Donor Network West v. Kennedy

Opinion

2 UNITED STATES DISTRICT COURT 3 DISTRICT OF NEVADA 4 DONOR NETWORK WEST, Case No. 3:25-cv-00140-ART-CSD 5 Plaintiff, ORDER ON MOTION FOR 6 v. PRELIMINARY INJUNCTION

7 ROBERT F. KENNEDY, JR., in his official capacity as Secretary of Health (ECF No. 15) 8 and Human Services;

9 STEPHANIE CARLTON, in her official capacity as Acting Administrator of the 10 Centers for Medicare & Medicaid Services; 11 UNITED STATES DEPARTMENT OF 12 HEALTH AND HUMAN SERVICES, CENTERS FOR MEDICARE & 13 MEDICAID SERVICES, Defendants. 14 RENOWN HEALTH, 15 Intervenor. 16 17 Plaintiff Donor Network West (“DNWest”), an organ procurement 18 organization (“OPO”), sues federal Defendants, including the Centers for Medicare 19 & Medicaid Services (“CMS”), a federal agency, for a preliminary injunction or 20 stay of CMS’s decision to grant Intervenor Renown Health’s (Renown) application 21 to switch OPOs. The Court holds that the public’s interest in not risking the loss 22 of donated organs in Intervenor Renown’s organ-donation program strongly 23 outweighs DNWest’s risk of irreparable reputational and economic harm and any 24 serious questions on the merits. 25 I. BACKGROUND 26 The National Organ Transplant Act (“Transplant Act”) is a broad federal 27 policy that addresses the backlog of people in need of organ transplants by 28 1 encouraging organ donation and distributing donated organs equitably and 2 effectively. The Act carries out these goals by authorizing the federal agencies to 3 “to provide grants and other payments to a national network of non-profit 4 organizations tasked with acquiring, preserving, and transporting donated 5 organs.” Adventist Health Sys./SunBelt, Inc. v. DHHS, 17 F.4th 793, 796 (8th Cir. 6 2021). “This is an incredibly complex effort.” Id. 7 A. Parties 8 Defendant Health & Human Services is a federal agency that contains the 9 Centers for Medicare & Medicaid Services (“CMS”), one of the federal agencies 10 that oversees organ donation and transplant programs. (ECF No. 1.) CMS granted 11 the waiver at issue in this case. (ECF No. 1-1.) Defendants Robert F. Kennedy, 12 Jr., and Stephanie Carlton are administrators for the Medicare program, sued in 13 their official capacities for CMS’s grant of the waiver. 14 Plaintiff Donor Network West (“DNWest”) is an Organ Procurement 15 Organization (“OPO”) that operates in California and Nevada. DNWest is the third 16 largest OPO in the country and has operated as Renown’s OPO for almost forty 17 years. (ECF No. 1-3 at 3, 4.) DNWest has performed well at Renown for the last 18 several years and received accolades for increasing the number of organ 19 donations in Renown’s hospital system. (See ECF Nos. 1-1, 16-1.) In 2023, 20 DNWest received an interim tier 2 performance rating from CMS. (ECF No. 1-1 at 21 2.) 22 Intervenor Renown Health (“Renown”) is a healthcare organization with 23 three hospitals in Reno, Nevada, at issue in this case. (ECF No. 47-1.) Renown 24 applied for a waiver to switch OPOs in September 2023. (Id.) 25 Nonparty Nevada Donor Network (“NDN”) is the OPO with which Renown 26 applied to partner in place of DNWest. In 2023, NDN received a tier 1 performance 27 evaluation from CMS. (ECF No. 1-1 at 2.) 28 B. How Organ Procurement Organizations Work 1 OPOs are private, federally funded organizations that coordinate organ 2 donations across the country. See 42 U.S.C. § 273; Adventist Health, 17 F.4th at 3 797. OPOs facilitate organ donation, while separate organizations carry out 4 transplants. Adventist Health, 17 F.4th at 797. 5 i. OPOs and Donation Service Areas 6 Congress saw the value of OPOs having durable relationships with the 7 hospitals and other organizations and volunteers where they operate. See, e.g., 8 42 U.S.C. § 1320b-8(a)(1)(B)(iv) (recognizing “length of continuity of a hospital’s 9 relationship” with an OPO); 42 U.S.C. § 273(b)(1)(H) (OPOs must have board 10 members who represent hospitals and the public residing in their donation 11 service area). To this end, OPOs are granted four-year monopolies for specified 12 donation service areas. 42 CFR § 486.308. Donation service areas are 13 “geographically irregular areas (within and among states)” that can be 14 constructed around non-geographic factors like religion and cultural 15 background. See Callahan v. DHHS, 939 F.3d 1251, 1255 (11th Cir. 2019); 16 (Trans.). During an OPO’s four-year term, it must serve “a substantial majority 17 of the hospitals and other health care entities” within its donation service area 18 that have facilities for donations. 42 U.S.C. § 273(b)(3). All donor hospitals must 19 have affiliation agreements with the OPO assigned to their donation service area. 20 42 U.S.C. § 1320b-8(a)(1)(C). 21 Donor hospitals work exclusively with the OPO that covers their donation 22 service area, and every hospital that conducts organ recovery or transplantation 23 must have an affiliation with this “designated” OPO. 42 U.S.C. § 1320b-8(a)(1)(C). 24 Renown’s designated OPO is DNWest. (See ECF No. 16-2 (Renown’s Affiliation 25 Agreement with DNWest).) 26 ii. Waivers for Hospitals to Substitute Designated OPO 27 Although hospitals must normally work with their designated OPO, a 28 hospital can seek a waiver to work with a different OPO if CMS finds that it meets 1 two statutory requirements. 42 U.S.C. § 1320b-8(a)(2)(A). CMS must determine 2 that: (i) the waiver is expected to increase organ donation; and 3 (ii) the waiver will assure equitable treatment of patients referred for 4 transplants within the service area served by such hospital’s designated organ procurement agency and within the service area served by the organ 5 procurement agency with which the hospital seeks to enter into an agreement under the waiver. 6 Id. CMS also considers cost effectiveness, improvements in quality, and the 7 length and continuity of a hospital’s relationship with an OPO. Id. § 1320b- 8 8(a)(2)(B). Neither the statute nor regulations specify how these factors are to be 9 evaluated. 