19-3953-cv
`Avon Nursing & Rehabilitation v. Becerra
`
`
`
`
`
`
`United States Court of Appeals
`for the Second Circuit
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`August Term, 2020
`
`(Argued: September 2, 2020
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`
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`Decided: April 27, 2021)
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`
`
`
`
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`Docket No. 19-3953
`_____________________________________
`
`AVON NURSING AND REHABILITATION, BRIGHTONIAN NURSING AND
`REHABILITATION, WOODSIDE MANOR NURSING AND REHABILITATION,
`THE SHORE WINDS NURSING AND REHABILITATION, THE HURLBUT
`NURSING AND REHABILITATION, HORNELL GARDENS NURSING AND
`REHABILITATION, CONESUS LAKE NURSING AND REHABILITATION,
`NEWARK MANOR NURSING AND REHABILITATION, PENFIELD PLACE
`NURSING AND REHABILITATION, HAMILTON MANOR, LATTA ROAD
`NURSING HOME EAST, LATTA ROAD NURSING HOME WEST, SENECA
`NURSING AND REHABILITATION, ELDERWOOD AT AMHERST,
`ELDERWOOD OF LAKESIDE AT BROCKPORT, ELDERWOOD AT
`CHEEKTOWAGA, ELDERWOOD AT GRAND ISLAND, ELDERWOOD AT
`HAMBURG, ELDERWOOD OF HORNELL, ELDERWOOD OF UIHLEIN AT
`LAKE PLACID, ELDERWOOD AT LANCASTER, ELDERWOOD AT
`LIVERPOOL, ELDERWOOD AT LOCKPORT, ELDERWOOD AT NORTH
`CREEK, ELDERWOOD AT WAVERLY, ELDERWOOD AT WHEATFIELD,
`ELDERWOOD AT WILLIAMSVILLE, ELDERWOOD AT RIVERSIDE,
`ELDERWOOD OF SCALLOP SHELL AT WAKEFIELD, WESTCHESTER
`CENTER FOR REHABILITATION AND NURSING, HIGHFIELD GARDENS
`CARE CENTER OF GREAT NECK, SAN SIMEON BY THE SOUND, DRY
`HARBOR NURSING HOME AND REHABILITATION CENTER,
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`Plaintiffs-Appellants,
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`NEW YORK CENTER FOR REHABILITATION AND NURSING,
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`
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`Plaintiff,
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`v.
`
`XAVIER BECERRA, Secretary of the United States
`Department of Health and Human Services,
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`
`
`Defendant-Appellee.*
`_____________________________________
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`
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`KATZMANN, LOHIER, and PARK, Circuit Judges.
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`Before:
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`
`
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`Plaintiffs-Appellants are a group of nursing homes that participate in both
`the Medicare and Medicaid programs, making them “dually participating
`facilities.” They challenge the legality of a Final Rule issued by the U.S.
`Department of Health and Human Services that permits survey teams conducting
`certain inspections of nursing homes not to include a registered nurse. The United
`States District Court for the Southern District of New York (Swain, J.) dismissed
`Plaintiffs’ claims, brought under the Medicare and Medicaid Acts, for lack of
`subject-matter jurisdiction based on claim-channeling and jurisdiction-stripping
`provisions governing claims arising under the Medicare Act. We conclude,
`however, that the district court has jurisdiction under 28 U.S.C. § 1331 over
`Plaintiffs’ claim arising under the Medicaid Act, which does not incorporate the
`same claim-channeling and jurisdiction-stripping provisions as the Medicare Act.
`The Medicare Act’s review provisions do not preclude Plaintiffs from challenging
`the Final Rule in federal court because their challenge is independently rooted in
`the Medicaid Act. REVERSED and REMANDED for further proceedings.
`
`
`BRIAN MARC FELDMAN, Harter Secrest &
`Emery LLP, Rochester, NY, for Plaintiffs-
`Appellants.
`
`
`
`* Under Federal Rule of Appellate Procedure 43, Secretary Xavier Becerra is automatically
`substituted for former Secretary Alex Azar. The Clerk of Court is respectfully directed to amend
`the caption accordingly.
