and quality of care provided under Medicare and Medicaid. These record-keeping requirements (Section 1160(a)(1)(C) are duplicated by an ambiguous authorization under Section 1155(b) (3) allowing PSROs to "examine the pertinent records" of practitioners and providers. This authority is, at best, redundant and could be the subject of abuse. It should be observed that unrestrained examinations of medical records would jeopardize their confidentiality.

(16) The role of the state medical society should be further augmented by authorizing the Secretary to enter into contracts with the state medical society, or its designated organization, to provide technical and administrative assistance to PSROS in the administration of the PSRO program. Under such contracts, the organization would be reimbursed directly by DHEW.

(17) Section 213 of P.L. 92-603, which describes circumstances under which payment may be made under Medicare for certain otherwise noncovered items and services, and under which recovery can be made from providers and practitioners, should be repealed.

(18) Provisions of Section 207 of P.L. 92–603, relating to utilization review procedures under Medicaid should be repealed.

(19) Section 229 of P.L. 92-603, authorizing the creation of program review teams, should be repealed.

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

(No. 75-C-560)

AMERICAN MEDICAL ASSOCIATION, FOR ITSELF AND ITS MEMBERS, AND RICHARD A. ADAMSKI, M.D., FRANK J. JIRKA, JR., M.D., EDWARD J. KROL, M.D., RISHER WATTS, JR., M.D., KENNETH M. WILCOX, M.D., WILLIAM BORRELLI, MARIE CLEMES, HAROLD GURGONE, MAURICE PAUL, LUCILLE ROUBAL, WILLIAM WHINNERY, CORINE BLOCK, MARY HINTON, LEROY KREER, A. L. PIVONKA, AND LEONARD STOLARSKI, PLAINTIFFS,

vs.

CASPAR W. WEINBERGER, SECRETARY OF THE UNITED STATES DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, DEFENDANT.

ORDER

This action having come on for hearing on March 4 through March 7, 1975, and on April 15, 1975, on plaintiffs' application for a preliminary injunction prohibiting enforcement by the defendant of 20 CFR § 405.1035 (e) (f) and 45 CFR § 250.19(a)(1)(viii); the plaintiffs having moved, at the conclusion of the hearing on the motion for preliminary injunction held March 4 through March 7, for a temporary restraining order pending decision on the application for preliminary injunction; and the court having considered the evidence admitted in behalf of plaintiffs and defendant, the oral and written presentations of the attorneys for plaintiffs and defendant, and the court having delivered orally on May 27, 1975, and filed on June 5, 1975, its memorandum of decision intended to satisfy the provisions of Rule 52(a) of the Federal Rules of Civil Procedure requiring the court to set forth its findings of fact and conclusions of law. It is ordered and adjudged that:

1. Plaintiffs' application for a preliminary injunction will be, and the same hereby is, allowed. A preliminary injunction will, therefore, issue forthwith prohibiting the defendant Secretary of the Department of Health, Education & Welfare from in any way enforcing or implementing 20 CFR § 405. 1035 (e) (f) and 45 CFR § 250.19 (a) (1) (viii), pending disposition of this cause on the merits, and without security in any amount from plaintiffs.

2. Plaintiffs' motion for a temporary restraining order will be, and the same hereby is, denied, it being moot as a result of this court's ruling on plaintiffs' application for preliminary injunction.

It is further ordered and adjudged, That defendant having moved on May 27, 1975, for a stay of preliminary injunction pending decision on appeal of the preliminary injunction, and the court having heard oral argument by the attorneys for plaintiffs and defendant, defendant's motion for a stay of injunction pending appeal will be, and the same hereby is, denied.

JULIUS J. HOFFMAN, Senior United States District Judge.

Dated at Chicago, Illinois, this 27th day of May, 1975.

