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October 7, 1982

RICHARD SCHWEIKER, et al., Defendants

The opinion of the court was delivered by: SIRICA


 This matter is before the Court on the defendants' motion to dismiss for lack of subject matter jurisdiction, or in the alternative, on cross-motions by both parties for summary judgment. This Court, by an order entered on June 3, 1982 stayed further proceedings in this case pending resolution of the difficult question of this Court's subject matter jurisdiction.

 Plaintiff, a New Jersey hospital, is seeking declaratory and injunctive relief from the defendants' actions in granting a waiver of plaintiff's statutory rights to the type of reimbursement traditionally available under the Medicare program, 42 U.S.C. 1395 et seq. The defendants assert that this Court's jurisdiction under 28 U.S.C. § 1331 is intercepted by 42 U.S.C. § 405(h). The defendants contend that 42 U.S.C. § 405(h) denies this Court subject matter jurisdiction over any and all claims for Medicare reimbursement, including the claims presented by the plaintiff in this case. Instead, argue the defendants, the plaintiffs must initially exhaust its claims through the administrative process afforded by 42 U.S.C. § 1395 oo. This provision states that a provider of Medicare services who is dissatisfied with the level of reimbursement must seek initial review of its claim by the Provider Reimbursement Review Board (PRRB). See 42 U.S.C. § 1395 oo ; 42 C.F.R. § 405.1835. Only upon completion of review by the Board and subsequent review by the Secretary of the Department of Health and Human Services can a provider seek limited judicial review in a District Court. 42 U.S.C. § 1395 oo (f) (1) (Supp. IV 1980).

 The defendant, the Secretary of the Department of Health and Human Services, however, fails to identify how the administrative process outlined by 42 U.S.C. § 1395 oo will meet and address the individual claims of the plaintiff in this case. Therefore the Court must undertake the task of isolating the separate claims of Riverside General Hospital, the plaintiff provider in this case, to determine whether they come within the class of cases excluded from this Court's jurisdiction by § 405(h). In addition, under the guidance of the recent decision of our Circuit Court of Appeals in National Association of Home Health Agencies v. Schweiker, 223 U.S. App. D.C. 209, 690 F.2d 932 (D.C. Cir. 1982) [hereinafter cited as NAHHA ], this Court must conduct a further inquiry as to whether a denial of subject matter jurisdiction by this Court would result in a complete preclusion of judicial review for the claims of plaintiff provider.

 The first task that confronts the Court in determining whether § 405(h) bars review of plaintiff's claims is separating the various claims of the plaintiff into their respective categories. Plaintiff argues that five of its eight challenges to the Secretary's action are purely procedural in character. Because the subject matter jurisdiction of this Court substantially depends on an accurate identification of whether plaintiff's claims are procedural or substantive, the Court cannot rely solely upon plaintiff's categorization of its claims. To the extent that plaintiff provider is accurate in the categorization of its claims as procedural, however, the law in this circuit is relatively clear that § 405(h) will not preclude review by this Court. See NAHHA, 690 F.2d at 937 (citing the "eminently logical" ruling of the Humana court); Humana of South Carolina v. Califano, 590 F.2d 1070, 1080-81 (D.C. Cir. 1978). Thus the first inquiry that this Court must conduct is determining whether the plaintiff's contentions are procedural or substantive in nature.

 I. Background

 The plaintiff is a New Jersey hospital which provides medical treatment to patients under the Medicare Act. 42 U.S.C. § 1395 (1976 & Supp. IV 1980) (title XVIII of the Social Security Act). Under that Act participant providers are reimbursed either directly by the federal government or through an intermediary for the "reasonable cost" of the medical services that they provide. 42 U.S.C. § 1395f(b). Reasonable cost is defined as expenses actually incurred minus unnecessary costs, 42 U.S.C. § 1395x(v), which figure is subject to regulations promulgated by the Secretary of the Department of Health and Human Resources governing computation. 42 U.S.C. § 1395x(v) (1) (A). Subsequent to the enactment of the original Medicare Act, Congress amended the Act on two occasions to allow the Secretary to develop alternatives to the reasonable cost method of reimbursement for providers. See Pub. L. No. 92-603 § 222(a), 86 Stat. 1390 [hereinafter cited as 1972 Amendments]; Pub. L. No. 90-248, § 402, 81 Stat. 930 [hereinafter cited as 1967 Amendments]. The 1967 Amendments authorized the Secretary to approve experimental incentive reimbursement programs without explicitly specifying which programs the Secretary should pursue. The 1972 Amendments authorized the Secretary to approve several types of specific incentive programs including prospective payment programs. Under both Amendments the Secretary was authorized to waive the reasonable cost restrictions on provider reimbursement for the purposes of conducting the particular incentive experiment that the Secretary had approved. The purpose behind the amendments was to encourage the Department of Health and Human Services, intermediaries, and providers to develop more efficient methods of supplying health care to Medicare beneficiaries. At least as of 1972, prospective reimbursement was viewed by Congress as a potential means to achieve that end.

