Knapp Med. Ctr. v. Hargan, 16-5234

• Decision Date: 21 November 2017
• Docket Number: No. 16-5234,16-5234
• Parties: KNAPP MEDICAL CENTER, et al., Appellants v. Eric D. HARGAN, in His Official Capacity as Acting Secretary of the Department of Health and Human Services, and Doctors Hospital at Renaissance, Appellees
• Court: U.S. Court of Appeals — District of Columbia Circuit

875 F.3d 1125

KNAPP MEDICAL CENTER, et al., Appellants

v.Eric D. HARGAN, in His Official Capacity as Acting Secretary of the Department of Health and Human Services, and Doctors Hospital at Renaissance, Appellees

No. 16-5234

United States Court of Appeals, District of Columbia Circuit.

Argued September 19, 2017

Decided November 21, 2017

Rehearing En Banc Denied January 23, 2018

Marc James Ayers argued the cause for appellants. With him on the briefs was Gregory Glen Marshall, Washington, DC.

Caroline D. Lopez, Attorney, U.S. Department of Justice, argued the cause for appellee Eric D. Hargan. With her on the brief was Alisa B. Klein, Attorney, Washington, DC.

Ryan Scarborough argued the cause for appellee Doctors Hospital at Renaissance. With him on the brief were John K. Villa, Enu Mainigi, and Richard A. Olderman, Washington, DC.

Before: Henderson and Griffith, Circuit Judges, and Williams, Senior Circuit Judge.

Karen LeCraft Henderson, Circuit Judge:

To prevent Medicare abuse through self-dealing, the Stark Law prohibits a physician from referring patients to a hospital or other healthcare facility in which he has a financial interest. There is an exception, however, for a physician-owned hospital, as long as the hospital complies with various reporting requirements. The Affordable Care Act amended the Stark Law to limit the ability of a physician-owned hospital to expand but carved out expansion exceptions for hospitals in medically underserved areas. As amended, the Stark Law prohibits judicial review of the procedure used to grant or deny an application for an expansion exception. The sole issue in this appeal is whether the district court correctly interpreted the preclusion-of-review provision to deprive it of subject matter jurisdiction. For the reasons that follow, we affirm.

I.

Title XVIII of the Social Security Act of 1935, 42 U.S.C. §§ 1395 – 1395lll , establishes Medicare, a medical insurance program for the elderly and disabled. Section 1877 of the Act—commonly referred to by the surname of its sponsor, former U.S. Congressman Peter Stark—forbids "self-referrals" by which a physician could profit from Medicare reimbursements to healthcare providers with which he has a financial relationship. 42 U.S.C. § 1395nn(a)(1)–(2). The "hospital ownership" exception accommodates physician-owned hospitals by allowing a physician to refer patients to a hospital in which he has an ownership interest, provided the hospital complies with reporting and disclosure requirements. 42 U.S.C. § 1395nn(d)(3)(D), (i)(1)(C)–(E), (i)(2).

Title VI of the Patient Protection and Affordable Care Act of 2010 (ACA) amends the Stark Law to prohibit physician-owned hospitals to expand beyond "the number of operating rooms, procedure rooms and beds for which the hospital is licensed ... on March 23, 2010." Pub. L. No. 111-148 § 6001(a), 124 Stat. 119, 684–689, codified as amended at 42 U.S.C. § 1395nn(d)(2)–(3), (i). The expansion restriction exempts some hospitals in medically underserved communities—"applicable hospitals" and "high Medicaid facilities"—subject to approval by the Secretary of the U.S. Department of Health and Human Services (HHS). See 42 U.S.C. § 1395nn(i)(3). As amended by the ACA, section 1395nn(i)(3) reads, in relevant part:

(A) Process . (i) ... The Secretary shall establish and implement a process under which a hospital ... may apply for an exception from the [nonexpansion] requirement .... [ (ii) ] The process under clause (i) shall provide ... the community ... the opportunity to provide input with respect to the application. (iii) ... The Secretary shall implement the process under clause (i) on February 1, 2012. (iv) ... Not later than January 1, 2012, the Secretary shall promulgate regulations to carry out the process under clause (i) .

(B) Frequency—The process described in subparagraph (A) shall permit an applicable hospital to apply for an exception up to once every 2 years.

(C) ... [A]n applicable hospital granted an exception under the process described in subparagraph (A) may [expand].

(D) ... Any [expansion] may only occur ... on the main campus of the applicable hospital.

(E) ... "[A]pplicable hospital" means a hospital—(i) that is located in a county in which [population growth has exceeded the state average by at least 150 per cent for the past five years] ...; (ii) [that has an] annual percent of total inpatient [Medicaid] admissions ... [that exceeds the county average]; (iii) that does not discriminate against beneficiaries of [Medicare or Medicaid nor] permit physicians practicing at the hospital to [do so]; (iv) that is located in a State in which the average bed capacity ... is less than the national average ...; and (v) that has an average bed occupancy rate that is greater than the [state] average ....