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

(No. 75-C-560)

AMERICAN MEDICAL ASSOCIATION, FOR ITSELF AND ITS MEMBERS, AND RICHARD A. ADAMSKI, M.D., FRANK J. JIRKA, JR., M.D., EDWARD J. KROL, M.D., RISHER WATTS, JR., M.D., KENNETH M. WILCOX, M.D., WILLIAM BORRELLI, MARIE CLEMES, HAROLD GURGONE, MAURICE PAUL, LUCILLE ROUBAL, WILLIAM WHINNERY, CORINE BLOCK, MARY HINTON, LEROY KREER, A. L. PIVONKA, AND LEONARD STOLARSKI, PLAINTIFFS,

vs.

CASPAR W. WEINBERGER, SECRETARY OF THE UNITED STATES DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, DEFENDANT

MEMORANDUM OF DECISION

Julius J. Hoffman, Senior District Judge. In this action by the American Medical Association and others for declaratory and injunctive relief from the enforcement of regulations promulgated by the defendant Secretary of the Department of Health, Education, and Welfare, plaintiffs move for a temporary restraining order and a preliminary injunction pending disposition on the merits.

Plaintiffs include not only the American Medical Association (AMA), which has filed suit against HEW for the first time in its history, but also five physicians, six recipients of Medicare benefits, two recipients of Medicaid benefits, and three other persons not participating in Medicare or Medicaid but desiring medical treatment. The challenged regulations, 20 CFR § 405.1035(e) (f) and 45 CFR § 250.19 (a) (1) (viii), condition Medicare and Medicaid reimbursement on the establishment by hospitals of "utilization review" committees which must assess the "medical necessity" of a patient's admission within 24 hours, or one working day, thereof. Plaintiffs allege that these regulations interfere, in violation of the First, Fifth, and Ninth Amendments, with a physician's right to practice medicine according to his best medical judgment and a patient's right to be treated according to the best medical judgment of his or her attending physician. The complaint also challenges the authority of the Secretary under the Social Security Act to issue the regulations, and asserts that the Secretary failed, prior to promulgation, to make specific findings as required by the Administrative Procedure Act and the Fifth Amendment. Jurisdiction is based on 28 U.S.C. § 1331, which confers upon the district courts original jurisdiction over civil actions arising under the Constitution or laws of the United States and in which the amount in controversy exceeds $10,000.00.

As the court has stated on several occasions during these proceedings, it regards this case as critically important to patients and physicians throughout the country, as well as to the Secretary, who seeks to limit the increasing costs of federal health insurance. The court has therefore proceeded deliberately, with the benefit of extensive written and oral presentations by the attorneys for the plaintiffs and the defendant.

On February 20, 1975, plaintiffs filed their complaint and motion for preliminary injunction together with a forty-two page memorandum in support. Four days later, the court set the matter down for hearing March 4 on the motion for preliminary injunction, and granted leave to defendant to file a memorandum in opposition exceeding the fifteen page limit prescribed by the local rules. On February 14, defendant moved for the convening of a three-judge court. After briefing and argument by the parties, the court denied that motion for the principal reason that plaintiffs seek an injunction against the enforcement of federal administrative regulations as opposed to an underlying enabling statute. A hearing on the motion for preliminary injunction was held from March 4 through March 7, at the completion of which the court ordered the parties to file, contemporaneously on March 21, proposed findings of fact and conclusions of law, and memoranda in support thereof. Also at the close of the hearing, plaintiffs moved for a temporary restraining order pending decision on the motion for a preliminary injunction. On March 10, defendant filed a memorandum in opposition to the motion for a temporary restraining order pursuant to his request for leave to submit written opposition to that motion. Shortly after submission, with respect to the motion for preliminary injunction, of the proposed findings of fact and conclusions of

law and supporting memoranda, counsel for the Secretary advised the court by letter that the original February 1 effective date had been amended to July 1, 1975. On April 15, the court held a hearing for consideration of the question whether, in view of the amended effective date, the issues raised by the motion for preliminary injunction were ripe for judicial determination and on April 18, the parties filed memoranda on the issue. On May 14, plaintiffs filed their motion for summary judgment, and the following week, on May 23, defendant filed his cross motion for summary judgment.

