Pursuant to Fede ral Rule of Civil Proc edure 25(d), Char les E. J ohnson is substi tuted as 1 Ac tin g Se c re tary

fo r h is p re de c e sso r, Mic ha e l O. L e avitt, S e c re tary of the U. S. D e pa

rtme nt o f H e a lth and Human Se rv ic e s. UNITED STAT ES DIS TRICT COURT

F OR THE D ISTRIC T OF CO LU M BIA

) CO LOR AD O HEA RT IN STIT UT E, LLC, e t al

. , ) ) ) P laintif fs, )

) v. ) Civil Action No. 08-1626 (RM C) ) CH ARLES E. JOH NSO N, Ac ti ng 1 Se c r e ta r y, U. S. D e par tm e ntof He alt h and Hum an Se r vic e s, ) ) ) ) Defendan t. ) )
M EM OR

AN DU M OP IN ION The Stark L aw, 42 U.S.C . § 1395nn, g ener ally prohibits a phy sician fr om refe rring Medica re patients to an “entity

for the f urnishing of

desig nated health service s” (“ DHS”) where a financi al re l ati onship ex ists between the phy sician and the entity . The Center s for Medic are & Medica id Services ( “CMS”) cur rently interpre ts this statutory lang uag e to r efe r only to the entity

that dir e c tly bills Med icare fo r D HS. Ho we ve r, e ff e c tiv e Oc tob e r 1 , 2 00 9, CMS w ill int e rp re t th is la n g u a g e t o a l s o i n c l u d e a s e c o n d e n t i t y t h a t p r o v i d e s D H S t o t h e f i r s t e n t i t y t h a t d ir e c tly

bil ls Medica re. Plaintiffs are phy sicians and phy sician-owne d entities that provide DHS under contra ct wi th h os pit a ls i n Co lor a do . Und e r C MS’ s c ur re nt i nte rp re tatio n, on ly

the ho sp ita l – t

he bil lin g e nti ty – is c on sid e re d to be furn ish ing DH S and , the re fo re , the ind ivi du a l phy sic ian Pl a int if fs c an la wf ull yI n addition to inpatient and outpatient hospital service s at issue her e, the other cate g ories 2 of DH S are c lin ic a l la

bo rator y se rv ic e s; ph y sic a l the ra py se rv ic e s; oc c up a tio na l the rapy ser vic e s; ra dio logy se rv ic e s, inc lud ingma g ne tic re so na nc e ima g ing , c omp ute ri zed a xial tom og ra

ph y sc ans , and ultrasound se rvi ces; radiation thera py service s and supplies; durable me dical equipment a nd supplies; parente ral a

nd enter al nutrients, equipment, and supplies; prosthe tics, orthotics, and prosthetic devic es and supplies; home health servic es; outpatient presc ription drug s; and outpatient speec h-languag e patholog y service s. See 42 U.S.C. § 1395nn(h)(6).

-2- ref er the ir Medica

re patients to the entities t h ey own. B ut under CMS’s new interpr etation, the phy sician-owne d entities that provide DHS under contrac t with the hos pitals also will be considere d to b e fu rn ish ingDH S. Co ns e qu e ntl y , a bs ent a n a pp lic a ble e xce pti on , th e Stark

L aw w ill pr oh ibi t the ind ivi du a l phy sic ian Pl a int if fs fr om r e fe rr ingthe ir

Me dic are pat ien ts to th e ir ow n e nti tie s. Pla int if fs se e k a de c laratio n that CMS’ s ne w int e rp re tatio n of e nti tie s fu rn ish ing DH S is unla

wf ul, and move f

or summary

judgme nt. Defe ndant m oves t o dismiss or, i n the alternative, for summary judgme nt. This Court l ac ks subject matter jurisdiction. Ac cording ly , it will gra nt Defe ndant’s motion to di smiss and deny Plaintiffs’ motion for summary judgme nt. I. BACKG ROUND Me dic are is a

