Adventist Health System v. U.S. Dept. of HHS

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 21-1589
___________________________
Adventist Health System/SunBelt, Inc., et al.
lllllllllllllllllllllPlaintiffs - Appellants
v.
United States Department of Health and Human Services, et al.;
United Network for Organ Sharing
lllllllllllllllllllllDefendants - Appellees
____________
Appeal from United States District Court
for the Southern District of Iowa - Eastern
____________
Submitted: June 17, 2021
Filed: November 8, 2021
____________
Before LOKEN, KELLY, and ERICKSON, Circuit Judges.
____________
LOKEN, Circuit Judge.
The Organ Procurement and Transplantation Network (“OPTN”) is a private,
non-profit entity established at the direction of Congress to perform essential
functions in implementing the National Organ Transplant Act of 1984, 42 U.S.C.
§ 273 et seq. (“Transplant Act”). See § 274. One of OPTN’s statutory
responsibilities is to “assist organ procurement organizations in the nationwide
distribution of organs equitably among transplant patients.” § 274(b)(2)(D). In
December 2019, OPTN adopted a new policy that significantly changes the method
for allocating donated kidneys to kidney transplant patients.
In December 2020, days before the new policy’s scheduled implementation,
plaintiffs -- adversely affected hospital systems and a patient on the kidney waitlist
(collectively, the “Hospitals”) -- sued to enjoin the new policy as unlawful under the
Transplant Act and the Administrative Procedure Act, 5 U.S.C. § 701 et seq.
(“APA”). After expedited briefing, the district court1 denied the Hospitals’ Motion
for Temporary Restraining Order and Preliminary Injunction. Adventist Health
Sys./SunBelt, Inc., et al. v. U.S. Dep’t of Health & Human Servs., et al., No. 3:20-cv-
00101, Order (S.D. Iowa Mar. 12, 2021). The court’s forty-five-page Order
concluded that plaintiffs failed to satisfy any of the well-established factors relevant
in determining whether to issue a preliminary injunction. See Dataphase Sys., Inc.
v. C L Sys., Inc., 640 F.2d 109, 113 (8th Cir. 1981) (en banc). The Hospitals appeal.
Reviewing the denial of a preliminary injunction for abuse of discretion, we affirm.
See Wise v. Dep’t of Transp., 943 F.3d 1161, 1165 (8th Cir. 2019) (standard of
review).
I. Background
Amending the Public Health Service Act, the Transplant Act codified a major
federal public-private effort to reduce chronic shortages of donated organs urgently
needed by patients awaiting transplants. The Act authorizes the Secretary of the
Department of Health and Human Services (HHS) to provide grants and other
payments to a national network of non-profit organizations tasked with acquiring,
preserving, and transporting donated organs, and allocating each donated organ to the
1
The Honorable Stephanie M. Rose, United States District Judge for the
Southern District of Iowa.
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highest priority patient on the transplant waiting list for that organ. This is an
incredibly complex effort, even for a single organ such as kidneys. And the scope of
the Transplant Act is far broader -- the term “organ” includes “the human kidney,
liver, heart, lung, pancreas, and any other human organ (other than corneas and eyes)
specified by the Secretary by regulation,” including bone marrow. 42 U.S.C.
§ 274b(d)(2).
A. A brief review of the private sector organizations involved in the effort to
improve kidney transplants will help put the regulatory issues presented by this
appeal in perspective. At the center of the effort is the OPTN. The Transplant Act
provides that the Secretary will contract for the establishment and funding of this
non-profit entity. 42 U.S.C. § 274(a). The OPTN “shall have” a board of directors
“that includes representatives” of the other key private sector players -- “organ
procurement organizations [OPOs], transplant centers, voluntary health associations,
and the general public.” § 274(b)(1)(B). OPTN’s prescribed, wide-ranging functions
include establishing a national list of persons who need organs, a system to match
organs and individuals, and medical criteria for allocating organs; adopting quality
standards for the acquisition and transportation of donated organs; coordinating the
transportation of organs from OPOs to transplant centers; assisting OPOs “in the
nationwide distribution of organs equitably among transplant patients”; and
“work[ing] actively to increase the supply of donated organs.” § 274(b)(2)(A), (B),
(D), (E), (G), (K). The Act requires the Secretary to establish procedures for
receiving and considering “critical comments” from interested persons “relating to
the manner in which [OPTN] is carrying out [its] duties under subsection (b).”
§ 274(c). Since the Act’s passage in 1984, defendant United Network for Organ
Sharing (“UNOS”) has served as the OPTN.
