Gаry L. KAISER and Verlene D. Kaiser, as debtors in possession, Community Home Health, Inc., Gary L. Kaiser, Shawna Exline and Sharie Monteferrante, Plaintiffs-Appellants,
v.
BLUE CROSS OF CALIFORNIA, United States of America, Department of Health and Welfare, Health Care Financing Agency, Defendants-Appellees.
No. 02-35020.
United States Court of Appeals, Ninth Circuit.
Submitted May 8, 2003* Seattle, Washington.
Filed October 28, 2003.
COPYRIGHT MATERIAL OMITTED Donald W. Lojek, Lojek Law Offices, Chtd., Boise, Idaho, for the plaintiffs-appellants.
Thomas E. Moss and Alan G. Burrow, Department of Health and Human Services and Blue Cross of California, Boise, Idaho, for the defendants-appellees.
Appeal from the United States District Court for the District of Idaho; Edward J. Lodge, District Judge, Presiding. D.C. No. CV 00-166-EJL.
Before: Richard D. Cudahy,** Diarmuid F. O'Scannlain and Ronald M. Gould, Circuit Judges.
OPINION
CUDAHY, Circuit Judge.
The Kaisers owned and operated an Idaho home health agency called Community Home Health, which was a Medicare provider operating under fiscal intermediary Blue Cross of California. In 1998, after Blue Cross ceased making payments to Community Home Health on account of Blue Cross's previous overpayments, Community Home Health entered Chapter 7 bankruptcy. The Kaisers sued Blue Cross and the federal government оn constitutional, statutory and common law claims, asserting that Blue Cross and the federal government acted improperly in their relationship with Community Home Health. The district court dismissed the case, finding no jurisdiction absent exhaustion of administrative review. 42 U.S.C. § 405(g), (h). The Kaisers appeal, arguing that the nature of their claims makes administrative procedures inapposite. Because their claims arise under Medicare, we affirm.
I.
Because this case was dismissed for lack of subject matter jurisdiction, we construe all facts in the light most fаvorable to the plaintiffs. Warren v. Fox Family Worldwide, Inc.,
Medicare, first enacted in 1965, provides health insurance to eligible aged and disabled persons. Among the services covered under Medicare are home health services, such as part-time nursing care, physical therapy and home health aid services. 42 U.S.C. § 1395d. An agency within the Department of Health and Human Services, the Health Care Financing Agency (HCFA, recently renamed the Centers for Medicare and Medicaid Services, or CMS), oversees the program. Home health care providers, like other Medicare providers, coordinate with the HCFA through "fiscal intermediaries," private insurance companies that contract with the HCFA to serve as agents for functions such as claims processing. 42 U.S.C. § 1395h. Blue Cross of California is such a fiscal intermediary.
Gary and Verlene Kaiser (along with the other individual plaintiffs in this lawsuit1) were shareholders of Community Home Health (CHH), an Idaho corporation providing home health services to some 500 clients in central and southwest Idaho. Since almost all of its patients were Mеdicare or Medicaid beneficiaries, CHH was highly dependent on the payments it received from the government through Blue Cross of California, the fiscal intermediary under which it operated; the government was its primary source of revenue. These payments, called periodic interim payments, were made in installments based on estimates of CHH's volume of business.
In late 1997, Congress passed the Balanced Budget Act of 1997, 105 Pub.L. No. 33, 111 Stat. 251, which directed the HCFA to promulgate new rules on the allowable costs of home health agencies, §§ 4602-03,
On April 27, 1998, CHH, recognizing that it had been overpaid more than one million dollars, sent a letter to Blue Cross requesting an extended repayment plan (ERP). Blue Cross at first denied that there had been an overpayment, then solicited additional information in order to review the request. On June 4, CHH was notified that its ERP request was denied and told that 100% of its future Medicare payments would be withheld until the entire overpayment was recouped. This recoupment was proposed without issuance of a Notice of Program Reimbursement (NPR). Two weeks later, Blue Cross reversed its position and offered CHH a 23-month ERP. Nonetheless, CHH closed its operations and filed for Chapter 7 bankruptcy on June 25, 1998. The Kaisers, who had personally guaranteed some of CHH's obligations, also entered bankruptcy.
After the filing of the petition for bankruptcy, Blue Cross auditors, sent to Idaho to audit other Medicare health care providers, allegedly breached confidentiality rules and defamed CHH and its officers, adversely impacting the ability of CHH and the Kaisers to do business in Idaho or elsewhere.
CHH's bankruptcy trustee sold to the Kaisers "[a]ll receivables, claims and causes of action against federal agencies or their agents related to Medicare." Armed with this assignment, the Kaisers filed the present lawsuit. The Kaisers allege that the HCFA violated the Administrative Procedure Act, the Regulatory Flexibility Act and the Fifth Amendment in its issuance of the new home health care regulations; that Blue Cross did not negotiate an ERP in good faith, in violation of 42 C.F.R. § 401.607(d)(1); that Blue Cross wrongfully neglected to issue an NPR; that the sudden cessation of payments by the HCFA and Blue Cross violated 4 C.F.R. §§ 102.1-.20 and the Fifth Amendment; that Blue Cross breached CHH's confidentiality, defamed CHH and the Kaisers and invaded their privacy; and that Blue Cross and the government did not abide by their contractual obligations to CHH. The Kaisers maintain that Blue Cross acted at all times as the agent of the HCFA and the United States, making all three entities responsible for the Kaisers' damages.
