Robert Odell, Jr. v. Hhs ( 2021 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ROBERT H. ODELL, JR.; ROBERT No. 19-15262
ODELL, M.D., PH.D. MEDICAL
ENTERPRISES, A Nevada D.C. No.
Corporation, 2:15-cv-01793-
Plaintiffs-Appellees, RFB-GWF
v.
OPINION
U.S. DEPARTMENT OF HEALTH &
HUMAN SERVICES; XAVIER
BECERRA,
Defendants-Appellants.
Appeal from the United States District Court
for the District of Nevada
Richard F. Boulware II, District Judge, Presiding
Argued and Submitted June 10, 2020
San Francisco, California
Filed April 27, 2021
2 ODELL V. HHS
Before: Eric D. Miller and Danielle J. Hunsaker, Circuit
Judges, and Douglas L. Rayes, * District Judge.
Opinion by Judge Miller
SUMMARY **
Medicare
The panel vacated a preliminary injunction and
remanded to the district court with instructions to dismiss the
complaint for lack of jurisdiction in an action brought by a
Nevada physician against a Medicare contractor who
allegedly wrongly denied his claims for reimbursement.
The panel held that the Medicare statute permits a court
to review only claims that have been presented to the agency.
The panel held that the physician here had not satisfied the
presentment requirement for any of his claims. Because this
case did not involve a claim that was presented to the agency,
the district court lacked subject matter jurisdiction.
*
The Honorable Douglas L. Rayes, United States District Judge for
the District of Arizona, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
ODELL V. HHS 3
COUNSEL
Sarah Carroll (argued), Michael S. Raab, and Abby C.
Wright, Appellate Staff; Nicholas A. Trutanich, United
States Attorney; Civil Division, United States Department of
Justice, Washington, D.C.; Janice L. Hoffman, Associate
General Counsel; Susan Maxson Lyons, Deputy Associate
General Counsel for Litigation; Brett Bierer, Attorney;
United States Department of Health & Human Services,
Washington, D.C.; for Defendants-Appellants.
George K. Brew (argued), Law Office of George Brew
PLLC, Jacksonville, Florida, for Plaintiffs-Appellees.
OPINION
MILLER, Circuit Judge:
Dr. Robert H. Odell, Jr., is a Nevada physician who treats
patients covered by Medicare. For several years, Odell has
been engaged in a dispute with the contractor that
administers Medicare in his region. Believing that the
contractor was improperly applying an “unwritten rule” that
led to the denial of his claims for reimbursement, Odell
sought an injunction compelling the contractor to change its
method of evaluating his claims. The district court granted
the injunction. The Medicare statute, however, permits a
court to review only claims that have been presented to the
agency. Because this case does not involve a claim that was
presented to the agency, the district court lacked subject-
matter jurisdiction. We therefore vacate the preliminary
injunction and remand to the district court with instructions
to dismiss the complaint for lack of jurisdiction.
4 ODELL V. HHS
I
A
Medicare is a federally subsidized medical insurance
program for the elderly and disabled. See 42 U.S.C. § 1395et seq.; Thomas Jefferson Univ. v. Shalala, 512 U.S. 504,
506 (1994). The Centers for Medicare & Medicaid Services
(CMS), an agency within the Department of Health and
Human Services, oversees the Medicare program. CMS
contracts with private entities to administer Medicare. See
42 U.S.C. §§ 1395u(a), 1395kk-1(a); 42 C.F.R. § 421.5(c).
Each contractor is responsible for a particular region of the
country. 42 C.F.R. § 421.404(b)(1), (c)(1).
Medicare pays only for services that are “reasonable and
necessary.” 42 U.S.C. § 1395y(a)(1)(A). The Medicare
contractor determines initially whether a service is covered.
Id. § 1395ff(a)(1); 42 C.F.R. § 405.920. In making that
determination, the contractor can rely on several sources of
guidance.
Sometimes, the agency issues a regulation or a “national
coverage determination” specifying “whether or not a
particular item or service is covered.” 42 U.S.C.
§ 1395ff(f)(1)(B); see id. § 1395hh. Both regulations and
national coverage determinations are binding on Medicare
contractors. See Erringer v. Thompson, 371 F.3d 625, 628
(9th Cir. 2004).
In other cases, a Medicare contractor can issue a “local
coverage determination” (LCD) specifying whether a
particular item or service will be covered within its
jurisdiction. 42 U.S.C. § 1395ff(f)(2)(B); see Erringer,
371 F.3d at 628. Before adopting an LCD, a contractor must
solicit public comment and hold an open meeting. See
ODELL V. HHS 5
Medicare Program Integrity Manual § 13.2.4 (rev. 863, Oct.
