FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

SENSORY NEUROSTIMULATION, INC., 

a California corporation,

Plaintiff-Appellant,

and

FRED BURBANK, MD, CEO, 

President, Board Chairman, and 

stock holder,

Plaintiff,

v.

ALEX M. AZAR II, in his official 

capacity as Secretary of the United 

States Department of Health and 

Human Services; U.S. DEPARTMENT 

OF HEALTH & HUMAN SERVICES;

CENTERS FOR MEDICARE &

MEDICAID SERVICES,

Defendants-Appellees,

and

SEEMA VERMA, Administrator 

Centers for Medicare and Medicaid 

Services; DEMETRIOS KOUZOUKAS, 

Principal Deputy Administrator 

Centers for Medicare and Medicaid 

No. 19-55036

D.C. No.

8:18-cv-00180-

CJC-JDE

OPINION
2 SENSORY NEUROSTIMULATION V. AZAR

Services; LAURENCE WILSON, 

Centers for Medicare and Medicaid 

Services; PETER J. GURK, MD, 

Medical Director, DME MAC, 

Jurisdiction D; ROBERT D. HOOVER,

JR., MD, MPH, FACP, Medical 

Director, DME MAC, Jurisdiction C; 

STACEY V. BRENNAN, M.D., FAAFP, 

Medical Director, DME MAC, 

Jurisdiction B; WILFRED MAMUYA,

MD, PHD Medical Director, DME 

MAC, Jurisdiction A,

Defendants.

Appeal from the United States District Court

for the Central District of California

Cormac J. Carney, District Judge, Presiding

Argued and Submitted May 13, 2020

Pasadena, California

Filed October 16, 2020

Before: Mary M. Schroeder and Daniel P. Collins, Circuit 

Judges, and Michael M. Baylson,

* District Judge.

Opinion by Judge Baylson

* The Honorable Michael M. Baylson, United States District Judge 

for the Eastern District of Pennsylvania, sitting by designation.
SENSORY NEUROSTIMULATION V. AZAR 3

SUMMARY**

Medicare

The panel affirmed the district court’s dismissal for lack 

of jurisdiction of a lawsuit brought by a medical device 

supplier seeking to have Medicare “cover” the supplier’s 

product.

Medical devices classified as “durable medical 

equipment” may be eligible for Medicare reimbursement. 

42 U.S.C. § 1395m(a)(2). Devices considered “personal 

comfort items” are categorically not covered. 42 U.S.C. 

§ 1395y(a)(6). A nationwide determination by the Centers 

for Medicare and Medicaid Services (“CMS”) as to whether 

Medicare will reimburse beneficiaries for the purchase of the 

device is a “national coverage determination” (“NCD”). The 

Medicare statute eliminates federal question jurisdiction 

over lawsuits brought to “recover on any claim arising 

under” Medicare. 42 U.S.C. § 405(h). This “channeling 

requirement” forces plaintiffs to exhaust pertinent 

administrative channels. The channeling requirement does 

not apply where its application would mean no review at all. 

Plaintiff-appellant Sensory NeuroStimulation, Inc. sells 

a prescription leg massager called “Relaxis,” and it is 

seeking a favorable NCD that Medicare will reimburse 

beneficiaries for the purchase of Relaxis. Sensory applied to 

CMS for an NCD, which determined that Relaxis was a 

personal comfort item but did not make a formal NCD. 

** This summary constitutes no part of the opinion of the court. It 

has been prepared by court staff for the convenience of the reader.
4 SENSORY NEUROSTIMULATION V. AZAR

Sensory filed this action, and the district court granted the 

government’s motion to dismiss based on its finding that 

Medicare’s channeling requirement applied and had not 

been met.

The panel held that this lawsuit arose under Medicare 

such that the administrative channeling requirements 

applied. The panel also held that Sensory was not entitled to 

a waiver of the statute’s exhaustion requirement. The panel 

further held that applying the exhaustion requirement would 

not mean “no review at all.” Finally, the panel held that the 

exception to the exhaustion requirement articulated in 

Bowen v. Michigan Academy of Family Physicians, 476 U.S. 

667 (1986), did not apply because another party – medical 

device suppliers – could bring the same claim through the 

existing administrative channel, and therefore some review 

was available. The panel concluded that § 405(h)’s 

administrative channeling requirement applied, and 

therefore there was no subject matter jurisdiction to hear 

Sensory’s claim.

COUNSEL

Linda T. Coberly (argued), Winston & Strawn LLP,

Chicago, Illinois; Diana Leiden and Saul S. Rostamian, 

Winston & Strawn LLP, Los Angeles, California; Lauren 

Gailey, Winston & Strawn LLP, Washington, D.C.; for 

Plaintiff-Appellant.

Karen Y. Paik (argued), Assistant United States Attorney; 

David M. Harris, Chief, Civil Division; Nicola T. Hanna, 

United States Attorney; United States Attorney’s Office, Los 

Angeles, California; for Defendants-Appellees.
SENSORY NEUROSTIMULATION V. AZAR 5

OPINION

BAYLSON, District Judge:

I. Introduction

The issue in this case is whether the district court 

correctly decided it lacked subject matter jurisdiction over a 

lawsuit brought by a medical device supplier seeking to have 

Medicare “cover” the supplier’s product. We conclude that 

the lawsuit is subject to Medicare’s administrative 

channeling requirements, that Plaintiff-Appellant Sensory 

NeuroStimulation, Inc. (“Sensory”) has not met those 

requirements, that there exists a way to satisfy those 

requirements, and that these conclusions do not completely 

preclude judicial review so as to trigger a key exception to 

the channeling requirements. We therefore affirm the 

district court.

