Court Opinion

ID: 8918482
Source: CourtListenerOpinion
Date Created: 2022-11-27 06:00:34.225985+00
Date Added: 2024-06-11T17:09:12.446408
License: Public Domain

WEIS, Circuit Judge,
dissenting.
The majority states the issue before us as whether “suppliers” of covered services as distinguished from “providers” have standing to seek “judicial review of Medicare reimbursement procedures or amounts.” This formulation of the plaintiffs’ cause of action, I believe, does not adequately describe the issues at stake. As I read the plaintiffs’ complaint, it does not simply present a reimbursement challenge. Rather, plaintiffs attack the failure of Medicare officials to promulgate guidelines as required by regulation and by statute. With that view of the litigation, I conclude that plaintiffs have standing and a jurisdictional basis for this suit.
I start with the proposition that in addressing a question of standing on a motion to dismiss, trial and reviewing courts must accept as true all material allegations in the plaintiffs’ complaint. Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 2206, 45 L.Ed.2d 343 (1975). See also Gladstone Realtors v. Village of Bellwood, 441 U.S. 91, 115 & n. 31, 99 S.Ct. 1601, 1616 & n. 31, 60 L.Ed.2d 66 (1979) (pleadings and discovery material considered; factual allegations for standing must be supported adequately by evidence at trial). The complaint in this case alleges that plaintiffs furnish services under arrangement with a skilled nursing facility and that they have been and will continue to be paid consistent with standards established by Prudential, the fiscal intermediary. Plaintiffs assert that HCFA, “a principal operating component” of HHS, 551 F.Supp. at 1025-26, is responsible for issuing reimbursement guidelines but has failed to issue any for speech pathology services. Complaint at ¶¶ 67-68. To fill this void, Prudential has adopted its own standards which were allegedly derived by misapplication of reasonable cost reimbursement principles, and were incorrectly based on unrelated guidelines. See Complaint at ¶¶53, 60, 62. As a result of Prudential’s action and HCFA’s inaction, plaintiffs contend they are denied the reasonable value of their services.1
Specifically, the complaint avers that “HCFA has consistently refused to act and has failed to develop, promulgate and issue any speech pathology GUIDELINES, all in violation of its statutory authority and duty.” Complaint at ¶ 70; see also Complaint at ¶¶ 67-68, 75. HCFA guidelines would supersede the measures used by Prudential and presumably would be more favorable to plaintiff. Thus, plaintiffs allege that they suffer and will continue to suffer injury because of the governmental agency’s lack of compliance with its obligation to promulgate guidelines. Although adoption of guidelines would not require Medicare to pay suppliers directly, plaintiffs suggest that the issuance of proper rules would increase government payments to nursing homes.
In the realities of the market place, the amount that the Medicare Program reimburses a nursing home for speech pathology services has a direct impact on what a speech pathologist working “under arrangement” will be paid. It is fanciful in the *389extreme to imagine that a nursing home will pay its speech pathologist more than the amount it may be reimbursed by Medicare for that specific service.
Although the pinch is felt first by the nursing home, that does not deny standing to plaintiffs. In Warth v. Seldin, 422 U.S. at 504-05, 95 S.Ct. at 2207-08, the court said, “The fact that the harm to petitioners may have resulted indirectly does not in itself preclude standing.” When governmental action against one party causes a third party to suffer a specific harm that a statute was intended to prevent, the indirectness of the injury does not necessarily deprive the injured person of standing. However, it may make it “more difficult to meet the minimum requirements of Art. Ill: to establish that, in fact, the asserted injury was the consequence of the defendants’ actions, or that prospective relief will remove the harm.” Id. at 505, 95 S.Ct. at 2208.
Simon v. Eastern Kentucky Welfare Rights Organization, 426 U.S. 26, 41-42, 96 S.Ct. 1917, 1925-1926,48 L.Ed.2d 450 (1976), reiterated the requirement that a federal court may act “only to redress injury that fairly can be traced to the challenged action of the defendant, and not injury that results from the independent action of some third party not before the court.” The Court denied standing in that case because it was speculative “whether the denials of [hospital] service specified in the complaint fairly can be traced to [Internal Revenue Service] ‘encouragement’ or instead result from decisions made by the hospitals without regard to the tax implications.” Id. at 42-43, 96 S.Ct. at 1926-1927. See also Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 472, 102 S.Ct. 752, 758, 70 L.Ed.2d 700 (1982).