In 1998, the Secretary promulgated regulations governing OPTN’s operations,
known as the “Final Rule.” See 42 C.F.R. pt. 121. The Final Rule provides that
OPTN “shall establish” committees necessary to perform its duties, whose members
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include transplant coordinators, OPOs, transplant hospitals, and transplant candidates
and donors. 42 C.F.R. § 121.3(a)(4)(i). The OPTN has established a Kidney
Transplantation Committee and a Pancreas Transplantation Committee. In addition,
the Final Rule provides that the Secretary will establish an Advisory Committee on
Organ Transplantation (“ACOT”), 42 C.F.R. § 121.12, “will refer significant
proposed policies” to the ACOT and publish them for comment in the Federal
Register, and “may seek the advice” of the ACOT on other proposed policies,
§ 121.4(b)(2). The Final Rule also provides that the OPTN and the Scientific
Registry of Transplant Recipients (“SRTR”), a transplant data-gathering entity
established by the Transplant Act, will provide the Secretary annual reports
containing information “necessary to assess the effectiveness of the Nation’s organ
donation, procurement and transplantation system.” § 121.11(b)(1)(i)(A); see 42
U.S.C. § 274a.
At the local level, the Transplant Act authorizes the Secretary to certify
qualified OPOs to receive federal grants. 42 U.S.C. § 273. Among other
qualifications, an OPO must have an agreement with the Secretary to be reimbursed
under Title XVIII of the Social Security Act (Medicare), must meet the Secretary’s
performance standards for a qualified OPO, must have “a defined service area that is
of sufficient size to assure maximum effectiveness in the procurement and equitable
distribution of organs,” and must have a staff “necessary to effectively obtain organs
from donors in its service area.” § 273(b)(1)(C), (D), (E), and (F). An OPO shall also
“have effective agreements, to identify potential organ donors, with a substantial
majority of the hospitals and other health care entities in its service area which have
facilities for organ donations.” § 273(b)(3)(A). An OPO’s required functions include
providing quality standards and arranging for the acquisition and preservation of
donated organs, participating in “systematic efforts” to acquire usable organs from
potential donors, maintaining “a system to allocate donated organs equitably among
transplant patients according to established medical criteria,” arranging for
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transportation of donated organs to transplant centers, and participating in the OPTN.
§ 273(b)(3)(B), (C), (E), (F), (H).
B. The Transplant Act explicitly requires a qualified OPO to have a “defined
service area” (DSA) and “effective agreements” with a substantial majority of the
health care entities in its service area that “have facilities for organ donation.”
§ 273(b)(1)(E), (b)(3)(A). Thus, it is hardly surprising that the policies initially
adopted by the OPTN board of directors for acquiring and allocating donated kidneys
were built around the relationships between OPOs and the transplant facilities in their
DSAs. There are currently 58 DSAs designated by the Centers for Medicare and
Medicaid Services. Each area -- usually statewide or metropolitan -- serves one OPO,
one or more transplant programs, and one or more donor hospitals. The initial OPTN
allocation policies, which persisted for three decades, provided that donated kidneys
were first offered to transplant candidates in the donor hospital’s DSA who are in the
same medical category and priority.2 If no transplant center in the DSA accepted the
kidney, it was then offered to candidates in the same OPTN Region before being
offered to candidates nationally. There are eleven geographic OPTN Regions, each
consisting of DSA clusters.
The Transplant Act initially acknowledged that existing DSA relationships
would be the basis for allocating donated organs -- it provided that the OPTN shall
“assist [OPOs] in the distribution of organs which cannot be placed within the service
areas of the organizations.” Pub. L. 98-507, Tit. III, § 372(b)(2)(C), 98 Stat. 2344(1984). Concerns about potential inequities inherent in a DSA-Region allocation
model quickly surfaced. Congress responded by striking the italicized portion of this
provision in 1988. Pub. L. 100-607, Tit. IV, § 403(a)(2), 102 Stat. 3115. The Senate
Committee on Labor and Human Resources Report explained:
2
A multitude of complex medical factors determine a transplant candidate’s
priority on the OPTN waitlist and medical category within the waitlist.
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The bill would also clarify and refine two aspects of the existing
responsibilities of the OPTN. The OPTN is currently required to assist
OPOs in the distribution of organs “which cannot be placed within the
service areas of the organizations.” This phrase is deleted, so as to
remove any statutory bias respecting the important question of criteria
for the proper distribution of organs among patients. . . . Patient welfare
must be the paramount consideration. The Committee does not wish the
statute to be read as establishing a preference for, or against,
distribution within the service area of the OPO.
