40 F.4th 616
D.C. Cir.2022Background
- PAMA (2014) requires “applicable laboratories” to report private payor rates so HHS can compute a weighted median to set Medicare laboratory reimbursement rates.
- The 2016 Rule identified reporting entities by National Provider Identifier (NPI), but most hospital outreach laboratories bill under the hospital’s NPI and thus were effectively excluded from reporting.
- ACLA sued, alleging the 2016 Rule was arbitrary and capricious because excluding many hospital labs depressed the weighted median and lowered Medicare payments.
- After this Court’s decision in ACLA I (931 F.3d 1195), HHS issued a 2018 Rule requiring hospital outreach labs to report via the CMS‑1450 14x TOB; the District Court then dismissed ACLA’s remanded APA challenge as moot.
- The D.C. Circuit reverses the District Court: holds the case is not moot (government failed voluntary‑cessation showing), finds ACLA satisfied standing and presentment/exhaustion via members, and concludes the 2016 Rule was arbitrary and capricious for relying on NPIs without adequately addressing the exclusion of hospital outreach labs.
- Relief: declaratory judgment for ACLA, prospective relief only; the court denies ACLA’s request to vacate the 2016 Rule and remands for further proceedings consistent with the opinion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Mootness / voluntary cessation | 2016 Rule causes continuing downstream harms; replacement by 2018 Rule does not eliminate likelihood of recurrence. | 2018 Rule supersedes 2016 Rule, so case is moot; past‑payment claims are barred by PAMA. | Not moot — HHS did not meet heavy burden to show the challenged conduct cannot reasonably recur. |
| Standing (associational) | ACLA’s members (e.g., Aculabs) suffered competitive injury and reduced Medicare reimbursements traceable to 2016 Rule. | Challenges to payment methodology are non‑justiciable under PAMA; injuries are speculative. | ACLA has associational standing; at least one member showed concrete, traceable, redressable injury. |
| Presentment / exhaustion under 42 U.S.C. §405(h) | ACLA satisfied presentment/exhaustion through member BioReference’s administrative submissions. | Section 405(h) bars district court review because claimants failed to present/ exhaust. | Presentment/exhaustion satisfied through ACLA member; §405(h) does not bar this APA challenge. |
| APA arbitrary‑and‑capricious challenge re: use of NPIs | The 2016 Rule’s reliance on NPIs excluded many hospital outreach labs from reporting; HHS failed to consider that important aspect. | Agency reasonably used NPIs to identify revenue sources and argued additional reporting was unlikely to change rates. | 2016 Rule arbitrary and capricious: HHS failed to reasonably explain use of NPIs and did not address the under‑inclusive impact on data. |
Key Cases Cited
- Am. Clinical Lab’y Ass’n v. Azar, 931 F.3d 1195 (D.C. Cir. 2019) (prior panel found associational standing and remanded for APA review)
- Lujan v. Defs. of Wildlife, 504 U.S. 555 (1992) (elements of constitutional standing)
- Friends of the Earth v. Laidlaw Env’t Servs., 528 U.S. 167 (2000) (standing assessed at time of filing; voluntary cessation standard)
- Motor Vehicle Mfrs. Ass’n v. State Farm, 463 U.S. 29 (1983) (arbitrary and capricious standard for agency action)
- Zukerman v. U.S. Postal Serv., 961 F.3d 431 (D.C. Cir. 2020) (government’s burden on voluntary cessation/mootness)
- Am. Hosp. Ass’n v. Azar, 895 F.3d 822 (D.C. Cir. 2018) (§405(h) presentment/exhaustion principles)