American Hospital Association v. Sebelius

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

THE AMERICAN HOSPITAL
ASSOCIATION, et al.,

Plaintiffs,

v.
Civil Action No. 12-1770 (CKK)
SYLVIA MATTHEWS BURWELL, in her
official capacity as Secretary of Health and
Human Services,

Defendant.

MEMORANDUM OPINION
(September 17, 2014)

Plaintiffs, the American Hospital Association, Missouri Baptist Sullivan Hospital,

Munson Medical Center, Lancaster General Hospital, Trinity Health Corporation, and Dignity

Health (collectively, “Plaintiffs”), bring this action against Defendant Sylvia Matthews Burwell,

in her official capacity as Secretary of Health and Human Services, 1 asserting claims that

Defendant’s purported policy applying time limits to the billing of certain Medicare claims is

arbitrary and capricious in violation of the Administrative Procedure Act; that defendant is

equitably estopped from applying the timely filing limit to certain new Medicare Part B claims;

and that the Medicare Act’s one-year time limit is equitably tolled. Plaintiffs seek both

declaratory and injunctive relief. Presently before the Court is Defendant’s [31] Motion to

Dismiss for Lack of Jurisdiction and Failure to State a Claim upon which Relief can be Granted.

1
Pursuant to Fed. R. Civ. P. 25(d), Sylvia Matthews Burwell has been automatically
substituted for Kathleen Sebelius, whom the parties’ pleadings name as Defendant.

1
Upon consideration of the pleadings, 2 the relevant legal authorities, and the record as a whole,

the Court GRANTS Defendant’s motion with respect to the lack of jurisdiction. Accordingly,

this action is DISMISSED in its entirety.

I. BACKGROUND

A. Factual Background
When patients are admitted to a hospital, they are treated on an inpatient basis; when

patients are treated without being admitted, they are treated on an outpatient basis. Second Am.

Compl. ¶ 1. Upon the submission of claims to the Secretary of Health and Human Services, see

42 U.S.C. §§ 1395f(a)(1), 1395n(a)(1), Medicare Part A provides reimbursement for inpatient

care of patients, and Medicare Part B provides reimbursement for outpatient services. Second

Am. Compl. ¶¶ 3, 4. Claims for reimbursement must be submitted “no later than the close of the

period ending 1 calendar year after the date of service.” 42 U.S.C. §§ 1395n(a)(1); see also

1395f(a)(1). The Medicare Act charges the Secretary with “prescrib[ing] such regulations as may

be necessary to carry out the administration of the insurance programs under this subchapter.”

42 U.S.C. § 1395hh(a)(1).

2
Compl., ECF No. [1] (“Compl.”); Amended Compl., ECF No. [14] (“First Am.
Compl.”); Second Amended Compl., ECF No. [26] (“Second Am. Compl.”); Def.’s Mot. to
Dismiss for Lack of Jurisdiction and Failure to State a Claim upon which Relief can be Granted,
ECF. No. [31] (“Def.’s Mot.”); Plaintiffs’ Opp’n to Def.’s Mot. to Dismiss, ECF No. [32] (“Pl.
Opp’n”); Amicus Brief by Healthcare Assoc. of New York, ECF No. [35]; Defendant’s Reply to
Opp’n to Def.’s Mot. to Dismiss and Response to Amicus Brief, ECF No. [37] (“Def.’s Reply”);
Pls.’ Supp. Br. Regarding Effect of Final CMS Rule on Def.’s Mot. to Dismiss, ECF No. [47]
(“Pls.’ Supp. Br.”); Def.’s Supp. Br. on the Effect of the Final Rule on Def.’s Mot. to Dismiss,
ECF No. [48] (“Def.’s Supp. Br.”); Pls.’ Supp. Br., ECF No. [51] (“Pls.’ Second Supp. Br.”); and
Def.’s Reply to Pls.’ Supp. Br., ECF No. [53] (“Def.’s Second Reply”).
In an exercise of its discretion, the Court finds that holding oral argument on the instant
motion and petition would not be of assistance in rendering a decision. See LCvR 7(f).

2
 As a means of correcting fraudulent billing, the Secretary of Health and Human Services,

operating through the Centers for Medicare and Medicaid Services (CMS), employs private third

parties, known as Recovery Audit Contractors (RACs), to review billing decisions. Second Am.