10 iii. The Tier System for Evaluating OPO Performance 11 The Transplant Act requires CMS to evaluate OPO performance every four 12 years. 42 U.S.C. § 273(b)(1)(D)(ii)(I). If OPOs do not meet CMS’s performance 13 standards, they are decertified, and their service area becomes open for 14 competitive bidding by other OPOs. Id.; see 42 C.F.R. § 486.316(b). 15 In 2020, CMS passed a final rule for evaluating OPOs by comparing 16 statistics among several metrics and separating them into three tiers based on 17 performance compared to all other OPOs. 42 C.F.R. § 486.316. At the end of the 18 four-year certification cycle, tier 1 OPOs retain their service areas, while tier 2 19 OPOs must compete for their service areas, and tier 3 OPOs are decertified. Id. 20 The first recertification period to use the tier system will be in 2026, and it will 21 only consider the tier rating from 2024. See 85 Fed. Reg. 77,898, 77,916. CMS 22 shares “preliminary results [tier rating statistics] with each OPO to provide the 23 opportunity to review the information and raise any concerns prior to the results 24 being made publicly available and taking any enforcement action.” Id. at 77,912. 25 CMS extensively considered the metrics that go into tier ratings, including organ 26 donation rate, transplant rate, and donor potential adjusted for hospitals with 27 waivers. Id. at 77, 921–22; see also 84 Fed. Reg. 76,228, 7630 et seq. (explanation 28 1 of factors that go into tier rating). 2 According to DNWest, the tier system is only meant to evaluate OPO 3 performance across entire service areas over a four-year period, and it arbitrarily 4 fluctuates between interim years. (ECF No. 1 at 11.) 5 C. Renown Seeks to End Contract with DNWest 6 Renown’s Affiliation Agreement with DNWest requires it to obtain a waiver 7 from CMS to switch OPOs, as required by the statute. (ECF No. 16-2.) In 2023, 8 Renown sent CMS a waiver request to switch OPOs from DNWest to NDN and 9 alerted DNWest of its intent. (ECF No. 1-6.) DNWest alleges that Renown applied 10 for a waiver to switch OPOs in exchange for NDN providing funding for a new 11 transplant center at Renown, and that such an agreement may violate state and 12 federal anti-kickback laws. (See ECF No. 1 at 21.) DNWest’s CEO claims that 13 Renown’s CEO told her that this funding was conditioned on applying for a 14 waiver, and he asked if DNWest could match NDN’s funding. (See ECF No. 16 at 15 11.) Renown responds that the transplant center collaboration has nothing to do 16 with the waiver request, and that had the waiver request been denied, NDN and 17 DNWest’s collaboration on the transplant center would have continued. (ECF No. 18 16-3; ECF No. 47-1 at 4.) Shortly after Renown applied for the waiver, DNWest 19 issued public statements about the alleged kickback and sued Renown and NDN. 20 (See e.g., ECF No. 47-3.) That lawsuit is also before this Court. See Donor Network 21 W. v. Nev. Donor Network, Inc., No. 3:23-CV-00632-ART-CSD, 2025 WL 326980 22 (D. Nev. Jan. 29, 2025). DNWest voluntarily dismissed Renown in January 2024. 23 (ECF No. 47-1). 24 D. CMS Grants Renown’s Waiver Request 25 CMS opened public comment on Renown’s request in November 2023. 88 26 Fed. Reg. 82,375; id. at 82,376, 82,381. It received 89 unique comments of 168 27 total. (ECF No. 1-1 at 1.) DNWest provides a letter from Congress and an internal 28 email from the Department of Health and Human Services suggesting that CMS 1 lacks the resources, expertise, and procedures to evaluate a hospital’s OPO 2 waiver request. (See ECF No. 1 at 13.) CMS approved the waiver in December 3 2024. (Id.) In its four-page waiver decision and eight-page internal analysis, CMS 4 summarized comments and explained its rationale. (ECF No. 1-1; ECF No. 42-3.) 5 CMS cited two reasons for finding that the waiver would be likely to 6 increase expected organ donation: NDN’s higher interim tier rating and DNWest’s 7 deteriorating relationship with Renown. CMS considered that the tier system 8 includes organ donation rates, expected transplant rates, observed transplant 9 rates, performance relative to other OPOs based on these rates, and previous 10 assessments on these factors for the previous three years. (ECF No. 42-3 at 4 11 (citing OPO Public Performance Report, 2023 Assessment).) CMS considered 12 advantages to using the tier system including CMS’s collection and analysis of 13 data, which lets the agency avoid relying on an OPO or hospital’s self-interested 14 framing of data. (See ECF No. 42-3 at 5.) 15 CMS also concluded that Renown’s “working relationship with DNWest has 16 recently deteriorated.” (ECF No. 1-1 at 4.) CMS considered DNWest’s lawsuit 17 against Renown, DNWest’s public statements accusing Renown of kickbacks with 18 NDN, and Renown’s other statements regarding its relationship with DNWest. 19 (See id. at 3; ECF No.42-3 at 9.) CMS’s comments about DNWest’s “public 20 statements” refers to several letters submitted to the administrative record that 21 mentioned DNWest’s lawsuit and accused Renown of taking kickbacks. (See ECF 22 No. 1-2 at 6; ECF No. 1-3 at 27.) 23 Regarding the second statutory factor, CMS also found that the waiver 24 would “assure equitable treatment.” (ECF No. 1-1 at 4); 42 U.S.C. § 1320b- 25 8(a)(2)(A)(ii). CMS found that racial minorities had comparable donation and 26 service rates at both DNWest and NDN, and the increased organ donation 27 expected from the waiver would assure equitable treatment for all those in need 28 of a transplant. (ECF No. 42-3 at 6.) CMS also explained that it did not believe 1 “that granting the waiver will impact the regional distribution of organs in the 2 service areas of either OPO” and “that the national organ allocation policies . . . 3 will help ensure equitable treatment of patients referred for transplants in both 4 service areas.” (ECF No. 1-1 at 4.) 