Citizens for Health v. Leavitt

Appellant Citizens for Health, along with nine other national and state associations and nine individuals (collectively "Citizens"), brought this action against the Secretary of the United States Department of Health and Human Services ("HHS" or "Agency") challenging a rule promulgated by the Agency pursuant to the administrative simplification provisions of the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), Pub.L. 104-191, 110 Stat. 1936. Citizens allege that the "Privacy Rule"-officially titled "Standards for Privacy of Individually Identifiable Health Information"-is invalid because it unlawfully authorizes health plans, health care clearinghouses, and certain health care providers to use and disclose personal health information for so-called "routine uses" without patient consent. The relevant part of the specific offending provision of the Privacy Rule reads:

(a) Standard: Permitted uses and disclosures. Except with respect to uses or disclosures that require an authorization under § 164.508(a)(2) [relating to psychotherapy notes] and (3) [relating to marketing], a covered entity may use or disclose protected health information for treatment, payment, or health care operations ... provided that such use or disclosure is consistent with other applicable requirements of this subpart.

(b) Standard: Consent for uses and disclosures permitted. (1) A covered entity may obtain consent of the individual to use or disclose protected health information to carry out treatment, payment, or health care operations.

(2) Consent, under paragraph (b) of this section, shall not be effective to permit a use or disclosure of protected health information when an authorization, under § 164.508, is required or when another condition must be met for such use or disclosure to be permissible under this subpart.

45 C.F.R. § 164.506 (emphasis added). Citizens challenge subsection (a) as authorizing disclosures that, they contend, violate individual privacy rights.

The District Court granted summary judgment to the Secretary on all of Citizens' claims based on its conclusions that the promulgation of the Privacy Rule did not violate the Administrative Procedure Act, that the Secretary did not exceed the scope of authority granted to him by HIPAA, and that, insofar as the Privacy Rule is permissive and does not compel any uses or disclosures of personal health information by providers, it does not affirmatively interfere with any right protected by the First or Fifth Amendments. Because we reason to the same conclusions reached by the District Court, albeit under a slightly different analysis, we will affirm.

The objectionable provision is only one aspect of a complex set of regulations that is the last in a series of attempts by HHS to strike a balance between two competing objectives of HIPAA-improving the efficiency and effectiveness of the national health care system and preserving individual privacy in personal health information.

HIPAA was passed by Congress in August 1996 to address a number of issues regarding the national health care and health insurance system. The statutory provisions relevant to the issues in this case are found in Subtitle F of Title II.1 Aimed at "administrative simplification," HIPAA Sections 261 through 264 provide for "the establishment of standards and requirements for the electronic transmission of certain health information." § 261, 110 Stat. at 2021. More specifically, these provisions direct the Secretary to adopt uniform national standards for the secure electronic exchange of health information. § 262, 110 Stat. at 2021-26.

Section 264 prescribes the process by which standards regarding the privacy of individually identifiable health information were to be adopted. § 264(a), 110 Stat. at 2033. This process contemplated that, within a year of HIPAA's enactment, the Secretary would submit detailed recommendations on such privacy standards, including individual rights concerning individually identifiable health information, procedures for exercising such rights, and the "uses and disclosures of such information that should be authorized or required," to Congress. § 264(a)-(b), 110 Stat. at 2033. If Congress did not enact further legislation within three years of HIPAA's enactment, the Secretary was directed to promulgate final regulations implementing the standards within 42 months of HIPAA's enactment. § 264(c)(1), 110 Stat. at 2033. The Act specified that any regulation promulgated pursuant to the authority of Section 264 would provide a federal baseline for privacy protection, but that such regulations would "not supercede a contrary provision of State law, if the provision of State law imposes requirements, standards, or implementation specifications that are more stringent than the requirements, standards, or implementation specifications imposed under the regulation." § 264(c)(2), 110 Stat. at 2033-34.2

