1 UNITED STATES DISTRICT COURT 2 DISTRICT OF NEVADA 3 DONOR NETWORK WEST, Case No. 3:25-cv-00140-ART-CSD 4 Plaintiff, ORDER 5 v.
6 ROBERT F. KENNEDY, JR., in his official capacity as Secretary of Health 7 and Human Services;
8 STEPHANIE CARLTON, in her official capacity as Acting Administrator of the 9 Centers for Medicare & Medicaid Services; 10 UNITED STATES DEPARTMENT OF 11 HEALTH AND HUMAN SERVICES, CENTERS FOR MEDICARE & 12 MEDICAID SERVICES, Defendants. 13 RENOWN HEALTH, 14 Intervenor. 15 16 Plaintiff Donor Network West (“DNWest”), an Organ Procurement 17 Organization (“OPO”), sued federal Defendants, including the Centers for 18 Medicare & Medicaid Services (“CMS”), a federal agency, asking this Court to 19 vacate CMS’s decision to grant Intervenor Renown Health’s (“Renown”) 20 application to switch OPOs. (ECF No. 1.) The Court then denied DNWest’s motion 21 for a preliminary injunction, finding that the public’s interest in not risking the 22 loss of donated organs in Intervenor Renown’s organ-donation program strongly 23 outweighed DNWest’s risk of irreparable reputational and economic harm and 24 any serious questions on the merits. (ECF No. 52.) 25 Before the Court now is DNWest’s motion for summary judgment (ECF No. 26 57), and CMS and Renown’s cross-motions for summary judgment. (ECF Nos. 60; 27 63.) For the reasons stated below, the Court denies DNWest’s motion for 28 1 summary judgment, and grants CMS and Renown’s cross-motions for summary 2 judgment. 3 I. BACKGROUND 4 The National Organ Transplant Act (“Transplant Act”) is a broad federal 5 policy that addresses the backlog of people in need of organ transplants by 6 encouraging organ donation and distributing donated organs equitably and 7 effectively. The Act carries out these goals by authorizing federal agencies “to 8 provide grants and other payments to a national network of non-profit 9 organizations tasked with acquiring, preserving, and transporting donated 10 organs.” Adventist Health Sys./SunBelt, Inc. v. DHHS, 17 F.4th 793, 796 (8th Cir. 11 2021). “This is an incredibly complex effort.” Id. 12 A. Parties 13 Defendant Health & Human Services is a federal agency that contains the 14 Centers for Medicare & Medicaid Services (“CMS”), one of the federal agencies 15 that oversees organ donation and transplant programs. (ECF No. 1.) CMS granted 16 the waiver at issue in this case. (ECF No. 68-1 at 5–7.) Defendants Robert F. 17 Kennedy, Jr., and Stephanie Carlton are administrators for the Medicare 18 program, and are sued in their official capacities for CMS’s grant of the waiver. 19 Plaintiff Donor Network West (“DNWest”) is an Organ Procurement 20 Organization (“OPO”) that operates in California and Nevada. DNWest is the third 21 largest OPO in the country and has operated as Renown’s OPO for almost forty 22 years. (ECF No. 68-1 at 38–39.) DNWest has performed well at Renown for the 23 last several years and received accolades for increasing the number of organ 24 donations in Renown’s hospital system. (See ECF No. 57.) In 2023, DNWest 25 received an interim tier 2 performance rating from CMS. (ECF No. 68-1 at 6.) 26 Intervenor Renown Health (“Renown”) is a healthcare organization with 27 three hospitals in Reno, Nevada, at issue in this case. (ECF No. 68-1.) Renown 28 applied for a waiver to switch OPOs in September 2023. (Id.) 1 Nonparty Nevada Donor Network (“NDN”) is the OPO with which Renown 2 applied to partner in place of DNWest. In 2023, NDN received a tier 1 performance 3 evaluation from CMS. (ECF No. 68-1 at 6.) 4 B. How Organ Procurement Organizations Work 5 OPOs are private, federally funded organizations that coordinate organ 6 donations across the country. See 42 U.S.C. § 273; Adventist Health, 17 F.4th at 7 797. OPOs facilitate organ donation, while separate organizations carry out 8 transplants. Adventist Health, 17 F.4th at 797. 9 i. OPOs and Donation Service Areas 10 Congress saw the value of OPOs having durable relationships with the 11 hospitals and other organizations and volunteers where they operate. See, e.g., 12 42 U.S.C. § 1320b-8(a)(1)(B)(iv) (recognizing “length of continuity of a hospital’s 13 relationship” with an OPO); 42 U.S.C. § 273(b)(1)(H) (OPOs must have board 14 members who represent hospitals and the public residing in their donation 15 service area). To this end, OPOs are granted four-year monopolies for specified 16 donation service areas. 42 CFR § 486.308. Donation service areas are 17 “geographically irregular areas (within and among states)” that can be 18 constructed around non-geographic factors like religion and cultural 19 background. See Callahan v. DHHS, 939 F.3d 1251, 1255 (11th Cir. 2019). 20 During an OPO’s four-year term, it must serve “a substantial majority of the 21 hospitals and other health care entities” within its donation service area that have 22 facilities for donations. 42 U.S.C. § 273(b)(3). All donor hospitals must have 23 affiliation agreements with the OPO assigned to their donation service area. 42 24 U.S.C. § 1320b-8(a)(1)(C). 