5 E. DNWest’s Harms from CMS’s Decision 6 DNWest alleges that CMS’s determination harms their reputation and 7 poses economic problems to their operations in northern Nevada. 8 DNWest alleges that in Nevada it performs better than NDN in several organ 9 donation metrics. DNWest argues that its kidney discard rate and cost 10 effectiveness is better than NDN’s. (See ECF No. 1-3.) DNWest also provided 11 charts to show how quickly tier data fluctuates. (ECF No. 45.) These charts show 12 that NDN also would have been rated Tier 2 based on data from December 2024. 13 (ECF No. 45-1.) On one of these charts, NDN has a significantly higher organ 14 donation rate than NDN, while DNWest has a marginally higher organ 15 transplantation rate than NDN. (Id.) 16 DNWest’s CEO fears that if Renown implements the allegedly legally 17 defective waiver, it will damage DNWest’s reputation, goodwill, and recruiting 18 efforts with hospitals and contractors at Renown and elsewhere in northern 19 Nevada. (ECF No. 16-1 at 7–8.) DNWest’s CEO also references harm in “the 20 broader Reno community” and comments from undisclosed “community 21 partners” who have already lowered their opinion DNWest or considered 22 withdrawing from partnerships because of the waiver decision. (Id.) 23 DNWest predicts that losing its staff and revenue stream at Renown would 24 force it to scale down its operations with other northern Nevada hospitals and 25 collaborators, which had been economically feasible because of economies of 26 scale at Renown, ultimately resulting in fewer programs, less goodwill, and less 27 revenue. (Id. at 8.) Representations made in the hearing confirmed that DNWest’s 28 three coordinators who worked at Renown had already stopped working at 1 Renown by the time of the hearing. (Trans.) 2 F. Renown Prepares to Switch OPOs 3 Following CMS’s approval of its request, in December 2024, Renown alerted 4 DNWest that the waiver would take effect on March 31, 2025. (ECF No. 47-2.) 5 DNWest’s CEO acknowledged this and told Renown that it would continue 6 providing services until termination. (Id.) DNWest filed its lawsuit on March 7, 7 2025, and notified Renown’s CEO of its intent to file a preliminary injunction the 8 same day. (ECF Nos. 1, 45-3.) 9 Between notifying DNWest and learning of the lawsuit, Renown engaged in 10 “significant planning, instruction, and communications with medical staff.” (ECF 11 No. 47-1 at 5.) A practicing nephrologist involved in Renown’s organ donation 12 program wrote in a sworn statement that any delay in “would cause considerable 13 disruption to the organ donation operations at Renown and risk the loss of critical 14 organs.” (Id.) 15 II. STANDARD OF REVIEW 16 A preliminary injunction is an “extraordinary” and “drastic” remedy that 17 requires the moving party to clearly show that they carry the burden of 18 persuasion. Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (cleaned up). A 19 movant seeking preliminary injunctive relief must show that they are likely to 20 succeed on the merits, that they are likely to suffer irreparable harm in the 21 absence of preliminary relief, that the balance of equities tips in their favor, and 22 that an injunction is in the public interest. Winter v. Nat. Res. Def. Council, Inc., 23 555 U.S. 7, 20 (2008). In cases against the government, the last two factors merge 24 into one. Drakes Bay Oyster Co. v. Jewell, 747 F.3d 1073, 1092 (9th Cir.), as 25 amended (Jan. 14, 2014). 26 While Winter requires a plaintiff to show likelihood of irreparable harm, the 27 Ninth Circuit applies a sliding scale approach to the other factors. All. for the Wild 28 Rockies v. Cottrell, 632 F.3d 1127, 1134–35, 1139 (9th Cir. 2011). If the movant 1 makes a threshold showing of “serious questions going to the merits” instead of 2 likelihood of success on the merits, then strong showings on the remaining 3 factors allow a court to issue the injunction. See Disney Enterprises, Inc. v. 4 VidAngel, Inc., 869 F.3d 848, 856 (9th Cir. 2017) (citing Garcia v. Google Inc., 786 5 F.3d 733, 740 (9th Cir. 2015)). If the movant fails to show serious questions going 6 to the merits, the other factors may not otherwise justify granting the injunction. 7 Id. 8 III. ANALYSIS 9 The Court considers CMS’s argument that DNWest lacks standing, then 10 evaluates whether DNWest is likely to succeed on the merits of any of its APA 11 claims, whether DNWest has shown irreparable injury, and whether the balance 12 of equities and public interest favors granting a preliminary injunction. 13 A. Standing 14 Federal Defendants argue that DNWest lacks standing because CMS 15 cannot redress Renown’s decision to switch from DNWest to NDN. DNWest 16 responds that the nature of the waiver statute and alleged violation establish 17 standing. To show standing, a party must allege injury in fact traceable to another 18 party’s challenged conduct that is likely to be redressed by a favorable judicial 19 decision. Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016). CMS concedes that 20 DNWest has alleged an injury, but it argues that vacating or staying CMS’s waiver 21 decision does not redress the harm of DNWest losing Renown as a hospital 22 partner. (ECF No. 42 at 15–17); see Hecate Energy LLC v. FERC, 126 F. 4th 660, 23 665 (D.C. Cir. 2025) (redressability difficult when relief depends on response of 24 third party’s discretion); see Wash. v. FDA, 108 F.4th 1163, 1175 (9th Cir. 2024). 25 DNWest responds that the Transplant Act prevents Renown from switching OPOs 26 unless CMS grants it a waiver. 27 The Court finds that staying or vacating the waiver redresses DNWest’s 28 injury. If the waiver is stayed or vacated, Renown may not operate an organ 1 donation program unless it is partnered with DNWest. See 42 U.S.C. § 1320b- 2 8(a)(1)(C). Renown’s contract also requires it to continue its partnership with 3 DNWest until agency action allows Renown to exit. (See ECF No. 16-2 at 6.) 