DCH Regional Medical Center v. Alex M. Azar II

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 24, 2018 Decided June 4, 2019

No. 17-5203

DCH REGIONAL MEDICAL CENTER,

APPELLANT

v.

ALEX MICHAEL AZAR, II, IN HIS OFFICIAL CAPACITY AS

SECRETARY OF HEALTH AND HUMAN SERVICES,

APPELLEE

Appeal from the United States District Court

for the District of Columbia

(No. 1:16-cv-00212)

Geoffrey M. Raux argued the cause for appellant. With

him on the briefs were Lori A. Rubin and Donald H. Romano.

Abby C. Wright, Attorney, U.S. Department of Justice,

argued the cause for appellee. With her on the brief were Jessie

K. Liu, U.S. Attorney, Alisa B. Klein, Attorney, Robert P.

Charrow, General Counsel, U.S. Department of Health and

Human Services, Janice L. Hoffman, Associate General

Counsel, Susan Maxson Lyons, Deputy Associate General

Counsel, and Jonathan C. Brumer, Attorney.

Before: MILLETT and KATSAS, Circuit Judges, and

SILBERMAN, Senior Circuit Judge.

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Opinion for the Court filed by Circuit Judge KATSAS.

KATSAS, Circuit Judge: The Medicare statute precludes

judicial review of estimates used to make certain payments to

hospitals for treating low-income patients. We must decide

whether this preclusion provision bars challenges to the

methodology used to make the estimates.

I

Through Medicare, the federal government pays for health

care for elderly and disabled individuals. 42 U.S.C. § 1395 et

seq. Hospitals receive increased payments if they serve “a

significantly disproportionate number of low-income patients.”

Id. § 1395ww(d)(5)(F)(i)(I). These increases are known as

“DSH payments,” which is shorthand for disproportionate

share hospital payments. Id. § 1395ww(r).

The payment at issue here is the “additional payment”

described in paragraph (2) of section 1395ww(r), which is

made annually to each disproportionate share hospital. The

payment is the product of three statutory “factors” estimated by

the Secretary of Health and Human Services. The third factor

measures an individual hospital’s share of all nationwide

uncompensated care. It is the quotient of two amounts:

(i) the amount of uncompensated care for such

hospital for a period selected by the Secretary (as

estimated by the Secretary, based on appropriate data

(including, in the case where the Secretary determines

that alternative data is available which is a better

proxy for the costs of [DSHs] for treating the

uninsured, the use of such alternative data)); and

(ii) the aggregate amount of uncompensated care for

all [DSHs] that receive a payment under this

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subsection for such period (as so estimated, based on

such data).

42 U.S.C. § 1395ww(r)(2)(C).

Congress precluded judicial review of the estimates of the

three statutory factors. Specifically, it provided that “[t]here

shall be no administrative or judicial review under section

1395ff of this title, section 1395oo of this title, or otherwise”

of “[a]ny estimate of the Secretary for purposes of determining

the factors described in paragraph (2).” 42 U.S.C.

§ 1395ww(r)(3)(A). Congress also precluded administrative

and judicial review of “[a]ny period selected by the Secretary

for such purposes.” Id. § 1395ww(r)(3)(B).

In 2013, HHS promulgated a rule setting forth the “data

sources and methodologies for computing” the three factors for

fiscal year 2014. 78 Fed. Reg. 50,496, 50,627 (Aug. 19, 2013)

(FY 2014 Rule). HHS decided to use data from 2010 or 2011,

as provided on hospitals’ then-most recent Medicare cost

reports. Id. at 50,640. In the regulatory preamble, HHS stated

that, “in the case of a merger between two hospitals” during

that time, “Factor 3 will be calculated based on the [data] under

the surviving [hospital’s certification number].” Id. at 50,642.

Plaintiff DCH Regional Medical Center merged with

Northport Regional Medical Center on May 1, 2011. The

merged entity operated under DCH’s name and certification

number. Consistent with the preamble, it received a DSH

payment for fiscal year 2014 based on DCH’s share of

uncompensated care, but not Northport’s.

DCH filed an appeal with the Provider Reimbursement

Review Board, which denied relief on the ground that section

1395ww(r)(3) barred administrative review.