 Of more relevance to the jurisdictional issue before the Court, however, are the procedural requirements that Congress attached to the power of the Secretary to waive the traditional reasonable cost principles which have formed the basic foundation for provider accountability under the Medicare program since its inception. The 1967 Amendments demand that the Secretary obtain the advice and recommendations of competent specialists prior to engaging in any incentive experiment. 42 U.S.C. § 1395b-1. The 1972 Amendments went even further and required in addition to the advice of competent experts the submission by the Secretary of a written report to two Congressional committees at least 30 days prior to the commencement of the experimental project. 42 U.S.C. § 1395b-1, note. A significant portion of plaintiff's challenges revolve around the Secretary's alleged noncompliance with these and other procedural requirements in initiating a state wide experimental program using prospective reimbursement for New Jersey providers. The defendants, in turn, allege that the plaintiff's claims do not really go to the issue of the procedures used to commence the New Jersey experiment. Rather, the defendants argue, the plaintiff's claims are simply disputes as to the appropriate amount of Medicare reimbursement due plaintiff cast in the garb of a procedural challenge.

 Before addressing the relationship of the claims at issue in this case to § 405(h)'s mandate to preclude judicial review before administrative exhaustion it will be useful to state the claims as the plaintiff provider views them. According to the plaintiff, five of its eight challenges are purely procedural. These challenges are: 1) that the defendants failed to obtain necessary internal approvals for their waiver of New Jersey's adherence to traditional Medicare reimbursement methods; 2) that the defendants failed to obtain the requisite study prior to allowing New Jersey undertake an experimental program under the 1967 Amendments; 3) that the defendants similarly failed to comply with the command of the 1972 Amendments to submit a written report to Congressional committees prior to commencement of the program in addition to failing to obtain the advice of experts; 4) that the defendants failed to follow their own guidelines regulating the approval of experimental reimbursement projects; and, 5) that the defendants implemented the New Jersey experiment in prospective reimbursement without providing for a constitutionally required notice and hearing. The plaintiff lists the balance of its challenges as substantive. These three claims are: 1) that the 1967 Amendments, upon which defendants rely in whole or in part, authorize only retrospective reimbursement and not prospective reimbursement; 2) that the defendants' waiver is unnecessarily broad; and, 3) that the Medicare Act, as amended, does not authorize reimbursement experiments which fail to include payment for a return on equity capital.

 II. Jurisdiction Over Substantive Claims

 The Court initially notes that plaintiff's challenge to the return on equity exclusion in calculating provider reimbursement comes to the closest of all of plaintiff's allegations to resembling a "claim" within the meaning of 42 U.S.C. § 405(h). This challenge is "unmistakenly directed at upsetting on the merits the Secretary's determination on an element of cost-reimbursement." Humana of South Carolina, Inc. v. Califano, 191 U.S. App. D.C. 368, 590 F.2d 1070, 1079 (D.C. Cir. 1978). As such, the Court must concur with the defendants' view of its jurisdiction over this claim and require the plaintiff to seek review of the return on equity issue through the administrative processes afforded them by 42 U.S.C. § 1395 oo.

 The other two claims that plaintiff concedes to be substantive in nature, on the other hand, are not as easily dispatched. While these two claims do not relate precisely to the manner in which the Secretary proceeded in implementing a prospective reimbursement program in New Jersey, they are not of a sort which can be handled by the administrative process set forth in 42 U.S.C. § 1395 oo. This Court, guided by the decision of our Circuit in NAHHA and greatly aided by the opinion of the District Court in that case, must determine whether these substantive claims would elude any form of judicial review should 42 U.S.C. § 405(h) be given preclusive effect.

 The test articulated by our Circuit for nonprocedural statutory claims in NAHHA appears to be twofold. First, the substantive claim must be cast as either " directly concern[ing] the amount of reimbursement" a provider receives, NAHHA, 690 F.2d at 938 (emphasis added), or not directly involving the amount of provider reimbursement. Once a substantive challenge has been identified as directly implicating the amount of Medicare reimbursement, the challenge becomes a "claim" within the meaning of 42 U.S.C. § 405(h). Of course, along with this categorization comes the result that § 405(h) intercepts this Court's subject matter jurisdiction. ...

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