* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not

be published and is not precedent except under the limited circumstances set forth in 5TH CIR.

R. 47.5.4.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 07-10107

ARTHUR FLEMING and M&F HOME HEALTH CARE INC.

Plaintiffs-Appellants

v.

MICHAEL O. LEAVITT et al

Defendants-Appellees

Appeal from the United States District Court

for the Northern District of Texas

No. 3-05-CV-2077-BH

Before JOLLY, HIGGINBOTHAM, and PRADO, Circuit Judges. 

PER CURIAM:*

This is a case under the Medicare Act. Plaintiffs sought mandamus and

declaratory relief in district court to compel Defendants to accept a cost report

and to reimburse Plaintiffs for their past services for amounts allegedly decided

in a settlement. The district court dismissed the action, finding that Plaintiffs

had failed to exhaust their administrative remedies – a prerequisite to

jurisdiction under the Medicare Act. Plaintiffs appealed. 

United States Court of Appeals

Fifth Circuit

F I L E D

January 18, 2008

Charles R. Fulbruge III

Clerk
No. 07-10107

2

I

Arthur Fleming provided home health care to Medicare patients through

M&F Home Health Care, Inc. The Secretary of the Department of Health and

Human Services has delegated the administration of Medicare to the Center for

Medicare and Medicaid Services. CMS contracts with insurance companies to

handle reimbursement of individual Medicare providers, such as Plaintiffs, from

the federal Medicare Trust. These “fiscal intermediaries” receive year-end cost

reports from providers, determine which provider claims are eligible for

reimbursement from the trust, and authorize payments for services provided to

eligible beneficiaries for covered care. M&F entered a provider agreement with

CMS. Medicare’s “Hospital Insurance Benefits for the Aged and Disabled (Part

A)” allowed CMS to pay M&F for some of the post-hospital home care that it

provided to patients. Palmetto Government Benefits Administrators, LLC, was

the financial intermediary between CMS and M&F, receiving interim and fiscal

year-end (FYE) cost reports from M&F. Palmetto, after accepting FYE cost

reports and auditing them, issued a Notice of Program Reimbursement, i.e., a

“settlement” or “NPR,” indicating adjustments that Palmetto had made based

on the audit. The NPRs authorized the amounts owed to M&F as a result of

underpayments throughout the fiscal year, as well as any amounts owed by

M&F to Medicare resulting from “overpayments” that M&F had received for

non-covered services or ineligible payments. 

Plaintiffs dispute Palmetto’s treatment oftwo of its cost reports. Based on

Plaintiffs’ cost report for FYE January 31, 1998, the first cost report, Palmetto

issued an NPR indicating that Medicare had overpaid M&F by more than $1.1

million and that M&F owed this amount to Medicare. Plaintiffs dispute this

amount and claim that the parties, after a partial administrative hearing,

resolved the dispute in a settlement agreement. Plaintiffs allege that the parties

established, through an unwritten settlement, that Medicare owed more than
No. 07-10107

1 Plaintiffs allege that Defendants initially refused to accept the cost report because it

was not dated with the proper FYE date of January 31, 1998. But Palmetto had allegedly

advised Plaintiffs to date the report as of December 31, 1998 – the date of Plaintiffs’ final day

of business. Plaintiffs claim that Palmetto’s employee “admits that the proper date for the cost

report was 12/31/98, but states that the report was not received until January 12, 2000,”

outside of the five-month time period allowed for filing. 

3

$1.1 million to M&F but that Defendants failed to honor this settlement

agreement. Plaintiffs do not allege that they appealed the disputed NPR to the

Provider Reimbursement Review Board; instead they alleged in their original

complaint before the district courtthat“[i]n 1998 M&F began an administrative

appeal to review the claims denied by Palmetto through the WEDGE/ORT [an

‘intensified audit or post-payment medical review’].” They further asserted that

the “settlement terms” established that M&F should be paid for 18,225 claims

and the visits associated with those claims. 