3, 2018). Once a contractor has adopted an LCD, any
interested party may request that the contractor reconsider it.
Id. § 13.3.2. And Medicare patients—but not doctors or
hospitals—may challenge an LCD through an administrative
process and, ultimately, in court. 42 U.S.C. § 1395ff(f)(2),
(5).
Absent a regulation, a national coverage determination,
or an LCD, the Medicare contractor proceeds on a case-by-
case basis to determine whether a service is reasonable and
necessary. 42 U.S.C. § 1395y(a)(1)(A).
If the contractor determines that a service is covered, it
pays the claim. 42 U.S.C. § 1395l(a). Otherwise, it denies
the claim. A party seeking reimbursement can then challenge
the denial of coverage through four levels of administrative
review. See Haro v. Sebelius, 747 F.3d 1099, 1114 (9th Cir.
2014). First, a party can seek redetermination by the
Medicare contractor. 42 U.S.C. § 1395ff(a)(3). Second, a
party can seek reconsideration by a “qualified independent
contractor,” which is not bound by the Medicare contractor’s
LCD but must give it “substantial deference.” Id.
§ 1395ff(c), (c)(3)(B)(ii)(II); 42 C.F.R. § 405.968(b)(2).
Third, a party can seek a hearing before an administrative
law judge. 42 U.S.C. § 1395ff(d)(1). Fourth, a party can seek
review of the administrative law judge’s decision before the
Medicare Appeals Council. Id. § 1395ff(d)(2); 42 C.F.R.
§ 405.1100; see 42 C.F.R. § 405.902. Like independent
contractors, administrative law judges and the Medicare
Appeals Council are not bound by an LCD but must give it
“substantial deference,” and if they depart from an LCD,
they must explain why. 42 C.F.R. § 405.1062(a)–(b). After
exhausting administrative remedies, a claimant can seek
judicial review. 42 U.S.C. § 1395ff(b)(1)(A).
6 ODELL V. HHS
B
Since approximately 2008, Odell has provided treatment
for a condition called neurological ischemia, which he
describes as “a root cause of pain, numbness and loss of
functionality in the lower extremities.” Odell’s treatment
involves “nerve blocks for pain together with electrical
stimulation.”
The Medicare contractor for Odell’s area has
promulgated a local coverage determination, LCD L28271,
for “Injections – Tendon, Ligament, Ganglion Cyst, Tunnel
Syndromes and Morton’s Neuroma.” Odell argues that the
contractor has erroneously applied that LCD to deny
coverage for his treatment and that the contractor should
instead apply LCD L28240, which covers “Blocks and
Destruction of Somatic and Sympathetic Nerves.”
Based on the limited record before us, it appears that
Odell has had some success in challenging the application of
LCD L28271 to his treatment at varying levels of
administrative review. While the independent contractor has
issued unfavorable decisions for certain claims (without
relying on any LCD), it has also issued favorable decisions
with respect to others. Similarly, Odell has obtained
favorable rulings from administrative law judges with
respect to certain claims. Those judges concluded that LCD
L28240 applied and that Odell’s treatment was covered by
Medicare. In some instances, however, the Medicare
Appeals Council has remanded for a more thorough
explanation of the administrative law judges’ decisions.
In response to the application of LCD L28271 to his
claims, Odell brought this action against the Secretary of
Health and Human Services. The complaint also named two
other plaintiffs: a corporation that Odell owns and Kenneth
ODELL V. HHS 7
Baker, one of Odell’s patients. But because nothing in our
analysis turns on the identity of the plaintiffs, we will discuss
only Odell.
According to the complaint, the Medicare contractor
follows an “unwritten rule” of erroneously applying LCD
L28271 to Odell’s claims to deny coverage for his treatment.
Odell does not argue that LCD L28271 is invalid; instead, he
argues that it does not apply to the treatment he provides. In
Odell’s view, the contractor’s “unwritten rule” of applying
LCD L28271 to his claims is invalid because that “unwritten
rule” was not adopted through notice-and-comment
rulemaking, is arbitrary and capricious, and is contrary to the
Medicare statute. Odell sought an injunction barring the
agency “from imposing an LCD that categorically denies
Medicare coverage of . . . Odell’s services or applying an
unwritten rule to do the same.” The Secretary moved to
dismiss for lack of subject-matter jurisdiction, and the
district court ordered limited jurisdictional discovery. Upon
the completion of discovery, Odell moved for a preliminary
injunction.