fe de ra lly fu n d e d p r o gr a m t h a t s u b s i d i z e s h e a l t

h ins ur anc e fo r t

he e lde rl y and disabled. See 42 U.S.C. § 1395 et seq . The S tark L aw was ena cted “ to addre ss the strain place d on the Medica

re Tr ust fund by

the over utiliz ation of ce rtain medica l service s by phy sicians who, for their own financ ial g ain rathe r than their patients’ medical ne ed, re fer red patients to entiti es in which the phy sicians held a f

inancial inter est.” Am. Lithotri psy Soc’ y v. Thompson , 215 F. Supp. 2d 23, 26 (D.D.C. 2002). To preve nt such financ ial conflicts of inter est from influenc ing me dical dec isionmakin g , th e Stark

L aw s e ts out e xplic it pr oh ibi tio ns int e nd e d to re str ic t the a bil ity of ph y sic ians to profit from their own ref

err als. Specifica lly , the statute g ener ally prohibits phy sicians from making
a re fer ral to an “entity for the furnishing of desig nated he alth service s” that will be paid by Medica re 2A “fin a n c ia l r e lati o n s h ip ” is d e f in e d b r o a d ly to e n c o mp a s s e it

h e r a “ c o mp e n s a ti on 3 arr ang ement” or

an “ownership or inves tment interest.” Id. § 1395nn(a) (2). A “ compensation arr ang ement” g ener ally means “any arr ang ement involving a ny remune ration betwe en a phy sician (or a n immediate family

member of

such phy sician) a

nd an entity
. . . .” Id. § 1395nn(h)( 1)(A) . An “owne rship or invest m en t i n t erest” includes a n interest “thr oug h equity , debt, or other means a nd includes an interest in a

n entity that holds a

n owner ship or investment interest in a ny entity providing the desig nated he alth service .” Id. § 1395nn(a) (2)

. Specific statutory

exceptions permit refe rra ls even whe re a n owner ship or compensation 4 arr ang ement exists. See id. § 1395nn(b)- (e)
. Criminal penalties may also apply u n der the “anti-kic kback statute.” See 42 U. S.C. 5 § 1320a-7b( b). -3- if the ph y sic ian, or

an imme diate fa

mil y me mbe r o f t

he ph y sic ian, ha s a

“ fi na nc ia l r e latio ns hip ” wi th 3 the entity
. 42 U.S.C. § 1395n n(a) (1)( A). In addition to the ge nera l prohibition on refer rals, the 4 Stark L aw pr ovides that an “ entity may not present or

cause to be presented a claim” f or Medica

re reimburse ment of DHS ref err ed in violation of the statute. Id. § 1395nn(a) (1)( B) . The statute f urther provides that no Medic are pay ments may be made f

or such se rvice s, and any

amounts collecte d for such ser vices must be re funded. Id. § 1395nn(g )(1) & ( 2). An e ntity that k n o wi n gl y p re sents or
cause s to be prese nted a pr ohibited claim, or knowing ly enter s into a prohibited arr ang ement or scheme , is subject to c ivil monetar y penalties and liability under the Fa lse Claims Ac t, 31 U .S.C. § 3729 et seq. Id. § 1395nn(g )(3) & ( 4). 5

Pla int if fs in t h i s c a s e i n c l ud e : ( i) thr e e e nti tie s th a t pr ov ide dia g no sti c and the ra pe uti c
car diac c atheter ization and related se rvice s (“Cath L abs”) ; (ii) car diologists and vasc ular surg eons who per form and r efe r cathet er i z at i on service s in the Cath L abs and who have a n owner ship or investment interest in one or more of the Cath L abs; (iii) a ca rdiolog y prac tice that is part owne r of the Cath L abs; and (iv) a compa ny and it s o wn er that provide mana g ement ser vices to two of the Cath L abs. See Am. Compl. ¶¶ 1-36. Under Medica re’ s billing rules, only

a hospital may

bill for-4-

the ca rdiac cathe terization service s perf ormed by

the Cath L abs. See Medica re Provider Reimbursement Manual, Part I , Ch. 21, § 2118.1. As a re sult, the Cath L abs provide the ir servic es to hospitals “under a