II. Background

A. Statutory Background

Medicare is a half-century-old federal health insurance 

program for elderly and disabled Americans. Social 

Security Amendments of 1965, Pub. L. 89-97, 79 Stat. 286. 

As of 2019, it insured 61.2 million people. 2020 Annual 

Report of the Boards of Trustees of the Federal Hospital 

Insurance and Federal Supplementary Medical Insurance 

Trust Funds 6 (2020). These federal insureds are known 

generally as Medicare “beneficiaries.” The program is 

administered by the Centers for Medicare and Medicaid 

Services (“CMS”), an agency housed in the United States 

Department of Health and Human Services (“HHS”). 

Medicare administrative contractors (“MACs”) help CMS 
6 SENSORY NEUROSTIMULATION V. AZAR

administer Medicare benefits in specific geographic regions. 

See 42 U.S.C. § 1395u.

Medicare is governed by an intricate statutory scheme, 

codified at 42 U.S.C. §§ 1395–1395lll. This case involves 

two parts of the statutory scheme: (1) provisions addressing 

how medical devices become covered, and (2) provisions 

defining the availability of judicial review.

1. Medicare’s Coverage for Medical Devices

Medicare covers a limited universe of medical devices. 

Relevant here, devices classified as “durable medical 

equipment” may be eligible for Medicare reimbursement, 

subject to an exception that does not apply here. 42 U.S.C. 

§ 1395m(a)(2). Devices considered “personal comfort 

items,” on the other hand, are categorically not covered. Id.

§ 1395y(a)(6). Durable medical equipment is equipment 

that “[c]an withstand repeated use,” “has an expected life of 

at least 3 years,” “[i]s primarily and customarily used to 

serve a medical purpose,” “[g]enerally is not useful to an 

individual in the absence of an illness or injury,” and “[i]s 

appropriate for use in the home.” 42 C.F.R. § 414.202.

Devices may be covered nationally, regionally, or on a 

case-by-case basis. A nationwide determination by CMS as 

to whether Medicare will reimburse beneficiaries for the 

purchase of the device is a “national coverage 

determination” (“NCD”). See 42 U.S.C. § 1395y(l)(6)(A). 

NCDs may be favorable or unfavorable.1 Id. NCDs bind 

1 The Medicare statute sometimes distinguishes “national coverage 

determinations,” which mandate nationwide coverage, from “national 

noncoverage determinations,” which bar coverage nationwide. See

42 U.S.C. § 1395ff(f)(4)(A) (discussing the issuance of “national 

coverage or noncoverage determination[s]”). Other times, it combines 
SENSORY NEUROSTIMULATION V. AZAR 7

MACs. See id. § 1395ff(c)(3)(B)(ii)(I); 42 C.F.R. 

§ 405.1060(a)(4). In the absence of an NCD, MACs may 

also issue “local” coverage determinations that apply to their 

own subsequent decisions. See 42 U.S.C. § 1395ff(f)(2)(B). 

In the absence of a national or local coverage determination, 

MACs deciding whether to reimburse particular claims 

make case-by-case decisions “based on applicable 

information, including clinical experience and medical, 

technical, and scientific evidence.” Id.

§ 1395ff(c)(3)(B)(ii)(III).

There are several pathways for CMS to initiate an NCD 

evaluation process. CMS may initiate an NCD process on 

its own initiative. Medicare Program; Revised Process for 

Making National Coverage Determinations, 78 Fed. Reg. 

48164, 48167 (Aug. 7, 2013). Alternatively, beneficiaries, 

medical professional societies, businesses such as medical 

device manufacturers, and others can request CMS initiate 

an NCD process through a written, “formal” request. Id. at 

41166.

When there is no NCD for particular medical services or 

devices, individual beneficiaries “in need of the items or 

services” can request that CMS initiate a coverage 

determination process and are ordinarily entitled to receive 

a decision within ninety days. 42 U.S.C. § 1395ff(f)(4)–(5). 

Such beneficiaries in need are known as “aggrieved parties.” 

Id. If the aggrieved party finds CMS’s decision 

both under the label “national coverage determinations.” Id.

§ 1395ff(f)(1)(B) (“For purposes of this section, the term ‘national 

coverage determination’ means a determination . . . with respect to 

whether or not a particular item . . . is covered nationally under” 

Medicare.). Here, we refer to national coverage and noncoverage 

determinations together as NCDs. Where the distinction matters, we 

refer to “favorable” or “unfavorable” NCDs.
8 SENSORY NEUROSTIMULATION V. AZAR

unsatisfactory—i.e., if CMS ultimately decides not to issue 

an NCD or issues an unfavorable NCD—the aggrieved party 

may appeal to the Departmental Appeals Board of HHS. Id.

§ 1395ff(f)(1)(A). The result of that appeal is a final agency 

action subject to judicial review. Id. § 1395ff(f)(1)(A)(v). 

No NCD requestors other than aggrieved parties have the 

same or even similar statutory rights to a decision and 

appeal, and aggrieved parties may not assign their rights. Id.

§ 1395ff(f)(1)(A)(iii); 42 C.F.R. § 426.320.

The heart of this case is about what, if any, rights to 

appeal are available to NCD requestors like Sensory who are 

not Medicare beneficiaries.

