Case 1:17-cv-02645-ABJ Document 62 Filed 03/30/21 Page 1 of 11
`
`Plaintiff,
`
`v.
`
`UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF COLUMBIA
` ____________________________________
`
`)
`AMERICAN CLINICAL
`)
`LABORATORY ASSOCIATION,
`)
`
`)
`
`)
`
`)
`
`)
`
`)
`XAVIER BECERRA,
`)
`Secretary, United States
`)
`Department of Health and
`)
`Human Services,
`)
`
`)
`Defendant.
`
`)
`____________________________________)
`
`
`
`
`
`Civil Action No. 17-2645 (ABJ)
`
`MEMORANDUM OPINION
`
`In this case, plaintiff American Clinical Laboratory Association challenged a regulation
`
`issued by the Secretary of the U.S. Department of Health and Human Services1 governing the
`
`reporting of the pricing information used to set Medicare reimbursement rates for clinical
`
`diagnostic laboratory services. Plaintiff is a trade association that represents clinical and anatomic
`
`pathology laboratories, Compl. [Dkt. # 1] ¶ 18, and the challenged regulation implements
`
`section 216 of the Protecting Access to Medicare Act of 2014 (“PAMA”), which established a new
`
`scheme for setting Medicare reimbursement rates for these laboratory tests.
`
`The parties have filed cross-motions for summary judgement and for the reasons set forth
`
`below, the Court will dismiss this case as moot.
`
`
`The newly appointed Secretary, Xavier Becerra, has been substituted as defendant pursuant
`1
`to Federal Rule of Civil Procedure 25(d).
`
`

`

`Case 1:17-cv-02645-ABJ Document 62 Filed 03/30/21 Page 2 of 11
`
`BACKGROUND
`
`Clinical diagnostic laboratory tests are tests performed on specimens of bodily fluids or
`
`tissue that are used to monitor, diagnose, and treat patients, and they range from routine blood
`
`tests to sophisticated genetic and molecular tests. Compl. ¶ 1. The federal Medicare program,
`
`which is administered by the Department of Health and Human Services (“HHS” or “the
`
`Department”) and pays for healthcare for elderly and disabled individuals, is the nation’s largest
`
`purchaser of clinical laboratory services. See 42 U.S.C. § 1395 et seq.; Am. Clinical Lab’y Ass’n.
`
`v. Azar, 931 F.3d 1195, 1199 (2019).
`
`How Medicare reimburses laboratories for clinical diagnostic laboratory tests depends on
`
`the setting in which they are provided. These services may be provided in hospitals on an inpatient
`
`or outpatient basis, in nursing facilities, or at a doctor’s office. Compl. ¶ 22. If a Medicare
`
`beneficiary receives these laboratory tests at a hospital, Medicare pays for all of the services the
`
`hospital provides to the beneficiary – medications, room and board, laboratory, and all other
`
`services – in one bundled payment pursuant to either the Inpatient Prospective Payment System
`
`(“IPPS”) or the Outpatient Prospective Payment System (“OPPS”). See 42 U.S.C. §§ 1395ww(d),
`
`1395l(t); Appalachian Reg’l Healthcare, Inc. v. Shalala, 131 F.3d 1050, 1051, 1053 (D.C. Cir.
`
`1997) (explaining that the IPPS provides a single payment “in full satisfaction of the bundle of
`
`covered items and services provided during a single inpatient hospital stay” based on the diagnosis
`
`related group (“DRG”) of the patient’s stay, rather than on the separate services a patient received
`
`from the hospital). In contrast, if a beneficiary receives laboratory tests outside of a hospital
`
`setting, such as at a doctor’s office or from an independent laboratory, Medicare pays the
`
`laboratory for each test performed based on the Clinical Laboratory Fee Schedule (“CLFS”) or the
`
`
`
`2
`
`