Because Congress did not enact privacy legislation by its self-imposed three-year deadline, the Secretary promulgated the privacy standards contemplated in Section 264 through an administrative rulemaking process. During this process, the Rule went through four iterations: the Proposed Original Rule, the Original Rule, the Proposed Amended Rule, and the Amended Rule.3 The Original Rule required covered entities to seek individual consent before using or disclosing protected health information for routine uses. Standards for Privacy of Individually Identifiable Health Information, 65 Fed.Reg. 82,810 (Dec. 28, 2000) (codified at former 45 C.F.R. pts. 160, 164 (2002)). Before the Original Rule could take effect, however, the Secretary was inundated with unsolicited criticism, principally from health care insurers and providers, warning that the Original Rule's mandatory consent provisions would significantly impact the ability of the health care industry to operate efficiently.4 Standards for Privacy of Individually Identifiable Health Information, 67 Fed.Reg. 14,776, 14,777 (Mar. 27, 2002). He responded by reopening the rulemaking process. Id. at 14,776. The final result was the Amended Rule-the currently effective, codified version of the Privacy Rule, see generally 45 C.F.R. pts. 160 & 164, which is the subject of Citizens' challenge here.5

The Amended Rule retains most of the Original Rule's privacy protections. It prohibits "covered entities"6-defined as health plans, health care clearinghouses, and health care providers who transmit any health information in electronic form in connection with a transaction covered by the regulations-from using or disclosing an individual's "protected health information"-defined as individually identifiable health information maintained in or transmitted in any form or media including electronic media-except as otherwise provided by the Rule. See 45 C.F.R. §§ 160.103 (defining "covered entities" and "protected health information"), 164.502(a) ("A covered entity may not use or disclose protected health information, except as permitted or required by this subpart or by subpart C of part 160 of this subchapter."). Covered entities must seek authorization from individuals before using or disclosing information unless a specific exception applies. Id. § 164.508(a)(1) ("Authorization required: general rule. Except as otherwise permitted or required by this subchapter, a covered entity may not use or disclose protected health information without an authorization that is valid under this section."). Uses and disclosures that the Amended Rule allows must be limited to the "minimum necessary" to accomplish the intended purpose. Id. § 164.502(b).

The Amended Rule departs from the Original Rule in one crucial respect. Where the Original Rule required covered entities to seek individual consent to use or disclose health information in all but the narrowest of circumstances,7 the Amended Rule allows such uses and disclosures without patient consent for "treatment, payment, and health care operations"-so-called "routine uses." Id. §§ 164.506 (providing routine use exception). "Health care operations," the broadest category under the routine use exception, refers to a range of management functions of covered entities, including quality assessment, practitioner evaluation, student training programs, insurance rating, auditing services, and business planning and development. Id. § 164.501. The Rule allows individuals the right to request restrictions on uses and disclosures of protected health information and to enter into agreements with covered entities regarding such restrictions, but does not require covered entities to abide by such requests or to agree to any restriction. Id. § 164.522(a). The Rule also permits, but does not require, covered entities to design and implement a consent process for routine uses and disclosures. Id. § 164.506; see also Standards for Privacy of Individually Identifiable Health Information, 67 Fed.Reg. 53,182, 53,211 (Aug. 14, 2002).

Importantly, the Rule contains detailed preemption provisions, which are consistent with HIPAA Sections 1178(a)(2)(B) and 264(c)(2). These provisions establish that the Rule is intended as a "federal floor" for privacy protection, allowing state law to control where a "provision of State law relates to the privacy of individually identifiable health information and is more stringent than a standard, requirement, or implementation specification adopted under [the Privacy Rule]." 45 C.F.R. § 160.203 (emphasis added).8

Citizens filed this action on April 10, 2003. In its Amended Complaint, Citizens alleged that the Secretary violated the APA and Sections 261 through 264 of HIPAA in promulgating the Amended Rule, and that, to the extent that the Amended Rule rescinded or eliminated the need for consent for the use and disclosure of individually identifiable health information for "routine uses," the Amended Rule violated privacy rights protected by the Fifth Amendment and free speech rights protected by the First Amendment of the United States Constitution. Citizens for Health v. Thompson, 2004 WL 765356 (E.D.Pa. Apr. 2, 2004), 2004 U.S. Dist. LEXIS 5745, at *22. Both parties moved for summary judgment, and, after a hearing on December 10, 2003, the District Court granted summary judgment in favor of the Secretary. Id. at *2.