Enactment of Medicare and Medicaid into the Social Security Act established the Federal government as the largest health insurer in the United States. Established under Title XIX of the Social Security Act, 42 U.S.C. §1396 et seq., Medicaid is a federal-state matching funds program providing medical assistance to elderly, blind, disabled and other individuals with insufficient resources to meet the cost of necessary medical care, as well as families with dependent children. Medicare is a federally funded and administered program created by Title XVIII of the Social Security Act providing hospital and out-patient insurance benefits to elderly persons. Principally to reduce the rising costs of these programs, the Secretary promulgated the challenged regulations. As the court has noted, the regulations require hospitals to implement by July 1, 1975, a "utilization review" procedure under which a committee of two or more physicians, "with the participation of other professional personnel," determines, within 24 hours or one working day, whether the admission of a patient is "medically necessary." Findings by the committee that admissions are not "medically necessary" result in denial of Medicare or Medicaid reimbursement.

I. STANDING AND RIPENESS

A. STANDING

The Secretary assets that, with respect to the American Medical Association, the complaint alleges solely that the AMA is an association of state medical societies in the United States, and contends that this allegation is insufficient, under Sierra Club v. Morton, 405 U.S. 727 (1972), to establish the AMA's standing to sue. More specifically, defendant contends that because the complaint lacks allegations that the AMA itself will be injured and that any of the plaintiffs are members of the AMA, it necessarily lacks an allegation that any member of the AMA is, or will be, injured by the regulations under attack. Defendant maintains also that the allegations of the complaint are insufficient to establish the standing of the patient plaintiffs.

As a practical matter, a ruling on the standing of the American Medical Association may be of small consequence, for the court holds that the patient plaintiffs have standing in any event. See, e.g. Doe v. Bolton, 410 U.S. 179 (1973), one of the two recent abortion decisions by the Supreme Court, in which the Court observed that "[i]nasmuch as Doe and her class are recognized, the question whether the other appellants-physicians, nurses, clergymen, social workers, and corporations-present a justiciable controversy and have standing is perhaps a matter of no great consequence." 410 U.S. at 188.

In the first paragraph of the complaint, all plaintiffs allege that the action arises in part under the Administrative Procedure Act, 5 U.S.C. § 551 et seq. Section 10 of the Act, 5 U.S.C. § 702, provides that a person suffering legal wrong, or "adversely affected" or "aggrieved" by agency action within the meaning of a relevant statute, is entitled to judicial review of that action. Recently, in United States v. SCRAP, 412 U.S. 669 (1973), the Supreme Court restated with clarity the requirements for standing under the Administrative Procedure Act as announced the previous year in Sierra Club v. Morton. In SCRAP, the Court stated that standing is conferred upon those who can show that the challenged action had caused them "injury in fact," and "where the alleged injury was to an interest 'arguably within the zone of interests to be protected or regulated' by the statutes that the agencies were claimed to have violated." 412 U.S. at 686. Articulating precisely what allegations are required, the Court went on to state that "[a] plaintiff must allege that he has been or will in fact be perceptibly harmed by the challenged agency action. ***" Id. at 688. (emphasis supplied). Here, the plaintiffs allege that the regulations will interfere with their right to be hospitalized in accordance with the best judgment of their respective physicians, will reduce the quality of medical care because non-medical matters will complicate the decision to hospitalize, and delay adminissions, to the detriment of their health and proper treatment.

These allegations, which, at the very least, assert "perceptible harm," are more specific than those held sufficient in SYRAP. In that case, the plaintiff SCRAP (Students Challenging Regulatory Agency Procedures), an unincorporated association of five law students, claimed, inter alia, that the use by each of its members of forests, streams, mountains and other resources was disturbed by the adverse environmental impact "caused by the nonuse of recyclable goods brought about by a rate increase on those commodities." 412 U.S. at 685.