4 CMS argues that DNWest’s real injury is that Renown wants to end its 5 relationship with DNWest regardless of CMS’s waiver decision, and this was the 6 case before CMS issued its decision. Hunter v. Dep’t of Ed., 115 F.4th 955, 970 7 (9th Cir. 2024) (no standing based on injury “that existed prior to a challenged 8 [agency action]”). 9 The Court finds that DNWest’s alleged injuries are reputational harm from 10 losing its placement at Renown and needing to scale back operations without 11 revenue generated at Renown. (ECF No. 16-1 at 7.) DNWest is not “equally likely” 12 to suffer these injuries if the waiver is stayed or vacated. Hunter, 115 F.4th at 13 970. 14 CMS then argues that DNWest’s injury is not redressable because Renown 15 could apply for another waiver to switch OPOs that would likely be granted. The 16 “mere fact” that an agency “might again issue a waiver” does not preclude 17 standing under the APA. Beno v. Shalala, 30 F.3d 1057 (9th Cir. 1994). The Court 18 finds that DNWest has standing for its APA claims. 19 B. Preliminary Injunction 20 1. Likelihood of Success on the Merits 21 DNWest’s claims arise under the Administrative Procedure Act, which 22 allows a court to overturn agency action that is arbitrary, capricious, an abuse of 23 discretion, otherwise not in accordance with law, or in excess of statutory 24 authority. 5 U.S.C. § 706(2)(A), (C). An action is arbitrary and capricious if it 25 “relied on factors which Congress has not intended it to consider, entirely failed 26 to consider an important aspect of the problem, [or] offered an explanation for its 27 decision that runs counter to the evidence before the agency . . . .’” Bark v. United 28 States Forest Serv., 958 F.3d 865, 869 (9th Cir. 2020) (internal citation omitted)). 1 DNWest argues that CMS’s decision was not in accordance with the authority 2 granted CMS by 42 U.S.C. § 1320b-8(a)(2)(A), that CMS failed to address 3 significant comments and objections, and that CMS’s decision relied on a clear 4 error of judgment. (ECF No. 16 at 17, 19, 21.) 5 a. Compliance with the Statute 6 DNWest argues that CMS exceeded its authority under 42 U.S.C. § 1320b- 7 8(a)(2)(A) by using interim tier ratings for OPOs and DNWest’s deteriorating 8 relationship with Renown as bases for its findings. (ECF No. 16 at 17–18.) CMS 9 and Renown respond that these were reasonable factors to consider in its findings 10 granting the waiver application. 11 Courts “exercise their independent judgment in deciding whether an 12 agency has acted within its statutory authority.” Loper Bright Enters. v. Raimondo, 13 603 U.S. 369, 412 (2024). In statutory interpretation, analysis begins “with the 14 plain language of the statute.” Cheneau v. Garland, 997 F.3d 916, 919 (9th Cir. 15 2021) (citing Jimenez v. Quarterman, 555 U.S. 113, 118 (2009)). To find the plain 16 language of the statute, courts read the words “in their context and with a view 17 to their place in the overall statutory scheme.” King v. Burwell, 576 U.S. 473, 486 18 (2015). 19 The relevant statute here is the Transplant Act, codified at 42 U.S.C. § 273 20 et seq. A separately codified provision at 42 U.S.C. § 1320b-8(a)(2)(A) requires 21 CMS to grant a waiver to a hospital to switch OPOs if the agency determines: 22 (i) the waiver is expected to increase organ donation; and 23 (ii) the waiver will assure equitable treatment of patients referred for 24 transplants within the service area served by such hospital’s 25 designated organ procurement agency and within the service area 26 served by the organ procurement agency with which the hospital 27 seeks to enter into an agreement under the waiver. 28 1 i. Expected to Increase Organ Donation 2 CMS used two bases to determine that letting Renown switch from DNWest 3 to NDN would increase organ donation: NDN’s higher tier rating and the 4 breakdown of DNWest’s relationship with Renown. The statute permits both of 5 these factors to be used to assess this requirement. Tier-Rating System Statutory Challenge 6 7 DNWest argues that 42 U.S.C. § 1320b-8(a)(2)(A) does not permit CMS to 8 consider tier-ratings when determining if a waiver is expected to increase organ 9 donation. (ECF No. 16 at 18.) CMS responds that CMS may choose how it 10 assesses this question. (ECF No. 42 at 21.) 11 Neither the statute nor the regulations explicitly provide a methodology to 12 use in deciding whether a waiver is expected to increase organ donation. See 42 13 U.S.C. § 1320b-8(a)(2)(A); 42 C.F.R. § 486.308(e). Read as a whole, the statutory 14 scheme allows the tier system as an acceptable basis for predicting increased 15 organ donation. See King, 576 U.S. at 486 (courts construe “statutes, not isolated 16 provisions”). The statute gives CMS authority to develop criteria to gauge the 17 performance of OPOs on “outcome and process performance measures . . . based 18 on empirical evidence . . . of organ donor potential in other related factors in each 19 service area . . . [and] use multiple outcome measures.” 42 U.S.C. § 20 273(b)(1)(a)(D). Under this grant of authority, CMS developed the tier system, 21 which considers multiple outcome measures of organ donor potential, transplant 22 rates, and other factors. See 85 Fed. Reg. 77,898 (Dec. 2, 2020); 42 CFR § 23 486.316. It is not contrary to the statute to use the methodology Congress 24 instructed the agency to develop for assessing OPO performance to assess OPO 25 performance. 26 DNWest argues that using the tier system to evaluate a single hospital’s 27 request for a waiver is contrary to the statute because tiers were designed to 28 compare OPOs across entire donation service areas. (ECF No. 1 at 11, 24.) The 1 plain reading of the waiver provision, in the context of the statute, does not 2 require CMS to find that organ donation rates will increase at the hospital 3 requesting a waiver. “When the legislature uses certain language in one part of 4 the statute and different language in another, the court assumes different 5 meanings were intended.” Cheneau, 997 F.3d at 920 (internal citation omitted). 