RICU LLC v. HHS ( 2022 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 13, 2021 Decided January 18, 2022
No. 21-5186
RICU LLC,
APPELLANT
v.
UNITED STATES DEPARTMENT OF HEALTH AND HUMAN
SERVICES, ET AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:21-cv-00452)
Jesse Panuccio argued the cause for appellant. With him
on the briefs were David Boies and Scott E. Gant.
Jennifer L. Utrecht, Attorney, U.S. Department of Justice,
argued the cause for appellees. With her on the brief were
Brian M. Boynton, Acting Assistant Attorney General, Abby C.
Wright, Attorney, Janice L. Hoffman, Associate General
Counsel, U.S. Department of Health and Human Services,
Susan Maxson Lyons, Deputy Associate General Counsel for
Litigation, and Bridgette Lynn Kaiser, Attorney.
2
Before: SRINIVASAN, Chief Judge, ROGERS and JACKSON,
Circuit Judges.
Opinion for the Court by Circuit Judge ROGERS.
ROGERS, Circuit Judge: On appeal from the dismissal of
its complaint, RICU LLC seeks to avoid well-settled authority
requiring administrative exhaustion under the Medicare Act by
presenting a concrete claim for payment of rendered services
to the U.S. Department of Health and Human Services for
decision. Instead, RICU LLC relies on its efforts to engage
Department officials in a generalized consideration of the
reimbursement potential for telehealth services provided by
contract physicians located outside of the United States.
Alternatively, RICU LLC invokes an exception to the
“channeling” requirement where no other path for judicial
review exists. For the following reasons, we affirm the
dismissal of the complaint for lack of subject matter
jurisdiction and do not address RICU LLC’s request for a
preliminary injunction to reverse the Department’s generalized
eligibility determination.
I.
According to the complaint, RICU LLC “is one of the
largest inpatient telehealth companies in the United States,”
specializing in remote critical care services. Compl. ¶ 26.
RICU LLC currently contracts with approximately 60 intensive
care physicians who live and work abroad but were trained in
the United States and hold U.S. board certifications and
licenses. See id. ¶¶ 27–30. These physicians provide critical
care telehealth services to “more than 250 hospitals located in
34 states, accessible to more than 35 million Americans,” id.
¶ 33, through service contracts between RICU LLC and
3
hospitals or third-party intermediaries, id. ¶ 34. RICU LLC’s
client hospitals pay hourly for critical care telehealth services
provided by RICU LLC’s intensive care physicians. Id.
Since its enactment in 1965, the Medicare Act, 42 U.S.C.
§ 1395 et seq., Part A of Title XVIII of the Social Security Act,
established a federal health insurance program for the elderly
and disabled and barred Medicare reimbursement for “any
expenses incurred for items or services . . . which are not
provided within the United States,” subject to limited
exceptions. 1 Indeed, prior to 1999, Medicare did not reimburse
for telehealth services. 2 That changed in 2000 when
Congress expanded Medicare to cover certain telehealth
services, specifically, those that physicians provided through
a telecommunications system to an eligible telehealth
individual, “notwithstanding that the individual physician or
practitioner providing the telehealth service is not at the same
location as the beneficiary.” 3 An “eligible telehealth
individual” is a Medicare Part B enrollee who “receives a
telehealth service furnished at an originating site,” which is a
hospital, clinic, physician’s office, or other medical facility
where the patient “is located at the time the service is
furnished.” Reimbursement was authorized for “professional
consultations, office visits, and office psychiatry services,” and
the Secretary of the Department could designate “any
additional service.” 4
By final rule, the Department provided for
reimbursements according to its annually-updated Physician
Fee Schedule in each of 112 geographic localities in the United
1
42 U.S.C. § 1395y(a)(4); see also id. § 1395f(f).
2
Balanced Budget Act of 1997, Pub. L. No. 105-33,
§ 4206(a), 111 Stat. 251, 377–78.