S. Rep. No. 100-310 at p.14, reprinted in 1988-6 U.S.C.C.A.N. 4236, 4241-42
(emphasis added). In 1990, Congress further clarified its nationwide focus on patient
welfare and fairness by amending this provision to the language presently found in
42 U.S.C. § 274(b)(2)(D) -- the OPTN shall “assist [OPOs] in the nationwide
distribution of organs equitably among transplant patients.” Pub. L. 101-616, Tit.
II, § 202(b)(1), 104 Stat. 3284 (language added italicized). Consistent with this
focus, the 1998 Final Rule provided that OPTN’s cadaveric organ allocation policies
“shall not be based on the [transplant] candidate’s place of residence or place of
listing, except to the extent required by paragraphs (a)(1)-(5) of this section.” 42
C.F.R. § 121.8(a)(8).
Despite these warning signals from Congress and HHS, the OPTN board of
directors stayed with an allocation model based on DSA and Region preferences.
Cries for reform grew louder. ACOT and the American Medical Association argued
that DSAs’ priority role in distributing organs resulted in geographic inequities and
might violate the Final Rule’s prohibition against prioritizing candidate location.
OPTN data showed geographic disparities in transplant candidate wait times, with
median times for kidney transplants varying widely across DSAs. Research indicated
that differences in DSA composition and performance were the largest contributor to
disparities in kidney allocation. OPTN further concluded that DSAs were “not a good
proxy for geographic distance between donors and transplant candidates because
[their] disparate sizes, shapes, and populations . . . are not rationally determined in
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a manner that can be consistently applied equally for all candidates,” and that Regions
were ill-suited for organ distribution because they were designed for other purposes
such as collecting public comments and allotting seats on the OPTN board.
Critics like ACOT and OPTN called for eliminating DSAs from organ
allocation policy because they are not a “good proxy” for distance between donor and
patient and lead to “geographic disparities in patient access to transplantation.” Two
examples illustrate these disparities. The district court noted, quoting the Acting
Secretary’s response to the Hospitals’ critical comment, that under the DSA model
a kidney donated in Minneapolis could be offered to a candidate in Bismarck (383
miles away) before a candidate in Des Moines (234 miles). The Eleventh Circuit
noted an even more graphic example in Callahan v. U.S. Dep’t of Health & Human
Servs. Through Alex Azar II, 939 F.3d 1251, 1255 n.3 (11th Cir. 2019): “Under the
current, DSA-based policy, if a liver becomes available in Charleston, South
Carolina, it would be offered to a moderately ill patient in Memphis, Tennessee (600
miles away) before a critically ill patient in Atlanta, Georgia (266 miles away) -- and
indeed, would have to be flown directly over Atlanta en route to Memphis.”
C. Despite this widespread criticism, the DSA-Region model persisted,
supported by strong defenders among the OPTN membership such as the Hospitals.
The current policy conflict and accompanying litigation began in May 2018 when the
Health Resources and Services Administration (“HRSA”), the HHS agency that
oversees the OPTN, received a well-researched critical comment on behalf of liver
transplant candidates in New York. These candidates contended that the DSA-
Region allocation model violates the Final Rule to their disadvantage by arbitrarily
prioritizing geography at the expense of medical and other appropriate criteria
enumerated in § 121.8(a). After directing OPTN to respond, HRSA’s Administrator
wrote OPTN’s President a July 31, 2018 letter, which Count I of the Hospitals’
Complaint now seeks to have declared unlawful under § 706(2) of the Administrative
Procedure Act. Briefly summarizing the five-page letter, HRSA stated that OPTN
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“has not justified and cannot justify” the use of DSAs and Regions in its revised liver
allocation policies, and “over the course of many years . . . has failed to [justify] how
DSAs and Regions meet the requirements of the OPTN final rule.” “On this basis,
the OPTN Board is directed to adopt a liver allocation policy that eliminates the use
of DSAs and OPTN Regions and that is compliant with the OPTN final rule.” “For
the same reasons described above concerning liver allocation, HRSA finds that the
use of DSAs and Regions in all other (non-liver) organ allocation policies has not
been and cannot be justified under the OPTN final rule.”