`

`Case 1:17-cv-02645-ABJ Document 62 Filed 03/30/21 Page 3 of 11
`
`Physician Fee Schedule (“PFS”). 2 See 81 Fed. Reg. 41,036, 41,038 (June 23, 2016); J.A.
`
`[Dkt. # 38].3
`
`Some hospital laboratories provide services not only to hospital patients, but also
`
`externally, to individuals who are not patients of the hospital. For example, the blood sample taken
`
`at a doctor’s office may be sent to a hospital laboratory for analysis. Such hospital laboratory
`
`services provided to non-hospital patients are referred to as “outreach services,” and Medicare
`
`pays for them as it would for an independent laboratory: on a fee-for-service basis based on the
`
`CLFS or the PFS. Id., citing 42 U.S.C. §§ 1832, 1833(a), (b), (h), 1861.
`
`I.
`
`Protecting Access to Medicare Act of 2014
`
`In 2014, Congress passed the Protecting Access to Medicare Act of 2014, Pub. L.
`
`No. 113-93, 128 Stat. 1040, to overhaul Medicare payments for laboratory services. Before
`
`PAMA, Medicare’s fee schedule for clinical laboratory services was set by the Secretary based on
`
`a “regional, statewide, or carrier service area basis,” with adjustments for differences in wages.
`
`42 U.S.C. § 1395l(h)(1)(B)–(C), (h)(4)(A). In 2013, the Department’s Office of Inspector General
`
`found that Medicare was paying eighteen to thirty percent more for laboratory tests than private
`
`insurers were paying. Am. Clinical Lab’y Ass’n, 931 F.3d at 1199. Congress passed PAMA in an
`
`effort to make Medicare’s reimbursement rates comparable to those paid by private insurers for
`
`the same laboratory tests. Id.; see also 160 Cong. Rec. S2860 (May 8, 2014) (stating Congress
`
`sought to “ensure that Medicare rates reflect true market rates for laboratory services”).
`
`
`Generally speaking, tests that require both a professional and technical component to
`2
`provide the test results are paid under the PFS, and those that require no interpretation by a
`physician or professional are paid under the CLFS. See 42 C.F.R. § 414.40(b)(2).
`
`Citations to the Joint Appendix refer to the Bates numbers appearing at the bottom right of
`3
`each page of the appendix.
`
`
`
`3
`
`

`

`Case 1:17-cv-02645-ABJ Document 62 Filed 03/30/21 Page 4 of 11
`
`PAMA established a market-based approach for setting payment rates based on the
`
`amounts private payors pay for these tests. See 42 U.S.C. § 1395m-1. Section 216 of PAMA
`
`requires “applicable laborator[ies]” to report to the Department every three years the amounts and
`
`volume of payments they receive from private insurers, 42 U.S.C. § 1395m-1(a),4 exempting
`
`certain “low volume or low expenditure” laboratories from the requirement. Id. § 1395m-1(a)(2).
`
`It requires the Secretary to compile the reported data to calculate Medicare’s reimbursement rates
`
`for laboratory tests. Id. § 1395m-1(b) (requiring the Secretary to calculate a weighted median for
`
`each laboratory test “by arraying the distribution of all payment rates reported for the period for
`
`each test weighted by volume for each payor and each laboratory”).
`
`PAMA defines “applicable laboratory” to mean “a laboratory that, with respect to its
`
`revenues under this subchapter, a majority of such revenues are from this section, section 1395l(h)
`
`of this title, or section 1395w–4 of this title.” Id. § 1395m-1(a)(2). In other words, a laboratory
`
`must receive the majority of its Medicare revenues from the CLFS or the PFS – the payment
`
`mechanisms covering non-hospital settings – rather than the inpatient or outpatient payment
`
`mechanisms, to be obligated to report its private payor data to the Secretary. Id.
`
`II.
`
`Rulemaking and Litigation History
`
`As required by the statute, the Secretary promulgated a rule in June of 2016 to implement
`
`PAMA’s provisions, including its data collection requirements. See 42 U.S.C. § 1395m-1(a)(12);
`
`81 Fed. Reg. 41,036 (June 23, 2016); J.A. at 0001, 0004–17 (“2016 Rule”). The 2016 Rule
`
`included its own definition for “applicable laboratory”: a laboratory that “bills Medicare Part B
`
`under its own NPI.” 81 Fed. Reg. at 41,047. The NPI, or National Provider Number, is a unique
`
`
`In the case of advanced diagnostic laboratory tests, laboratories must report this
`4
`information annually. 42 U.S.C. § 1395m-1(a).
`
`
`
`4
`
`