25 Donor hospitals work exclusively with the OPO that covers their donation 26 service area, and every hospital that conducts organ recovery or transplantation 27 must have an affiliation with this “designated” OPO. 42 U.S.C. § 1320b-8(a)(1)(C). 28 Renown’s designated OPO is DNWest. (See ECF No. 68-1 at 273.) 1 Although hospitals must normally work with their designated OPO, a 2 hospital can seek a waiver to work with a different OPO if CMS finds that it meets 3 two statutory requirements. 42 U.S.C. § 1320b-8(a)(2)(A). CMS must determine 4 that: (i) the waiver is expected to increase organ donation; and 5 (ii) the waiver will assure equitable treatment of patients referred for 6 transplants within the service area served by such hospital’s designated organ procurement agency and within the service area served by the organ 7 procurement agency with which the hospital seeks to enter into an agreement under the waiver. 8 Id. CMS also considers cost effectiveness, improvements in quality, and the 9 length and continuity of a hospital’s relationship with an OPO. Id. § 1320b- 10 8(a)(2)(B). Neither the statute nor regulations specify how these factors are to be 11 evaluated. 12 ii. The Tier System for Evaluating OPO Performance 13 The Transplant Act requires CMS to evaluate OPO performance every four 14 years. 42 U.S.C. § 273(b)(1)(D)(ii)(I). If OPOs do not meet CMS’s performance 15 standards, they are decertified, and their service area becomes open for 16 competitive bidding by other OPOs. Id.; see 42 C.F.R. § 486.316(b). 17 In 2020, CMS adopted a final rule for evaluating OPOs by comparing 18 statistics among several metrics and separating them into three tiers based on 19 performance compared to all other OPOs. 42 C.F.R. § 486.316. At the end of the 20 four-year certification cycle, tier 1 OPOs retain their service areas, while tier 2 21 OPOs must compete for their service areas, and tier 3 OPOs are decertified. Id. 22 The first recertification period to use the tier system will be in 2026, and it will 23 only consider the tier rating from 2024. See 85 Fed. Reg. 77,898, 77,916. CMS 24 shares “preliminary results [tier rating statistics] with each OPO to provide the 25 opportunity to review the information and raise any concerns prior to the results 26 being made publicly available and taking any enforcement action.” Id. at 77,912. 27 CMS extensively considered the metrics that go into tier ratings, including organ 28 1 donation rate, transplant rate, and donor potential adjusted for hospitals with 2 waivers. Id. at 77, 921–22; see also 84 Fed. Reg. 76,228, 7630 et seq. (explanation 3 of factors that go into tier rating). 4 C. Renown Seeks to End Contract with DNWest 5 Renown had to obtain a waiver from CMS to switch OPOs, as required by 6 the statute. (ECF No. 68-1 at 9–14.) In 2023, Renown sent CMS a waiver request 7 to switch OPOs from DNWest to NDN and alerted DNWest of its intent. (ECF No. 8 1-6.) DNWest alleges that Renown applied for a waiver to switch OPOs in 9 exchange for NDN providing funding for a new transplant center at Renown, and 10 that such an agreement may violate state and federal anti-kickback laws. (ECF 11 No. 57 at 15–16.) Renown responds that the transplant center collaboration has 12 nothing to do with the waiver request, and that had the waiver request been 13 denied, NDN and DNWest’s collaboration on the transplant center would have 14 continued. (ECF No. 63 at 16; ECF No. 68-1 at 226.) Shortly after Renown applied 15 for the waiver, DNWest issued public statements about the alleged kickback and 16 sued Renown and NDN. (See e.g., ECF No. 68-1 at 64.) That lawsuit is also before 17 this Court. See Donor Network W. v. Nev. Donor Network, Inc., No. 3:23-CV-00632- 18 ART-CSD, 2025 WL 326980 (D. Nev. Jan. 29, 2025). DNWest voluntarily 19 dismissed Renown in January 2024. (See ECF No. 68-1 at 64.) 20 D. CMS Grants Renown’s Waiver Request 21 CMS opened public comment on Renown’s request in November 2023. 88 22 Fed. Reg. 82,375; id. at 82,376, 82,381. It received 89 unique comments of 168 23 total. (ECF No. 68-1 at 5.) CMS approved the waiver in December 2024. (Id.) In 24 its four-page waiver decision and eight-page internal analysis, CMS summarized 25 comments and explained its rationale. (Id. at 5–8, 280–87.) 26 CMS cited two reasons for finding that the waiver would be likely to 27 increase expected organ donation: NDN’s higher interim tier rating and DNWest’s 28 deteriorating relationship with Renown. CMS considered that the tier system 1 includes organ donation rates, expected transplant rates, observed transplant 2 rates, performance relative to other OPOs based on these rates, and previous 3 assessments on these factors for the previous three years. (Id. at 282–83 (citing 4 OPO Public Performance Report, 2023 Assessment).) CMS considered advantages 5 to using the tier system including CMS’s collection and analysis of data, which 6 lets the agency avoid relying on an OPO or hospital’s self-interested framing of 7 data. (See id. at 283.) 