3
42 U.S.C. § 1395m(m)(1).
4
Id. § 1395m(m)(4)(B), (C)(i), (F)(i).
4
States. The site of service is the location of the physician or
practitioner, not the patient’s location. 5 To qualify for
reimbursement, a telehealth service must be on the telehealth
list, and before 2020, critical care telehealth services typically
provided in a hospital’s intensive care unit were not on the
telehealth list and therefore were ineligible. 6 In response to the
COVID-19 pandemic, however, Congress authorized the
Department “to temporarily waive or modify the application
of” Medicare requirements governing telehealth services
furnished during the public health emergency. 7 In early April
2020, the Department adopted an interim final rule adding
critical care telehealth services to the telehealth list. The final
rule, effective in December 2020, made critical care telehealth
services reimbursable through the end of the calendar year in
which the COVID public health emergency ends. 8
On April 22, 2020, RICU LLC sought “urgent
clarification” by the Department of whether the emergency
eligibility of critical care telehealth services meant that
Medicare would reimburse for those services provided by
physicians located outside the United States. Email Seth
Rabinowitz, Pres., RICU LLC, to Brian R. Pabst, Tech. Adv’r,
Centers for Medicare and Medicaid Services (“CMS”) (Apr.
22, 2020). By letter of June 20, 2020, the Acting Director of
CMS’ Chronic Care Policy Group responded that, after “an
exhaustive review of the statute and regulations,” CMS had
determined that Medicare could not reimburse any telehealth
services furnished by medical providers outside the United
5
66 Fed. Reg. 55,246, 55,282, 55,284 (Nov. 1, 2001)
(codified as amended at 42 C.F.R. § 410.78); see 42 U.S.C. § 1395w-
4(b)-(e).
6
See 42 C.F.R. § 410.78(b), (f).
7
42 U.S.C. § 1320b-5(b)(8), (g)(1)(B).
8
85 Fed. Reg. 19,230, 19,232, 19,236 (Apr. 6, 2020);
85 Fed. Reg. 84,472, 84,507, 84,515, 84,527–28 (Dec. 28, 2020).
5
States because the Medicare Act’s ban on foreign payments
“remains in effect during a public health emergency and is not
affected by telehealth flexibilities for the COVID-19
pandemic.” Ltr. Jason Bennett, Act. Dir., Chron. Care Pol’y
Grp., CMS (June 1, 2020) at 1. Seeking to overturn this
ineligibility determination, RICU LLC contacted increasingly
senior CMS officials. See Compl. ¶¶ 78–79. In July 2020,
CMS advised RICU LLC that its “senior Medicare team and
General Counsel’s Office” agreed with the determination in the
June 2020 letter. Email Kimberly Brandt, Princ. Dep. Adm’r,
CMS (July 9, 2020). CMS again confirmed its position on
October 28, 2020, following RICU LLC’s meeting with high-
level CMS officials. Ltr. Demetrios L. Kouzoukas, Princ. Dep.
Adm’r & Dir., Ctr. for Medicare (Oct. 28, 2020) at 1.
In February 2021, RICU LLC filed a complaint in the
district court, alleging that the Department’s determination that
critical care telehealth services provided by physicians who are
outside of the United States are ineligible for Medicare
reimbursement was contrary to law and arbitrary and
capricious, in violation of the Administrative Procedure Act.
Compl. ¶¶ 86–108. RICU LLC also moved for a preliminary
injunction preventing the Department from denying Medicare
reimbursement for telehealth services provided by physicians
located outside of the United States. The Department moved
to dismiss the complaint, pursuant to Federal Rule of Civil
Procedure 12(b)(1), because RICU LLC had not presented a
concrete claim for payment to the Department as required by
the Medicare Act’s channeling procedure in order to obtain
judicial review. The district court granted the Department’s
motion after a hearing and dismissed the complaint for lack of
subject matter jurisdiction and denied RICU LLC’s motion for
a preliminary injunction. RICU LLC v. U.S. Dep’t of Health &
Hum. Servs., No. 21-cv-452, 2021 WL 3709736, at *9 (D.D.C.
