i'd like to address three points this morning which i'll summarize briefly first there have been developments during the course of this appeal that resolve the preserve a related issue issues and open the door to the resolution of the others is the case second that this court's resolve those issues and third the merits of them during the pendency of this appeal all of the planet hospitals have file four for a five point nine zero for how how does that help you the presumption problem you have is there's no final decision assuming that applies in this context that's equally true now with the the on on this point to correct yet that resentment and exhaustion ok resentment is the president resentment is the jurisdictional issue exhaustion completing the process and is futile is way i understand but the the requirement of a final decision goes to present as i understand it now no i don't think so you are the the case is suggest that there are two features of the requirement of a final agencies one is present which is generally term jurisdiction the other is exhaustion going to the end percentage went to the agency while the agency process runs its course process and that's a separate issue and we think because it was the only place the coin could actually be considered that action alliance demonstrates that there is some flexibility in what is sufficient presentment and we argue that when you do it in the only way possible you've succeeded but that issue does not need to be addressed here i was beginning on the present point so there are cases like matthews versus diaz that say that something can happen while a case of pending on appeal to effectively correct a jurisdictional problem in that case though the corrective action had taken place before the district court at a time when the district court could have accepted an amended pleading and then the question is and maybe you have some cases that support this but the question is does that same logic apply when i think by listeners listen i agree with you too late even now to cure the jurisdictional defect of approximated end of the beginning is a quote twenty eight u s c six hundred fifty three says that complaints can be amended any stage even on appeal to cure or just jurisdiction and is that actually happened and i don't do complaints actually get the complaint itself gets amended while cases on appeal in the novak case in this court for fifty two f third the claim was a claim for personal injuries and jurisdiction was predicated on diversity when the the case was dismissed on different grounds when it reached this court the court looked at the complaint and question whether there was complete diversity inquired of the parties and everyone this court saw it everyone figured it out and then the plaintiff appellants moved to dismiss the non diverse defendants and this court granted that motion and moved to i'm in the complaint and this court granted that supreme court speaking to cure the jurisdictional defect to what what's left of what i had thought was the general principle which is snore malee you measure jurisdiction at the outset i think  jurisdiction of the outset when ms sounds like basically then with what happens with the world is the rule that jurisdictions measured at the time of the complaint be filed only helps plaintiffs because it sounds like that that defendant diversity issues and as i said section sixteen fifty three is pretty clear that you can amend complaints to cure jurisdictional defects which suggest a general rate much like what six hundred fifty three doesn't tell you  said it does say that the complaint can be amended but it doesn't tell you the timeframe of the actions that can be the basis of an amendment because it could be that yanking men to complain while the case is on appeal that has to be based on something that had happened already require where there is no other issue about affecting other parties rights like a lion jumping in a first filed situation where there is no prejudice at all to the amendment and where both parties agree that the lay prejudice is here the government has argued that in this closed environment of revenue neutral system that suring if this court were to find that the rule is invalid providing a cure for that gets more complicated as the dollars issue roll the plaintiffs of demonstrated that they are hospitals who treat the poor they are lifelines essential to under served medical communities and they it operate on tight margins and provide services to people people who desperately need them without these funds and one point six billion dollars a year that's an issue it's pretty clear that these hospitals are going to have to pull back on what they are able to do for their needs populations where you are and it can you say me any case where seen one of those that's in challenge through the mechanism you're proposing well you're both without you know coming straight to district court and secondly to get a preliminary injunction and i'm just reimbursement review board with these claims i mean here you can you go can you take a claim like this to the perp like you have this year starting in my when it kicked in in january twenty eighth you said you've presented the plans yes we have if you go to the provider reimbursement review  then when it comes ask for the expedited judicial review why isn't that the mechanism for this does it not apply to these lines because of the second development that i said i was going to tell you about the government has filed another case pending in the district court of pleading that assures the court that any appeal presented to the agency based on the invalidity of the regulation will be summarily dismissed but that's exactly why the provider reimbursement review board provision