The district court denied the Secretary’s motion to
dismiss and granted a preliminary injunction. Odell v. Azar,
344 F. Supp. 3d 1192, 1207 (D. Nev. 2018). The court
recognized that the Medicare statute requires exhaustion of
administrative remedies as a prerequisite to bringing an
action in court, but it excused Odell’s failure to exhaust on
the ground that it would be “impractical for Dr. Odell to
appeal hundreds of claims on a piecemeal basis,” and
therefore it would be futile for him to attempt “to challenge
the unwritten rule through the administrative process.” Id. at
1199–1200, 1202. The court then determined that Odell had
shown “a likelihood of success on the merits for his claims
that the continuous default application of LCD L28271 to his
8 ODELL V. HHS
treatment is arbitrary and capricious in violation of the APA
and/or constitutes a new substantive rule that did not go
through the required rulemaking process.” Id. at 1206. It
entered an injunction barring the Medicare contractor from
applying LCD L28271 to any claim filed by Odell without
first conducting “an individual medical review of the claim.”
II
We begin—and end—by considering the district court’s
subject-matter jurisdiction. The judicial-review provision in
the Medicare statute incorporates that of the Social Security
Act. 42 U.S.C. § 1395ii. That statute, in turn, provides an
exclusive mechanism for review of the agency’s decisions,
expressly displacing the general federal-question
jurisdiction of 28 U.S.C. § 1331. See 42 U.S.C. § 405(h). It
states that “[a]ny individual, after any final decision of the
[Secretary of the Department of Health and Human Services]
made after a hearing to which he was a party, . . . may obtain
a review of such decision by a civil action.” Id. § 405(g); see
id. § 1395ff(b)(1)(A). For our purposes, the critical feature
of section 405(g) is that it permits review only “after any
final decision” of the agency.
The Supreme Court has explained that “the statute
empowers district courts to review a particular type of
decision by the Secretary, that type being those which are
‘final’ and ‘made after a hearing,’” with that limitation being
“central to the requisite grant of subject-matter jurisdiction.”
Weinberger v. Salfi, 422 U.S. 749, 764 (1975). More
specifically, the Court has held that “the requirement that a
claim for benefits shall have been presented to the Secretary”
is “nonwaivable.” Mathews v. Eldridge, 424 U.S. 319, 328
(1976). In other words, presentment of the claim to the
Secretary “is an essential and distinct precondition for
§ 405(g) jurisdiction.” Id. at 329.
ODELL V. HHS 9
The Court has confirmed that even when an individual
raises a constitutional challenge to agency procedures—a
challenge that could be considered “collateral” to any
specific “claim for benefits”—the statute nevertheless
“contains the nonwaivable and nonexcusable requirement
that an individual present a claim to the agency before
raising it in court.” Shalala v. Illinois Council on Long Term
Care, Inc., 529 U.S. 1, 15 (2000); see also Heckler v. Ringer,
466 U.S. 602, 622–23 (1984). And we have similarly
concluded that a wide range of challenges to the operation of
the Medicare program “arise under” the Medicare statute and
therefore “require[] an agency decision in advance of
judicial review.” Kaiser v. Blue Cross of Calif., 347 F.3d
1107, 1111–12 (9th Cir. 2003); accord Sensory
NeuroStimulation, Inc. v. Azar, 977 F.3d 969, 975 (9th Cir.
2020).
The district court recognized that Odell had not
exhausted his administrative remedies, but it reasoned that
exhaustion could be excused because, in the court’s view,
exhaustion would have been futile. 344 F. Supp. 3d at 1202.
That conclusion is debatable, but we need not consider it
further because the district court lacked jurisdiction even if
Odell’s failure to exhaust could be excused. Section 405(g)
“contains two separate elements: first, a ‘jurisdictional’
requirement that claims be presented to the agency, and
second, a ‘waivable . . . requirement that the administrative
remedies prescribed by the Secretary be exhausted.’” Smith
v. Berryhill, 139 S. Ct. 1765, 1773 (2019) (omission in
original) (quoting Eldridge, 424 U.S. at 328). Although the
requirement of exhaustion may be excused, the requirement
of presentment may not. Illinois Council, 529 U.S. at 15.