It is, moreover, evident that the interests of the plaintiff recipients of Medicare and Medicaid benefits are arguably within the zone of interests sought to be regulated or protected. The programs exist to serve them. Their allegations are, therefore, sufficient to confer standing under § 10 of the Administrative Procedure Act to challenge the action of the Secretary in promulgating the regulations.

The complaint is likewise sufficient to establish the standing of the American Medical Association and the physician plaintiffs. Sierra Club v. Morton requires that a party seeking review of administrative action must allege that he himself has suffered injury. The Supreme Court stated in that case that "[i]t is clear that an organization whose members are injured may represent those members in a proceeding for judicial review." 405 U.S. at 727, citing NAACP v. Button, 371 U.S. 415, 428 (1963). In Sierra Club v. Morton, the Court held that because the plaintiff Sierra Club had failed, in its complaint seeking to enjoin federal officials from approving development of a resort in a region of great natural beauty, to allege that it or any of its members would be affected by the development, it lacked standing to challenge the administrative action.

Here the AMA and the physician plaintiffs have alleged more than the mere "special interest" held insufficient to confer standing on the Sierra Club. The physicians allege that the regulations unlawfully interfere with the doctor-patient relationship and the right of a physician to practice medicine according to his best medical judgment. The regulations, they aver, will "* * * unlawfully 'chill,' deter, and otherwise interfere with attempts by physicians to treat their patients in a manner dictated by the medical needs of the patients." They complain that contrary committee decisions may subject them to malpractice actions and other damage proceedings based on committee findings and will expose them to damage to their professional reputations. These allegations reflect, moreover, interests arguably within the zone of interests sought to be regulated or protected. The Secretary has indicated that one of the purposes of the regulations is to improve the quality of medical care. The physicians perform most of the services the costs of which the Secretary has sought to reduce.

While it is true, as the Secretary points out, that nowhere in the complaint do the five physician plaintiffs indicate that they are members of the American Medical Association, two of them, James H. Sammons, M. D., and Frank J. Jirka, M. D., set forth their membership in affidavits attached to the complaint. When the Supreme Court decided Sierra Club v. Morton, it looked to "pleadings or affidavits;" 405 U.S. at 735. Plaintiff, Risher Watts, M. D., moreover, testified that he is a member of the AMA.

Roe v. Wade, 410 U.S. 113 (1973), has minimal application to the physician plaintiffs in the case at bar. In that case, the plaintiff doctor was under state criminal indictment for violation of the same statute he sought to challenge in the federal court. The Supreme Court held that he had made no allegation of a threat to any federally protected right that could not be asserted in defense of the state court prosecution.

B. RIPENESS

There is no disagreement that the legal issues in this action present a "case or controversy" within that requirement of Article III of the United States Constitution. In view of the postponement of the effective date of the regulations from February 1 to July 1, 1975, however, the Secretary questions the propriety of a motion for preliminary injunction prior to July 1. The injunction is sought against enforcement of the challenged regulations. Since there can be no enforcement prior to the effective date, the Secretary argues, an order of preliminary injunction at this time would be a meaningless act. Traditionally, the question thus presented has been cast in terms of "ripeness," or the timing of judicial review.

The power of the district court to review an administrative regulation prior to enforcement is well-settled. See Pierce v. Society of Sisters, 268 U.S. 510 (1925); Village of Euclid v. Amber Realty Co., 272 U.S. 365 (1926); Abbott Laboratories, Inc. v. Gardner, 387 U.S. 136 (1966). See also Public Utilities Commission v. United States, 355 U.S. 534 (1958). Whether challenge to the regulation is "ripe" depends on whether the issues tendered are appropriate for judicial resolution,

and the hardship to the parties of withholding judicial consideration. Abbott Laboratories, Inc. v. Gardner, supra. See also, Toilet Goods Ass'n. Inc. v. Gardner, 387 U.S. 158 (1966).