rra ng ements” in whic h the hospitals co n t ra ct with the Cath L abs to provide “nursingand tec hnical per sonnel, equipment, d ru gs , and medica l supplies” for the c ardia c
c a th e te r iz a ti o ns e r

v ic e s . A m. Co mp l. ¶

¶ 4 2 , 6 0
. E a c ho f

th e h o s p it a ls th a t h a s c ontrac ted wit h a Ca th L ab “e stablishes its own prices, neg otiates reimburse ment amounts with third-party payors, and bills such pay ors including Medica re and Medica id for all hospital servic es including those provided under a rra ng ement.” Id. ¶ 53. The ho s p i t al s then pay the Cath L abs a “ flat fe e for eac h service provided.” I

d

. ¶ 52. The Cath L abs, in turn, distribute the ea rning s from the fe es paid by the hospitals “to the phy sic i an i nvestors ac cordingto their owner ship interests.” Id. ¶ 6 4. Du e to eff iciencie s, the Cath L abs ca n p ro v i d e the ca rdiac cathe terization service s “at a lower c ost than
c o u ld b e p r o v id e d b y th e h o s p itals.” Id

. ¶ 5 4. “ Ac c or din g ly , th e ho sp ita ls p ro fi t by havin g the se
s erv i ce s u n d er

arra n gem en t .” Id. An d

b e c a us e Me dic are on ly

re imb ur se s h os pit a ls f

or su c h s e rv ic e s,

“ on ly a ve ry sma ll p e rc e nta g e ” of

the Cath L a

bs ’ r e ve nu e s “ are g e ne ra

te d fr om s e rv ic e s th a t c ou ld be per formed a

nd billed from an indepe ndent outpatient fa cility .” Id. ¶ 43. Th e Se c re tary

of He a lthand

Human Se rv ic e s (“ HH S” ) ha s a uth or ity to p ro mul g a te regulations impl ementingthe Medica re pr og ram, including t h e S t ark L aw, see 42 U. S.C. §§ 1395hh(a) (1) & 1395nn(b)( 4), and has deleg ated his authority to CMS. Be cause the Stark L aw does not define when an entity furnishes DHS, it ha s been le ft to CMS to do so by regulation. Under CMS’s current r egulations, “[a] person or entity is considere d to be furnishing DHS if it is the person or entity to which CMS makes pay ment for the D HS, directly or upon assig nment on the patient’s behalf
. ” 4 2 C. F
. R. § 4 1 1
. 3 5 1 ( d e f in it io no f “ e n ti ty” )
. A c c o r d in g ly , p r e s e n tl y in an“under-5-

arr ang ements” tra

nsaction, only

the hospital is considered t o b e a n entity furnishing DHS; the entities supply ing D HS to the hospital, such as the Cath L abs, ar e not co n sidered to be entities furnishing DHS. There fore , the Stark L aw doe s not curre ntly prohibit the individual phy sician Plaintiffs from making ref

err als to the Cath L abs in which they have a financ ial interest. This will all chang e on Oc tober 1, 2009, whe n CMS’s fin al rule that Pl aintiffs challe n g e her e take s eff

ect. That rule provides that “[a] person or entity is considere d to be fu rn ish ingDH S if

it i s the pe rs on or e nti ty that has pe rf or me d ser vic e s th a t are bil le d a s D HS” or it

“ is the pe rs on

or e nti ty that ha s p re se nte d a

c la im t o M e dic are fo r th e DHS
. . . .” Cha ng e s to Phy sician Self-Ref

err al Rules, 73 Fe d. Reg . 48,434, at 48,751 (Aug
. 19, 2008) (to be codified at 42 C.F.R. § 411.351 (def

inition of “entity ”)) . Thus, eff ec t i v e Oc tober 1, 2009, both the hospital and the entities supply ing D HS to the hospital, such as the C ath L abs, wil l be considered to be entities fu rn ish ingDH S inan “ un de r a rr ang e me nts ” tr ans a c tio n. Con se qu e ntl y , a bs e nt a n a pp lic a ble
e xce pti on , th e Stark

L aw w ill pr oh ibi t the ind ivi du a l phy sic ian Pl a int if fs fr om m akin g re fe rr a ls t o their own Cath L abs.