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DCH then sued. It sought to challenge “the methodology

adopted and employed” by HHS to calculate the third factor

bearing on its DSH additional payment. J.A. 5. DCH

requested vacatur of “the Secretary’s Fiscal Year 2014 Factor

3 calculation for Plaintiff,” as well as an order compelling the

Secretary “to recalculate the Fiscal Year 2014 disproportionate

share adjustment owed to Plaintiff through application of a

methodology for determining Factor 3 that considers data

associated with both the surviving and non-surviving hospitals

that underwent a merger.” J.A. 20.

The district court held that section 1395ww(r)(3) barred

judicial review of DCH’s claims, so it dismissed the case for

lack of jurisdiction. DCH Reg’l Med. Ctr. v. Price, 257 F.

Supp. 3d 91 (D.D.C. 2017). We review that decision de novo.

Am. Hosp. Ass’n v. Azar, 895 F.3d 822, 825 (D.C. Cir. 2018).

II

By its terms, section 1395ww(r)(3)(A) provides that

“[t]here shall be no administrative or judicial review” of “[a]ny

estimate of the Secretary for purposes of determining the

factors described” in section 1395ww(r)(2). DCH concedes

that this preclusion provision bars review of the estimates used

by the Secretary to make the DSH additional payments under

section 1395ww(r)(2). Yet DCH contends that the provision

does not bar review of the methodology used to make the

estimates. We disagree.

A

Although we “presume” that agency action is judicially

reviewable, “that presumption, like all presumptions used in

interpreting statutes, may be overcome by specific language

that is a reliable indicator of congressional intent.” Knapp

Med. Ctr. v. Hargan, 875 F.3d 1125, 1128 (D.C. Cir. 2017)

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(cleaned up). When Congress provides that “there shall be no

administrative or judicial review” of specified agency actions,

42 U.S.C. § 1395nn(i)(3)(I), its intent to bar review is clear, so

we determine only whether the challenged action falls “within

the preclusive scope” of the statute, Knapp Med. Ctr., 875 F.3d

at 1128. Here, Congress has barred review of “[a]ny estimate”

used by the Secretary to calculate a DSH additional payment.

42 U.S.C. § 1395ww(r)(3)(A).

In this statutory scheme, a challenge to the methodology

for estimating uncompensated care is unavoidably a challenge

to the estimates themselves. The statute draws no distinction

between the two. Instead, it simply provides for payments

under a formula consisting of three factors estimated by the

Secretary. 42 U.S.C. § 1395ww(r)(2). There is also no way to

review the Secretary’s method of estimation without reviewing

the estimate itself. DCH’s complaint confirms this point. It

seeks both vacatur of “the Secretary’s Fiscal Year 2014 Factor

3 calculation for Plaintiff” and an order compelling the

Secretary “to recalculate the Fiscal Year 2014 disproportionate

share adjustment owed to Plaintiff.” J.A. 20. This attacks the

estimate used to calculate a DSH additional payment.

Moreover, DCH’s proposed distinction between

methodology and estimates would eviscerate the statutory bar,

for almost any challenge to an estimate could be recast as a

challenge to its underlying methodology. For example, all the

determinations made in the FY 2014 Rule, see 78 Fed. Reg. at

50,627–47, or in any of its successor rules, are fairly described

as methodological. So, the only unreviewable estimates would

be ones turning on how to apply these elaborate rules in

individual cases. Such a line might make sense if Congress had

required the Secretary to formulate a methodology for

calculating DSH additional payments by rule, and then

foreclosed judicial review only of adjudications applying the

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rule to specific hospitals. But here, Congress has foreclosed

review of “[a]ny estimate” used by the Secretary “for purposes

of determining the factors” bearing on DSH additional

payments. 42 U.S.C. § 1395ww(r)(3)(A). Many of the

relevant estimates involve determinations that do not vary from

hospital to hospital—and thus are sensibly made by rule. For

example, the first statutory factor turns on “the aggregate

amount of payments” that would have been made to all

disproportionate share hospitals under a prior version of the

statute, “as estimated by the Secretary.” Id.

