United States Court of Appeals
For the First Circuit
No. 07-2476
PUERTO RICAN ASSOCIATION OF PHYSICAL MEDICINE AND REHABILITATION,
INC.; DOCTORS MARIA PALOU, LAURA PLAZA AND MIGUEL CARDONA; AND
PATIENTS ROSITA MENDOZA-VEGA AND JOHN DOE,
Plaintiffs, Appellants,
v.
UNITED STATES OF AMERICA; TRIPLE S OF PUERTO RICO; CENTERS FOR
MEDICARE AND MEDICAID SERVICES; UNITED STATES DEPARTMENT OF
HEALTH AND HUMAN SERVICES,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. José Antonio Fusté, U.S. District Judge]
Before
Boudin, Chief Judge,
Lynch, Circuit Judge,
and Keenan,* Senior District Judge.
Rafael E. Silva-Almeyda with whom Silva-Almeyda Law Offices,
René Arrillaga-Armendáriz and Arrillaga & Arrillaga were on brief
for appellants.
Marcus H. Christ, Jr., Office of the General Counsel,
Department of Health and Human Services, with whom Daniel Meron,
General Counsel, Carol Bennett, Acting Associate General Counsel,
*
Of the Southern District of New York, sitting by designation.
Jeffrey S. Bucholtz, Acting Assistant Attorney General, Rosa E.
Rodríguez-Vélez, United States Attorney, and Barbara C. Biddle,
Appellate Staff, Civil Division, Department of Justice, were on
brief for appellees.
March 26, 2008
BOUDIN, Chief Judge. The Puerto Rico Association of
Physical Medicine and Rehabilitation ("PRAPMR") is a group of
medical doctors practicing in Puerto Rico. It, and several doctors
and patients, sued to challenge a regulation restricting Medicare
reimbursement for physical therapy services. The district court
dismissed the case, relying on statutory provisions that preclude
all actions "brought under section 1331 or 1346 of Title 28 to
recover on any claim arising under" the Medicare Act. 42 U.S.C.
§§ 405(h), 1395ii (2000). This appeal followed.
The federal Medicare program has several components. At
issue here is Medicare Part B, which offers voluntary supplemental
health insurance for "aged and disabled individuals who elect to
enroll under such program." 42 U.S.C. § 1395j. Enrolled
beneficiaries are entitled to recover reimbursement (usually
partial) for covered medical costs; they may alternatively assign
reimbursement rights to their physicians or other health care
providers, who may then pursue the claims. 42 C.F.R. § 422.574(b).
Among the medical costs covered by Medicare are those for
services "furnished as an incident to a physician's professional
service, of kinds which are commonly furnished in physicians'
offices and are commonly either rendered without charge or included
in the physicians' bills." 42 U.S.C. § 1395x(s)(2)(A). But under
a regulation promulgated by the Secretary of Health and Human
Services in 2004, physical therapy services provided in this
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"incident-to" fashion can only be reimbursed if the individual
providing the therapy meets certain educational and training
requirements. 42 C.F.R. §§ 410.60(a)(3)(iii), 484.4. The
regulation means that medical doctors may no longer bill Medicare
for physical therapy services provided in their offices by, for
example, athletic trainers who lack the approved, specialized
training in physical therapy.
The regulation implemented a statutory prohibition,
enacted by Congress in 1997, that precludes payment for physical
therapy services provided "incident to" a doctor's services unless
such services "meet the standards and conditions" that the
Secretary is authorized to impose to govern physical therapy
services provided independently, e.g. in a physical therapist's
private office. 42 U.S.C. § 1395y(a)(20); see also id. § 1395x(p).
Essentially, the new regulations require that whether therapy is
billed as "incident to" a doctor's services or as an independent
medical service, those providing the therapy meet the same
qualifications.
In March 2006, some eight months after the regulation
took effect, PRAPMR submitted a self-styled "Administrative Appeal"
to the Centers for Medicare and Medicaid Services ("CMS"), the
agency that administers Medicare on behalf of the Secretary. The
submission argued that the regulation was arbitrary, unauthorized
by statute and unconstitutional; CMS responded, advising the
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doctors that their letter had "no legal bearing on CMS" and
suggesting that they "pursue whatever other administrative
processes are available." PRAPMR then filed this suit in Puerto
Rico's federal district court, premised on federal question
jurisdiction, 28 U.S.C. § 1331 (2000), seeking declaratory and
injunctive relief on the same medley of statutory and
constitutional grounds.