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`CHRISTOPHER CONNOLLY
`(Arastu K.
`Chaudhury, on the brief), for Audrey Strauss,
`United States Attorney for the Southern
`District of New York, New York, NY, for
`Defendant-Appellee.
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`James F. Segroves, Reed Smith LLP,
`Washington, DC, for Amicus Curiae American
`Health Care Association.
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`PARK, Circuit Judge:
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`Plaintiffs-Appellants are a group of nursing homes that participate in both
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`the Medicare and Medicaid programs, making them “dually participating
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`facilities.” They challenge the legality of a U.S. Department of Health and Human
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`Services (“HHS”) regulation that permits survey teams conducting certain
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`inspections of nursing homes not to include a registered nurse. See Survey Team
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`Composition, 82 Fed. Reg. 36,530, 36,623–25, 36,635–36 (Aug. 4, 2017) (the “Final
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`Rule”).
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`The United States District Court for the Southern District of New York
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`(Swain, J.) dismissed Plaintiffs’ claims for lack of subject-matter jurisdiction based
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`on claim-channeling and jurisdiction-stripping provisions governing claims
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`arising under the Medicare Act. We conclude, however, that the district court has
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`jurisdiction under 28 U.S.C. § 1331 over Plaintiffs’ claim arising under the
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`Medicaid Act, which does not incorporate the same claim-channeling and
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`jurisdiction-stripping provisions as the Medicare Act. The Medicare Act’s review
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`provisions do not preclude Plaintiffs from challenging the Final Rule in federal
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`court because their challenge is independently rooted in the Medicaid Act.
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`We reverse the judgment of the district court and remand for further
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`proceedings.
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`I. BACKGROUND
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`A.
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`Statutory Context and the Final Rule
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`Congress created the Medicare and Medicaid programs in 1965. See Social
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`Security Amendments of 1965, Pub. L. No. 89-97, §§ 102, 121, 79 Stat. 286, 291, 343.
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`Medicare, set forth in subchapter XVIII of the Social Security Act, is a federally
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`funded health-insurance program for the aged and disabled. 42 U.S.C. § 1395c.
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`Medicaid, set forth in subchapter XIX, is a cooperative federal-state medical
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`assistance program for individuals “whose income and resources are insufficient
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`to meet the costs of necessary medical services.” Id. §§ 1396-1, 1396a. The
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`programs cover certain stays in nursing facilities, and the vast majority of nursing
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`facilities participate in both Medicare and Medicaid, 1 making them “[d]ually
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`participating facilit[ies].” 42 C.F.R. § 488.301.
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`State health agencies are responsible for conducting periodic inspections, or
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`“surveys,” and “certifying . . . the compliance of” nursing facilities with the
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`requirements of the Medicare and Medicaid Acts. 42 U.S.C. §§ 1395i-3(g)(1)(A),
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`1396r(g)(1)(A).2 Both Acts direct States to “maintain procedures and adequate
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`staff to . . . investigate complaints of violations of requirements by” nursing
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`facilities. Id. §§ 1395i-3(g)(4), 1396r(g)(4). “A State may maintain and utilize a
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`specialized team (including an attorney, an auditor, and appropriate health care
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`professionals) for the purpose of identifying, surveying, gathering and preserving
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`evidence, and carrying out appropriate enforcement actions against substandard”
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`1 See Nat’l Ctr. for Health Stats., U.S. Dep’t of Health & Hum. Servs., Long-term Care
`Providers and Services Users
`in
`the United States, 2015–2016, at 9–10
`(2019),
`https://www.cdc.gov/nchs/data/series/sr_03/sr03_43-508.pdf (stating that 97.5% of nursing
`facilities are certified under Medicare and 95.2% are certified under Medicaid).
