DeMOSS, Circuit Judge:
This appeal involves a challenge to the 2011 Medicare payment rate set by the Secretary of Health and Human Services (the "Secretary") for partial hospitalization services. Paladin Community Mental Health Center and Sherry Osteen (collectively, "Paladin") claim the Secretary's use of both hospital-based and community mental health center cost data in establishing and adjusting the 2011 relative payment weights and ultimate payment rate was in excess of her statutory authority. Without first presenting an administrative claim, Paladin filed suit in district court, alleging jurisdiction was proper under 28 U.S.C. § 1331. After a hearing, the district court concluded that Congress expressly precluded judicial review of the Secretary's payment rate decisions and dismissed the case for lack of subject matter jurisdiction. We affirm.
The Medicare Act establishes a health insurance program for elderly and disabled persons. See 42 U.S.C. § 1395 et seq. Medicare Part A provides coverage for inpatient hospital services and institutional care, see §§ 1395c to 1395i-5, while Medicare Part B provides supplemental coverage for physician and outpatient department services. §§ 1395j to 1395w-4. Both hospitals and community mental health centers are eligible to receive Medicare Part B payments for certain qualifying outpatient services, including partial hospitalization program services. See §§ 1395x(s), 1395x(ff)(1)-(3). Paladin is a Medicare-certified community mental health center which provides partial hospitalization services to patients in and around Austin, Texas, and derives over 80% of its revenue from Medicare payments.
For years Medicare paid suppliers of partial hospitalization services based on their specific costs. However, in 1997, in an attempt to better control costs and encourage more efficient delivery of care, Congress directed the Secretary to establish an outpatient prospective payment
In 2000, the Secretary established the outpatient prospective payment system using a "per diem" methodology and then calculated the initial relative payment weights and ultimate payment rate for partial hospitalization services. Thereafter, the Secretary was instructed to
§ 1395l(t)(9)(A).
Since 2000, the Secretary has used the annual review and adjustment process to help her refine the payment system. This process includes analyzing cost data provided by both hospitals and community mental health centers. In 2000 through 2002, 2009, and 2010, the Secretary used only hospital-based cost data to compute the relative payment weights and ultimate payment rate for covered services for all partial hospitalization service providers. However, in response to comments from community mental health centers, from 2003 through 2008 the Secretary used both hospital-based and community mental health center cost data in computing relative payment weights and the ultimate payment rate for all providers.
In July 2010, the Secretary sought comment on a proposed rule establishing the 2011 payment rate for partial hospitalization services. The proposed rule provided that the Secretary would compute separate partial hospitalization costs, relative payment weights, and ultimate payment rates for hospitals and community mental health centers based on their own respective cost data (i.e., hospital rates would reflect only their own data and community mental health center rates would reflect only their own data). The Secretary's reasoning for this change was based on "the different cost structures of [community mental health centers] and hospital-based [partial hospitalization programs]." See 75 Fed. Reg. 71992 (November 24, 2010) (indicating
Ultimately, in an attempt to prevent potential community mental health center closures caused by lower payment rates, the Secretary implemented a two-year transition into using only community mental health center cost data to calculate payment rates for community mental health centers. Id. at 71,993. The final rule for 2011, promulgated in November 2010, used (i) only hospital-based cost data to calculate the relative payment weights for hospital-based partial hospitalization services, and (ii) both hospital-based and community mental health center cost data to calculate the relative payment weights for community mental health center partial hospitalization services. Id.
In December 2010, prior to implementation of the final rule and without first pursuing an administrative remedy, Paladin filed a complaint seeking injunctive relief and a declaration that the Secretary's action was unlawful. Paladin argued that the Secretary "circumvented the clear instructions of Congress regarding utilization of hospital cost data as the sole metric for developing relative payment weights for partial hospitalization services for [community mental health centers]." The Secretary moved to dismiss for lack of subject matter jurisdiction and, alternatively, for failure to exhaust administrative remedies. After a hearing, the district court dismissed the complaint for lack of subject matter jurisdiction, explaining that "sections 1395l(t)(12)(A) and (C) expressly preclude review of the relative payment-weight determination, and ... the Secretary has acted within her statutory authority to establish payment rates for [outpatient department] services pursuant to section 1395l(t)(2)(C)."
Paladin timely appealed.
