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Almy v. Sebelius

United States District Court, D. Maryland

March 7, 2014

MONIQUE D. ALMY, Chapter 7 Trustee for the Bankruptcy Estate of Bionicare Medical Technologies, Inc., Plaintiff,
KATHLEEN SEBELIUS, Secretary, United States Department of Health and Human Services Defendant.


RICHARD D. BENNETT, District Judge.

The Plaintiff Monique Almy, as Chapter 7 Trustee for the Bankruptcy Estate of Bionicare Medical Technologies, Inc., filed these seven lawsuits against Kathleen Sebelius, in her capacity as the Secretary of the United States Department of Health and Human Services (the "Secretary" or the "Defendant"), appealing the Secretary's decisions to deny Medicare coverage for a medical device, pursuant to Title XVIII of the Social Security Act, 42 U.S.C. § 1395, et seq. (the "Medicare Act"), and the Administrative Procedure Act, 5 U.S.C. § 551, et seq. These filings followed an initial lawsuit in which this Court granted summary judgment in favor of the Secretary. Almy v. Sebelius, 749 F.Supp.2d 315 (D. Md. 2010) (" Almy I "). The parties agreed to a stay in these seven cases pending an appeal to the United States Court of Appeals for the Fourth Circuit, which affirmed this Court's opinion. Almy v. Sebelius, 679 F.3d 297 (4th Cir. 2012). Still pending are the Defendant's Motions to Dismiss filed in these seven remaining actions.[1] The parties' submissions have been reviewed and no hearing is deemed necessary. See Loc. R. 105.6 (D. Md. 2011). For the reasons that follow, the Defendant's Motions are GRANTED, and these remaining cases are DISMISSED WITH PREJUDICE.


The Plaintiff Almy is the bankruptcy trustee of Bionicare Medical Technologies, Inc. ("Bionicare"), a company that sold a medical device, the Bionicare Stimulator System, Model 1000 (the "BIO-1000"), that purportedly treats osteoarthritis of the knee by electrical stimulation. The BIO-1000 is an item of Durable Medical Equipment as defined in 42 U.S.C. § 1395x(n). It was originally developed by Murray Electronics, which initially sought approval from the Food and Drug Administration ("FDA") under the stringent "Pre-Market Approval" standard, but eventually marketed the BIO-1000 pursuant to the less stringent "510(k) process." Under Section 510(k) of the Food, Drug, and Cosmetics Act, a device may be sold if it is "substantially equivalent to another device" that is already approved and on the market. 21 U.S.C. § 360c(f)(1)(A)(ii). In 1997, the FDA approved the BIO-1000 pursuant to the 510(k) process, concluding that it was equivalent to the Transcutaneous Electric Nerve Stimulator already approved for the market.[2] In 2003 and 2006, the FDA reaffirmed clearance of the BIO-1000.

Part B of the Medicare Act, 42 U.S.C. §§ 1395k(a), 1395x(s)(6), provides coverage for certain types of Durable Medical Equipment, but explicitly denies coverage for items that are "not reasonable and necessary, " 42 U.S.C. § 1395y(a)(1)(A). From 2004 until Bionicare filed for bankruptcy in 2007, the company was enrolled in Medicare as a supplier of Durable Medical Equipment. Since the BIO-1000's approval in 1997, it was distributed to thousands of patients and Bionicare submitted thousands of claims to Medicare for the device. To facilitate administration of such claims, the Center for Medicare and Medicaid Services assigned the BIO-1000 a billing code in the Healthcare Common Procedure Coding System ("HCPCS") and created a fee schedule for the device. Some Medicare contractors have covered the BIO-1000 while others have rejected Bionicare's claims. Bionicare appealed many of its claims through the administrative process through adjudication by the Medical Appeals Council ("MAC"), which rendered a final decision of the Secretary covering, or rejecting coverage of, the BIO-1000.

The Plaintiff alleges that, with regard to many claims, the Defendant Secretary of Health and Human Services improperly denied Medicare reimbursement for the BIO-1000. Almy first sued the Secretary in this Court in case No. RDB-08-1245 (" Almy I "). In Almy I, the Plaintiff sought judicial review and reversal of eight groups of Medicare Appeals Council decisions denying coverage. After Almy I was filed, the Plaintiff filed these other actions against the Secretary as more claims for the BIO-1000 were denied. It was agreed that because the resolution of Almy I might be dispositive of the issues at bar, these other cases regarding the denial of Medicare coverage for the BIO-1000 would be stayed. Accordingly, these seven other suits (" Almy II-VIII "), addressing dozens of MAC decisions, were stayed pending resolution of Almy I.