M&Fstopped doing business with Medicare andPalmetto on December 31,

1998. It filed the second cost report at issue on April 19, 1999. This report

included all costs for the final months of its business – February 1, 1998,

through December 31, 1998. Palmetto allegedly refused to accept this report and

created its own cost report.1It then issued an NPR indicating further amounts

that M&F owed to Medicare and on November 19, 1998, declared M&F to be in

non-payment status. 

In 2005, Plaintiffs filed a complaint in federal district court, requesting

three remedies. First, they asked the district court to enter a declaratory

judgment setting out the rights established under the alleged settlement.

Second, they requested two writs of mandamus: one to require Defendants to

accept their second cost report, and one to stop Defendants’ collection

proceedings. Defendants filed a motion to dismiss under Rules 12(b)(1) and

12(b)(6). The parties consented to have their case heard by a magistrate judge.

The magistrate determined, “Because the exhaustion of administrative remedies

that ends in a final agency determination is a jurisdictional prerequisite to suit,
No. 07-10107

2 Fleming v. Leavitt, Civ. Action No. 3:05-CV-2077-BH, 2006 WL 2880452, *6 (N.D.

Tex. Sept. 29, 2006). 

3 RenCare, Ltd. v. Humana Health Plan of Tex., Inc., 395 F.3d 555, 557 (5th Cir. 2004).

4 See Zephyr Aviation, L.L.C. v. Dailey, 247 F.3d 565, 570 (5th Cir. 2001). 

5 RenCare, 395 F.3d at 557 (quoting Heckler v. Ringer, 466 U.S. 602, 606, 623 (1984)).

6 See Ringer, 466 U.S. at 614-15 (citing Weinberger v. Salfi, 422 U.S. 749, 760-61 (1975))

(“The third sentence of 42 U. S. C. § 405(h), made applicable to the Medicare Act by 42 U.S.C.

§ 1395ii, provides that § 405(g), to the exclusion of 28 U.S.C. § 1331, is the sole avenue for

judicial review for all ‘claim[s] arising under’ the Medicare Act.”).

4

this court lacks subject matter jurisdiction to hear Plaintiffs’ claim for

declaratory judgment.”2 The district court dismissed Plaintiffs’ petition in its

entirety in a corrected final judgment, finding a lack of jurisdiction under

12(b)(1). Plaintiffs timely appealed. 

II

We review de novo a district court’s determination that a case arises under

the Medicare Act.3 We also review de novo a grant of a 12(b)(1) motion to

dismiss on the grounds of a failure to exhaust.4 Defendants and Plaintiffs both

argue that this case arises under the Medicare Act, and the court did not err in

finding the same. A claim arises under the Medicare Act if “‘both the standing

and the substantive basis for the presentation’ of the claim is the Medicare Act

. . . or if the claim is ‘inextricably intertwined’ with a claim for Medicare

benefits.”5 All of Plaintiffs’ claims involve Defendants’ determinations of

amounts owed for money that Medicare allegedly overpaid to Plaintiffs – a

quintessential reimbursement dispute arising under the Medicare Act. 

The Medicare Act, Title XVIII of the Social Security Act, is subject to the

Social Security Act’s requirements for exhaustion of claims.6 42 U.S.C. § 405(g)

provides,

Any individual, after any final decision of the Commissioner of

Social Security made after a hearing to which he was a party,
No. 07-10107

7 Emphasis added. 

8 466 U.S. at 615; see also Shalala v. Ill. Council on Long Term Care, 529 U.S. 1, 12

(2000) (citing Ringer’s reiteration of this principle).

9 42 U.S.C. § 1395oo(a)(2). 

10 42 U.S.C. § 1395oo(a)(1)(A)(i). 

11 42 U.S.C. § 1395oo(a)(3). 