Aug. 20, 2021).
6
RICU LLC appeals and filed an unopposed motion for
expedition pursuant to 28 U.S.C. § 1657 in view of the shortage
of internal critical care physicians during the ongoing COVID-
19 pandemic that RICU LLC’s telehealth services may
alleviate. The court granted expedition. The court reviews
the dismissal of the complaint for lack of subject matter
jurisdiction de novo, Am. Hosp. Ass’n v. Azar, 895 F.3d 822,
825 (D.C. Cir. 2018), assuming the truth of all well-pled
material factual allegations in the complaint and granting the
plaintiff the benefit of all reasonable inferences from the
alleged facts, Am. Nat. Ins. Co. v. FDIC, 642 F.3d 1137, 1139
(D.C. Cir. 2011) (citing Thomas v. Principi, 394 F.3d 970, 972
(D.C. Cir. 2005)).
II.
On appeal, RICU LLC contends that it satisfied the
Medicare Act’s presentment requirement when it sought an
eligibility determination from the Department under its interim
final rule for payment of critical care telehealth services by
physicians located abroad. Alternatively, RICU LLC relies on
an exception to presentment recognized by the Supreme Court
to show that the district court had subject matter jurisdiction
over RICU LLC’s complaint. Neither contention is persuasive
in view of judicial precedent.
A.
Beginning in April 2020, RICU LLC had requested
Department guidance on how the interim final rule applied to
RICU LLC’s services abroad, not resolution of a specific claim
for reimbursement. The contention that it nonetheless satisfied
the Medicare Act’s presentment requirement is foreclosed by
Supreme Court and circuit precedent. The Supreme Court has
rejected the argument that district court review is available
7
prior to submission of a specific reimbursement claim to the
Department, in view of the presentment and exhaustion
requirements under the Medicare Act, Heckler v. Ringer, 466
U.S. 602, 620–22 (1984), and circuit precedent eliminates any
doubt RICU LLC’s complaint was properly dismissed by the
district court.
By its plain terms, the Medicare Act, 42 U.S.C. § 405(h),
strips the court of jurisdiction under 28 U.S.C. § 1331 and
§ 1346 over “any claim arising under” Title II of the Social
Security Act, and prevents review of any decision of the
Commissioner of Social Security, “except as herein provided.”
Section 405(g) provides an exception for a civil action filed by
an individual challenging “any final decision of the
Commissioner of Social Security made after a hearing to which
[the plaintiff] was a party,” who is thereby able to “obtain a
review of such decision” in the district court. In turn, Section
1395ii provides that certain provisions of Title II of the Social
Security Act, including parts of Section 405, specifically
subsection (h), “shall also apply” to the Medicare Act “to the
same extent as they are applicable with respect to” Title II, with
the Secretary of the Department or the agency substituted for
“any reference . . . to the Commissioner of Social Security or
the Social Security Administration.” Although Section 1395ii
does not designate subsection (g) as an incorporated provision,
the Supreme Court, focusing on the “final decision” required
by the third sentence of Section 405(h), has treated Section
405(g) as effectively incorporated as the exception “herein
provided.” Ringer, 466 U.S. at 614–15 (citing Weinberger v.
Salfi, 422 U.S. 749, 760–61 (1975)).
In Weinberger v. Salfi, 422 U.S. 749 (1975), a class action
seeking benefits under the Social Security Act, the Supreme
Court held that the third sentence of Section 405(h) was
unambiguous and to be broadly construed, see id. at 756–57,
8
while appropriate deference was due to the Department’s
interpretation of the undefined statutory term “final decision,”
id. at 766–67. In light of that precedent, the Supreme Court
stated in Heckler v. Ringer, 466 U.S. 602 (1984), that a “claim
for future benefits” is a Section 405(h) “claim,” and that “all
aspects” of any such present or future claim must be
“channeled” through the administrative process, id. at 620–21.