[ (F)–(H) define terms not relevant here and require publication of expansion decisions.]

(I) Limitation on review—There shall be no administrative or judicial review under section 1395ff of this title, section 1395oo of this title, or otherwise of the process under this paragraph (including the establishment of such process) .

42 U.S.C. § 1395nn(i)(3) (emphasis added).

Doctors Hospital at Renaissance (DHR), a physician-owned hospital in Hidalgo County, Texas, applied to expand as an applicable hospital. See 80 Fed. Reg. 26,566, 26,567 (May 8, 2015) (notice of application). Knapp Medical Center, McAllen Hospitals, L.P. and Cornerstone Regional Hospital, L.P. (collectively, Knapp), competitors of DHR, filed comments opposing DHR's expansion application. They argued that HHS—specifically the Center for Medicare and Medicaid Services (CMS)—had failed to publish and accept public comments on an earlier version of the expansion application; that the approved application had been filed less than two years after the first, unpublished application, in contravention of HHS rules; and that DHR did not qualify as an applicable hospital because it failed the statutory requirements for county population growth, Medicaid admissions and Medicaid nondiscrimination. Finding the objections meritless, CMS approved the application. See 80 Fed. Reg. 55,851, 55,852 (Sept. 17, 2015) (decision granting application).

Less than one month later, Knapp sued to set aside the decision and block DHR's expansion. The district court dismissed Knapp's complaint for lack of subject matter jurisdiction, holding that its claims are unreviewable per 42 U.S.C. § 1395nn(i)(3)(I), which, as set forth supra , bars administrative and judicial review of the expansion-restriction exception "process." Knapp Med. Ctr. v. Burwell , 192 F.Supp.3d 129, 134–35 (D.D.C. 2016). Knapp appeals.

II.

We review de novo the district court's dismissal for lack of subject matter jurisdiction, taking the plaintiffs' allegations as true and drawing all reasonable inferences in their favor. Fla. Health Scis. Ctr., Inc. v. Sec'y of Health & Human Servs. , 830 F.3d 515, 518 (D.C. Cir. 2016). In interpreting a provision that precludes judicial review, we "must determine whether the challenged agency action is of the sort shielded from review" and "may not inquire whether a challenged agency decision is arbitrary, capricious, or procedurally defective" unless we are certain of our subject matter jurisdiction. Amgen, Inc. v. Smith , 357 F.3d 103, 113 (D.C. Cir. 2004). The plaintiffs bear the burden of establishing jurisdiction. Lujan v. Defs. of Wildlife , 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). Although we presume the Congress intends that agency action be judicially reviewable, El Paso Nat. Gas Co. v. United States , 632 F.3d 1272, 1276 (D.C. Cir. 2011), that presumption, "like all presumptions used in interpreting statutes, may be overcome by specific language ... that is a reliable indicator of congressional intent," Tex. All. for Home Care Servs. v. Sebelius , 681 F.3d 402, 408 (D.C. Cir. 2012) (quoting Block v. Cmty. Nutrition Inst. , 467 U.S. 340, 349, 104 S.Ct. 2450, 81 L.Ed.2d 270 (1984) ).

"Only Congress may determine a lower federal court's subject-matter jurisdiction," Kontrick v. Ryan , 540 U.S. 443, 452, 124 S.Ct. 906, 157 L.Ed.2d 867 (2004) (citing U.S. CONST. ART. III, § 1 ), and what the Congress gives, the Congress may take away. "[T]he 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), is therefore rebuttable by a clear statement of congressional intent to preclude review, Block , 467 U.S. at 349, 104 S.Ct. 2450. Our task is to determine whether the Secretary's approval of an expansion application under the Stark Law is within the preclusive scope of section 1395nn(i)(3)(I). See Amgen , 357 F.3d at 113.

As noted earlier, the ACA amended the Stark Law to incorporate the expansion prohibition, the applicable-hospital exception and the preclusion-of-review provision.¹ Pub. L. No. 111-148, § 6001(a), 124 Stat. 119, 688. And as further noted earlier, the preclusion provision forbids "administrative or judicial review under section 1869 [ 42 U.S.C. § 1395ff ], section 1878 [ 42 U.S.C. § 1395oo ], or otherwise of the process under this paragraph (including the establishment of such process)." Knapp offers four reasons why its claims are not subject to the jurisdictional bar.

First, in Knapp's view, "process," as used in section 1395nn(i)(3)(I), refers only to the HHS regulation implementing the expansion prohibition and its exceptions, and "the establishment of the process" is the notice-and-comment rulemaking by which the regulation was developed and promulgated. According to Knapp's interpretation, the "process" is distinct from the CMS determination flowing from the process; therefore, according to Knapp, although an APA attack on the rulemaking and a challenge to specific requirements of the regulation are unreviewable, its challenge to an individual exception decision is reviewable. Knapp attaches great...