Here, however, the complaint alleges facts from which it is fairly inferable that the preparation and issuance of appropriate guidelines will grant plaintiffs some relief. Their position is that as a result of HCFA’s inaction, Prudential developed and applied a reimbursement methodology without proper notice to or consultation with plaintiffs. In contrast, when HCFA acts, guidelines are issued “after consultation with the appropriate therapy organization,” Provid.Reimb. Man., Part I § 1406.2, Medicare & Medicaid Guide (CCH) ¶ 5849D-23,2 and notice of promulgation is required, 42 C.F.R. § 405.-432(d).3 The complaint avers that as a result of the lack of opportunity to comment and Prudential’s failure to consider some of the factors relevant to a proper determination of reimbursement levels, “[t]he artificial amounts set forth by Prudential for the cost of speech pathology services were and are well below the actual cost of providing said services in the State of New Jersey.” Complaint at ¶ 63.
Plaintiffs have thus asserted economic detriment as a result of the failure to include pertinent elements in the formulation of guidelines. These deficiencies would be cured by HCFA promulgating independent guidelines after its required consultation with plaintiffs and after consideration of comments received following publication of the proposed guidelines. The standing prerequisites of establishing an expectancy of prospective relief, as well as the causal link between the challenged failure to act and the plaintiffs’ detriment, have thus been met.
Any doubt about whether standing can exist even though the effect is only indirect would appear to have been settled by Columbia Broadcasting System, Inc. v. United States, 316 U.S. 407, 62 S.Ct. 1194, 86 L.Ed. 1563 (1942). There, the Court confronted Federal Communication Commission regula*390tions that by their terms were applicable to individual broadcasting stations and did not directly govern the plaintiff network. The district court dismissed, but the Supreme Court found standing, saying,
“Appellant’s standing to maintain the present suit in equity is unaffected by the fact that the regulations are not directed to appellant and do not in terms compel action by it or impose penalties upon it because of its action or failure to act.”
Id. at 422, 62 S.Ct. at 1202. The Court found it was enough that the regulations purportedly operated to “alter and affect adversely appellant’s contractual rights and business relations with station owners” whose licenses might be revoked as a result of the regulations. Id.; see also United States v. SCRAP, 412 U.S. 669, 683-690, 93 S.Ct. 2405, 2413-2417, 37 L.Ed.2d 254 (1973).
Plaintiffs have established economic detriment to themselves, both present and future, although the shock of the impact travels through the nursing homes acting as conduits. The injury to plaintiffs and the controversy presented fulfill the requirements of Article III.
The next step in the standing analysis focuses on prudential considerations — judicial rules limiting cases that courts may consider, even when Article III has been satisfied. Defendants observe that only nursing homes receive reimbursement and have direct contact with the Medicare program. Therefore, defendants argue, plaintiffs have no standing under a prudential standard because they are not within the “zone of interests” that the statute and regulations were intended to regulate and protect. See generally, Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970); Colonial Penn Insurance Co. v. Heckler, 721 F.2d 431 at 434-435 (3d Cir.1983).4 But the circumstances in this case clearly demonstrate that this test has been met.5
In general, beneficiaries and providers are within the zone of interests of the Medicare Act. See Colonial Penn, at 435. Although plaintiffs are not in either category, they are at least arguably regulated by the provisions at issue in this case. As the majority observes, “regulations prescribe the qualifications of speech pathologists .. . and set forth the requirement of a written treatment plan for speech therapy services.... ” See also 42 C.F.R. §§ 405.1101(t), 405.1121(i), 405.1126 (1982).
In addition, the Act provides that “[wjhere . .. speech therapy services ... are furnished under an arrangement” with a nursing home, the amount included in any payment to the nursing facility “as the reasonable cost of such services .. . shall not exceed ... the salary” that the nursing home would have paid to an employee for the services plus certain allowances, “as the Secretary may in regulations determine to be appropriate.” 42 U.S.C. § 1395x(v)(5) (A) (1976).
In Cotovsky-Kaplan Physical Therapy Assoc., Ltd. v. United States, 507 F.2d 1363 (7th Cir.1975), the plaintiffs were physical therapy organizations affected by a regulation that, as a condition of Medicare participation by home health agencies, precluded that provider from entering into an arrangement with those plaintiffs. In rejecting an attack on standing, the Court of Appeals said, “To focus on whether the *391plaintiffs are directly regulated themselves is to read the Data Processing test too narrowly. The test is not whether these plaintiffs are regulated by the statute but whether the interests asserted by them arguably fall within the zone of interests so regulated.” Id. at 1366. Cf. Granville House, Inc. v. Department of Health & Human Services, 715 F.2d 1292, 1299 (8th Cir.1983).
The case at hand is as strong for standing as Cotovsky-Kaplan, and is readily distinguishable from National Union of Hospital & Health Care Employees v. Carey, 557 F.2d 278 (2d Cir.1977). In the latter ease, a union of nursing home employees was held to lack standing to challenge a statute limiting increases to the total level of reimbursement paid to the homes under Medicaid. In that case, Medicaid did not determine the specific allowable costs for routine employment expenditures, and the interests asserted by the union were viewed as those of the providers. As the court remarked in addressing the question of third-party standing, “The interests of the homes and appellants are not inextricably bound together in these matters.” Id. at 281.