2. Medicare’s Limitation on Judicial Review: The 

“Channeling” Requirement

The Medicare statute eliminates federal question 

jurisdiction over lawsuits brought “to recover on any claim 

arising under” Medicare. See 42 U.S.C. § 405(h) (“No 

action against the United States . . . or any officer or 

employee thereof shall be brought under section 1331 or 

1346 of title 28 to recover on any claim arising under this 

subchapter.”); id. § 1395ii (incorporating § 405(h) into the 

Medicare statute). This is known as § 405(h)’s “channeling 

requirement” because it forces plaintiffs to exhaust pertinent 

administrative channels. Shalala v. Ill. Council on Long 

Term Care, Inc., 529 U.S. 1, 19 (2000). In practice, the 

channeling requirement “assures the agency greater 

opportunity to apply, interpret, or revise policies, 

regulations, or statutes without possibly premature 

interference by different individual courts.” Id. at 13.

The Medicare statute creates administrative channels 

specifically designed for Medicare. As discussed earlier, 

under 42 U.S.C. § 1395ff(f)(1)(A)(iii), when an aggrieved 
SENSORY NEUROSTIMULATION V. AZAR 9

party is unhappy with the agency’s NCD, that aggrieved 

party may appeal that decision to the Departmental Appeals 

Board of HHS, and that Appeals Board’s decision 

“constitutes a final agency action and is subject to judicial 

review.” 42 U.S.C. § 1395ff(f)(1)(A)(v). Some of the 

administrative channels are adapted from other statutory 

schemes. For example, beneficiaries’ challenges to adverse 

benefits determinations “shall be entitled to reconsideration 

of the determination, and . . . a hearing thereon by the 

Secretary to the same extent as is provided in” 42 U.S.C. 

§ 405(b). Id. § 1395ff(b)(1)(A).

When a claim arises under Medicare, § 405(h) eliminates 

federal question jurisdiction and the plaintiffs must first 

exhaust the appropriate administrative channels before 

seeking judicial review. The Supreme Court has held that a 

wide range of claims “arise under” Medicare. See 

Weinberger v. Salfi, 422 U.S. 749 (1975); Ill. Council, 

529 U.S. at 13–14. Of course, § 405(h)’s channeling 

requirement applies in “a typical Social Security or Medicare 

benefits case, where an individual seeks a monetary benefit 

from the agency (say, a disability payment, or payment for 

some medical procedure), the agency denies the benefit, and 

the individual challenges the lawfulness of that denial.” Ill. 

Council, 529 U.S. at 10. § 405(h) also requires that plaintiffs 

channel claims that advance “general legal” arguments just 

as much as claims that advance “fact-specific” arguments; 

claims that are “collateral” to a benefits determination just 

as much as claims that are not; claims based on a “potential 

future” just as much as claims rooted in the “actual present”; 

and claims for declaratory, injunctive, or monetary relief. Id.

at 13–14.

There is an important exception to the broad channeling 

requirement, however. The channeling requirement does not 
10 SENSORY NEUROSTIMULATION V. AZAR

apply where its “application . . . would mean no review at 

all.” Id. at 19 (interpreting Bowen v. Mich. Acad. of Fam. 

Physicians, 476 U.S. 667 (1986)) (known as the “Michigan 

Academy exception”). In Michigan Academy, a group of 

physicians brought statutory and constitutional challenges to 

a regulation promulgated under Part B of the Medicare 

statute. 476 U.S. at 668–69. That regulation determined 

rates at which physicians could recover for certain services. 

See 42 C.F.R. § 405.504(b) (1985). The Court explained 

that, because plaintiffs could not bring their challenges 

through any administrative channel, applying § 405(h)’s 

channeling requirement would have meant the plaintiffs 

could not obtain judicial review of their claims at all. Mich. 

Acad., 476 U.S. at 681. The Court, applying the “‘strong 

presumption that Congress did not mean to prohibit all 

judicial review’ of executive action,” thus concluded that 

§ 405(h) did not divest the federal courts of jurisdiction. Id.

at 680–81 (quoting Dunlop v. Bachowksi, 421 U.S. 560, 567 

(1975)).

In assessing whether requiring channeling would result

in “no review at all,” id. at 680, “the question is whether, as 

applied generally to those covered by a particular statutory 

provision, hardship likely found in many cases turns what 

appears to be simply a channeling requirement into complete

preclusion of judicial review.” Ill. Council, 529 U.S. at 22–

23 (citing McNary v. Haitian Refugee Ctr., 498 U.S. 479, 

496–97 (1991)).

Taking these statutory provisions and cases together, it 

becomes clear that assessing whether a court has subject 

matter jurisdiction to hear a claim related to Medicare 

requires a three-step analysis.

1. In the first step, the court must decide whether 

the claim “arises under” Medicare such that 
SENSORY NEUROSTIMULATION V. AZAR 11

§ 405(h)’s administrative channeling 

requirement applies. If it does not, the plaintiff 

may proceed in court. If it does, the court moves 

on to the second step.

2. In the second step, the court must decide whether 

the plaintiff has satisfied the channeling 

requirements by properly presenting the claim 

and exhausting the appropriate administrative 

channel. If the plaintiff has done so, or 

alternatively, has satisfied the requirements for 

judicial waiver of the exhaustion requirement, 

the plaintiff may proceed in court. If the plaintiff 

has not, the court moves on to the third and final 

step.

