United States Court of Appeals, District of Columbia Circuit
April 23, 2019
from the United States District Court for the District of
Columbia (No. 1:17-cv-02645)
C. Parrish argued the cause for appellant. With him on the
briefs were Mark D. Polston, Elizabeth N. Swayne, and Amelia
Scott Caulkins and Jeffrey J. Sherrin were on the brief for
amicus curiae American Association of Bioanalysts in support
McAloon was on the brief for amici curiae The College of
American Pathologists, et al. in support of appellant.
Fan, Attorney, U.S. Department of Justice, argued the cause
for appellee. With him on the brief were Abby C.
Wright, Attorney, Robert P. Charrow, General Counsel, U.S.
Department of Health & Human Services, Janice L. Hoffman,
Associate General Counsel, Susan Maxson Lyons, Deputy
Associate General Counsel, and Debra M. Laboschin, Attorney.
Alisa B. Klein, Attorney U.S. Department of Justice, entered
Before: Griffith, Millett and Pillard, Circuit Judges.
PILLARD, CIRCUIT JUDGE
Protecting Access to Medicare Act (PAMA, or the Act) seeks to
align Medicare reimbursement rates for laboratory tests with
rates paid for such tests in the private market. To enable
the Secretary of Health and Human Services (HHS) to ascertain
the private market's reimbursement rates, PAMA requires
"applicable laboratories" to report private payor
data to the Secretary that the Medicare program then uses to
set new, presumably lower, Medicare reimbursement rates. The
Secretary must implement the statute's definition of
"applicable laboratory" before it can be used to
collect the requisite data. In 2016, the Secretary issued a
final rule doing so, and plaintiff American Clinical
Laboratory Association (ACLA) filed suit claiming the rule
unlawfully excluded most hospital laboratories from the
Act's reporting requirements.
on PAMA's prohibition of judicial review of "the
establishment of payment amounts," the district court
dismissed ACLA's complaint for lack of subject matter
jurisdiction. We conclude that the statutory provision
stripping jurisdiction to review payment amounts does not
cover the statute's data-collection provision. We also
reject ACLA's claim that the Secretary's rule was
ultra vires. We thus reverse and remand to the
district court to consider in the first instance whether the
rule comports with the APA.
federal Medicare program, which pays for healthcare for
elderly and disabled individuals, see 42 U.S.C.
§ 1395 et seq., is the nation's largest purchaser of
clinical laboratory services. In 2013, the HHS Office of
Inspector General concluded that Medicare was paying 18 to 30
percent more than private insurance companies for a range of
common laboratory tests. Congress responded by enacting the
Protecting Access to Medicare Act, Pub. L. No. 113-93, 128
Stat. 1040 (2014). A central goal of the Act is to set
Medicare reimbursement rates for laboratory tests at
approximately the price private insurers pay for the same
tests. See 42 U.S.C. § 1395m-1(b)(1)(A).
inform the Secretary's rate setting, the statute requires
"applicable laborator[ies]" within the private
sector to report "private payor" data-both the
price and volume of laboratory tests-to HHS every three
years. Id. § 1395m-1(a). The statute defines
the term "private payor" as a "health
insurance issuer and a group health plan," a
"Medicare Advantage plan," or a "medicaid
managed care organization." Id. §
1395m-1(a)(8). It calls on the Secretary to establish
parameters for data collection through notice and comment
rulemaking. Id. § 1395m-1(a)(12). Applicable
laboratories that fail to report accurate data face monetary
penalties of up to $10, 000 per day. Id. §
separate provisions, the statute explains how the Secretary
is to use private payor data on each laboratory test already
available in the market to calculate a "weighted
median" rate, which becomes Medicare's reimbursement
rate for that test. Id. § 1395m-1(b). For new
tests that do not have private payor data, the Secretary is
to use a "gapfilling process" and consult with an
expert advisory panel to establish the new test's
Medicare payment rate. Id. §§
1395m-1(c)-(d), (f). Because the market-approximating
Medicare rates are likely to be lower than existing Medicare
rates, the statute allows for a multi-year
"[p]hase-in" process to transition to the
market-based rates. Id. § 1395m-1(b)(3).
Finally, the statute declares that "[t]here shall be no
administrative or judicial review . . . of the establishment
of payment amounts under this section," id.
§ 1395m-1(h)(1), thereby barring otherwise available
review by the Departmental Appeals Board and Provider
Reimbursement Board as well as the federal courts.
appeal is about whether the Secretary's implementation of
PAMA's definition of "applicable laboratories"
is subject to review in response to a claim that it
unlawfully excludes hospital laboratories-which tend to
charge higher prices than standalone laboratories-from the
dataset used to determine new Medicare rates. See
Medicare Program; Medicare Clinical Diagnostic Laboratory
Tests Payment System, 81 Fed. Reg. 41, 036 (June 23, 2016).
Laboratory tests are available to the public through three
main types of laboratories: physician-office laboratories
(which in 2015 comprised 17 percent of all labs), independent
laboratories (50 percent of all labs), and hospital
laboratories (33 percent of all labs). The statute does not
expressly discuss those distinct types of institutional
settings, instead generally defining an applicable laboratory
as "a laboratory that, with respect to its revenues
under this subchapter, a majority of such revenues are from
this section, section 1395l(h) of this title, or section
1395w-4 of this title." 42 U.S.C. § 1395m-1(a)(2).
In plain terms, that definition refers to a laboratory that
receives most of its overall Medicare funding from the
Physician Fee Schedule (PFS) or ...