Even if this assessment of the various interests at stake was correct, see National Union, 557 F.2d at 284-85 (Mansfield, J., dissenting), a different situation is presented in the case at hand. As we have seen, Congress has specifically instructed the Secretary to establish by regulation the reasonable cost of plaintiffs’ services within the perimeters set forth in the statute. 42 U.S.C. § 1395x(v)(5)(A). The relationship between plaintiffs here and the nursing homes, as well as the plaintiffs’ interests, are not separate and distinct from the home’s interest in or relationship with the Medicare program. Since the provider acts primarily as a conduit for payment, the plaintiffs’ own, independent interests can be viewed as implicated by this statutory provision.
The district court believed, however, that plaintiffs were not affected by the Act because they were free to bargain with the nursing home operators for higher compensation. 551 F.Supp. at 1032. The implied premise underlying this rationale is that the nursing homes could recoup the cost of the plaintiffs’ services not covered by Medicare from some other source — presumably from patients not eligible for Medicare.
Aside from underestimating nursing home dependence on Medicare, that approach overlooks the congressional policy of having Medicare pay its own way. The Senate report accompanying the original Medicare bill stated that the payments were to be computed so that “the costs of services of individuals covered by the program will not be borne by individuals not covered, and the costs of services of individuals not covered will not be borne by the program.” S.Rep. No. 404, 89th Cong., 1st Sess., reprinted in 1965 U.S.Code & Adm.News 1943, 1976. See also id. at 2126; Chelsea Community Hospital, SNF v. Michigan Blue Cross Association, 630 F.2d 1131, 1136 (6th Cir.1980); 42 U.S.C. § 1395x(v)(1)(A).6
It is clear to me that the practical and policy strictures on the plaintiffs’ independent course of action place them inescapably within the scope of interests arguably regulated by Medicare. The pervasive regulatory scheme sets standards for competency that speech therapists must meet, requires certain procedures to be followed for the planning of treatment, and in a very practical sense places a ceiling on their compensation. The majority concedes that in this context the standing question is “difficult” but I find it difficult to argue that plaintiffs are not within the zone of interests sought to be regulated.
The majority avoids a frontal assault on this question and, instead, attempts to flank the issue by directing attention to what it sees as an implied legislative denial of standing to suppliers of services such as plaintiffs. That line of attack, however, clashes head-on with the general principle that judicial review of agency action “will not be cut off unless there is persuasive *392reason to believe that such was the purpose of Congress” and “only upon a showing of ‘clear and convincing evidence’ of a contrary legislative intent should the courts restrict access to judicial review.” Abbott Laboratories v. Gardner, 387 U.S. 136, 140, 141, 87 S.Ct. 1507, 1510, 1511, 18 L.Ed.2d 681 (1967). See also Dunlop v. Bachowski, 421 U.S. 560, 568, 95 S.Ct. 1851, 1858, 44 L.Ed.2d 377 (1975). As the Supreme Court observed in Association of Data Processing Service Organizations, Inc. v. Camp, “There is no presumption against judicial review and in favor of administrative absolutism unless that scheme is fairly discernible in the statutory scheme.” 397 U.S. at 157, 90 S.Ct. at 832 (citation omitted). The evidence that the majority presents to meet the clear and convincing test fails to pass muster.
In essence, the majority’s argument is that since Congress provided an administrative remedy for providers, the nursing homes here, and did not include plaintiff suppliers, the latter are barred from seeking judicial review of agency action. This contention, however, loses its force in light of the type of dispute that the administrative process was intended to resolve and the nature of the plaintiffs’ cause of action here.
The administrative review provision cited by the majority, 42 U.S.C. § 1395oo (1976 & Supp. V 1981), is intended to permit appeals by the provider from determinations of the fiscal intermediary on usual claims for reimbursement. This limitation on the range of issues eligible for consideration by the Provider Reimbursement Review Board is evidenced by the statute’s delineation of when a provider may seek review under this provision. In general, resort to the Board is available if the provider is dissatisfied “as to the amount of total program reimbursement.” 42 U.S.C. § 1395oo(a)(1)(A).7 By implication, the administrative process may in some instances also consider provider challenges to the application of regulations. See id. § 1395oo(f)(1) (right of immediate judicial review if Board determines that it is without authority to decide question of law). After administrative exhaustion, judicial review is provided.