3. In this last step, the court must decide whether 

the administrative channeling requirement would 

mean that there would be “no review at all” of the 

plaintiff’s claim. If it would, the plaintiff may 

proceed in court under 28 U.S.C. § 1331 or some 

other jurisdictional predicate. If not, the 

plaintiff’s claim cannot proceed and must be 

dismissed for lack of subject matter jurisdiction.

As explained below, this case implicates all three of the 

above steps.

B. Factual Background

Appellant Sensory Neurostimulation, Inc. sells a 

prescription leg massager called “Relaxis” specifically 

designed to treat Restless Leg Syndrome (“RLS”). The 

company’s founder, Dr. Fred Burbank, is an RLS sufferer 

and Medicare beneficiary. Sensory is ultimately seeking a 

favorable NCD—that is, a binding nationwide determination 
12 SENSORY NEUROSTIMULATION V. AZAR

that Medicare will reimburse beneficiaries for the purchase 

of Relaxis.

In November of 2015, Sensory asked CMS to make an 

informal “benefit category determination” (“BCD”) for 

Relaxis—in other words, to decide whether Relaxis is 

durable medical equipment eligible to be covered by 

Medicare. A CMS employee decided that Relaxis is a 

personal comfort item, categorically ineligible for coverage, 

on the grounds that it could serve a non-medical purpose. 

The employee then suggested that Relaxis ask Noridian, the 

California MAC, for a “local” BCD. A few months later, 

Noridian also decided that Relaxis is a personal comfort 

item.

In June of 2016, Sensory formally applied to CMS for an 

NCD. CMS informed Sensory by letter dated March 20, 

2017 that it had determined that Relaxis is a personal 

comfort item. The determination was not a formal NCD, so 

it did not bind the MACs. A few months later, Sensory met 

with Dr. Demetrios L. Kouzoukas, Principal Deputy 

Administrator of CMS and Director for the Center of 

Medicare, to try to persuade him otherwise. CMS took no 

action for six months, at which point Dr. Burbank sued HHS 

in his own name. On February 16, 2018, Dr. Kouzoukas sent 

Sensory a brief letter affirming the March 20, 2017 letter. 

Sensory filed the First Amended Complaint, which 

substituted Sensory for Dr. Burbank as plaintiff, on 

September 28, 2018.

C. District Court Proceedings

The Government moved under Federal Rule of Civil 

Procedure 12(b)(1) to dismiss the First Amended Complaint 

on October 25, 2018. The Government argued that the 

District Court lacked subject matter jurisdiction because 
SENSORY NEUROSTIMULATION V. AZAR 13

Sensory’s lawsuit arose under Medicare such that § 405(h)’s 

channeling requirement applied and Sensory had not gone 

through the appropriate administrative channels. In its 

response brief, Sensory argued that it was entitled to judicial 

review because there was no further appropriate channel that 

it was required to follow. Either the channeling requirement 

did not apply, Sensory argued, or Sensory had satisfied it.

The district court agreed with the Government. It found 

that Medicare’s channeling requirement applied and had not 

been met. Consequently, it dismissed the case without 

prejudice, and without leave to amend.

First, the district court decided that there was “little 

question that Sensory’s claim substantively ‘ar[o]se under’ 

the Medicare statute.” “[An NCD] merely codifies the 

Secretary’s position on whether Medicare will approve 

individual claims for that item or service. Accordingly . . . 

Sensory’s claims [are] ‘inextricably intertwined with a claim 

for benefits . . . .’” (quoting Heckler v. Ringer, 466 U.S. 602, 

614–15 (1984)). Thus, the channeling requirement applied.

Next, the district court considered whether the 

channeling requirement would effectively result in “no 

review at all” such that the channeling requirement should 

be ignored. The court concluded that Sensory could still 

pursue its interests by either accepting assignments of 

beneficiaries’ claims to benefits or by recruiting an 

aggrieved party to file a request for an NCD determination 

pursuant to 42 U.S.C. § 1395ff(f)(1)(A). The court held it 

irrelevant that Sensory could not receive an NCD by 

accepting assignments of individuals’ claims, because it is 

“action[s],” not “particular contention[s],” that must be 

channeled through the agency. (quoting Ill. Council, 

529 U.S. at 23) (internal quotation marks omitted).
14 SENSORY NEUROSTIMULATION V. AZAR

Finally, the district court considered whether it could 

waive the need for Sensory to exhaust possible 

administrative remedies. It concluded that Sensory’s lawsuit 

met none of the three requirements for waiver. The lawsuit 

was not “collateral” to a claim of entitlement under 

Medicare, as it arose under Medicare; any harm was not 

“irreparable,” because harm could be remedied with money 

damages; and administrative procedures were not “futile,” 

because further proceedings would serve the purposes of 

exhaustion by enabling the agency to fulfill its role “without 

possibly premature interference.” (quoting Ill. Council, 

529 U.S. at 13) (internal quotation marks omitted).

The district court dismissed the suit without prejudice 

and denied leave to amend on grounds of futility.

D. The Parties’ Arguments on Appeal

The parties dispute three issues in this appeal. First, 

whether the lawsuit “arises under” Medicare such that the 

channeling requirement of 42 U.S.C. § 405(h) applies. 

Second, whether Sensory has met the requirements to sue 

under 42 U.S.C. § 405(g). And third, whether, if the lawsuit 

arises under Medicare and there is no jurisdiction under 

42 U.S.C. § 405(g), that means that there is “no review at 

all” such that Sensory may bypass § 405(h)’s channeling 

requirement altogether.