The Court rejected the argument that district court review was
available prior to submission of a specific reimbursement claim
for payment to the Department. Id. at 620. Presentment instead
demanded that the Department have “an opportunity to rule on
a concrete claim for reimbursement,” id. at 622, and so, to
establish jurisdiction, the plaintiff had to file a claim for
payment “after the medical service for which payment is
sought has been furnished,” id. at 621. The Court has adhered
to its interpretation. See, e.g., Smith v. Berryhill, 139 S. Ct.
1765, 1777–78 (2019).
The Supreme Court had previously determined that
Section 405(g) creates two prerequisites for judicial review of
Medicare claims. First, a plaintiff’s claim must “have been
presented to the Secretary.” Mathews v. Eldridge, 424 U.S.
319, 328 (1976). The “presentment” requirement is a
“nonwaivable element” of jurisdiction for “[a]bsent such a
claim there can be no ‘decision’ of any type,” which Section
405(g)’s reference to a “final decision” of the Secretary
demands. Id. Second, a plaintiff must fully exhaust “the
administrative remedies prescribed by the Secretary.” Id.; see
Berryhill, 139 S. Ct. at 1773–74 (same, holding Appeal
Council’s dismissal of untimely request for review of
administrative judge’s merits decision after a hearing is a “final
decision” subject to judicial review).
Subsequently, in Shalala v. Illinois Council on Long
Term Care, Inc., 529 U.S. 1 (2000), the Court reaffirmed
9
that taken together, the presentment and exhaustion
requirements under the Medicare Act impose a channeling
requirement for Medicare Act claims that “reaches beyond
ordinary administrative law principles of ‘ripeness’ and
‘exhaustion,’ . . . doctrines that . . . normally require channeling
of a legal challenge through the agency,” id. at 12 (quoting
Salfi, 422 U.S. at 757), and “demands the ‘channeling’ of
virtually all legal attacks through the agency,” id. at 13.
Relying on Ringer, the Court stated in Illinois Council that “a
‘claim for future benefits’ is a § 405(h) ‘claim,’ and that ‘all
aspects’ of any such present or future claim must be
‘channeled’ through the administrative process.” Id. at 12
(quoting Ringer, 466 U.S. at 614, 621–22). As a result, the
special review scheme “prevents application of the ‘ripeness’
and ‘exhaustion’ exceptions” typical in other administrative
contexts. Id. at 13. To be clear, the Court spoke broadly,
rejecting possible exceptions to the channeling requirement
“based upon the ‘potential future’ versus the ‘actual present’
nature of the claim, the ‘general legal’ versus the ‘fact-specific’
nature of the challenge, the ‘collateral’ versus ‘noncollateral’
nature of the issues, or the ‘declaratory’ versus ‘injunctive’
nature of the relief sought.” Id. at 13–14. This sweeping
statement makes clear that Sections 405(g) and (h) effectively
preclude the exercise of district court jurisdiction in the
absence of presentment of a concrete dispute, regardless of the
nature of the claim at issue.
As the Supreme Court defined and refined the Medicare
Act’s channeling requirement, this court followed its
instruction. For instance, in 1992, the court held in National
Kidney Patients’ Ass’n v. Sullivan, 958 F.2d 1127 (D.C. Cir.
1992), that Section 405(g) prevented a Medicare provider from
challenging a new regulation by “proceed[ing] directly to
district court” and “seeking a preliminary injunction” against
the regulation, id. at 1129. Although “the exact meaning of
10
‘presentment’ may be unclear,” the court was satisfied that “the
requirement seems well suited to preventing a provider from
securing an advance decision” on its claims. Id. at 1131. The
provider had “sued before providing the services covered” by
the requested injunction, id. at 1132, and so the agency had not
had an opportunity to make an “initial administrative
determination in a concrete setting,” id. at 1133.
