United States v. Lahey Clinic Hospital, Inc.

United States Court of Appeals
For the First Circuit

No. 04-1753

UNITED STATES OF AMERICA,

Plaintiff, Appellee,

v.

LAHEY CLINIC HOSPITAL, INC.,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Rya W. Zobel, U.S. District Judge]

Before

Lynch, Lipez, Howard, Circuit Judges.

Richard P. Ward, with whom Ropes & Gray LLP was on brief, for
appellant.

Jeffrey Clair, Attorney, Civil Division, United States Justice
Department, with whom Peter D. Keisler, Assistant Attorney General,
Michael J. Sullivan, United States Attorney, Douglas N. Letter, and
Nancy Rue, Attorneys, Civil Division, United States Justice
Department, were on brief, for appellee.

February 4, 2005
 LYNCH, Circuit Judge. The United States filed a civil

complaint in federal district court under 42 U.S.C. § 1345 alleging

that the Lahey Clinic Hospital billed Medicare and received payment

for tests and other diagnostic procedures performed by its clinical

laboratory when Lahey knew, or reasonably should have known, that

the tests were not reasonable and necessary for diagnosis or

treatment of illness or injury of Medicare beneficiaries. The

United States sought restitution for these overpayments, including

an accounting, disgorgement of improper gains of over $311,000, and

prejudgment interest, under common law theories of unjust

enrichment and payment under mistake of fact.

Lahey moved for judgment on the pleadings and, in the

alternative, for summary judgment. Lahey argued that the Medicare

Act, 42 U.S.C. § 1395, et seq., and the attendant administrative

procedures promulgated by the Secretary of Health and Human

Services (HHS), are the exclusive avenue for recovery by the United

States of Medicare overpayments, and as such, the district court

had no subject matter jurisdiction. The court denied the motion

and certified the question of subject matter jurisdiction to this

court under 28 U.S.C. § 1292(b).

On interlocutory appeal, the question presented is

whether the district court lacks subject matter jurisdiction

because the Medicare Act explicitly or implicitly repeals the grant

of federal court jurisdiction under 28 U.S.C. § 1345 or displaces

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the underlying common law causes of action over which § 1345 gives

federal courts jurisdiction. We hold that the Medicare Act does

not repeal 28 U.S.C. § 1345 or displace the underlying common law

causes of action. We affirm.

I.

Congress established the Medicare program in 1965 by

Title XVIII of the Social Security Act. 42 U.S.C. § 1395 et seq.

Medicare is a federally subsidized health insurance program for the

elderly and certain disabled individuals. See id. § 1395c. The

Secretary of HHS is responsible for the Medicare program, and

during the time period relevant to this case, the Health Care

Financing Administration (HCFA)1 was the component of HHS

responsible for administering the Medicare program.

Medicare is divided into two parts: Part A and Part B.

Part A provides insurance for covered inpatient hospital and

related post-hospital services. Part B provides voluntary and

supplementary insurance which covers physicians' and certain other

medical and health services, including laboratory tests

administered by a hospital and furnished to outpatients for the

purpose of diagnosis. Id. §§ 1395j, 1395k, 1395x(s). The

Secretary contracts with "fiscal intermediaries" (FIs) and

"carriers" to make initial reimbursement determinations and to

1
The Health Care Financing Administration is now referred to
as the Center for Medicare and Medicaid Services.

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administer payments. These entities are often private insurance

companies. In most circumstances, FIs administer Part A and

carriers administer Part B, but FIs administer the program with

respect to hospitals for outpatient services covered under Part B.

The claims here concern payments for services provided

under Part B of Medicare. During the relevant time period involved

in this case, these payment decisions were made "by the Secretary

in accordance with the regulations prescribed by him." Id. §

1395ff(a). In order to be reimbursed through Medicare Part B,

participating providers must first file a claim with their FI. As

for the services involved in this case, they must be reasonable and

necessary for diagnosis or treatment of illness or injury; they

were covered only if ordered by a treating physician who used the

test results in the management of the beneficiary’s specific

medical problem. 42 C.F.R. § 410.32. Once a payment decision has

been made, a dissatisfied provider may seek administrative review

of this determination and then judicial review of the Secretary's

final decision after the avenues of administrative appeal have been

exhausted. Id. § 1395ff(b)(1).

In the late 1980's, Medicare's escalating payments for

laboratory services became a source of increasing concern to

Congress, the Secretary, and HHS's Office of Inspector General. In

legislation that took effect in 1986, Congress imposed payment caps

on the amount individual carriers could pay in reimbursement for

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laboratory services. See 42 U.S.C. 1395l(h). Nonetheless,

payments for Part B laboratory services continued to rise, reaching

$3.9 billion in fiscal year 1987.

In response to these rising costs, in 1990, the HHS

Inspector General (IG) conducted a review of a sample of Medicare

billings for the year 1988 and determined that Medicare was paying

nearly twice as much as physicians for the same tests. The IG

found that much of the added cost was attributable to Medicare's

reimbursement of panels of tests. These tests were bundled

together and performed at the same time, as an integrated group.

The IG found that when physicians ordered these panels of tests,

they were billed at a reduced rate to account for savings from

performing the tests as a group. However, when Medicare was billed

for these tests, the individual tests within the panel were billed

separately at their full rate, resulting in greatly increased costs

to Medicare.

A 1998 audit by the IG found the same problem in claims

for clinical tests performed by hospital laboratories serving

outpatients. The 1998 audit also raised concerns about certain

hematology indices, which can be generated from the results of

other tests. The report concluded that in many instances these

indices were automatically prepared when other related tests were

ordered and then separately billed to Medicare, even if the index

was duplicative or medically unnecessary.

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 Within the narrow category of services of clinical

laboratory tests performed by hospital outpatient laboratories,

including chemistry, hematology, and urinalysis tests, the IG found

that "Medicare FIs overpaid hospital outpatient department

laboratories about $43.6 million . . . during a two year period

from January 1, 1994 to December 31, 1995." The IG found for that

same time period "an additional $15.6 million could have been saved

if policies had been developed to preclude payment for additional

automated hematology indices."