8 CMS also concluded that Renown’s “working relationship with DNWest has 9 recently deteriorated.” (Id. at 7.) CMS considered DNWest’s lawsuit against 10 Renown, DNWest’s public statements accusing Renown of kickbacks with NDN, 11 and Renown’s other statements regarding its relationship with DNWest. (See id. 12 at 286.) CMS’s comments about DNWest’s “public statements” refers to several 13 letters submitted to the administrative record that mentioned DNWest’s lawsuit 14 and accused Renown of taking kickbacks. (See id. at 55–60, 101–28, 234–45.) 15 Regarding the second statutory factor, CMS also found that the waiver 16 would “assure equitable treatment.” (Id. at 282–84); 42 U.S.C. § 1320b- 17 8(a)(2)(A)(ii). CMS found that racial minorities had comparable donation and 18 service rates at both DNWest and NDN, and the increased organ donation 19 expected from the waiver would assure equitable treatment for all those in need 20 of a transplant. (Id.) CMS also explained that it did not believe “that granting the 21 waiver will impact the regional distribution of organs in the service areas of either 22 OPO” and “that the national organ allocation policies . . . will help ensure 23 equitable treatment of patients referred for transplants in both service areas.” 24 (Id.) 25 E. The Court Denies DNWest’s Motion for a Preliminary Injunction 26 Following CMS’s approval of its request, in December 2024, Renown alerted 27 DNWest that the waiver would take effect on March 31, 2025. (ECF No. 68-1 at 28 320.) DNWest filed its lawsuit on March 7, 2025, and a motion for a preliminary 1 injunction on March 10, 2025. (ECF Nos. 1, 15.) Between notifying DNWest and 2 learning of the lawsuit, Renown engaged in “significant planning, instruction, and 3 communications with medical staff.” (ECF No. 63-1 at 4.) Renown subsequently 4 moved to intervene. (ECF No. 41.) 5 On March 31, 2025, the Court denied DNWest’s motion for a preliminary 6 injunction, finding that the public’s interest in not risking the loss of donated 7 organs in Renown’s organ-donation program strongly outweighed DNWest’s risk 8 of irreparable reputational and economic harm and any serious questions on the 9 merits. (ECF No. 52.) 10 Renown effectuated the transition on April 1, 2025, and reported that when 11 comparing the annualized figures for 2025 to the statistics for 2024, there will 12 likely be a 64% increase in donors, a 121% increase in transplants, and a 28% 13 increase in tissue donation. (ECF No. 63-1 at 4.) 14 DNWest subsequently moved for summary judgment, arguing that CMS’s 15 decision to grant the waiver exceeded its statutory authority and was arbitrary 16 and capricious. (ECF No. 57.) CMS and Renown, in response, cross-moved for 17 summary judgment on DNWest’s claims (ECF Nos. 60, 63), and DNWest replied. 18 (ECF No. 67.) The parties then filed a Joint Appendix containing all pages of the 19 administrative record that are cited or relied upon by the parties in their briefs. 20 (ECF No. 68-1.) 21 II. STANDARD OF REVIEW 22 DNWest’s claims arise under the Administrative Procedure Act, which 23 allows a court to overturn agency action that is arbitrary, capricious, an abuse of 24 discretion, otherwise not in accordance with law, as well as agency action taken 25 “in excess of statutory jurisdiction, authority, or limitations, or short of statutory 26 right.” 5 U.S.C. § 706(2)(A), (C). The reviewing court must determine whether the 27 agency's decision was based on a consideration of the relevant factors or whether 28 there has been a clear error of judgment. Motor Vehicle Manufacturers Ass'n of the 1 United States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983); Hells 2 Canyon Alliance v. U.S. Forest Serv., 227 F.3d 1170, 1177 (9th Cir. 2000). An 3 action is arbitrary and capricious if it “relied on factors which Congress has not 4 intended it to consider, entirely failed to consider an important aspect of the 5 problem, [or] offered an explanation for its decision that runs counter to the 6 evidence before the agency . . . .” Bark v. United States Forest Serv., 958 F.3d 865, 7 869 (9th Cir. 2020) (internal citation omitted). 8 In deciding whether to grant summary judgment on an APA challenge, the 9 district court “is not required to resolve any facts.” Occidental Eng'g Co. v. I.N.S., 10 753 F.2d 766, 769 (9th Cir. 1985). Instead, the court determines “whether or not 11 as a matter of law the evidence in the administrative record permitted the agency 12 to make the decision it did.” Id. 13 III. ANALYSIS 14 DNWest argues that CMS’s decision was not in accordance with the 15 authority granted CMS by 42 U.S.C. § 1320b-8(a)(2)(A), that CMS’s decision did 16 not comply with the requirements of reasoned decision-making, and that CMS 17 failed to address significant comments, objections, and evidence. (ECF No. 57.) 18 CMS and Renown contend that CMS’s approval complied with the statute, that 19 its decision was adequately explained and supported by substantial evidence, 20 and that it properly responded to public comments. (ECF Nos. 60; 63.) 21 A. Compliance with the Statute 22 DNWest argues that CMS exceeded its authority under 42 U.S.C. § 1320b- 23 8(a)(2)(A) by using interim tier ratings for OPOs and DNWest’s deteriorating 24 relationship with Renown as bases for its findings. (ECF No. 57 at 24–27.) CMS 25 and Renown argue that these were reasonable factors to consider in its findings 26 granting the waiver application, and that CMS complied with the statute. (ECF 27 Nos. 60 at 16–23; 63 at 13–18.) 