Paladin raises several issues on appeal. The first is whether, pursuant to § 1395l(t)(12), Congress precluded from judicial review Paladin's challenge to the Secretary's 2011 payment rate determinations for partial hospitalization services. The second is, assuming Congress did not preclude judicial review, whether Paladin must exhaust its administrative remedies prior to filing suit in district court. And the third is, assuming the district court has jurisdiction and administrative exhaustion is not required, whether the Secretary is permitted to use community mental health center cost data in establishing and adjusting the 2011 payment rates for community mental health centers. Because we affirm the district court's determination that it lacked subject matter jurisdiction, we need not reach the second and third issues.
The Secretary determined that she would calculate relative payment weights for partial hospitalization services provided by community mental health centers in 2011 using both hospital-based and community mental health center cost data.
There is a "strong presumption that Congress intends judicial review of administrative action." Bowen v. Mich. Acad. of Family Physicians, 476 U.S. 667, 670, 106 S.Ct. 2133, 90 L.Ed.2d 623 (1986). However,
Id. at 672-73, 106 S.Ct. 2133 (quoting Block v. Cmty. Nutrition Inst., 467 U.S. 340, 349, 351, 104 S.Ct. 2450, 81 L.Ed.2d 270 (1984)).
Here, the Medicare Act's legislative scheme makes clear Congress's specific intent to preclude certain payment rate determinations from judicial review:
§ 1395l(t)(12); see Am. Soc'y of Cataract & Refractive Surgery v. Thompson, 279 F.3d 447, 452 (7th Cir.2002) (finding no judicial review of "relative values and relative value units" under Medicare Part B); Painter v. Shalala, 97 F.3d 1351, 1356 (10th Cir.1996) (finding no judicial review of "conversion factor" under Medicare Part B). The plain text of § 1395l(t)(12) makes Congress's intent "fairly discernible" and thus overcomes the general presumption favoring judicial review. Mich. Acad., 476 U.S. at 673, 106 S.Ct. 2133.
Faced with clear congressional intent to preclude from judicial review the Secretary's establishment of, and annual adjustments to, relative payment weights for partial hospitalization service payments, Paladin attempts to draw a distinction between relative payment weights and the "national rate" (a non-statutory term Paladin uses apparently meaning the ultimate payment rate — the per diem rate — for covered services). This attempt fails. As the
Moreover, the ultimate payment rate in any given year is based upon the aggregate adjustments made to the relative payment weights by the Secretary since she established the prospective payment system in 2000 (i.e., ten years of adjustments from 2001 to 2011). Not only did Congress expressly shield from judicial review the Secretary's initial establishment of relative payment weights in 2000, it also expressly shielded from judicial review her annual adjustments made to the relative payment weights which are supposed to "take into account changes in medical practice, changes in technology, the addition of new services, new cost data, and other relevant information and factors." See § 1395l(t)(9), (t)(12)(A), (C). Straightforward application of the statutory text shows that Paladin's challenge falls within the class of activities Congress specifically precluded from judicial review.
Paladin also argues that the district court should have exercised jurisdiction pursuant to Leedom v. Kyne, 358 U.S. 184, 188-89, 79 S.Ct. 180, 3 L.Ed.2d 210 (1958), even if Congress expressly precluded the Secretary's determinations from judicial review. In Kyne, the Supreme Court recognized a narrow exception to a congressional bar on judicial review for claims that an agency exceeded the scope of its authority or violated a clear statutory mandate. Id.
Paladin's reliance on Kyne is misplaced. While Kyne does permit a district court "to conduct a cursory review of the merits of the case to determine whether the Secretary violated a clear statutory mandate," Hanauer v. Reich, 82 F.3d 1304, 1309 (4th Cir.1996) (internal quotation omitted), our cursory review reveals that the Secretary was acting within her delegated authority. When the Secretary made her 2011 payment rate determinations she was acting pursuant to her authority both to (i) "establish relative payment weights for covered [outpatient department] services ... based on median (or, at the election of the Secretary, mean) hospital costs," § 1395l(t)(2)(C), and (ii) "review not less often than annually and revise the groups, the relative payment weights, and the wage and other adjustments ... to take into account changes in medical practice, changes in technology, the addition of new services, new cost data, and other relevant information and factors." § 1395l(t)(9)(A).
Paladin's argument is at best a dispute over the Secretary's interpretation of the "based on ... hospital costs" language found in § 1395l(t)(2)(C), which is not the "extraordinary" situation that falls within the very limited Kyne exception. Kirby Corp. v. Pena, 109 F.3d 258, 269 (5th Cir.
For the foregoing reasons, we find that Congress expressly precluded judicial review of the Secretary's determinations and that her actions are not a facial violation of a clear statutory mandate. Accordingly, the district court's dismissal for lack of subject matter jurisdiction is AFFIRMED.