For the reasons stated below, we agree with the 

Government that this lawsuit arises under Medicare, that 

Sensory is not entitled to waiver of the statute’s exhaustion 

requirement, and that applying the exhaustion requirement 

here would not mean “no review at all.”
SENSORY NEUROSTIMULATION V. AZAR 15

III. Standard of Review

Our review of questions of subject matter jurisdiction is 

de novo. Do Sung Uhm v. Humana, Inc., 620 F.3d 1134, 

1140 (9th Cir. 2010) (citing Sommatino v. United States, 

255 F.3d 704, 707 (9th Cir. 2001)).

IV. Discussion

A. Section 405(h)’s channeling requirement applies.

Section 405(h)’s channeling requirement eliminates 

federal question jurisdiction for lawsuits “arising under” the 

Medicare statute. Because Sensory’s lawsuit arises under 

Medicare, it applies here.

In interpreting the phrase “arising under,” we are not 

writing on a “blank slate.” P.R. Ass’n of Physical Med. & 

Rehab., Inc. v. United States, 521 F.3d 46, 48 (1st Cir. 2008). 

The Supreme Court has provided considerable guidance in 

this area. We briefly review three key cases below.

Weinberger v. Salfi, a Social Security case, interpreted 

the scope of § 405(h)’s administrative channeling 

requirement. In Salfi, a widow and her child had been denied 

survivorship benefits on the grounds that the widow’s 

marriage to her late husband was too brief. 422 U.S. at 753–

54. They brought a § 1331 (federal question) suit seeking 

monetary, declaratory, and injunctive relief against the 

Social Security Administration on behalf of themselves and 

a putative class of others similarly situated. Id. at 755. The 

Supreme Court held that § 405(h)’s administrative 

channeling requirement applied to the suit, barring § 1331 

jurisdiction, notwithstanding the fact that the plaintiffs’ 

claims were constitutional rather than statutory. Id. at 760–

61. The Court explained that, “not only is it Social Security 
16 SENSORY NEUROSTIMULATION V. AZAR

benefits which appellees seek to recover, it is the Social 

Security Act which provides both the standing and the 

substantive basis for the presentation of their constitutional 

contentions.” Id. Ultimately, the Supreme Court held that 

because the complaint did not allege that the putative class 

members had even sought administrative remedies, the class 

allegations should have been dismissed for failure to exhaust 

administrative remedies. Id. at 764. In contrast, the named 

plaintiffs had exhausted their remedies and were allowed to 

proceed to the merits. Id. at 764–67. Although Salfi dealt 

with the Social Security Act, “Salfi’s interpretation of 

§ 405(h) is directly applicable to conflicts arising under the 

Medicare Act and the courts have applied Salfi to a broad 

variety of disputes arising under the Medicare Act.” 

Drennan v. Harris, 606 F.2d 846, 850 (9th Cir. 1979).

After Salfi came the important 1984 case of Heckler v. 

Ringer. In Heckler, four Medicare beneficiaries sued the 

Government under inter alia § 1331 to obtain coverage for a 

particular surgical procedure. 466 U.S. at 604–05. The 

beneficiaries sought declaratory and injunctive relief only. 

Id. at 615, 620. Despite the beneficiaries’ choice not to seek 

monetary relief, the Supreme Court held that the suit arose 

under Medicare and that § 405(h)’s administrative 

channeling requirement applied. Id. at 615–16, 621–22. The 

channeling requirement even applied to the claim for 

declaratory relief brought by one beneficiary who had not 

yet undergone the procedure and so could not have had a 

claim for reimbursement pending at the time of the suit. Id.

at 621–22.

Finally, the Supreme Court further clarified the scope of 

the administrative channeling requirement in Illinois 

Council. There, the Court considered how § 405(h) affected 

§ 1331 lawsuits brought by plaintiffs “who might later seek 
SENSORY NEUROSTIMULATION V. AZAR 17

money or some other benefit from (or contest the imposition 

of a penalty by) the agency[,] challeng[ing] in advance . . . 

the lawfulness of a policy, regulation, or statute that might

later bar recovery of that benefit (or authorize the imposition 

of the penalty)[.]” 529 U.S. at 10. After reviewing Heckler 

and Salfi, the Court concluded:

Those cases themselves foreclose 

distinctions based upon the “potential future” 

versus the “actual present” nature of the 

claim, the “general legal” versus the “factspecific” nature of the challenge, the 

“collateral” versus “noncollateral” nature of 

the issues, or the “declaratory” versus 

“injunctive” nature of the relief sought. Nor 

can we accept a distinction that limits the 

scope of § 405(h) to claims for monetary 

benefits . . . . There is no reason to 

distinguish among them in terms of the 

language or in terms of the purposes of 

§ 405(h).

Id. at 13–14.

As Illinois Council makes clear, Sensory’s lawsuit arises 

under Medicare. Sensory contends that it is seeking to create 

an entitlement to benefits for others, but not for itself. In 

other words, its argument is that its suit is “collateral,” 

addresses “general legal” issues, is aimed at “potential 

future” outcomes, seeks no particular monetary benefits, and 

is third-party. But Illinois Council held that a lawsuit’s 

“collateral,” “general legal,” or “potential future” nature, as 

well as the fact that the plaintiff is not seeking damages, are 

all immaterial to the “arising under” analysis. Id. That 

leaves only one way in which this case can be distinguished 
18 SENSORY NEUROSTIMULATION V. AZAR

from one in which channeling can be required under Illinois 

Council: that Sensory, as a medical device supplier, is a third 

party to the relationship between Medicare beneficiaries and 

the government. We are unpersuaded that this distinction 

matters for two reasons.