In August 2018, as directed by UNOS, the OPTN Kidney and Pancreas
Transplantation Committees formed a Kidney-Pancreas Workgroup to develop
alternatives to the use of DSAs and Regions. In December, the Workgroup released
for 60-day public comment a concept paper outlining five new policy variations of
a “Fixed Circle Policy.” See 42 C.F.R. § 121.4(b)(1). After considering statistical
modeling data from the SRTR, in August 2019 the Kidney Committee published for
public comment a proposed Fixed Circle Policy that gave kidney allocation priority
to candidates within 500 nautical miles of the donor’s hospital and eliminated use of
OPTN Regions. After receiving public comments expressing logistical concerns, the
Committee reduced the proposed priority distance to 250 nautical miles and provided
a second 60-day public comment period. The Hospitals submitted negative public
comments. In November 2019, by a vote of 13 to 4, the Kidney Transplantation
Committee recommended the revised 250-mile Fixed Circle Policy to the OPTN
Board. On December 3, 2019, the OPTN Board adopted the 250-mile Fixed Circle
Policy by a vote of 34 to 5. OPTN then engaged in extensive outreach efforts to
prepare the transplant community for the transition, advising it would implement the
Fixed Circle kidney allocation policy by the end of 2020 despite the emergence of
COVID-19. In late October 2020, OPTN announced an implementation date,
December 15, 2020.
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On December 1, 2020, the Hospitals submitted a critical comment to HRSA
objecting to implementation of the Fixed Circle Policy. They argued an immediate
change was ill-advised given the impact of COVID-19 on the transplant community.
Procedurally, they argued Fixed Circle was a “significant” proposed policy and
therefore HHS must refer it to ACOT and publish it in the Federal Register for public
comment. See 42 C.F.R. § 121.4(b)(2). Substantively, they argued that SRTR
modeling on which OPTN relied showed the new policy would result in fewer total
kidney transplants, worse outcomes, and greater donated kidney wastage. Before
HHS could respond to their critical comment, the Hospitals filed this action on
December 9 and moved for an emergency temporary restraining order and preliminary
injunction to prevent the policy from going into effect the following week.
On December 14, just before a hearing on the Hospitals’ motion, HRSA
directed OPTN to stay implementation of the Fixed Circle Policy to allow the agency
time to consider the Hospitals’ critical comment. HRSA ordered OPTN to provide
its views on the critical comment. After OPTN explained why it concluded the
Hospitals’ claims were unfounded, HHS rejected the critical comment and declined
to rescind OPTN’s Fixed Circle Policy. See 42 U.S.C. § 121.4(d)(1).
After expedited briefing, the district court denied the Hospitals’ motion for
preliminary injunctive relief in a thorough, well-reasoned opinion. The court
concluded that the Dataphase preliminary injunction factors weighed decisively
against an injunction. The Hospitals appeal the denial of a preliminary injunction,
which we have jurisdiction to review. See 28 U.S.C. § 1292(a)(1). On March 14,
2021, we denied the Hospitals’ request for a stay of the Fixed Circle Policy pending
appeal. The Policy went into effect as scheduled on March 15.
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II. Analysis
A party seeking a preliminary injunction bears the burden of satisfying the four
Dataphase factors. The district court flexibly balances the “particular circumstances”
in each case to determine whether the movant is entitled to injunctive relief.
Dataphase, 640 F.2d at 113. In determining whether the court abused its discretion
in denying an injunction, we examine whether the court based its balancing of the
Dataphase factors on clearly erroneous factual findings or on an erroneous legal
conclusion. See Wise, 943 F.3d at 1165.
“The threshold inquiry [for preliminary injunctive relief] is whether the movant
has shown the threat of irreparable injury.” Gelco Corp. v. Coniston Partners, 811
F.2d 414, 418 (8th Cir. 1987). Thus, in many cases, irreparable injury is the first
Dataphase factor that is addressed. But here, the district court concluded, and we
agree, that the Hospitals have shown injury in fact, but not irreparable injury
warranting the preliminary injunctive relief they seek. Having shown at least some
monetary injury, the Hospitals argue that HHS did not follow mandatory regulatory
procedures, and therefore the district court erred in denying a preliminary injunction
because the APA requires vacatur of an agency action taken “without observance of
procedure required by law.” 5 U.S.C. § 706(2)(D). “[A]n injunction cannot issue if
there is no chance of success on the merits.” Jet Midwest Int’l Co. v. Jet Midwest
Grp., LLC, 953 F.3d 1041, 1044 (8th Cir. 2020), quoting Mid-Am. Real Estate Co.
v. Iowa Realty Co., 406 F.3d 969, 972 (8th Cir. 2005). So we begin by addressing
the Hospitals’ likelihood of success on the merits, which includes this procedural
issue.
