Cmty. Oncology Alliance, Inc. v. Office of Mgmt. & Budget

• Decision Date: 16 February 2021
• Docket Number: No. 19-5116,19-5116
• Parties: COMMUNITY ONCOLOGY ALLIANCE, INC., Appellant v. OFFICE OF MANAGEMENT AND BUDGET, et al., Appellees
• Court: U.S. Court of Appeals — District of Columbia Circuit

987 F.3d 1137

COMMUNITY ONCOLOGY ALLIANCE, INC., Appellant

v.OFFICE OF MANAGEMENT AND BUDGET, et al., Appellees

No. 19-5116

United States Court of Appeals, District of Columbia Circuit.

Argued January 9, 2020

Decided February 16, 2021

Laurence S. Shtasel, pro hac vice, argued the cause for appellant. With him on the briefs was Alan M. Freeman, Washington, DC.

Courtney L. Dixon, Attorney, U.S. Department of Justice, argued the cause for appellees. With her on the brief was Alisa B. Klein, Attorney, Washington, DC.

Before: Pillard and Katsas, Circuit Judges, and Sentelle, Senior Circuit Judge.

Katsas, Circuit Judge:

The plaintiff here seeks to challenge a reduction in Medicare drug reimbursement rates caused by a sequestration order under the Balanced Budget Act. We hold that the district court lacked subject-matter jurisdiction over the case.

I

Through the Medicare program, the federal government pays for health care for the elderly and disabled. 42 U.S.C. § 1395 et seq . Under Part B of Medicare, the government reimburses physicians who provide covered outpatient services and drugs to beneficiaries. The Medicare Modernization Act establishes a reimbursement formula for certain Part B drugs: Section 1395w-3a of Title 42 provides that "the amount of payment determined under this section" is 106% of the drug's average sales price, as calculated under a statutory formula. See id. § 1395w-3a(b)(1). Section 1395w-3a further provides that "[t]here shall be no administrative or judicial review" of "determinations of payment amounts under this section." Id. § 1395w-3a(g)(1).

The Balanced Budget and Emergency Deficit Control Act of 1985 (Balanced Budget Act) sets forth various spending targets designed to reduce the federal budget deficit. 2 U.S.C. §§ 901 – 03. When the targets are not met, the Act requires the President to order automatic spending cuts known as sequestration. Id. § 904(f)(5). The Act contains special rules for "individual payments for services" covered by Medicare Part B, id. § 906(d)(1)(A), which cannot be reduced by more than two percent, id. § 901a(6)(A).

In 2013, Congress failed to reach a budget agreement. As a result, the President issued a sequestration order that required a two percent reduction in all Medicare reimbursements. This order has been extended many times and is now set to remain effective through 2030.

Community Oncology Alliance is an association of oncologists. The government reimburses many of its members for the cost of cancer drugs provided to patients through Medicare Part B. In this lawsuit, Community Oncology contends that sequestration does not apply to these drugs, which it says must be reimbursed at the full amount specified by the Medicare Modernization Act. Community Oncology invoked a private cause of action in the Balanced Budget Act, 2 U.S.C. § 922(a)(2). It requested declaratory and injunctive relief barring application of the sequestration order to Medicare Part B drugs.

Community Oncology moved to convene a three-judge court under the Balanced Budget Act. The district court denied the motion on the ground that section 922(a)(2) does not encompass its claims.

The district court then dismissed the case for lack of jurisdiction. It held that section 1395w-3a(g)(1) bars judicial review of Community Oncology's claim for increased reimbursement of Part B drugs. Cmty. Oncology All., Inc. v. OMB , No. 18-cv-1256, 2019 WL 1440132, at *2–3 (D.D.C. Mar. 31 2019). The court did not reach the government's alternative argument that 42 U.S.C. § 405(h), another Medicare provision, independently bars judicial review by stripping the district court of its federal-question jurisdiction. We have appellate jurisdiction under 28 U.S.C. § 1291.

On appeal, Community Oncology contends that the district court had subject-matter jurisdiction under the Balanced Budget Act and the federal-question statute, 28 U.S.C. § 1331. It also contends that the Balanced Budget Act required convening a three-judge district court. We review these legal questions de novo. See Am. Hosp. Ass'n v. Azar , 895 F.3d 822, 825 (D.C. Cir. 2018) ; Indep. Inst. v. FEC , 816 F.3d 113, 115 (D.C. Cir. 2016).

II

To establish the district court's original jurisdiction, Community Oncology first invokes 2 U.S.C. § 922(a)(2), a provision of the Balanced Budget Act. It states that "[a]ny Member of Congress, or any other person adversely affected by any action taken under this title, may bring an action, in the United States District Court for the District of Columbia, for declaratory judgment and injunctive relief concerning the constitutionality of this title." By affording review specifically in our district court, section 922(a)(2) both confers subject-matter jurisdiction on that court and creates a private right of action. See Wagner v. FEC , 717 F.3d 1007, 1011–13, 1012 n.5 (D.C. Cir. 2013) ; City of Rochester v. Bond , 603 F.2d 927, 931 (D.C. Cir. 1979).

