DCH Regional Medical Center v. Alex M. Azar II

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 24, 2018 Decided June 4, 2019
No. 17-5203
DCH REGIONAL MEDICAL CENTER,
APPELLANT
v.
ALEX MICHAEL AZAR, II, IN HIS OFFICIAL CAPACITY AS
SECRETARY OF HEALTH AND HUMAN SERVICES,
APPELLEE
Appeal from the United States District Court
for the District of Columbia
(No. 1:16-cv-00212)
Geoffrey M. Raux argued the cause for appellant. With
him on the briefs were Lori A. Rubin and Donald H. Romano.
Abby C. Wright, Attorney, U.S. Department of Justice,
argued the cause for appellee. With her on the brief were Jessie
K. Liu, U.S. Attorney, Alisa B. Klein, Attorney, Robert P.
Charrow, General Counsel, U.S. Department of Health and
Human Services, Janice L. Hoffman, Associate General
Counsel, Susan Maxson Lyons, Deputy Associate General
Counsel, and Jonathan C. Brumer, Attorney.
Before: MILLETT and KATSAS, Circuit Judges, and
SILBERMAN, Senior Circuit Judge.
2
Opinion for the Court filed by Circuit Judge KATSAS.
KATSAS, Circuit Judge: The Medicare statute precludes
judicial review of estimates used to make certain payments to
hospitals for treating low-income patients. We must decide
whether this preclusion provision bars challenges to the
methodology used to make the estimates.
I
Through Medicare, the federal government pays for health
care for elderly and disabled individuals. 42 U.S.C. § 1395 et
seq. Hospitals receive increased payments if they serve “a
significantly disproportionate number of low-income patients.”
Id. § 1395ww(d)(5)(F)(i)(I). These increases are known as
“DSH payments,” which is shorthand for disproportionate
share hospital payments. Id. § 1395ww(r).
The payment at issue here is the “additional payment”
described in paragraph (2) of section 1395ww(r), which is
made annually to each disproportionate share hospital. The
payment is the product of three statutory “factors” estimated by
the Secretary of Health and Human Services. The third factor
measures an individual hospital’s share of all nationwide
uncompensated care. It is the quotient of two amounts:
(i) the amount of uncompensated care for such
hospital for a period selected by the Secretary (as
estimated by the Secretary, based on appropriate data
(including, in the case where the Secretary determines
that alternative data is available which is a better
proxy for the costs of [DSHs] for treating the
uninsured, the use of such alternative data)); and
(ii) the aggregate amount of uncompensated care for
all [DSHs] that receive a payment under this
3
subsection for such period (as so estimated, based on
such data).
42 U.S.C. § 1395ww(r)(2)(C).
Congress precluded judicial review of the estimates of the
three statutory factors. Specifically, it provided that “[t]here
shall be no administrative or judicial review under section
1395ff of this title, section 1395oo of this title, or otherwise”
of “[a]ny estimate of the Secretary for purposes of determining
the factors described in paragraph (2).” 42 U.S.C.
§ 1395ww(r)(3)(A). Congress also precluded administrative
and judicial review of “[a]ny period selected by the Secretary
for such purposes.” Id. § 1395ww(r)(3)(B).
In 2013, HHS promulgated a rule setting forth the “data
sources and methodologies for computing” the three factors for
fiscal year 2014. 78 Fed. Reg. 50,496, 50,627 (Aug. 19, 2013)
(FY 2014 Rule). HHS decided to use data from 2010 or 2011,
as provided on hospitals’ then-most recent Medicare cost
reports. Id. at 50,640. In the regulatory preamble, HHS stated
that, “in the case of a merger between two hospitals” during
that time, “Factor 3 will be calculated based on the [data] under
the surviving [hospital’s certification number].” Id. at 50,642.
Plaintiff DCH Regional Medical Center merged with
Northport Regional Medical Center on May 1, 2011. The
merged entity operated under DCH’s name and certification
number. Consistent with the preamble, it received a DSH
payment for fiscal year 2014 based on DCH’s share of
uncompensated care, but not Northport’s.
DCH filed an appeal with the Provider Reimbursement
Review Board, which denied relief on the ground that section
1395ww(r)(3) barred administrative review.