On Citizens' APA claims, the Court concluded that the Secretary had adequately informed the public regarding the proposed rulemaking, examined the relevant data, responded to public comments, and provided a reasoned analysis that rationally connected the facts with the decision to rescind the consent requirement in the Amended Rule. Id. at *33-43. Regarding Citizens' claims alleging violations of HIPAA, the Court concluded that the changes in the Amended Rule were reasonably related to the legislative purpose of Subtitle F of the Act, and, because the Amended Rule was promulgated before the Original Rule took effect, the Amended Rule did not eliminate any "rights" created under the Original Rule. Id. at *43-46. Finally, regarding Citizens' constitutional claims, the Court concluded that because (1) neither the First Amendment nor the Fifth Amendment places an affirmative obligation on the State to protect individuals' rights from harm by third parties and (2) the Amended Rule is wholly permissive as to whether covered entities seek consent from an individual before using or disclosing personal health information for routine uses, the Amended Rule did not violate individual rights under either Amendment. Id. at *46-50.

The District Court had jurisdiction under 28 U.S.C. § 1331, and we have jurisdiction to review the final decision of the District Court under 28 U.S.C. § 1291. We exercise plenary review over the District Court's grant of summary judgment, applying the same test as the District Court. Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir.1976). To affirm the grant of summary judgment, we must be convinced that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law when the facts are viewed in the light most favorable to the nonmoving party. Fed.R.Civ.P. 56(c).

On appeal, Citizens reassert the claims they made before the District Court, that the Secretary, by promulgating the Privacy Rule, (1) unlawfully infringed Citizens' fundamental rights to privacy in personal health information under due process principles of the Fifth Amendment of the United States Constitution; (2) unlawfully infringed Citizens' rights to communicate privately with their medical practitioners under the First Amendment of the Constitution; (3) contravened Congress's intent in enacting HIPAA by eliminating Citizens' reasonable expectations of medical privacy; and (4) violated the APA by arbitrarily and capriciously reversing a settled course of behavior and adopting a policy that he had previously rejected.

Before addressing Citizens' claims on the merits, we note that we raised the issue of justiciability at oral argument, and asked the parties for separate briefing on this issue. Our concern was that, in their complaint, the party plaintiffs do not recount specific instances of violations of their privacy rights traceable to the regulation, but, instead, complain of the regulation's general effect. After reviewing the parties' responses to our questions, however, we are satisfied that these specific instances do, in fact, exist, notwithstanding the general allegations in the complaint.9 We therefore proceed to address each of Citizens' claims in turn.

A. Fifth Amendment Substantive Due Process Claim

In discussing Citizens' Fifth Amendment claim, the District Court noted that substantive due process bars the government from depriving individuals of life, liberty, or property without due process of law, but it does not "`impose an affirmative obligation on the State to ensure that those interests do not come to harm through other means.'" Citizens for Health, 2004 U.S. Dist. LEXIS 5745, at *46-47 (quoting DeShaney v. Winnebago County Soc. Servs. Dep't, 489 U.S. 189, 195, 109 S.Ct. 998, 103 L.Ed.2d 249 (1989)). Applying this principle to the case at hand, the Court reasoned that, even assuming that individuals have a constitutional right to medical privacy, the Amended Rule is "wholly permissive with respect to whether a covered entity should seek consent from a patient before using his or her information for routine purposes. The Amended Rule neither requires nor prohibits that practice." Id. at *47-48. In short, "[b]ecause the Amended Rule is not compulsory in nature, it does not affirmatively interfere with any right." Id. We agree with the District Court that Citizens' constitutional claims should ultimately be resolved based on the nature of the state's involvement in light of the Amended Rule's permissive character. However, we think that the District Court's analysis does not go far enough, and that its reliance on DeShaney does not fully explain why Citizens cannot succeed here.