`2 The Medicare and Medicaid Acts identify three types of surveys conducted by State
`agencies: (1) “standard” surveys, which occur annually to evaluate the quality of care furnished
`by a facility, id. §§ 1395i-3(g)(2)(A), 1396r(g)(2)(A); (2) “extended” surveys, which are conducted
`after a standard survey reveals substandard care, id. §§ 1395i-3(g)(2)(B), 1396r(g)(2)(B); and
`(3) “special” surveys, which may include standard or “abbreviated standard” surveys,
`id. §§ 1395i-3(g)(2)(A)(II), 1396r(g)(2)(A)(II), and up until the Final Rule’s publication, see 82 Fed.
`Reg. at 36,624, included “survey[s] conducted for the purpose of investigating a complaint against
`a facility,” 59 Fed. Reg. 56,116, 56,158 (Nov. 10, 1994). The Secretary may also conduct “validation
`surveys” to evaluate the adequacy of a State agency’s survey results. 42 U.S.C. §§ 1395i-3(g)(3),
`1396r(g)(3).
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`nursing facilities. Id. §§ 1395i-3(g)(4), 1396r(g)(4). HHS has interpreted this
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`provision to authorize States to conduct “complaint surveys” based on
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`“substantial allegation[s] of noncompliance.” 42 C.F.R. § 488.30.
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`Both the Medicare and Medicaid Acts provide that surveys “shall be
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`conducted by a multidisciplinary team of professionals (including a registered
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`professional nurse).” 42 U.S.C. §§ 1395i-3(g)(2)(E)(i), 1396r(g)(2)(E)(i). In 2017,
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`HHS promulgated the Final Rule, which permits survey teams conducting
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`complaint surveys of nursing homes not to include a registered nurse. See Survey
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`Team Composition, 82 Fed. Reg. 36,530, 36,624–25, 36,635–36 (Aug. 4, 2017). The
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`Final Rule “clarif[ied]” the agency’s view that the inclusion of a registered nurse
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`on survey teams is not required for “those surveys conducted to investigate
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`complaints or to monitor compliance on-site under sections 1819(g)(4) [Medicare]
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`and 1919(g)(4) [Medicaid] of the [Social Security] Act.” 82 Fed. Reg. at 36,531. The
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`Final Rule thus amended HHS’s prior regulations to state that only “[s]urveys
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`under sections 1819(g)(2) [Medicare] and 1919(g)(2) [Medicaid] of the Social
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`Security Act [i.e., standard, extended, and special surveys] must be conducted by
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`an interdisciplinary team of professionals, which must include a registered nurse.”
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`Id. at 36,636 (codified at 42 C.F.R. § 488.314).
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`The Final Rule was promulgated following administrative proceedings
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`involving one of the Plaintiffs, Avon Nursing & Rehabilitation (“Avon”). See Avon
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`Nursing Home, DAB No. CR4670 (2016). In 2013, Avon reported to the New York
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`State Department of Health an incident involving a resident who had sustained a
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`burn after spilling soup on her lap. The State agency sent a survey team consisting
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`of two dieticians and no registered nurse to conduct an abbreviated standard
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`survey of the facility. The survey team found that Avon was not in substantial
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`compliance with Medicare participation requirements and imposed a penalty.
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`Avon challenged the noncompliance determination and penalty before an
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`administrative law judge (“ALJ”). As relevant here, the ALJ concluded that “the
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`state agency violated” the Medicare Act “by permitting a survey team with no
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`registered nurse participating to conduct the survey.” Id. at 16.
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`That decision was vacated by the Appellate Division of the Departmental
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`Appeals Board, see Avon Nursing Home, DAB No. 2830 (2017), and the parties
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`eventually settled. HHS proposed the Final Rule to address the regulatory
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`question presented by Avon’s administrative proceedings.
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`B. Medicare and Medicaid Review Procedures
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`The Medicare Act incorporates claim-channeling and jurisdiction-stripping
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`provisions from the Social Security Act. First, claim-channeling (section 405(g)):
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`The Medicare Act provides that a facility dissatisfied with a determination that it
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`“fails to comply substantially with the provisions of . . . [the Medicare Act] and the
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`regulations thereunder,” 42 U.S.C. § 1395cc(b)(2)(A), “shall be entitled to a
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`hearing” before an ALJ and “to judicial review of the Secretary’s final decision
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`after such hearing as is provided in section 405(g)” of the Social Security Act, id.