5

irrespective of the amount in controversy, may obtain a review of

such decision by a civil action commenced within sixty days after

the mailing to him of notice of such decision or within such further

time as the Commissioner of Social Security may allow. Such action

shall be brought in the district court of the United States . . . .7

The Supreme Court in Heckler v. Ringer confirmed that parties must

follow the exhaustion requirements of § 405 when the Medicare Act is “both the

standing and the substantive basis for the presentation.”8 Several sections of the

Medicare Act specify the administrative procedures that parties must pursue

when disputing NPRs. 42 U.S.C. § 1395oo provides that “[a]ny provider of

services which has filed a required cost report within the time specified in

regulations may obtain a hearing with respect to such cost report by a Provider

Reimbursement Review Board” (the PRRB). If the amount in controversy is

$10,000 or more,9 a hearing is available for any provider 

dissatisfied with a final determination of the organization serving as its

fiscal intermediary . . . to the amount of total program reimbursement due

the provider for the items and services furnished to individuals for which

payment may be made under this title [42 USCS §§ 1395 et seq.] for the

period covered by such report . . . .10

The provider must file “a request for a hearing within 180 days after notice of

the intermediary’s final determination.”11 A PRRB decision based on the hearing

is final unless the Secretary, “within 60 days after the provider of services is

notified of the Board’s decision, reverses, affirms, or modifies the Board’s
No. 07-10107

12 42 U.S.C. § 1385oo(f)(1). 

13 Id.

14 Plaintiffs’ Brief at 3. 

6

decision,”12 in which case the decision is final once the Secretary has acted on it.

A provider has 

the right to obtain judicial review of any final decision of the Board,

or of any reversal, affirmance, or modification by the Secretary, by

a civil action commenced within 60 days of the date on which notice

of any final decision by the Board or of any reversal, affirmance, or

modification by the Secretary is received.13

Defendants assert that because Plaintiffs’ claims all arise under the

Medicare Act and because Plaintiffs failed to exhaust their administrative

remedies as required under the Act, the district court properly found that it

lacked jurisdiction. Plaintiffs counter that, although their claims arise under the

Act, there were no available remedies for them to exhaust: by allegedly

“settling,” Defendants precluded the possibility of administrative exhaustion.

Because Defendants wrongfully halted administrative review by “settling,”

Plaintiffs assert, they should be estopped from arguing exhaustion.

Furthermore, they argue, “the fiscal intermediary’s refusal to accept the

providers’ timely submitted final cost report was an action for which no

administrative review was permitted.”14

The district court did not err in finding that Plaintiffs had administrative

remedies available to them and failed to exhaust those remedies, thus divesting

the court of jurisdiction. Plaintiffs’ complaint contested Palmetto’s refusal to

reopen the disputed cost reports underlying the NPRs. As the district court

found, Palmetto, as the financial intermediary, was not required to reopen the
No. 07-10107

15 See 42 C.F.R. § 405.1885(a) (providing that intermediaries “may” reopen their

determination if providers make a motion to reopen “within 3 years of the date of the notice

of the intermediary or Board hearing decision, or where there has been no such decision, any

such request to reopen must be made within 3 years of the date of notice of the intermediary

determination”). 

16 See Huff v. Int’l Longshoremen’s Ass’n, Local No. 24, 799 F.2d 1087, 1088 (5th Cir.

1987); see also Sandy Creek Investors, Ltd. v. City of Jonestown, 325 F.3d 623, 626 (5th Cir.