Odell has not satisfied the presentment requirement for
any of his claims. To the extent that Odell disputes the
10 ODELL V. HHS
application of LCD L28271 to his past claims, jurisdiction is
lacking because he does not challenge any specific “final
decision” of the agency. 42 U.S.C. § 405(g). The complaint
identifies various instances in which the contractor denied
reimbursement and Odell then received a favorable decision
from an administrative law judge. Odell does not seek
review of any of those favorable decisions—nor could he—
and he does not identify any particular adverse decision for
which he is seeking review.
Instead, the principal objective of the complaint appears
to be to obtain prospective relief from the application of
LCD L28271 to Odell’s future claims. But there is no
subject-matter jurisdiction over those claims because Odell
has not yet presented them to the Secretary for a final
decision. See Illinois Council, 529 U.S. at 15; Haro,
747 F.3d at 1112–14. As the District of Columbia Circuit has
explained, a plaintiff “cannot satisfy § 405(g)’s presentment
requirement with respect to future claims because those
claims have not yet arisen.” Porzecanski v. Azar, 943 F.3d
472, 482 (D.C. Cir. 2019); see Ringer, 466 U.S. at 621. Here,
no final decision from the Secretary confirms the denial of
reimbursement for those future claims, whether based on
LCD L28271 or some other basis. Because Odell has not
presented the claims, section 405(g) does not permit the
exercise of jurisdiction. See Porzecanski, 943 F.3d at 482.
Pointing to the various cases in which he has pursued
administrative appeals of the contractor’s denial of benefits,
Odell argues that he has in fact “presented [his] claims to the
Secretary on numerous occasions.” But “[p]roperly
channeling one claim”—or even several claims—“does not
permit a plaintiff to resolve other claims or causes of action
that have not been channeled.” Porzecanski, 943 F.3d at 484.
In his administrative challenges to denials of prior claims for
ODELL V. HHS 11
reimbursement, Odell may have raised his arguments about
the application of LCD L28271. That does not confer
jurisdiction on the district court to adjudicate those
arguments as they relate to other claims for reimbursement.
In other words, “even in the case of claims which appear to
rest upon identical questions of law and fact” to other claims
that the agency has previously considered, a court still can
hear only claims that have been properly presented. Pacific
Coast Med. Enters. v. Harris, 633 F.2d 123, 138 (9th Cir.
1980).
Odell relies on our decision in Los Angeles Haven
Hospice, Inc. v. Sebelius, 638 F.3d 644 (9th Cir. 2011), but
that case does not support exercising jurisdiction here.
Haven Hospice involved a facial challenge to a Medicare
regulation, and we held that a provider could bring that
challenge under 42 U.S.C. § 1395oo(f)(1). That statute
“specifically authorizes the district courts to decide pure
questions of law,” Haven Hospice, 638 F.3d at 664, and it
applies “notwithstanding any other provisions in section
405,” 42 U.S.C. § 1395oo(f)(1). See Porzecanski, 943 F.3d
at 484 (explaining that the court in Haven Hospice
“exercised jurisdiction under 42 U.S.C. § 1395oo(f)(1),
which sets out a judicial review scheme that deviates from
§ 1395ii and § 405(g) in important ways”).
Odell emphasizes that the Medicare statute does not
incorporate section 405(h)—and thus does not preclude
other forms of review—in cases “where application of
§ 405(h) would not simply channel review through the
agency, but would mean no review at all.” Illinois Council,
529 U.S. at 19. That class of cases is narrowly defined, and
it does not include those in which some “administrative
channel for review exists.” Sensory NeuroStimulation,
977 F.3d at 983. Here, an administrative channel for review
12 ODELL V. HHS
is available to Odell. When the contractor denies a claim for
payment based on the application of LCD L28271, Odell can
challenge the denial. Either he will prevail in the
administrative process, or he will obtain an adverse final
decision of the agency that he can challenge in court.
We recognize that pursuing “the often lengthy
administrative review process” on a claim-by-claim basis is
more costly than proceeding directly to court to obtain an
injunction directing a programmatic change in the agency’s
approach. Ringer, 466 U.S. at 619. The Supreme Court has
acknowledged that although the statute “assures the agency
greater opportunity to apply, interpret, or revise policies,
regulations, or statutes without possibly premature
interference by different individual courts,” that “assurance
comes at a price, namely, occasional individual, delay-
related hardship.” Illinois Council, 529 U.S. at 13. Whether
that price is worth paying is a judgment for Congress to
make. Section 405 reflects that judgment, and it forecloses
the exercise of jurisdiction in this case.
VACATED and REMANDED.