28 Courts “exercise their independent judgment in deciding whether an 1 agency has acted within its statutory authority.” Loper Bright Enters. v. Raimondo, 2 603 U.S. 369, 412 (2024). In statutory interpretation, analysis begins “with the 3 plain language of the statute.” Cheneau v. Garland, 997 F.3d 916, 919 (9th Cir. 4 2021) (citing Jimenez v. Quarterman, 555 U.S. 113, 118 (2009)). To find the plain 5 language of the statute, courts read the words “in their context and with a view 6 to their place in the overall statutory scheme.” King v. Burwell, 576 U.S. 473, 486 7 (2015). 8 The relevant statute here is the Transplant Act, codified at 42 U.S.C. § 273 9 et seq. A separately codified provision at 42 U.S.C. § 1320b-8(a)(2)(A) requires 10 CMS to grant a waiver to a hospital to switch OPOs if the agency determines: 11 (i) the waiver is expected to increase organ donation; and 12 (ii) the waiver will assure equitable treatment of patients referred for 13 transplants within the service area served by such hospital’s 14 designated organ procurement agency and within the service area 15 served by the organ procurement agency with which the hospital 16 seeks to enter into an agreement under the waiver. 17 1. Expected to Increase Organ Donation 18 CMS used two bases to determine that letting Renown switch from DNWest 19 to NDN would increase organ donation: NDN’s higher tier rating and the 20 breakdown of DNWest’s relationship with Renown. The statute permits both 21 factors to be used to assess this requirement. 22 a. Tier-Rating System 23 DNWest argues that 42 U.S.C. § 1320b-8(a)(2)(A) does not permit CMS to 24 consider interim tier-ratings when determining if a waiver is expected to increase 25 organ donation. (ECF No. 57 at 23–27.) CMS and Renown contend that CMS may 26 choose how it assesses this question. (ECF Nos. 60 at 21–22; 63 at 15.) 27 Neither the statute nor the regulations explicitly provide a methodology to 28 use in deciding whether a waiver is expected to increase organ donation. See 42 1 U.S.C. § 1320b-8(a)(2)(A); 42 C.F.R. § 486.308(e). Read as a whole, the statutory 2 scheme allows the tier system, and interim data, as an acceptable basis for 3 predicting increased organ donation. See King, 576 U.S. at 486 (courts construe 4 “statutes, not isolated provisions”). The statute gives CMS authority to develop 5 criteria to gauge the performance of OPOs on “outcome and process performance 6 measures . . . based on empirical evidence . . . of organ donor potential in other 7 related factors in each service area . . . [and] use multiple outcome measures.” 8 42 U.S.C. § 273(b)(1)(a)(D). Under this grant of authority, CMS developed the tier 9 system, which considers multiple outcome measures of organ donor potential, 10 transplant rates, and other factors. See 85 Fed. Reg. 77,898 (Dec. 2, 2020); 42 11 CFR § 486.316. It is not contrary to the statute to use the methodology Congress 12 instructed the agency to develop for assessing OPO performance to assess OPO 13 performance. 14 DNWest argues that using the interim tier system to evaluate a single 15 hospital’s request for a waiver is contrary to the statute because tiers were 16 designed to compare OPOs across entire donation service areas. (ECF No. 57 at 17 24–27.) The plain reading of the waiver provision, in the context of the statute, 18 does not require CMS to find that organ donation rates will increase at the 19 hospital requesting a waiver. “When the legislature uses certain language in one 20 part of the statute and different language in another, the court assumes different 21 meanings were intended.” Cheneau, 997 F.3d at 920 (internal citation omitted). 22 Other provisions in the Transplant Act require an agency to evaluate “the rate of 23 organ donation” at particular hospitals. See, e.g., 42 U.S.C. §§ 274(f)–2(a)(1), (e). 24 The hospital waiver provision only requires the agency to determine if the waiver 25 is expected to increase organ donation. See 42 U.S.C. § 1320b-8(a)(2)(A)(i). CMS 26 did not need to use a hospital-specific methodology to evaluate this factor. 27 DNWest also argues that using the tiering system is a bad proxy because 28 it is preliminary and prone to fluctuations. (ECF No. 57.) However, DNWest does 1 not contend that the data is unreliable or invalid, and a plain reading of the 2 provision and the statute does not limit CMS to only considering the data used 3 for recertification decisions. The tier ratings that CMS used measured organ 4 donation rates, expected transplant rates, observed transplant rates, 5 performance relative to other OPOs based on these rates, and prior assessments 6 on these factors for the previous three years, which all bear on whether organ 7 donation is expected to increase. (ECF No. 68-1 at 282 (citing OPO Public 8 Performance Report, 2023 Assessment).) As a result, CMS did not exceed its 9 statutory authority when it used the tiering system to predict whether granting 10 the waiver would increase organ donation. 