allows for expedited judicial review of the board determines that it has no capacity and no power to determine the legal claim that it gives you a ticket directly to district court but if exhaustion use they would be claims for reimbursement of particular drugs ah you know they are submitted regularly throughout the year and is that the only argument that would be made with respect to reimbursement is gys because sometimes a lawyer arguments about about the drugs is the only one that would be made ye think have some other challenges to raise as well not the the relevant documents are in the in the very brief appendix to the reply pages one and two are the government's pleading saying violation to make and they said they won't consider him and we say and you can see it in the addendum to the reply we say the only issue here is the operation of the formula the rule there is no section t twelve which is on page eighty three of our brief precludes not only administrative but also judicial review so as has been said the claims don't go through the provider review board because there is no administrative review these kinds of challenges to the payment rates that the secretary sets for services and drugs under the outpatient prospected payment system and i can walk through briefly the three provisions that demonstrate that that's true  they are teach to which is the secretary general authority to set up the classification system set payment rates and i just those rates fourteen which is gives additional instruction on how the secretary shall set rates for certain viewing fourteen as a subset of two rather than as a separate freestanding program yes your honor to the what the secretary is doing under t her graph fourteen sets up a a special scheme for s c o d specially covered outpatient drugs all of those drugs were assessed and reimbursed as outpatient drugs under paragraph two that's correct there's also a provision that was added in between the initial establishment of the o p s system and this inclusion of fourteen which provides for what are called passive payments for new drugs but that's something separate and sort of the general classification of establishing groups of drugs that are comparable clinically and with regard to use of resources and then setting and adjusting payment rates for those drugs which is what the secretary general for the for the drugs that are now cods under fourteen do they are are they still assessed for other purposes under under two of the general provisions or are because about just if it's if it's that drug it's just under fourteen and nothing else was there what fourteen does is provides an instruction to the secretary on how to  under his teeth to authorities sets up the classification groups and then once he has a group for this kind of drug to fourteen provide some clarification on what the payment rate should be for those drugs why should we view the staying just given if you look at what cross references are and what cross references are not in the scheme so you have your general provision into has crossed references to five and six but not to fourteen the preclusion provision makes reference to two but not fourteen fourteen makes no reference back to two what why doesn't that at least support a colorable argument the fourteen is really something distinct so if i can take that in two parts the first being that what that are not part of the general classification system and that it does and other adjustments as determined to be necessary to ensure equitable payments so it is perfectly reasonable for congress to think that zack covered i don't think there was any need for congress to back reference to the fourteen because it already had a catch all provision is what sort of from what's what's the relationship between the provision which talks about adjustments nine which also which also talks about the secretary making adjustments and also has the budget neutrality requirement so if i may section nine is a general authority story to periodically review and adjust and but but then within the sort of general scheme there are specific adjustments that the secretary is authorized to make with regard to specific kinds of payments and that is the kind of thing that's covered in the follows references to five and six and therefore i assume your you would take the position that secretaries action here is independently supportable under two e and under nine under both general authority that secretary has at the outset to set up the system and various conversion factors and payments that are involved in that and just as an especially confusing matter what it says in c is paragraph six  those are as i said separate payment authorities that the secretary has to make additional payments outside of his general t to authority to develop the classification system and set rates and so it's perfectly reasonable that they would have because as i said fourteen says it doesn't give the secretary authority to make new payments what it says is for the class of drugs that is covered under this provision the pain and rate shall be as follows and then give some additional instruction on how the secretary shall set the rate for that it's not a new payment of any kind outside the t two classification system it's just a clarification on how is there anything that happens under and so it's actually seems at least ambiguous to me that congress would have meant that one covered the other so if i could i think part of what's driving your question is perhaps what are the purposes of this paragraph  reimbursement of medicare provision in order to create a subsidy but that's not how it works it's just a discount it's us totally separate statutory provision under which certain providers can buy drugs at a discounted rate