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`§ 1395cc(h)(1)(A). Section 405(g) states that a party, “after any final decision of the
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`[Secretary] made after a hearing[,] . . . may obtain a review of such decision . . . in
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`[federal] district court.” Id. § 405(g). The Medicare Act’s claim-channeling
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`provision thus requires a facility dissatisfied with a determination by the Secretary
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`to seek administrative review before going to court.
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` Id. § 1395cc(h)(1)
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`(incorporating section 405(g)).
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`Second, the Medicare Act incorporates the Social Security Act’s jurisdiction-
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`stripping provision (section 405(h)). This provision states that “[n]o action against
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`the United States, the [Secretary], or any officer or employee thereof shall be
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`brought under section 1331 [federal-question jurisdiction] or 1346 [jurisdiction
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`over the United States as a defendant] of Title 28 to recover on any claim arising
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`under [the Medicare Act].” Id. § 405(h). Section 405(h) is incorporated into the
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`Medicare Act through section 1395ii, which broadly applies the jurisdiction-
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`stripping provision to the entire Medicare Act. Id. § 1395ii. Together,
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`sections 405(g) and (h) “channel[] most, if not all, Medicare claims through th[e]
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`special review system” described in section 405(g). Shalala v. Ill. Council on Long
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`Term Care, Inc., 529 U.S. 1, 5 (2000).
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`Unlike the Medicare Act, the Medicaid Act does not incorporate
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`sections 405(g) or (h). Although the Medicaid Act incorporates certain provisions
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`of the Social Security Act relating to subpoenas, see 42 U.S.C. § 1396q
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`(incorporating sections 405(d) and (e)), it does not contain provisions mirroring
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`the Medicare Act’s incorporation of sections 405(g) and (h)—at least not for claims
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`brought by nursing facilities. Another section of the Medicaid Act does
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`incorporate the claim-channeling provision (section 405(g)), but its application is
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`limited to “intermediate care facilit[ies] for the mentally retarded”; it does not
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`apply to dually participating facilities. Id. § 1396i(b)(2).
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`C.
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`Procedural History
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`After publication of the Final Rule, Avon and over thirty other dually
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`participating facilities sued the government in the United States District Court for
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`the Southern District of New York seeking vacatur of the rule and declaratory and
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`injunctive relief. Plaintiffs’ complaint asserts a cause of action under the
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`Administrative Procedure Act (“APA”), challenging the Final Rule “as applied to
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`Medicaid” and “as applied to Medicare.” Compl. ¶¶ 46–47. Plaintiffs contend
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`that “subsections 1819(g) [Medicare] and 1919(g) [Medicaid] of the Social Security
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`Act require[] that all survey teams include registered nurses—including
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`abbreviated standard surveys . . . and surveys arising following complaints.” Id.
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`¶ 78. But the Final Rule “purports to permit such surveys to be conducted without
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`any registered nurse,” id., and according to Plaintiffs, the Final Rule thus
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`“contravenes the plain language of the statute and is therefore arbitrary,
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`capricious, and otherwise not in accordance with law,” id. ¶ 113.
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`The government responds that the statutory
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`language “does not
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`unambiguously establish the necessity of registered nurses on all survey teams.”
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`Appellee’s Br. at 33. Instead, it “most clearly supports the opposite interpretation:
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`that by cabining the registered nurse requirement to surveys conducted under
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`‘this subsection,’ § 1395i-3(g)(2)(E)(i) unambiguously applies that requirement
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`only to standard and extended surveys under (g)(2).” Id. Alternatively, the
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`government claims that the relevant language is ambiguous and its “rule
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`interpreting that ambiguity” is entitled to Chevron deference. Id. at 28–29.