A. Likelihood of Success on the Merits. The Hospitals argue they are likely
to succeed on the merits of two claims -- that HHS violated the APA when it failed
to comply with the procedural requirements of the Final Rule in 42 C.F.R. part 121,
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and that the Fixed Circle Policy is substantively invalid because OPTN and HHS
acted arbitrarily and capriciously in adopting it.
1. The APA Procedural Claim. Section 121.4(b) of the Final Rule prescribes
the procedures the OPTN Board of Directors “shall” follow in developing policies
within its statutory mission. Subsection 121.4(b)(1) requires the Board to provide its
members and “other interested parties” an opportunity to comment on all proposed
policies and requires the Board to take those comments into account in developing
and adopting policies. Subsection 121.4(b)(2) provides that the OPTN Board will
refer to the Secretary, at least 60 days prior to implementation, two types of proposed
policies: those the Board “recommends to be enforceable under § 121.10,” and
“proposed policies on such other matters as the Secretary directs.” At issue here is
the following sentence in this lengthy subsection:
The Secretary will refer significant proposed policies to the [ACOT]
established under § 121.12 and publish them in the FEDERAL
REGISTER for public comment.
The Hospitals argue the Secretary’s failure to follow those procedures before the
kidney Fixed Circle Policy was implemented renders this an agency action taken
“without observance of procedure required by law” that must be vacated under
§ 706(2)(D) of the APA. Like the district court, we disagree.
More background is relevant to this issue. In April 2019, a group of hospitals
and individual patients that included some of the plaintiff hospitals in this case,
represented by mostly the same attorneys, commenced an action in the Northern
District of Georgia seeking to enjoin implementation of OPTN’s new liver allocation
policy. Plaintiffs alleged, inter alia, that this fundamental change in liver allocation
procedures was a “significant policy” unlawfully adopted without compliance with
the § 121.4(b)(2) procedures. The district court denied a preliminary injunction,
rejecting this interpretation of § 121.4(b)(2), and plaintiffs appealed. On September
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25, 2019, the Eleventh Circuit affirmed the district court’s interpretation of the
regulations, rejecting plaintiffs’ contention that § 121.4(b)(2) requires the Secretary
to refer to ACOT and publish for public comment all proposed policies determined
to be “significant.” Callahan, 939 F.3d at 1258-65. Agreeing with the Secretary’s
interpretation -- applying “traditional tools of [statutory] construction,” rather than
deference to the agency3 -- the court concluded:
[T]he significant-proposed-policies sentence’s [ACOT] referral and
publication requirements are triggered only in the two circumstances
specified in § 121.4(b)(2)’s opening clauses: (1) when the policy at issue
is one that the OPTN’s Board “recommends to be enforceable . . . or (2)
when the policy at issue is one that relates to “such other matters as the
Secretary directs . . . .”
Id. at 1258-59. As it was “undisputed that neither of those two conditions obtained,”
the Court upheld the district court’s ruling that plaintiffs failed to demonstrate a
substantial likelihood of success on the merits of this APA procedural claim. Id. at
1258, 1265.4
In this case, the Hospitals, no doubt correctly anticipating we would agree with
the Eleventh Circuit’s careful textual analysis of § 121.4(b)(2), specifically alleged
that the kidney Fixed Circle Policy “is significant and on a matter the Secretary
directs.” Complaint ¶ 74 (emphasis added). The Hospitals base this new “Secretary
directs” argument on a strained interpretation of § 121.8, a section of the Final Rule
titled “Allocation of organs” that was not even mentioned in Callahan.
3
As the district court noted, HHS in this case again does not seek what has long
been referred to as Auer deference to its interpretation of the Final Rule. See Kisor
v. Wilkie, 139 S. Ct. 2400, 2413-14 (2019) (plurality opinion).
4
The Eleventh Circuit remanded for further consideration of other substantive
APA and due process claims.
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Subsection 121.8(a) enumerates criteria to guide OPTN’s Board of Directors
in developing allocation policies. For example, it specifies that policies “[s]hall be
designed to avoid wasting organs, to avoid futile transplants, to promote patient
access to transplantation, and to promote the efficient management of organ
placement.” 42 C.F.R. § 121.8(a)(5). Subsection 121.8(f) provides:
The OPTN’s transmittal to the Secretary of proposed allocation policies
and performance indicators shall include such supporting material,
including the results of model-based computer simulations, as the
Secretary may require to assess the likely effects of policy changes and
as are necessary to demonstrate that the proposed policies comply with
the performance indicators and transition procedures of paragraphs (c)
and (d) of this section.