which allows them to stretch their dollars further the medicare reimbursement rate at issue here applies to a small category of those drugs that are paid under the outpatient prospect of payment system and that what the secretary is doing he said in that rate has nothing to do with the price up with the three forty b discount with the secretary is doing is setting the rate under the medicare statute which directs him to separate as equal to either one the acquisition cost if certain survey data is available or two if that is not available to use the average price of the drug as set by a different provision of the statute but the present in question is the sale of the drug from the manufacturer to the provider so what congress is trying to get at is a number that approximates the acquisition cost of those drugs and it the problem that c m s was addressing here is that the average sales price as calculated by c m s doesn't account for the three forty discounts and there's been a number of studies that have demonstrated that provide three forty b providers or buying these drugs at well below not only the price but also the statutory maximum price under the three for the b program so the secretary i just did the reimbursement for those drugs in such a way that better reflects the actual acquisition cost of those drugs to providers and that not only addresses the purposes of the paragraph which is to approximate acquisition costs but also is equitable payment because that money is distributed through the paragraphs separately yes or ok there's a question about whether that's in fact true about the police of sudan but it also does two questions first what are the other paragraphs that are completely subsumed put into because i suppose it's not just fourteen the nine i think you mentioned but maybe there's others too and then secondly it's speech in terms of the development of the classification system and it sounds like a lot of these questions about what happens in the fourteen at least doesn't sound in development it so they are in a sense part of the general development of the system that the secretary makes at the outset but what how it works is that the secretary takes account of all of the drugs and services that are covered under the outpatient prospect of payment system and fries them into groups and then sets relative payment weights and makes adjustments to those payment rates in the system and the secretary does this in a budget neutral manner and does it at at the outset it's intended to be prospected it's intended to be budget neutral to look forward and to set the rate for the various services that would be at the i wish and they will be paid throughout the year so all of that is assumed within the development of the system the application of the system is the paying of claims at the rates set at the outset by the secretary and that's outside limitation of the review certainly you can get review of your claim if you think that you weren't paid enough money i f it was denied for failure to adequately justify the claim any of those kinds of things but where you cannot get review under t twelve is the rate at which the secretary sets the payment for the year and that's what they're trying to challenge here and that's why it's precluded under twelve because that's part of what the secretary is doing in his under his teeth to authority is setting the rates for and is there any way that they can get the challenge of the rate as your following year and suggest that the rate was too low and should be higher for the next year but you can't get judicial review of the payment rate in part because as i said it's budget neutral which means that any adjustment that's made to the payment rates by a backward looking court would not only affect the rate for that drug and service but also the entire o p p r system which as we noted in our brief process is one hundred million cl take off the table the question of initial setup design versus adjustment over just over time design yes i think they both address the same thing and so in this circumstance where the secretary is using both his authority under t two and t nine to establish the rates for two thousand and eighteen that both of those provisions would preclude review of the rate set and it just meant here and  that this is all i'm actually came in here thinking that you couldn't avoid them not because it's a six but then but this is the one that everybody apparently agrees with it's actually supposed to be nine there's no question if you look back at the statutory history that they just didn't update the cross reference provision in c also would cover what's going on here and that as this court recognise in florida health sciences the fact that there are overlapping provisions in fact demonstrates that congress really meant no judicial and  in the statute the secretary has the discretion to adjust as necessary for purposes of the paragraph courts have recognized that in some extreme instances where the adjustment actually amounts to an elimination of the pain meant that that might be something that's considered also bars and that was the analysis in amgen but there's no basis to conclude that when the the congress has given the secretary to adjust as necessary that that wouldn't cover  adjustment issue here which was in response to an enormous disparity between the acquisition cost of the drugs under the three forty program and the reimbursement rate that they were receiving under section t fourteen and in the s system and and the secretary also took account as i said of the fact that that those savings would be redistributed throughout the system and also that that is affects the rate at which medicare beneficiaries are required to pay a certain amount of step by statute