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`The district court did not reach this issue, however, because it concluded
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`that it lacked subject-matter jurisdiction over Plaintiffs’ claims based on the
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`Medicare Act’s claim-channeling and jurisdiction-stripping provisions. The court
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`acknowledged that Ҥ 405(h) has not been incorporated by reference into the
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`Medicaid Act” but concluded that it would not “interpret[] this omission as
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`abrogating” the Medicare Act’s claim-channeling requirement “in Medicaid cases
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`involving dually-participating facilities.” Avon Nursing & Rehab. v. Azar, 410
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`F. Supp. 3d 648, 655 (S.D.N.Y. 2019) (internal quotation marks omitted). The court
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`explained that “the survey team composition requirements of the Final Rule
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`implicates the same statutory language under both Acts, thus, given ‘[t]he similar
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`structures of the two Acts, evasion concerns, and considerations of judicial
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`economy and orderliness,’ Plaintiffs cannot assert an independent basis of
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`jurisdiction under the Medicaid Act and must pursue their claim through
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`administrative channels in the first instance.” Id. (quoting Mich. Ass’n of Homes &
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`Servs. for Aging, Inc. v. Shalala, 127 F.3d 496, 503 (6th Cir. 1997)) (alteration in
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`original).
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`The district court dismissed the complaint, and this appeal followed.
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`II. DISCUSSION
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`The question presented is whether the claim-channeling and jurisdiction-
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`stripping provisions that govern claims under the Medicare Act apply to Plaintiffs’
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`claim challenging the Final Rule under the Medicaid Act. According to Plaintiffs,
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`the “Medicaid Act, unlike the Medicare Act, contains no provision stripping courts
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`of federal question jurisdiction,” so “general federal question jurisdiction under
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`[28 U.S.C.] § 1331 therefore supplies the avenue of judicial review.” Appellant’s
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`Br. at 43 (quoting Ill. Council on Long Term Care Inc. v. Shalala, 143 F.3d 1072, 1076
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`(7th Cir. 1998), rev’d on other grounds, 529 U.S. 1 (2000)). The government responds
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`that the “reading urged by plaintiffs would be inconsistent with the statutory and
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`regulatory scheme,” “runs afoul of every appellate court decision to consider the
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`issue,” and would enable Plaintiffs “to perform an end-run around § 405(h).”
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`Appellee’s Br. at 24–26.
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`We agree with Plaintiffs. The Medicaid Act, unlike the Medicare Act, does
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`not incorporate the claim-channeling and jurisdiction-stripping provisions of the
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`Social Security Act. Plaintiffs’ challenge to the Final Rule arises under both the
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`Medicare and Medicaid Acts, and their claim that the Final Rule contravenes the
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`Medicaid Act is not inextricably intertwined with a claim for benefits or a
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`compliance determination under the Medicare Act.
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`A.
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`Standard of Review
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`On appeal from a district court’s dismissal for lack of subject-matter
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`jurisdiction, “we review factual findings for clear error and legal conclusions de
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`novo.” Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000) (quoting Close v.
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`New York, 125 F.3d 31, 35 (2d Cir. 1997)).
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`“We begin with the strong presumption that Congress intends judicial
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`review of administrative action.” Bowen v. Mich. Acad. of Fam. Physicians, 476 U.S.
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`667, 670 (1986). “That presumption is rebuttable . . . . [b]ut the agency bears a
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`heavy burden in attempting to show that Congress prohibited all judicial review
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`of the agency’s compliance with a legislative mandate.” Mach Mining, LLC v.
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`EEOC, 575 U.S. 480, 486 (2015) (cleaned up); see also S. New Eng. Tel. Co. v. Glob.
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`NAPs Inc., 624 F.3d 123, 135 (2d Cir. 2010) (holding that “a clear statement from
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`Congress is required before we conclude that a statute withdraws the original
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`jurisdiction of the district courts”).
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`B.
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`Jurisdiction over Medicaid Act Claims
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`Unlike the Medicare Act, the Medicaid Act does not incorporate the Social
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`Security Act’s claim-channeling and jurisdiction-stripping provisions, 42 U.S.C.
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`§ 405(g) and (h). Federal courts thus have jurisdiction over claims arising under
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`the Medicaid Act pursuant to 28 U.S.C. § 1331. See, e.g., Springdale Convalescent Ctr.
