American Clinical Laboratory v. Alex Azar, II
931 F.3d 1195
D.C. Cir.2019Background
- PAMA (2014) requires "applicable laboratories" to report private-payor price and volume data so HHS can set Medicare laboratory payment rates based on market rates; HHS must define "applicable laboratory" via notice-and-comment rulemaking.
- The statute bars "administrative or judicial review . . . of the establishment of payment amounts."
- Hospitals receive Medicare lab reimbursements through multiple mechanisms (PFS/CLFS for outreach services, bundled inpatient/outpatient payments otherwise); identifying the reporting unit (laboratory vs. hospital entity) determines whether hospital labs qualify as applicable laboratories.
- HHS’s 2016 final rule defined the reporting unit at the NPI level (not the hospital-wide TIN), which in practice excluded most hospital labs from reporting because few hospital labs have distinct NPIs; reporting was therefore dominated by independent labs (e.g., Quest, LabCorp).
- ACLA sued claiming the 2016 rule unlawfully excluded most hospital labs (skewing data and lowering Medicare rates); the district court dismissed for lack of jurisdiction under PAMA’s review bar.
- The D.C. Circuit: (1) held the statute’s bar on review of the "establishment of payment amounts" does not clearly preclude judicial review of the separate data-collection rule; (2) rejected ACLA’s ultra vires argument that HHS exceeded statutory authority by using NPIs; and (3) remanded for the district court to consider ACLA’s APA (arbitrary-and-capricious) challenge.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether PAMA's ban on review of "establishment of payment amounts" precludes judicial review of the Secretary's rule defining which labs must report data | ACLA: The rule is a de facto challenge to payment-setting because excluding hospital labs skews rate-setting; thus review should be permitted of the data-collection rule (or the bar doesn't apply) | HHS: The jurisdictional bar covers the entire process that leads to payment amounts, including data-collection rules, so courts lack jurisdiction | Court: The bar is read narrowly; it does not clearly cover the separate notice-and-comment data-collection rule, so judicial review is available |
| Whether HHS acted ultra vires by operationalizing "laboratory" at the NPI/entity level (excluding hospital labs) | ACLA: Statutory text requires the reporting unit be the laboratory; using an entity-level NPI compares lab PFS/CLFS revenue to the whole hospital's Medicare revenue, unlawfully excluding labs | HHS: Statute is ambiguous on the unit; implementing via NPI was a reasonable, record-supported choice after notice and comment | Court: HHS did not commit a "patent violation" of statutory authority; the NPI approach is within the agency's delegated rulemaking discretion (no ultra vires) |
| Remedy / next step | ACLA: Seek invalidation of the rule and remand for correction | HHS: Maintain rule; later rulemaking may expand hospital outreach reporting | Court: Reverse dismissal; remand for district court to consider APA (arbitrary-and-capricious) challenge on the merits |
Key Cases Cited
- Smith v. Berryhill, 139 S. Ct. 1765 (2019) (strong presumption favoring judicial review of agency action)
- Bowen v. Mich. Acad. of Family Physicians, 476 U.S. 667 (1986) (statutory review bars must be read narrowly)
- Gutierrez de Martinez v. Lamagno, 515 U.S. 417 (1995) (presumption of reviewability where statute is susceptible to divergent interpretation)
- Block v. Cmty. Nutrition Inst., 467 U.S. 340 (1984) (reviewability depends on text, structure, legislative history, and nature of action)
- Texas Alliance for Home Care Servs. v. Sebelius, 681 F.3d 402 (D.C. Cir. 2012) (statutory structure can show Congress meant to preclude review when challenged action is subsumed in unreviewable scheme)
- Florida Health Scis. Ctr., Inc. v. Sec’y of Health & Human Servs., 830 F.3d 515 (D.C. Cir. 2016) (when methodology is inextricably intertwined with an unreviewable estimate, review may be barred)