in co pay and so taking account of that they need an appropriate adjustment to reflect that disparity between as he said the acquisition cost and the actual discounts that already to make adjustments under nine does include a budget neutrality requirement and the secretary tries to adhere to that when making adjustments throughout the system here function a little bit come  but we everything that he did here could also have been done under teach you which does require budget neutrality and it was budget neutral which means that if this court seeks to unscramble what the secretary did in setting the two thousand and eight ra fourteen and nine but fourteen is not broader than two yes or yes and fourteen is also completely with a nine or no but only some applications of fourteen or nine i believe it's only some applications because gave the secretary the general authority to set up this system and then also given the authority to invoke periodic adjustments to the system and the actions that he's taking in setting up the system and making a similar if not identical it's just sort of separate you know you at the beginning you do this and then when you intend to to adjust periodical you use your one when you hear that sort of say in this role or you can't agree with this but is that it's all these provisions kind of interlake kind of sometimes and sometimes kind of then you know a lot of times they do but then there's a sliver that stands outside then in order to figure out whether a limitation on review provision applies it could be pinned to what's actually in vote because then that indicates the adjustments and you know i'm for of youth already but not twelve c for the with that and i think as i said twelve c because it lists and number of provisions it seeks to address some of the concern you have by saying ok well if it's this provision or this for that one then it's all all agree that it essentially was amended and move on but it doesn't say that you can go past district court review of the merits or any of the other as issues in the case and conclude that a jurisdictional defect can be cured before the court of take your question it could be amended but it would have to go back to district court to review the merits of the question and the other the preclusion of review question as to the desert as we know from b s it doesn't have to go back to the strip no i i think what he has sa that's that's a question of discretion of whether we want to do that which seems different from the question of whether there's in fact jurisdiction in the case at all and the district court ruled that there wasn't and you're pressing that argument and it's true that if we found th for these purposes and just call that up resentment so if you think that that is so first law that they can't just cure the jurisdiction of the fact while the court cases pending in the court of appeals and just go on their or i do not think it is it just is a d s situation in that everybody agreed that it could have been amended in district court and it wasn't and that is a technical error and we should just overlook and allow the opinion of the complaint how this is a different i don't have a position on whether it does or not i don't think that it's as clear as plaintiffs are making it out to be that it does it as i said it says we are entitled to pain at this rate it does not actually flush out any of the reasons spell out legal arguments i think maybe they were assuming you all are on notice for one position is i'm just trying to understand this presentment argument that you're presenting so i don't know exactly how fulsome it not like it was defective if i could get to sort of the second part of it the problem that all of this highlights is that h h s reads t twelve to apply and te twelve also precludes administrator for a few so they're not going taking this claim before the provider review board because the ministry of review of this kind of challenge is precluded so they could we could go back to district court and litigate these questions again but we're asking  difficult as well and that they're entitled to some additional measure of administrative review that they're not currently getting so i'm not sure the complaint could be amended in a way that would satisfy the present and admonition in the exhaustion s cannot address and in the administrative review process specifically regulatory or statutory or constitutional claims and there is an administrative review process for those that is expedited and so  even the thirteen under five or yes even if if this claim is something that is as you know by challenging a position of the century right made by regulation they still need to go through that process and that's well  settled supreme court lot that even if the agency can't give you the review the relief that you're seeking you still need to go through the administrative process and exhaust your claim in the medicare cont the new rate violates thirteen ninety five the authority to pay for this drug because it is not an adjustment to the statutory rape is based on acquisition costs reliable data are not available and it was for the explicit purposes  reducing benefits provided by the statutory created three forty the program that's a direct summary of the claim that was presented in the complaint below and that we're litigating here as to futility the pleading that the government promptly it's absolutely clear that there is no door open within the agency it's futility square it was futility before the government said this because the decision makers in the agency  bound to apply the rule and it's now futility squared because the agency said there are no decision makers who will even evaluate the argument we don't have jurisdiction the as took the complaint