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Three Lower Counties Community Health Services Inc. v. U.S. Dep't of Health and Human Services

October 9, 2007


The opinion of the court was delivered by: Ellen Segal Huvelle United States District Judge


Plaintiff Three Lower Counties Community Services, Inc. ("TLC") has filed this putative class action lawsuit seeking to enjoin the United States Department of Health and Human Services and its Secretary (collectively "HHS") from applying two cost limits -- a per visit payment "cap" and a physician productivity "screen" -- when making cost reimbursements under the Medicare program to Federally-Qualified Health Centers ("FQHCs"). Before the Court is defendants' motion to dismiss for lack of subject matter jurisdiction.*fn1 For the following reasons, the motion to dismiss will be GRANTED.


Plaintiff, a non-profit corporation located in Princess Anne, Maryland, operates as a "health center" under the Public Health Services ("PHS") Act, 42 U.S.C. § 245b. (Compl. at ¶ 5.) The PHS Act authorizes grant payments to health centers for the provision of health services in medically-underserved communities. (Id.; Defs.' Mot. at 6.) Because it receives a grant under § 254b of the Medicare statute, plaintiff also qualifies as an FQHC, 42 U.S.C. § 1395x(aa)(4), and receives payment under the Medicare statute for the services that it provides to the program's beneficiaries. (Defs.' Mot. at 6.)

Medicare pays FQHCs an all-inclusive per visit payment amount based upon 80 percent of the facility's "reasonable costs" of furnishing services to Medicare beneficiaries. 42 U.S.C. § 1395l(a)(3). To maintain its status as an FQHC and to receive reimbursement for the services it provides, an FQHC must submit a detailed cost report to its designated financial intermediary. 42 C.F.R. § 405.2470(c)(2). The intermediary reviews the cost report and issues a "notice of program reimbursement" ("NPR"), which specifies the amount the provider is owed for the services it has provided. 42 C.F.R. § 405.2466(c).

If an FQHC is dissatisfied with the NPR, the Medicare statute and its implementing regulations outline an administrative process that the FQHC may follow to appeal the intermediary's determination as to its reimbursable costs. The FQHC may request a hearing before the intermediary if the amount in controversy is at least $1,000, but less than $10,000, 42 C.F.R. § 405.1809, or before the Provider Reimbursement Review Board ("PRRB" or the "Board") if the amount in controversy is more than $10,000. 42 U.S.C. §§ 1395oo(a)(1)-(2); 42 C.F.R. § 405.1835. If the PRRB has jurisdiction to consider the FQHC's claims, it holds a hearing and renders a decision. 42 C.F.R. § 405.1871(a). The PRRB's decision is subject to discretionary review by the Secretary. 42 U.S.C. § 1395oo(f)(1); 42 C.F.R. § 405.1875. After a final decision is issued, the provider has 60 days to seek judicial review in the district court. 42 U.S.C. § 1395oo(f)(1); 42 C.F.R. § 405.1877.

As an FQHC, plaintiff's Medicare reimbursement is subject to the two cost limits at issue in this case: the "per visit payment limit" and the "productivity screen." (Compl. at ¶¶ 62, 68; Defs.' Mot. at 7.) On October 10, 2006, plaintiff sent a letter to the PRRB requesting a "ruling" as to whether PRRB had jurisdiction to consider a challenge to these two limits. (Defs.' Attach. 1, Ex. A [Oct. 10, 2006 letter from TLC to PRRB].) Plaintiff explained its understanding that PRRB lacked jurisdiction to consider its claims because it would be unable to provide appropriate relief, i.e., "a finding that the limits are unlawful under APA standards, and an order that would enjoin their further use and require corrective action to the extent the limits have adversely affected Medicare payments to FQHCs." (Id. at 2.) Plaintiff also requested that its challenge be placed immediately on the appeals docket, in the event that the PRRB determined that it had jurisdiction. (Id.)