6 Other provisions in the Transplant Act require an agency to evaluate “the rate of 7 organ donation” at particular hospitals. See, e.g., 42 U.S.C. §§ 274(f)–2(a)(1), (e). 8 The hospital waiver provision only requires the agency to determine if the waiver 9 is expected to increase organ donation. See 42 U.S.C. § 1320b-8(a)(2)(A)(i). CMS 10 did not need to use a hospital-specific methodology to evaluate this factor. 11 DNWest argues that using the tier system is a bad proxy because it does 12 not account for the treatment of patients in both service areas, ensure effective 13 coverage of service areas, or predict “an increase in donation rates at the 14 particular hospital requesting a waiver.” (ECF No. 16 at 18.) The plain reading of 15 the provision and the statute does not require findings on the treatment of 16 patients or “effective coverage” of service areas. 17 Using Tier Rating to Evaluate Renown’s Request was not Arbitrary and Capricious 18 19 DNWest further argues that the data considered in the tier system is an 20 inadequate proxy for expected increased organ donation because it measures 21 OPO performance across entire service areas over a four-year period and 22 fluctuates between interim years. (ECF No. 16 at 18; ECF No. 44 at 11–12). This 23 is a challenge to a policy decision, not statutory interpretation. Under deferential 24 arbitrary and capricious review, the Court may not substitute its “policy 25 judgment for that of the agency.” China Unicom (Americas) Operations Ltd. v. FCC, 26 124 F.4th 1128, 1151 (9th Cir. 2024) (citing FCC v. Prometheus Radio Project, 592 27 U.S. 414, 423 (2021)). “‘[R]eview of an administrative agency's decision begins 28 and ends with the reasoning that the agency relied upon in making that 1 decision.’” Nat. Res. Def. Council v. EPA, 735 F.3d 873, 877 (9th Cir. 2013) 2 (quoting Safe Air for Everyone v. EPA, 488 F.3d 1088, 1091 (9th Cir. 2007)). 3 The tier ratings used by CMS to make their decision included relevant data 4 to predicting increased organ donation, like organ donation rates, expected 5 transplant rates, observed transplant rates, performance relative to other OPOs 6 based on these rates, and previous assessments on these factors for the previous 7 three years. (ECF No. 42-3 at 4 (citing OPO Public Performance Report, 2023 8 Assessment.) CMS also considered other reasonable advantages to the tier 9 system. CMS collects and assembles the data used to evaluate tiers, which avoids 10 the problem of relying on an OPO or hospital’s self-interested framing of data, 11 facts noted by CMS. (See ECF No. 42-3 at 5 (recognizing this fact from a comment 12 by NDN).) Data from the tier system is made public, which allows OPOs and 13 hospitals to compare relative performance, anticipate possible challenges based 14 on tier performance, or notice and publicize problematic data-collection, data- 15 assembly, or data-reporting practices. The tier system incorporates procedural 16 protections to meet these goals as well. See also 85 Fed. Reg. 77,898, 77,912 17 (“CMS will share preliminary results with each OPO to provide the opportunity to 18 review the information and raise any concerns prior to the results being made 19 publicly available and taking any enforcement action”). Tier data is a reasonable 20 proxy for assessing expected increases in organ donation. 21 DNWest argues that using tier rating is arbitrary and capricious because 22 ratings fluctuate greatly between years. (See ECF No. 45 at 2.) To support this 23 view, DNWest points to data that would have been available to CMS at the time 24 it made its waiver decision in 2024. (See id. at 3.) DNWest argues that its own 25 analysis of “Provisional Data” from 2023, showing both NDN and DNWest as tier 26 2 OPOs, proves that tier ratings change too quickly to accurately gauge waiver 27 requests. (Id.; ECF No. 45-1.) While noting that this data still shows NDN as 28 having a higher organ donation rate than DNWest, (ECF No. 45-1 at 2), the Court 1 lacks a basis for accepting DNWest’s assertion that this fluctuation is arbitrary 2 and does not reflect change in performance between years. CMS’s adoption of the 3 final rule contemplated performance changes between interim ratings—that is 4 why CMS provides them to OPOs. See 85 Fed. Reg. at 77,912. Additionally, the 5 Court is loath to fault CMS for not having used a data set labeled “provisional.” 6 DNWest also argues that basing a waiver request solely on differences in 7 tier rating, without considering factors specific to the applicant hospital and 8 service area, undermines the statutory scheme. DNWest argues that allowing 9 waivers based solely on difference in tier status would incentivize OPOs to raid 10 high-performing hospitals between certification periods. (ECF No. 16 at 18.) 11 DNWest has failed to show that is the case here, because CMS also considered 12 whether either OPO has geographically advantageous locations to serve Renown, 13 cost effectiveness, and the breakdown of Renown and DNWest’s relationship. 14 (ECF No. 1-1 at 3–4.) Renown’s Relationship with DNWest 15 16 The Transplant Act recognizes that relationships between hospitals and 17 OPOs are relevant to increasing organ donation. The Court construes the statute 18 as a whole and assumes that Congress intended different meanings for “certain 19 language in one part of the statute and different language in another.” See King, 20 576 U.S. at 486; Cheneau, 997 F.3d at 920. The Transplant Act requires OPOs 21 to “have effective agreements” with hospitals in its service areas, while it only 22 requires that OPOs “have arrangements” with entities like tissue banks. 42 U.S.C. 23 §§ 273(b)(3)(B), (G), (I). The Act funds programs for increasing organ donation 24 rates at particular hospitals that must be “carried out jointly,” with joint 25 “leadership responsibility and accountability” by the hospital and OPO. Id. §§ 26 274(f)–2(b), (c). Read together, these provisions show that relationships between 27 OPOs and hospitals are important to the Act’s aim of increasing organ donation. 