Compl. ¶ 2. When a RAC determines that a particular patient should not have been admitted to a

hospital to receive inpatient care, it will “claw back” the payments made to the hospital. Id.

Decisions by RACs are subject to multiple layers of administrative review: a provider can ask for

a determination of a RAC’s findings by a Medicare Administrative Processor (MAC); can then

seek reconsideration from a Qualified Independent Contractor (QIC), including an independent

record review by a panel of healthcare professionals; can receive review of the QIC action by an

Administrative Law Judge (ALJ); and can finally appeal the ALJ decision to the Departmental

Appeals Board Medicare Appeals Council (DAB). Id. ¶ 50. “A decision of the Departmental

Appeals Board constitutes a final agency action and is subject to judicial review.” 42 U.S.C.

§ 1395ff(f)(2)(A)(iv).

Plaintiffs allege that, prior to March, 2013, CMS had indicated that Part B compensation

was not available for services provided on an inpatient basis where a RAC had clawed back Part

A reimbursement because inpatient treatment was not appropriate, except for certain ancillary

services. Second Am. Compl. ¶¶ 46–48. At the times relevant to the claims in this action, the

Medicare Benefits Policy Manual stated, in Chapter 6, § 10, “Payment may be made under Part

B for . . . medical and other health services listed below when furnished by a participating

hospital (either directly or under arrangements) to an inpatient of the hospital, but only if

payment for these services cannot be made under Part A.” Id. ¶ 48. The services “listed below”

were limited to ancillary services like diagnostic tests, surgical dressings, splints and casts,

outpatient physical therapy, and vaccines. Id.

3
 Some hospitals appealed their Part A denials, and, in at least 16 cases between 2005 and

2012, the DAB concluded that a Part B payment was available to hospitals that provided

reasonably and medically necessary services on an inpatient basis when the patient could have

been treated in an outpatient setting. 3 Id. ¶ 51. But many more hospitals did not seek Part B

payment after a Part A denial. Id. ¶ 53. Plaintiffs are in the latter category. Plaintiffs are the

American Hospital Association, a national organization representing and serving hospitals and

healthcare systems and networks, as well as individual members; three individual hospitals; and

two health care systems. Id. ¶¶ 14–19. Plaintiffs—and their constituent hospitals—were subject

to Part A claw backs because of RAC determinations that the services should have been provided

as outpatient care rather than inpatient care. 4 Id. ¶¶ 69, 80, 93, 104, 117, 128–130. Only after

filing this action did Plaintiffs begin to seek Part B payment for services denied Part A

reimbursement. See Pls.’ Second Supp. at 4–10. Among these claims, some were granted, some

were denied, and others are still pending. See id.

B. Procedural History
On November 1, 2012, Plaintiffs filed suit in this Court, challenging CMS’s purported

“Payment Denial Policy.” See Second Am. Comp. ¶ 7; see generally Compl. One month later, on

December 13, 2012, Plaintiffs filed their First Amended Complaint. See First Am. Compl. On

March 13, 2013, CMS issued an interim policy to handle rebilling after Part A denials, CMS

Ruling 1455-R, and issued a proposed rule to address such claims on a permanent basis. Second

3
Plaintiffs are unaware of any DAB decisions with the reverse outcome. Id. ¶ 51.
4
Pursuant to CMS Ruling 1455-R, issued on March 13, 2013, hospitals could receive
rebilling under Part B for services denied Part A reimbursement within a limited window of time,
even if the Part B claim was filed more than one-calendar year after the date of services. Second
Am. Compl. ¶¶ 56, 59. Plaintiffs were able to seek rebilling on claims subject to Ruling 1455-R.
Id. ¶¶ 71, 82, 105; 120, 131. But Ruling 1455-R was not applicable to the claims that are the
subject of this action. See id. ¶¶ 72, 83, 95, 105, 120, 131; Pls.’ Supp. Br. at 1.

4
Am. Compl. ¶ 56; see also Medicare Program; Part B Inpatient Billing in Hospitals, 78 Fed. Reg.

16,632 (Mar. 18, 2013). Given the issuance of the proposed rule and the interim ruling by CMS,

the Court granted the parties’ Joint Motion to Amend the Schedule in Light of Recent Ruling by

the Administrator of the Centers for Medicare and Medicaid Services. Plaintiffs filed a Second

Amended Complaint on April 19, 2013. See Second Am. Compl. In response, on June 6, 2013,

Defendant filed the motion to dismiss presently before the Court. See Def.’s Motion to Dismiss.

