- Medicare contractors can set standards, majority says
- Agendia eying all options, including SCOTUS review
(Reuters) – A divided panel of the 9th U.S. Circuit Court of Appeals reversed a win for molecular-diagnostic test maker Agendia Inc in its challenge to Local Coverage Determinations (LCDs) — standards for Medicare coverage adopted by the private contractors who handle claims for payment.
The majority on Friday said a district court judge erred in reviving 86 claims Agendia had filed in 2012 and 2013, which a regional Medicare contractor had denied based on its 2011 LCD that nearly all molecular-diagnostic testing was “investigational.”
The lower court had agreed with Agendia’s lawyers at Hooper, Lundy & Bookman, who argued that LCDs must go through the rigorous notice-and-comment procedures the Medicare Act requires for substantive rulemaking by the U.S. Health and Human Services Department.
However, Circuit Judges Michelle Friedland and Mark Bennett said there were no notice-and-comment requirements for LCDs prior to a 2016 amendment of the Medicare Act, and those rules did not apply to Agendia’s claims because Congress did not make them retroactive.
U.S. District Judge Frederic Block of Brooklyn, sitting by designation, dissented. He said the 2016 amendment did not add notice and comment requirements for LCDs, but rather loosened the existing rules.
Agendia, a California-based subsidiary of Amsterdam-based Agendia BV, is now considering “all … options, including Supreme Court review,” its lawyer, Patric Hooper, wrote in an email Friday. “We believe the dissenting judge got it right.”
HHS was represented by the U.S. Justice Department, which declined to comment.
According to Friday’s opinion, Agendia filed its claims with then-regional contractor Palmetto GBA, seeking reimbursement for BluePrint and TargetPrint tests it had supplied to oncologists. The tests use genomic molecular diagnostics to identify sub-types of breast cancer and other information that can be used to evaluate treatment options.
Palmetto denied payment based on its 2011 LCD. After a lengthy administrative appeal, an Administrative Law Judge ruled in Agendia’s favor in 2018. However, an appellate council reversed, finding the LCD was entitled to substantial deference.
Agendia then filed suit in U.S. District Court in Santa Ana, California, arguing that it was unconstitutional to allow private contractors to create LCDs. It also argued that LCDs must comply with Section 1395hh of the Medicare Act, which requires publication in the Federal Register and a 60-day comment period. (Under the 2016 amendment, LCDs must be posted online, with a 45-day comment period.)
U.S. District Judge David Carter rejected Agendia’s constitutional arguments – a decision the 9th Circuit unanimously affirmed – but found Palmetto’s LCD invalid based on Section 1395hh.
Reversing, the majority said Section 1395hh applies to any rule that “establishes or changes a substantive legal standard” under the Medicare Act. An LCD does not establish or change any standard, but “simply reflects one contractor’s attempt to apply” the standard that treatment be “reasonable and necessary,” Friedland wrote.
Section 1395hh also explicitly exempts National Coverage Determinations by HHS, which must instead be posted online for 30 days. The majority said it “would make little sense” to subject non-binding LCDs to a formal rule-making process but not their “national, binding counterparts.”
In his dissent, Block said that if Congress meant to exempt LCDs, “it could have easily added the phrase ‘and LCDs’” to the NCD’s exemption. “It has not done so,” he wrote.
The case is Agendia Inc v. Xavier Becerra, Secretary of U.S. Department of Health and Human Services, 9th U.S. Circuit Court of Appeals, No. 19-56516.
For Agendia: Patric Hooper and Bridget Gordon of Hooper, Lundy & Bookman
For HHS: Stephanie Marcus, U.S. Justice Department; Grace Park, U.S. Attorney’s Office, Los Angeles