28 CMS found that switching OPOs at Renown would lead to increased organ 1 donation because Renown’s “working relationship with DNWest has recently 2 deteriorated.” (ECF No. 1-1 at 4.) Specifically, CMS considered DNWest’s lawsuit 3 against Renown, DNWest’s public statements accusing Renown of kickbacks with 4 NDN, and Renown’s other statements regarding its relationship with DNWest. 5 (See id. at 3; ECF No.42-3 at 9.) 6 DNWest challenges CMS’s assessment of the evidence suggesting its 7 relationship with Renown had deteriorated. The Court must uphold the agency’s 8 conclusions so long as they are supported by “[m]ore than a scintilla” of evidence. 9 Nat. Res. Def. Council v. EPA, 735 F.3d 873, 877 (9th Cir. 2013). DNWest argues 10 that the evidence on the administrative record showed that CMS’s conclusion 11 that the relationship had soured was based solely on evidence showing a 12 breakdown among senior management. DNWest further argues that failing to 13 recognize this distinction would let a hospital manufacture a waiver for 14 commercial reasons without regard to statutory requirements. (See ECF No. 50 15 at 2.) But here, DNWest’s own actions contributed to the relationship’s decline. 16 Sufficient evidence supported CMS’s conclusion that DNWest’s 17 relationship with Renown deteriorated. CMS concluded that DNWest’s “public 18 statements,” (see ECF No. 1-1 at 3), including several letters submitted to the 19 administrative record showing that DNWest accused Renown of taking kickbacks, 20 led to a breakdown in DNWest’s and Renown’s relationship. (See ECF No. 1-2 at 21 6; ECF No. 1-3 at 27; see also ECF No. 47-3.). The agency reasonably concluded 22 that deteriorating relations could negatively impact organ donation. 23 ii. Assuring Equitable Treatment 24 DNWest argues that CMS did not make a reasoned determination that 25 Renown met the second mandatory factor regarding equitable treatment, which 26 provides: [T]he waiver will assure equitable treatment of patients referred for 27 transplants within the service area served by such hospital’s 28 designated organ procurement agency and within the service area 1 seeks to enter into an agreement under the waiver. 2 42 U.S.C. § 1320b-8(a)(2)(A)(ii). 3 CMS’s rationale for this determination was based on racial equity, 4 increased expected organ donations with NDN as Renown’s OPO, and national 5 policy for allocating transplants. (ECF No. 1-1 at 4–5.) CMS found that racial 6 minorities had comparable donation and service rates at both OPOs, increased 7 organ donation expected from the switch would assure equitable treatment, and 8 that national organ allocation policies will ensure equitable treatment. (ECF No. 9 42-3 at 6.) CMS also explained that it did not believe “that granting the waiver 10 will impact the regional distribution of organs in the service areas of either OPO” 11 and “that the national organ allocation policies . . . will help ensure equitable 12 treatment of patients referred for transplants in both service areas.” (ECF No. 1- 13 1 at 4.) 14 While DNWest argues that CMS’s findings were inadequate, they satisfied 15 the statute. This provision requires equitable allocation of donated organs in the 16 donation service areas of both the existing and replacing OPO. This provision 17 passed into law when an OPO’s donation service area could affect where a 18 donated organ would be transplanted. Social Security Act Amendments of 1994, 19 Pub. L. No. 103-432 § 155, 108 Stat 4398, 4438 (1994). Current allocation 20 policies do not allow for donation service areas to be considered in organ 21 allocation decisions. See Adventist Health, 17 F.4th at 799–800. DNWest 22 acknowledged this at the hearing. Accordingly, CMS’s findings that the waiver 23 would not “impact regional distribution of organs” and that national allocation 24 policies ensure equitable treatment satisfied the statute. (ECF No. 1-1 at 4.) 25 b. Failure to Respond to Significant Comments 26 DNWest argues that CMS failed to take into account significant comments 27 that alleged a kickback scheme between Renown and NDN, financial impropriety 28 1 at NDN, NDN’s poor relationship with its transplant center in Las Vegas, and 2 comments raising policy concerns about rival OPOs to raiding high-performing 3 hospitals. (ECF No. ECF No. 16 at 19–21; ECF No. 44 at 15.) 4 “An agency must consider and respond to significant comments received 5 during the period for public comment.” Perez v. Mortg. Bankers Ass’in, 575 U.S. 6 92, 96 (2015); PPL Wallingford Energy LLC v. FERC, 419 F.3d 1194, 1198 (D.C. 7 Cir. 2005). Courts may not second-guess an agency’s “weighing of risks and 8 benefits” or penalize it “for departing from the . . . inferences and assumptions” 9 of others.” California by & through Becerra v. Azar, 950 F.3d 1067, 1096 (9th Cir. 10 2020). 11 CMS’s internal analysis and decision granting the waiver considered the 12 kickback allegations in concluding that DNWest and Renown’s relationship had 13 deteriorated. CMS’s internal analysis says that DNWest claimed that “Renown 14 Health was offered money by the requested OPO to build a transplant center, and 15 . . . the requested OPO appeared to predicate the gift on Renown Health’s 16 application for a waiver.” (ECF No. 42-3 at 8–9.) CMS’s decision then mentions 17 “Donor Network West’s lawsuit against Renown Health and related public 18 statements, which Renown Health contends mischaracterized its intent in 19 seeking to change OPOs.” (ECF No. 1-1 at 3.) The agency’s mention of the lawsuit 20 refers to DNWest’s lawsuit against Renown and NDN alleging a kickback scheme, 21 as confirmed by comments mentioning the lawsuit. (ECF No. 1-3 at 26–27; ECF 22 No. 1-10 at 2.) When read with the internal analysis and comments alleging the 23 kickback, the decision’s mention of “related public statements” includes 24 DNWest’s allegations of the alleged kickback scheme. (ECF No. 1-1 at 3.) In its 25 concluding paragraph of the “Increased Organ Donation” section, these facts led 26 CMS to conclude that Renown’s working relationship with DNWest had 27 deteriorated. (Id. at 4.) CMS rejecting DNWest’s concern does not make its 28 decision arbitrary and capricious. See Becerra, 950 F.3d at 1096. 