In Pierce v. Society of Sisters, supra, the Supreme Court affirmed, on June 21, 1925, a preliminary injunction against the enforcement of a statute that would not become effective until September 1, 1926. There, the Court found that the statute, which required parents to send children of certain ages to public schools, caused present irreparable harm to private schools. See also, Flemming v. Florida Citrus Exchange, 358 U.S. 153 (1958); Textile and Apparel Group v. FTC, 410 F.2d 1052 (D.C. Cir. 1968), cert. denied, 396 U.S. 910 (1969).

In Abbott Laboratories, Inc. v. Gardner, supra, the court upheld pre-enforcement permanent equitable relief against the Secretary of the Department of Health, Education & Welfare. There, plaintiff drug manufacturers challenged regulations requiring that the "established name" of a drug accompany each appearance on a label of a proprietary name. The Court held that the impact of the regulations was sufficiently direct and immediate as to render the issue appropriate for judicial review at this stage." 387 U.S. at 152. The Court went on to quote the following from the opinion of the district court: "[e]ither they [the plaintiff manufacturers] must comply with the every time requirement and incur the costs of changing over their promotional material and labeling or they must follow their present course and risk prosecution." Id., quoting 228 F. Supp. 855 at 861.

In his treatise on administrative law, Professor Kenneth Culp Davis characterized as "clearly unsound," the "easy assumption that a statute cannot be ripe for challenge until it has been applied by an administrator*** in a concrete case." 3 DAVIS, ADMINISTRATIVE LAW TREATISE, § 21.03 (1958). The reason is that "enforcement" may occur through the actions of private parties as well as the promulgating official or agency.

That is precisely what is occurring with respect to the regulations now before the court. Risher Watts, Jr., M.D., one of the physician plaintiffs and medical director of two Chicago hospitals serving primarily Medicare and Medicaid patients, testified that his hospitals have begun to implement the challenged regulations. Moreover, the notices of the amended effective date contained the following statement: "The Department wishes to emphasize that it expects all facilities participating in Medicare to be in full compliance with these regulations on July 1, 1975. Facilities should not abate their efforts to develop criteria and programs to comply with these regulations as a result of the change in effective date." (emphasis supplied).

40 F. Reg. 14591. The notice with respect to the Medicaid regulations is, with the exception of its reference to Medicaid instead of Medicare, identical. 40 F. Reg. 14597. Furthermore, in what appears to be an undated departmental memorandum of the Social Security Administration, the following is stated: "The regulations now are to be implemented by the new effective date, i.e. hospitals will be expected to be actually reviewing admissions and assigning extended stay review dates in accordance with the new requirements by July 1, 1975." (emphasis originally included).

As the court noted earlier, the parties agree that the legal issues presented are justiciable. The regulations having been promulgated, published in the Federal Register, and an effective date having been set, agency action is "final" within the provisions of § 10 of the Administrative Procedur Act. The basic rationale of the ripeness doctrine is, in the words of Justice Harian: "*** to prevent the courts through avoidance of premature adjudication, from entangling themselves in abstract disagreements over administrative policies, and also to protect the agencies from judicial interference until an administrative decision has been formalized and its effects felt in a concrete way by the challenging parties. Abbott Laboratories v. Gardner, supra, 387 U.S. at 148-149. There is no "abstract disagreement" here over the motion for preliminary injunction; hospitals are implementing the challenged regulations. As will appear more fully in the discussion to follow, the risks of withholding judicial consideration of this motion are substantial. It is, therefore, "ripe" for adjudication by this court.

II. MERITS OF THE MOTION FOR PRELIMINARY INJUNCTION

Plaintiffs move for a preliminary injunction against the enforcement of the challenged regulations pending disposition of the case on the merits. The motion is addressed to the discretion of the trail court. Doeskin Products v. United Paper Co., 195 F.2d 356 (7th Cir. 1952). The purpose of a preliminary injunction is to preserve the status quo pending a decision on the merits. Id. In this circuit, the