The purpose of the administrative mechanism is clear. It is intended to resolve routine reimbursement claims, and some legal questions in the same limited area. By channeling reimbursement claims in this fashion, the courts will not be overloaded with disputes that can be adequately handled in the administrative process.
If plaintiffs here were presenting only individual claims for reimbursement, the majority’s argument would have greater force. Plaintiffs, however, seek relief because of the agency’s failure to issue guidelines. It should be obvious that under section 1395oo, the Board has no authority to direct the agency to comply with regulations. The administrative proceeding is and must be confined to adjudication of claims for amounts presented. The Provider Reimbursement Review Board has no authority to direct that its parent agency take affirmative steps to comply with law. Cf. H.Rep. No. 1167, 96th Cong., 2d Sess., 394, reprinted in 1980 U.S.Code Cong. & Ad. News 5526, 5757 (“Board has no authority, for example, to rule on the legality of the Secretary’s regulations....”)
*393In United States v. Erika, 456 U.S. 201, 102 S.Ct. 1650, 72 L.Ed.2d 12 (1982), the Supreme Court concluded that Congress intended to preclude judicial review of a carrier’s determination of the amount of benefits awardable under Part B of the Medicare Program, a voluntary program supplementing the general coverage of Part A at issue here. The Court reached its result, however, after observing that the statute in question, 42 U.S.C. § 1395ff, expressly allowed for judicial review of administrative determinations in only two situations, not applicable in that case. 456 U.S. at 206-08, 102 S.Ct. at 1653-54. Congressional committee reports established a clear legislative intent to restrict review to those instances, id. at 208-211, 102 S.Ct. at 1654-1655, “in order to avoid overloading the courts with quite minor matters,” id. at 209, 102 S.Ct. at 1655. In the face of the “statute’s precisely drawn provisions” and the specifically expressed intent of Congress, the Supreme Court held that judicial review was barred.
In this case no such specific statutory exclusion applies to the issue of an agency’s failure to act, and no clear statement of legislative intent is present suggesting limited judicial review. Here there is only silence. That does not supply the “clear and convincing evidence” necessary to preclude review. An attempt to restrict judicial review in Medicare cases based on a rationale similar to that employed by the majority here was rejected by the court of appeals in National Association of Home Health Agencies v. Schweiker, 690 F.2d 932, 941-42 (D.C.Cir.1982), cert. denied, -U.S.-, 103 S.Ct. 1193, 75 L.Ed.2d 438 (1983). See also Starnes v. Schweiker, 715 F.2d 134, 138-39 (4th Cir.1983).
Additionally, it is significant that the cause of action plaintiffs assert is based on the defendants’ failure to enact guidelines, an issue of national import. This case is not simply one of the numerous individualized claims for reimbursement. Insofar as one of this suit’s basic complaints is that defendants failed to meet their obligations to enact guidelines, it is a “one shot” effort. Allowing this action to proceed on that ground would not raise the spectre of flooding the courts with small claims that are perhaps better suited, at least in the first instance, to the administrative process.
The circumspection with which the Supreme Court approached the issue in Erika and the basis for its holding are strong evidence that preclusion of judicial review by implication is not favored, even in the Medicare field. That hesitation should govern the question of standing presented here as well.
Because I find standing, I must meet the question of jurisdiction. Even though its decision on standing would be dispositive, the district court, in a pragmatic disposition of the issues, addressed the matter of jurisdiction under the federal question provision, 28 U.S.C. § 1331. The court held that jurisdiction on this basis was not available to plaintiffs. With that conclusion, I disagree.
In Colonial Penn Insurance Co. v. Heckler, 721 F.2d 431 (3d Cir.1983), this court was presented with a challenge to the availability of section 1331 jurisdiction similar to that urged here. Colonial Penn rejected the argument that 42 U.S.C. § 1395ii barred the exercise of section 1331 jurisdiction over certain statutory and constitutional claims. 721 F.2d at 436-439. We noted the disagreement among the circuits on this complex issue, but chose the approach most consistent with the general presumption in favor of judicial review of administrative decisions.
I need not repeat the Colonial Penn analysis here, other than to note that like the situation in that case, plaintiffs here are not primarily presenting a claim for reimbursement. Their complaint seeks prospective relief based on agency failure to enact regulations. In that setting, the argument for section 1331 jurisdiction is stronger than when a claim for payment is presented. See also Starnes v. Schweiker, 715 F.2d at 139-41; National Association of Home Health Agencies v. Schweiker, 690 F.2d at 936-42.
We intimated in Colonial Penn that mandamus jurisdiction might also be available. 721 F.2d at 437 n. 2,439; see also Kuehner v. *394Schweiker, 717 F.2d 813 (3d Cir.1983). Its application in the case at hand seems even stronger. Here, the regulations specifically require HCFA to issue guidelines, and it has failed to take that course.
I would vacate the judgment of the district court and remand for further proceedings.