Accordingly, the IG recommended that the Secretary

implement controls to stop these overpayments and seek to recover

overpayments previously made. The Secretary agreed and noted that

he would "coordinate any recovery activity with the Department of

Justice through our Office of General Counsel." A number of civil

actions have been instituted to recover some of these costs under

various theories. See, e.g., United States v. Blue Cross & Blue

Shield of Ala., 156 F.3d 1098 (11th Cir. 1998) (False Claims Act);

United States v. Tenet Healthcare Corp., 343 F. Supp. 2d 922 (C.D.

Cal. 2004) (common law mistake and negligent misrepresentation).

The current dispute between Lahey and the United States arose

against this background.

We are careful to say that Lahey does not argue that the

United States may not recover overpayments, only that it has chosen

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the wrong approach in doing so.2 Similarly, the United States has

not alleged fraud on Lahey's part in this action. Lahey is a

renowned academic medical center that participates in the Medicare

program as a "provider of services" to Medicare beneficiaries.

Lahey has entered into a provider agreement with the Secretary

pursuant to 42 U.S.C. § 1395cc. The agreement provides that Lahey

will be reimbursed by Medicare through Blue Cross/Blue Shield of

Massachusetts (Lahey's FI during the relevant time period) for

medical services that are "reasonable and necessary for the

diagnosis or treatment of illness or injury or to improve the

functioning of a malformed body member." 42 U.S.C. §

1395y(a)(1)(A).

On January 30, 2003, the United States filed an action

under 28 U.S.C. § 13453 against Lahey alleging "violations of the

common law giving rise to causes of action for unjust enrichment

2
Lahey does assert in its statement of facts and in its reply
brief that the Medicare statute limits the Secretary’s authority to
seek restitution of overpayments more than three years after
determination of the initial claim. Lahey relies on 42 U.S.C.
§ 1395gg(b) for the proposition that no collection may be had from
a provider who is "without fault," and that the statute presumes
that a provider is without fault if the reimbursement determination
is more than three years' old. The United States disputes this
assertion and offers a different interpretation of the statute.
The United States argues that the statute's three-year presumption
of "without fault" is limited by the language, "in the absence of
evidence to the contrary." Id. This claim does not go to the
subject matter jurisdiction of the district court, and therefore we
do not address it.
3
28 U.S.C. § 1345 grants broad jurisdictional power to the
district courts over suits when the United States is plaintiff.

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and payment under mistake of fact." The allegations were split

into two different groups. The first group asserted that Lahey

"repeatedly billed Medicare for separate individual laboratory

tests that could practically and more economically be performed as

a single panel of tests." This billing practice violated Medicare

reimbursement policies which required the tests to be billed as "an

integrated, single panel of tests rather than separately." The

government also alleged that Lahey knew or should have known of

this reimbursement requirement and that Lahey nonetheless submitted

numerous individual claims between July 1, 1993 and June 30, 1994.

In total, the United States stated that Lahey submitted over 9,300

Medicare claims for unbundled blood chemistry tests.

A second group of allegations asserted that virtually

every time a complete blood count test was ordered for a patient

and Lahey billed the United States for this test, Lahey performed

a medically unnecessary hematology test. Specifically, between

July 1, 1993 and December 31, 1996, Lahey submitted over 88,000

claims for payment of certain "automated hemogram indices," which

were generated every time a complete blood count was ordered. The

United States alleges that Lahey repeatedly billed Medicare for

these tests without making any determination that they were

medically necessary or actually sought by the treating physician

and that in fact these tests were rarely medically useful.

Lahey moved for judgment on the pleadings or in the

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alternative, summary judgment, primarily arguing that the district

court did not have subject matter jurisdiction because Medicare's

jurisdictional provisions, specifically 42 U.S.C. §§ 405(h) and

405(g), bar the United States from seeking to recover a prior

overpayment through a direct action in federal court. Lahey

asserted that the initial decision by the FI to reimburse Lahey for

the tests is a final decision of the Secretary, and this final

decision can only be reopened by the Secretary through the

processes and procedures outlined in the Medicare Act and the

regulations promulgated pursuant to it.

Finding that it had subject matter jurisdiction, the

district court denied Lahey's motion on March 25, 2004. The court

held that the statutory provisions in the Medicare Act apply to

claims brought against the United States not claims brought by the

United States as plaintiff. The district court based its decision

on several factors: the language of the statutory provisions; the

decision in United States v. Aquavella, 615 F.2d 12, 21 (2d. Cir.

1979), which concluded that "§ 405(h) by its terms applies only to

actions brought against the government and not by the government";

and that the policy reasons for requiring administrative review are

not implicated when the government is the plaintiff.

Lahey requested that the district court certify its order

for interlocutory appellate review. On April 30, 2004, the

district court amended its prior order and certified the issue for

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interlocutory appeal under 28 U.S.C. § 1292(b), stating that the

denial of summary judgment involved "a controlling question of law

as to which there is a substantial ground for difference of opinion

and that an immediate appeal from this Order may materially advance

the ultimate termination of the litigation."4 Lahey then

petitioned this court for permission to take an interlocutory

appeal, and framed the question presented as whether "Lahey Clinic

Hospital, Inc. [is] entitled to dismissal pursuant to Fed. R. Civ.

P., Rule 12(b)(1) because the Court lacks subject matter

jurisdiction." This court granted permission to appeal on June 9,

2004, and we have jurisdiction pursuant to 28 U.S.C. § 1292(b).

II.

Lahey's opening brief to us argues that the district

court lacks subject matter jurisdiction because:

By virtue of the incorporation of §§ 405(g)
and 405(h) into the Medicare Act, federal
district courts only have subject matter
jurisdiction to review Medicare payment
decisions that have initially been presented
to and determined by the Secretary and any
such determinations have been fully reviewed
under the Secretary's regulations establishing
administrative review procedures. Only after

4
Indeed there is a conflict of views within the district of
Massachusetts. Compare United States v. Univ. of Mass. Mem'l Med.
Ctr., 296 F. Supp. 2d. 20 (D.Mass. 2003) (finding that § 405(h)
barred an exercise of subject matter jurisdiction and dismissing
the action), with United States v. Lahey Clinic Hosp., No. 03-
10194-RWZ (D. Mass. April 30, 2004) (finding that § 405(h) did not
apply when the action was brought by the United States). Our
opinion today overrules the reasoning in Univ. of Mass. Mem'l Med.
Ctr., supra.