`

`Case 1:17-cv-02645-ABJ Document 62 Filed 03/30/21 Page 5 of 11
`
`billing number assigned by the Department to health care providers to use when submitting claims
`
`for Medicare reimbursement. 81 Fed. Reg. at 41,042, citing 45 C.F.R. § 162.406 (2004); 80 Fed.
`
`Reg. 59,386, 59,392 (Oct. 1, 2015); J.A. at 00075.
`
`Plaintiff filed this lawsuit on December 11, 2017, challenging the Secretary’s regulatory
`
`definition of “applicable laboratory.” Compl. [Dkt. #1] ¶¶ 3–4. According to plaintiff, defining
`
`the term to mean only laboratories that bill Medicare under their own NPIs excluded significant
`
`numbers of hospital laboratories that provide outreach services from the Secretary’s data
`
`collection; this is because most hospital laboratories bill under their hospitals’ NPIs, rather than
`
`their own. See id. ¶ 44 (alleging the Secretary improperly “treated the entire hospital as a
`
`laboratory for purposes of evaluating whether the statutory revenue requirements are satisfied” and
`
`“effectively carved out hospital laboratories from the statutory requirements,” ensuring the
`
`reporting obligations would be imposed primarily on only independent and physician-office
`
`laboratories). At the end of the day, less than one percent “of the total number of laboratories that
`
`currently serve Medicare beneficiaries” reported data to the Secretary in 2016. Id. ¶ 7.
`
`The Court did not reach the merits of plaintiff’s claim that this narrowing of the definition
`
`was arbitrary and capricious. A motion to dismiss was filed, and in light of a provision Congress
`
`included in PAMA, the Court concluded that judicial review was precluded, and it dismissed the
`
`case for lack of subject matter jurisdiction. Order (Sept. 21, 2018) [Dkt. # 46]; Mem. Op.
`
`[Dkt. # 47]. Plaintiff appealed the ruling. Notice of Appeal [Dkt. # 48].
`
`Two months later, on November 23, 2018, the Secretary promulgated another rule that
`
`amended the definition of “applicable laboratory” to address the problem plaintiff had identified.
`
`83 Fed. Reg. 59,452 (Nov. 23, 2018) (“2018 Rule”). The 2018 Rule revised the definition to add
`
`“hospital outreach laboratories” that “bill[ ] Medicare Part B on the CMS 1450 under bill type
`
`14x,” a claim form used by hospitals for non-patient laboratory services. Id. at 60,074; see also
`5
`
`
`
`