On August 19, 2013, CMS issued a final rule, Medicare Program; Payment Policies Related to

Patient Status, which supplanted Ruling 1455-R. 78 Fed. Reg. 50,496, 50,906 (Aug. 19, 2013).

At the Court’s request, Plaintiffs and Defendant filed supplemental briefing, on October

28, 2013, on the effect of the Final Rule on these proceedings. See Pls.’ Supp. Br.; Def.’s Supp.

Br. To respond to additional questions from the Court regarding the potential mootness of

Plaintiffs’ claims and regarding the status of Plaintiffs’ claims for payment, Plaintiffs filed

supplemental briefing yet again on March 7, 2014, and Defendant filed a reply on March 21,

2014. See Pls.’ Second Supp. Br.; Def.’s Second Reply. In light of the issuance of the Final Rule,

Plaintiffs clarified that they are “challeng[ing] a policy—CMS’s application of a time limit to

rebill for Medicare Part B payment after a RAC denial—that CMS itself agrees was in place

since before interim Ruling 1455-R, and remains in place after the final rule.” Pls.’ Second Supp.

Br. at 1. Plaintiffs specified “the broader challenges” in this action: “First, it is arbitrary to make

hospitals submit ‘new’ Part B claims when they could instead amend or supplement their

existing claims. Second, it is arbitrary to apply a waivable time limit to a circumstance where the

agency knows the requirement cannot be met.” Id. at 3 (citations omitted). Finally, given that

Count VI of Plaintiffs’ Second Amended Complaint was based on Ruling 1455-R, Plaintiffs

agreed to dismiss Count VI. See Pls.’ Second Supp. Br. at 3 n.1.

5
 II. LEGAL STANDARD
Defendant moves to dismiss Plaintiffs’ actions pursuant to Federal Rule of Civil

Procedure 12(b)(1), arguing the Court lacks subject matter jurisdiction because none of the

jurisdictional provisions on which Plaintiffs rely support jurisdiction in these circumstances. 5 See

Def.’s Mot. at 16–20, 24–30; Def.’s Supp. Br. at 2-3; see generally Def.’s Second Reply.

“Federal courts are courts of limited jurisdiction” and can adjudicate only those cases entrusted

to them by the Constitution or an Act of Congress. Kokkonen v. Guardian Life Ins. Co. of Am.,

511 U.S. 375, 377 (1994). The Court begins with the presumption that it does not have subject

matter jurisdiction over a case. Id. To survive a motion to dismiss pursuant to Rule 12(b)(1), a

plaintiff bears the burden of establishing that the Court has subject matter jurisdiction over its

claim. Moms Against Mercury v. FDA, 483 F.3d 824, 828 (D.C. Cir. 2007). In determining

whether there is jurisdiction, the Court may “consider the complaint supplemented by undisputed

facts evidenced in the record, or the complaint supplemented by undisputed facts plus the court’s

resolution of disputed facts.” Coal. for Underground Expansion v. Mineta, 333 F.3d 193, 198

(D.C. Cir. 2003) (citations omitted).

III. DISCUSSION
Plaintiffs argue that this Court has jurisdiction over this action by virtue of 42 U.S.C.

§ 405(g), the jurisdictional provision of the Medicare Act. In the alternative, Plaintiffs argue that

there is federal question jurisdiction under 28 U.S.C. § 1331, notwithstanding the bar against

federal question jurisdiction by 42 U.S.C. § 405(h) to “all claims that have their ‘standing and

5
Defendant also moved to dismiss Counts IV and V of Plaintiffs’ complaint on the
grounds that Plaintiffs failed to state a claim, pursuant to Federal Rule of Civil Procedure
12(b)(6). See Def.’s Mot. at 30–31. Because there is no jurisdiction for the claims pleaded by
Plaintiffs in the first instance, the Court does not reach these alternative arguments for dismissal.

6
substantive basis’ in the Medicare Act.” Am. Chiropractic Ass’n, Inc. v. Leavitt, 431 F.3d 812,

816 (D.C. Cir. 2005) (citation omitted). As explained below, neither statutory provision supports

jurisdiction in this action. 6

A. Jurisdiction under the Medicare Act
Plaintiffs argue that there is jurisdiction to consider their claims under the Medicare Act.