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`v. Mathews, 545 F.2d 943, 949 (5th Cir. 1977) (“[B]y not incorporating 42 U.S.C.
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`§ 405(h) into the Medicaid Act,” Congress “refused to insulate the Secretary’s
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`exercise of statutory authority under that Act from judicial review.”), abrogated on
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`other grounds by Good Samaritan Hosp. v. Shalala, 508 U.S. 402 (1993).
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`The fact that the Medicare Act incorporates section 405(h) “reinforce[s] the
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`conclusion that [the Medicaid Act’s] silence on the subject leaves the jurisdictional
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`grant of § 1331 untouched,” “[f]or where otherwise applicable jurisdiction was
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`meant to be excluded, it was excluded expressly.” Verizon Md., Inc. v. Pub. Serv.
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`Comm’n of Md., 535 U.S. 635, 644 (2002). “Where Congress includes particular
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`language in one section of a statute but omits it in another,” we “presume[] that
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`Congress acts intentionally and purposely in the disparate inclusion or exclusion.”
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`United States ex rel. Hayes v. Allstate Ins. Co., 853 F.3d 80, 86 (2d Cir. 2017) (quoting
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`Kucana v. Holder, 558 U.S. 233, 249 (2010)).
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`As a matter of statutory interpretation, then, our subject-matter jurisdiction
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`over claims arising under the Medicaid Act alone is straightforward. See Marvel
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`Characters, Inc. v. Simon, 310 F.3d 280, 290 (2d Cir. 2002) (“When the language of a
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`statute is unambiguous, ‘judicial inquiry is complete.’” (quoting Conn. Nat’l Bank
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`v. Germain, 503 U.S. 249, 254 (1992))). The next question is whether this result is
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`different for dually participating facilities bringing claims under both the
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`Medicaid Act, which does not incorporate section 405(h), and the Medicare Act,
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`which does.
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`C.
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`Jurisdiction over Claims of Dually Participating Facilities Arising Under
`Both the Medicaid and Medicare Acts
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`The government argues that the claim-channeling and jurisdiction-stripping
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`provisions of the Medicare Act apply to Plaintiffs’ claims here, which arise under
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`both the Medicare and Medicaid Acts. See Appellee’s Br. at 25 (“[J]urisdiction over
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`Medicare and Medicaid claims brought by dually-participating facilities like
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`plaintiffs is coextensive.”). According to the government, “the Medicaid Act does
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`not provide an independent basis for jurisdiction for claims that are otherwise
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`non-justiciable under the Medicare Act.” Id. at 15.
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`We disagree. Although the Final Rule regulates survey teams under both
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`programs, that does not mean that claim-channeling under the Medicare Act also
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`divests the district court of jurisdiction over Plaintiffs’ challenge under the
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`Medicaid Act. Section 405(h) strips the district court of subject-matter jurisdiction
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`over Plaintiffs’ Medicaid Act claim only if it actually “aris[es] under” the Medicare
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`Act. 42 U.S.C. § 405(h). The Supreme Court has defined claims that “arise under”
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`the Medicare Act as those for which “‘both the standing and the substantive basis
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`for the presentation’ of the claims is the [Medicare] Act” and those that are
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`“inextricably intertwined with what . . . is in essence a claim for benefits.” Heckler
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`v. Ringer, 466 U.S. 602, 615, 624 (1984) (quoting Weinberger v. Salfi, 422 U.S. 749,
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`760–61 (1975)). Here, Plaintiffs’ challenge to the Final Rule arises under both Acts
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`but has an independent basis in the Medicaid Act and is not inextricably
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`intertwined with a claim for benefits under the Medicare Act. The district court
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`thus has jurisdiction over this action.
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`Plaintiffs’ Challenge Is Independently Rooted in the Medicaid Act
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`Plaintiffs argue that the Final Rule violates the APA because it is inconsistent
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`with the text of both the Medicare and Medicaid Acts. The government responds
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`that “Plaintiffs seek to challenge certain of HHS’s Medicare regulations, yet ask
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`the Court to find jurisdiction through the Medicaid Act.” Gov’t Mot. at 5, No. 18-
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`cv-2390, ECF No. 28. Although as a practical matter the claims are essentially
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`identical and the same survey teams enforce regulations under both programs, as
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`a legal matter, the two Acts are distinct, as are Plaintiffs’ bases for challenging the
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`Final Rule.