`

`Case 1:17-cv-02645-ABJ Document 62 Filed 03/30/21 Page 6 of 11
`
`Am. Clinical Lab. Ass’n, 931 F.3d at 1202 (explaining that “the CMS-1450 14x TOB” is “a billing
`
`form used only by hospital outreach laboratories”).
`
`On July 30, 2019, the D.C. Circuit overturned the dismissal of the case, remanding the
`
`matter to the Court “to address in the first instance the merits of petitioner’s arbitrary-and-
`
`capricious challenge.” Am. Clinical Lab’y Ass’n, 931 F.3d at 1209.
`
`After remand, plaintiff filed a motion for summary judgement on October 14, 2019. Pl.’s
`
`Mot. for Summ. J. [Dkt. # 53] (“Pl.’s Mot.”). Defendant filed a cross-motion for summary
`
`judgment and opposition on November 22, 2019. Def.’s Cross-Mot. and Opp. to Pl.’s Mot. for
`
`Summ. J. [Dkt. # 54]; Def.’s Mem. in Supp. [Dkt. # 54-1] (“Def.’s Mem.”). Plaintiff filed its
`
`cross-opposition and reply brief on December 13, 2019, Pl.’s Reply in Supp. of Pl.’s Mot. and
`
`Opp. to Def.’s Cross-Mot. [Dkt. # 56] (“Pl.’s Opp. & Reply”), and defendant filed his reply brief
`
`on January 24, 2020. Def.’s Reply in Supp. of Cross-Mot. for Summ. J. [Dkt. # 59].
`
`I.
`
`Subject Matter Jurisdiction
`
`STANDARD OF REVIEW
`
`Federal courts are courts of limited jurisdiction and the law presumes that “a cause lies
`
`outside this limited jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377
`
`(1994); see also Gen. Motors Corp. v. EPA, 363 F.3d 442, 448 (D.C. Cir. 2004) (“As a court of
`
`limited jurisdiction, we begin, and end, with an examination of our jurisdiction.”). “[B]ecause
`
`subject-matter jurisdiction is ‘an Art[icle] III as well as a statutory requirement . . . no action of
`
`the parties can confer subject-matter jurisdiction upon a federal court.’” Akinseye v. District of
`
`Columbia, 339 F.3d 970, 971 (D.C. Cir. 2003), quoting Ins. Corp. of Ir., Ltd. v. Compagnie des
`
`Bauxites de Guinee, 456 U.S. 694, 702 (1982). “Federal courts cannot address the merits of a case
`
`until jurisdiction – the power to decide – is established.” Hancock v. Urban Outfitters, Inc.,
`
`830 F.3d 511, 513 (D.C. Cir. 2016).
`
`
`
`6
`
`

`

`Case 1:17-cv-02645-ABJ Document 62 Filed 03/30/21 Page 7 of 11
`
`II.
`
`Summary Judgment
`
`Summary judgment is appropriate “if the movant shows that there is no genuine dispute as
`
`to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
`
`56(a). The party seeking summary judgment “bears the initial responsibility of informing the
`
`district court of the basis for its motion, and identifying those portions of the pleadings,
`
`depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,
`
`which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v.
`
`Catrett, 477 U.S. 317, 323 (1986) (internal quotation marks omitted). To defeat summary
`
`judgment, the non-moving party must “designate specific facts showing that there is a genuine
`
`issue for trial.” Id. at 324 (internal quotation marks omitted).
`
`The mere existence of a factual dispute is insufficient to preclude summary judgment.
`
`Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986). A dispute is “genuine” only if a
`
`reasonable fact-finder could find for the non-moving party; a fact is “material” only if it is capable
`
`of affecting the outcome of the litigation. Id. at 248; see also Laningham v. U.S. Navy, 813 F.2d
`
`1236, 1241 (D.C. Cir. 1987). In assessing a party’s motion, the court must “view the facts and
`
`draw reasonable inferences ‘in the light most favorable to the party opposing the summary
`
`judgment motion.’” Scott v. Harris, 550 U.S. 372, 378 (2007) (alterations omitted), quoting United
`
`States v. Diebold, Inc., 369 U.S. 654, 655 (1962) (per curiam).
`
`“The rule governing cross-motions for summary judgment . . . is that neither party waives
`
`the right to a full trial on the merits by filing its own motion; each side concedes that no material
`
`facts are at issue only for the purposes of its own motion.” Sherwood v. Wash. Post, 871 F.2d
`
`1144, 1147 n.4 (D.C. Cir. 1989) (alteration in original), quoting McKenzie v. Sawyer, 684 F.2d 62,
`
`68 n.3 (D.C. Cir. 1982). In assessing each party’s motion, “[a]ll underlying facts and inferences
`
`
`
`7
`
`