11 b. Renown’s Relationship with DNWest 12 DNWest next argues that CMS improperly relied on the deteriorating 13 relationship with Renown and DNWest in determining if a waiver was expected to 14 increase organ donation. (ECF No. 57 at 27–28.) CMS responds that the statute 15 expressly allows CMS to consider this relationship. (ECF No. 60 at 23.) 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 The importance of relationships between OPOs and hospitals is also underscored 1 by 42 U.S.C. § 1320b-8(a)(2)(A)–(B), which allows CMS to consider “the length 2 and continuity of a hospital’s relationship with an organ procurement agency 3 other than the hospital’s designated organ procurement agency.” 4 CMS found that switching OPOs at Renown would lead to increased organ 5 donation because Renown’s “relationship with DNWest has become increasingly 6 strained and potentially irreconcilable.” (ECF No. 68-1 at 278–79.) Specifically, 7 CMS considered DNWest’s lawsuit against Renown, DNWest’s public statements 8 accusing Renown of kickbacks with NDN, and Renown’s other statements 9 regarding its relationship with DNWest. (Id. at 226, 278–79.) Because the statute 10 recognizes the importance of relationships between OPOs and hospitals, CMS did 11 not exceed its statutory authority when it considered Renown’s deteroriating 12 relationship with DNWest in granting the waiver. 13 2. Assuring Equitable Treatment 14 Renown also met the second mandatory factor regarding equitable 15 treatment, which provides: [T]he waiver will assure equitable treatment of patients referred for 16 transplants within the service area served by such hospital’s 17 designated organ procurement agency and within the service area served by the organ procurement agency with which the hospital 18 seeks to enter into an agreement under the waiver. 19 42 U.S.C. § 1320b-8(a)(2)(A)(ii). 20 CMS’s rationale for this determination was based on racial equity, 21 increased expected organ donations with NDN as Renown’s OPO, and national 22 policy for allocating transplants. (ECF No. 68-1 at 282–84.) CMS found that racial 23 minorities had comparable donation and service rates at both OPOs, increased 24 organ donation expected from the switch would assure equitable treatment, and 25 that national organ allocation policies will ensure equitable treatment. (Id.) CMS 26 also explained that it did not believe “that granting the waiver will impact the 27 regional distribution of organs in the service areas of either OPO” and “that the 28 national organ allocation policies . . . will help ensure equitable treatment of 1 patients referred for transplants in both service areas.” (Id. at 7.) 2 While DNWest argues that CMS’s findings were inadequate, they satisfied 3 the statute. This provision requires equitable allocation of donated organs in the 4 donation service areas of both the existing and replacing OPO. This provision 5 passed into law when an OPO’s donation service area could affect where a 6 donated organ would be transplanted. Social Security Act Amendments of 1994, 7 Pub. L. No. 103-432 § 155, 108 Stat 4398, 4438 (1994). Current allocation 8 policies do not allow for donation service areas to be considered in organ 9 allocation decisions. See Adventist Health, 17 F.4th at 799–800. Accordingly, 10 CMS’s findings that the waiver would not “impact regional distribution of organs” 11 and that national allocation policies ensure equitable treatment satisfied the 12 statute. (ECF No. 68-1 at 7.) The Court therefore concludes that CMS did not act 13 in excess of its statutory authority when it granted Renown’s waiver request. 14 B. Reasoned Determination Supported by Substantial Evidence in 15 the Administrative Record 16 1. Using Tier Rating to Evaluate Renown’s Request was not 17 Arbitrary and Capricious 18 DNWest next argues that data considered in the tier system is an 19 inadequate proxy for expected increased organ donation because it measures 20 OPO performance across entire service areas over a four-year period and 21 fluctuates between interim years. (ECF No. 57 at 24–27.) This is a challenge to a 22 policy decision, not statutory interpretation. Under deferential arbitrary and 23 capricious review, the Court may not substitute its “policy judgment for that of 24 the agency.” China Unicom (Americas) Operations Ltd. v. FCC, 124 F.4th 1128, 25 1151 (9th Cir. 2024) (citing FCC v. Prometheus Radio Project, 592 U.S. 414, 423 26 (2021)). The Court must uphold the agency’s conclusions so long as they are 27 supported by “[m]ore than a scintilla” of evidence. Nat. Res. Def. Council v. EPA, 28 735 F.3d 873, 877 (9th Cir. 2013). “‘[R]eview of an administrative agency's 1 decision begins and ends with the reasoning that the agency relied upon in 2 making that decision.’” Nat. Res. Def. Council v. EPA, 735 F.3d 873, 877 (9th Cir. 3 2013) (quoting Safe Air for Everyone v. EPA, 488 F.3d 1088, 1091 (9th Cir. 2007)). 