The Hospitals argue that, because § 121.8(f) requires OPTN to transmit all proposed
organ allocation policies to the Secretary, every transmitted proposed allocation
policy is a matter submitted “as the Secretary directs” and therefore is eligible to be
a “significant policy” within the meaning of § 121.4(b)(2).
We conclude this argument is even less persuasive than the “all policies are
significant” argument rejected by the Eleventh Circuit in Callahan. Section 121.8(f)
does not use the word “direct” and does not refer to § 121.4(b)(2). It recognizes the
reality that OPTN will transmit its policy proposals to the Secretary as part of HHS’s
oversight role and specifies what “supporting material” shall be included.5 Section
121.4(b)(2) gives the Secretary the discretion to “refer” some proposed policies that
are “significant” enough to warrant the additional, time-consuming procedures of
referral to ACOT and publishing for public comment. The Hospitals’ interpretation
would eliminate this discretion and mandate procedures that no proposed allocation
5
The record reflects that representatives of the Secretary sit as non-voting
members of the OPTN Board and on every OPTN committee responsible for
developing organ allocation policies.
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policy has ever gone through. If HHS intended in the Final Rule that all proposed
organ allocation policies be subject to § 121.4(b)(2)’s enhanced procedures, it would
have explicitly referred to § 121.4(b)(2) in § 121.8(f). Cf. Whitman v. Am. Trucking
Ass’ns, 531 U.S. 457, 468 (2001) (“Congress . . . does not, one might say, hide
elephants in mouseholes.”).
The Hospitals argue the district court’s interpretation of the Final Rule creates
a “no-review vacuum” for proposed organ allocation policies. But as the district
court and the decision in Callahan both noted, the Secretary has discretion under
§ 121.4(b)(2) to refer proposed policies to ACOT and publish them in the Federal
Register. See 939 F.3d at 1264-65. HHS may also elicit feedback on proposed organ
allocation policies using the critical comment process outlined in § 121.4(d), as it did
in this case. The Hospitals suggest that our interpretation nullifies ACOT’s role, but
the Final Rule provides that the Secretary “may” seek ACOT’s comment on any non-
significant policy OPTN proposes. See 42 C.F.R. § 121.12. In addition, the district
court noted, since 2010 ACOT has recommended that the Secretary “take steps to
ensure the OPTN develops evidence-based allocation policies which are not
determined by arbitrary administrative boundaries such as [the DSA/Region model].”
Adventist Health Sys., Mar. 12, 2021 Order at p.8.
The district court did not err in concluding that the Hospitals failed to show
that their procedural APA claim is likely to succeed on the merits.
2. Substantive Challenges to the Fixed Circle Policy. The Hospitals argue that
defendants acted arbitrarily and capriciously throughout the Fixed Circle Policy’s
development process, violating the Transplant Act and § 706(2)(A) of the APA.
Arbitrary and capricious is a highly deferential standard of review. We defer to
agency action so long as “an agency ‘examine[d] the relevant data and articulate[d]
a satisfactory explanation for its action.” Org. for Competitive Mkts. v. U.S. Dep’t
of Agric., 912 F.3d 455, 459 (8th Cir. 2018), quoting FCC v. Fox Television Stations,
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Inc., 556 U.S. 502, 513 (2009). A court cannot “substitute its judgment for that of the
agency.” Id. at 513, quoting Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm
Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1987). This is particularly true “when the
resolution of the dispute involves primarily issues of fact and analysis of the relevant
information requires a high level of technical expertise” by an agency acting within
its sphere of expertise. Voyageurs Nat’l Park Ass’n v. Norton, 381 F.3d 759, 763
(8th Cir. 2004) (cleaned up).
The Hospitals attack the OPTN and HHS procedures and analysis as well as
the merits of the Fixed Circle Policy on multiple grounds. On appeal, they emphasize
their contention that the agency action was arbitrary and capricious because the policy
development process began with its conclusion “that the use of DSAs and Regions
in all . . . organ allocation policies has not been and cannot be justified under the
OPTN final rule,” quoting the HRSA Administrator’s July 31, 2018 letter to OPTN.
Thus, the Hospitals argue, the long-followed DSAs and Regions option “was taken
off the table from the outset, Defendants never even considered it.” As the Brief for
Government Appellees did not directly respond to this argument -- indeed the APA
was not even cited in their Brief -- we think the argument requires specific attention.
