Court Opinion

ID: 1041690
Source: CourtListenerOpinion
Date Created: 2013-09-23 17:25:46.766402+00
Date Added: 2024-06-11T12:50:04.506027
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

YAKIMA VALLEY MEMORIAL                    No. 12-35652
HOSPITAL, a Washington nonprofit
corporation,                                 D.C. No.
               Plaintiff-Appellant,       2:09-cv-03032-
                                               EFS
                 v.

WASHINGTON STATE DEPARTMENT                 OPINION
OF HEALTH; MARY C. SELECKY, in
her official capacity as Secretary of
the Washington State Dept. of
Health,
                Defendants-Appellees,

                and

YAKIMA HMA, LLC, DBA Yakima
Regional Medical and Cardiac
Center,
             Intervenor-Defendant.

      Appeal from the United States District Court
        for the Eastern District of Washington
       Edward F. Shea, District Judge, Presiding

                 Argued and Submitted
           June 4, 2013—Seattle, Washington

               Filed September 23, 2013
2 YAKIMA VALLEY MEM’L HOSP. V. DEP’T OF HEALTH

      Before: M. Margaret McKeown and Sandra S. Ikuta,
     Circuit Judges, and Cormac J. Carney, District Judge.*

                  Opinion by Judge McKeown

                           SUMMARY**

                       Constitutional Law

   Affirming the district court’s summary judgment, the
panel held that Washington State Department of Health
Certificate of Need regulations did not violate the dormant
Commerce Clause.

    The regulations provided that hospitals without on-site
cardiac surgical facilities could perform elective percutaneous
coronary interventions, which are nonsurgical procedures
used to treat coronary heart disease, only if they obtained a
Certificate of Need demonstrating sufficient need in the
region to support an annual minimum volume. The panel
held that the regulations did not violate the dormant
Commerce Clause, which prohibits states from discriminating
against interstate commerce, because the impact on interstate
commerce, if any, was highly attenuated, and did not
outweigh the safety benefits of the regulations.

 *
  The Honorable Cormac J. Carney, District Judge for the U.S. District
Court for the Central District of California, sitting by designation.
  **
     This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
   YAKIMA VALLEY MEM’L HOSP. V. DEP’T OF HEALTH 3

                         COUNSEL

James L. Phillips (argued), Miller Nash LLP, Seattle,
Washington, for Plaintiff-Appellant.

Pamela Anderson (argued) and Richard A. McCartan,
Assistant Attorneys General, Olympia, Washington, for
Defendants-Appellees.

                         OPINION

McKEOWN, Circuit Judge:

    This appeal involves a constitutional challenge under the
Commerce Clause to Washington State Department of Health
(“Department”) Certificate of Need (“Certificate”)
regulations. In particular, the challenge targets regulations
related to scheduled, or “elective,” percutaneous coronary
interventions (“PCIs”), which are nonsurgical procedures
used to treat coronary heart disease. Hospitals without on-site
cardiac surgical facilities may perform elective PCIs only if
they obtain a Certificate demonstrating sufficient need in the
region to support an annual minimum volume. Yakima
Valley Memorial Hospital (“Memorial”) claims the
requirement that elective PCIs be performed only at hospitals
that have a minimum annual volume of 300 procedures lacks
a reasonable basis and that its putative benefits, including
safety, are outweighed by the burdens it places on interstate
commerce, thus violating the dormant Commerce Clause.
We disagree. The impact on interstate commerce, if any, is
highly attenuated, and does not outweigh the safety benefits
of the regulations. We affirm the district court’s dismissal of
Memorial’s claims at summary judgment.
4 YAKIMA VALLEY MEM’L HOSP. V. DEP’T OF HEALTH