1 DNWest also argues that CMS was required to address arguments in the 2 comments that allowing OPOs to bribe high-performing hospitals would 3 undermine the OPO system. (ECF No. 16 at 20–21.) CMS responds that these 4 comments did not relate to the statutory findings it was required to make, and 5 “adverse incentives are a result of the governing statute, which Congress—not 6 CMS—must address.” (ECF No. 42 at 25.) Renown also points to regulatory 7 history of the Transplant Act that suggests that CMS had already considered and 8 rejected DNWest’s policy concern regarding poaching high-performing hospitals 9 through waivers. (See ECF No. 49 (citing 71 Fed. Reg. 30982, 30987 (2006).) 10 Finally, DNWest argues that CMS failed to consider comments pointing out 11 NDN’s allegedly wasteful spending of government funds and NDN’s poor 12 relationship with its transplant center in Las Vegas. The internal analysis 13 explicitly mentions and considers these comments in the section labeled “cost 14 effectiveness.” (ECF No. 42-3 at 6.) The decision mentions that “organ acquisition 15 costs may be higher if the waiver is granted” and that NDN “has higher organ 16 acquisition costs for kidneys . . . we do not believe that any potential increase 17 would outweigh the other considerations identified.” (ECF No. 1-1 at 3, 4.) Though 18 brief, these findings demonstrate that CMS considered these comments, and the 19 Court will not second-guess its weighing. Becerra, 950 F.3d at 1096. 20 c. CMS’s Decision in Light of the Evidence Before It 21 DNWest argues that CMS’s decision was unreasonable in light of the 22 evidence considered. (ECF No. 16 at 21–22.) An agency action is arbitrary and 23 capricious if its rationale “runs counter to the evidence” or so implausible that it 24 is not due to a difference in view or the product of agency expertise. Cal. Energy 25 Comm’n v. Dep’t of Energy, 585 F.3d 1143, 1150–51 (9th Cir. 2009). Courts apply 26 a deferential standard to agency factfinding and policymaking decisions. Loper 27 Bright, 603 U.S. at 392. 28 DNWest’s argument here mirrors its first and second claims: CMS did not 1 properly weigh evidence purporting to show that DNWest is a more effective OPO 2 than NDN, NDN engaged in financial impropriety and kickbacks, and DNWest 3 has a longer relationship with Renown. 4 Regarding the DNWest’s data showing higher performance in Nevada 5 compared to NDN, the Court notes that “where analysis of the relevant documents 6 requires a high level of technical expertise,” courts “defer to the informed 7 discretion of the responsible federal agencies.” Arizona ex rel. Darwin v. EPA, 815 8 F.3d 519, 530 (9th Cir. 2016) (internal citations and quotations removed). 9 DNWest’s statistics showing higher costs and discard rates for some organs over 10 others do not themselves compel the Court to find CMS’s use of tier data arbitrary 11 or capricious. See supra III.B.1.a.i.II. 12 Regarding the conflict between DNWest and Renown as an adequate basis 13 for expecting increased organ donation, the Court reiterates the argument made 14 above. See supra III.B.1.a.i.III. 15 CMS also considered the length of DNWest’s relationship with Renown, 16 and, as this is not a statutorily required factor for deciding whether to issue a 17 waiver, was not required to weigh it as a factor in its final decision, even though 18 CMS mentioned it. (ECF No. 1-1 at 4.) 19 Accordingly, the Court holds that the statute does not foreclose using 20 CMS’s tier rating and breakdown in a relationship to evaluate the hospital-waiver 21 factors and finds that CMS's consideration of the evidence and comments before 22 it was not arbitrary and capricious. DNWest’s claims do not raise serious 23 questions on the merits. 24 2. Irreparable Harm 25 DNWest argues it will suffer irreparable reputational harm from the waiver 26 taking effect and irreparable economic harm from scaling down operations in 27 Northern Nevada (ECF No. 16 at 22–25). CMS and Renown respond that 28 DNWest’s delay and the speculative nature of its harms do not warrant finding 1 irreparable reputational harm. (ECF Nos. 42, 47.) 2 A preliminary injunction requires a showing of likely, not possible, 3 irreparable harm. Winter, 555 U.S. at 22. “Intangible injuries” like harm to 4 reputation may qualify as irreparable harm. Rent-A-Ctr., Inc. v. Canyon Television 5 & Appliance Rental, Inc., 944 F.2d 597, 603 (9th Cir. 1991) (citing Regents of Univ. 6 of Cal. v. Am. Broadcasting Cos., 747 F.2d 511, 519–20 (9th Cir.1984)); Herb Reed 7 Enters., LLC v. Fla. Ent. Mgmt., Inc., 736 F.3d 1239, 1250 (9th Cir. 2013) 8 (reversing preliminary injunction for insufficient showing of irreparable harm). 9 Irreparable reputational damages generally arise when an entity is posed 10 to lose competitively important goodwill at a competitively important time. In 11 Rent-A-Center, the plaintiff showed irreparable harm to goodwill when the 12 defendant opened a store five months after having agreed with the plaintiff not to 13 open a store in that location for three years. 944 F.2d at 603. If the plaintiff would 14 have had to wait until the end of litigation to seek damages, it would have been 15 difficult to evaluate the effect of the competitor’s presence on prospective 16 consumers. See id. Similarly, in Regents of University of California v. American 17 Broadcasting Companies, the Ninth Circuit held that the loss of television 18 audience's goodwill from not being able to broadcast a college football game was 19 irreparable. 