No. 98-1109

In the Supreme Court of the United States

DONNA E. SHALALA, SECRETARY OF HEALTH AND
HUMAN SERVICES, ET AL., PETITIONERS

v.

ILLINOIS COUNCIL ON LONG TERM CARE, INC.

ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT

REPLY BRIEF FOR THE PETITIONERS


SETH P. WAXMAN
Solicitor General
Counsel of Record
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217



In the Supreme Court of the United States

No. 98-1109
DONNA E. SHALALA, SECRETARY OF HEALTH AND
HUMAN SERVICES, ET AL., PETITIONERS
v.
ILLINOIS COUNCIL ON LONG TERM CARE, INC.

ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT


REPLY BRIEF FOR THE PETITIONERS


This case concerns the timing-not the availability-of judicial review. Respondentdoes not dispute that the Medicare Act provides comprehensive mechanismsfor administrative and judicial review. Nor does respondent deny that oneof those mechanisms entitles any nursing home that is "dissatisfiedwith a determination * * * that it is not a provider of services,"or that it does not "substantially comply" with the Secretary'shealth, safety and quality-of-care regulations, to a hearing as providedin 42 U.S.C. 405(b), and to judicial review as provided in 42 U.S.C. 405(g).42 U.S.C. 1395cc(h)(1) and (b)(2); Resp. Br. 7. Respondent argues, however,that that mechanism is not exclusive-despite Congress's declaration thatit "intended that the remedies provided by th[o]se review proceduresshall be exclusive." S. Rep. No. 404, 89th Cong., 1st Sess. Pt. 1,at 54-55 (1965).

That contention is foreclosed by 42 U.S.C. 405(h), incorporated into theMedicare Act by 42 U.S.C. 1395ii. The second sentence of Section 405(h)declares that "[n]o findings of fact or decision of the [Secretary]shall be reviewed by any person, tribunal, or governmental agency exceptas herein provided." And the third sentence adds that "[n]o action* * * shall be brought under section 1331 or 1346 of title 28 to recoveron any claim arising under this subchapter." "[T]he first twosentences of § 405(h) * * * assure that administrative exhaustion willbe required," Weinberger v. Salfi, 422 U.S. 749, 757 (1975), whilethe third sentence "provides that § 405(g), to the exclusion of28 U.S.C. § 1331, is the sole avenue for judicial review of all 'claim[s]arising under' the Medicare Act." Heckler v. Ringer, 466 U.S. 602,614-615 (1984) (emphasis added). Simply put, where (as here) plaintiffs"have an adequate remedy in § 405(g) * * *[,] § 405(g) isthe only avenue for judicial review," Ringer, 466 U.S. at 617-evenif the plaintiffs challenge a rule or policy of general applicability, asin Ringer itself, id. at 613-616, 620-621, 624-626, and in Salfi as well,see Gov't Br. 34-35.

A. 1. Respondent and its amici argue that Section 405(h) applies only to"individual claims for benefits." See Resp. Br. 15, 16, 17, 21,25. See also Am. Hosp. Ass'n (AHA) Br. 9, 12, 18; Am. Health Care Ass'n(AHCA) Br. 8. To the extent respondent and its amici suggest that Section405(h) applies only to claims for monetary payments, this Court has alreadyrejected that contention. In Ringer, the plaintiffs and the dissent contendedthat Section 405(h) "precludes only actions" in "which theclaimant seeks payment of benefits"; it does not extend, they argued,to suits (like Ringer) that challenge generally applicable policies andseek only declaratory and injunctive relief. See 466 U.S. at 635 (dissentingopinion). They, like respondent, also sought to distinguish this Court'sdecision in Salfi as a benefits case. Ibid. This Court, however, rejectedthose arguments. "[T]here is no indication in Salfi," the Courtexplained, "that our holding in any way depended on the fact that theclaimants there sought an award of benefits." 466 U.S. at 623. "Furthermore,"the Court continued, "today we explicitly hold that our conclusionthat the claims of [the respondents] are barred by § 405(h) is in noway affected by the fact that those respondents did not seek an award ofbenefits." Ibid.

Moreover, as we have explained (Gov't Br. 39-42), respondent's proposalto limit Section 405(h)'s preclusive scope to "amount," "benefits,"or "reimbursement" claims has no basis in the text of Section405(h). The court of appeals suggested (Pet. App. 6a) that such a limitmight be found in Section 405(h)'s third sentence, which bars federal-questionjurisdiction over suits "to recover" on a claim arising underthe Medicare Act. That argument is not only inconsistent with Ringer, butalso incorrect as a textual matter. As we have pointed out (and respondentand its amici do not dispute), the word "recover" in legal contextshas never been limited to monetary recoveries. Gov't Br. 39. Moreover, theattempt to limit Section 405(h)'s preclusive effect to suits for benefitsor payments cannot be reconciled with the fact that Congress expressly incorporatedSection 405(h) into numerous Medicare provisions that do not involve theadjudication of claims for payments-including provisions that, like 42 U.S.C.1395cc(h) here, deal with the imposition of remedies for noncompliance.See Gov't Br. 39-40 & n.21. Nor can it be reconciled with the statutorystructure, as construing Section 405(h) to reach only benefits determinationswould make the third sentence of Section 405(h) superfluous in light ofthe second. See p. 5, infra; Gov't Br. 40.1

Although the foregoing arguments appear in our opening brief, respondentand its amici make no attempt to answer them. In fact, notwithstanding theirrepeated use of phrases like "benefits claims" and "amountdeterminations," they ultimately concede that 42 U.S.C. 405(h)'s preclusivescope extends beyond suits seeking monetary payments. Resp. Br. 18, 19,20 (conceding that Section 405(h)'s preclusion extends to non-monetary "providerstatus" claims, i.e., suits challenging the termination of providersfrom the program)2; Am. Ass'n of Homes & Servs. for the Aging (AAHSA)Br. 30 ("the issue is not whether payment of an 'amount' of money isat stake").