§ 1395ww(r)(2)(A). The second factor turns on the “percent

change” of uninsured individuals under 65 years old

nationwide, “as calculated by the Secretary” for fiscal years

2014 to 2017, and on the “percent change” of all uninsured

individuals nationwide, “as estimated by the Secretary” in each

subsequent fiscal year. Id. § 1395ww(r)(2)(B). The third

factor turns on each individual hospital’s share of uninsured

care, measured relative to a denominator of “the aggregate

amount of uncompensated care” provided by all

disproportionate share hospitals, “as estimated by the

Secretary.” Id. § 1395ww(r)(2)(C). Under this statutory

structure, which plainly bars review of estimates made across-

the-board and by rule, estimates cannot be separated from the

methodology used to generate them.

Our decision in Florida Health Sciences Center, Inc. v.

Secretary of HHS, 830 F.3d 515 (D.C. Cir. 2016), reinforces

this analysis. There, we held that section 1395ww(r)(3)(A)

bars judicial review of the choice of data used to estimate a

hospital’s amount of uncompensated care. We rejected the

argument that “an ‘estimate’ is not the same thing as the ‘data’

on which it is based.” Id. at 519. Instead, we held that, because

the selection of data used to make estimates is “inextricably

intertwined” with the estimates themselves, the bar on judicial

review applies to both. Id. at 521. That reasoning governs this

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case, for the methodology used to generate estimates is no less

“inextricably intertwined” with the estimates. In particular, the

decision held unreviewable in Florida Health—to exclude

from the 2014 estimates any data submitted after March

2013—is a methodological choice as well as a data choice.

Indeed, both the Secretary and this Court described it as such.

See id. at 517 (“methodology for calculating DSH payments”);

FY 2014 Rule, 78 Fed. Reg. at 50,634 (“Methodology to

Calculate Factor 3”).

If anything, the case for preclusion is even stronger here

than in Florida Health. The governing statute speaks of

uncompensated care “as estimated by the Secretary, based on

appropriate data.” 42 U.S.C. § 1395ww(r)(2)(C)(i). So, it

provides at least some textual basis for considering whether

estimates can be separated from their underlying data. But the

statute makes no reference to “methodology” as such—and

thus provides no textual basis for separating estimates from

their underlying methodology.

In construing other Medicare provisions barring judicial

review, we have employed similar reasoning. For example, in

Texas Alliance for Home Care Services v. Sebelius, 681 F.3d

402 (D.C. Cir. 2012), we construed a statute that bars review

of “the awarding of contracts” to cover challenges to a

regulation setting forth financial eligibility standards, which

we described as “indispensable to ‘the awarding of contracts.’”

Id. at 409. Likewise, we construed a provision barring review

of “the bidding structure and number of contractors selected”

to cover the same eligibility regulation, which we described as

“inextricably intertwined with the bidding structure.” Id. at

411. Most recently, we held that a statute barring judicial

review of “prospective payment rates” covers “adjustments

used to calculate th[ose] rate[s].” Mercy Hosp., Inc. v. Azar,

891 F.3d 1062, 1066 (D.C. Cir. 2018). Citing Florida Health,

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we reasoned that the adjustments were “inextricably

intertwined” with the rates. Id. at 1066–67 (“Because

reviewing a formula used by the prospective payment rate

would effectively review the rate itself, we cannot review the

former if we cannot review the latter.”). These decisions

confirm our analysis above: We cannot review the Secretary’s

method of estimation without also reviewing the estimate. And

because the two are inextricably intertwined,

section 1395ww(r)(3)(A) precludes review of both.

B

To support its argument for jurisdiction, DCH invokes

McNary v. Haitian Refugee Center, Inc., 498 U.S. 479 (1991),

and ParkView Medical Associates v. Shalala, 158 F.3d 146

(D.C. Cir. 1998). Neither case is apposite.

McNary involved a provision that barred district-court

review of any “determination respecting an application for

adjustment of status” of certain alien farmworkers. 498 U.S. at

486 n.6. The Supreme Court held that this provision did not

bar a class action asserting due-process challenges to the

procedures used by the agency to adjudicate individual

adjustment decisions. The Court reasoned that the preclusion

provision covered only “a single act rather than a group of

decisions or a practice or procedure employed in making

decisions.” Id. at 491–92.

McNary is inapplicable here. For one thing, the preclusion

provision there covered only decisions made through

adjudicatory determinations about individual applications.

Here, by contrast, the preclusion provision covers “[a]ny

estimate of the Secretary for purposes of determining” DSH

additional payments. 42 U.S.C. § 1395ww(r)(3)(A). As

explained above, this text suggests, and statutory context

confirms, that the provision covers broad estimates made by

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rule, as well as individualized estimates made by adjudication.