First, stating that Sensory is a third party simply restates 

two of the other four immaterial distinctions. Its lawsuit is 

collateral to claims for benefits and seeks no particular 

monetary benefits precisely because Sensory is a third 

party—specifically, a medical device supplier. Given that 

the prior two derivative distinctions are immaterial, the 

distinction that that the lawsuit is brought by a third party 

must be as well.

Second, allowing Sensory to proceed because it is a third 

party would enable plaintiffs to circumvent Medicare’s 

administrative channeling scheme. Such circumvention is 

disfavored. See Heckler, 466 U.S. at 621–22. One of the 

Heckler plaintiffs had not yet undergone the surgery at issue 

and so sought prospective relief. Id. at 620. This 

distinguished him from his co-plaintiffs, who had undergone 

the surgery and sought retroactive relief. Id. at 613. The 

Supreme Court held that he could not proceed in court 

without first exhausting his claim before the agency, because 

it would “invit[e] [beneficiaries] to bypass the exhaustion 

requirements of the Medicare Act by simply bringing 

declaratory judgment actions in federal court before they 

undergo the medical procedure in question.” Id. at 621 

(citing Att’y Registration & Disciplinary Comm’n v. 

Schweiker, 715 F.2d 282, 287 (7th Cir. 1983)). Similarly, 

allowing providers or device suppliers to sue where 

beneficiaries cannot could enable beneficiaries to bypass 

§ 405(h)’s administrative channeling requirement by having 

third-party providers or suppliers bring declaratory 
SENSORY NEUROSTIMULATION V. AZAR 19

judgment actions in federal court before the beneficiaries 

undergo the medical procedure or obtain the device in 

question.

The role the Heckler beneficiaries’ physician played in 

their case demonstrates that such circumvention is a real 

possibility. In Heckler, all the beneficiaries were treated by 

the same physician, a specialist in the surgery in question, 

who also served as a co-plaintiff representing the 

beneficiaries. Id. at 609 & n.6. As the Court noted, the 

physician brought no individual claims; he merely served as 

a representative of his patients, who were the actual 

claimants. Id. at 609 n.6. The physician was therefore a 

third party in all but name. The Court concluded that 

because there was no jurisdiction as to the patients, there 

necessarily was no jurisdiction as to the physician. Id.

To summarize: Illinois Council, Salfi, and Heckler

dictate that Sensory’s lawsuit arises under Medicare even 

though the lawsuit may be third-party or otherwise 

distinguishable from a typical benefits appeal. Because 

Sensory’s lawsuit arises under Medicare, § 405(h)’s 

administrative channeling requirement applies. Unless 

Sensory has exhausted an appropriate administrative 

channel or can show that applying the administrative 

channeling requirements would mean “no review at all,” it 

cannot proceed.

Before discussing those issues, we note that the First 

Circuit came to the same conclusion in 2008 when faced 

with a lawsuit much like this one. An association of physical 

therapists had sued to overturn a regulation prohibiting 

Medicare reimbursements for services provided by physical 

therapists who did not meet certain educational and training 

requirements. P.R. Ass’n, 521 F.3d at 47–48. Applying
20 SENSORY NEUROSTIMULATION V. AZAR

Illinois Council, the First Circuit concluded the lawsuit arose 

under Medicare:

Although [the association’s] suit challenges a 

regulation and does not directly request 

payment for a specific service, it seeks at its 

heart the extension of Medicare benefits; 

accordingly, it would appear barred by 

section 405(h) as construed by the Supreme 

Court. The regulation being challenged is 

simply a limitation on the claims that 

Medicare will pay and so foreshadows the 

denial of such claims.

Id. at 48. Like Sensory, the plaintiff in Puerto Rican Ass’n 

was a third party suing to create coverage for medical care 

that it could provide. The First Circuit held that that lawsuit 

arose under Medicare. We hold the same as to Sensory’s.

B. Section 405(g) does not provide an alternative 

basis for jurisdiction.

Sensory contends that, even if federal question 

jurisdiction is unavailable, it has met the requirements to 

bring suit under 42 U.S.C. § 405(g), which provides for 

judicial review of final agency actions that have been 

presented to the Secretary of HHS. We disagree.

Even assuming arguendo that the Medicare statute 

incorporated § 405(g) for claims like Sensory’s, Sensory 

could not proceed under § 405(g) in this case. Parties 

proceeding under § 405(g) must obtain a “final decision” 

from the Secretary. 42 U.S.C. § 405(g); Johnson v. Shalala, 

2 F.3d 918, 921 (9th Cir. 1993). Sensory has not done so.
SENSORY NEUROSTIMULATION V. AZAR 21

There are two components to a final decision under 

§ 405(g): “the presentment of a claim to the Secretary and 

the exhaustion of administrative remedies.” Johnson, 2 F.3d 

at 921. Of these elements, only the exhaustion requirement 

is judicially waivable. See Haro v. Sebelius, 747 F.3d 1099, 

1112 (9th Cir. 2014) (“Exhaustion is waivable, presentment 

is not.” (citing Kaiser v. Blue Cross of Cal., 347 F.3d 1107, 

1115 (9th Cir. 2003))). Sensory has not exhausted 

administrative remedies, so § 405(g) only provides 

jurisdiction if the exhaustion requirement in this case can be 

judicially waived.