Plaintiffs sue t he S ecr etar y of HHS in his officia l capa city seekinga dec laration that CMS’ s b ro a de ne d d e fi nit ion of an e nti ty fu rn ish ingDH S “ is c on tr ary to cl e ar c on g re ssi on a l in te nt, based on a

n impermissible c onstruction of the Stark L aw, arbitra ry and ca pricious, and e x cee ds the ag ency ’s authority ,” in contravention of the Administrative Proce dure A ct (“ APA”), 5 U .S.C. § 551 et seq. A m. Co mp l. a t 4

- 5 ( I n tr o d u c ti o n )
. Pl a inti f

f s a s s e rt t h a t t h e Co u rt h a s ju

r is d ic ti o nu n d er Section 702 of the APA, 5 U.S.C. § 702, a nd the g ener al fe dera l question statute, 28 U.S.C. § 1331. Id. ¶ 38. They move for summary judgme nt. D efe ndant moves to dismiss for lack of subjec t matter jurisdiction, or in the alternative, for summary judgme nt.-6- II. LEGAL STANDARD F e de ra l c ourt s are c ourt s o f l imi te d ju ri sd ic tio n a

nd the law p re sume s that “ a c a us e lies outside this li mited jurisdiction.” Kokkone n v. Guardian Life Ins. Co. of Am. , 511 U.S. 375, 377 (1 99 4) ; St. Paul Mercury Indem . Co. v. Red Cab Co. , 30 3 U. S. 28 3, 28 8- 89 (19 38 ). Because “subjec t-matter jurisdiction is an ‘Ar t. I I I as well as a statutory require ment[,] no action of the parties
can c onfer

subject-matter jurisdiction upon a fe dera l court.’” Ak ins e y e v . D ist ric t of Colum bia , 339 F. 3 d 9 7 0 , 9 7 1 (D
. C
. C i r. 2 0 0 3 ) ( qu o t i n g Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxite deGuinea , 456 U.S. 694, 702 (1982))
. On a motion to di smiss for lack of subje ct-matter jurisdiction pursuant to Rule 12(b)(1) , the plaintiff bea rs the burde n of establishing th at t h e cour t has subject-matter jurisdiction. Kokkone n , 511 U.S. at 377.

B e c a us e su bje c t- matte r jur isd ic tio n fo c us e s on the c ourt ’s po we r to he ar the c la im, ho we ve r, the c ourt

mus t g ive the pla int if

f’ s fa c tua l a lle g a tio ns c los e r sc rutiny wh e n re so lvi ng a Rul e 12 (b )( 1) mot ion

tha n w ou ld b e re qu ir e d f

or a Rul e 12 (b )( 6) mot ion f

or fai lu re to state a

c la im. Macharia v. U

nited States , 334 F.3d 61, 64, 69 ( D.C. Cir. 2003); Grand Lodge of Fraternal Order of P oli c e v . A sh c ro

ft , 185 F. Supp. 2d 9, 13 (D.D .C. 2001). Moreove r, the c ourt is not limit ed to the alleg ations contained in the c omplaint. Hohri v. United States , 782 F.2d 227, 241 ( D.C. Cir. 1986), vacate d on other grounds , 482 U.S. 64 (1987). Instead, to dete rmine whe ther it has jurisdiction over the claim, the court may

consider materials outside the plea dings. He rb e rt v . Na t’ l A c ad . o f Sc is. , 974 F.2d 192, 197 ( D.C. Cir. 1992).-7- III . A NA LY SIS Plaintiffs assert that the Court has jurisdiction under Section 702 of th e AP A, 5 U. S.C. § 7 02 , a

