Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 94 C 1396 -- Sarah Evans Barker, Chief Judge.
Before ESCHBACH, FLAUM, and MANION, Circuit Judges.
DECIDED SEPTEMBER 26, 1995
Erin Colleen Smith brought this action for declaratory and injunctive relief against the Office of Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) and William Perry, in his official capacity as the Secretary of the Defense, challenging the defendants' refusal to pay for certain procedures recommended by Smith's doctors as treatment for her breast cancer. The district court declared the recommended procedures would be covered by CHAMPUS, held that the defendants had acted arbitrarily and capriciously in concluding otherwise, and entered a permanent injunction enjoining the defendants from denying Smith coverage. We reverse the district court's judgment and remand for the district court to enter an appropriate order affirming CHAMPUS' initial determination to deny Smith coverage.
At the time of her complaint, Erin Smith was a forty-year-old woman diagnosed with advanced breast cancer. Because of her poor prognosis and the high risk that her cancer would reoccur following conventional treatment, Smith's doctors recommended immediate treatment involving high-dosage chemotherapy (HDC). HDC involves administering the same chemotherapeutic agents used in standard chemotherapy but at higher dosages. While HDC is more effective at killing the cancer, it is also more likely to kill the patient's stem cells, the cells which generate white blood cells, the primary component of the body's immune system. To prevent this potential damage to the patient's immune system, it is necessary to extract (the technical term is "harvest") some of the patient's stem cells prior to administering the HDC. This harvesting process, referred to as autologous stem cell rescue (ASCR), is accomplished by one of two methods: autologous bone marrow transplant support (ABMT), in which the stem cells are harvested from the patient's bone marrow, and peripheral stem cell rescue (PSCR), in which stem cells are harvested from the patient's blood stream. Under either method, the harvested stem cells are frozen and stored until after completion of the HDC at which time the stem cells are reintroduced into the patient.
Smith's doctors advised her that her cancer had spread to her local lymph nodes and that HDC coupled with PSCR would provide her with the best chances of survival. However, neither Smith's doctors nor St. Vincent Hospital in Indianapolis where the treatment was to be provided would commence treatment until they received assurances that Smith had the means to pay for the costs.
Smith, who was married to an Air Force retiree, received her primary health care coverage through CHAMPUS. CHAMPUS was established by Congress pursuant to the Dependents' Medical Care Act, 10 U.S.C. sec. 1071 et seq., to provide medical and dental benefits to dependents of present and former members of the military. CHAMPUS is not an insurance program, under which the insurer guarantees the indemnification of the insured in return for the insured paying a premium. CHAMPUS beneficiaries pay no premiums. Rather, CHAMPUS is funded by annual Congressional appropriations. Another unique feature of CHAMPUS is that it is an "at risk" program. That is, unlike insurance programs, where beneficiaries usually know before receiving medical care whether it is covered by their policy, CHAMPUS beneficiaries generally receive medical care first and then submit a claim to CHAMPUS which makes an after-the-fact determination as to whether the medical care received was a covered service. Thus, the beneficiary is "at risk" in the sense that the medical services received may not qualify for payment under CHAMPUS. These determinations of coverage as well as other day-to-day administrative duties of CHAMPUS have by statute been charged to the Secretary of Defense who has, in turn, delegated these duties to the Director of the Office of CHAMPUS (OCHAMPUS). 32 C.F.R. secs. 199.5, 199.7.