`

`Case 1:17-cv-02645-ABJ Document 62 Filed 03/30/21 Page 8 of 11
`
`are analyzed in the light most favorable to the non-moving party.” N.S. ex rel. Stein v. District of
`
`Columbia, 709 F. Supp. 2d 57, 65 (D.D.C. 2010), citing Anderson, 477 U.S. at 247.
`
`ANALYSIS
`
`Plaintiff challenged the definition of “applicable laboratory” in the 2016 Rule, asserting
`
`that it was detrimental to plaintiff’s members because it excluded many hospital laboratories from
`
`reporting their pricing data to the Department, and that therefore, its promulgation violated the
`
`Administrative Procedure Act (“APA”) and PAMA. See Compl.; Pl.’s Mot. In addition to
`
`defending the 2016 Rule on the merits, defendant raises several jurisdictional and procedural
`
`challenges to the complaint, arguing that plaintiff lacks standing, that plaintiff failed to present its
`
`claims and exhaust its remedies with the agency, and that the matter is moot because of the 2018
`
`Rule. See Def.’s Mem. Because the absence of a live controversy divests this Court of jurisdiction
`
`to decide the lawsuit even if plaintiff’s APA claim has force, the Court must stop here.
`
`A case becomes moot “when the issues presented are no longer live or the parties lack a
`
`legally cognizable interest in the outcome.” Larsen v. U.S. Navy, 525 F.3d 1, 3–4 (D.C. Cir. 2008),
`
`quoting County of Los Angeles v. Davis, 440 U.S. 625, 631 (1979); see also Honig v. Doe,
`
`484 U.S. 305, 317 (1988) (explaining that Article III, Section 2 of the Constitution permits federal
`
`courts to adjudicate only “actual, ongoing controversies”). If events outrun the controversy such
`
`that the Court can grant no meaningful relief, the case must be dismissed as moot. See,
`
`e.g., Church of Scientology of Cal. v. United States, 506 U.S. 9, 12 (1992); McBryde v. Comm. to
`
`Review, 264 F.3d 52, 55 (D.C. Cir. 2001). “Even where litigation poses a live controversy when
`
`filed, the [mootness] doctrine requires a federal court to refrain from deciding it if ‘events have so
`
`transpired that [a judicial] decision will neither presently affect the parties’ rights nor have a more-
`
`than-speculative chance of affecting them in the future.’” Clarke v. United States, 915 F.2d 699,
`
`701 (D.C. Cir. 1990), quoting Transwestern Pipeline Co. v. FERC, 897 F.2d 570, 575 (D.C. Cir.
`
`
`
`8
`
`

`

`Case 1:17-cv-02645-ABJ Document 62 Filed 03/30/21 Page 9 of 11
`
`1990); see also Spencer v. Kemna, 523 U.S. 1, 18 (1998) (noting that a case is moot when “there
`
`is nothing for [the court] to remedy, even if [it] were disposed to do so”).
`
`“A plaintiff always bears the ultimate burden of showing . . . that a court has jurisdiction
`
`over his claims.” Han Jeong Seon v. Lynch, 223 F. Supp. 3d 95, 103 (D.D.C. 2016), citing Delta
`
`Air Lines v. Exp.-Imp. Bank of United States, 85 F. Supp. 3d 250, 259 (D.D.C. 2015); see also
`
`Muhammad v. FDIC, 751 F. Supp. 2d 114, 118 (D.D.C. 2010) (“Plaintiff [must establish] by a
`
`preponderance of the evidence that the Court possesses jurisdiction.”). But where mootness is at
`
`issue, “[t]he initial ‘heavy burden’ of establishing mootness lies with the party asserting a case
`
`is moot, [and] the opposing party bears the burden of showing an exception applies.” Han, 223 F.
`
`Supp. 3d at 103 (second alteration added), quoting Honeywell Int’l, Inc. v. Nuclear
`
`Regul. Comm’n, 628 F.3d 568, 576 (D.C. Cir. 2010). “[M]ootness, however it may have come
`
`about, simply deprives [the court] of [its] power to act.” Id., quoting Spencer, 523 U.S. at 18 (first
`
`alteration added).
`
`Defendant argues that plaintiff’s claims concerning the 2016 Rule are moot because the
`
`Secretary revised the definition of “applicable laboratory” in the 2018 Rule, and the challenged
`
`definition is no longer applicable. Def.’s Mem. at 22–24. This lawsuit does not challenge the new
`
`rule, so the only remedy that would be available to plaintiff here would be retrospective relief for
`
`any past payments that were calculated using the only 2016 Rule – that is, payments calculated for
`
`2018–20 based on data collected data in early 2017 using the challenged definition. Id. at 23. At
`
`first blush, that would appear to create a live controversy. But defendant argues that the Court
`
`cannot provide plaintiff or its members any relief as to the payment calculations for 2018–20
`
`because the statute bars judicial review of “the establishment of payment amounts” under PAMA.
`
`Id. at 23–24, citing 42 U.S.C. § 1395m-1(h).
`
`
`
`9
`
`