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 the Secretary has made a "final decision"
after affording the provider of services an
administrative evidentiary hearing to
determine the many factual issues that bear on
whether under applicable Medicare principles
there were any overpayments for which the
provider is liable, does a federal court have
jurisdiction to review a decision of the
Secretary.

These preliminary procedures did not take place, and therefore,

Lahey argues, the district court does not have subject matter

jurisdiction.

Lahey also argues that the district court lacks subject

matter jurisdiction for a number of other reasons: (1) the

judicially established doctrines of exclusive or primary

jurisdiction; (2) the lack of justiciability under the doctrines of

ripeness and exhaustion of administrative remedies; (3) exercising

jurisdiction in this case would deprive Lahey of procedural due

process mandated by the Medicare Act;5 and (4) the United States

failed to meet its burden of proof to present sufficient facts to

establish subject matter jurisdiction.6

5
This argument does not implicate the district court's subject
matter jurisdiction under 12(b)(1) and is beyond the scope of this
interlocutory appeal.
6
"A motion to dismiss an action under Rule 12(b)(1) . . .
raises the fundamental question whether the federal district court
has subject matter jurisdiction over the action before it." 5B
Charles Alan Wright & Arthur B. Miller, Federal Practice and
Procedure § 1350, at 61 (3d ed. 2004). While this challenge is
usually employed in the instance in which the moving party believes
there is no federal question jurisdiction under 28 U.S.C. § 1331 or
diversity of citizenship jurisdiction under 28 U.S.C. § 1332, "the
scope of Rule 12(b)(1) is flexible," and it can serve as "a

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 Lahey's order of argument is misplaced. Each of its

arguments assumes the premises that the Medicare Act is the only

avenue available to the United States to recover Medicare

overpayments and that the Act repeals the grant of federal court

jurisdiction under § 1345 and displaces the underlying common law

causes of action. We first address whether those premises are

correct.

Subject matter jurisdiction in this case is barred by the

Medicare Act only if Congress in enacting the Medicare Act has

removed federal court jurisdiction over these claims brought by the

United States as plaintiff under 28 U.S.C. § 1345. A related issue

is whether the Medicare Act displaced the underlying common law

causes of action relied on by the government in this case to

exercise its right to recover payments wrongfully made out of the

public fisc. Congress undoubtedly has the ability to do both of

procedural vehicle" for raising a variety of challenges to the
court's power to hear the case. Id. at 100-02. Failure to exhaust
administrative remedies and ripeness challenges may be appropriate
in a motion to dismiss for lack of subject matter jurisdiction.
See Bonilla v. Muebles J.J. Alvarez, Inc., 194 F.3d 275 (1st Cir.
1999); Deniz v. Municipality of Guaynabo, 285 F.3d 142 (1st Cir.
2002). In addition, jurisdictional facts might be relevant for
determining whether the district court has subject matter
jurisdiction in a Rule 12(b)(1) motion when there is a dispute over
those facts. See Skwira v. United States, 344 F.3d 64 (1st Cir.
2003) (discussing the different standard of review of the district
court's findings as to jurisdictional facts and the district
court's ultimate conclusion of subject matter jurisdiction, which
is a question of law subject to de novo review). There are,
however, no relevant jurisdictional facts in dispute here as the
issue is one of law.

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these actions. See Colorado River Water Conservation Dist. v.

United States, 424 U.S. 800 (1976); City of Milwaukee v. Illinois,

451 U.S. 304 (1981).

But if Congress has not acted in this manner, then

Lahey's argument, concerning the need for a final overpayment

decision that was initially presented to and determined by the

Secretary and was fully reviewed under the Secretary's

administrative regulations prior to the exercise of federal court

jurisdiction, is irrelevant.7 The federal court has an independent

jurisdictional grant under § 1345 and the United States has an

independent cause of action for recovery under the common law.

We now turn to those two critical issues and treat them

as corollary. Both are pure questions of law, and our review is de

7
Lahey argues that the Supreme Court reasoned in Weinberger
v. Salfi, 422 U.S. 749, 766 (1975), that the federal courts do not
have jurisdiction over claims involving Medicare overpayment
decisions, until the two jurisdictional prerequisites of § 405(h)
-- initial presentment to the Secretary and administrative
exhaustion through the agency's administrative review and hearing
procedures -- are satisfied. We disagree with Lahey's reading of
Salfi as it relates to this case for two reasons. First, Salfi
involved a constitutional challenge by a class of individuals who
brought an action against the Secretary seeking to recover Social
Security benefits. Id. at 755. Second, the United States does
not rely on the Medicare Act as the source of its cause of action
or the jurisdictional basis of its claim. It relies on 28 U.S.C.
§ 1345 for jurisdiction and common law remedies to recover payments
erroneously made out of the public fisc. Salfi is factually
distinct, and the Salfi Court did not engage in an analysis of
implied repeal of § 1345 or the displacement of the federal common
law claims.

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novo. P.R. Tel. Co. v. Telecomm. Regulatory Bd. of P.R., 189 F.3d

1, 7 (1st Cir. 1999).

28 U.S.C. § 1345 grants broad jurisdictional power to the

district courts over suits when the United States is plaintiff.

The statute provides:

Except as otherwise provided by Act of
Congress, the district courts shall have
original jurisdiction of all civil actions,
suits, or proceedings commenced by the United
States or by an agency or officer thereof
expressly authorized to sue by Act of
Congress.

28 U.S.C. § 1345.8

Section 1345 creates subject matter jurisdiction, and the

statute can only be limited, as the initial proviso provides, by

(1) an explicit repeal of the statute by an Act of Congress or (2)

an implicit repeal by total irreconcilability of the two acts. See

Colorado River, 424 U.S. at 808. Repeal of a federal statute by

implication is disfavored, and the individual arguing for repeal

has the burden of showing that the statute has been repealed. Cf.