nd the g e ne ra l f

e de ra l q ues ti on st a tut e , 2 8 U .S. C. § 13 31 . A m. C omp l. ¶ 38. Howeve r, Section 702 of the A PA does not provide an inde pendent ba sis f o r j u ri s d i cti on. See Cal ifa no v . S

an de rs , 430 U.S. 9 9 , 1 0 7 -0 7 (1977) ( concludingthat the “APA doe s not affor d an i mplied gr ant of subjec t-matter jurisdiction per mitti ng fede ral judicial re view of a g ency action”)
. Thus, jurisdiction lies, if at all, under 28 U.S.C. § 1331. See R obbins v. Reagan , 780 F.2d 37, 42- 43 (D.C. Cir. 1985).

Section 405(h) of

the Social Secur ity

Act, made applicable to the Medica re A ct by 42 U. S.C. § 1 39 5ii , p ro vid e s:

No ac tion ag ains t the United States, the [Secreta ry of He alth and Human Servic es], or any office r or employ ee the reof shall be broug ht under se ction 1331, or 1346 of title 28 to recove r on any claim ar ising u n d e r [th e M e d ic ar e A c t]
. 42 U.S.C. § 405(h). “This bar ag ainst § 1331 actions applies to all cla ims that have their ‘standing and substantive basis’ in the Medica re A ct.” Am . Ch iro

prac tic As s’n, In c . v . Le av itt , 431 F.3d 812, 8 1 6 (D
. C
. C i r. 2 0 0 5 ) ( qu o t i n g S h a la la v . I

ll

. Co u n c il o n Lo n g Te rm Care, Inc. , 5 2 9 U.S. 1, 11 (2000))
. As this Court rece ntly explained, in Il lin ois Cou nc il the Supreme Court he ld that “Section 405(h) of the Medica re Ac t prec luded re view under the g ener al fe dera l question jurisdiction of Se c tio n 1 33 1 a

nd re qu ir e d th a t th e c la im b e e xha us te d thro ug h H HS’ s a dmi nis tr a tiv e c la ims pr oc e ss befor e it c ould be hear d in fede ral c ourt.” At l. U ro log ic al A sso cs. , P .A . v . Le av itt , 549 F. Supp. 2d 20 , 2 9 (D .D .C. 20 08 ). “ I n o the r w or ds , Se c tio n 4 05 (h ) m and a te s th e ‘‘ c ha nn e lin g ’ o f v ir

tua lly a ll leg al attac ks throug h the ag ency .’” Id
. (q u o t i n g Il l. C ou nc il , 529 U.S. at 13).I n case s involving a f acia l challeng e to the validity of a r egulation or statutory provision, 6 the hospitals may reque st expedited judicial revie w s o that the leg al cha lleng e may be dec ided more quickly
. See 42 U.S.C. § 1395ff(b)( 2); 42 C.F.R. § 405.990. Moreove r, Defenda nt has assure d the Court that the hospitals will be a ble to bring an administrative c halleng e without risk of incurr ing sanctions. See Def

s.’Mot. to D ismiss & Cross Mot. for Summ. J . at 16-17. Plaintiffs have g iven the Court “ no convincing rea son to doubt the Secre tary ’s descr iption of the ag ency ’s g ener al pra ctice.” Il l. C ou nc il , 529 U.S. at 22. -8- “ Al tho ug h § 13 95 ii, wh ic h in c or po rate s § 40 5( h) , w ou ld a pp e ar to prec lud e a ll Medica re suits founded on g ener al fe dera l question jurisdiction, the Supreme Court ha s rec og nized
an e xce pti on : if

the c la ima

nt c an o bta in j ud ic ia l r e vie w o nly in a fe de ra l qu e sti on su it, § 1 39 5ii wi ll not bar the suit.” Am . Ch iro prac tic , 4 3 1 F. 3 d