2. Respondent and its amici also argue that Section 405(h) is preclusiveonly with respect "to individual claims * * * for which there is anadministrative hearing and a final decision." Resp. Br. 16, 19, 20,29 (emphasis added). According to them, Section 405(h) distinguishes "betweenchallenges to individualized determinations, which must be brought throughestablished administrative channels," and "broad-based" pre-enforcement"challenges to the Secretary's rules and regulations governing suchdeterminations, which may be brought directly in district court." AMABr. 5-6; see Resp. Br. 29 (distinguishing between "statutory or constitutionalchallenges to a regulation or policy" and "an individual claimof entitlement").

That proposed distinction likewise has no textual basis. Section 405(h)'ssecond sentence does channel review of individual claims through specialstatutory review mecha- nisms. It declares that "[n]o * * * decisionof the [Secretary] shall be reviewed * * * except as herein provided,"42 U.S.C. 405(h), and "decisions" of the Secretary are generallyindividualized determinations, see Bowen v. Michigan Academy, 476 U.S. 667,679 n.8 (1986). But it would be inconsistent with the reasons for that exhaustionrequirement, and with the very existence of a special statutory review procedure,to permit a party to separate out one legal issue that may bear on an administrativeadjudication and present that issue in a separate anticipatory suit. Inany event, the third sentence of Section 405(h) declares that "no action* * * to recover on any claim arising under" the Medicare Act shallbe brought under Section 1331. Nothing in that "sweeping and direct"language "limit[s]" its "reach * * * to decisions of theSecretary" or other individualized or fact-based claims. Salfi, 422U.S. at 762. To the contrary, by its plain terms, the third sentence ofSection 405(h) precludes district courts from exercising federal-questionjurisdiction over "any claim" arising under the Medicare Act,whether it is characterized as "individual" or as a broad-basedchallenge to regulations, policies, or a provision of the Act. Moreover,because Section 405(h)'s second sentence precludes review of individualdeterminations ("decisions" of the Secretary) except through thespecial review mechanisms in the Act, respondent's "treatment of thethird sentence of § 405(h) not only ignore[s] that [third] sentence'splain language, but also relegate[s] it to a function which is already performedby other statutory provisions." Id. at 758-750 & n.6.

For similar reasons, respondent (Br. 30) and its amici (AHA Br. 17-19; AAHSABr. 30; AMA Br. 17-19) err in relying on McNary v. Haitian Refugee Center,Inc., 498 U.S. 479 (1991), Reno v. Catholic Social Services, Inc., 509 U.S.43 (1993), Johnson v. Robison, 415 U.S. 361 (1974), and Traynor v. Turnage,485 U.S. 535 (1988), to support their argument that Section 405(h) distinguishesbetween individual claims and more generalized challenges to rules and regulations.None of the statutes in those cases contained a sweeping preclusion provisioncomparable to the third sentence of Section 405(h).3 And in each of thosecases, this Court relied on the fact that, absent review under 28 U.S.C.1331, there would have been no mechanism for judicial review of substantialconstitutional claims. Robison, 415 U.S. at 366-367, 373-374; Traynor, 485U.S. at 542-544; McNary, 498 U.S. at 484, 486; Catholic Soc. Servs., 509U.S. at 63-65.

It was on those very grounds that this Court in Salfi distinguished Robisonand refused to import into Section 405(h) a distinction between individualizedclaims and broad-based constitutional challenges to the Act itself. Whereasthe statute in Robison precluded review only of a "decision of theadministrator," the Court explained, "[t]he language of §405(h) is quite different. Its reach is not limited to decisions of theSecretary * * *. Rather, it extends to any 'action' seeking 'to recoveron any * * * claim'" arising under the Act. 422 U.S. at 761-762. Moreover,the Court explained, in Robison "absolutely no judicial considerationof the issue would be available" if the statute were read as precludingthe suit. Id. at 762. Here and in Salfi, by contrast, Section 405(h) doesnot "preclude constitutional" challenges, but "simply require[s]that [such challenges] be brought under the jurisdictional grants containedin the" Act itself, "and thus in conformity" with all other"claims arising under the Act." 422 U.S. at 762; Gov't Br. 44-46,47-48.4

