible for the remainder.
Plaintiffs argue that HCFA's payment of 100 percent of the costs under the demonstration project would violate the Act's "anti-fraud" statute, 42 U.S.C. § 1320a-7b, and "freedom of choice" provision, 42 U.S.C. § 1395a. The district court rejected these arguments.
42 U.S.C. § 1320a-7b(b)(1) ("Illegal remunerations") provides:
(1) whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind—
(A) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under subehapter XVIII of this chapter or a State health care program, or
(B) in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under subchapter XVIII of this chapter or a State health care program,
shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both.
Id.
The district court held:
The Court finds that the Cataract Demonstration does not violate the Medicare Fraud and Abuse statute, 42 U.S.C. §. 1320a-7b(b). Under the Demonstration, the HCFA may approve a payment methodology where Medicare will pay 100 percent of the total package price for the cataract surgery. As the defendants have pointed out, there are numerous situations in which Medicare pays 100 percent of the cost for medical services. Pursuant to the Secretary's authority to conduct demonstration projects, he has designed a project to test the merits of a bundled payment methodology. Regardless of whether the alternative payment methodology is viewed as including deductible and copayment waiver or as Medicare paying 100 percent of the total package price, no one is being misled, deceived, or misdirected. The court further finds that the defendants' actions in this regard are not arbitrary, capricious, or an abuse of discretion.
District Court's Opinion and Order at 22.
The appellees argue that, subsequent to the district court's decision, this issue has become moot because:
it has become crystal clear that the negotiated rates that will be employed by all of the facilities participating in the demonstration project will require HCFA to pay only the ordinary 80 percent and the beneficiary will still pay the standard 20 percent copayment. All of the contracts in the project are now either final or near final, but in every case the parties have agreed to retain the ordinary 80 percent to 20 percent HCFA-beneficiary payment ratio.
Appellee's Brief at 32.
In support thereof, the HCFA director announced (in relevant part):
1. I am the Director of the Office of Research and Demonstrations, Health Care Financing Administration (HCFA).... Some of the responsibilities of the office are to design, implement, and evaluate research and demonstration projects that have the possibility of improving the efficiency and effectiveness of the Medicare program.
4. The proposed demonstration project has progressed beyond the solicitation and review process. Final provider sites have been recommended by an internal and external group of clinical and technical experts, and HCFA has conducted negotiations with the providers in all three geographic areas: Cleveland, Dallas-Fort Worth and Phoenix. The Albany-Troy area was dropped from consideration because of a lack of interest in the project by the area providers, and Phoenix was substituted in its place.
6. During July and August 1992, negotiations were held with the remaining providers in the geographic areas of Cleveland and Dallas-Fort Worth, and in September, we conducted negotiations with the Phoenix providers. HCFA now anticipates implementing the demonstration in three provider settings in Cleveland, two in Dallas-Forth Worth and one in Phoenix on the same basic timeframe. These six provider groups are the final participants at this time, and we do not plan to add additional areas or provider groups in the existing areas.
7. In all 3 areas, HCFA and each individual provider have agreed on many specific details including a combined price for cataract surgery for both physician and facility components. This combined price is less than what Medicare would pay absent the demonstration. The Medicare beneficiary will continue to be responsible for deductible and coinsurance under the demonstration at each provider location. The beneficiaries' coinsurance amount will be established at 20 percent of the individual provider's combined price for the cataract surgery.
Third Declaration of Joseph R. Antos, Ph.D. at 1-3.
Because Director Antos' declaration clearly reveals that the agreements do not contain the contested features of the Cataract Demonstration, we need not address the appellants' claim under 42 U.S.C. § 1320a-7b. See United States Parole Comm'n v. Geraghty, 445 U.S. 388, 396, 100 S.Ct. 1202, 1208, 63 L.Ed.2d 479 (1980) (a case becomes moot when the disputed issues are no longer "live" or the parties have no personal stake in the outcome); Zanders v. O'Gara-Hess & Eisenhardt Armoring Co., 952 F.2d 404 (6th Cir.1992) (unpublished) ("[WJhen the plaintiff receives the relief he seeks, . the case becomes moot.").