It is essential to recall the context for the July 2018 letter. In December 2017,
the OPTN Board published a new liver allocation policy recognizing that “[r]egional
and donation service area (DSA) boundaries determine current liver distribution” but
adding a “150-nautical mile radius proximity circle around the donor hospital.” As
recounted above, New York objectors submitted a May 30, 2018 critical comment
complaining that Congress, the Final Rule, ACOT, and the OPTN itself had been
arguing for decades that OPO regions and DSAs are arbitrary geographic boundaries
that violate the Final Rule. The comment explained why the new liver policy did not
comply with the law and asked that the Secretary, acting under 42 C.F.R. § 121.4(d),
“[d]irect the OPTN to revise the policies or practices consistent with the Secretary’s
response to the comments.”
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Consistent with § 274(c) of the Transplant Act, the Final Rule provides that,
when interested parties submit critical comments, “[t]he Secretary will consider the
comments in light of the National Organ Transplant Act” and after review may
“[d]irect the OPTN to revise the policies or practices consistent with the Secretary’s
response to the comments.” 42 C.F.R. § 121.4(d)(2). It is undisputed that use of the
DSAs and Regions model to determine allocation priorities for donated organs had
been repeatedly attacked for decades by OPTN, ACOT, and others as contrary to the
command of Congress, reflected in the Final Rule, that allocation policies “[s]hall not
be based on the [transplant] candidate’s place of residence or place of listing, except
to the extent required by paragraphs (a)(1)-(5) of this section.” § 121.8(a)(8). Yet the
OPTN Board had not effectively responded, seemingly paralyzed by influential
members who benefitted from the status quo. Viewed in this light, it is apparent that
HRSA did not arbitrarily and capriciously “beg[i]n with its conclusion.” The merits
of the conclusion were well understood and supported by a majority of the transplant
community. The Secretary exercised oversight authority over OPTN that Congress
explicitly granted in enacting the Transplant Act’s public-private effort. In doing so,
HHS did not direct “any particular policy outcome or allocation scheme,” only that
the DSA model could not be used.
The Hospitals further argue that, even if Defendants were not arbitrary and
capricious in beginning from the premise that the DSA model must be replaced, they
were arbitrary and capricious in ignoring the fact that the SRTR modeling data on
which they relied then established that the Fixed Circle Policy produced a worse
result. To avoid this bad news, the Hospitals argue, Defendants “fudged” their
analysis of SRTR data to fit their predetermined result, then ignored the fact that even
this flawed data showed the new policy will decrease total kidney transplants,
increase donated kidney wastage, and reduce transplant efficiencies. The district
court explained in great detail why it rejected these contentions, noting that HHS in
responding to the Hospitals’ critical comment rationally explained why it disagreed
with the assertion that the Fixed Circle Policy would “result in fewer kidney
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transplants, increased wastage, or increase discard of viable kidneys,” and why the
Secretary therefore declined to rescind the Policy. Adventist Health Sys., Mar. 12,
2021 Order at pp.19-37. The court further concluded that the agency’s procedures
were consistent with Final Rule requirements:
Statistical modeling was conducted and analyzed by SRTR. The Kidney
Committee issued extensive and detailed concept papers to the
transplant community and to the public. Public comments were received
and taken under consideration. And the OPTN received thorough
briefing papers explaining the scientific basis for the proposed policy
revision. The disagreements advanced by [the Hospitals] were
adequately addressed by SRTR’s data modeling and OPTN’s briefing
papers, upon which the Acting Secretary relied.
Based on the OPTN’s expertise in the area of transplant organ
allocation, HHS reasonably concluded the Fixed Circle Policy will not
result in significantly fewer kidney transplants.
Id. at 30 (citations omitted). After careful review, for the reasons stated by the district
court, we agree that the Hospitals failed to demonstrate they are likely to succeed on
the merits of their claim that adoption of the Fixed Circle Policy was arbitrary and
capricious agency action.
B. Irreparable Harm. At the initial hearing on the Hospitals’ motion for a
temporary restraining order, the district court observed that the Hospitals’ long delay
in bringing suit was a “tough hurdle” and it expected them “to pay a great deal of
attention to that particular issue.” True to its word, the district court denied the
Hospitals a preliminary injunction based in part on the fact that their delay in bringing
suit until one year after Fixed Circle’s adoption, and fewer than five days before its
scheduled implementation, undercut their allegations of irreparable harm. Without
question, “[a] long delay by plaintiff after learning of the threatened harm . . . may be
taken as an indication that the harm would not be serious enough to justify a
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preliminary injunction.” Wright & Miller, 11A Fed. Prac. & Proc., § 2948.1 & n.13
(3d ed. 2013); see Hubbard Feeds, Inc. v. Animal Feed Supplement, Inc., 182 F.3d
598, 603 (8th Cir. 1999). “[A] party requesting a preliminary injunction must
generally show reasonable diligence.” Benisek v. Lamone, 138 S. Ct. 1942, 1944
(2018).