Magistrate Judge Mikel H. Williams reviewed the defendants' Motion to Dismiss, and issued a Report and Recommendation supporting the grant of the motion. Magistrate Judge Williams agreed with the defendants that the Kaisers' claims "arose under" Medicare, and were therefore subject to the 42 U.S.C. § 405(g) requirement that claimants first exhaust administrative review. District Judge Lodge adopted this order in its entirety.
II.
A dismissal for lack of subject matter jurisdiction is reviewed de novo. See Sommatino v. United States,
We ask first whether the Kaisers' claims arise under Medicare, requiring them to have exhausted their administrative remedies. Second, we consider whether any exhaustion requirement should be waived. Third, we decide whether the case should be transferred to the Court of Federal Claims. Finally, we ask whether, for any claims that might not be subject to the exhaustion requirement, jurisdiction is barred by sovereign immunity.
A.
"No action against the United States, the [Secretary of Health and Human Services], or any officer or employee thereof shаll be brought under section 1331 or 1346 of Title 28 to recover on any claim arising under this subchapter." 42 U.S.C. § 405(h) (made applicable to Medicare and modified by 42 U.S.C. § 1395ii). Jurisdiction over cases "arising under" Medicare exists only under 42 U.S.C. § 405(g), which requires an agency decision in advance of judicial review. 42 U.S.C. § 405(g) ("Any individual, after any final decision of the [Secretary] made after a hearing to which he was a party, irrespective of the amount in controversy, may obtain a review of such decision by a civil action."); Ass'n of Am. Med. Colls. v. United States,
The Kaisers acknowledge that claims such as those disputing the amount of payment for Medicare services should be channeled through the administrative process. Appellants' Opening Br. at 16-18. The Kaisers argue, however, that because they seek damages rather than Medicare payments, their claims do not arise under the Medicare Act.2 Id. at 17 ("The Medicare Act does not рrovide a procedure for damages."). However, the set of cases arising under Medicare is far larger than the Appellants argue. For example, suits for injunctive relief not available under Medicare may still be found to arise under Medicare. See Heckler v. Ringer,
Indeed, courts have considered numerous cases that do not, on their face, appear to claim specific Medicare benefits or reimbursements yet have been found to arise under Medicare. One category of such cases are those cases that are "[c]leverly concealed claims for benefits." United States v. Blue Cross & Blue Shield of Ala., Inc.,
Rather than looking at the legal specifics of the claims that are raised, the Supreme Court has applied two tests to determine whether claims arise under Medicare. First, claims that are "inextricably intertwined" with a Medicare benefits determination may arise under Medicare. See Ringer,
The principal case on which the Kaisers rely is Ardary v. Aetna Health Plans of S. Cal., Inc.,
We agree with the Kaisers that a broad reading of Ardary could weigh in their favor. Like the plaintiffs in Ardary, the Kaisers are not, strictly speaking, seeking reimbursement for Medicare services and are proceeding under various statutory and common law theories. The Ardarys suffered a death because of the alleged torts committed by Aetna; the Kaisers suffered the loss of their business and personal bankruptcy because of alleged wrongs committed by Blue Cross and the HCFA. We find, however, far more differences distinguishing the two claims. We characterized the question in Ardary as follows:
[D]oes the Medicare Act, which provides for exclusive administrative review of all claims "arising under" that Act, apply to preclude the heirs of a deceased Medicare beneficiary from bringing state law claims for wrongful death against a private Medicare provider when those claims do not seek recovery of Medicare benefits but instead seek compensatory and punitive damages on the grounds that the provider both improperly denied emergency medical services and misrepresented its managed care plan to the beneficiary?
Ardary,
On the contrary, Bodimetric is perfectly applicable to the facts in this case. In Bodimetric, a home health agency ran into difficulties in its relationship with its Medicare fiscal intermediary, Aetna. As a result of Aetna's refusal to pay certain claims, Bodimetric was forced to shut down. Bodimetric in its lawsuit made numerous claims against Aetna, including fraud, fraudulent concealment, breach of contractual relationship, tortious breach of implied covenant of good faith and fair dealing and intentional harm to property interest. Bodimetric,
The Seventh Circuit has also confronted facts similar to those at hand since Bodimetric and Ardary. In Ancillary Affiliated Health Servs. v. Shalala,
Another relevant recent case is Midland Psychiatric Assocs., Inc. v. United States,
The Kaisers' claims here are "inextricably intertwined" with CHH's claims for Medicare reimbursement. The Kaisers allege faults in the HCFA's issuance of the new home health care regulations, Blue Cross's temporary failure to negotiate an ERP, Blue Cross's failure to issue an NPR and the sudden cessation of payments by the HCFA and Blue Cross. Each of these claims deals with the appropriateness of the HCFA's and Blue Cross's decisions with respect to the compensation the Kaisers should have received for the services it provided to Medicare beneficiaries. Had the Kaisers been immediately granted a satisfactory ERP, for example, or had they never accrued an overpayment in the first place, they never would have brought this case. Hearing most of the Kaisers' claims would necessarily mean redeciding Blue Cross's CHH-related Medicare decisions. Midland Psychiatric,
The only claim that arguably is not subject to 42 U.S.C. § 405(h) is the plaintiffs' defamation and invasion of privacy claim, since the alleged statements, while they concern CHH's dealings with the HCFA, are largely independent of the underlying Medicare law. We treat the defamation and invasion of privacy claim below in Section D. All other claims arise under Medicare and so are subject to § 405(h).
