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From Health Law Daily, September 21, 2016

Federal court lacked jurisdiction until administrative remedies were exhausted

By Robert B. Barnett Jr., J.D.

In a suit by a nonprofit health care foundation against the Secretary of HHS to collect Medicare reimbursements for disproportionate share hospital (DSH) services provided more than 10 years ago, the federal district court lacked subject matter jurisdiction to hear the suit because the foundation had not yet exhausted its administrative remedies. However frustrated the foundation might have been that the Provider Reimbursement Review Board (PRRB) remanded its claim, in effect starting the process all over again, none of the limited exceptions to the general rule that administrative remedies must be exhausted applied in this case (Empire Health Foundation v. Burwell, September 19, 2016, Boasberg, J.).

Background. Empire Health Foundation is a nonprofit that provides health services in western Washington state. Two of its hospitals filed claims for Medicare reimbursement of services they provided. When a fiscal intermediary approved claims amounts that were below what Empire Health felt were proper, Empire Health filed a challenge with the PRRB in 2009 involving reimbursement sums beginning in 2005. In 2015, the PRRB remanded the dispute to the fiscal intermediary for a recalculation.

Upset at the prospect of starting all over again, Empire Health objected via letter that the PRRB improperly remanded the entire appeal, since the fiscal intermediary’s misuse of the Medicare Supplemental Security Income (SSI) data-matching process was only one of its claims in the original challenge, and not the primary one. Before the PRRB could respond, Empire Health filed suit against the Secretary of HHS in federal district court for the District of Columbia challenging the remand. Shortly thereafter, the PRRB denied Empire Health’s request to undo the remand. The Secretary filed a motion in the federal suit to dismiss all claims for lack of subject matter jurisdiction.

Subject matter jurisdiction. The courts have interpreted the Medicare Act to preclude Medicare-based causes of action until the entire underlying action has made its way through the administrative review process (Weinberger v. Salfi, 422 U.S. 749, 760-762 (1975)). The question for this court, then, was whether the remand order constituted a final agency decision. "The conclusion," the court said, "that Empire Health’s Medicare process has not yet terminated seems inescapable." Not only was the fiscal intermediary still recalculating the reimbursement but also its new decision would be subject to further administrative review.

Exceptions. Empire Health, however, made three arguments that narrow exceptions to the general rule applied in this case. First, it argued that the PRRB’s remand order was a jurisdictional dismissal, which is the equivalent to a final agency decision. The court determined that, although some legitimate confusion existed, the PRRB’s order was similar to routine non-jurisdictional remands found in federal court. As such, the remand order was not fit for judicial review. Second, Empire Health argued that an exception applied here for non-final administrative orders where a party’s right of judicial review was precluded. The court disagreed, noting that the exception did not apply where, as here, the right to judicial review was merely postponed or the party was inconvenienced by the delay. Third, Empire Health argued for application of an exception where an agency acted in excess of its powers and thereby barred review by a federal district court. On the contrary, the court said, Empire Health was still entitled to judicial review in this case in due course.

Having found that none of the exceptions apply, the court granted the Secretary’s motion to dismiss the complaint.

The case is No. 15-2251 (JEB).

Attorneys: Jeffrey A. Lovitky (Jeffrey A. Lovitky, Attorney at Law) for Empire Health Foundation, Deaconess Medical Center, and Valley Hospital Medical Center. Emily Nestler, U.S. Department of Justice, for Sylvia Mathews Burwell, Secretary, U.S. Department of Health and Human Services.

Companies: Empire Health Foundation; Deaconess Medical Center; Valley Hospital Medical Center; U.S. Department of Health and Human Services

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