This Court's cases establish that a claim "arises under" the SocialSecurity Act within the meaning of Section 405(h) -and review under 28 U.S.C.1331 is therefore precluded in favor of review through 42 U.S.C. 405(g)-ifthe Act "provides both the standing and the substantive basis for thepresentation" of the plaintiff's contentions. Salfi, 422 U.S. at 760-761;Ringer, 466 U.S. at 615; Mathews v. Eldridge, 424 U.S. 319, 327 (1976).Those cases draw no distinction between claims turning on specific factsand legal claims of more systemic import. Indeed, the plaintiffs in Salfirepresented a class of plaintiffs and sought broad-based relief with respectto general practices. They requested and obtained from the district courtdeclaratory relief and a nationwide injunction against statutory duration-of-relationshiprequirements alleged to be unconstitutional. 422 U.S. at 754-755. This Courtnonetheless held that Section 405(h) precluded them from bringing theirchallenge under 28 U.S.C. 1331, in circumvention of 42 U.S.C. 405(g). 422U.S. at 765.5

Nor can the distinction proposed by respondent and amici be defended underthe theory that "collateral" claims are exempted from 42 U.S.C.405(h)'s preclusive scope. Resp. Br. 29-30; AMA Br. 24; AAHSA Br. 10; AHCABr. 10-11. Even if we assume, arguendo, that respondent's claims are "collateral"to the merits of enforcement actions that might be brought against its members,this Court has specifically held that "[t]he only avenue for judicialreview" of collateral claims "is 42 U.S.C. 405(g)." Eldridge,424 U.S. at 327, 330-332; Bowen v. City of New York, 476 U.S. 467, 483-486(1986).6

Finally, the "individual" claim gloss that respondent seeks toplace on Section 405(h)'s plain language is implausible. Under respondent'sview, providers with the least need for immediate judicial review-thosethat do not face imminent enforcement proceedings and instead assert onlyabstract facial challenges-would have immediate access to the courts, whilea provider subjected to an enforcement action would have to exhaust administrativeremedies. See Gov't Br. 43. Respondent's construction also defeats the purposesof the statutory design. By requiring claims to arise in the concrete factualsetting of a specific enforcement action, the Act ensures that controversiesare of manageable proportions, that constitutional issues can be avoidedif possible, and that judicial review does not prematurely or unduly interferewith this important federal program. It is precisely such an unmanageablebroadside attack-a suit that demands constitutional adjudication in theabstract and that requests a broad injunction against the use of the veryremedies Congress found to be essential to enforcement of Medicare's health,safety, and quality-of-care regulations- that respondent has brought here.See Gov't Br. 26-28.7

B. In the end, respondent and its amici rely primarily not on the text ofSection 405(h) but rather on Michigan Academy, which they construe as creatingan across-the-board distinction between "amount claims," to whichSection 405(h) concededly applies, and "methodology claims," towhich it allegedly does not. See Resp. Br. 33-40; AMA Br. 12-21, 24-30.But they do not dispute that Michigan Academy expressly declined to providea generalized construction of Section 405(h), see 476 U.S. at 680, or thatthe two alternative constructions it did identify both would bar respondent'sextra-statutory pre-enforcement suit. Gov't Br. 38. Respondent and amicilikewise do not dispute that the Court in Michigan Academy derived its "amount/methodology"distinction from the language of 42 U.S.C. 1395ff(b)(1), a provision thatis not applicable here, and that the provision that is applicable in thiscase, 42 U.S.C. 1395cc(h), does not support that distinction and has nothingto do with "amount" claims in any event. Gov't Br. 33.

More fundamentally, respondent and its amici do not dispute that MichiganAcademy relied heavily on the presumption that Congress intends judicialreview to be available in some manner-and the canon that statutes shouldbe construed to avoid serious constitutional questions-because, absent reviewunder 28 U.S.C. 1331, the Secretary's interpretation of Part B payment obligationswould have been absolutely unreviewable. Gov't Br. 31-32. Nor, finally,do they dispute that the Court relied extensively on legislative historyindicating that Congress did not intend to foreclose judicial review altogether.Id. at 32-33. Since the question here is not the reviewability of the Secretary'sregulations and policies but rather its timing, neither the rules of constructionnor the legislative history on which Michigan Academy relied applies tothis case. See National Kidney Patients Ass'n v. Sullivan, 958 F.2d 1127,1133 (D.C. Cir. 1992) ("[T]he court in Michigan Academy was concernednot with timing, but with reviewability vel non."), cert. denied, 506U.S. 1049 (1993); Gov't Br. 31-34 (additional cases).

For that reason, respondent and its amici's reliance on selective quotesfrom Michigan Academy is unavailing. Respondent, for example, relies onMichigan Academy's observation that "[t]he legislative history * ** provides specific evidence of Congress' intent to foreclose review onlyof 'amount determinations'-i.e., those 'quite minor matters,' remitted finallyand exclusively to adjudication by private insurance carriers in a 'fairhearing,'" and the statement that "matters which Congress didnot delegate to private carriers, such as challenges to the validity ofthe Secretary's instructions and regulations, are cognizable in courts oflaw." Resp. Br. 35-36. But again, the question here is not whetherSection 405(h) "foreclose[s]" such challenges altogether. It iswhether Congress, by providing for review through 42 U.S.C. 405(g), andbarring recourse to alternative mechanisms through 42 U.S.C. 405(h), requiredchallenges to rules and policies to be routed through the express statutorymechanism for administrative and judicial review.8 Ringer squarely heldthat it did. See p. 2, supra.9 Simply put, Congress paired Section 405(g)with Section 405(h) for the obvious purpose of excluding through the latter,at a minimum, those claims that could be raised under the former. Sinceclaims like respondent's-unlike the claims at issue in Michigan Academywhen that case was decided-can be raised under Section 405(g), Section 405(h)precludes their assertion here.

