Puerto Rican Asso v. US, (1st Cir. 2008)

Text

---

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,

[1]

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,

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

"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

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

(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).

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"

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).

[2]

         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

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

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.

         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.

Footnotes

[1] 'Of the Southern District of New York, sitting by designation.

[2] '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.

---