4 The tier ratings used by CMS to make their decision included relevant data 5 to predicting increased organ donation, like organ donation rates, expected 6 transplant rates, observed transplant rates, performance relative to other OPOs 7 based on these rates, and previous assessments on these factors for the previous 8 three years. (ECF No. 68-1 at 282 (citing OPO Public Performance Report, 2023 9 Assessment).) CMS also considered other reasonable advantages to the tier 10 system. CMS collects and assembles the data used to evaluate tiers, which avoids 11 the problem of relying on an OPO or hospital’s self-interested framing of data, 12 facts noted by CMS. (See ECF No. 68-1 at 283 (recognizing this fact from a 13 comment by NDN).) Data from the tier system is made public, which allows OPOs 14 and hospitals to compare relative performance, anticipate possible challenges 15 based on tier performance, or notice and publicize problematic data-collection, 16 data-assembly, or data-reporting practices. The tier system incorporates 17 procedural protections to meet these goals as well. See also 85 Fed. Reg. 77,898, 18 77,912 (“CMS will share preliminary results with each OPO to provide the 19 opportunity to review the information and raise any concerns prior to the results 20 being made publicly available and taking any enforcement action”). Tier data is a 21 reasonable proxy for assessing expected increases in organ donation. 22 DNWest argues that using tier rating is arbitrary and capricious because 23 ratings fluctuate greatly between years. (ECF No. 57 at 25–26.) To support this 24 view, DNWest points to data that would have been available to CMS at the time 25 it made its waiver decision in 2024. (See ECF No. 45.) DNWest argues that its 26 own analysis of “Provisional Data” from 2023, showing both NDN and DNWest as 27 tier 2 OPOs, proves that tier ratings change too quickly to accurately gauge waiver 28 requests. (Id.; ECF No. 45-1.) While noting that this data still shows NDN as 1 having a higher organ donation rate than DNWest, (ECF No. 45-1 at 2), the Court 2 lacks a basis for accepting DNWest’s assertion that this fluctuation is arbitrary 3 and does not reflect change in performance between years. CMS’s adoption of the 4 final rule contemplated performance changes between interim ratings—that is 5 why CMS provides them to OPOs. See 85 Fed. Reg. at 77,912. Additionally, the 6 administrative record shows that NDN’s donation and transplant rates also 7 exceeded DNWest’s in 2019, 2020, and 2021. (ECF No. 68-1 at 70, 339–40, 344– 8 45, 349–50.) 9 DNWest also argues that using interim tier data to make ultimate 10 determinations upsets reliance interests and represents an unexplained change 11 in position. (ECF No. 57 at 25.) DNWest alleges that CMS indicated it would only 12 use interim data for monitoring purposes. (Id. (citing 85 Fed. Reg. at 77,916).) 13 But the regulation that DNWest relies on for that proposition does not discuss 14 the OPO waiver process and there is no evidence that CMS ever made such a 15 claim. Instead, language in the cited regulation indicates that CMS expects “OPOs 16 to implement a comprehensive data-driven [] program to monitor and evaluate 17 their performance.” 85 Fed. Reg. at 77,916. Contrary to DNWest’s argument, this 18 language could not invite any reliance interests. See Food & Drug Admin. v. Wages 19 & White Lion Invs., L.L.C., 604 U.S. 542, 585 (2025) (“[A] belief about how an 20 agency is likely to exercise its enforcement discretion is not a ‘serious reliance 21 interes[t].’” (quoting F.C.C. v. Fox Television Stations, Inc., 556 U.S. 502, 515 22 (2009)). 23 DNWest also contends that basing a waiver request solely on differences in 24 tier rating, without considering factors specific to the applicant hospital and 25 service area, undermines the statutory scheme. (ECF No. 57 at 26–27.) However, 26 DNWest has failed to show that is the case here, because CMS also considered 27 whether either OPO has geographically advantageous locations to serve Renown, 28 cost effectiveness, and the breakdown of Renown and DNWest’s relationship. 1 (ECF No. 68-1 at 6–7.) 2 The Court therefore concludes that CMS’s consideration of tier rating was 3 not arbitrary and capricious. 4 2. Using Renown’s Relationship with DNWest to Evaluate 5 Renown’s Request was not Arbitrary and Capricious 6 DNWest challenges CMS’s assessment of the evidence suggesting its 7 relationship with Renown had deteriorated. As stated above, the Court must 8 uphold the agency’s conclusions so long as they are supported by “[m]ore than a 9 scintilla” of evidence. Nat. Res. Def. Council v. EPA, 735 F.3d 873, 877 (9th Cir. 10 2013). DNWest argues that there is no evidence on the administrative record 11 showing that litigation had negatively affected performance metrics at Renown. 12 (ECF No. 57 at 27–28.) DNWest further argues that mere assertions that a 13 working relationship has deteriorated would let a hospital manufacture a waiver 14 for commercial reasons without regard to statutory requirements. (Id. at 28.) But 15 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. 68-1 at 5–6), 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. 