2003) (quoting United States v. Lipscomb, 299 F.3d 303, 358 (5th Cir.2002)) (“‘[I]f parties do

7

report,15 nor was its refusal to do so a final appealable action. Plaintiffs could

have disputed Palmetto’s audits of their cost reports and resulting NPR

determinations by appealing the NPRs, as provided in the Medicare Act, but

they failed to exhaust these administrative procedures. Plaintiffs could also

have appealed the amounts owed in the alleged “settlement agreement” between

Plaintiffs and Defendants by appealing the NPR that gave rise to those amounts

owed. Although Plaintiffs allege that they “began an administrative appeal” in

1998 and thatPalmetto offered to “settle”the proceedings, Plaintiffs fail to allege

that they appealed pursuant to the procedures in 42 U.S.C. § 1395oo(a), nor do

they explain why the alleged settlement, which they concede was “not reduced

to writing,” prevented them from pursuing the judicial review procedures

provided in 42 U.S.C. § 1395oo(f)(1). Indeed, Plaintiffs began these

administrative proceedings before Defendants issued an NPR;the Medicare Act

requires providers to request review after the intermediary has made a “final

determination” – i.e., completed an NPR. In short, the district court correctly

identified the administrative remedies available to Plaintiffs and their failure

to allege that they had properly exhausted those remedies. 

Even assuming that Defendants were estopped from asserting that

Plaintiffs failed to exhausttheir administrative remedies, which it appears they

were not, we must consider sua sponte, if necessary, whether Plaintiffs

exhausted their available remedies in determining whether the district court

had subject matter jurisdiction;16 exhaustion under the Medicare Act is a
No. 07-10107

not raise the issue of jurisdiction, or even if they contend that the Court of Appeals has

jurisdiction we still must determine, sua sponte, whether we have jurisdiction in a particular

case.’”).

17 Ringer, 466 U.S. at 616. 

18 See, e.g., Schilling v. Rogers, 363 U.S. 666, 677 (1960) (citation omitted) (holding that

“the Declaratory Judgments Act is not an independent source of federal jurisdiction”). 

8

prerequisite to jurisdiction. Because Plaintiffs failed to exhaust their remedies

under the Act, the district court did not err in holding that it lacks jurisdiction.

III 

In district court, Plaintiffs asserted jurisdiction under 28 U.S.C. § 1331,

28 U.S.C. §§ 2201 and 2202 (the Declaratory Judgment Act), and 28 U.S.C. §

1361 (providing jurisdiction for mandamus relief). 

Section 405(h) expressly excludes federal question jurisdiction under §

1331, and where claims arise under the Medicare Act, as they did here, no

portion of those claims “can be channeled into federal court by way of

federal-question jurisdiction.”17

For Plaintiffs’ assertion of jurisdiction under the Declaratory Judgment

Act, the district court did not err in holding that the Declaratory Judgment Act

is not an independent source of jurisdiction,18 and Plaintiffs have failed to raise

other valid bases for jurisdiction. 

Although we have not determined whether § 405 requires exhaustion of

administrative remedies prior to requesting mandamus relief, the district court

also did not err in holding that it lacked mandamus jurisdiction. The district

court held “that the exhaustion requirement applies to Plaintiffs’ pleas for

mandamus relief,” but its jurisdictional holding need not have reached so

broadly. Its recognition that “mandamus ‘is intended to provide a remedy for a

plaintiff only if he has exhausted all other avenues of relief and only if the
No. 07-10107

19 Fleming, 2006 WL 2880452, at *6 (quoting Ringer, 466 U.S. at 616). 

20 Ringer, 466 U.S. at 616. 

9

defendant owes him a clear nondiscretionary duty’”19 was an adequate basis for

denial of relief. Exhaustion aside, mandamus could not “properly issue”20 here.

Plaintiffs sought a writ of mandamus requiring Defendants to accept their

second cost report. As discussed above, financial intermediaries do not have a

duty to reopen cost reports – they can do so at their discretion. Plaintiffs also

sought mandamus to stop collection proceedings. The collection proceedings

were a direct result of Defendants’ NPRs, which Plaintiffs could have appealed

by properly initiating administrative review. 

The district court properly determined thatitlacked jurisdiction under the

three bases for jurisdiction proffered by Plaintiffs. Because the district court

lacked jurisdiction to hear any of Plaintiffs’ claims, we need not address

Plaintiffs’ remaining arguments.

AFFIRMED.