King v. Collagen Corp., 983 F.2d 1130 (1st Cir. 1993) (burden on

the individual arguing for preemption of state law to show that the

law is preempted). The intention of Congress to repeal must be

clear and manifest. Radzanower v. Touche Ross & Co., 426 U.S. 148,

8
Lahey's argument appears to assume that if the federal courts
lack jurisdiction, the United States could not bring a common law
action in state courts. That might be a possible conclusion out of
Lahey's second argument (displacement of the common law causes of
action), but surely not as to the first (repeal of § 1345).

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154 (1976). There is a strong presumption against implied repeals

of federal statutes, see Kremer v. Chemical Constr. Corp., 456 U.S.

461, 468 (1982); United States v. Commonwealth of Puerto Rico, 721

F.2d 832, 836 (1st Cir. 1983), and this presumption is perhaps an

even stronger one when the repeal is a grant of jurisdiction to the

federal courts. Where, in particular, the subject matter

jurisdiction of the federal courts is involved, jurisdiction

"should not be disturbed by mere implication from the subsequent

legislation." Colorado River, 424 U.S. at 808 (quoting Rosecrans

v. United States, 165 U.S. 257, 262 (1897)).

To show an explicit repeal of a grant of federal court

jurisdiction under § 1345, Lahey must point to a later enacted

statute which by its terms explicitly repeals this jurisdiction.

Second, if Congress has not explicitly repealed § 1345,

then Lahey must point to total irreconcilability with a later

statute or, perhaps, that the later act was meant as a substitute

by covering the whole subject matter.9

9
It is unclear whether implied repeal of a jurisdictional
statute, such as § 1345, can be effectuated by the second test
articulated in Kremer. Kremer did not deal with a grant of federal
court jurisdiction. This court has adopted the reasoning of Kremer
as it applies to the implied repeal of § 1345. See United States
v. Commonwealth of Puerto Rico, 721 F.2d 832 (1st Cir. 1983).
However, there the court limited its repeal analysis to whether §
1345 was irreconcilable with the subsequent statute and determined
that it was not. Congress could easily wish to change a
substantive rule without depriving the federal courts of
jurisdiction.
The second test articulated in Kremer is relevant when dealing
with the implied repeal of a rule of law apart from the

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 Kremer, a case not involving the repeal of a grant of

federal court jurisdiction, sets forth a two-part test for implied

repeals of federal statutes:

(1) where provisions in the two acts are in
irreconcilable conflict, the later act to the
extent of the conflict constitutes an implied
repeal of the earlier one; and (2) if the
later act covers the whole subject of the
earlier one and is clearly intended as a
substitute, it will operate similarly as a
repeal of the earlier act. But, in either
case, the intention of the legislature to
repeal must be clear and manifest. . . .

Kremer, 456 U.S. at 468 (citing Radzanower v. Touche Ross & Co.,

426 U.S. at 154 (quoting Posadas v. Nat'l City Bank, 296 U.S. 497,

503 (1936))). We assume in Lahey's favor that both prongs of the

Kremer test are available for all aspects of its claims. In

shorthand terms, to show an implicit repeal of § 1345, Lahey must

show that (1) the provisions of § 1345 are in irreconcilable

conflict with the Medicare Act or (2) the Medicare Act, by clear

and manifest intent, covers the whole subject matter area and was

meant as a substitute.

jurisdiction of the court. However, Colorado River may limit the
implied repeal of jurisdictional statutes only to situations where
jurisdiction of the federal courts under § 1345 is irreconcilable
with the subsequent statute. See Colorado River, 424 U.S. at 808
("In the absence of some affirmative showing of an intention to
repeal, the only permissible justification for a repeal by
implication is when the earlier and later statutes are
irreconcilable.") (quoting Morton v. Mancari, 417 U.S. 535, 550
(1974)).

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 As for Lahey's second claim that a federal statute

displaces the federal common law, "the relevant inquiry is whether

the statute [speaks] directly to [the] question otherwise answered

by the common law." See County of Oneida, New York v. Oneida

Indian Nation, 470 U.S. 226, 237 (1985) (quoting City of Milwaukee,

451 U.S. at 315) (internal quotation marks omitted). Although the

Court recognized that Congress need not "affirmatively proscribe"

the common law doctrine at issue, see United States v. Texas, 507

U.S. 529, 534 (1993) (quoting City of Milwaukee, 451 U.S. at 315),

still "[s]tatutes which invade the common law . . . are to be read

with a presumption favoring the retention of long-established and

familiar principles . . . ." Id. (quoting Isbrandtsen Co. v.

Johnson, 343 U.S. 779, 783 (1952)).

To show displacement of the common law causes of action

relied on by the United States to recover money wrongfully paid by

the Treasury, Lahey must overcome this presumption and demonstrate

that Congress has directly addressed the issue and that Congress

intended to preclude the United States from assertion of common law

rights to recover overpayments by enactment of the Medicare Act.

Inconsistency between the two statutes (or claimed

inconsistency of a statute with common law) is not enough: "where

two seemingly inconsistent acts can reasonably stand together, a

court must interpret them in a manner which gives harmonious

operation and effect to both, in the absence of clear and

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unambiguous expression of Congressional intent to the contrary."

United States v. Kenaan, 557 F.2d 912, 917 (1st Cir. 1977) (citing

Morton v. Mancari, 417 U.S. 535, 549-51 (1973)).

A. Explicit Repeal of Section 1345

Lahey asserts that jurisdiction under § 1345 is expressly

limited by the introductory proviso that states: "Except as

otherwise provided by Act of Congress . . . ." 28 U.S.C. § 1345.

Lahey argues that §§ 405(g) and 405(h), of the Medicare Act, 42

U.S.C. § 1395ff(b) and 42 U.S.C. § 1395ii respectively, repeal the

jurisdictional grant of § 1345 as they are "Act[s] of Congress"

that come within this limiting proviso.