We begin our analysis with the premise that the right to medical privacy asserted by Citizens is legally cognizable under the Due Process Clause of the Fifth Amendment, although, as Citizens themselves concede, its "boundaries ... have not been exhaustively delineated." (Appellants' Br. at 12.)10 Whatever those boundaries may be, it is undisputed that a violation of a citizen's right to medical privacy rises to the level of a constitutional claim only when that violation can properly be ascribed to the government. The Constitution protects against state interference with fundamental rights. It only applies to restrict private behavior in limited circumstances. Because such circumstances are not present in this case, and because the "violations" of the right to medical privacy that Citizens have asserted, if they amount to violations of that right at all, occurred at the hands of private entities, the protections of the Due Process Clause of the Fifth Amendment are not implicated in this case. We will accordingly affirm the District Court's finding that the Secretary did not violate Citizens' constitutional rights when he promulgated the Amended Rule.

"The Constitution structures the National Government, confines its actions, and, in regard to certain individual liberties and other specified matters, confines the actions of the States. With a few exceptions, ... constitutional guarantees of individual liberty and equal protection do not apply to the actions of private entities." Edmonson, 500 U.S. at 619, 111 S.Ct. 2077. Indeed, it is well established that the substantive component of due process, embodied in both the Fifth and Fourteenth Amendments,11 "`provides heightened protection against government interference with certain fundamental rights and liberty interests.'" Troxel v. Granville, 530 U.S. 57, 65, 120 S.Ct. 2054, 147 L.Ed.2d 49 (2000) (quoting Washington v. Glucksberg, 521 U.S. 702, 720, 117 S.Ct. 2258, 138 L.Ed.2d 772 (1997)) (emphasis added); see also Reno v. Flores, 507 U.S. 292, 301, 113 S.Ct. 1439, 123 L.Ed.2d 1 (1993). As explained in DeShaney, the Due Process Clauses of the Fifth and Fourteenth Amendments were intended to prevent federal and state governments "`from abusing [their] power, or employing it as an instrument of oppression.'" 489 U.S. at 196, 109 S.Ct. 998 (quoting Davidson v. Cannon, 474 U.S. 344, 348, 106 S.Ct. 668, 88 L.Ed.2d 677 (1986)). Their "purpose was to protect the people from the State, not to ensure that the State protected them from each other." Id.

At first glance, the posture of this case seems different from that of most state action cases. The issue of state action usually arises where plaintiffs assert that their rights have been violated by private parties who, they claim, are acting on behalf of the state. E.g., Jackson v. Metro. Edison Co., 419 U.S. 345, 95 S.Ct. 449, 42 L.Ed.2d 477 (1974) (customer suing private utility company for violation of procedural due process on the theory that the utility was a "state actor" by virtue of a state-granted monopoly and extensive state regulation). In this case, by contrast, the action that Citizens challenge-the promulgation of the Amended Rule by the Secretary-is clearly government conduct. As noted above, however, the injury that Citizens allege is that their "personal health information" is being "used and disclosed, without their permission and against their will" by third parties. (Appellants' Br. at 2.) To support their claims, Citizens point to privacy notices that they received from private health care providers and pharmacies. See Citizens for Health, 2004 U.S. Dist. LEXIS 5745, at *27-28. Citizens did not challenge any use or disclosure by the Secretary himself, or urge that the third parties were somehow acting on the Secretary's behalf, before the District Court.12 The relevant question, then, is whether the Secretary, as a state actor, was sufficiently involved in producing the harm Citizens assert to satisfy the Constitution's state action requirement.