The Balanced Budget Act authorizes three types of declaratory or injunctive claims. Any Member of Congress may sue "on the ground that any order that might be issued pursuant to section 904 ... violates the Constitution." 2 U.S.C. § 922(a)(1). Any Member of Congress also may sue "on the ground that the terms of an order issued under section 904 ... do not comply with the requirements of this title." Id. § 922(a)(3). Finally, as noted above, any Member of Congress "or any other person adversely affected by any action taken under this title" may seek relief "concerning the constitutionality of this title." Id. § 922(a)(2). As quoted in the provisions above, the phrase "this title" refers to Title II of Public Law 99-177 —i.e. , the Balanced Budget Act. See Pub. L. No. 99-177, § 200(a), 99 Stat. 1037, 1038 (1985).¹

This scheme permits private parties to raise facial constitutional challenges to the Balanced Budget Act, but not as-applied challenges to individual sequestration orders. Section 922(a)(2), the only provision of the Act that allows private litigation, permits Members of Congress and private parties to raise claims "concerning the constitutionality of this title "—i.e. , of the Balanced Budget Act itself (emphasis added). In contrast, section 922(a)(1) permits Members of Congress to claim that an "order that might be issued pursuant to" the Balanced Budget Act "violates the Constitution" (emphasis added). Section 922(a)(2) most naturally denotes facial challenges to the statute, while section 922(a)(1) most naturally denotes as-applied challenges to individual sequestration orders. Moreover, we must presume that these different formulations—sharply juxtaposed in immediately adjacent causes of action—mean something different. See , e.g. , D.H.S. v. MacLean , 574 U.S. 383, 391–92, 135 S.Ct. 913, 190 L.Ed.2d 771 (2015) ; Russello v. United States , 464 U.S. 16, 23, 104 S.Ct. 296, 78 L.Ed.2d 17 (1983).

A broader reading of section 922(a)(2) would make nonsense of the statutory structure. If section 922(a)(2) were read to permit challenges to individual sequestration orders, then section 922(a)(1) would be entirely unnecessary. Members of Congress could challenge sequestration orders under either provision, and section 922(a)(1) would reach no farther than section 922(a)(2). We should avoid interpretations that "treat statutory terms as surplusage," Babbitt v. Sweet Home Chapter of Cmtys. for a Great Or. , 515 U.S. 687, 698, 115 S.Ct. 2407, 132 L.Ed.2d 597 (1995), much less interpretations that treat entire causes of action as such.

Community Oncology resists the charge of surplusage by emphasizing the phrase "might be issued" in section 922(a)(1). It argues that this language authorizes Members of Congress to challenge proposed sequestration orders before they are issued, whereas section 922(a)(2) permits only retrospective challenges to "any action taken" in the past. We are not so sure, given the obvious Article III problem presented by challenges to orders not yet issued. See , e.g. , Clapper v. Amnesty Int'l USA , 568 U.S. 398, 409, 133 S.Ct. 1138, 185 L.Ed.2d 264 (2013). In any event, Community Oncology's interpretation of section 922(a)(2) still would create surplusage. For if that provision permits as-applied challenges to issued sequestration orders, then it also permits Members of Congress to bring as-applied challenges to proposed sequestration orders. The requirement of a claim "concerning the constitutionality" of the Balanced Budget Act does not distinguish between those two kinds of as-applied challenges. And while section 922(a)(2) requires private plaintiffs to have been harmed by an action already "taken" under the Balanced Budget Act, it imposes no such restriction on Members of Congress. Thus, even if section 922(a)(1) permitted prospective challenges to proposed sequestration orders, Community Oncology's broad interpretation of section 922(a)(2) still would reduce section 922(a)(1) to surplusage.

As we have construed it, section 922(a)(2) does not cover the claims in this case. In its complaint, Community Oncology challenged "the application of the sequestration to Medicare Part B drugs that was made effective April 1, 2013." J.A. 23. It sought a declaratory judgment that "the sequestration cannot be applied to alter" the formula "for reimbursement of Medicare Part B drugs," as well as an injunction along the same lines. Id. at 23–25, 104 S.Ct. 296. Because Community Oncology sought to challenge one aspect of a sequestration order under the Balanced Budget Act, rather than the Act itself, section 922(a)(2) conferred neither subject-matter jurisdiction nor a cause of action. And although the Balanced Budget Act requires the merits of "[a]ny action brought under" section 922(a)(2) to be "heard and determined by a three-judge court," 2 U.S.C. § 922(a)(5), that provision did not bar the district court from determining whether this action was properly "brought under" section 922(a)(2) in the first place. See Shapiro v. McManus , 577 U.S. 39, 136 S. Ct. 450,...