Section 405(g) provides for judicial review in the

federal courts of the Secretary's final administrative decision by

an individual. The relevant part of § 405(g) states as follows:

(g) Judicial Review

Any individual, after any final decision of
the Commissioner of Social Security made after
a hearing to which he was a party,
irrespective of the amount in controversy, may
obtain a review of such decision by a civil
action commenced within sixty days after the
mailing to him of notice of such decision or
within such further time as the Commissioner
of Social Security may allow. Such action
shall be brought in the district court of the
United States for the judicial district in
which the plaintiff resides, or has his
principal place of business, or, if he does
not reside or have his principal place of
business within any such judicial district, in
the United States District Court for the
District of Columbia.

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42 U.S.C. § 405(g).10

Lahey argues that § 405(h), in turn, makes § 405(g) the

exclusive avenue for judicial review of the Secretary's final

determinations. Section 405(h) provides:

(h) Finality of Commissioner's decision

The findings and decision of the Commissioner
of Social Security after a hearing shall be
binding upon all individuals who were parties
to such hearing. No findings of fact or
decision of the Commissioner of Social
Security shall be reviewed by any person,
tribunal, or governmental agency except as
herein provided. No action against the United
States, the Commissioner of Social Security,
or any officer or employee thereof shall be
brought under section 1331 or 1346 of Title 28
to recover on any claim arising under this
subchapter.

Id. § 405(h).

Specifically, Lahey points to the second sentence in

§ 405(h) -- "[n]o findings of fact or decision of the [Secretary of

HHS] shall be reviewed by any person, tribunal, or governmental

agency except as herein provided" -- and argues the language

manifests an express congressional intent to repeal § 1345 in

decisions regarding the payment or overpayment of Medicare claims.

Lahey contends that the initial payment decision to reimburse Lahey

10
The text of 405(g) and 405(h) refers to the "Commissioner of
Social Security" rather than the Secretary. The statutory
provisions applying § 405(h) to Medicare, however, make clear that
references to the Commissioner should be deemed to be references to
the "Secretary" where the context indicates. See 42 U.S.C. §
1395ii.

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for the tests is "a decision of the Secretary" and § 405(h) makes

§ 405(g) the exclusive avenue for judicial review of this decision,

regardless of whether the plaintiff is the United States or a

dissatisfied beneficiary or provider.11

The argument fails. By its terms, neither the sentence

Lahey cites nor § 405(h) as a whole mention § 1345. Also, they do

not apply where, as here, the Secretary has made neither findings

of fact nor a decision after a hearing. The United States is not

asking the federal courts to review a decision of the Secretary, it

is bringing an independent action to establish the United States'

right to obtain restitution of monies wrongfully paid from the

public fisc.

Indeed, by its terms, § 405(h) is more consistent with

congressional intent to preserve jurisdiction under § 1345. The

third sentence of § 405(h) is explicit that no action "against the

11
Lahey's brief also directs the court's attention to the
Federal Claims Collection Act, 31 U.S.C. § 3711(a)(1). In this
statute, Congress mandated that heads of agencies attempt to
recover overpayments. The statute provides in pertinent part:

§ 3711. Collection and compromise
(a) The head of an executive, judicial, or legislative
agency - -
(1) shall try to collect a claim of the United States
Government for money or property arising out of the
activities of, or referred to, the agency . . . .

31 U.S.C. § 3711(a)(1). Quite correctly Lahey does not suggest
that this statute somehow expresses a congressional intent to
preclude the United States from pursuing overpayment actions under
§ 1345 or displaces the federal common law remedies available to
the United States.

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United States . . . shall be brought under § 1331 or 1346 of Title

28 to recover on any claim arising under this subchapter." 42

U.S.C. § 405(h) (emphasis added). Section 405(h) does not refer to

actions brought by the United States or actions brought under 28

U.S.C. § 1345. And § 405(g), the terms of which Lahey argues are

the exclusive route to judicial review, refers to "individuals,"

not to the "United States."

Lahey's argument is also inconsistent with Colorado

River, which involved the question of whether the same statute here

at issue, 28 U.S.C. § 1345, had been repealed by the McCarran

Amendment. Colorado River, 424 U.S. at 807-09. The Court noted

that the McCarran Amendment did contain some limitations but, as

here, did not mention § 1345. The court concluded that the statute

by its terms did not "indicate any repeal of jurisdiction under §

1345." Id. at 807.

A reading of the text of the statute alone may not be

dispositive of the explicit repeal question. When determining the

intent of Congress, Colorado River at least encourages12 a further

12
Subsequent case law suggests that resort to legislative
history is more appropriate in the implied repeal analysis. See
Kremer, 456 U.S. 461 (examining legislative history to determine
whether a previous statute had been implicitly repealed by a
subsequent statute); Commonwealth of Puerto Rico, 721 F.2d 832
(examining legislative history to determine whether Congress
impliedly repealed § 1345); Kenaan, 557 F.2d at 916. Regardless of
under which prong of the repeal analysis legislative history is
considered, the legislative history relevant to Lahey's claims does
not advance Lahey's argument that § 1345 was repealed by the
Medicare Act.

-21-
examination of the legislative history of the Medicare Act to see

if it evidences "a clear purpose to terminate any portion of § 1345

jurisdiction." Id.; see also Commonwealth of Puerto Rico, 721 F.2d

at 836. The United States argues that "the fundamental purpose of

Medicare's jurisdictional scheme is to channel all claims pressed

by dissatisfied providers or beneficiaries through a detailed

process of administrative review before such claims are presented

in federal court." See Shalala v. Ill. Council on Long Term Care,

Inc., 529 U.S. 1, 13 (2000) (The Medicare scheme requires the

"channeling" of "virtually all legal attacks" on the Secretary's

decisions and determinations through the agency.).

Lahey has provided no legislative history in support of

its argument that Congress intended to repeal jurisdiction under §

1345. Nor has it refuted the government's assertions as to the

purpose of the review provisions. The burden is on Lahey, and it

does not meet its burden. Our own review shows the legislative

history supports the government's position. The 1965 Amendments to

the Social Security Act established the Medicare program and the

appeals process for payment determinations. Social Security

Amendments of 1965, Pub. L. No. 89-97, 79 Stat. 286 (1965). Senate

Report 89-404 accompanies this law. S. Rep. No. 89-404. The

Senate Report is void of any expression by Congress of intent to

repeal federal court jurisdiction under § 1345. Instead, the

report focuses on the need for the appeals process in order for the

-22-
individual to challenge the determinations of the Secretary. Id.

at 58.