Second Am. Compl. ¶ 22. Defendant responds that there is no jurisdiction under the statute for

the particular claims that Plaintiffs bring. Def.’s Mot. at 24–30; Def.’s Second Reply at 1–3.

Section 42 U.S.C. § 1395ff(b)(1)(A) of the Medicare Act incorporates the judicial review

provisions of 42 U.S.C. § 405(g) of the Social Security Act. Section 405(g) provides, in relevant

part:

Any individual, after any final decision of the [Secretary] 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
[Secretary] may allow.

6
Plaintiffs previously offered two additional statutory bases for this Court’s jurisdiction:
the Administration Procedure Act, 5 U.S.C. § 706(2), and mandamus jurisdiction under
28 U.S.C. § 1361. See Second Am. Compl. ¶ 23–24. However, Plaintiffs did not respond to
Defendant’s arguments regarding these bases. See Def.’s Mot. at 28–30; Pls.’ Opp’n.
Accordingly, these arguments are dismissed as conceded. See Hopkins v. Women’s Div., Gen.
Bd. of Global Ministries, 238 F. Supp. 2d 174, 178 (D.D.C. 2002) (citing FDIC v. Bender, 127
F.3d 58, 67–68 (D.C. Cir. 1997) (“It is well understood in this Circuit that when a plaintiff files
an opposition to a motion to dismiss addressing only certain arguments raised by the defendant, a
court may treat those arguments that the plaintiff failed to address as conceded.”)) The Court
notes, as well, that Plaintiffs did not rely on these bases in any of the supplementary briefing. See
Pls.’ Supp. Br.; Pls.’ Second Supp. Br. Moreover, even if the Court were to consider Plaintiffs’
arguments with respect to these two bases, they would not support jurisdiction. The judicial
review provision of the Administrative Procedure Act, 5 U.S.C. § 706, “is not an independent
grant of subject matter jurisdiction.” Your Home Visiting Nurse Service, Inc. v. Shalala, 525 U.S.
449, 457–58 (1999) (citations omitted). Likewise, the mandamus statute “is intended to provide a
remedy for a plaintiff only if he has exhausted all other avenues of relief and only if the
defendant owes him a clear nondiscretionary duty.” Heckler v. Ringer, 466 U.S. 602, 616 (1984).
Plaintiffs’ pleadings do not satisfy these “strict requirements for mandamus relief.” Ass’n of
Flight Attendants-CWA v. Chao, 493 F.3d 155, 160 (D.C. Cir. 2007).

7
“The term ‘final decision’ is not only left undefined by the Act, but its meaning is left to the

Secretary to flesh out by regulation.” Weinberger v. Salfi, 422 U.S. 749, 766 (1975). See 42

U.S.C. § 405(a) (“The Secretary shall have full power and authority to make rules and

regulations and to establish procedures, not inconsistent with the provisions of this subchapter,

which are necessary or appropriate to carry out such provisions . . . ”). Only certain decisions

with respect to Medicare claims are appealable. Compare 42 C.F.R. § 405.904 (initial

determinations of benefits are appealable), with 42 C.F.R. §§ 405.980(a)(5), 405.926(l)

(decisions whether to “reopen” claims are not appealable). Accord Palomar Med. Ctr. v.

Sebelius, 693 F.3d 1151, 1160 (9th Cir. 2012).

Plaintiffs claim they are challenging a “systemwide CMS policy of general applicability.”

Pls.’ Opp’n at 30. In Plaintiffs’ view, this general policy consists of two pillars: the requirement

that Part B claims stemming from related Part A denials must be filed as new claims, and the

insistence that the new claims meet the timely filing requirements of the statute, requiring filing

within one year of the provision of the medical services. Pls.’ Second Supp. Br. at 3. But because

they cannot point to a moment in which these policies came into being, or trace them to any

decision by CMS, they immediately run into an insurmountable barrier. Judicial review under the

Medicare Act is limited to “any final decision . . . made after a hearing.” 42 U.S.C. § 405(g).

Even insofar as this two-part policy exists, it does not embody any such final decision.

