On September 17, 2014, the U.S. District Court for the District of Columbia dismissed a lawsuit brought by the American Hospital Association (AHA), three individual hospitals, and two health care systems that challenged CMS’s “Part B inpatient” billing policies.  Am. Hosp. Ass’n v. Burwell, No. 12-1770-CKK (D.D.C. Sept. 17, 2014).  The court dismissed the case for lack of jurisdiction. 

AHA filed this lawsuit in 2012, challenging a CMS policy that severely restricts hospitals’ ability to bill Medicare Part B for medically necessary services provided to inpatients following the denial of the inpatient stay because, in the CMS contractor’s view, the services should have been provided in an outpatient setting.  AHA challenged CMS’s requirement that hospitals must submit “new” Part B claims after a Part A denial, rather than permitting hospitals to amend or supplement the existing Part A claim.  AHA also challenged CMS’s policy that any “new” Part B claims be filed within one year after the date of service, citing the fact that almost all Medicare contractor denials, especially recovery audit contractor (RAC) denials, come more than a year after the date of service.  AHA argued that CMS’s failure to create a categorical exception to the one-year timely filing requirement under these circumstances was arbitrary and capricious.

The court did not address these challenges on their merits.  Instead, the court held that it did not have jurisdiction under the Medicare statute.  Under the Medicare statute, judicial review is available only “after a[] final decision of the [Secretary] made after a hearing,” and CMS has narrowly defined what constitutes a “final decision,” the most common example of which is a denied claim for Medicare reimbursement.  The court found, however, that CMS’s failure to make an exception to its timeliness policy does not embody an appealable “final decision,” but is rather a “non-exercise of the agency’s discretion.”  Similarly, the court held that the requirement to submit a new Part B claim after a Part A denial, rather than allow for amending the previously filed claim was also a “non-existent decision . . . [and] not one of the categories of final decisions of which judicial review is allowed.”

AHA had argued that if the court did not have jurisdiction under the Medicare statute, then it did have federal question jurisdiction under 28 U.S.C. § 1331.  Generally, the Medicare statute requires that all legal challenges to the agency’s final decisions be channeled through the agency’s five-level administrative appeals process before they can be filed in federal court.  But the Supreme Court has recognized an exception to this channeling requirement “when roadblocks practically cut off any avenue to federal court, . . . [such that] judicial review [is] unavailable as a practical matter.”  Am. Chiropractic Ass'n. v. Leavitt, 431 F.3d 812, 816 (2005) (citing Shalala v. Illinois Council on Long Term Care, 529 U.S. 1, 22-23 (2000)).  Ultimately, AHA could not demonstrate that it met this exception because other hospitals had successfully challenged CMS’s refusal to rebill under Part B and received favorable decisions from the Departmental Appeals Board awarding reimbursement under Part B.  Even if AHA’s member hospitals were unsuccessful in such an appeal, the court reasoned, they could then obtain judicial review of that administrative decision.  The full decision is available here.  The relevant Final Rule regarding CMS policy for Part B rebilling after a RAC denial for Part A claims is available here.  78 Fed. Reg. 50,496, 50,906 (Aug. 19, 2013).