The oncology department at St. Vincent's Hospital, on Smith's behalf, filed a claim with CHAMPUS outlining the particulars of Smith's case and requested a pre-treatment determination by CHAMPUS as to whether the prescribed HDC/PSCR treatment would be covered. By letter dated August 2, 1994, David S. Bogner, M.D., the medical director of CHAMPUS, issued an initial determination in which he explained that CHAMPUS would not cover the prescribed HDC/PSCR treatment. In his letter Dr. Bogner explained that under the terms of its policy CHAMPUS does not provide coverage for treatments or procedures that are considered experimental or investigational. He further explained that whether a treatment or procedure is experimental or investigational is determined by whether it meets the "generally accepted standards of usual professional medical practice in the general medical community." This, in turn, is determined by evaluating the outcomes of clinical trials which have been published in the medical literature. Dr. Bogner informed Smith's doctors that due to the absence of such clinical trials in the medical literature it was his conclusion as the medical director of CHAMPUS that HDC/PSCR did not yet meet the generally accepted standards in the general medical community for the treatment of breast cancer and must therefore be excluded from benefits coverage as experimental or investigational. In closing, Dr. Bogner invited Smith's doctors to submit documentation to support the position that HDC/PSCR does in fact meet the generally accepted standards of usual professional medical practice for the treatment of breast cancer. However, Dr. Bogner informed them that "while personal opinions are valued, we must give the greatest weight to well-designed, Phase III, outcome-based studies which have been published in refereed medical journals."
By letter of September 2, 1994, Smith's attorney filed a request for reconsideration of Dr. Bogner's initial denial of coverage. Acting on Dr. Bogner's invitation, counsel submitted affidavits of two of Smith's oncologists along with a third familiar with Smith's case, each of whom maintained that HDC/PSCR was generally accepted in the medical community and was not considered experimental for the treatment of breast cancer. Counsel also submitted two other bases for reconsideration: an article which posited that most private insurance companies eventually approved coverage for HDC treatment; and a reference to three recent district court decisions, Gripkey v. Mail Handlers Benefit Plan, No. 3:94-378-0, 1994 WL 276265 (D.S.C. Feb. 14, 1994) (unpublished), Hawkins v. Mail Handlers Benefit Plan, No. 1:94CV6, 1994 WL 214262 (W.D.N.C. Jan. 28, 1994) (unpublished), and Wheeler v. Dynamic Engineering, Inc., 850 F.Supp. 459 (E.D. Va. 1994), aff'd, __ F.3d __, 1995 WL 486416 (4th Cir. Aug. 16, 1995), two of which involved similar determinations by Dr. Bogner to deny coverage for HDC/PSCR for the treatment of breast cancer (Gripkey and Hawkins), and all of which had enjoined CHAMPUS from denying coverage for that form of treatment. *fn1 Counsel did not, however, provide Dr. Bogner with the requested clinical studies published in medical journals indicating that HDC/PSCR was generally accepted in the medical community for the treatment of breast cancer.
By letter of September 14, 1994, Dr. Bogner denied Smith's request for reconsideration. Dr. Bogner noted counsel's failure to provide him with the requested medical literature upon which CHAMPUS could base a decision to provide coverage for this form of breast cancer treatment. Given this absence of the requested evidence, and notwithstanding the opinions of the doctors contained in their affidavits, the article or the decisions from the district courts, Dr. Bogner remained of the opinion that HDC/PSCR breast cancer treatment had not yet gained general acceptance in the medical community for the treatment of breast cancer and thus remained experimental and investigational for that purpose. Hence, Dr. Bogner reaffirmed his initial determination to exclude HDC/PSCR from coverage under CHAMPUS.
Smith responded by filing a complaint in the district court in which she requested a declaration that HDC/PSCR was covered under CHAMPUS and an injunction prohibiting CHAMPUS from denying her coverage for it. The Secretary filed a motion for summary judgment on the grounds that the decision to deny coverage was supported by the administrative record and was not arbitrary and capricious. Following extremely expedited proceedings, the district court denied judgment to the defendants and entered judgment in favor of Smith. As the principal reason for its ruling, the district court found that CHAMPUS relied on outdated medical studies in making its determination that HDC/PSCR was experimental for the treatment of breast cancer. The court believed that these outdated studies could not defeat the affidavits submitted by Smith's oncologists stating that HDC/PSCR was generally accepted treatment for breast cancer and was not experimental. The district court concluded that CHAMPUS' denial of coverage of HDC/PSCR was arbitrary and capricious and accordingly entered an order permanently ...