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From Health Law Daily, November 27, 2017

Stark Law preclusion-of-review amendment bars judicial review of HHS decision

By Jeffrey H. Brochin, J.D.

A preclusion-of-review provision included in the Affordable Care Act prohibits judicial review of potential Stark Law violations after a CMS determination approves a physician-owned hospital expansion. The Court of Appeals for the District of Columbia Circuit determined that the D.C. District Court correctly interpreted the preclusion-of-review provision, and affirmed the dismissal of competing hospitals’ complaints due to lack of subject matter jurisdiction (Knapp Medical Center v. Hargan, November 21, 2017, Henderson, K.).

Background. To prevent Medicare abuse through self-dealing, the Stark Law (42 U.S.C. §1395nn) prohibits a physician from referring patients to a hospital or other healthcare facility in which he or she has a financial interest. There is an exception, however, for a physician-owned hospital, as long as the hospital complies with various reporting requirements. Section 6001(a)(3) of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) 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 also prohibits judicial review of the procedure used to grant or deny an application for an expansion exception. After a physician-owned hospital in Texas applied for an expansion, its competitors (including Knapp Medical Center) filed comments opposing the expansion; CMS found the objections to be meritless and approved the expansion application. Knapp sued to set aside the decision, but the district court dismissed the complaint for lack of subject matter jurisdiction (see Judicial review of physician-owned hospital expansion decision foreclosed by Congress, June 30, 2016). For the reasons set forth below, the appellate court upheld the district court’s dismissal.

Judicial review—a rebuttable presumption. Although the courts presume that Congress intends that agency actions be judicially reviewable, the presumption may be overcome by specific language indicating a different congressional intent. The Stark Law’s clear statutory language provides that there shall be no administrative or judicial review of the process under which a hospital may apply for an exception from the hospital non-expansion rule. Therefore, the issue before the appellate court was limited to whether CMS’ approval of an expansion application under the Stark Law was within the preclusive scope of Sec. 1395nn(i)(3)(I).

Process versus determination. Knapp argued that the term "process" as used in the statute referred only to implementing HHS regulations, and that the establishment of the process meant the notice-and-comment rulemaking by which the regulation was developed and promulgated. Therefore, according to Knapp, "process" should be viewed as distinct from the CMS "determination" flowing from the process. Knapp said that although an attack on the rulemaking and a challenge to specific requirements of the regulation would be unreviewable, its challenge to an individual exception decision was reviewable. The court rejected this argument, noting that as a textual matter, the statute referenced more than one process, and that Congress used cross references to clarify what process it was referring to in each part of Sec. 1395nn.

No inference from legislative precursor. Knapp referred to the legislative history of the statute entitled "America’s Affordable Health Choices Act of 2009," a precursor to the ACA that contained a broader provision precluding review of the exception process—including the establishment of the process—and any determination made under such process. Although Knapp regarded this difference as meaning that Congress specifically considered and rejected CMS’ interpretation, the court noted that it could infer nothing from Congress’s consideration and rejection of a differently worded provision in a separate piece of legislation. Therefore, even if the legislative history of the ACA had probative value, the legislative history of a different health care bill that never became law was not.

Misconstruing precedent. Knapp pointed to the appellate court’s prior ruling interpreting the ACA’s preclusion-of-review provision with regards to disproportionate share hospitals as reinforcing the notion that determinations are reviewable even if the process is not. However, the court noted that it had twice rejected the categorical distinction between legislative inputs and outputs, and that in any event, unlike the legislative sections previously examined in which Congress specified what items were unreviewable, in the instant case, Sec. 1395nn(i)(3)(I)’s preclusion of review was unqualified.

The court concluded that "process" under the relevant paragraph encompassed all of Sec. 1395nn(i)(3), including the granting or denial of hospital expansion applications, and because the statute precluded judicial review of Knapp’s claims, the district court lacked subject matter jurisdiction of the complaint. The district court’s judgment of dismissal was therefore affirmed.

The case is No. 16-5234.

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