As noted above, the District Court touched on the state action issue when it applied DeShaney's holding that due process does not impose an affirmative obligation on the State to protect individuals' interests in life, liberty, or property from harm inflicted by private actors. See 489 U.S. at 195, 109 S.Ct. 998. But the District Court's analysis in this respect was incomplete. Although the fundamental principle that due process protections apply only to prevent injury attributable to conduct of the State underlies the discussion in DeShaney, the Supreme Court's analysis in that case did not focus on "state action" as such. There, the Court was presented with a claim against a local government for its failure to prevent a father from physically abusing his son to the point of permanent injury where the local social services agency knew of the abuse but failed to remove the child from the father's custody. Id. at 191, 109 S.Ct. 998. Plaintiffs argued that the State was "categorically obligated" to protect the child from abuse and that, given this obligation, the State's failure to act was a proper basis for a due process challenge. Id. at 195, 109 S.Ct. 998. The Court's analysis thus sought to determine whether due process imposed a "duty" or "obligation" on the State to protect individuals from private harm, not "whether the State was sufficiently involved [in the privately caused harm] to treat that decisive conduct as state action." Tarkanian, 488 U.S. at 192, 109 S.Ct. 454.

In this case, DeShaney helps resolve a preliminary question: Was the Secretary obliged to prohibit any and all disclosures without consent in order to protect privacy rights across the board? We think the District Court appropriately relied on DeShaney to answer that question in the negative. But DeShaney does not reach the specific question before us: Is the nonconsensual use or disclosure of individual health information by private parties, as permitted by the Amended Rule, legally attributable to the Secretary? We conclude that it is not.

To answer this question, we must determine "whether there is a sufficiently close nexus between the State and the challenged action of the regulated entity [-the private party-] so that the action of the latter may fairly be treated as that of the State itself." Jackson, 419 U.S. at 351, 95 S.Ct. 449. Where, as here, plaintiff argues that the State has "authorized" or "empowered" a private entity to act in a way that directly brings about the alleged injury, our inquiry focuses on "whether the State provided a mantle of authority that enhanced the power of the harm-causing individual actor." Tarkanian, 488 U.S. at 192, 109 S.Ct. 454. Unfortunately, there is no "infallible test" to employ in this analysis. Reitman v. Mulkey, 387 U.S. 369, 378, 87 S.Ct. 1627, 18 L.Ed.2d 830 (1967). Rather, it is "`[o]nly by sifting facts and weighing circumstances' on a case-by-case basis [that] a `nonobvious involvement of the State in private conduct [can] be attributed its true significance.'" Id. (quoting Burton v. Wilmington Parking Auth., 365 U.S. 715, 722, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961)).

The Supreme Court provided guidance as to what satisfies the Constitution's state action requirement in Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). In that case, the Court explained that actions challenged on constitutional grounds fall somewhere along a continuum, with direct action by the State on one side and action by a "private party not acting against a backdrop of state compulsion or involvement" on the other. Id. at 168, 90 S.Ct. 1598. Whereas the former meets the state action requirement for constitutional claims, the latter does not (although it could form the basis for a claim on statutory or common law grounds, depending on the alleged violation). The Court further elaborated that, along this continuum, the enactment of a state law "requiring" violation of individual rights, and "enforcement" of such a law establish the requisite state action. Id. at 170, 90 S.Ct. 1598. "[A] State is responsible for the discriminatory act of a private party when the State, by its law, has compelled the act" or when the State has "commanded" a particular result. Id. (emphasis added) (citing Peterson v. City of Greenville, 373 U.S. 244, 248, 83 S.Ct. 1119, 10 L.Ed.2d 323 (1963); Robinson v. Florida, 378 U.S. 153, 84 S.Ct. 1693, 12 L.Ed.2d 771 (1964); Lombard v. Louisiana, 373 U.S. 267, 83 S.Ct. 1122, 10 L.Ed.2d 338 (1963); Shuttlesworth v. Birmingham, 373 U.S. 262, 83 S.Ct. 1130, 10 L.Ed.2d 335 (1963)).