4
DCH then sued. It sought to challenge “the methodology
adopted and employed” by HHS to calculate the third factor
bearing on its DSH additional payment. J.A. 5. DCH
requested vacatur of “the Secretary’s Fiscal Year 2014 Factor
3 calculation for Plaintiff,” as well as an order compelling the
Secretary “to recalculate the Fiscal Year 2014 disproportionate
share adjustment owed to Plaintiff through application of a
methodology for determining Factor 3 that considers data
associated with both the surviving and non-surviving hospitals
that underwent a merger.” J.A. 20.
The district court held that section 1395ww(r)(3) barred
judicial review of DCH’s claims, so it dismissed the case for
lack of jurisdiction. DCH Reg’l Med. Ctr. v. Price, 257 F.
Supp. 3d 91 (D.D.C. 2017). We review that decision de novo.
Am. Hosp. Ass’n v. Azar, 895 F.3d 822, 825 (D.C. Cir. 2018).
II
By its terms, section 1395ww(r)(3)(A) provides that
“[t]here shall be no administrative or judicial review” of “[a]ny
estimate of the Secretary for purposes of determining the
factors described” in section 1395ww(r)(2). DCH concedes
that this preclusion provision bars review of the estimates used
by the Secretary to make the DSH additional payments under
section 1395ww(r)(2). Yet DCH contends that the provision
does not bar review of the methodology used to make the
estimates. We disagree.
A
Although we “presume” that agency action is judicially
reviewable, “that presumption, like all presumptions used in
interpreting statutes, may be overcome by specific language
that is a reliable indicator of congressional intent.” Knapp
Med. Ctr. v. Hargan, 875 F.3d 1125, 1128 (D.C. Cir. 2017)
5
(cleaned up). When Congress provides that “there shall be no
administrative or judicial review” of specified agency actions,
42 U.S.C. § 1395nn(i)(3)(I), its intent to bar review is clear, so
we determine only whether the challenged action falls “within
the preclusive scope” of the statute, Knapp Med. Ctr., 875 F.3d
at 1128. Here, Congress has barred review of “[a]ny estimate”
used by the Secretary to calculate a DSH additional payment.
42 U.S.C. § 1395ww(r)(3)(A).
In this statutory scheme, a challenge to the methodology
for estimating uncompensated care is unavoidably a challenge
to the estimates themselves. The statute draws no distinction
between the two. Instead, it simply provides for payments
under a formula consisting of three factors estimated by the
Secretary. 42 U.S.C. § 1395ww(r)(2). There is also no way to
review the Secretary’s method of estimation without reviewing
the estimate itself. DCH’s complaint confirms this point. It
seeks both vacatur of “the Secretary’s Fiscal Year 2014 Factor
3 calculation for Plaintiff” and an order compelling the
Secretary “to recalculate the Fiscal Year 2014 disproportionate
share adjustment owed to Plaintiff.” J.A. 20. This attacks the
estimate used to calculate a DSH additional payment.
Moreover, DCH’s proposed distinction between
methodology and estimates would eviscerate the statutory bar,
for almost any challenge to an estimate could be recast as a
challenge to its underlying methodology. For example, all the
determinations made in the FY 2014 Rule, see 78 Fed. Reg. at
50,627–47, or in any of its successor rules, are fairly described
as methodological. So, the only unreviewable estimates would
be ones turning on how to apply these elaborate rules in
individual cases. Such a line might make sense if Congress had
required the Secretary to formulate a methodology for
calculating DSH additional payments by rule, and then
foreclosed judicial review only of adjudications applying the
6
rule to specific hospitals. But here, Congress has foreclosed
review of “[a]ny estimate” used by the Secretary “for purposes
of determining the factors” bearing on DSH additional
payments. 42 U.S.C. § 1395ww(r)(3)(A). Many of the
relevant estimates involve determinations that do not vary from
hospital to hospital—and thus are sensibly made by rule. For
example, the first statutory factor turns on “the aggregate
amount of payments” that would have been made to all
disproportionate share hospitals under a prior version of the
statute, “as estimated by the Secretary.” Id.