Moreover, the relief sought in McNary—greater agency

process—would not have had “the practical effect of also

deciding th[e] claims for benefits on the merits.” Fornaro v.

James, 416 F.3d 63, 68 (D.C. Cir. 2005) (quoting McNary, 498

U.S. at 495). Here, by contrast, DCH seeks to attack the very

estimates that the preclusion provision insulates from review.

Finally, this case involves only statutory claims, so we may

apply the preclusion provision without straining to avoid the

“serious constitutional question” that would arise from denying

judicial review of constitutional claims. Bowen v. Mich. Acad.

of Family Physicians, 476 U.S. 667, 681 n.12 (1986) (quotation

marks omitted).

ParkView is similarly inapplicable. That case involved a

provision barring review of “[t]he decision of the Secretary”

about whether to reclassify a hospital, for Medicare

reimbursement purposes, from rural to urban. 158 F.3d at 147–

48. The Court held that “this bar leaves hospitals free to

challenge the general rules leading to denial” of

reclassification, id. at 148, and it went on to conclude that

regulations governing the choice of data for reclassification

decisions were not arbitrary and capricious, id. at 148–49. As

in McNary, the preclusion provision in ParkView targeted only

a particular kind of adjudicatory decision, rather than any

estimate used to make the decision.

Moreover, ParkView has been twice limited, in a way that

creates a second dispositive distinction. First, in addressing the

preclusion provision at issue there, we clarified that “when a

procedure is challenged solely in order to reverse an individual

reclassification decision, judicial review is not permitted.”

Palisades Gen. Hosp. Inc. v. Leavitt, 426 F.3d 400, 405 (D.C.

Cir. 2005). In other words, ParkView is “inapplicable … where

the hospital’s challenge is no more than an attempt to undo an

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individual [decision].” Id. Later, in Florida Health, we

extended that reasoning to the preclusion provision at issue

here. We held that section 1395ww(r)(3) barred review

because the plaintiff was “simply trying to undo the Secretary’s

estimate of the hospital’s uncompensated care by recasting its

challenge to the Secretary’s choice of data as an attack on the

general rules leading to her estimate.” 830 F.3d at 522.

That principle governs this case. As explained above,

DCH is simply trying to undo the Secretary’s estimate of its

uncompensated care by recasting its challenge to that estimate

as an attack on the underlying methodology. Indeed, DCH is

trying to do so explicitly, in seeking vacatur of the calculation

of its own DSH additional payment for fiscal year 2014 and an

order requiring the Secretary to recalculate it. For these

reasons, Florida Health—not Parkview—controls here.

III

DCH further argues that even if the statutory bar on

judicial review applies, the district court still should have set

aside the calculation of its DSH additional payment as ultra

vires. According to DCH, the district court could have done so

because the Secretary, in making the calculation, failed to

choose appropriate data. DCH is mistaken.

The doctrine invoked by DCH traces to Leedom v. Kyne,

358 U.S. 184 (1958). That case involved section 9(b)(1) of the

National Labor Relations Act, which provides that the National

Labor Relations Board “shall not” certify a bargaining unit

including professionals and other employees “unless a majority

of such professional employees vote for inclusion in such unit.”

29 U.S.C. § 159(b)(1). The Board had done just that, and the

Supreme Court described its action as one “made in excess of

its delegated powers and contrary to a specific prohibition in

the Act.” 358 U.S. at 188. The Court further held that the

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district court had jurisdiction to set aside this unlawful agency

action. That question arose because the NLRA permits court-

of-appeals review of any “final order of the Board,” 29 U.S.C.

§ 160(f), a term that the Court had construed not to encompass

certification orders, see Am. Fed’n of Labor v. NLRB, 308 U.S.

401 (1940). The Court held that this specific-review scheme

did not oust the district court of jurisdiction under 28 U.S.C.

§ 1337, which otherwise applied. See 358 U.S. at 187, 191.

In Board of Governors of the Federal Reserve System v.

MCorp Financial, Inc., 502 U.S. 32 (1991), the Supreme Court

cautioned against overreading Kyne’s jurisdictional holding. A

court of appeals had read Kyne “as authorizing judicial review

of any agency action that is alleged to have exceeded the

agency’s statutory authority,” but the Supreme Court

disagreed. Id. at 43. The Court stressed that, in Kyne, the

putative bar on district-court review was “implied” from the

“silence” of a statute permitting review in the courts of appeals.