68-1 at 21 55–60, 101–28, 234–45.) From this evidence, CMS reasonably concluded that a 22 deteriorating relationship between DNWest and Renown could negatively impact 23 organ donation. CMS did not have to cite to adversely impacted performance 24 metrics when making this predictive judgment. See Lands Council v. McNair, 537 25 F.3d 981, 986 (9th Cir. 2008) (en banc), overruled in part on other grounds by 26 Winter v. Nat. Res. Def. Council, 555 U.S. 7 (2008) (Courts must “conduct a 27 particularly deferential review of an agency's predictive judgments about areas 28 that are within the agency's field of discretion and expertise” (internal quotations 1 and citations omitted)). The agency thus reasonably concluded that deteriorating 2 relations could negatively impact organ donation. 3 3. Other Considerations 4 DNWest also argues that CMS did not adequately explain how allowing 5 Renown to partner with an OPO with a lower donation rate in Nevada, a higher 6 kidney discard rate, higher costs, no proven success record with Renown, and no 7 geographic advantage would lead to increased organ donation and ensure 8 equitable treatment. (ECF No. 57 at 23.) However, CMS must determine whether 9 granting a waiver is expected to increase organ donation and assure equitable 10 treatment. 42 U.S.C. § 1320b-8(a)(2)(A). The agency is not required to find that 11 one OPO outperforms the other in every available metric. 12 Regarding DNWest’s data showing higher performance in Nevada compared 13 to NDN, the Court notes that “where analysis of the relevant documents requires 14 a high level of technical expertise,” courts “defer to the informed discretion of the 15 responsible federal agencies.” Arizona ex rel. Darwin v. EPA, 815 F.3d 519, 530 16 (9th Cir. 2016) (internal citations and quotations removed). DNWest’s statistics 17 showing higher costs and discard rates for some organs over others do not 18 themselves compel the Court to find CMS’s waiver decision arbitrary and 19 capricious. CMS considered this argument, but ultimately exercised its judgment 20 in determining that NDN’s tier rating, which considers several factors, including 21 organ donation, would lead to increased donation rates if the waiver was granted. 22 (ECF No. 68-1 at 7.) 23 Similarly, CMS considered DNWest’s claims that it outperforms NDN in 24 kidney discard rates. As stated above, the waiver statute directs CMS to 25 determine whether granting a waiver request will increase organ donation, not 26 just kidney donation. CMS found that the evidence demonstrated that NDN had 27 higher donation and transplant rates overall, and reasonably concluded that 28 “donation rates are expected to increase in partnership with [NDN].” (Id. at 7.) 1 Additionally, CMS considered DNWest’s allegations that it has lower kidney 2 costs than NDN. However, in reviewing the evidence, CMS found that NDN has 3 lower costs for heart, liver, and lung. (Id. at 284–85.) CMS thus reasonably used 4 its expertise to conclude that a “potential increase [in kidney costs] would [not] 5 outweigh other considerations” supporting waiver. (Id. at 7.) Moreover, though 6 cost effectiveness is a factor identified in the statute, consideration of cost 7 effectiveness is discretionary. 42 U.S.C. § 1320b-8(a)(2)(B)(ii). 8 CMS also considered the length of DNWest’s relationship with Renown and 9 its claimed “geographic advantage.” However, a prior relationship is not a 10 statutorily mandated factor for deciding whether to issue a waiver, therefore CMS 11 was not required to weigh it as a factor in its final decision, even though CMS 12 discussed it. (ECF No. 68-1 at 286–87.) And CMS also considered that DNWest 13 and Renown’s relationship had recently deteriorated, while Renown and NDN had 14 a decades-long positive relationship. (Id.) Similarly, CMS considered that “both 15 DNW and NDN claim to have headquarters or office locations that are 16 geographically advantageous to Renown,” and reasonably concluded from the 17 evidence before it that neither OPO had a “clear advantage over the other in terms 18 of geographical location that might translate into increased quality or cost 19 effectiveness.” (Id. at 6–7.) 20 Accordingly, CMS made a reasonable determination, based on substantial 21 evidence, that granting Renown’s waiver request would increase organ donation 22 and assure equitable treatment. 23 C. Response to Significant Comments 24 DNWest argues that CMS failed to take into account significant comments 25 that alleged a kickback scheme between Renown and NDN, financial impropriety 26 at NDN, NDN’s poor relationship with its transplant center in Las Vegas, and 27 comments raising policy concerns about rival OPOs raiding high-performing 28 hospitals. (ECF No. 57 at 28–33.) 1 “An agency must consider and respond to significant comments received 2 during the period for public comment.” Perez v. Mortg. Bankers Ass’in, 575 U.S. 3 92, 96 (2015); PPL Wallingford Energy LLC v. FERC, 419 F.3d 1194, 1198 (D.C. 4 Cir. 2005). Courts may not second-guess an agency’s “weighing of risks and 5 benefits” or penalize it “for departing from the . . . inferences and assumptions” 6 of others.” California by & through Becerra v. Azar, 950 F.3d 1067, 1096 (9th Cir. 7 2020). 