at 8 1 6 (c i t i n g Il l. C

ou nc il , 529 U.S. at 10-13). “ The question theref

ore is whe ther [Plainti ffs] could g et [their] claim[] hear d a d mi n is tr a ti v e ly a n d whether [t hey ] could rece ive judicial re view af ter a dminist rative c hanneling .” Id. I ti s u n d i s p u t ed t h at P l ai n t i ff s co u l d n o tt h em s el v es b ri n g an ad m i n i s t ra t i v e c h al l en ge befor e HHS bec ause they cannot dire ctly bill or rece ive pay

ments from Medica

re f or DHS. See Am
. Compl. ¶ 100; Def

.’s M ot. to Dismi ss & Cross Mot. for Summ. J . at 14. I t also is undisput ed that the ho sp ita ls w ithwh ic h th e Cath L a bs c on tr a c t – t

he e nti tie s that dir e c tly

bil l and re c e ive pa

y me nts from Medic are for DH S – could, i f they so chose, br ing a

n administrative cha lleng e bef ore H HS and g et judicial re view of H HS’s deter mination. See 42 C.F .R. Part 40 5, Sub pa rt I ; 42 U. S.C. § 1395ff( b). The issue, th en , is whether the hospitals’ ability to ge t administrative and judicial 6 revie w of CMS’s expanded interpre tation of entit ies furnishing DHS ousts the Court of jurisdiction
ov e r P la int if

fs ’ c la im. I n Am e ric an Chi ro

prac tic , an assoc iation of chiropr actor s sought to cha lleng e a Medica re r egulation that per m i t t ed HM Os to require patients to obtain a re fer ral fr om a doctor or osteopath in order

to rec eive c overe d chiropra ctic ser vices. In finding that the district court lac ked-9-

Se c tio n 1 33 1 ju

ri sd ic tio n o ve r t

hat c la im, the D. C. Cir c uit no te d that on e wa y the c hir op ra c tor s c ou ld g et their c laim hear d administratively was indi re ct l y

throug h a patient f

iling a grieva

nce w ith the HMO cla iming that the r efe rra l require ment was illeg al. 431 F.3d at 816. I f a patient were to do so, the n th e patie nt’ s f

ili ng“ wo uld

tr ig g e r t he a d m i n i s t r a t i v e pr oc e ss” and

the c hir op ra c tor s’ c la im c ou ld g et hea rd indirec tly

throug h the patient’s f

iling. Id. a t 8 1 7
. T h e a s s o c i a t i o n o f c h i r o p r a c t o r s a lso soug ht to challeng e a Medica re r egulation that permitted medica l doctors and osteopaths, in addition to chiropra ctors, to per form a spe cific c overe d service
. The c ourt held that the district cour t lacked Se c tio n 1 33 1 ju

ri sd ic tio n o ve r t

hat clai m as we ll b e c a

us e the c hir op ra c tor s c ou ld g e t th e ir c la im he ard a dmi nis tr a tiv e ly

if (1 ) a n H MO pr ov ide d th a t on ly med ica l do c tor s and os te op a ths c ou ld perf orm the ser

vice; (2) a patient in such a n HMO enlisted the se rvice s of a c hiroprac tor; (3) the patient (or the chiropra ctor as the patient’s assig nee) filed an administrative claim arguing that the HMO must cover

the servic e (or

reimburse the chiropr actor ); and (4) t h e HM O d efended on the g round that anothe r Medica re r egulation entitles it t o re s t ri ct t he ty pe of pr actitioners who ma y provide a service
. Se e id . T he c ourt he ld t hat un de r t

hat c ha in o f e ve nts : [t ]he HMO’s invocation of this provision would square ly prese nt the questio n wh ether

medical doc tors and osteopaths, as well as chiropra ctors, ar e “qua lified to fu rn i s h ” the servic e . . . . I t follows that chiro p ra ctors could rece ive an a dminist rative de cision on the issue prese nted . . . and that unde r Il lin ois Cou nc il t h e district court ha d n o ju ri sd ic tio n to de c ide that c la im. Id. at 817- 1 8. The c ourt rea ched that conclusion despite ac knowledg ing that just 22 percent of HMOs re quired the se rvice to be per formed by medical do ct o rs o r osteopaths only , and that chiropra ctors with patients in the remaining 78 perc ent of HMOs w ould have no mea ns of g etting their cla im heard a dminist ratively or judicially
. See id. at 817.-10- Ag a ins t th is b a c kd