B.
Because most of the Kaisers' claims arise under Medicare, the Kaisers must, for those claims, proceed under 42 U.S.C. § 405(g). That is, they must satisfy the presentment and exhaustion requirements under that subsection prior to seeking judicial relief. See Ringer,
Setting aside the presentment question, it is apparent that the Kaisers do not meet the conditions for waiver of exhaustion. In Johnson v. Shalala,
C.
The Kaisers argue that if jurisdiction did not lie in the district court, that court should have transferred their claims to the Court of Federal Claims, which they argue would have jurisdictiоn under the Tucker Act. See 28 U.S.C. § 1491(a)(1) (conferring jurisdiction on the Court of Federal Claims for claims against the United States based on the Constitution, statutes and contracts). The district court did not consider this argument.
This court has previously recommended referral to the Court of Federal Claims for Medicare-related claims such as the Kaisers'. Drennan v. Harris,
D.
The Appellees arguеd below, and argue on appeal, that sovereign immunity applies to defeat any of the Kaisers' claims that might otherwise be valid. With respect to the bulk of the Kaisers' claims, which are in any event foreclosed by § 405(h), there is no need to reach this question. However, we agree that to the extent the Kaisers' defamation and invasion of privacy claim does not arise under Medicare, it is barred by sovereign immunity.
The United States, including its agencies and its employees, can be sued only to the extent that it has expressly wаived its sovereign immunity. United States v. Testan,
The Kaisers' attempts to find a waiver of sovereign immunity are unsuccessful. Of course, the Kaisers could not take advantage of any waiver of sovereign immunity for cases arising under Medicare, since any such claim is defeated by the exhaustion requirement of 42 U.S.C. § 405(g). Waiver of sovereign immunity is not available to them under 5 U.S.C. § 702 or Bivens v. Six Unknown Named Agents of the Fed. Bureau of Narcotics,
AFFIRMED.
Notes:
Notes
This panel unanimously finds this case suitable for decision without oral argumentSee Fed. R.App. P. 34(a)(2).
The Honorable Richard D. Cudahy, Senior United States Circuit Judge for the Seventh Circuit, sitting by designation
For simplicity, we sоmetimes refer, in this memorandum disposition, to all of the plaintiffs collectively as "the Kaisers."
The Kaisers further note that CHH is seeking an actual claim for Medicare payments through the administrative process, and that those claims are not relevant to the claims here. Appellants' Opening Br. at 19 n. 4
While the facts ofAncillary Affiliated are very close to the facts at hand, Ancillary Affiliated does not fit squarely here because the plaintiff in that case sought an injunction compelling the reimbursement payments, unlike the plaintiffs here who seek extra-Medicare damages. Ancillary Affiliated,
The potential futility for the Kaisers оf bringing this action before the administrative process merits additional discussion. As we noted above, much of the Kaisers' argument that their claims do not "arise under" Medicare was grounded on the fact that the administrative process could not award the type of damages they sought. Indeed, 42 U.S.C. § 1395oo, which describes the function of the Provider Reimbursement Review Board (PRRB), specifies that the PRRB's role is to decide "the amount of total program reimbursement due" to providers. § 1395oo(1)(A). This futility argument, however, goes to whether exhaustion should be waived, rather than whether § 405(g) and (h) apply in the first place, which is guided by the "inextricably intertwined" test of Ringer. In other words, the set of claims which are subject to § 405(g) and (h) is greater than the set of claims that the PRRB can fully resolve.
This brings us to the disconnect that cases may "arise under" Medicare under § 405(h) and yet contain issues which are not suitable for resolution by the PRRB. This disconnect, while at first puzzling, makes sense in the context of the purposes of exhaustion. "Exhaustion is generally required as a matter of preventing premature interference with agency рrocesses, so that the agency may function efficiently and so that it may have an opportunity to correct its own errors, to afford the parties and the courts the benefit of its experience and expertise, and to compile a record which is adequate for judicial review." Salfi,
The plaintiffs have acknowledged in their pleadings that "Blue Cross acted at all times as the agent of the HCFA and the United States." Am. Compl. at 10 para. XXIX, Record at 2