B. Implied Repeal of § 1345 and Displacement of Common Law

Even if Lahey cannot prevail on the express repeal prong,

a second avenue of argument is available: that Congress impliedly

repealed § 1345 jurisdiction. Lahey also argues that Congress

displaced the underlying common law causes of action as to claims

by the United States for recovery of Medicare overpayments.

We understand Lahey to argue as follows: Congress

authorized the Secretary of HHS to recover Medicare overpayments

and to promulgate regulations to this end. Those regulations

provide detailed procedures under which providers can challenge

decisions made by the Secretary. The law is clear that a provider

must make an initial presentation to the agency, which then must

make a final determination, before there is any federal court

review. The law is also clear that once this initial payment

decision is final, in order to reopen it, the Secretary must follow

established procedures. As a result, the administrative claims

procedure is in irreconcilable conflict with § 1345 and it speaks

directly to and hence displaces the United States' independent

action for restitution. According to Lahey, under the provisions

of the Medicare Act, only the Secretary, in accordance with

established procedures, may collect overpayments because only the

Secretary can make and reopen final payment determinations, not the

-23-
Department of Justice. In other words, the detailed remedies for

recoupment established under the statute are exclusive and cannot

be bypassed by the Department of Justice.

Lahey argues that "under the Medicare Act and its

supplementary regulations, Congress has provided for very

specialized remedies relating to and dealing with the recoupment of

any overpayment." Lahey's argument of implied repeal of § 1345 and

displacement of common law rests entirely, not on the Medicare Act

itself, but on a supposed conflict between suit to recover

overpayment under § 1345 and an administrative remedial scheme for

collection of overpayments, see 42 C.F.R. §§ 405.370, 405.371,

405.372, promulgated by the Secretary to carry out the purposes of

31 U.S.C. § 3711 and 42 U.S.C. § 1395g. The argument is based on

a fundamental misunderstanding.

Congress could, perhaps (we need not decide), attempt to

expressly provide for repeal of a statute or displacement of the

common law through delegation of such power to an agency. But

Congress has not done so here. In the absence of such a

delegation, a statute, § 1345, cannot be repealed by administrative

regulation from an executive branch agency. First, § 1345 by its

terms states, "except as otherwise provided by Act of Congress"; it

does not state "except as provided by administrative regulation of

an agency." In addition, the tests for implied repeal established

through the case law involve congressional intent, not the intent

-24-
of an agency's regulations, regardless of how extensive they are.

As for displacement of common law, the tests concern whether

Congress directly spoke to the issue and whether Congress intended

to deprive the government of a longstanding power. Thirdly, to

permit an agency by its actions to repeal an act of Congress or

displace a long standing power of the United States would pose

grave constitutional questions of violation of separation of

powers. Cf. Clinton v. New York, 524 U.S. 417 (1998).

There is nothing in the Medicare Act which establishes

that the administrative remedy chosen by the Secretary here to

collect overpayments and the limited judicial review provided for

in §§ 405(b) and 405(h) are mandated by Congress as the exclusive

remedy or that Congress delegated any such a choice to the

Secretary.13

13
As to reimbursement determinations made after October 1,
2002, an amendment, which was enacted in October 2000 and is not
relevant to the claims at issue in this case, provides:

(G) Reopening and Revision of Determinations.
The Secretary may reopen or revise any initial
determination or reconsidered determination described in
this subsection under guidelines established by the
Secretary in regulations.

42 U.S.C. § 1395ff(b)(1)(G). It expresses no intent by Congress to
displace the federal common law or repeal federal jurisdiction
under § 1345, by making this the exclusive avenue for reopening or
revisiting initial payment determinations. Indeed the language of
the statute itself suggests that the Secretary is not required to
reopen or revise initial determinations. Surely Congress would not
limit the ability to the government to bring an action outside of
the administrative scheme yet not require the Secretary to collect
overpayments.

-25-
 As to the implied repeal of § 1345, we reject Lahey's

argument that an irreconcilable conflict arises from the fact that

in §§ 405(h), 405(g), and 42 U.S.C. § 1395oo14 Congress deprives the

federal courts of jurisdiction except on review of final decisions

after an administrative hearing, and then only on a substantial

evidence basis. Again, Lahey's argument is misplaced; these

statutes do not purport to limit the government's ability to bring

a claim against Medicare providers under a different grant of

jurisdiction. "The mere fact that some acts are made reviewable

should not suffice to support an implication of exclusion as to

others." Verizon Md., Inc. v. Pub. Serv. Comm. of Md., 535 U.S.

635, 644 (2000). In Verizon, the Court concluded that the

Congress did not strip the general grant of federal question

jurisdiction in 28 U.S.C. § 1331 when it provided for federal

review of state commission determinations under a specific

provision of the Telecommunications Act. See id. Similarly, the

fact that Congress has provided a limited avenue for judicial

review in some circumstances does not support an implication that

other avenues of judicial review are precluded.15

14
Section 1395oo creates the Provider Reimbursement Review
Board which is charged with holding hearings and rendering
decisions in disputes over Part A payments. The claims in this
case involve payments under Part B of Medicare. Additionally, §
1395oo by its terms provides for administrative and judicial review
of claims filed by providers.
15
In addition, Lahey reads the judicial review provisions of
the Medicare Act out of context. Section 1395ff(b), during the

-26-
 Before addressing Lahey's contention that the Medicare

Act displaces the United States' common law causes of action, we

add a few words about special problems raised by the claim. First,

it does not go to subject matter jurisdiction at all. The Supreme

Court has stated that "[i]t is firmly established in our cases that

the absence of a valid (as opposed to arguable) cause of action

does not implicate subject-matter jurisdiction, i.e., the courts'

statutory or constitutional power to adjudicate the case."