ro p, the Cou

rt fi nd s th a t it la c ks jur isd ic tio n ove r P la int if fs ’ c la im. Any one of the hospitals “ under arr ang ement” with a Cath L ab could g et administrative and judicia l revie w of CMS’s expanded interpre tation of entities furnis h i n g DHS, the issue pre sented by Plaintiffs’ claim her e. L ike the chir oprac tors in American Chiropractic whose c laims could be hea rd ind ir e c tly thr ou gh t h e i r p a t i e nts, the ph y sic ians and

ph y sic ian- ow ne d Cath L a bs he re c ou ld h ave the ir
c la im h e ard

ind ir e c tly thr ou g h a ho sp ita l w ithwh ic h th e y

c on tr a c t. B e c a

us e Pla int if

fs c ou ld g e t th e ir claim hea rd administratively

and could ge t judicial revie w after adminis trative channeling , the Court ha s n o Se c tio n 1 33 1 ju

ri sd ic tio n o ve r P la int if

fs ’ c la im. Pla int if fs argue that Ame r ican Chiropractic is disti ng uishable bec ause “ the cour t found that the plaintiff association of chiropra ctors could ‘g et its c laim he ard’ beca use its members had dire ct ac cess to administrative r eview a s the assignee of t heir patients.” Pls.’ Opp’n to Def.’ s Mo t. t o D ism iss a t 10 . Wh ile it is tru e that th e c ourt no te d th a t th e c hir op ra c tor s c ou ld a lso g e t th e ir claim hea r d d ir e c tl y b y w a iv in g an y

r igh t t o p ay

me n t f r o m t h e p a ti e n t a

n d b e c o mi n g th e p a ti e n t’ s assig nee, see 431 F.3d at 817, there would have been no rea son for the court to disc uss h o w t he chiropra ctors could g et their c laim hear d indirectly throug h the patient if the onl y rele vant inquiry was whe ther the c hiroprac tors thems el v es could challeng e the r efe rra l require ment direc tly
. See Nat’l Athletic Trai ners’ Ass’n, I nc. v. H HS , 455 F.3d 500, 504 ( 5th Cir. 2006) (“Unlike the chiropra ctors in Am e ric an Chi ro prac tic , the athletic trainer s here are not service providers, the ref ore they cannot be come a ssi gn ee s o f the patients. Ne verthe less, the American Chiropractic court considere d both the patient’s and the chiropra ctor’s rig hts to pursue administr at i v e review.” ). Plaintiffs’ lack of

a dire ct ave nue to administrative review through an assig nment does not mean that they could not g et their claim hear d. As the F ifth Circuit has explained:-11- We are not persuade d t h at t h e inabili ty to acquire the phy sician or bene fi ci ary ’s rig ht to administ rative r eview e nds our inquiry ; “the qu e s t i o ni s w h e t h e r , a s a p p l i e d g e n e r a l l y t o t h o s e c o v e r e d b y a particula r statutory

provision, hardshi p likely found in many

case s tur ns wh a t a

pp e ars to b e sim

ply a c ha nn e lin g re qu ir e me nt i nto complete prec lu sion of judicial revie w.” Ac cording ly , in deciding whether the Il lin ois Cou nc il exception appl i es , we must consider whether t h e claim may ultimately

be subjec t to review a fter pr oc e e din g thr ou g h a dmi nis tr a tiv e c ha nn e ls. Id. at 504-05 (c itations omi tted) (e mphasis in origina l).