`

`Case 1:17-cv-02645-ABJ Document 62 Filed 03/30/21 Page 10 of 11
`
`Plaintiff, on the other hand, emphasizes that its complaint does not directly challenge the
`
`determination of the 2018–20 payment amounts. Pl.’s Opp. & Reply at 17–18. It challenges the
`
`“unlawful reporting rule” used to determine which laboratories would report data to the Secretary.
`
`Id. at 17. Plaintiff emphasizes that the D.C. Circuit recognized the “bifurcated structure” of
`
`PAMA, which divided the statute into the data collection process and the establishment of payment
`
`amounts. Am. Clinical Lab’y Ass’n, 931 F.3d at 1207. Although the results of the data collection
`
`process are used to establish Medicare payment amounts, the data collection provision is distinct
`
`from its rate-estimation provisions. Id. Plaintiff contends that its inability to challenge the
`
`reimbursement rates themselves does not prevent the Court from requiring the Secretary to comply
`
`with the data collection provision, even if this “necessarily result[s] in a change to the rates.” Pl.’s
`
`Opp. & Reply at 17.
`
`Plaintiff asserts if the Court were to rule in its favor, nothing in the statute would prevent
`
`the Court from ordering the Secretary to collect 2017 data using a regulation that complies with
`
`PAMA and then recalculate payment rates for 2018–20. Pl.’s Opp. & Reply at 17 (arguing “those
`
`rates can change without any challenge to their ‘establishment’”) (emphasis in original). New data
`
`could be collected. But PAMA provides that “payment amounts under this section shall not be
`
`subject to any adjustment (including any geographic adjustment, budget neutrality adjustment,
`
`annual update, or other adjustment).” 42 U.S.C. § 1395m-1(b)(4)(B) (emphasis added). So even
`
`if the Court were to rule in plaintiff’s favor on the merits, it could not order the agency to revise
`
`any payment amounts in the fee schedules used to determine 2018–20 payments or any particular
`
`payments to plaintiff’s members. See Keli v. Rice, 571 F. Supp. 2d 127, 132 (D.D.C. 2008) (ruling
`
`that case was moot where “the language of the statute unequivocally bars the Court from granting
`
`the relief sought”).
`
`
`
`10
`
`

`

`Case 1:17-cv-02645-ABJ Document 62 Filed 03/30/21 Page 11 of 11
`
` Further, the Court could not vacate the challenged definition and order the Secretary to
`
`bring his regulations into compliance with the Medicare statute since the definition is no longer in
`
`effect. In other words, any decision “will neither presently affect the parties’ rights nor have a
`
`more-than-speculative chance of affecting them in the future.” Clarke, 915 F.2d at 701 (internal
`
`quotation marks omitted). For these reasons, the Court finds that this dispute is moot.
`
`For the reasons set for above, the Court will dismiss the case for lack of subject matter
`
`CONCLUSION
`
`jurisdiction.
`
`
`
`
`
`
`DATE: March 30, 2021
`
`AMY BERMAN JACKSON
`United States District Judge
`
`
`
`11
`
`