On appeal, the Hospitals argue, without direct supporting authority, that they
sought to enjoin the Fixed Circle Policy before it took effect, and “[d]elay bears on
irreparable harm only where the plaintiff delays despite suffering the harm.” We
reject this implausible assertion of law. Moreover, at least in this case, it would be
outweighed by the third Dataphase factor, “that the balance of equities tips in [the
Hospitals’] favor.” Wise, 943 F.3d at 1165, quoting Winter v. Nat. Res. Def. Council,
Inc., 555 U.S. 7, 20 (2008). The record establishes that, in the year after the Fixed
Circle Policy was adopted but before implementation, OPTN engaged in extensive
outreach efforts to prepare the transplant community for the coming changes, working
with OPOs and transplant centers to run simulated previews of the Policy. Knowing
of these collaborative efforts, and no doubt participating in them to some extent, the
Hospitals would not have delayed in seeking injunctive relief that would nullify these
costly efforts if their alleged financial harms were truly irreparable. (As the district
court noted, the balance of the harms for patients on the kidney transplant waitlist is
basically a wash -- some will receive kidney transplants more quickly under the Fixed
Circle Policy, while others may have a longer wait.)
The Hospitals further argue that claims of delay are overblown because OPTN
only announced the Fixed Circle Policy implementation date in October 2020, and
they promptly filed a critical comment in early December. This contention is
factually unpersuasive. OPTN communicated its intention to eliminate DSAs and
Regions from its kidney allocation policy in August 2018. Plaintiffs in Callahan
commenced their action to enjoin the new liver allocation policy in April 2019. The
Hospitals submitted adverse public comments to the proposed kidney policy later in
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2019. OPTN adopted the Fixed Circle Policy in December 2019 and consistently
maintained it would be implemented by the end of 2020, notwithstanding COVID-
19’s impact on healthcare.
Highly relevant in our view was the Hospitals’ delay in submitting a critical
comment until a mere two weeks before the Policy’s implementation. The Transplant
Act and Final Rule require OPTN and HHS to solicit and respond to public comments
to optimize final adopted policies. See 42 U.S.C. § 274(b)(2)(B), (c); 42 C.F.R.
§ 121.4(b)(1), (d). Here, the Hospitals knew of the Fixed Circle Policy’s alleged
drawbacks well in advance but chose not to bring their substantive critiques to the
attention of HHS until the eve of implementation.
In these circumstances, the district court did not abuse its discretion in
concluding that the Hospitals’ one-year delay refuted their allegations of irreparable
harm. See Novus Franchising, Inc. v. Dawson, 725 F.3d 885, 889, 894 (8th Cir.
2013) (seventeen-month delay); Tough Traveler, Ltd. v. Outbound Prods., 60 F.3d
964, 968 (2d Cir. 1995) (nine months), cert. denied, 527 U.S. 1036 (1999); cf.
Hubbard Feeds, 182 F.3d at 602 (nine years). The failure to show irreparable harm
is an “independently sufficient basis upon which to deny a preliminary injunction.”
Sessler v. City of Davenport, 990 F.3d 1150, 1156 (8th Cir. 2021), quoting Watkins
Inc. v. Lewis, 346 F.3d 841, 844 (8th Cir. 2003).
C. Balance of Equities and Public Interest. As we explained in Part II.B., the
Hospitals’ unreasonable delay in submitting an adverse public comment and filing
this lawsuit means that the balance of equities favors the denial of a preliminary
injunction, as in Benisek, 138 S. Ct. at 1944. As for the public interest, the Fixed
Circle Policy has been in effect since mid-March of this year, so forcing the transplant
community to revert to the DSA model would disrupt, not preserve, the status quo of
a program intended by Congress to increase the number of kidneys donated for
transplant and to equitably allocate donated kidneys to the highest priority patients
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on a nationwide basis. We agree with the district court that the public interest weighs
in favor of denying the requested preliminary injunction because “allowing the Fixed
Circle Policy to proceed as-planned maintains the status quo for every other interested
party that has prepared for it.” Order at p.44; see Benisek, 138 S. Ct. at 1945.
III. Conclusion
The district court’s March 12, 2021 Order denying the Hospitals’ Motion for
Temporary Restraining Order and Preliminary Injunction is affirmed.
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