B. Freedom of Choice
The appellants claim that the demonstration project will impair a Medicare beneficiary's right to select a qualified health care provider as guaranteed under the Medicare Act. 42 U.S.C. § 1395a. The district court rejected this claim:
The Court finds that the Cataract Demonstration does not violate the Medicare freedom of choice provisions of 42 U.S.C. § 1395a. A patient in need of cataract surgery, or any medical care, considers many factors when choosing a particular physician to perform the surgery, i.e., quality of care, reputation of the physician, cost to the patient, location of the physician, availability of the physician, etc. Cost to the patient is but one of many factors. Accordingly, a patient seeking cataract surgery remains free to choose a Demonstration provider or a non-Demonstration provider. It is not as if the Demonstration creates exclusive providers for cataract surgery. The Court further finds that the defendants' actions in this regard are not arbitrary, capricious, nor an abuse of discretion.
District Court's Opinion and Order at 24.
Because the cataract demonstration does not compel Medicare beneficiaries to use any particular doctor or facility, we reject the appellants' "freedom of choice" claim.
Supervision and Control Over the Practice of Medicine
Appellants assert that the negotiated payments will dictate the type and level of care that will be offered by doctors and that this is tantamount to "supervision and control" of the practice of medicine in violation of the Act which provides:
Nothing in this subchapter shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine or the manner in which medical services are provided, [or] to exercise any supervision or control over the administration or operation of any such institution, agency, or person.
42 U.S.C. § 1895. The district court rejected the appellants' contention:
The Court finds that the Cataract Demonstration does not enable the defendants to exercise illegal supervision over the practice of medicine in violation of 42 U.S.C. § 1395. In making the decisions as to what services will be included in the bundle, the defendants are not exercising control and supervision over the practice of medicine, but rather the defendants are making policy decisions in an effort to regulate Medicare coverage. The Court finds that the Demonstration does not create a clear incentive for ophthalmologists not to prescribe care above and beyond that which is included in the bundled items in a complex case. Such an assertion is unfounded. Further, the Court finds that the Demonstration's alternative payment methodology may affect patient patterns; however, this does not amount to supervising or controlling the practice of medicine. The Court further finds that the defendants' actions in this regard are not arbitrary, capricious, nor an abuse of discretion.
District Court's Opinion and Order at 25-26. We agree.
The experimentation with a bundled payment does not control or compel the type of services provided. It is the health care provider, not the Secretary, who decides what type of services are required. If a patient has a complicated case that requires care beyond that encompassed by the project, then that treatment will be paid by HCFA under the ordinary fee-for-service payment scheme. Because this project does not serve as a mechanism to supervise or control the practice of medicine, we reject the appellants' third assignment of error.
Equal Protection
Appellants argue that the Secretary is violating their equal protection rights by paying 100 percent of the costs under the demonstration project.
The district court rejected the appellants' equal protection claim:
The Court finds that the Cataract Demonstration does not deny ophthalmologists equal protection of the laws in violation of the due process clause of the fifth amendment to the Constitution. The Court finds that there is a legitimate governmental purpose — testing alternative payment methodologies — underlying the Cataract Demonstration, and that the Demonstration is rationally related to that legitimate purpose.
District Court's Opinion and Order at 27.
In light of Director Antos' declaration, this issue is rendered moot and need not be addressed because the demonstration project's negotiated contracts do not call for 100% reimbursement.
III.
We AFFIRM the district court's Opinion and Order for the aforementioned reasons.
. 42 U.S.C. § 1395a provides:
Any individual entitled to insurance benefits under this subchapter may obtain health services from any institution, agency, or person qualified to participate under this subchapter if such institution, agency, or person undertakes to provide him such services.