With respect to the time limit aspect of the purported policy, the essence of Plaintiffs’

argument is that CMS refuses to create an additional exception to the deadlines for filing of new

claims, which are set out by statute. The Medicare Act requires filing of claims “no later than the

period ending 1 calendar year after the date of service,” 42 U.S.C. § 1395u(b)(3), but “the

Secretary may specify exceptions to the 1 calendar year period specified in such paragraph,”

8
42 U.S.C. § 1395n(a)(1). Pursuant to the Secretary’s regulatory authority, CMS regulations

reiterate the time limit set by statute and then enumerate several exclusive categories of

exceptions from and extensions to the time limits. See 42 C.F.R. § 424.44(b)(1)-(5). Plaintiffs do

not argue that these specific enumerated exceptions apply to them; nor do they purport to

challenge these particular regulations. 7 See Pls.’ Second Supp. Br. at 1-4; Second Am. Compl.

Instead Plaintiffs argue that it is arbitrary and capricious, and thus unlawful, for CMS to refuse to

create an additional categorical exception for those claimants that, like them, seek to file a Part B

claim after a Part A denial. See Pls.’ Second Supp. Br. at 3. Because the enumerated exceptions

are exclusive, see 42 C.F.R. § 424.44(a), Plaintiffs effectively argue that it is unlawful for CMS

to refuse to promulgate a regulation creating an additional exception.

However, CMS’s non-exercise of the agency’s discretion to create an additional category

of exceptions does not constitute a “final decision . . . after a hearing,” as it must in order to

justify the Court’s jurisdiction. See 42 U.S.C. § 405(g). The Court would not necessarily even

need to consult the agency’s regulations in order to determine that this non-exercise of discretion

is not, in fact, a decision, let alone a final decision after a hearing. Plaintiffs do not—and it

appears that they cannot—point to the actual decision introducing the policy that they claim to be

challenging. Furthermore, the term “final decision” is limited to those categories of decisions

denominated as such by the Secretary. See Salfi, 422 U.S. at 766. The refusal to create an

additional category of exceptions by regulation is not one of these categories and is thus not

subject to appeal under the Medicare Act. 8 See 42 C.F.R. § 405.

7
Notably, Plaintiffs do not purport to challenge any of the regulations regarding rebilling
in this action. See Second Am. Compl. ¶¶ 138, 140, 141; Def.’s Second Supp. Br. at 3.
8
CMS twice refused suggestions to amend their regulations to include the exception to
the timeliness requirements that Plaintiffs seek. In a rule issued November 29, 2010, CMS
decided not to accede to commenters’ request to create an “exception to the timely filing rules so

9
 Plaintiffs’ attack on the requirement that health care providers file new Part B claims with

respect to inpatient services denied payment under Part A—the second pillar of the purported

general policy that Plaintiffs challenge—falls victim to a similar analysis. Plaintiffs argue that

they should be able to adjust existing Part A claims to meet the criteria of Part B and that such

adjustment would not require the reopening of those claims. See Pls.’ Opp’n at 4; Pls.’ Supp. Br.

at 6–7. Plaintiffs locate CMS’s failure to allow them to do so in a generalized policy and do not

point to any specific action that Defendant took that introduced such a policy. See Second Am.

Comp. ¶¶ 148–153; see generally Pls.’ Second Supp. Br. Defendant responds that the purported

policy is nothing more than the agency’s implementation of its regulations and, in turn, the

statute. See Def.’s Second Reply at 3. Indeed, the regulations support Defendant’s response that

adjustment in such circumstances is not possible without reopening the claims. See 42 C.F.R.

§ 405.928 (“[a]n initial determination . . . is binding unless it is revised or reconsidered . . . or

revised as a result of reopening”); 42 C.F.R. § 405.980(a)(1) (“A reopening is a remedial action

taken to change a binding determination or decision . . . , even though the binding determination

or decision may have been correct at the time it was made based on the evidence of record.”).

Once again, Plaintiffs do not challenge the underlying regulations. Even if the language of these

regulations were not clear, the Court would be bound to defer to CMS’s interpretation of its own

regulation, which is “controlling unless plainly erroneous or inconsistent with the regulation.”

that hospitals are permitted to file inpatient Part B only claims for any inpatient cases that are . . .
determined not to be medically necessary in an inpatient setting.” Medicare Program; Payment
Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2011, 75 Fed.
Reg. 73,169, 73,449 (Nov. 29, 2010). CMS reiterated this conclusion in the Final Rule that
followed the initiation of this action. See Medicare Program; Payment Policies Related to Patient
Status, 78 Fed. Reg. 50,496, 50,922 (Aug. 19, 2013). Plaintiffs do not purport to challenge these
rulemakings in this action. See Second Am. Compl.; Pls.’ Second Supp. Br. But the Court notes
that one of the Plaintiffs, the American Hospital Association, has challenged the 2013 Final Rule
in a separate action, which is currently pending. See Compl. at 1, American Hospital Association
v. Sebelius (No. 14-cv-609).