                            BACKGROUND

    PCI, a nonsurgical procedure used to treat coronary heart
disease, includes balloon stenting and angioplasty. The
procedure involves removing arterial plaque, thereby clearing
out obstructed coronary arteries and ameliorating the effects
of heart disease. Elective PCIs are performed when the
patient is stable and no medical emergency requires
immediate action. Washington law requires healthcare
providers to obtain a Certificate1 in order to offer certain
facilities and services, including elective PCIs. Wash. Rev.
Code § 70.38.105. Before 2007, only hospitals that had on-
site surgical facilities were permitted to perform elective
PCIs. In 2007, the state legislature directed the Department
to promulgate elective PCI regulations for hospitals that, like
Memorial, do not otherwise perform on-site cardiac surgery.
Id. § 70.38.128. Factors to be considered included, among
others, “access to care, patient safety, [and] quality
outcomes . . . .” Id.

   The Department worked with Health Management
Associates (“HMA”), an operator of acute-care hospitals, on

  1
    Earlier federal laws from the 1970s, now repealed, required states to
pass Certificate laws in order to qualify for federal healthcare funding.
Certificate laws allowed state health agencies to determine the need for
certain health services in each geographic area and to license only needed
services. Cmty. Psychiatric Ctrs. Of Or., Inc. v. Grant, 664 F.2d 1148,
1149–50 (9th Cir. 1981) (describing Congress’ creation of “areawide
‘health systems agencies’ . . . to oversee and assist state agencies in
planning and in the operation of state health programs,” including state
certificate of need programs for offering new institutional health services).
Washington law requires Certificates for any “specialized service that
meets complicated medical needs of people and requires sufficient patient
volume to optimize provider effectiveness, quality of service, and
improved outcomes of care.” Wash. Rev. Code § 70.38.025(14).
   YAKIMA VALLEY MEM’L HOSP. V. DEP’T OF HEALTH 5

an “independent evidence-based review of the circumstances
under which elective [PCIs] should be allowed in Washington
at hospitals that do not otherwise provide on-site surgery.”
The September 2007 HMA report stated that “[e]lective
PCI[s] should not be performed in hospitals without on-site
surgery,” and recommended limiting approval to “program[s]
that serve[] a community or population with a fully
documented pattern of unmet need.” The report also
recommended that elective PCIs should be performed only at
hospitals that had a minimum annual volume of 300
procedures, noting that the “optimal” annual volume was 400
or more.        The report recognized, however, that
“[p]ublications suggest or recommend minimum volumes
ranging from >200, 400, 500, to even 600.”

    After receiving the HMA report, the Department met with
numerous additional stakeholders, who advised the
Department that hospitals with on-site surgery facilities
preferred a 400-PCI minimum, while those without on-site
facilities favored a 200-PCI minimum. The final regulations
elected the midpoint between the two positions: only
hospitals that can demonstrate that they will perform at least
300 PCIs annually will receive a Certificate permitting them
to perform elective PCIs. Wash. Admin. Code § 246-310-
720(1). The regulations apply statewide and do not single out
or target particular facilities.

    Only one hospital in the Yakima Valley area has on-site
surgery facilities: Yakima Regional Medical and Cardiac
Care Center (“Regional”). Regional is a for-profit hospital
owned by a Florida corporation. As a holder of a PCI
Certificate, it performs both elective and emergency PCIs.
Regional requires a 20–30% prepayment before performing
an elective PCI, and it will not perform an elective PCI
6 YAKIMA VALLEY MEM’L HOSP. V. DEP’T OF HEALTH

without adequate reimbursement. In contrast, Memorial is a
nonprofit hospital that serves both uninsured and insured
residents of Yakima Valley. Unlike Regional, Memorial
would perform an elective PCI on an uninsured patient. In
2009, Regional performed 338 elective and emergency PCIs
and Memorial performed 132 emergency PCIs.

    In February 2011, Memorial filed an application for a
Certificate to perform elective PCIs. The Department denied
the application, finding that Memorial had not demonstrated
a need for a second elective PCI program in the relevant
planning area. Memorial is unlikely to secure a PCI
Certificate until sometime around 2022, when the Yakima
Valley market’s projected unmet need will exceed 300
procedures.