Waiver is warranted if the claim is “(1) collateral to a 

substantive claim of entitlement (collaterality); (2) colorable 

in its showing that denial of relief will cause irreparable 

harm (irreparability); and (3) one whose resolution would 

not serve the purposes of exhaustion (futility).” Johnson, 

2 F.3d at 921 (citing Briggs v. Sullivan, 886 F.2d 1132, 1139 

(9th Cir. 1989)). The third of these elements—futility—has 

not been satisfied, so we cannot waive the exhaustion 

requirement.

Futility is established if exhausting administrative 

remedies “would not serve the policies underlying 

exhaustion.” Cassim v. Bowen, 824 F.2d 791, 795 (9th Cir. 

1987). “In most cases, the exhaustion requirement allows 

the agency to compile a detailed factual record and apply 

agency expertise in administering its own regulations. The 

requirement also conserves judicial resources. The agency 

will correct its own errors through administrative review.” 

Johnson, 2 F.3d at 922.

Requiring Sensory to seek administrative review of 

CMS’s decision that Relaxis is a personal comfort item 

would serve all these policies. There are at least two ways 

for Sensory to seek administrative review. Sensory can 
22 SENSORY NEUROSTIMULATION V. AZAR

either accept assignment of an individual claim for benefits 

and pursue that claim or recruit an aggrieved party to file a 

request for an NCD then challenge an adverse decision 

through the HHS appeals process. Either of these 

proceedings might result in the agency changing its mind 

and providing coverage for Relaxis, so further proceedings 

would serve the policy of allowing the agency to “correct its 

own errors through administrative review.” Id. And either 

of these proceedings might result in an administrative record 

that could assist in any subsequent judicial review. This is 

simply not a case where “there [i]s nothing to be gained from 

permitting the compilation of a detailed factual record, or 

from agency expertise.” Bowen v. City of New York, 

476 U.S. 467, 485 (1986) (citing McKart v. United States, 

395 U.S. 185, 200 (1969)). For these reasons, further 

administrative proceedings would not be futile.

Because further administrative proceedings would not be 

futile, exhaustion should not be waived. And because 

exhaustion should not be waived, Sensory has not obtained 

a “final decision” within the meaning of § 405(g). As a 

result, even if claims like Sensory’s could proceed under 

§ 405(g) in theory, Sensory could not proceed under 

§ 405(g) in this case.

C. Applying § 405(h)’s channeling requirement will 

not result in “no review at all,” so the Michigan 

Academy exception does not apply.

There is an important exception to § 405(h)’s 

administrative channeling requirement. Sensory contends 

that it applies here.

As explained above, the Supreme Court first articulated 

this exception in Bowen v. Michigan Academy of Family 

Physicians. In that case, applying § 405(h)’s channeling 
SENSORY NEUROSTIMULATION V. AZAR 23

requirement would have meant the plaintiff could obtain “no 

[judicial] review at all of substantial statutory and 

constitutional challenges to the Secretary’s administration of 

Part B of the Medicare program.” 476 U.S. at 680. The 

Court, applying the “‘strong presumption that Congress did 

not mean to prohibit all judicial review’ of executive action,” 

concluded that § 405(h) did not apply. Id. at 680–81 

(quoting Dunlop v. Bachowksi, 421 U.S. 560, 567 (1975)).

The Court later clarified the sweep of the Michigan 

Academy exception in Illinois Council. There, an 

association representing nursing homes challenged a 

Medicare regulation that dictated what agencies were to do 

when they found that a nursing home was violating 

substantive standards. 529 U.S. at 6. The association argued 

that the Medicare statute only allowed review when the 

Secretary terminated a nursing home agreement, but not 

when the Secretary imposed a lesser sanction. Id. at 20. 

Relying on the Secretary’s assurances that nursing homes 

could obtain review of most decisions by incurring a minor 

penalty, the Court concluded that channeling was required 

and that § 405(h) barred review. Id. at 22. The Court 

explained that in deciding whether channeling “mean[s] no 

review at all,” “the question is whether, as applied generally 

to those covered by a particular statutory provision, hardship 

likely found in many cases turns what appears to be simply 

a channeling requirement into complete preclusion of 

judicial review.” Id. at 19, 22–23 (citing Haitian Refugee 

Ctr., 498 U.S. at 496–97). If such complete preclusion of 

judicial review occurs, § 405(h)’s channeling requirement 

does not apply. Id. at 22–23.

The Supreme Court has not revisited the Michigan 

Academy exception since Illinois Council. This Circuit has 

rarely encountered it, but we did find that the exception 
24 SENSORY NEUROSTIMULATION V. AZAR

applied in Haro v. Sebelius, 747 F.3d 1099, 1115 (9th Cir. 

2014). In Haro, an attorney for a Medicare beneficiary sued 

to overturn a Medicare policy that distinctly affected 

attorneys for Medicare beneficiaries. Id. at 1104. The panel 

observed that the attorney could not follow the 

administrative channels open to beneficiaries, that it was 

“unaware of any other path to administrative review of the 

policy that [the attorney] challenge[d], and [that] the parties 

cite[d] none.” Id. at 1115. Because there was no 

administrative channel through which the attorney (or 

anyone else) could bring his claim, the panel concluded that 

“the claim falls within the very narrow Michigan Academy 

exception, and the district court had federal question 

jurisdiction under § 1331 to adjudicate it.” Id. (citation 

omitted).