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`Plaintiffs’ challenge to the Final Rule as contrary to the text of the Medicare
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`and Medicaid Acts is independently rooted in both Acts. First, the Final Rule was
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`promulgated under the Social Security Act’s general grant of authority to the
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`Secretary to “make and publish such rules and regulations . . . as may be necessary
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`to the efficient administration of the functions with which [the Secretary] is
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`charged” under the Social Security Act, including under both “subchapter XVIII”
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`(Medicare) and “subchapter XIX” (Medicaid). 42 U.S.C. § 1302; see 82 Fed. Reg. at
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`36,635 (citing 42 U.S.C. § 1302). Second, the survey-team regulation amended by
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`the Final Rule is housed in Part 488 of the Code of Federal Regulations, see 82 Fed.
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`Reg. at 36,635 (codified at 42 C.F.R. § 488.314), which concerns the survey process
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`and is based on both sections 1819 (Medicare) and 1919 (Medicaid) of the Social
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`Security Act, see 42 C.F.R. § 488.2 (setting forth statutory bases). Finally, the
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`regulation applies, on its face, to “[s]urveys under sections 1819(g)(2) [Medicare]
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`and 1919(g)(2) [Medicaid] of the Social Security Act.” Id. § 488.314.
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`Moreover, Plaintiffs’ challenge is based on both “[t]he plain and
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`unambiguous meaning of . . . subsection 1819(g)” (Medicare) and “the plain and
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`unambiguous meaning of . . . subsection 1919(g)” (Medicaid). Compl. ¶¶ 66–67.
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`The complaint also includes two separate jurisdictional bases—one for “Plaintiffs’
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`challenge[] to the Final Rule as applied to Medicaid under the Medicaid Act
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`claim,” id. ¶ 46, and another for “Plaintiffs’ challenge[] to the Final Rule as applied
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`to Medicare,” id. ¶ 47.
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`To be sure, courts have, in some circumstances, found that a plaintiff’s
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`Medicaid Act claim in fact has its “standing and substantive basis” in the Medicare
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`Act. See, e.g., R.I. Hosp. v. Califano, 585 F.2d 1153, 1162 (1st Cir. 1978) (finding no
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`subject-matter jurisdiction over a Medicaid Act reimbursement claim where doing
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`so would put the court “in the peculiar posture of hearing a case that consists
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`entirely of a challenge to the limits promulgated under [the Medicare Act], when
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`[the court is] expressly barred by [that Act] from entertaining that challenge”). For
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`example, a court may find that the Medicare Act provides the basis for a nursing
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`facility’s challenge to the termination of its Medicaid provider agreement when
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`“the sole reason for termination of [the] Medicaid provider agreement was the
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`termination of [the] Medicare provider agreement for [the facility’s] failure to
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`comply with Medicare laws and regulations.” In re Bayou Shores SNF, 828 F.3d
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`1297, 1330 (11th Cir. 2016) (emphasis in original). But when “faced with a case like
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`[Plaintiffs’] in which the gravamen” of the claim “can be said to arise under the
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`Medicaid Act,” that Act is the basis for the claim. R.I. Hosp., 585 F.2d at 1162.
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`We thus agree with Plaintiffs that their Medicaid Act claim arises
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`independent of the Medicare Act.
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`Plaintiffs’ Medicaid Act Claim Is Not Inextricably Intertwined with a
`Medicare Act Claim for Benefits or Compliance Determination
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`The government suggests that Medicaid Act claims asserted by dually
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`participating facilities are subject to the claim-channeling and jurisdiction-
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`stripping provisions of the Medicare Act if they are inextricably intertwined with
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`a claim for benefits. See Appellee’s Br. at 25 (“[W]hen [the agency] imposes a
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`remedy on a dually-participating facility, the facility may only administratively
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`appeal that determination under the Medicare appeal procedures, which
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`culminate in judicial review under § 405(g).”). Plaintiffs’ claims here, however,
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`are not “inextricably intertwined with what . . . is in essence a claim for benefits.”