    In its complaint, Memorial alleged that the PCI
regulations are an unreasonable restraint of trade in violation
of the Sherman Act, 15 U.S.C. § 1, and unreasonably
discriminate against interstate commerce in violation of the
dormant Commerce Clause and 42 U.S.C. § 1983. The
district court previously granted the Department’s motion for
judgment on the pleadings, and on a prior appeal of that
ruling, we upheld the dismissal of the Sherman Act claims,
but reversed and remanded for further proceedings on the
constitutional claim. Yakima Valley Mem’l Hosp. v. Wash.
State Dep’t of Health (“Yakima I”), 654 F.3d 919 (9th Cir.
2011).

    On remand, the Department moved for summary
judgment, arguing that under the dormant Commerce Clause,
Memorial could not show that the burden imposed on
interstate commerce by the 300 minimum volume standard
“is clearly excessive in relation to the putative local benefits.”
   YAKIMA VALLEY MEM’L HOSP. V. DEP’T OF HEALTH 7

Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970). We
review de novo the district court’s grant of the Department’s
motion. See Universal Health Servs., Inc. v. Thompson,
363 F.3d 1013, 1019 (9th Cir. 2004).

                          ANALYSIS

    The Commerce Clause of Article I, § 8 of the United
States Constitution empowers Congress to “regulate
Commerce . . . among the several States.” Courts have long
read a negative implication into the clause, termed the
“dormant Commerce Clause,” that prohibits states from
discriminating against interstate commerce. See Dep’t of
Revenue of Ky. v. Davis, 553 U.S. 328, 337 (2008). “The
modern law of what has come to be called the dormant
Commerce Clause is driven by concern about ‘economic
protectionism—that is, regulatory measures designed to
benefit in-state economic interests by burdening out-of-state
competitors.’” Id. at 337–38 (quoting New Energy Co. of Ind.
v. Limbach, 486 U.S. 269, 273–74 (1988)).

    The first inquiry under the dormant Commerce Clause is
whether the law treats in-state and out-of-state economic
interests differently, in which case it “it is virtually per se
invalid.” Or. Waste Sys., Inc. v. Dep’t of Envtl. Quality of
State of Or., 511 U.S. 93, 99 (1994). The regulations here do
not facially discriminate against out-of-state interests, but
instead act “evenhandedly,” with, at best, only “incidental”
impacts on interstate trade. Hughes v. Oklahoma, 441 U.S.
322, 336 (1979) (internal quotation marks omitted).
Regulations with incidental impacts are analyzed under the
balancing test set forth in Pike:
8 YAKIMA VALLEY MEM’L HOSP. V. DEP’T OF HEALTH

       Where the statute regulates even-handedly to
       effectuate a legitimate local public interest,
       and its effects on interstate commerce are only
       incidental, it will be upheld unless the burden
       imposed on such commerce is clearly
       excessive in relation to the putative local
       benefits. If a legitimate local purpose is
       found, then the question becomes one of
       degree. And the extent of the burden that will
       be tolerated will of course depend on the
       nature of the local interest involved, and on
       whether it could be promoted as well with a
       lesser impact on interstate activities.

397 U.S. at 142 (internal citation omitted).

    The Supreme Court has further emphasized that “a state’s
power to regulate commerce is at its zenith in areas
traditionally of local concern” and that “regulations that touch
upon safety . . . are those that ‘the Court has been most
reluctant to invalidate.’” Kassel v. Consol. Freightways
Corp. of Del., 450 U.S. 662, 679 (1981) (citation omitted)
(quoting Raymond Motor Transp., Inc. v. Rice, 434 U.S. 429,
443 (1978)).