2. The amount/methodology distinction drawn by Michigan Academy in any eventhas been superseded by statute even in the specific context in which thatcase arose. In 1986, shortly after Michigan Academy was decided, Congressamended 42 U.S.C. 1395ff to provide an express mechanism by which providerscan challenge Part B reimbursement determinations in court, and therebyraise their Part B "methodology" claims as well. Since then, thecourts of appeals have unanimously agreed that Michigan Academy's holdingthat "methodology" claims can be raised outside of express statutorymechanisms has been superseded. Gov't Br. 36-37.10 The legislative historyof the 1986 amendment, which explains that it was designed to bring reviewof Part B claims into line with review of Part A claims, H.R. Rep. No. 727,99th Cong., 2d Sess. 95 (1986), supports that conclusion; the courts ofappeals (like this Court in Ringer) have long recognized that, with respectto Part A claims, the Medicare Act's special review mechanism is exclusive.11

Respondent and its amici seek to bolster their argument that Michigan Academyhas continuing vitality with respect to Part B "methodology" challengesby quoting Representative Wyden's assertion that the 1986 amendment "strengthensthe rights established by * * * Bowen versus Michigan Academy." Resp.Br. 38 (quoting 132 Cong. Rec. 32,978 (1986)). But that isolated statementdoes not support respondent's position.12 Even though the 1986 amendmentsuperseded Michigan Academy's specific holding that Part B methodology challengesmay be brought under 28 U.S.C. 1331, it strengthened the right to insiston a proper methodology by establishing a special (and exclusive) statutorymechanism by which physicians can challenge the individual reimbursementdecisions in which the Secretary applies her methodology. Under MichiganAcademy, in contrast, physicians could not challenge individual determinations,and thus could not avoid losses from even a wholly unlawful methodologyexcept by obtaining a declaratory judgment before the Secretary actuallyapplied that methodology.

Finally, respondent's argument that the 1986 amendment codifies the specificholding in Michigan Academy cannot be reconciled with the fact that identicalchanges were proposed in 1985, before Michigan Academy was decided. Norcan it be reconciled with the fact that, when those changes were proposedin 1985, Congress clearly understood that the new mechanism for review wouldbe exclusive. Indeed, the amendment's proponents justified it by explainingthat, absent the legislation, no review would be available at all.13

C. Finally, abandoning the rationale of the court of appeals, respondentand its amici argue that the specific statutory mechanisms for review establishedby the Medicare Act are inadequate. But Congress, in establishing thosemechanisms and rendering them exclusive, deemed them adequate under thevast Medicare program, and courts may not carve out exceptions to that statutoryarrangement based on their own assessments of adequacy. In any event, respondent'sand amici's complaints are without merit.

1. AAHSA asserts (Br. 16, 19) that Section 1395cc(h) provides no right toreview at all except "in the limited instances where a provider hasbeen terminated or excluded from the Medicare program, or assessed a [civilmoney penalty]." See also Resp. Br. 27. That assertion is incorrect.See Gov't Br. 5. Section 1395cc(h) provides for review where a provideris "dissatisfied" with a determination that the provider is "nota provider of services," such as where the Secretary decides to terminateit from Medicare, "or with a determination described in subsection(b)(2)." Subsection (b)(2) in turn describes several types of determinations,including a "determin[ation] that the provider fails to comply substantiallywith the provisions of [its provider agreement]," or "with theprovisions of [the Medicare Act] and regulations thereunder." 42 U.S.C.1395cc(b)(2). Section 1395cc(h) thus permits review not only when the provideris terminated or excluded from the program, but also when (because someother remedy is imposed) it is dissatisfied with a finding that it is notin substantial compliance with its provider agreement, the Act, or the Secretary'sregulations.14

Respondent admits (Br. 7) that Section 1395cc(h) provides for administrativeand judicial review of any finding of noncompliance where a remedy is imposed.See also AHA Br. 10. But it argues that review should be permitted under28 U.S.C. 1331 because ALJs cannot rule on challenges to the Secretary'sregulations and therefore would not develop a factual record, and becausejudicial review under 42 U.S.C. 405(g) is limited to the administrativerecord. See Resp. Br. 23-26; AHCA Br. 12, 15. That argument is without merit.First, facial challenges to regulations generally do not require a factualrecord beyond what was developed in the rulemaking proceeding, and an asapplied challenge generally can be resolved on the basis of the administrativerecord. Second, although ALJs are bound by the Secretary's regulations andought not rule on their validity, nothing precludes ALJs from acceptingproffers of evidence relevant to such challenges in appropriate circumstances.Cf. 42 C.F.R. 498.61 (ALJ not bound by rules of evidence, including relevance).Third, district courts can "at any time" remand a case with aninadequate record and "order additional evidence to be taken."42 U.S.C. 405(g); see Sullivan v. Hudson, 490 U.S. 877, 885 (1989). Fourth,it is well settled in administrative law generally that, if agency processesdo not permit necessary record development for substantial constitutionalclaims, the district court may allow the parties to supplement the record.15Section 405(g) should not be construed to depart from that approach whereconstitutional claims are raised. Cf. City of New York, 476 U.S. at 473-474,478 (noting district court trial on unique "secret policy" issuein suit under 42 U.S.C. 405(g)).16