In dismissing the suit, the district court agreed with
the agency that any challenge to the regulation must be channeled
through a multi-step administrative review process before a federal
court may pass on it. A patient or provider may, under a
statutorily prescribed regime, seek administrative review wherever
a claim for reimbursement for a service is rejected, 42 U.S.C.
§ 1395ff(b)(1)(A); and, if the agency outcome is adverse, obtain
federal court review. Id. § 405(g). The district court ruling
meant that the regulation could be challenged but only through this
statutory "exhaustion of remedies" procedure.
There is no uniform rule governing when and how agency
action can be judicially reviewed; the proper process depends,
inter alia, on which agency is involved, what type of claim is
pressed, statutory provisions and court-created doctrine. For
example, courts have constructed doctrines requiring that
administrative remedies be exhausted before judicial review is
sought, Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-51
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(1938), and that claims be "ripe" for review, Abbott Labs. v.
Gardner, 387 U.S. 136, 148-49 (1967), although both rules are
subject to multiple exceptions. E.g., McCarthy v. Madigan, 503
U.S. 140, 147-48 (1992) (futility exception); Abbott Labs., 387
U.S. at 149 (hardship exception).
In the case of the Medicare Act, Congress has enacted a
statute that "reaches beyond ordinary administrative law principles
of 'ripeness' and 'exhaustion of administrative remedies'."
Shalala v. Ill. Council on Long Term Care, Inc., 529 U.S. 1, 12
(2000). Under 42 U.S.C. § 405(h), which in terms relates to the
Social Security program but is incorporated mutatis mutandis into
the Medicare Act, id. § 1395ii, neither federal question nor
federal defendant jurisdiction is available for suits "to recover
on any claim arising under" the Act. Separate provisions, id.
§§ 405(g), 1395ff(b)(1)(A), allow for judicial review once a
specified agency appeals process is completed.
Were we writing on a blank slate, the scope of section
405(h) would raise interesting questions. But we are not: the
Supreme Court has interpreted broadly the section 405(h) bar,
holding that a claim "arises under" the Social Security or Medicare
Act if "the standing and the substantive basis" for the claim
derive from that statute. Weinberger v. Salfi, 422 U.S. 749, 760-
61 (1975); see also Heckler v. Ringer, 466 U.S. 602, 615 (1984).
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The provision thus mandates the "'channeling' of virtually all
legal attacks through the agency." Ill. Council, 529 U.S. at 13.
Although PRAPMR's suit challenges a regulation and does
not directly request payment for a specific service, it seeks at
its heart the extension of Medicare benefits; accordingly, it would
appear barred by section 405(h) as construed by the Supreme Court.
The regulation being challenged is simply a limitation on the
claims that Medicare will pay and so foreshadows the denial of such
claims. The government concedes that--if a specific claim is
denied on account of the regulation--the regulation may be
challenged in court on review of the denial of a specific claim
after administrative remedies are exhausted. See Ill. Council, 529
U.S. at 23 (so holding).
PRAPMR responds with heavy reliance on the Supreme
Court's decision in Bowen v. Michigan Academy of Family Physicians,
476 U.S. 667 (1986). When that case was decided, the Medicare Act
did not provide for any judicial review of determinations made
under Medicare Part B, and the Court refused to assume that
Congress "intended no review at all of substantial statutory and
constitutional challenges to the Secretary's administration" of
that program. Id. at 680. Invoking the canon of constitutional
avoidance, the Court distinguished "amount" challenges (i.e., fact-
based challenges to particular decisions) from "methodology"
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challenges (i.e., legal attacks on statutes, regulations and the
like), and permitted the latter to proceed directly to court. Id.
PRAPMR's claim is, under that dichotomy, a "methodology"
attack. But only a few months after Michigan Academy, Congress
provided explicitly that Part B determinations can be challenged in
court after administrative remedies have been exhausted. Omnibus
Budget Reconciliation Act of 1986, Pub. L. No. 99-509,
§ 9341(a)(1), (b), 100 Stat. 1874, 2037-38 (codified at 42 U.S.C.