I. THE MINIMUM PROCEDURE REQUIREMENT DOES NOT
   BURDEN INTERSTATE COMMERCE

    The PCI regulations do not treat in-state and out-of-state
actors differently, nor are they an even-handed law that
incidentally makes it harder for out-of-state actors to do
business in the state. Instead, the practical upshot of the
regulations is to restrict one in-state hospital—Memorial—
from expanding its PCI business, which ends up going to
      YAKIMA VALLEY MEM’L HOSP. V. DEP’T OF HEALTH 9

Regional, another in-state hospital.2 Our prior opinion noted
that Memorial’s allegations involved the impact on interstate
commerce and directed the district court to apply the Pike
balancing test, but made no finding about the significance of
the alleged burden. Yakima I, 654 F.3d at 932 (“The ultimate
question of whether the PCI regulations survive Pike scrutiny
is not before us.”). The district court correctly interpreted our
holding and on remand inquired into the downstream impact
of the PCI regulations on interstate commerce. Accepting as
true Memorial’s arguments and evidence, the burden on
interstate commerce is obviously too minor and remote to
create a “substantial burden” under Pike.

    We recently considered the dormant Commerce Clause in
relation to a California statute prohibiting licensed opticians
from offering prescription eyewear at the same location as
eye examinations. Nat’l Ass’n of Optometrists & Opticians
v. Harris, 682 F.3d 1144, 1147–48 (9th Cir. 2012). Looking
to Exxon Corp. v. Governor of Md., 437 U.S. 117, 128
(1978), we held that “there is not a significant burden on
interstate commerce merely because a nondiscriminatory
regulation precludes a preferred, more profitable method of
operating in a retail market.” Optometrists, 682 F.3d at 1153.
The decision of whether a nondiscriminatory regulation
nevertheless significantly burdens interstate commerce
depends “on the interstate flow of goods, not on where the
retailers were incorporated, what the out-of-state market
shares of sales and profits were, or whether competition
would be affected by the statute.” Id. The same analysis

  2
   Although it is not dispositive, we note that Regional is owned by an
out-of-state entity, and Memorial’s challenge reverses the traditional
dormant Commerce Clause framework where an out-of-state entity
challenges a law that disadvantages it relative to in-state competitors.
10 YAKIMA VALLEY MEM’L HOSP. V. DEP’T OF HEALTH

applies here. What is really at issue is the shifting of business
from one competitor to another, not a burden on interstate
commerce. The regulations do not “impair the free flow of
materials and products across state borders.” Id. at 1155. As
in Optometrists, a significant burden on interstate commerce
does not exist simply because the nondiscriminatory PCI
regulations affect the structure of the market. Id.

    Memorial attempts to meet its burden of showing an
impact on interstate commerce by pointing to the interstate
transactions it must forego because of the PCI regulations—
recruiting out-of-state interventional cardiologists, purchasing
supplies from out of state, and providing service to and
receiving payment from out-of-state patients. But these
meager allegations do not show that the challenged
regulations impede those interstate transactions in general.
These transactions are collateral to Memorial having the
authorization to perform elective PCI procedures. It is
uncontroverted that the 300-procedure minimum instead
shifts PCI business, and associated interstate activity, from
Memorial to Regional, which will perform elective PCIs in
Memorial’s place. Memorial’s loss of business to Regional—
whatever the consequence to Memorial’s bottom line—does
not itself burden interstate commerce. See Exxon, 437 U.S.
at 127 (holding that “interstate commerce is not subjected to
an impermissible burden simply because an otherwise valid
regulation causes some business to shift from one interstate
supplier to another”); Optometrists, 682 F.3d at 1153.