More recently, and dispositive here, in American Hospital
Ass’n v. Azar, 895 F.3d 822 (D.C. Cir. 2018), where the
plaintiffs challenged regulatory annual reimbursement rates for
certain drugs set by an informal rulemaking, “[w]ithout
submitting any individual claims for reimbursement to HHS,”
id. at 824, the court rejected the contention that submission of
comments in that process satisfied presentment, id. at 823,
826–28. The plaintiffs “had neither presented their claim nor
obtained any administrative decision at all” because no plaintiff
“had challenged the new reimbursement regulation in the
context of a specific administrative claim for payment.” Id. at
826 (emphasis added). So too here. RICU LLC failed to
present its challenge in the context of a specific administrative
claim for reimbursement of service, and instead raised only a
prospective request for guidance as to whether its services
provided by physicians located outside of the United States
would be eligible for reimbursement under the interim final
rule. That is not enough to meet the presentment requirement
under Section 405(g).
Against the weight of precedent, RICU LLC relies on
Mathews v. Eldridge, 424 U.S. 319, Salfi, 422 U.S. 749, and
Action Alliance of Senior Citizens v. Sebelius, 607 F.3d 860(D.C. Cir. 2010). None support RICU LLC’s position that
it can satisfy presentment without submitting a concrete claim
for payment to the Department. Eldridge addressed the
presentment requirement only in passing, noting that the
11
plaintiff “has fulfilled th[e] crucial prerequisite“ of
presentment “through his answers to the state agency
questionnaire, and his letter in response to the [state agency’s]
tentative determination that his disability had ceased,” which
amount to a “specific claim that his benefits should not be
terminated because he was still disabled.” The Court further
noted that the plaintiff had obtained a state agency decision
denying the claim, which was accepted by the Social Security
Administration. 424 U.S. at 329. Likewise, the named
plaintiffs in Salfi for whom the Supreme Court recognized
district court jurisdiction had “fully presented their claims” for
Social Security benefits under a contested statutory provision
and had received both an initial agency denial and a denial on
reconsideration from lower-level officials. 422 U.S. at 764–
65. In contrast, the court lacked jurisdiction over putative class
members who did not allege “that they ha[d] even filed an
application” for benefits. Id. at 764. Eldridge and Salfi do not
call into question that presentment requires submission of a
concrete claim for payment to the Department.
Nor does Action Alliance, where the court’s discussion of
presentment was limited to noting that the plaintiffs had
“cured” their earlier failure to present. 607 F.3d at 862 n.1.
Because the court never explained how the plaintiffs had
satisfied presentment, this case “has no precedential value on
that specific point.” Am. Hosp., 895 F.3d at 827. In any event,
the Action Alliance plaintiffs, unlike RICU LLC, were engaged
in a concrete payment dispute challenging the Department’s
recovery efforts of overpayment of Medicare reimbursement
benefits to each plaintiff. Action All., 607 F.3d at 861.
Because RICU LLC did not present a concrete claim for
payment to the Department in the context of a specific payment
dispute, it failed to satisfy the presentment requirement and
12
consequently the district court lacked subject matter
jurisdiction to consider its arguments under the Medicare Act.
B.
Alternatively, RICU LLC invokes the Illinois Council
exception to show that the district court had subject matter
jurisdiction over its complaint. There, the Supreme Court
recognized a limited exception to the requirements of Sections
405(g) and (h) where their application “would not simply
channel review through the agency, but would mean no
review at all.” Ill. Council, 529 U.S. at 19. Because mere
postponement of judicial review would not trigger the
exception, a party may not invoke Illinois Council to avoid
channeling when “postponement would mean added
inconvenience or cost in an isolated, particular case,” unless
adherence to the channeling requirement effectively would cut
off judicial review under the Medicare Act. Id. at 22.