Respondent complains that, because 42 U.S.C. 1395cc(h) provides for reviewonly in the context of actual noncompliance findings, associational plaintiffslike respondent-which do not operate nursing homes and thus are not subjectto noncompliance findings-cannot seek judicial review in their own right.Resp. Br. 32-33; AMA Br. 28-30. Because respondent's standing derives fromand extends no further than that of its members, and because its membershave an adequate remedy under 42 U.S.C. 1395cc(h), the fact that respondentcannot sue under that provision causes it no legally cognizable injury.17Respondent, moreover, can raise its issues in court by participating asamicus when one of its members seeks judicial review, and it can facilitatereview by assuming a member's litigation costs.

2. Respondent's and amici's remaining arguments are directed not at theadequacy of the statutory review mechanisms, but rather at the Secretary'simplementation. In essence, they argue that the Secretary's regulationsrestrict the scope and availability of administrative review under 42 U.S.C.1395cc(h) in a manner that renders it inadequate as a practical matter.See Resp. Br. 26-27; AAHSA Br. 16-25; AHCA Br. 14-27. Those contentions,however, can be raised on judicial review under 42 U.S.C. 405(g), as incorporatedinto 42 U.S.C. 1395cc(h). See, e.g., Eldridge, supra (challenging regulationsthat did not provide a pre-deprivation hearing); Califano v. Yamasaki, 442U.S. 682 (1979) (similar). And precisely those claims have been raised under42 U.S.C. 405(g) in the context of specific enforcement actions. See, e.g.,Rafael Convalescent Hosp. v. Shalala, No. C-97-1967 FMS, 1998 WL 196469(N.D. Cal. Apr. 15, 1998) (due process, vagueness, and APA challenges toregulations); Beverly Health & Rehab. Serv. v. Shalala, No. 99-09012(N.D. Cal. complaint filed Sept. 3, 1999) (similar). Thus, far from justifyingbypass of the special statutory mechanism for administrative and judicialreview, respondent's and amici's attack on the regulations is preciselythe sort of challenge that should be raised under that mechanism.

The claims of inadequacy are, in any event, without merit. Respondent andits amici complain that the Secretary's regulations do not provide for administrativereview unless a remedy is imposed, 42 C.F.R. 498.3(b)(12), and that theSecretary ordinarily rescinds proposed remedies if a noncomplying providerfiles a plan of correction and cures the violation within a specified periodof time. According to respondent and its amici, the Secretary's practiceof requiring them to correct their violations immediately, and not providingfor an appeal if, in light of the immediate correction, no remedy is imposed,"coerces" them into surrendering their right to administrativereview. Resp. Br. 26-27; AAHSA Br. 17-18; AHCA Br. 17.

It is hard to see how the Secretary's decision not to impose penalties ona provider in a particular instance-i.e., giving the provider a chance tocorrect deficiencies before imposing remedies-could be a basis for complaint.The Secretary could impose remedies in all cases of noncompliance withoutproviding an opportunity to correct (with the incidental effect of permittingimmediate appeal of every noncompliance finding). But a practice of imposingpenalties for all violations without opportunity for correction would notmake nursing homes and other providers better off.

Nor do the Secretary's regulations "coerce" providers into surrenderingtheir appeal rights. Although amici are correct that nursing homes facethe possibility of termination if they fail to submit a voluntary plan ofcorrection and correct the deficiencies, AHCA Br. 17-19; AAHSA Br. 17-18,22, see also 42 C.F.R. 488.456(b)(ii), terminations from the program arerare and generally reserved for the most egregious recidivist institutions.HHS has informed us that, between July 1995 and June 1996, only 25 of 13,166nursing homes were terminated. More important, providers are not penalizedfor preserving their appeal rights. The remedy imposed on a facility thatfails to submit a plan of correction or to correct a deficiency-and appealsthe deficiency-is no different than the remedy the Secretary ordinarilywould impose in the first instance, upon identifying the deficiency, ifthe Secretary did not give the facility an intervening opportunity to correct.Facilities thus do not face termination for failing to correct or submita plan of correction in order to preserve their appeal rights; they facetermination for noncompliance, and then only if the noncompliance is sufficientlydangerous to patient health to warrant that remedy.

Amici also argue that the regulations-by not providing for appeal of deficiencyfindings if the deficiencies are corrected and no remedy is imposed-causeproviders to suffer more severe penalties in later enforcement actions basedon findings that are unreviewable. AHCA Br. 19-21; AAHSA Br. 18, 22. Thevery administrative decisions they cite, however, refute that contention.In Fort Tryon Nursing Home v. HCFA, DAB No. CR425, 1996 WL 385660 (HHS July3, 1996), for example, the Department Appeals Board explained that, althoughthe challenged deficiency was not subject to administrative review becauseno remedy had been imposed, if HCFA later "determined to impose a remedybased on the finding of a new deficiency coupled with [the provider's] pastcompliance record, including the finding of deficiency on which [the provider]bases its current hearing request, then [the provider] would have a rightto a hearing, both as to the existence of the new deficiency and as to theexistence of the deficiency which is at issue here." (Emphasis added).18