10
Auer v. Robbins, 519 U.S. 452, 461 (1997). CMS’s interpretation has no such flaw. As Plaintiffs

do not point to any decision—outside of these regulations—that spawned the purported policy,

Plaintiffs’ challenge fails to satisfy the requirements of § 405(g), limiting judicial review to

“final decision[s] . . . after a hearing.” This non-existent decision is not one of the categories of

final decisions of which judicial review is allowed, see Salfi, 422 U.S. at 766; 42 C.F.R. § 405.

Even if the Court ignored Plaintiffs’ explanation that they are challenging a general

policy rather than particular claim decisions, their arguments for jurisdiction are unavailing.

Plaintiffs object to CMS’s refusal to adjust and supplement existing claims, see Pls.’ Supp. at 6;

and object to the agency’s insistence on applying a one-year time limit to the filing of new

claims, see id. at 9. Each of these theories fails because of the limitation of jurisdiction by

§ 405(g) to review of “final decision[s] . . . made after a hearing.” As explained above, Plaintiffs’

suggestion that they should be able to adjust and supplement their original claims without

reopening fails. See 42 C.F.R. § 405.928; 42 C.F.R. § 405.980(a)(1). Decisions not to reopen are

“not initial determinations and are not appealable.” 42 C.F.R. § 405.926(l). See Your Home

Visiting Nurse Servs., Inc. v. Shalala, 525 U.S. 449, 454 (1999); Palomar Med. Ctr. v. Sebelius, 693

F.3d 1151, 1165–67 (9th Cir. 2012). Similarly, the decision that a claim is not timely filed is not

appealable. 42 C.F.R. § 405.926(n).

Finally, Defendant additionally argues that jurisdiction fails under § 405(g) because

Plaintiffs failed to exhaust administrative remedies. Def.’s Mot. at 17–19. The Court notes that

Plaintiffs report that they continue to pursue their administrative remedies as to the rebilling of

previously denied Part A claims. See Pls.’ Second Supp. Br. at 4–10. While Plaintiffs continue to

argue that exhaustion is futile, Defendant responds that Plaintiffs’ reported success on some of

their rebilling claims, see, e.g., id. at 6, eviscerates the futility argument. However, the Court

11
need not resolve this dispute because the statute does not support jurisdiction over these claims

in the first instance. 9

B. Federal Question Jurisdiction
In Plaintiffs’ Opposition to Defendant’s Motion to Dismiss, Plaintiffs raised an additional

ground for jurisdiction: general federal question jurisdiction under 28 U.S.C. § 1331. This basis

did not appear in Plaintiffs’ complaint (originally or as amended). In a footnote in their

opposition, Plaintiffs requested leave to amend their complaint to assert this basis for

jurisdiction. Pls.’ Opp’n at 37 n.9. But couching a motion to amend in a footnote in an opposition

to a motion to dismiss is procedurally improper. See Arbitraje Casa de Cambio, S.A. de C.V. v.

U.S. Postal Serv., 297 F. Supp. 2d 165, 170 (D.D.C. 2003) (“It is axiomatic that a complaint may

not be amended by the briefs in opposition to a motion to dismiss.”) (quotation marks omitted).

Nonetheless, because of the “strong presumption that Congress intends judicial review of

administrative action,” Bowen v. Michigan Acad. of Family Physicians, 476 U.S. 667, 670

(1986), and because Defendant has responded to this argument in subsequent briefing, the Court

exercises its discretion to review this argument. But considering this argument does not lead to

Plaintiffs’ desired result: even if this basis for jurisdiction had been properly pleaded, it does not

support the Court’s jurisdiction in this action.

“No action against the United States, the [Secretary of Health and Human Services], or

any officer or employee thereof shall be brought under [28 U.S.C. §] 1331 . . . to recover on any

claim arising under” the Medicare Act. 42 U.S.C. § 405(h); see 42 U.S.C. § 1395ii (incorporating

9
Thus, Plaintiffs’ citations to Tataranowicz v. Sullivan, 959 F.2d 268 (D.C. Cir. 1992),
are inapposite. In Tataranowicz, the D.C. Circuit reached the merits of a question of statutory
interpretation upon determining that exhaustion was futile and upon “finding that dispensing
with further administrative process is consistent with the purposes of exhaustion.” Id. at 275.