747 F.2d at 520. 20 Here, reputational damage from the CMS decision has either already 21 happened or can be addressed by a later decision on the merits. Unlike the 22 prospective consumers in Rent-A-Center or the television audiences in Regents, 23 DNWest’s collaborators—including Renown—have known about Renown’s intent 24 to switch OPOs since at least September 2023. (See ECF No. 47-1.) DNWest’s 25 allegations about the NDN-Renown kickback have been public since at least 26 December 2023. (See ECF No. 47-3.) The waiver decision has been public since 27 December 2024. (See ECF No. 1-1.) DNWest names “the broader Reno 28 community” and “community partners” who may lower their esteem of DNWest if 1 the waiver goes into effect, but it has not provided enough explanation about 2 relevant people who are not already familiar with this conflict or who would lose 3 trust in DNWest should they find out about it. See Titaness Light Shop, LLC v. 4 Sunlight Supply, Inc., 585 F. App'x 390, 391 (9th Cir. 2014) (describing absence 5 of a causal chain that alleged reputational harm would likely occur). Reputational 6 harm caused by DNWest employees leaving Renown had already happened by 7 the time of the hearing. 8 Renown and CMS argue that DNWest’s delay in bringing this litigation 9 weighs against finding irreparable harm. DNWest responds that delay is not a 10 dispositive factor. See Arc of Cal. v. Douglas, 757 F.3d 975, 990 (9th Cir. 2014); 11 Cuviello v. City of Vallejo, 944 F.3d 816, 833 (9th Cir. 2019) (permitting delay over 12 one year for pro se plaintiff seeking redress of worsening constitutional violation); 13 but see Garcia, 786 F.3d at 746 (three-month delay in filing for injunction 14 reasonable factor to consider in denying injunction). DNWest knew about the 15 waiver for over two months before filing this suit or alerting interested parties of 16 its intent. (See ECF Nos. 1, 1-1.) DNWest’s delay weighs against finding 17 irreparable harm. 18 DNWest also argues that allowing the waiver to take effect would require it 19 to “redirect its resources, which may include scaling down its operations” which 20 could in turn “negatively impact its services and hinder its growth trajectory” 21 within its Nevada service area. (ECF No. 16 at 24.) “Where parties cannot typically 22 recover monetary damages flowing from their injury—as is often the case in APA 23 cases—economic harm can be considered irreparable.” E. Bay Sanctuary 24 Covenant v. Biden, 993 F.3d 640, 677 (9th Cir. 2021). Here, though, DNWest has 25 not identified concrete economic harm beyond relocating three employees who 26 worked inside of Renown. (ECF No. 16-1 at 8.) Under the statute, DNWest is 27 obligated to provide service in its donation service area which still includes 28 northern Nevada. See 42 USC § 273(b)(3). 1 Accordingly, the Court finds that DNWest has shown irreparable harm only 2 in having to relocate three employees, though this limited harm does not outweigh 3 the lack of serious questions on the merits or public interest and equity. 4 3. Public Interest and Equity 5 DNWest argues that the public interest and equity favor stopping CMS’s 6 allegedly unlawful action, while CMS argues that allowing Renown to receive the 7 waiver it applied for satisfies these factors. (ECF No. 16 at 25; ECF No. 42 at 31.) 8 Renown argues that it has been planning for the switch to NDN for several 9 months and that unexpected judicial intervention could interrupt its organ- 10 donation program. (ECF No. 47 at 18–20.) Renown has the better argument that 11 outweighs all other factors discussed above. 12 The balance of equities and public interest considerations “merge when the 13 Government is the opposing party.” Nken v. Holder, 556 U.S. 418, 435 (2009). 14 Although there is “no public interest in the perpetuation of unlawful agency 15 action,” courts must weigh the “public consequences in employing the 16 extraordinary remedy of injunction.” League of Women Voters v. Newby, 838 F.3d 17 1, 12 (D.C. Cir. 2016); Stormans, Inc. v. Selecky, 586 F.3d 1109, 1139 (9th Cir. 18 2009). 19 Renown’s declaration from a practicing nephrologist involved in the 20 transplant program states that DNWest’s last-minute application for injunctive 21 relief would “cause considerable disruption to the organ donation operations at 22 Renown and risk the loss of critical organs.” (ECF No. 47-1 at 5; see also Trans. 23 (indicating errata to first page of declaration).) Renown and its staff have been 24 planning for a smooth transition from DNWest to NDN for the last several months. 25 (ECF No. 47-1 at 4–5.) While DNWest argues that CMS's decision threatens public 26 trust in organ donation, the Court finds that disruption to the organ-donation 27 system at Renown poses a more serious risk to the public. Renown's credible 28 claim that granting the injunction could risk losing organs outweighs immediate 1 || vindication of DNWest’s procedural rights. Additionally, the fact that DNWest 2 || could have indicated to CMS and Renown its intent to seek injunctive relief more 3 || than two months before it did, (see ECF No. 47-2 at 2-3), weighs against granting 4 || an injunction. The public interest and balance of equities strongly favors denying 5 || the preliminary injunction. 6 Applying the sliding scale approach to injunctive relief, All. for the Wild 7 || Rockies, 632 F.3d at 1139, the Court holds that there are not serious questions 8 || on the merits and DNWest faces some irreparable harm, but even if serious 9 || questions on the merits and irreparable harm exist, the public interest outweighs 10 || these factors and requires denying DNWest’s motion for a preliminary injunction. 11 || IV. CONCLUSION 12 The Court denies Plaintiffs motion for preliminary injunctive relief. (ECF 13 |} No. 15.) 14 15 DATED THIS 31st day of March, 2025. 16 Ana jlosed Jd 17 ANNE R. TRAUM 18 UNITED STATES DISTRICT JUDGE 19 20 21 22 23 24 25 26 27 28