The first inquiry, then, is whether the Amended Rule can fairly be read to "require," "compel," or "command" routine use disclosures without consent. We conclude that it cannot. The fact that subsection (b) of the Rule expressly permits covered entities to obtain consent belies such an interpretation. See 45 C.F.R. § 164.506(b)(1) ("A covered entity may obtain consent of the individual to use or disclose protected health information to carry out treatment, payment, or health care operations.") (emphasis added). Thus, the Amended Rule does not directly "provide a mantle of authority that enhance[s] the power of" health care providers and other entities, Tarkanian, 488 U.S. at 192, 109 S.Ct. 454.

Citizens argue that the Amended Rule's grant of "regulatory permission" to make the challenged uses and disclosures, see, e.g., 67 Fed.Reg. at 53,209, 53,211, 53,212 (discussing Amended Rule), indirectly provides the requisite "mantle of authority". To demonstrate a link between the Amended Rule and private parties' use and disclosure of Citizens' health information without their consent, Citizens point to two sources: (1) changes in the privacy policies of covered entities, and (2) evidence that some entities have begun ignoring applicable state privacy laws. On the first point, Citizens have identified at least one covered entity that has adopted a blanket policy of refusing all requests for restrictions on uses and disclosures of health information since the promulgation of the Amended Rule.13 They further assert that some covered entities have simply ignored applicable, more restrictive, state laws in making such uses and disclosures.14

Our reading of the case law discussed below, however, leads us to the conclusion that the fact that a private party changed its behavior in response to a law does not give the law the coercive quality upon which the state action inquiry depends unless the law itself suddenly authorized something that was previously prohibited. Citizens' argument assumes (1) that covered entities were previously prohibited from making nonconsensual uses or disclosures for routine uses and (2) that the Amended Rule's "authorization" somehow permits uses or disclosures that were previously "unauthorized". But there is no authority for either proposition. Citizens have not shown that federal law prohibited nonconsensual uses or disclosures of health information before the Rule was promulgated.15 And the preemption provisions of HIPAA and the Amended Rule expressly provide that any state statutes that prohibited such uses and disclosures before the Amended Rule was promulgated remain in effect.16 Because there is no indication that the nonconsensual uses and disclosures permitted by the Amended Rule were prohibited before the Rule went into effect, we have difficulty understanding how the Amended Rule "authorizes" covered entities to take action that they could not have otherwise taken. In the words of the Tarkanian test, Citizens have not shown how, by promulgating the Amended Rule, the Secretary "enhanced the power" of the covered entities to use or disclose health information without patients' consent; covered entities had this power already.

By way of analogy, assume that Congress were to pass legislation permitting private cinema operators, at their discretion, to search all moviegoers for any reason, without any showing of probable cause or reasonable suspicion. Although the Fourth Amendment would preclude the federal government from conducting such a search, private cinema operators are not bound by the Fourth Amendment, and absent any other law prohibiting it, private cinema operators were already "permitted" to conduct such a search before the new legislation took effect. To the extent that this new legislation changes the legal landscape at all, then, it only codifies a power that cinema operators had already. The codification does not transform the private exercise of the codified power into "state action." Similarly, although the codification itself is clearly government action, it seems insufficient to endow a moviegoer's challenge to a search by a cinema operator with constitutional significance given that the codification has neither enhanced nor diminished the individual moviegoer's rights.

None of the cases that Citizens or amici cite supports the view that a government authorization of conduct that was already legally permissible satisfies the constitutional state action requirement. It is true that these cases find state action based on the enactment of statutes that perm