12
§ 405(h) into the Medicare Act). Judicial review under § 405(g) is available “only after the claim

has been presented to the Secretary and administrative remedies have been exhausted.” Am.

Chiropractic Ass’n, Inc., 431 F.3d at 816. Section 405(h) is a broad jurisdictional bar,

eliminating general federal question jurisdiction wherever “ ‘both the standing and the

substantive basis for the presentation’ of a claim is the Medicare Act.” Shalala v. Illinois Council

on Long Term Care, Inc., 529 U.S. 1, 12 (2000) (quoting Salfi, 422 U.S. at 760–61). However,

there is an exception to this broad bar “if the claimant can obtain judicial review only in a federal

question suit.” Am. Chiropractic Assn, Inc., 431 F.3d at 816 (citing Illinois Council, 529 U.S. at

10–13). The Illinois Council exception “applies not only when administrative regulations

foreclose judicial review, but also when roadblocks practically cut off any avenue to federal

court. As to the latter, it is not enough that claimants would encounter potentially isolated

instances of the inconveniences sometimes associated with the postponement of judicial review,

or that their claims might not receive adequate administrative attention. The difficulties must be

severe enough to render judicial review unavailable as a practical matter.” Id. (citations and

quotation marks omitted). Indeed, “the Illinois Council exception is not intended to allow section

1331 federal question jurisdiction in every case where section 405(h) would prevent a particular

individual or entity from seeking judicial review.” Council for Urological Interests v. Sebelius,

668 F.3d 704, 711 (D.C. Cir. 2011),

While framed as a challenge to a general policy, fundamentally, Plaintiffs’ argument is

that they should be allowed to recoup payments for Part A claims that were previously clawed

back because of a determination that the services should have been provided in an outpatient,

rather than inpatient, setting. Plaintiffs could have raised these arguments following a “final

decision” after “hearing,” when their Part A claims were denied. Plaintiffs argue that doing so

13
appeared futile since they were informed by CMS that they could not seek Part B repayment for

their denied Part A claims. See Pls.’ Supp. at 9. But the “uniform line of cases” in which the

Departmental Appeals Board held that Part B rebilling was available, Second Am. Compl. ¶ 51,

belies this claim. Given that others successfully challenged the refusal to rebill under Part B, it

was not impossible for Plaintiffs to obtain similar review. More broadly, if Plaintiffs had timely

appealed the agency’s decisions with respect to rebilling, regardless of whether those

administrative decisions were in their favor, they could have obtained judicial review in this

Court. See Illinois Council, 529 U.S. at 23 (Plaintiffs “remain free, however, after following the

special review route that the statutes prescribe, to contest in court the lawfulness of any

regulation or statute upon which an agency determination depends. . . . After the action has been

so channeled, the court will consider the contention when it later reviews the action. And a court

reviewing an agency determination under § 405(g) has adequate authority to resolve any

statutory or constitutional contention that the agency does not, or cannot, decide”).

That Plaintiffs did not raise these claims at the appropriate time through Medicare Act

channels does not make § 1331 available to do so now. For the purposes of the Illinois Council

analysis, it does not matter whether this challenge is framed as one to a general policy or one to

specific payment decisions. To allow Plaintiffs access to the courts through § 1331 because they

cloaked their Medicare Act challenge in the garb of a challenge to a general policy would subvert

the channeling function of 405(h) in the first instance. See Illinois Council, 529 U.S. at 13 (2000)

(“insofar as [§ 405(h)] demands the ‘channeling’ of virtually all legal attacks through the agency,

it assures the agency greater opportunity to apply, interpret, or revise policies, regulations, or

statutes without possibly premature interference by different individual courts applying

‘ripeness’ and ‘exhaustion’ exceptions case by case”).

14
 Moreover, the Illinois Council exception is an ill fit for the circumstances facing the

Court. Here, current regulations explicitly foreclose the outcome Plaintiffs seek, see 42 C.F.R.