8 As an initial matter, DNWest argues that CMS did not adequately consider 9 or respond to all comments in granting the waiver request. (ECF No. 57 at 33– 10 34.) “However, an agency need only respond to ‘significant’ comments, i.e., those 11 which raise relevant points and which, if adopted, would require a change in the 12 agency's proposed rule.” Am. Min. Cong. v. U.S. E.P.A., 965 F.2d 759, 771 (9th 13 Cir. 1992) (citing Home Box Office v. FCC, 567 F.2d 9, 35 & n. 58 (D.C. Cir. 1977), 14 cert. denied, 434 U.S. 829 (1977)). “The failure to respond to comments is grounds 15 for reversal only if it reveals that the agency's decision was not based on 16 consideration of the relevant factors.” Id. (citing Thompson v. Clark, 741 F.2d 401, 17 409 (D.C. Cir. 1984)). As stated above, CMS made a reasoned determination 18 based on the relevant factors and found that granting the waiver request would 19 increase organ donation and assure equitable treatment. CMS also responded to 20 all significant comments. DNWest’s contention that CMS did not adequately 21 respond to comments is therefore misplaced. 22 CMS’s internal analysis and decision granting the waiver considered the 23 kickback allegations in determining that DNWest and Renown’s relationship had 24 deteriorated. CMS’s internal analysis says that DNWest claimed that “Renown 25 Health was offered money by the requested OPO to build a transplant center, and 26 . . . the requested OPO appeared to predicate the gift on Renown Health’s 27 application for a waiver.” (ECF No. 68-1 at 282, 286.) CMS’s decision then states 28 that “Donor Network West’s lawsuit against Renown Health and related public 1 statements, which Renown Health contends mischaracterized its intent in 2 seeking to change OPOs.” (Id. at 6.) The agency’s reference to the lawsuit refers 3 to DNWest’s lawsuit against Renown and NDN alleging a kickback scheme, as 4 confirmed by comments mentioning the lawsuit. (Id. at 125–26, 142.) When read 5 with the internal analysis and comments alleging the kickback, the decision’s 6 reference to “related public statements” includes DNWest’s allegations of the 7 alleged kickback scheme. (Id. at 6.) In its concluding paragraph of the “Increased 8 Organ Donation” section, these facts led CMS to conclude that Renown’s working 9 relationship with DNWest had deteriorated. (Id. at 7.) CMS rejecting DNWest’s 10 concern does not make its decision arbitrary and capricious. See Becerra, 950 11 F.3d at 1096. 12 DNWest also argues that CMS was required to address arguments in the 13 comments that allowing OPOs to bribe high-performing hospitals would 14 undermine the OPO system. (ECF No. 57 at 31–32.) CMS responds that these 15 comments did not relate to the statutory findings it was required to make, and 16 “adverse incentives are a result of the governing statute, which Congress—not 17 CMS—must address.” (ECF No. 60 at 29–30.) Renown also points to regulatory 18 history of the Transplant Act that suggests that CMS had already considered and 19 rejected DNWest’s policy concern regarding poaching high-performing hospitals 20 through waivers. (See ECF No. 63 (citing 71 Fed. Reg. 30982, 30987 (2006).) 21 Finally, DNWest argues that CMS failed to consider comments pointing out 22 NDN’s allegedly wasteful spending of government funds and NDN’s poor 23 relationship with its transplant center in Las Vegas. (ECF No. 57 at 30–31.) The 24 internal analysis explicitly mentions and considers these comments in the section 25 labeled “cost effectiveness.” (ECF No. 68-1 at 284.) The decision mentions that 26 “organ acquisition costs may be higher if the waiver is granted” and that NDN 27 “has higher organ acquisition costs for kidneys . . . we do not believe that any 28 potential increase would outweigh the other considerations identified.” (Id. at 6– 1 || 7.) Though brief, these findings demonstrate that CMS considered these 2 || comments, and the Court will not second-guess its weighing. Becerra, 950 F.3d 3 || at 1096. 4 Regarding comments concerning DNWest’s prior success with Renown, 5 || higher performance statistics within Nevada than NDN, lower kidney discard rate, 6 || lower costs, and geographic advantage, the Court reiterates the arguments made 7 || above. See supra III.B.3. 8 Accordingly, the Court holds that the statute does not foreclose using 9 || CMS’s tier rating and breakdown in a relationship to evaluate the hospital-waiver 10 || factors and finds that CMS's consideration of the evidence and comments before 11 || it was not arbitrary and capricious. IV. CONCLUSION 13 IT IS THEREFORE ORDERED that DNWest’s motion for summary 14 || judgment (ECF No. 57) is DENIED. 15 IT IS FURTHER ORDERED that CMS’s cross-motion for summary 16 || judgment (ECF No. 60) is GRANTED. 17 IT IS FURTHER ORDERED that Renown’s cross-motion for summary 18 || judgment (ECF No. 63) is GRANTED. 19 IT IS FURTHER ORDERED that the Clerk of the Court is kindly instructed 20 || to ENTER JUDGMENT accordingly in favor of Defendants and CLOSE this case. 21 22 DATED THIS 10th day of March 2026. 23 en
25 UNITED STATES DISTRICT JUDGE 26 27 28