Finally, AHCA complains (Br. 23) that the agency's characterization of thescope and severity of violations, and the agency's exercise of discretionin selecting remedies, are not subject to administrative review. But itdoes not deny that those issues are subject to judicial review. See Gov'tBr. 48-49 n.27. See also Thunder Basin Coal Co. v. Reich, 510 U.S. 200,215 (1994) (review mechanism exclusive "[e]ven if" the agencywould not adjudicate certain claims, if those issues would "be meaningfullyaddressed" on judicial review). Moreover, the factual predicates forthe scope and severity characterizations are within the scope of administrativereview; only review of the characterization itself, divorced from the factsunderlying it, is sometimes excluded from the hearing. See, e.g., BeverlyHealth & Rehab. Springhill v. HCFA, DAB No. CR553, 1998 WL 839612 (HHSOct. 27, 1998). And the characterizations of scope and severity are subjectto administrative review if a successful challenge would alter the rangeof permissible remedies, such as where the provider claims that its performanceconstituted substantial compliance (in which case no remedy can be imposed).19Where civil money penalties are imposed, ALJs can consider the appropriatenessof the penalty amount in light of the number and nature of the violations,even if the characterization of scope and severity is not itself reviewable.42 C.F.R. 498.3(b)(13), 488.38(e)-(f).20
* * * * *
For the foregoing reasons and those stated in the opening brief, the judgmentof the court of appeals should be reversed.

SETH P. WAXMAN
Solicitor General


SEPTEMBER 1999


1 In any event, respondent's suit-which seeks invalidation of regulationsthat might render its members ineligible to participate in (and thereforeto receive payments under) Medicare, and seeks an injunction to prohibit"any ban on payment as a remedy for any deficiency," J.A. 52-isinextricably intertwined with payment claims. See Gov't Br. 34-35, 41-42.

2 Respondent relies (Br. 20-21) on the fact that the 1965 legislative history,when stating that the statutory review procedures are exclusive, mentionsonly benefits determinations and "determinations regarding * * * eligibilityto participate in the program." In 1965, however, those were the onlycategories that existed; terminating a provider's participation was theonly remedy the Secretary could impose for non-compliance. Gov't Br. 7.It follows that the statutory mechanism for judicial review is exclusivewith respect to the additional remedies Congress authorized in 1986 as well.

3 In Robison, 415 U.S. at 367, and Traynor, 485 U.S. at 541, the statutebarred review of "decisions of the Administrator," and in McNaryand Catholic Social Services, the statute barred "judicial review ofa determination respecting an application for adjustment of status,"498 U.S. at 491; 509 U.S. 53, 60. Indeed, in McNary, the Court emphasizedthat the "critical words" of the provision there referred "onlyto review 'of a determination respecting an application"-a "singleact" respecting an "individual application"-and did not extendto more general challenges to "a group of decisions or a practice orprocedure." 498 U.S. at 491-492.

4 Respondent seems to argue (Br. 24) that Section 405(g) does not permitjudicial review of regulations except those relating to the claimant's "burdenof proof." That assertion is incorrect. See, e.g., Califano v. Yamasaki,442 U.S. 682 (1979) (reviewing, under 42 U.S.C. 405(g), the validity ofregulations providing that hearings are available only after an initial"recoupment" determination); Sullivan v. Everhart, 494 U.S. 83(1990) (reviewing "netting" regulations under 42 U.S.C. 405(g)).

5 Respondent suggests that because 42 U.S.C. 405(b)-which, as incorporatedinto 42 U.S.C. 1395cc(h), provides a right to an administrative hearing-isfocused on individualized fact-bound disputes, Section 405(h) should beso read as well. But Congress chose to provide for administrative and judicialreview under the special statutory review procedures only in connectionwith claims arising out of specific enforcement actions precisely to ensurethat adjudication would take place in a concrete, factual setting; permittingabstract pre-enforcement challenges in district court outside the specialstatutory mechanism would defeat that purpose. The text of Section 405(h)'sthird sentence, its legislative history, and Ringer and Salfi are all, inany event, directly contrary to respondent's position. See pp. 2-5, supra.Respondent and its amici also argue that 42 U.S.C. 405(b) provides for administrativereview only with respect to monetary issues (i.e., benefits claims). SeeResp. Br. 15-16; AHCA Br. 7. But the review provided by Section 405(b),as incorporated mutatis mutandis into the particular aspect of the Medicareprogram at issue here, cannot be limited to monetary claims, since Section1395cc(h) gives providers a right to a Section 405(b) hearing on mattersthat do not involve requests for payment, as respondent concedes (Br. 16,20).

6 Eldridge and City of New York held that collateral claims could be raisedthrough Section 405(g) itself without complete exhaustion because Section405(g)'s requirement of a "final" decision-like the "finaldecision" requirement of 28 U.S.C. 1291-permits immediate review ofcollateral legal issues in exceptional circumstances once a claim has beenpresented to the Secretary. See Gov't Br. 46-47 n.26; cf. Cohen v. BeneficialIndus. Loan Corp., 337 U.S. 541 (1949). In Eldridge and City of New York,moreover, the Court held that a collateral issue can be raised under 42U.S.C. 405(g) without complete exhaustion only if (1) a claim has been presentedto the Secretary, and (2) relief on the collateral issue could not be affordedafter exhaustion. 424 U.S. at 331-332; 476 U.S. at 483. If respondent werecorrect that claims can be brought under 28 U.S.C. 1331 merely because theyare in some sense "collateral"-without presentment to the Secretaryand without a showing of irreparable injury-then those requirements wouldbe superfluous.