§ 1395ff). So, as clarified in Illinois Council, Michigan Academy
means only that section 405(h) does not apply if "its application
to a particular category of cases . . . would not lead to a
channeling of review through the agency, but would mean no review
at all." Ill. Council, 529 U.S. 1, 17 (2000).1
That PRAPMR seeks to challenge an administrative
regulation rather than a particular factual determination thus does
not matter. The precedents "foreclose distinctions based upon the
'potential future' versus the 'actual present' nature of the claim,
the 'general legal' versus the 'fact-specific' nature of the
1
There was initial uncertainty as to whether the Michigan
Academy exception retained its full force after the amendments.
Most circuits said no, given that the decision's rationale had been
entirely undermined, see Fanning v. United States, 346 F.3d 386,
397-98 (3d Cir. 2003), cert. denied, 542 U.S. 919 (2004), but one
court insisted that "inferior courts are not authorized to declare
the reasoning of [Supreme Court] opinions outdated." Ill. Council
on Long Term Care, Inc. v. Shalala, 143 F.3d 1072, 1076 (7th Cir.
1998). On review, that uncertainty was resolved by the Supreme
Court.
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challenge," and so on. Ill. Council, 529 U.S. at 13-14. What does
matter is whether PRAPMR can, at some point, using some process,
obtain judicial review of its claims. Accord Am. Chiropractic
Assoc., Inc. v. Leavitt, 431 F.3d 812, 816 (D.C. Cir. 2005).
PRAPMR insists that barring its federal law suit would mean "no
review at all" for its claims, Ill. Council, 529 U.S. at 17,
"because there has been no payment claim denials yet." But this is
not a denial of review, merely its postponement until a payment
claim has been denied.
Appellants complain that, in the meanwhile, the supply of
therapists may dry up, and doctors may be unwilling to supply (or
patients unwilling to accept) services that do not qualify, fearing
that they may be asked to reimburse the agency later. But the
doctors and therapists certainly have ample economic incentive to
frame and support a test case. Appellants could provide service to
a couple of patients through therapists who do not qualify, submit
claims for reimbursement, and candidly admit in their filings that
their only challenge is to the regulation.
We therefore need not decide whether or when irreparable
injury "turns what appears to be simply a channeling requirement
into complete preclusion of judicial review," Ill. Council, 529
U.S. at 22-23, nor whether Illinois Council's exception applies to
statutory as well as constitutional claims; but it should be
remembered that the litigation process itself imposes risks and
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unrecoverable costs and there is little doubt that Congress can, in
the context of a complex administrative scheme, preclude pre-
enforcement challenges without creating a hardship exception. Cf.
Nat'l Private Truck Council, Inc. v. Okla. Tax Comm'n, 515 U.S.
582, 591 (1995) (no federal right to declaratory or injunctive
relief from unconstitutional state taxes if state law offers ex
post refund).
Further, the problem of irreparable injury does not only
affect one side. It is likely that section 405's insistence on
exhaustion owes something to the fear that the Secretary's
decisions restricting payment might otherwise be promiscuously
enjoined at great cost to the government. Channeling review makes
certain that the agency determinations are thoroughly developed
through the administrative process and that payments are not
compelled until judicial review has been undertaken.
At oral argument, PRAPMR suggested that the agency was
approving noncompliant claims notwithstanding the regulation, but
government counsel said he was unaware of any program of deliberate
non-enforcement. We need not consider whether a pattern of conduct
designed to frustrate test cases brought to challenge the
regulation would trigger the "no review at all" exception of
Illinois Council; neither in the district court nor on appeal have
the appellants offered anything more than speculation or even
provided the legal analysis necessary to develop such an argument.
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Finally, PRAPMR argues that the submission of its self-
styled "Administrative Appeal" to the agency should somehow change
the analysis. But it concedes that it has not appealed any
Medicare claim denial, and that is the only way, under the statute
and regulations, 42 U.S.C. § 1395ff(b)(1)(A); 42 C.F.R. § 405.801,
to initiate the multi-step appeal process that culminates in
federal court review. We add only that it is in the government's
interest, as well as the appellants', to get such a claim served up
promptly.
Affirmed.
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