Am. Clinical Lab. Ass'n v. Azar

• Decision Date: 21 September 2018
• Docket Number: Civil Action No. 17-2645 (ABJ)
• Citation: 334 F.Supp.3d 301
• Parties: AMERICAN CLINICAL LABORATORY ASSOCIATION, Plaintiff, v. Alex M. AZAR, II Secretary, United States Department of Health and Human Services, Defendant.
• Court: U.S. District Court — District of Columbia

334 F.Supp.3d 301

AMERICAN CLINICAL LABORATORY ASSOCIATION, Plaintiff,

v.Alex M. AZAR, II Secretary, United States Department of Health and Human Services, Defendant.

Civil Action No. 17-2645 (ABJ)

United States District Court, District of Columbia.

Signed September 21, 2018

Ashley Charles Parrish, Mark D. Polston, King & Spalding LLP, Washington, DC, for Plaintiff.

Kate Bailey, Michael Leon Drezner, U.S. Department of Justice, Washington, DC, for Defendant.

MEMORANDUM OPINION

AMY BERMAN JACKSON, United States District Judge

Plaintiff American Clinical Laboratory Association, a trade association that represents clinical and anatomic pathology laboratories, Compl. [Dkt. # 1] ¶ 18, has challenged a regulation issued by the Secretary of the U.S. Department of Health and Human Services, Alex M. Azar, II. The regulation at issue implements Section 216 of the Protecting Access to Medicare Act of 2014 ("PAMA") by requiring certain laboratories to report pricing information to the agency for use in establishing Medicare rates. Plaintiff contends that the definition of the term "applicable laboratory" in the regulation violates PAMA and the Administrative Procedure Act ("APA"). In response, defendant asserts that in the statute, Congress expressly precluded judicial review of issues such as these, and the Court has no jurisdiction to hear the case. While the Court acknowledges that plaintiff's arguments on the merits raise important questions, it agrees with defendant that it cannot resolve this dispute, and it will dismiss this matter for lack of subject matter jurisdiction.

STATUTORY FRAMEWORK

The federal Medicare program, established by Title XVIII of the Social Security Act, provides health insurance to the elderly and disabled. Amgen, Inc. v. Smith, 357 F.3d 103, 105 (D.C. Cir. 2004). The program is administered by the Department of Health and Human Services ("HHS"), and the Secretary of the Department is authorized to "giv[e] content to the broad outlines of the Medicare statute." Dialysis Clinic, Inc. v. Leavitt , 518 F.Supp.2d 197, 199 (D.D.C. 2007), quoting Thomas Jefferson Univ. v. Shalala , 512 U.S. 504, 506–07, 114 S.Ct. 2381, 129 L.Ed.2d 405 (1994). Part A of Medicare covers inpatient hospital stays and related services, while Part B covers outpatient treatment and services, such as doctor's visits and laboratory tests. See Abington Crest Nursing & Rehab. Ctr. v. Sebelius , 575 F.3d 717, 718 (D.C. Cir. 2009).

This case concerns laboratory tests paid for under Medicare Part B – specifically, clinical diagnostic laboratory tests, which are performed on specimens, such as blood or urine, and are used in monitoring, diagnosing, and treating patients. Pl.'s Corrected Mem. of P. & A. in Supp. of Pl.'s Mot. for Summ. J. [Dkt. # 31-1] ("Pl.'s Mem.") at 4. They can range from routine blood work to sophisticated genetic and molecular tests. Pl.'s Mem. at 4.

Since 1984, Medicare has paid for these tests based on a fee schedule. See Medicare Program; Medicare Clinical Diagnostic Lab. Tests Payment Sys.; Final Rule, 81 Fed. Reg. 41,036, 41,036 (June 23, 2016) ("Final Rule") (codified at 42 C.F.R. §§ 414.500 – 414.522 ). In 2014, Congress passed the Protecting Access to Medicare Act of 2014, which, among other things, revised the payment scheme for diagnostic tests by substituting a market-based approach for the Clinical Laboratory Fee Schedule. Pub. L. No. 113-93, § 216, 128 Stat. 1040, 1053 (2014) (codified at 42 U.S.C. § 1395m-1 ).

Section 216 of PAMA provides that Medicare payments for clinical diagnostic laboratory tests will be based upon what private payors pay laboratories for these tests. See 42 U.S.C. § 1395m-1(a) ; see also Thomas C. Fox et al., Health Care Fin. Transactions Man . § 21:21 (2018). To calculate the appropriate payment amounts, the Secretary is authorized to gather data, and Section 216 requires "applicable laborator[ies]" to report to HHS the amounts and volume of private sector payments they receive for tests, 42 U.S.C. § 1395m-1(a), which the Secretary will then use to calculate Medicare's payment rates for the tests. Id. § 1395m-1(b).

The statute defines "applicable laboratory" to mean a laboratory for which a majority of the revenues it receives from Medicare "are from this section, section 1395l (h) of this title, or section 1395w–4 of this title" – in other words, that they are from Medicare's Clinical Laboratory Fee Schedule or its Physician Fee Schedule.

Id. § 1395m-1(a)(2) ; see also Pl.'s Mem. at 8.