7 Respondent's argument (Br. 21-22) that the Declaratory Judgment Act, 28U.S.C. 2201, and the Administrative Procedure Act, 5 U.S.C. 702-704, authorizesuit under 28 U.S.C. 1331 is also unavailing. The Declaratory Judgment Actcreates a remedy; it is not an independent jurisdictional grant. SkellyOil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671 (1950). It thereforecannot create jurisdiction under 28 U.S.C. 1331 where 42 U.S.C. 405(h) withdrawsit, and the Court in Ringer specifically rejected the contention that adeclaratory judgment action can be used to circumvent the special statutoryreview procedure in Section 405(g). See 466 U.S. at 621-622. Likewise, theAPA does not create subject-matter jurisdiction; it merely creates a causeof action. Califano v. Sanders, 430 U.S. 99, 106 (1977). Moreover, thatcause of action is unavailable on its own terms where, as here, Congresshas provided a "special statutory review proceeding relevant to thesubject matter" if that mechanism is adequate. 5 U.S.C. 703; Gov'tBr. 25-26. Here, the special statutory mechanism-quite aside from beingrendered exclusive by the Medicare Act itself, 42 U.S.C. 405(h)-is fullyadequate. See pp. 14-20, infra.

8 Citing this Court's statement that "matters which Congress did notleave to be determined in a 'fair hearing' conducted by the carrier-includingchallenges to the validity of the Secretary's instructions and regulations-arenot impliedly insulated from judicial review by 42 U.S.C. 1395ff,"respondent also argues that Michigan Academy makes judicial review availableunder 28 U.S.C. 1331 for any issue that an ALJ would not address under 42U.S.C. 405(b). Resp. Br. 35. That result would be flatly inconsistent withSalfi, where the Court held that a challenge to the constitutionality ofthe Act, which could not be resolved by an ALJ, nevertheless had to be broughtunder Section 405(g). See 422 U.S. at 760-764. Read in context, the sentencerespondent quotes from Michigan Academy merely states that Congress, byomitting any special mechanism by which Part B "methodology" claimscould be asserted first in an administrative forum and then in court, hadnot clearly indicated its intent to foreclose judicial review of such claimsaltogether. The Court was not addressing the very different question ofwhether, when Congress does provide for administrative and then judicialreview, Section 405(h) renders that mechanism exclusive.

9 As the District of Columbia Circuit has observed, a broad constructionof Michigan Academy like respondent's would "require a decision thatMichigan Academy either overruled Ringer * * * or assumed that it was onlyan 'amount' case, not a methodology dispute. The latter would be a stretch,however, as Ringer revolved around the legality of the Secretary's policystatement expressing her generic approach to BCBR * * * operations."National Kidney Patients Ass'n, 958 F.2d at 1132.

10 The AMA (Br. 20) and respondent (Br. 38) point out that Congress didnot amend 42 U.S.C. 1395ii, or 42 U.S.C. 405(h), in 1986. As the AMA recognizes(Br. 14-15), in Michigan Academy this Court construed the scope of 42 U.S.C.1395ii and 405(h) in light of 42 U.S.C. 1395ff, reading them as not foreclosingreview when neither Section 1395ff nor any other provision of the Act provideda mechanism for review. Congress has since amended Section 1395ff to providefor judicial review of Part B claims, thereby rendering inapplicable toPart B "methodology" claims the limitation on the reach of Section405(h) and 1395ii the Court identified in Michigan Academy. When Congressamends one set of provisions, the effect of related statutory provisionsmay be altered as well. See, e.g., Clark v. Uebersee Finanz-Korporation,A.G., 332 U.S. 480, 489 (1947). Respondent likewise errs in asserting (Br.37-38) that Michigan Academy must still be good law because this Court hascited it for various propositions-in non-Medicare cases-since the 1986 amendment.This Court often cites a prior case for a particular principle even afterthe statute that case interpreted has been amended in a way that may overturnthe specific result reached. See, e.g., McKennon v. Nashville Banner Publ'gCo., 513 U.S. 352, 360-361 (1995) (citing Price Waterhouse v. Hopkins, 490U.S. 228 (1989), even though it was superseded by statute, see Landgrafv. USI Film Prod., 511 U.S. 244, 251 (1994)); Seminole Tribe v. Florida,517 U.S. 44, 54 n.7, 55-56 (1996) (citing Atascadero State Hosp. v. Scanlon,473 U.S. 234 (1985), even though the statute was amended in response toAtascadero, see Lane v. Peña, 518 U.S. 187, 198 (1996)).