On November 9, 2006, the Chair of the PRRB sent plaintiff a letter advising that "the Board does not furnish advisory opinions on jurisdiction. The only jurisdictional rulings issued by the Board involve cases pending before it." (Defs.' Attach. 2, Ex. B [Nov. 9, 2006 letter from S. Cochran to TLC].) In response to the PRRB's letter, plaintiff acknowledged that even though the claims it was raising were not connected to a specific cost report, it was requesting an opinion from the PRRB as to how a provider should "challenge a regulation or cost limit on its face." (Defs.' Attach. 3, Ex. C [Dec. 21, 2006 letter from TLC to PRRB] at 1.) Plaintiff went on to state that, based upon the PRRB's earlier letter, plaintiff "presume[d] than [sic] the PRRB has no administrative process to challenge these cost limits on their face." (Id.)

On January 4, 2007, the PRRB sent plaintiff a letter assigning it a case number. (Defs.' Attach. 4, Ex. D [Jan. 4, 2007 letter from PRRB to TLC].) On January 16, 2007, plaintiff responded, stating that it would "rely" on the Board's letter of November 9, 2006, which to plaintiff's understanding "indicat[ed] that no relief could be afforded through the process . . . [the PRRB's] letter would commit . . . [plaintiff] to follow." (Defs.' Attach 5, Ex. E [Jan. 16, 2007 letter from TLC to PRRB] at 1-2.) Plaintiff concluded by stating that "we already have a timely and otherwise proper decision of the Board, and intend to rely on it any future action we may take . . . ." (Id. at 2.)

Approximately three months later, the PRRB issued a decision dismissing plaintiff's appeal for lack of jurisdiction. (Defs.' Attach. 6, Ex. F [Decision of the Board].) The PRRB concluded that a provider has the right to a hearing with respect to costs claimed on the cost report if "dissatisfied" with the final determination of the intermediary, if the amount in controversy is $10,000 or more, and if a request for a hearing is filed within 180 days of the determination. (Id. at 2.) The PRRB found that plaintiff had failed to meet any of these jurisdictional prerequisites, and therefore its appeal had to be dismissed on jurisdictional grounds. (Id.) The PRRB held, however, that if and when plaintiff was able to comply with these requirements, the PRRB would, at that time, determine if it had jurisdiction over the substantive issue and whether expedited judicial review would be appropriate. (Id.)

On May 4, 2007, plaintiff filed this action, seeking an order declaring the per visit cap and the productivity screen "arbitrary, capricious, and otherwise unlawful"; enjoining the Medicare program from using these two cost measurement mechanisms in determining payments to FQHCs; and directing Medicare to re-calculate past FQHC payment rates paid under the Medicare program without the use of these two cost measures.


It is axiomatic that "[a] federal court's subject matter jurisdiction, constitutionally limited by article III, extends only so far as Congress provides by statute." Commodity Futures Trading Com'n v. Nahas, 738 F.2d 487, 492 (D.C. Cir. 1984). Therefore, "the court must scrupulously preserve the precise jurisdictional limits prescribed by Congress." Id. at 492 n.9. Plaintiff's complaint cites 28 U.S.C. § 1331 as the primary basis for this Court's jurisdiction.*fn2 Defendants respond by arguing that because plaintiff's claims arise under the Medicare Act, plaintiffs must exhaust their administrative remedies under that statute before seeking judicial review.

In 42 U.S.C. § 405(h), incorporated into the Medicare Act by 42 U.S.C. § 1395ii, Congress expressly precluded federal question jurisdiction over claims "arising under" the Medicare Act. Section 405(h) provides that "[n]o action against the United States, the Commissioner of Social Security, or any officer or employee thereof shall be brought under section 1331 . . . of title 28 to recover on any claim arising under this subchapter." 42 U.S.C. § 405(h). A "[p]petitioner's claim 'arises under' the Medicare Act within the meaning of this provision . . . [when] both the standing and the substantive basis for the presentation of the claim are the Medicare Act." Your Home Visiting Nurse Services, Inc. v. Shalala, 525 U.S. 449, 456 (1999) (internal quotation marks omitted). As the Supreme Court has explained, ยง 405(h) "demands the ...

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