The statute also requires the Secretary to issue rules about how these applicable laboratories would report the amounts and volume of private sector payments they receive to the agency. Id. at § 1395m-1(a)(12). So in 2016, after publishing a preliminary rule and providing a public notice-and-comment period, the Secretary issued a final rule implementing Section 216. See Final Rule. In it, the Secretary further defined an "applicable laboratory" to mean one that "[b]ills Medicare Part B under its own National Provider Identifier (NPI)." 81 Fed. Reg. at 41,098 ; 42 C.F.R. § 414.502. Plaintiff objects to the additional gloss on the statute.

PROCEDURAL HISTORY

On December 11, 2017, plaintiff filed this lawsuit, challenging the definition of "applicable laboratory" set forth in the Final Rule. Compl. [Dkt. # 1]. Pending before the Court are the parties' cross-motions for summary judgment. Pl.'s Mot. for Summ. J. [Dkt. # 13]; Def.'s Cross-Mot. for Summ. J. & Opp. to Pl.'s Mot. for Summ. J. [Dkt. # 27] ("Def.'s Cross-Mot. & Opp.").¹ The motions are fully briefed, see Pl.'s Combined Opp. to Def.'s Mot. and Reply in Supp. of Pl.'s Mot. for Summ. J. [Dkt. # 29] ("Pl.'s Opp."); Def.'s Reply in Supp. of Cross-Mot. for Summ. J. [Dkt. # 34-1].² The Court received four amicus briefs,³ and the administrative record [Dkt. # 38] was filed on May 4, 2018.

STANDARD OF REVIEW

Federal courts are courts of limited jurisdiction, and the law presumes that "a cause lies outside this limited jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am. , 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994) ; see also Gen. Motors Corp. v. EPA , 363 F.3d 442, 448 (D.C. Cir. 2004) ("As a court of limited jurisdiction, we begin, and end, with an examination of our jurisdiction."). "[B]ecause subject-matter jurisdiction is ‘an Art[icle] III as well as a statutory requirement ... no action of the parties can confer subject-matter jurisdiction upon a federal court.’ " Akinseye v. District of Columbia , 339 F.3d 970, 971 (D.C. Cir. 2003), quoting Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee , 456 U.S. 694, 702, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982). Under Rule 12(b)(1), the plaintiff bears the burden of establishing jurisdiction by a preponderance of the evidence. See Lujan v. Defs. of Wildlife , 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) ; Shekoyan v. Sibley Int'l Corp. , 217 F.Supp.2d 59, 63 (D.D.C. 2002).

When considering a motion to dismiss for lack of jurisdiction, unlike when deciding a motion to dismiss under Rule 12(b)(6), the court "is not limited to the allegations of the complaint." Hohri v. United States , 782 F.2d 227, 241 (D.C. Cir. 1986), vacated on other grounds , 482 U.S. 64, 107 S.Ct. 2246, 96 L.Ed.2d 51 (1987).

Rather, "a court may consider such materials outside the pleadings as it deems appropriate to resolve the question [of] whether it has jurisdiction to hear the case." Scolaro v. D.C. Bd. of Elections & Ethics , 104 F.Supp.2d 18, 22 (D.D.C. 2000), citing Herbert v. Nat'l Acad. of Scis. , 974 F.2d 192, 197 (D.C. Cir. 1992) ; see also Jerome Stevens Pharms. , Inc. v. FDA , 402 F.3d 1249, 1253 (D.C. Cir. 2005).

ANALYSIS

Plaintiff challenges the Secretary's definition of "applicable laboratory" on the grounds that it is contrary to the language of PAMA and therefore, promulgated in violation of the APA. It asserts that by defining the term to mean only a laboratory that bills Medicare Part B under its own NPI, the Secretary improperly excluded "virtually all" hospital laboratories from PAMA's data-reporting requirements. Pl.'s Mem. at 2 (stating that most hospital laboratories do not have their own NPIs but bill Medicare using their hospitals' NPI). It contends that the definition is contrary to PAMA's plain text, is unreasonable, and is arbitrary and capricious because it improperly excludes a large body of relevant data and does not reflect private-sector market prices for diagnostic tests. Pl.'s Mem. at 3.

Defendant asserts that the Court does not have subject matter jurisdiction over plaintiff's lawsuit because the Final Rule is not subject to judicial review, and even if it were, plaintiffs do not have standing, and they did not exhaust their administrative remedies. Def.'s Cross-Mot. & Opp. at 1–2.

There is a "strong presumption that Congress intends judicial review of administrative action," Bowen v. Mich. Acad. of Family Physicians, 476 U.S. 667, 670, 106 S.Ct. 2133, 90 L.Ed.2d 623 (1986), and the APA provides for a "basic presumption of judicial review" of administrative actions. Tex. All. for Home Care Servs. v. Sebelius, 681 F.3d 402, 408 (D.C. Cir. 2012), quoting Banzhaf v. Smith, 737 F.2d 1167, 1169 (D.C. Cir. 1984) (en banc); see also 5 U.S.C. § 701(a)(1). Congress may, however, preclude judicial review of an administrative action by statute. Tex. All. , 681 F.3d at 408, citing Block v. Cmty. Nutrition Inst. , 467 U.S. 340, 349, 104 S.Ct. 2450, 81 L.Ed.2d 270 (1984) (holding that the presumption in favor of judicial review can be overcome by "specific language" in the statute that is a "reliable indicator" of Congress's intent to preclude review).

To determine "[w]hether and to what extent a particular statute precludes judicial review," courts consider its "express language, ... the structure of the statutory scheme, its objectives, its legislative history, and the nature of the administrative action involved." Block , 467 U.S. at 345, 104 S.Ct. 2450. In conducting this...