410 F.Supp.3d 648
S.D.N.Y.2019Background
- Plaintiffs are 31 skilled nursing facilities that participate in both Medicare and Medicaid and challenged an HHS/CMS Final Rule (Aug. 2017) that allows complaint-initiated investigative surveys to be conducted without a registered nurse on the survey team.
- Avon, one plaintiff, underwent a September 2013 complaint survey without an RN; an ALJ later ruled the survey team composition violated the statute/regulation and invalidated the survey findings, but the DAB vacated that ALJ decision and remanded without deciding whether an RN is required for complaint surveys.
- In response to the ALJ decision, HHS issued a Final Rule clarifying the RN requirement applies to certain surveys but not to complaint or on-site monitoring surveys; the Final Rule became effective October 1, 2017.
- Plaintiffs filed a pre-enforcement APA action seeking vacatur of the Final Rule and injunctive/declaratory relief prohibiting survey teams without an RN; defendant moved to dismiss for lack of subject-matter jurisdiction under the Medicare Act’s channeling/§405(h) framework.
- The District Court concluded plaintiffs must first pursue the Medicare administrative review channel (and could not evade that channel by invoking Medicaid or arguing lack of meaningful review), held §405(h) bars the pre-enforcement suit, granted the Rule 12(b)(1) dismissal, and denied the cross-motions for summary judgment as moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §405(h) (as incorporated by §1395ii) bars pre-enforcement APA challenge to the Final Rule | The Rule cannot be redressed through post-enforcement Medicare review because agency rules and precedent foreclose relief for survey-process defects | §405(h) requires channeling of claims through administrative process; plaintiffs must present/exhaust claims before the Secretary | Court: §405(h) bars the pre-enforcement challenge; dismissal for lack of jurisdiction |
| Whether plaintiffs fall within the Michigan Academy exception (i.e., "no review at all") | DAB decisions and cases (e.g., Rosewood) show the agency won’t or can’t provide meaningful review of survey-process challenges, so the exception applies | Even if agency sometimes declines to invalidate findings, that does not mean there is no available channel for review; agency/tribunal review can address statutory challenges | Court: Plaintiffs did not show absence of meaningful review; Michigan Academy exception does not apply |
| Whether plaintiffs can proceed under the Medicaid Act to avoid Medicare channeling | Plaintiffs argue Medicaid does not incorporate §405(h), so federal-question jurisdiction exists | Defendant: Plaintiffs are dually certified; the same statutes/regulations apply and courts disallow evasion of Medicare channeling by recasting claims as Medicaid claims | Court: Dually-participating providers cannot avoid Medicare channeling; no independent Medicaid jurisdiction |
| Whether exhaustion/channeling doctrine is excused because of administrative inability to grant the requested relief | Plaintiffs say administrative remedies cannot provide the relief they seek (invalidating rule as-applied to complaint surveys) | Defendant: Administrative process can adjudicate statutory challenges and provide the requisite record for judicial review under §405(g) | Court: Administrative channeling/exhaustion is required despite limits on the agency’s remedial powers |
Key Cases Cited
- Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1 (2000) (§405(h) channels pre-enforcement challenges to Medicare rules through the agency; exhaustion required)
- Weinberger v. Salfi, 422 U.S. 749 (1975) (interpreting §405(h) to require channeling and restrict direct federal-question suits)
- Heckler v. Ringer, 466 U.S. 602 (1984) (further explaining §405(h) exhaustion/channeling principles)
- Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667 (1986) (distinguishing situations where §405(h) would eliminate judicial review entirely)
- Cathedral Rock of North College Hill, Inc. v. Shalala, 223 F.3d 354 (6th Cir.) (2000) (dually-certified providers cannot avoid Medicare channeling by invoking Medicaid)
- Rosewood Care Ctr. of Swansea v. Price, 868 F.3d 605 (7th Cir.) (2018) (survey-process defects do not necessarily invalidate supported deficiencies)
- In re Bayou Shores, 828 F.3d 1297 (11th Cir.) (2016) (rejecting attempts to bypass Medicare administrative channeling)