In Almy I, this Court granted summary judgment for the Defendant and denied the Plaintiff's motion for reconsideration. 749 F.Supp.2d 315 (D. Md. 2010). First, this Court held that although some claims for the BIO-1000 were paid while others were denied, the Secretary's decisions were not inconsistent and were therefore entitled to deference pursuant to 5 U.S.C. § 706, 42 U.S.C. § 405(g), and Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 843-45 (1984) (where a statute is silent or ambiguous as to a specific question, the administrative agency's permissible construction of the statute is accorded deference by the court).[3] In particular, this Court noted that a certain amount of variation in coverage determinations is understandable, and that lower-level decisions by contractors and Administrative Law Judges ("ALJs") are non-precedential. Under the deferential standard, this Court held that the Secretary properly considered the FDA's clearance of the BIO-1000 under the Section 510(k) process in determining coverage, noting that FDA approval is necessary, but not sufficient for Medicare coverage. In addition, this Court upheld the Secretary's negative determination of the BIO-1000's medical efficacy and acceptance, holding that the Secretary properly considered and rejected evidence of peer-reviewed publications and case studies, statements and letters of medical necessity by physicians and experts, and the assignment of an HCPCS billing code and fee schedule for the device. The Plaintiff's argument that the MAC improperly calculated the payment amount for BIO-1000 claims that were covered was also rejected. Finally, this Court found unpersuasive Bionicare's argument that it should not be liable for the non-covered cost of the BIO-1000 because it sent an Advance Beneficiary Notice ("ABN") pursuant to 42 U.S.C. § 1395pp to certain beneficiaries explaining that the device may not be covered. Specifically, this Court found that the ABN was too generic to shift liability to the beneficiary. The Plaintiff appealed the grant of summary judgment against her.

The United States Court of Appeals for the Fourth Circuit affirmed, and denied Almy's motion for rehearing and for rehearing en banc on June 25, 2012. 679 F.3d 297 (4th Cir. 2012). Almy's three challenges to this Court's ruling were rejected. Specifically, the Fourth Circuit held that the Secretary did not improperly implement policy by assessing coverage of the BIO-1000 through adjudication of individual claims rather than issuing broader National or Local Coverage Determinations. The Fourth Circuit noted that no policy is made by any single adjudication or by "the accretion of individual decisions finding that the BIO-1000 does not meet the statutory requirements for coverage, " and that the Plaintiff's theory would "effectively require the Secretary to issue item-specific coverage rules for each and every item of [Durable Medical Equipment] before issuing case adjudications.'" Id. at 303-04 (quoting 679 F.Supp.2d at 324 n.2). Furthermore, the Fourth Circuit held that Almy had not carried her burden to show coverage through "credible and credited evidence, " while the Secretary's determination of coverage was supported by substantial evidence. The Fourth Circuit also held that the Secretary employed proper procedures pursuant to 5 U.S.C. § 706(2)(A), and adequately considered FDA Section 510(k) approval, [4] the effect of precedent on Medicare Appeals Council decisions, HCPCS fee schedules, payment determinations, Advance Beneficiary Notices, and peer-reviewed studies in concluding that the BIO-1000 was not covered.

The Supreme Court of the United States denied Almy's petition for certiorari on January 7, 2013. 133 S.Ct. 841 (2013). Upon the denial of certiorari, this Court then instructed the parties to address, via the pending Motions to Dismiss, whether the Fourth Circuit's decision in Almy I is controlling as to Almy II-VIII, compelling dismissal of the other seven cases. See Letter Order of Mar. 7, 2013, No. 09-0255, ECF No. 12. On April 30, 2013, the Defendant filed an identical Motion to Dismiss in all seven pending cases.


Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Rule 12(b)(6) authorizes the dismissal of a complaint if it fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). Therefore, "the purpose of Rule 12(b)(6) is to test the sufficiency of a complaint and not to resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006) (internal quotation marks and alterations omitted) (quoting Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999))). When ruling on such a motion, the court must "accept the well-pled allegations of the complaint as true, " and "construe the facts and reasonable inferences derived therefrom in the light most favorable to the plaintiff." Ibarra v. United States, 120 F.3d 472, 474 (4th Cir. 1997). However, this Court "need not accept the legal conclusions drawn from the facts, and [this Court] need not accept as true unwarranted inferences, unreasonable conclusions or arguments." Nemet Chevrolet, Ltd. v., Inc., 591 F.3d 250, 253 (4th Cir. 2009) (internal quotation marks and citation omitted).

The Supreme Court's opinions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), "require that complaints in civil actions be alleged with greater specificity than previously was required." Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012) (citation omitted). The Supreme Court's decision in Twombly articulated "[t]wo working principles" that courts must employ when ruling on Rule 12(b)(6) motions to dismiss. Iqbal, 556 U.S. at 678. First, while a court must accept as true all the factual allegations contained in the complaint, legal conclusions drawn from those facts are not afforded such deference. Id .; Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012) ("The mere recital of elements of a cause of action, supported only by conclusory statements, is not sufficient to survive a motion made pursuant to Rule 12(b)(6)." (citing Iqbal, 556 U.S. at 678.)). Second, a complaint must be dismissed if it does not allege "a plausible claim for relief." Iqbal, 556 U.S. at 679.

Furthermore, as this Court has previously noted in Almy I, the Medicare Act provides that "the Secretary's finding of fact, if supported by substantial evidence, shall be conclusive." 749 F.Supp.2d at 322 (quoting McKenzie Med. Supply, Inc. v. Leavitt, 506 F.3d 341, 346 (4th Cir. 2007) (citing 42 U.S.C. § 1395ff(b)(1)(A) and 42 U.S.C. § 405(g))). In addition, judicial review of the Secretary's decision is governed by the Administrative Procedure Act, "which provides that final agency action shall be upheld absent a finding that it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.'" 749 F.Supp.2d at 322 (quoting 5 U.S.C. § 706(2)(A)). As noted by the Fourth Circuit in its affirmance of Almy I, the Secretary's interptetation of what is ...

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