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`Heckler, 466 U.S. at 624.
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`To the contrary, Plaintiffs seek to bring a pre-enforcement rulemaking
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`challenge that does not involve any compliance determination that would trigger
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`section 405(g)’s claim-channeling function.
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` See 42 U.S.C. § 1395cc(h)(1)
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`(channeling claims brought by facilities dissatisfied with a “determination”);
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`42 C.F.R. § 498.3 (listing which agency decisions are considered “determinations”
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`subject to section 405(g)’s claim-channeling procedures).
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`As the district court noted, the Sixth Circuit has held that Medicaid Act
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`claims brought by dually participating facilities are channeled along with
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`Medicare Act claims when the Medicaid Act claims are “‘inextricably intertwined’
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`with [a] substantive challenge to” a noncompliance determination. Cathedral Rock
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`of N. Coll. Hill, Inc. v. Shalala, 223 F.3d 354, 363 (6th Cir. 2000). This is consistent
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`with the Supreme Court’s guidance that a claim should be channeled if it concerns
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`“the lawfulness of [a] regulation or statute upon which an agency determination
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`depends.” Shalala v. Ill. Council on Long Term Care, Inc., 529 U.S. 1, 23 (2000)
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`(emphasis added).3
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`3 In Shalala v. Illinois Council on Long Term Care, Inc., the Supreme Court channeled
`constitutional and statutory challenges to a Medicare regulation, reasoning that although “the
`agency might not provide a hearing for [those] particular contention[s],” the plaintiffs
`“remain[ed] free,” after following the Medicare Act’s administrative procedures, “to contest in
`court the lawfulness of any regulation or statute upon which an agency determination depends.”
`Id. (emphasis omitted). The same logic applies to Medicaid Act claims involving the lawfulness
`of a regulation upon which an agency determination depends; “[t]o conclude otherwise would
`allow any party to avoid the Medicare Act’s administrative procedures for reviewing the
`Secretary’s determinations simply by making purely legal constitutional or statutory arguments.”
`Cathedral Rock, 223 F.3d at 363. “Rather, a court must examine whether the allegedly collateral
`claim involves completely separate issues from the party’s claim that it is entitled to benefits or
`continued participation in the Medicare program or whether it is inextricably intertwined with
`its substantive claim to benefits or participation.” Id.
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`Here, no Plaintiff has raised a claim for benefits or is otherwise subject to a
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`noncompliance determination, and there is no suggestion that resolution of the
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`legal issue here will lead to a favorable decision on any claim for benefits or
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`challenge to a noncompliance determination. 4 Instead, Plaintiffs contend that
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`“[t]his pre-enforcement action is . . . critical to preventing HHS, and those acting
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`in concert with
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`it, from violating with
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`impunity the registered-nurse
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`requirement[]” of the Medicaid Act, because “such illegality is not redressable
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`through post-enforcement proceedings.” Compl. ¶¶ 109–10; see, e.g., Perry Cnty.
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`Nursing Ctr., DAB No. 2555, at 6 (2014) (legality of a survey team is not “reviewable
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`in [an] administrative appeal proceeding”), aff’d, Perry Cnty. Nursing Ctr. v. U.S.
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`Dep’t of Health & Human Servs., 603 F. App’x 265 (5th Cir. 2015).
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`We thus conclude that Plaintiffs’ challenge to the Final Rule is not
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`inextricably intertwined with a claim for benefits or a determination of
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`noncompliance by the government.5
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`4 Indeed, the recommendations of State agencies are not binding on HHS. For dually
`participating facilities, “[c]ertifications by the State survey agency represent recommendations,”
`42 C.F.R. § 488.12, and are “subject to the approval” of the Secretary, id. § 488.330(a)(1)(i).
`5 The government’s reliance on the Sixth Circuit’s decision in Michigan Association of
`Homes & Services for Aging, Inc. v. Shalala, 127 F.3d