    Memorial also argues that the PCI regulations burden
interstate commerce by reducing the total number of PCIs
performed. We credit Memorial’s claim that the total number
of potential PCIs in the area may be reduced because 25% of
the area’s population is uninsured and some of those
     YAKIMA VALLEY MEM’L HOSP. V. DEP’T OF HEALTH 11

uninsured residents would come to Memorial for the
procedure but are not eligible for treatment at Regional.
Memorial did not estimate how many of these uninsured
patients forego elective PCIs each year. However, regardless
of the size of this potential unserved market, we agree with
the district court that this speculative downstream impact is
“highly attenuated” and that a reduction in the total number
of elective PCIs performed in the Yakima Valley does not
place a significant burden on interstate commerce.3

    Although Supreme Court precedent recognizes the burden
placed on individual entities arising from protectionist or
discriminatory regulations, no such protectionist motive or
effect exists here. See Pike, 397 U.S. at 145 (analyzing
economic burden imposed by requirement that cantaloupes
grown in Arizona be packed and processed there instead of in
existing California facilities); and Hunt v. Wash. State Apple
Adver. Comm’n, 432 U.S. 333, 350–54 (1977) (striking down
law that burdened Washington apple producers in favor of
North Carolina growers). Similarly, the absence of
protectionist impact makes this case unlike Walgreen v.
Rullen, 405 F.3d 50 (1st Cir. 2005), where the First Circuit
struck down a facially nondiscriminatory Certificate law that
in effect protected in-state incumbent pharmacies from out-
of-state competition.

 3
   We likewise reject Memorial’s argument that the district court erred by
failing to follow the instruction in Pike to consider alternatives with a
lesser impact on interstate commerce. In Optometrists we concluded that
“[b]ecause the challenged laws do not impose a significant burden on
interstate commerce, it would be inappropriate for us to set them aside
based on a conclusion that the State’s purposes could be served as well
with alternative laws.” 682 F.3d 1157.
12 YAKIMA VALLEY MEM’L HOSP. V. DEP’T OF HEALTH

    Not only are the challenged regulations
nondiscriminatory, they are predicated on a safety-related
purpose. See Gen. Motors Corp. v. Tracy, 519 U.S. 278, 306
(1997) (“[T]he Commerce Clause . . . was never intended to
cut the States off from legislating on all subjects relating to
the health, life, and safety of their citizens, though the
legislation might indirectly affect the commerce of the
country.” (internal quotation marks omitted)); City of
Philadelphia v. New Jersey, 437 U.S. 617, 623–24 (1978)
(“[I]ncidental burdens on interstate commerce may be
unavoidable when a State legislates to safeguard the health
and safety of its people.”). In sum, neither the economic
impact on Memorial’s own operations, nor the alleged
downstream impact on uninsured patients, creates a
substantial burden on interstate commerce.

II. THE MINIMUM PROCEDURE REQUIREMENT PROTECTS
    PUBLIC SAFETY

    Our conclusion that the burden on interstate commerce is
insignificant would normally end the constitutional inquiry.
See Optometrists, 682 F.3d at 1155 (“If a regulation merely
has an effect on interstate commerce, but does not impose a
significant burden on interstate commerce, it follows that
there cannot be a burden on interstate commerce that is
‘clearly excessive in relation to the putative local benefits’
under Pike.”). Nonetheless, because Memorial claims that
the safety benefits of the 300-PCI minimum are not just
minimal, but illusory or nonexistent, we address this
argument.

   Memorial’s argument is narrow, namely that the choice
of a 300-PCI minimum over a 200-PCI minimum is
constitutionally infirm. In Memorial’s view, because no
   YAKIMA VALLEY MEM’L HOSP. V. DEP’T OF HEALTH 13

study establishes a difference between its proposed 200-PCI
minimum and the Department’s 300-PCI standard, the choice
of 300 was arbitrary and any benefit is illusory. We
recognize that “the incantation of a purpose to promote the
public health or safety does not insulate a state law from
Commerce Clause attack,” but the safety aspects here are
neither illusory nor a fig leaf masking discrimination. Kassel,
450 U.S. at 670.