Id. at 44. The Court further described Kyne as merely standing

for the “familiar proposition” that judicial review is presumed

to be available absent a clear statute to the contrary. Id. And

it distinguished Kyne because the statute at issue in MCorp

barred judicial review “clearly and directly.” Id.

Following MCorp, there is not much room to contend that

courts may disregard statutory bars on judicial review just

because the underlying merits seem obvious. This Court has

stated that such an argument “is essentially a Hail Mary pass—

and in court as in football, the attempt rarely succeeds.” Nyunt

v. Chairman, Broad. Bd. of Governors, 589 F.3d 445, 449

(D.C. Cir. 2009). Other decisions confirm that Kyne, if

construed to permit this kind of backdoor review, has “very

limited scope.” DOJ v. FLRA, 981 F.2d 1339, 1342 (D.C. Cir.

1993); see also Griffith v. FLRA, 842 F.2d 487, 493 (D.C. Cir.

1988) (“extremely limited scope”); Hartz Mountain Corp. v.

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Dotson, 727 F.2d 1308, 1312 (D.C. Cir. 1984) (“extraordinarily

narrow”). At most, such a “Kyne exception” applies only when

three requirements are met: “(i) the statutory preclusion of

review is implied rather than express; (ii) there is no alternative

procedure for review of the statutory claim; and (iii) the agency

plainly acts in excess of its delegated powers and contrary to a

specific prohibition in the statute that is clear and mandatory.”

Nyunt, 589 F.3d at 449 (cleaned up). The third requirement

covers only “extreme” agency error, not merely “[g]arden-

variety errors of law or fact.” Griffith, 842 F.2d at 493.

DCH fails to satisfy the first or third of these requirements.

Here, the bar on judicial review is express. Moreover, DCH

fails to allege any obvious violation of a clear statutory

command. To the contrary, it invokes only the requirement that

the Secretary, in calculating the DSH additional payment, must

choose “appropriate data.” 42 U.S.C. § 1395ww(r)(2)(C).

DCH makes no attempt to explain why the Secretary’s

treatment of hospital mergers violates this open-ended

provision at all, much less obviously so. Instead, DCH argues

only that the Secretary treats hospital mergers differently in

different contexts and that, in calculating DSH additional

payments, the Secretary treated hospital mergers differently in

fiscal years 2014 and 2015. At most, that suggests that the

2014 treatment may have been arbitrary and capricious. And

even that point is debatable, for the Secretary, in discussing the

choice of data for the 2014 payment calculations, suggested

possible administrability problems with the rule urged by

DCH. See 78 Fed. Reg. at 50,642. Whatever the merits of

DCH’s objection, it is worlds apart from the obvious violation

of the clear statutory command at issue in Kyne.

DCH claims support from Southwest Airlines Co. v. TSA,

554 F.3d 1065 (D.C. Cir. 2009), and COMSAT Corp. v. FCC,

114 F.3d 223 (D.C. Cir. 1997), but those cases are off-point.

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They permitted review not because an obvious legal error

justified disregarding an applicable statutory bar, but because

the relevant statutory bar, in the circumstances of each case,

was effectively coextensive with the merits. The same agency

error thus simultaneously made the jurisdictional bar

“inapplicable” and compelled setting aside the challenged

agency action. See COMSAT, 114 F.3d at 227 (statutory bar

“merges consideration” of jurisdiction and merits); Sw.

Airlines, 554 F.3d at 1071 (following COMSAT). Moreover,

even if these cases did support a Kyne exception, each involved

a far more obvious legal error than anything arguably present

here. In COMSAT, the agency was authorized to collect fees

only for “rulemaking proceedings or changes in law,” yet it

sought to collect fees for concededly different activities. 114

F.3d at 225. Likewise, in Southwest Airlines, the agency was

authorized to collect certain fees only for screening

“passengers and property,” yet it sought to collect those fees

for screening non-passengers. 554 F.3d at 1070–71. Nothing

remotely analogous is present here.

IV

For these reasons, the district court correctly concluded

that section 1395ww(r)(3) bars judicial review in this case.

Affirmed.