Verizon, 535 U.S. at 642-43 (quoting Steel Co. v. Citizens for

Better Environment, 523 U.S. 83, 89 (1998)).

Jurisdiction . . . is not defeated . . . by
the possibility that the averments might fail
to state a cause of action on which
petitioners could actually recover. Rather,
the district court has jurisdiction if the
right of the petitioners to recover under
their complaint will be sustained if the
Constitution and laws of the United States are
given one construction and will be defeated if
they are given another, unless the claim
clearly appears to be immaterial and made
solely for the purpose of obtaining

time relevant to this appeal, provided that "[a]ny individual
dissatisfied with any determination under subsection (a) of this
section as to . . . the amount of benefits . . . shall be entitled
to a hearing thereon by the Secretary to the same extent as is
provided in § 405(b) of this title and to judicial review of the
Secretary's final decisions after such hearing as is provided in §
405(g) of this title." After the individual or provider has
exhausted the administrative provisions laid out in § 405(b), the
individual is then allowed to seek judicial review under § 405(g).
The United States' ability to bring claims against the providers is
not implicated at all in the provisions relating to how to
challenge the FI's payment decisions. It is this administrative
mechanism, as it relates to claims by providers, that § 405(h)
makes the exclusive avenue of judicial review.

-27-
 jurisdiction or where such a claim is wholly
insubstantial and frivolous.

Steel Co., 523 U.S. at 89 (internal quotations and citations

omitted). There is no allegation that the United States' claim is

"wholly insubstantial and frivolous."

Regardless, Lahey's argument, even if viewed as an

argument for failure to state a claim, is simply wrong: the

Medicare Act does not displace the common law remedies asserted by

the United States. Lahey relies on City of Milwaukee for the

proposition that "when Congress addresses a question previously

governed by a decision rested on federal common law the need for

such an unusual exercise of lawmaking by federal courts

disappears." City of Milwaukee, 451 U.S. at 314. Lahey contends

that the Medicare Act is a "comprehensive scheme" enacted by

Congress that "directly addresses" the United States' remedy for

collecting overpayments, and therefore the need for the common law

remedy "disappears."

The Court in a subsequent decision, United States v.

Texas, recognized that although Congress need not "affirmatively

proscribe" the common law doctrine at issue, 507 U.S. at 534

(quoting City of Milwaukee, 451 U.S. at 315), nonetheless

"[s]tatutes which invade the common law . . . are to be read with

a presumption favoring the retention of long-established and

familiar principles . . . ." Id. (quoting Isbrandtsen Co. v.

Johnson, 343 U.S. 779, 783 (1952)).

-28-
 This presumption may be even stronger when a longstanding

power of the United States is involved. In the context of recovery

of overpayments, the government has broad power to recover monies

wrongly paid from the Treasury, even absent any express statutory

authorization to sue. See United States v. Wurts, 303 U.S. 414

(1938). "The Government by appropriate action can recover funds

which its agents have wrongfully, erroneously, or illegally paid.

'No statute is necessary to authorize the United States to sue in

such a case. The right to sue is independent of statute . . . .'"

Id. at 415 (quoting United States v. Bank of Metropolis, 15 Pet.

377, 401 (1841)).16

Congress, of course, by statute can curtail the

government's right to sue; however, "courts may take it as a given

that Congress has legislated with an expectation that the [common

law] principle will apply except 'when a statutory purpose to the

16
United States v. Wurts and the cases it relies on do not
refer to the government's power to collect money wrongfully paid as
a construction of the common law. See 303 U.S. 414 (1938).
Indeed, the power of the United States to recover sums illegally or
erroneously paid has been described by one court as part of the
United States' "inherent authority." Aetna Cas. & Sur. Co. v.
United States, 526 F.2d 1127, 1130 (Ct. Claims 1975). The Court of
Claims suggested that an erroneously or illegally made payment is
tied to a direct violation of the United States Constitution,
Article IV, section 3, clause 2, id., which lodges with the
Congress the power to "release or otherwise dispose of the rights
and property of the United States." See Royal Indemnity Co. v.
United States, 313 U.S. 289, 294 (1941). The causes of action
asserted here for exercising this right are common law causes of
action, but the right itself seems to be something more intimately
tied with the power of the United States.

-29-
contrary is evident.'" Texas, 507 U.S. at 534 (quoting Astoria Fed.

Sav. & Loan Ass'n. v. Solimino, 501 U.S. 104, 108 (1991)).

Statutes are presumed not to divest the United States of pre-

existing rights, such as the ability to collect wrongfully paid

monies, absent a clear congressional command. See United States v.

United Mine Workers of America, 330 U.S. 258, 272 (1947)("There is

an old and well-known rule that statutes which in general terms

divest pre-existing rights or privileges will not be applied to the

sovereign without express words to that effect.").

Although provisions of the Medicare Act expressly

authorize the Secretary to reopen initial payment determinations

and to recoup overpayments administratively in certain

circumstances, see 42 U.S.C. § 1395g(a) and 1395gg, the statute

does not displace the United States' long standing power to collect

monies wrongfully paid through an action independent of the

administrative scheme,17 nor is there any inconsistency. To the

extent that a congressional purpose and intent to collect money

wrongfully paid by the Medicare program is expressed through the

17
The fact that the Medicare Act will be relevant to the common
law action does not mean it displaces suit by the United States.
In order to prove the allegations in the complaint, that indeed the
payments were wrongfully made, the United States will have to refer
to Medicare manuals, regulations, and other materials that relate
to the appropriateness of the previous payments. However they in
no way displace or limit the underlying ability to bring the
independent claim for recovery. "Congress's obvious desire to
enhance the common law in specific, well-defined situations does
not signal its desire to extinguish the common law in other
situations." Texas, 507 U.S. at 535 n.4.

-30-
Medicare statutes allowing the Secretary to collect these

overpayments, allowing the United States to pursue collection

independently is fully consistent with this purpose.