§ 1395ww(r)(2)(A). The second factor turns on the “percent
change” of uninsured individuals under 65 years old
nationwide, “as calculated by the Secretary” for fiscal years
2014 to 2017, and on the “percent change” of all uninsured
individuals nationwide, “as estimated by the Secretary” in each
subsequent fiscal year. Id. § 1395ww(r)(2)(B). The third
factor turns on each individual hospital’s share of uninsured
care, measured relative to a denominator of “the aggregate
amount of uncompensated care” provided by all
disproportionate share hospitals, “as estimated by the
Secretary.” Id. § 1395ww(r)(2)(C). Under this statutory
structure, which plainly bars review of estimates made across-
the-board and by rule, estimates cannot be separated from the
methodology used to generate them.
Our decision in Florida Health Sciences Center, Inc. v.
Secretary of HHS, 830 F.3d 515 (D.C. Cir. 2016), reinforces
this analysis. There, we held that section 1395ww(r)(3)(A)
bars judicial review of the choice of data used to estimate a
hospital’s amount of uncompensated care. We rejected the
argument that “an ‘estimate’ is not the same thing as the ‘data’
on which it is based.” Id. at 519. Instead, we held that, because
the selection of data used to make estimates is “inextricably
intertwined” with the estimates themselves, the bar on judicial
review applies to both. Id. at 521. That reasoning governs this
7
case, for the methodology used to generate estimates is no less
“inextricably intertwined” with the estimates. In particular, the
decision held unreviewable in Florida Health—to exclude
from the 2014 estimates any data submitted after March
2013—is a methodological choice as well as a data choice.
Indeed, both the Secretary and this Court described it as such.
See id. at 517 (“methodology for calculating DSH payments”);
FY 2014 Rule, 78 Fed. Reg. at 50,634 (“Methodology to
Calculate Factor 3”).
If anything, the case for preclusion is even stronger here
than in Florida Health. The governing statute speaks of
uncompensated care “as estimated by the Secretary, based on
appropriate data.” 42 U.S.C. § 1395ww(r)(2)(C)(i). So, it
provides at least some textual basis for considering whether
estimates can be separated from their underlying data. But the
statute makes no reference to “methodology” as such—and
thus provides no textual basis for separating estimates from
their underlying methodology.
In construing other Medicare provisions barring judicial
review, we have employed similar reasoning. For example, in
Texas Alliance for Home Care Services v. Sebelius, 681 F.3d
402 (D.C. Cir. 2012), we construed a statute that bars review
of “the awarding of contracts” to cover challenges to a
regulation setting forth financial eligibility standards, which
we described as “indispensable to ‘the awarding of contracts.’”
Id. at 409. Likewise, we construed a provision barring review
of “the bidding structure and number of contractors selected”
to cover the same eligibility regulation, which we described as
“inextricably intertwined with the bidding structure.” Id. at
411. Most recently, we held that a statute barring judicial
review of “prospective payment rates” covers “adjustments
used to calculate th[ose] rate[s].” Mercy Hosp., Inc. v. Azar,
891 F.3d 1062, 1066 (D.C. Cir. 2018). Citing Florida Health,
8
we reasoned that the adjustments were “inextricably
intertwined” with the rates. Id. at 1066–67 (“Because
reviewing a formula used by the prospective payment rate
would effectively review the rate itself, we cannot review the
former if we cannot review the latter.”). These decisions
confirm our analysis above: We cannot review the Secretary’s
method of estimation without also reviewing the estimate. And
because the two are inextricably intertwined,
section 1395ww(r)(3)(A) precludes review of both.
B
To support its argument for jurisdiction, DCH invokes
McNary v. Haitian Refugee Center, Inc., 498 U.S. 479 (1991),
and ParkView Medical Associates v. Shalala, 158 F.3d 146
(D.C. Cir. 1998). Neither case is apposite.
McNary involved a provision that barred district-court
review of any “determination respecting an application for
adjustment of status” of certain alien farmworkers. 498 U.S. at
486 n.6. The Supreme Court held that this provision did not
bar a class action asserting due-process challenges to the
procedures used by the agency to adjudicate individual
adjustment decisions. The Court reasoned that the preclusion
provision covered only “a single act rather than a group of
decisions or a practice or procedure employed in making
decisions.” Id. at 491–92.
McNary is inapplicable here. For one thing, the preclusion
provision there covered only decisions made through
adjudicatory determinations about individual applications.
Here, by contrast, the preclusion provision covers “[a]ny
estimate of the Secretary for purposes of determining” DSH
additional payments. 42 U.S.C. § 1395ww(r)(3)(A). As
explained above, this text suggests, and statutory context
confirms, that the provision covers broad estimates made by
9
rule, as well as individualized estimates made by adjudication.