Plaintiffs argue that the hospitals are n o t adequate proxies because they have no incentive to cha

nnel the cla im admini s t ra tively and bec ause the y

fac e their own roadbloc ks to the administrative r eview pr ocess. In support of their a rgument that the Court has jurisdiction absent an ade quate pr ox y for their claim, Plaintiffs cite American Lithotripsy Society v . Thompson , 2 15 F. Supp. 2d 23 (D.D.C. 2002). B ut that de cision issued befor e the D.C. Circuit’s de cision in American Chi ro prac tic . The American Lithotripsy court spec ifically relied on t h e reasoningof the district court in Am e ric an Chi ro

prac tic in finding jurisdiction bec ause the re w as an ina dequate proxy , see 215 F. Supp. 2d at 29-30, rea soning that the D.C
. Circuit omitt ed whe n it rever sed the district cour t in Am e ric an Chi ro

prac tic
. See 431 F.3d at 817-18. Telling ly , in finding that the district court lac ked Section 1331 jurisdiction over the c hiroprac tors’ cla ims in Am e ric an Chi ro prac tic , th e D. C. C ir c uit did not analy

ze whether the patients wer e adequate proxi es for the c hiroprac tors’ cla ims. There w as
no dis c us sio n o f t

he patie nts ’ i nc e nti ve to b ri ngan a dmi nis tr a tiv e c la im o r t he chi rop ract or s’
ro a db loc ks to o bta ini nga dmi nis tr a tiv e re vie w. I t wa s e no ug h “ that c hir op ra c tor s could rec eive a n administrative dec ision on the issue presente d ” if an HMO disallowed chiropr actor s to perfor m the service (only

22 perc ent did), a patient in such an HMO e nlisted the service s of a c hiroprac tor, and the patie nt ( or

the c hir op ra c tor

a s a ssi g ne e ) f

ile d a c la im Id. at 817 (e mphasis added)
.-12- The Court re cogni z es that the Fif th Circuit has looked to see not only whether a pla int if f’ s c la im c ou ld b e he ard

a dmi nis tr a tiv e ly

but a lso wh e the r t

he thi rd pa rt y wi th t he me ans to bring the claim bef

ore the ag ency

has the ne cessa

ry incentive to do so. See Nat ’l At hle tic , 455 F.3d at 505-08. Howeve r, t he F ifth Circuit relied on Am e ric an Lith otr ips y . See id. at 505. As discussed above, Am e ric an Lith otr ips yrelied on the rea soning of the district court in Am e ric an Chi ro prac tic that the D.C. Circuit omitt ed whe n it rever sed the dist rict court. Accor dingly , while Fif th Circuit law mig ht r e qu ir e a

thi rd pa rt y to h ave bo th the me ans and the inc e nti ve to f

ile an a dmi nis tr a tiv e c la im, that do es n o t appea

r to be the la

w in this Ci rcuit. B ut even if it we re, the Court finds that the hospitals have the ne cessa ry incentive to file a

n administrative claim her e becau s e the Cath L abs pr ov ide the c ard ia c c a the te ri zat ion se rv ic e s “at a lowe r co st tha n co uld be pr ov ide d by

the ho sp ita ls”
and “ the ho sp ita ls pr of

it by havin g the se se rv ic e s und e r a rr ang e me nt. ” Am . Co mpl
. ¶ 54. Assuming Plaintiffs’ alleg ations to be t rue, the n the hospitals have suff icient incentive to c halleng e CMS’s
e xpand e d inte rp re tatio n o f e nti tie s f ur nis hin g DH S. IV . C ON CL USI ON F or the fo re g oin g re a so ns , this Court la c ks jur isd ic tio n. Ac c or din g ly , th e Court wi ll g rant Defenda

nt’s motion to di smiss [ Dkt. # 17], deny Plaintiffs’ motion for summary judgme nt [Dkt. # 13] , and deny

as moot Defe ndant’s motion for summary j u d gm en t [ Dk t . # 16]. A memorializing Orde r ac companies this Memora ndum Opinion.
Date : Apr il 2 0, 20 09 /s/ ROSEMARY M. COL L YER Un i t edS t at es Di s t ri ct J u d ge