     Memorial’s position is weak and ignores the substantial
evidence linking minimum requirements to safety and
quality. The Department presented evidence that a facility’s
skills and competence and, accordingly, patient safety
increase with the number of PCIs, although the exact point
and rate at which those returns diminish is unclear (“Overall,
high volume operators had better outcomes . . . in low-risk
and high-risk patients.”). The 2007 HMA report to the
Department reviewed the relevant literature and
recommended that “PCI programs in hospitals with and
without on-site cardiac surgery should have minimum annual
PCI volumes of >300 and an optimal annual volume of
>400.” The report stated that a “minimum annual volume of
>300 was selected based on a balanced review of the
literature. Publications suggest or recommend minimum
volumes ranging from >200, 400, 500, to even 600. Most
experts recommend that PCI programs with <200 be
evaluated for closure. It is logical to recommend a minimum
that exceeds the closure set point.” Nothing suggests that the
Department took anything other than a comprehensive,
balanced view of the data, which, significantly, recommended
closing facilities that fell below the 200 procedure threshold.
Memorial is simply unhappy that the Department did not
adopt the lowest minimum mentioned in the HMA report.
14 YAKIMA VALLEY MEM’L HOSP. V. DEP’T OF HEALTH

    The extensive HMA report, which Memorial does not
attack on the merits, distinguishes this matter from Kassel,
the primary case that Memorial invokes. In Kassel, the Iowa
regulation prohibited the use of particular large trucks (65-
foot “double” or “twin” trailers) within Iowa’s borders.
450 U.S. at 665. Iowa conceded that “it [could] produce no
study that establishes a statistically significant difference in
safety between the 65-foot double and the kinds of vehicles
[Iowa] permits.” Id. at 673. The Court struck down the
statute given the economic burdens of either complying with
the size regulations or re-routing interstate traffic around
Iowa. Id. at 674. Unlike in Kassel, the data here show that
the safety benefits of the 300-PCI minimum are not illusory.
The Department had ample justification to conclude that, if a
minimum volume of 400 is “safer” than a range of 200–400,
a 300-PCI minimum is “safer” than a 200-PCI requirement,
the minimum threshold under any recommendation.

    Memorial further argues that the 300-PCI minimum was
chosen to protect incumbent providers of PCI procedures
instead of to meet a medical necessity. The Department held
five meetings with stakeholders in the process of the PCI
rulemaking. The stakeholders submitted a report in which
incumbent providers recommended a 400-PCI minimum and
providers seeking to provide elective PCIs recommended a
200-PCI minimum. The Department’s adoption of a 300-PCI
minimum—the midpoint between the two positions—does
not suggest “regulatory capture” by the incumbents. We also
note that the Department subsequently granted nine new PCI
Certificates, eight of them in areas where there was already
an incumbent provider, weakening any inference that the
standard is designed to block the entry of new market
participants.
   YAKIMA VALLEY MEM’L HOSP. V. DEP’T OF HEALTH 15

    Finally, Memorial claims that the 300-PCI minimum,
which derives in part from American College of Cardiology
Foundation (“ACCF”) recommendations, should be
invalidated because the Department does not uniformly
mandate that hospitals adhere to those guidelines in various
practice cases. This is an “apples to oranges” argument that
does nothing to invalidate the Department’s conclusion that
a 300-PCI minimum has real safety benefits above a
threshold of 200 PCIs.

    Memorial offers no evidence that the benefits of the 300-
PCI minimum are illusory or manufactured. In view of the
substantial record supporting the safety requirement, we are
loath to insert ourselves into the medical debate. As the
Supreme Court has emphasized, “if safety justifications are
not illusory, the Court will not second-guess legislative
judgment about their importance in comparison with related
burdens on interstate commerce.” Kassel, 450 U.S. at 670
(internal quotation marks omitted); see also Kleenwell
Biohazard Waste and Gen. Ecology Consultants, Inc. v.
Nelson, 48 F.3d 391, 399–400 (9th Cir. 1995) (upholding
nondiscriminatory regulation of solid waste disposal based on
“ample evidence” that regulations protected the public).

                       CONCLUSION

   Memorial did not establish that the challenged regulations
burdened interstate commerce or that the putative safety
benefits were illusory. We therefore affirm the district
court’s dismissal of all of Memorial’s remaining claims.

   AFFIRMED.