Moreover, the relief sought in McNary—greater agency
process—would not have had “the practical effect of also
deciding th[e] claims for benefits on the merits.” Fornaro v.
James, 416 F.3d 63, 68 (D.C. Cir. 2005) (quoting McNary, 498
U.S. at 495). Here, by contrast, DCH seeks to attack the very
estimates that the preclusion provision insulates from review.
Finally, this case involves only statutory claims, so we may
apply the preclusion provision without straining to avoid the
“serious constitutional question” that would arise from denying
judicial review of constitutional claims. Bowen v. Mich. Acad.
of Family Physicians, 476 U.S. 667, 681 n.12 (1986) (quotation
marks omitted).
ParkView is similarly inapplicable. That case involved a
provision barring review of “[t]he decision of the Secretary”
about whether to reclassify a hospital, for Medicare
reimbursement purposes, from rural to urban. 158 F.3d at 147–
48. The Court held that “this bar leaves hospitals free to
challenge the general rules leading to denial” of
reclassification, id. at 148, and it went on to conclude that
regulations governing the choice of data for reclassification
decisions were not arbitrary and capricious, id. at 148–49. As
in McNary, the preclusion provision in ParkView targeted only
a particular kind of adjudicatory decision, rather than any
estimate used to make the decision.
Moreover, ParkView has been twice limited, in a way that
creates a second dispositive distinction. First, in addressing the
preclusion provision at issue there, we clarified that “when a
procedure is challenged solely in order to reverse an individual
reclassification decision, judicial review is not permitted.”
Palisades Gen. Hosp. Inc. v. Leavitt, 426 F.3d 400, 405 (D.C.
Cir. 2005). In other words, ParkView is “inapplicable … where
the hospital’s challenge is no more than an attempt to undo an
10
individual [decision].” Id. Later, in Florida Health, we
extended that reasoning to the preclusion provision at issue
here. We held that section 1395ww(r)(3) barred review
because the plaintiff was “simply trying to undo the Secretary’s
estimate of the hospital’s uncompensated care by recasting its
challenge to the Secretary’s choice of data as an attack on the
general rules leading to her estimate.” 830 F.3d at 522.
That principle governs this case. As explained above,
DCH is simply trying to undo the Secretary’s estimate of its
uncompensated care by recasting its challenge to that estimate
as an attack on the underlying methodology. Indeed, DCH is
trying to do so explicitly, in seeking vacatur of the calculation
of its own DSH additional payment for fiscal year 2014 and an
order requiring the Secretary to recalculate it. For these
reasons, Florida Health—not Parkview—controls here.
III
DCH further argues that even if the statutory bar on
judicial review applies, the district court still should have set
aside the calculation of its DSH additional payment as ultra
vires. According to DCH, the district court could have done so
because the Secretary, in making the calculation, failed to
choose appropriate data. DCH is mistaken.
The doctrine invoked by DCH traces to Leedom v. Kyne,
358 U.S. 184 (1958). That case involved section 9(b)(1) of the
National Labor Relations Act, which provides that the National
Labor Relations Board “shall not” certify a bargaining unit
including professionals and other employees “unless a majority
of such professional employees vote for inclusion in such unit.”
29 U.S.C. § 159(b)(1). The Board had done just that, and the
Supreme Court described its action as one “made in excess of
its delegated powers and contrary to a specific prohibition in
the Act.” 358 U.S. at 188. The Court further held that the
11
district court had jurisdiction to set aside this unlawful agency
action. That question arose because the NLRA permits court-
of-appeals review of any “final order of the Board,” 29 U.S.C.
§ 160(f), a term that the Court had construed not to encompass
certification orders, see Am. Fed’n of Labor v. NLRB, 308 U.S.
401 (1940). The Court held that this specific-review scheme
did not oust the district court of jurisdiction under 28 U.S.C.
§ 1337, which otherwise applied. See 358 U.S. at 187, 191.
In Board of Governors of the Federal Reserve System v.
MCorp Financial, Inc., 502 U.S. 32 (1991), the Supreme Court
cautioned against overreading Kyne’s jurisdictional holding. A
court of appeals had read Kyne “as authorizing judicial review
of any agency action that is alleged to have exceeded the
agency’s statutory authority,” but the Supreme Court
disagreed. Id. at 43. The Court stressed that, in Kyne, the
putative bar on district-court review was “implied” from the
“silence” of a statute permitting review in the courts of appeals.