as constructive no reason to believe that the agency machinery will exceed this claim ever and clearly that's the case here as to the preclusion you got to look at paragraph twelve or five sub character of every single one specifically names the paragraph in the statute to which is applicable if you look at paragraph twelve what about the argument that two that every application of fourteen is necessarily an application of two and therefore there was no reason to  some connection with two when for example paragraph there could be a difference between having some connection to and being in tireless of suit with n z in other words i thought i thought the argument was a matter of architecture was that everything that's ever done under fourteen is necessarily an application of two and therefore it just there was no is just no reason to mention fourteen separately because you've already mentioned it by mentioning two and what was it the other is they may touch on refers back to paragraph two throughout the scheme you can see that here and there but the preclusion paragraph but but section two that does not apply to every decision it's made here the secretary clearly was acting and said he was acting under paragraph fourteen not paragraph two when paragraph thirty was added at the same time as paragraph fourteen paragraph thirteen included the language with a reference to paragraph two read because congress intended that can i ask on the on the cross references fourteen age has a cross reference which says that adjustments under fourteen after an initial period are taken into account for adjustments under nine and why doesn't that strongly support the government's position that initial setting under fourteen is really hard to find later adjustments under fourteen are really under nine congress to find how the adjustment was to work congress gave to me i understand but just on the question on the preclusion question a lot of the force of your position is in the cross references that are or are not present and seems like that one cuts against you but it's not part of the statutory specification of how you derive the formula and it doesn't preclusion turns on whether fourteen is is under two hundred nine or soft by itself well for one thing eight refers to two thousand and four in two thousand and five phone in the subsequent adjustment has to be an adjustment to sales price average sales price average sales price is a market measure across the entire country paragraph twelve  fourteen that the rate is set in the pen the paragraph nine and the secretary did not actually size paragraph nine authority here to adjust the rate if it applies which i don't think it does i thought that they were  reference the night it sounds like the i do not know that this issue was raised and i accept that it might be but i do not know for sure with respect to the heart of this matter what happened here and why there is a violation of paragraph fourteen is that what the secretary did was to draw all of the provisions of paragraph of option one average acquisition cost rate setting in the paragraph to pare that the got the government the rule the knowledge is that this was set this way to quote better represent the average acquisition cost option one prevents the use of that measure unless requisite data is available in his conceded that it's not and option to the average sales price requires the use of a market price across the country that can be adjusted for things like overhead but does not permit a special rate to be said for a subgroup of hospitals as option one does so nominally in words the secretary used average sales price terminology but substantively and in fact and it's evident on the face of the rule the secretary used the authority and option one to set rates for subgroups and use the authority in option one to use acquisition cost these the scheme as a whole seems to prefer a measure of cost rather than price right now it doesn't say use cost or price it says you must measure by costs if cost that are available and what why would it be beyond the scope of a statute or arbitrary and capricious for the secretary to say i may not know exactly what the costs data are but we know that price overstates cost and cost is the preferred measure and so we want to move the compensation in that direction often one requires very rigorous data and i think shows congress's skepticism that the rate should actually be said that should or thirty that it should not be said that the secretary should not use acquisition cost in the absence of rigorous data here the secretary not had just said you know you so so you can't say you can't just rest on it just adjustment doesn't mean eliminate and you say you need some notion of well this is this adjust undermining the purpose of the program targets the program i think it's the language we use and that's just it seems like a little bit of a tough case where what he says what he's targeting and aiming at and it was so huge and president bush has the intention was not to use every sales price the intention was to make whatever adjustment was necessary to end up acquisition cost impermissibly and notably to apply that to one subgroup of hospitals and not to the other participants in the o p s the option one permits that that option too doesn't and it disadvantages the hospitals if we have an apples and oranges calculation where the discounts to three freebie hospitals are taking into account but the discount to all the other hospitals who may have negotiated substantially large discounts are not taking effect  e really cutting the pie up using different measures for different people and it's particularly inappropriate where it affects negatively the hud hospitals that provide care thank you counsel cases th