. There are other allegations in the plaintiffs’ broad-based attack, but I believe that those cited present the plaintiffs’ best case and the one we should accept. See Warth v. Seldin, 422 U.S. at 501, 95 S.Ct. at 2206.

. The Provider Reimbursement Manual, Part I, § 1406.2, provides in part:
“Schedules of guidelines for ... therapy services and other services will be issued, as necessary, after consultation with the appropriate
therapy organization.”

. Title 42 C.F.R. § 405.432(d) provides:
“(d) Notice of guidelines to be imposed Pri- or to the beginning of a period to which a guideline will be applied, a notice will be published in the FEDERAL REGISTER establishing the guideline amounts to be applied to each geographical area by type of therapy.”

. There has been some speculation whether this test should be applied or poses any substantial barrier. See 4 K. Davis, ADMINISTRATIVE LAW TREATISE § 24:17 (2d ed 1983); 13 C. Wright, A. Miller, and E. Cooper, FEDERAL PRACTICE AND PROCEDURE § 3531 at 196 (1975). Nevertheless, the Supreme Court has continued to discuss it. See Valley Forge Christian College, 454 U.S. at 475, 102 S.Ct. at 760 (1982); Gladstone Realtors v. Village of Bellwood, 441 U.S. 91, 100 n. 6, 99 S.Ct. 1601, 1608 n. 6, 60 L.Ed.2d 66 (1979); see also Colonial Penn Insurance Co. v. Heckler, 721 F.2d 431, 434 (3d Cir.1983).

. To the extent defendants contend that plaintiffs are asserting rights of third parties, satisfaction of the zone of interest standard disposes of the argument. “[T]he concept of third-party standing ... creates a limited exception ... to the zone of interest requirement.” Bowman v. Wilson, 672 F.2d 1145, 1152 (3d Cir.1982). See also Warth v. Seldin, 422 U.S. at 501, 95 S.Ct. at 2206.

. Regulations of the Secretary also reflect this policy. See, e.g., 42 C.F.R. §§ 405.402(a), 405.-420(d), 405.451(b), 405.452(a), 405.2043(a) (1982).

. Under section 1395oo(a)(1), a provider may obtain a hearing with respect to a cost report if the provider
“(A) is dissatisfied with the final determination of the ... fiscal intermediary ... as 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 subchapter ...,
(B) has not received such final determination from such intermediary on a timely basis ..., or
(C) has not received such final determinations on a timely basis after filing a supplementary cost report.... ”
(Emphasis added.)
That the Provider Reimbursement Review Board is to focus only on reimbursement disputes is further exhibited by the composition of the Board. Section 1395oo(h) states that all “members of the Board shall be persons knowledgeable in the field of cost reimbursement, and at least one of them shall be a certified public accountant.” There is no legal training requirement.