Id. at 44. The Court further described Kyne as merely standing
for the “familiar proposition” that judicial review is presumed
to be available absent a clear statute to the contrary. Id. And
it distinguished Kyne because the statute at issue in MCorp
barred judicial review “clearly and directly.” Id.
Following MCorp, there is not much room to contend that
courts may disregard statutory bars on judicial review just
because the underlying merits seem obvious. This Court has
stated that such an argument “is essentially a Hail Mary pass—
and in court as in football, the attempt rarely succeeds.” Nyunt
v. Chairman, Broad. Bd. of Governors, 589 F.3d 445, 449
(D.C. Cir. 2009). Other decisions confirm that Kyne, if
construed to permit this kind of backdoor review, has “very
limited scope.” DOJ v. FLRA, 981 F.2d 1339, 1342 (D.C. Cir.
1993); see also Griffith v. FLRA, 842 F.2d 487, 493 (D.C. Cir.
1988) (“extremely limited scope”); Hartz Mountain Corp. v.
12
Dotson, 727 F.2d 1308, 1312 (D.C. Cir. 1984) (“extraordinarily
narrow”). At most, such a “Kyne exception” applies only when
three requirements are met: “(i) the statutory preclusion of
review is implied rather than express; (ii) there is no alternative
procedure for review of the statutory claim; and (iii) the agency
plainly acts in excess of its delegated powers and contrary to a
specific prohibition in the statute that is clear and mandatory.”
Nyunt, 589 F.3d at 449 (cleaned up). The third requirement
covers only “extreme” agency error, not merely “[g]arden-
variety errors of law or fact.” Griffith, 842 F.2d at 493.
DCH fails to satisfy the first or third of these requirements.
Here, the bar on judicial review is express. Moreover, DCH
fails to allege any obvious violation of a clear statutory
command. To the contrary, it invokes only the requirement that
the Secretary, in calculating the DSH additional payment, must
choose “appropriate data.” 42 U.S.C. § 1395ww(r)(2)(C).
DCH makes no attempt to explain why the Secretary’s
treatment of hospital mergers violates this open-ended
provision at all, much less obviously so. Instead, DCH argues
only that the Secretary treats hospital mergers differently in
different contexts and that, in calculating DSH additional
payments, the Secretary treated hospital mergers differently in
fiscal years 2014 and 2015. At most, that suggests that the
2014 treatment may have been arbitrary and capricious. And
even that point is debatable, for the Secretary, in discussing the
choice of data for the 2014 payment calculations, suggested
possible administrability problems with the rule urged by
DCH. See 78 Fed. Reg. at 50,642. Whatever the merits of
DCH’s objection, it is worlds apart from the obvious violation
of the clear statutory command at issue in Kyne.
DCH claims support from Southwest Airlines Co. v. TSA,
554 F.3d 1065 (D.C. Cir. 2009), and COMSAT Corp. v. FCC,
114 F.3d 223 (D.C. Cir. 1997), but those cases are off-point.
13
They permitted review not because an obvious legal error
justified disregarding an applicable statutory bar, but because
the relevant statutory bar, in the circumstances of each case,
was effectively coextensive with the merits. The same agency
error thus simultaneously made the jurisdictional bar
“inapplicable” and compelled setting aside the challenged
agency action. See COMSAT, 114 F.3d at 227 (statutory bar
“merges consideration” of jurisdiction and merits); Sw.
Airlines, 554 F.3d at 1071 (following COMSAT). Moreover,
even if these cases did support a Kyne exception, each involved
a far more obvious legal error than anything arguably present
here. In COMSAT, the agency was authorized to collect fees
only for “rulemaking proceedings or changes in law,” yet it
sought to collect fees for concededly different activities. 114
F.3d at 225. Likewise, in Southwest Airlines, the agency was
authorized to collect certain fees only for screening
“passengers and property,” yet it sought to collect those fees
for screening non-passengers. 554 F.3d at 1070–71. Nothing
remotely analogous is present here.
IV
For these reasons, the district court correctly concluded
that section 1395ww(r)(3) bars judicial review in this case.
Affirmed.