Indeed, the Secretary's very choice of how to proceed

illustrates that the administrative remedies are not exclusive when

the United States institutes suit. First, the Secretary chose to

allow for only particular remedies in the administrative scheme, an

indication that the administrative scheme is not exclusive of other

remedies elsewhere. Second, the plaintiff in this case is "the

United States of America, acting through the Department of Health

and Human Services," which reflects the Secretary's position that

the common law remedy and federal court jurisdiction under § 1345

are also available. Third, if the administrative remedy were

exclusive, that would, in some situations, hinder or preclude the

United States from recovering overpayment.

The Secretary has chosen the administrative remedies of

suspension, recoupment, and offset (also called a setoff). See 42

C.F.R. §§ 405.370, 405.371. These are terms of art; "the pertinent

distinction between a setoff and a recoupment is whether the debt

owed the creditor . . . arose out of the 'same transaction' as the

debt the creditor owes the debtor." See In re Holyoke Nursing

Home, Inc., 372 F.3d 1, 3 (1st Cir. 2004). The Secretary's

regulations specifically define the types of remedies available to

the Secretary for recovering overpayments administratively. An

-31-
"Offset" is defined as "[t]he recovery by Medicare of a

non-Medicare debt by reducing present or future Medicare payments

and applying the amount withheld to the indebtedness." 42 C.F.R.

§ 405.370. The regulation defines a "Recoupment" as "[t]he

recovery by Medicare of any outstanding Medicare debt by reducing

present or future Medicare payments and applying the amount

withheld to the indebtedness." Id. Finally, a "Suspension of

payment" is defined as "[t]he withholding of payment by an

intermediary or carrier from a provider or supplier of an approved

Medicare payment amount before a determination of the amount of the

overpayment exists." Id.

Each of these remedies of recoupment, offset, and

suspension assume an ongoing relationship between the Secretary and

the provider. In situations in which there is no ongoing Medicare

relationship between the Secretary and the provider, such as where

the provider has ceased to treat Medicare beneficiaries or has gone

out of business, neither recoupment nor offset would provide the

United States with an opportunity to recover the overpaid Medicare

payments. In addition, in situations in which the government seeks

damages in the form of a complete payment from the provider for the

Medicare overpayments, the recoupment, suspension, and offset

procedures do not provide for this relief.

Were more needed, we would say other parts of the federal

statutory scheme also refute Lahey's "repeal" and "displacement"

-32-
arguments and demonstrate that the administrative scheme is not

exclusive. In fact, Congress in other statutes has provided for

the collection of overpayments independent of the scheme set up by

the Medicare Act and the Secretary of HHS. In addition to the

common law remedies available to the United States under § 1345,

Congress has provided the government two other independent methods

to recover overpayments. Under 42 U.S.C. § 1320a-7a(a)(1)(A), the

Secretary may seek civil money penalties for knowing violations of

the Medicare Act. Further, and wholly independent of the

Secretary, the Attorney General may seek to recover Medicare

payments made on the basis of a false or fraudulent claim. 31

U.S.C. §§ 3729-3733. The existence of these other statutes

expresses a clear congressional intent to provide several avenues

for the United States to recover monies owed to it and not to limit

the means of recovery to those promulgated by the Secretary in the

Medicare Act.

To its credit, Lahey correctly concedes that if the

statute sued on were the False Claims Act, 31 U.S.C. § 3729-3733,

rather than § 1345, the district court would have subject matter

jurisdiction, admitting that the Medicare scheme does not impliedly

repeal the False Claims Act. The difference, Lahey argues, is that

§ 1345 simply provides jurisdiction for common law actions, while

the False Claims Act embodies a congressionally created cause of

action. It is hard for us to fathom why Congress would intend to

-33-
give the government access to a judicial forum by statute when the

overpayment was procured by fraud but to preclude the government

from a routine common law damages action for overpayment.18

Finally, where two different statutory schemes give

concurrent jurisdiction to courts "[t]here is no irreconcilability

in the existence of concurrent state and federal jurisdiction."

Colorado River Water Conservation District, 424 U.S. at 809. That

being so, it is hard to understand why concurrent jurisdiction in

a court and the discretionary decision by an agency to create a

partially overlapping administrative forum would lead to implied

repeal of the court's statutory jurisdiction or displacement of the

United States' common law remedies.

C. Primary Jurisdiction

Lahey makes a final plea for deference to the Secretary's

18
Lahey also argues that there is a meaningful difference for
these purposes between actions for fraud and actions for recovery
which do not assert fraud, as under § 1345. Lahey argues the court
is particularly well equipped to handle cases involving fraud as
opposed to cases involving unjust enrichment and payment under
mistake of fact, which implicate the expertise of the agency. We
do not see a meaningful distinction: a False Claims Act action
would involve the same interpretation of Medicare codes as an
overpayment action with the largest difference being that the
government under the False Claims Act must also show fraudulent
intent.

-34-
administrative expertise19 by arguing that there should be a primary

jurisdiction referral. The primary jurisdiction referral request,

denied by the district court, invokes prudential doctrines, and

"does not implicate the subject matter jurisdiction of the federal

court." See P.R. Mar. Shipping Auth. v. Fed. Mar. Comm'n, 75 F.3d

63, 67 (1st Cir. 1996). It is not within the scope of the

certified question to us. Even if we arguably had some form of

supplemental appellate jurisdiction to reach the question, we see

no basis on which to upset the district court's order.

III.

Conclusion

We affirm the judgment of the district court. Costs are

awarded to the United States.

19
Lahey also asserts a parade of horribles argument: that the
case is too complex to be tried in federal court, that the problems
of proof of overpayment of numerous claims are insurmountable, and
that the case would take twenty years to try. One response is that
these cases are less complicated to try than fraud cases, which
Lahey concedes are permissible. Further, sampling of similar
claims and extrapolation from the sample is a recognized method of
proof. Chaves County Home Health Serv., Inc. v. Sullivan, 931 F.2d
914, 919 (D.C. Cir. 1991); Ratasen v. Cal. Dept. of Health Servs.,
11 F.3d 1467, 1471 (9th Cir. 1993). There is no reason to doubt
the competence of courts; both civil and criminal cases for abuse
of the Medicare system by providers are sadly common. See, e.g.,
United States v. McGovern, 329 F.3d 247 (1st Cir. 2003).

-35-