The Fifth and D.C. Circuits have both considered the 

exception at greater length. Both have ruled that the 

Michigan Academy exception does not apply where another 

party is able to pursue the same claim through an appropriate 

administrative channel and is incentivized to do so. See

Fam. Rehab., Inc. v. Azar, 886 F.3d 496, 505 (5th Cir. 2018) 

(“[W]e have required channeling so long as ‘there 

potentially were other parties with an interest and a right to 

seek administrative review.’”) (quoting Physician Hosps. of 

Am. v. Sebelius, 691 F.3d 649, 657 (5th Cir. 2012)); Am. 

Chiropractic Ass’n v. Leavitt, 431 F.3d 812, 816–17 (D.C. 

Cir. 2005) (holding Michigan Academy exception did not 

apply because chiropractors’ association, although unable to 

proceed in its own name, could recruit enrollee to proceed 

through administrative channels); cf. Council for Urological 

Interests v. Sebelius, 668 F.3d 704, 712 (D.C. Cir. 2011) 

(“Although we agree that the [Michigan Academy] exception 

is primarily concerned with whether a particular claim can 

be heard through Medicare Act channels, we see nothing in 
SENSORY NEUROSTIMULATION V. AZAR 25

the case law requiring us to disregard factors that speak to a 

potential proxy’s willingness and ability to pursue the 

plaintiff’s claim.”); P.R. Ass’n, 521 F.3d at 49–50 (holding 

Michigan Academy exception did not apply because 

“doctors and therapists certainly have ample economic 

incentive to frame and support a test case”). American 

Chiropractic, for example, concerned the American 

Chiropractic Association’s attack on a Medicare rule 

allowing HMOs to require that patients receive a referral 

from a non-chiropractor before seeking chiropractic 

services. 431 F.3d at 814–15. Although there was no 

administrative channel through which the Association could 

attack the rule, the D.C. Circuit concluded that applying the 

channeling requirement would not mean “no review at all” 

because a beneficiary could receive chiropractic services 

without a referral, have his or her claim for benefits denied 

by his or her HMO, and then proceed through the 

administrative process. Id. at 816–17.

These out-of-circuit cases address the basic question 

here: does the Michigan Academy exception apply when an 

administrative channel exists for review of a certain category 

of claims, but is closed to the particular plaintiff bringing the 

lawsuit? They conclude that if another party can bring the 

same claim through the existing administrative channel, and 

is sufficiently incentivized to do so, then some review is 

available, and the Michigan Academy exception does not 

apply. We agree, and we reach the same conclusion here.

In this case, an administrative channel for review exists.2 

Indisputably, 42 U.S.C. § 1395ff(f) provides an 

administrative channel for “aggrieved parties” to request 

2 This feature distinguishes this case from Haro, where no 

appropriate administrative channel existed. 747 F.3d at 1115.
26 SENSORY NEUROSTIMULATION V. AZAR

NCDs and challenge unsatisfactory results. The difficulty 

for Sensory (and similarly situated suppliers) is that it is not 

an “aggrieved party” within the meaning of the statute. 

Because it is not an “aggrieved party,” it cannot directly 

avail itself of this administrative channel. However, Sensory 

(or a similarly situated supplier) could indirectly avail itself 

of this channel. That is enough to take this case out of the 

Michigan Academy exception.

It may not be easy for a particular supplier to find an 

agreeable proxy, but particular suppliers’ difficulties do not 

affect the analysis. Whether there would be “no review at 

all” is an objective inquiry. See Ill. Council, 529 U.S. at 22–

23 (“[T]he question is whether, as applied generally . . . 

hardship likely found in many cases turns what appears to 

be simply a channeling requirement into complete preclusion 

of judicial review.” (first and second emphasis added)). A 

particular supplier’s difficulty finding a proxy does not 

amount to “hardship likely found in many cases . . . [causing] 

complete preclusion of judicial review.” Id. (first emphasis 

added).

Although the government contends otherwise, the fact 

that Dr. Burbank is an RLS sufferer and Medicare 

beneficiary does not inform the “no review at all” inquiry 

either. Again, the Michigan Academy inquiry is objective. 

Id. Circumstances that make recruiting proxies easier for 

particular medical device suppliers are no more pertinent to 

that inquiry than circumstances that make recruiting proxies 

more difficult for others. This case’s unusual feature—that 

Sensory’s CEO, President, Board Chairman, and 

stockholder is himself capable of becoming “aggrieved”—is 

simply not “likely found in many cases,” id., and cannot 

relieve Sensory from the channeling requirements.
SENSORY NEUROSTIMULATION V. AZAR 27

Ultimately, because medical device suppliers seeking 

NCDs can be expected to recruit proxies to exhaust the 

administrative channel provided in 42 U.S.C. § 1395ff(f), 

they can effectively obtain judicial review. Because medical 

device suppliers can effectively obtain judicial review, the 

Michigan Academy exception does not apply in this suit. 

And because the Michigan Academy exception does not 

apply, the district court correctly dismissed this lawsuit for 

lack of subject matter jurisdiction.

V. Conclusion

The district court correctly held that § 405(h)’s 

administrative channeling requirement applied and that it 

therefore had no subject matter jurisdiction to hear Sensory’s 

claims. AFFIRMED.