This court has twice applied the Illinois Council
exception. In American Chiropractic Ass’n v. Leavitt, 431 F.3d
812 (D.C. Cir. 2005), the court’s analysis arose in the context
of a challenge to a Medicare reimbursement regulation, id. at
814–15, and centered on “whether the Association could get
its claims heard administratively and whether it could receive
judicial review after administrative channeling,” id. at 816.
Some members could obtain administrative review by
providing services to Medicare enrollees, who could submit
specific claims for reimbursement to the Department and
make the members their assignees. Id. at 816–17. The court
concluded that the option to meet the channeling requirement
through proxies meant that a path to judicial review under
Section 405 existed and the Illinois Council exception did not
apply. Id. at 817–18.
13
In Council for Urological Interests v. Sebelius, 668 F.3d
704 (D.C. Cir. 2011), the court adhered to the same
interpretation of the Illinois Council exception, namely that the
exception is “primarily concerned with whether a particular
claim can be heard through Medicare Act channels,” id. at 712,
but held the exception applied in the circumstances. Focusing
on whether the purported proxies had adequate incentives to
raise the otherwise foreclosed claims, it evaluated “factors that
speak to a potential proxy’s willingness and ability to pursue
the plaintiff’s claim,” id., and accepted
as true allegations in the complaint that the hospitals
contracting for members’ services “had no incentive” to raise a
challenge to the disputed regulations because they had a tense
relationship with members, and the disputed regulations would
eliminate their financial need to purchase members’ services,
id. at 713. Unlike the association members in American
Chiropractic, here members could not “becom[e] assignees” of
their clients’ claims and had no other “shared interests” with
the hospitals. Id. “[U]nder the specific facts of this case,” the
court held that the Illinois Council exception applied because
“invoking section 405(h) . . . would have the practical effect of
‘turn[ing] what appears to be simply a channeling requirement
into complete preclusion of judicial review.’” Id. at 714(alteration in original) (quoting Ill. Council, 529 U.S. at 22-23).
The district court thus had jurisdiction under Section 1331 to
consider the merits of the association’s challenges. Id.The parties do not dispute that RICU LLC cannot bring an
administrative challenge directly because it is not a Medicare
enrolled provider. RICU LLC, 2021 WL 3709736, at *6.
RICU LLC acknowledges, however, that its client hospitals
“continue[] to inquire about whether there is any hope that [the
Department] will change course” to allow reimbursement and
have “always been extremely satisfied with RICU [LLC]’s
services and the quality of the RICU [LLC] physicians.” Decl.
14
of Seth Rabinowitz, Pres., RICU LLC, Supp. Pl.’s Mot. Prelim.
Inj. ¶ 37. Indeed, RICU LLC represents that the purpose of its
communications with the Department was to determine
whether its “client hospitals could bill Medicare for RICU
[LLC]’s services provided to Medicare beneficiaries,” id. ¶ 26,
and that “some existing clients have decreased the amount of
services they are procuring from RICU [LLC], citing the lack
of ability to seek Medicare reimbursement for RICU [LLC]’s
services,” id. ¶ 36. Further, these customers want the
Department to allow reimbursement so they can more readily
maintain or even expand their contracts with RICU LLC. See
id. ¶¶ 34–40.
Taking these factual allegations as true, the client hospitals
are adequate proxies to channel RICU LLC’s general claim that
its services are eligible for Medicare reimbursement through a
concrete claim for payment. Therefore, the Illinois Council
exception does not apply to provide federal question
jurisdiction in the absence of such presentment.
Accordingly, because RICU LLC has neither satisfied the
channeling requirement of Section 405(g) nor demonstrated
that the Illinois Council exception applies, we affirm the
dismissal of the complaint for lack of jurisdiction and so have
no jurisdiction to consider the merits of RICU LLC’s motion
for a preliminary injunction, see Am. Hosp., 895 F.3d at 828.