§ 424.44(b), but yet Plaintiffs do not challenge those regulations or the agency’s interpretation of

those regulations. Insofar as Plaintiffs challenge a policy ungrounded in any specified decision,

the Court seriously doubts that it could be considered the sort of “final agency action” necessary

to state a cause of action under the Administrative Procedure Act, see Bennett v. Spear, 520 U.S.

151, 177–78 (1997), without which jurisdiction under § 1331 would be futile. Although the

Court is foreclosed from reaching the merits of this claim because of the absence of

jurisdiction, 10 the fact that the purported policy would likely be unreviewable in any event

confirms the conclusion that this is not the sort of case encompassed by Illinois Council. Cf. Am.

Chiropractic Ass’n, 431 F.3d at 816 (“the Supreme Court has recognized an exception: if the

claimant can obtain judicial review only in a federal question suit, § [405(h)] will not bar the

suit”) (emphasis added). A futile alternative does not justify the Illinois Council exception.

Because this case is not one of the cases falling within the scope of the Illinois Council

exception, the broad bar of § 405(h) precludes review rooted in general federal question

jurisdiction.

IV. CONCLUSION
Plaintiffs’ explanations about what, precisely, they are challenging have shifted

throughout the course of this litigation. Plaintiffs began by challenging what they call CMS’s

“Payment Denial Policy,” prohibiting Part B reimbursement for items originally billed under Part

A, and seeking repayment for services previously provided. See Compl. ¶¶ 5, 9. After Plaintiffs

10
The absence of final agency action is not jurisdictional. See Vietnam Veterans of Am. v.
Shinseki, 599 F.3d 654, 661 (D.C. Cir. 2010) (“We think the proposition that the review
provisions of the APA are not jurisdictional is now firmly established.”).

15
filed their complaint, as described above, CMS issued both an interim ruling and a proposed rule

with respect to rebilling of such claims. Accordingly, Plaintiffs amended their complaint, and it

appeared that they were challenging (1) CMS’s projected refusal to allow Plaintiffs to amend

their previous Part A claims and projected application of a one-year filing limit to new Part B

claims; (2) the interim ruling, 1455-R; and (3) the proposed new rule. See Second Am. Compl.

¶¶ 7–13. Defendant responded, among other arguments in her Motion to Dismiss, that the Court

does not have jurisdiction to review discretionary claims processing decisions with respect to

specific Part A and Part B claims. Def.’s Mot. at 24. Plaintiffs contested Defendant’s

construction of their complaint, arguing that they are “challenging a systemwide CMS policy of

general applicability.” Pls.’ Opp’n at 30. But at the same time, Plaintiffs explained that they are

challenging CMS’s refusal to allow Plaintiffs to adjust or supplement particular previously

submitted Part A claims. See id. at 33.

Meanwhile, CMS issued a final rule, superseding both the interim ruling and the

proposed rule. Even after the issuance of the final rule, Plaintiffs appeared to ground their

challenge in Ruling 1455-R. See Pls.’ Supp. at 8 n.2 (“Plaintiffs are challenging a policy of

general applicability adopted just this March.”). But, in response to the Court’s request for

clarification in light of those events, Plaintiffs explained that they are challenging “a policy that

has been in place since before Ruling 1455-R and remains in place after the Final Rule.” Pls.’

Second Supp. at 4. The parties agree that 1455-R does not apply to the claims in question. See id.

at 1; Def.’s Mot. at 12. Ultimately, the Court considered the Plaintiffs’ challenge as they have

reframed it, in light of intervening events, challenging a general policy neither promulgated in

16
CMS’s recent rulemaking nor in the now-superseded interim ruling, 1455-R. The Court has no

jurisdiction over this challenge. 11

For the foregoing reasons, Defendant’s [31] Motion to Dismiss for Lack of Subject

Matter Jurisdiction is GRANTED. Count VI has been dismissed voluntarily by Plaintiffs. All

other counts are dismissed for lack of subject matter jurisdiction. The Court does not reach the

argument that the complaint fails to state a claim upon which relief can be granted. Accordingly,

this action is DISMISSED in its entirety. An appropriate Order accompanies this Memorandum

Opinion.

Dated: September 17, 2014

____/s/________________________
COLLEEN KOLLAR-KOTELLY
United States District Judge

11
As explained above, even if understood as a challenge to specific claims processing
decisions, notwithstanding Plaintiffs’ protestations to the contrary, Plaintiffs would have
similarly little jurisdictional ground to stand on.

17