11 See National Kidney Patients, 958 F.2d at 1132; St. Francis Med. Ctr.v. Shalala, 32 F.3d 805, 812-813 (3d Cir. 1994), cert. denied, 514 U.S.1016 (1995); Westchester Mgm't Corp. v. HHS, 948 F.2d 279, 282 (6th Cir.1991), cert. denied, 504 U.S. 909 (1992). Notwithstanding those decisions,amicus AMA contends (Br. 13 & n.9, 22) that Michigan Academy permitsboth Part A and Part B "methodology" claims to be asserted under28 U.S.C. 1331. That argument is foreclosed by Ringer insofar as Part Ais concerned. Moreover, the AMA cites not one decision that so concludesunder Part A, and never explains how the reasoning of Michigan Academy-whichrests almost solely on the fact that review of Part B methodology claimswould have been entirely unavailable absent review under 28 U.S.C. 1331,see 476 U.S. at 670-674, 678-681-could be applicable to Part A methodologyclaims, which could always be raised in the context of a specific reimbursementdetermination.

12 Such an isolated floor statement is entitled to little weight, Weinbergerv. Rossi, 456 U.S. 25, 35 n.15 (1982), especially where (as here) the statementwas inserted into the Congressional Record after the fact, see 132 Cong.Rec. at 32,707 (1986) (explaining significance of typeface); CongressionalQuarterly, How Congress Works 101 (3d ed. 1998). See Gustafson v. AlloydCo., 513 U.S. 561, 580 (1995).

13 See 131 Cong. Rec. 22,274, 22,275 (1985) (bill necessary to provide "judicialreview of claims disputed by Medicare's beneficiaries," and "toguarantee * * * due process"); id. at 22,275 (bill necessary because"[f]or Part B beneficiaries, as well as providers, the Medicare statuteand recent court decisions have effectively precluded judicial review ofpart B programs and claims"); ibid. (reform necessary because totalpreclusion of review is potentially unconstitutional); id. at 17,232, 17,244(bill would permit judicial review of Part B claims).

14 AAHSA's contention that review is available only when a termination occursalso renders Section 1395cc(h)'s reference to "determinations describedin subsection (b)(2)" mere surplusage, because Section 1395cc(h), evenabsent that reference, makes any decision to terminate a provider reviewableas a determination that the institution "is not a provider of services."See also Gov't Br. 5 n.4 (noting that phrase "not a provider of services"can be construed to include findings of noncompliance). The Secretary'sconstruction of the hearing right provided by Section 1395cc(h) is entitledto deference. See, e.g., Your Home Visiting Nurse Servs. v. Shalala, 119S. Ct. 930, 933-934 (1999).

15 American Trucking Ass'n v. United States, 344 U.S. 298, 320 (1953) (The"right to introduce evidence to support the [constitutional] claim* * * may be enforced in the District Court, if the Commission bars an opportunityto do so."); cf. Citizens to Preserve Overton Park, Inc. v. Volpe,401 U.S. 402, 415 (1971) (under APA, "there may be independent judicialfactfinding" in adjudicatory actions when "agency factfindingprocedures are inadequate" and "when issues that were not beforethe agency are raised in a proceeding to enforce nonadjudicatory action.").

16 In McNary, relied upon by respondent (Br. 25-26; see AHCA Br. 12), therecord could not be developed in district court because judicial reviewwas directed to the courts of appeals, 498 U.S. at 497. AHCA attempts (Br.15) to make this case more like McNary by noting that review of civil moneypenalties is directly in the court of appeals. The scope of administrativereview in the context of civil money penalties, however, is broader thanin other contexts, 42 C.F.R. 498.3(b)(13), 488.438(e) and (f); p. 20, infra,and the statutory provision governing such appeals, 42 U.S.C. 1320a-7a(e)(as incorporated by 42 U.S.C. 1395i-3h(2)(B)(ii)), provides for remandsfor factfinding under appropriate conditions.

17 For the same reason, respondent (Br. 33) and its amici (AAHSA Br. 2-4,26-27) err in relying on Nader v. Alleghany Airlines, Inc., 426 U.S. 290,302 (1976), Rosado v. Wyman, 397 U.S. 396, 406 (1970), and Estate of Smithv. Heckler, 747 F.2d 583 (10th Cir. 1984). None of those cases held thatan association that has no interests other than those of its members canbring suit outside of an otherwise exclusive statutory review procedurewhere that procedure provides the association's members with a way to obtainjudicial review. To the contrary, in those cases, the statute provided neitherthe members nor a relevant association with an express mechanism for seekingreview; the question therefore was whether Congress intended to bar reviewaltogether.

18 Accord Baltic Country Manor v. HCFA, [1986-1987 Transfer Binder] Medicare& Medicaid Guide (CCH) ¶¶ 45,038, at 52,578 (Dec. 11, 1996)(to the extent HCFA bases civil money penalty amount on earlier noncompliance,provider can "contradict or make more accurate any history of noncompliance").AAHSA also complains (Br. 17, 18) about the Secretary's general policy ofimposing sanctions immediately on so-called poor-performing facilities withoutoffering them an opportunity to correct. But the decision to proceed withenforcement actions against such facilities immediately, and to permit othersto correct their mistakes without imposing a remedy, is a wholly legitimate(and essentially unreviewable) exercise of enforcement discretion. See Hecklerv. Chaney, 470 U.S. 821, 830 (1985); cf. Reno v. American-Arab Anti-DiscriminationCommittee, 119 S. Ct. 936, 945 (1999).

19 See 42 C.F.R. 498.3(d)(10)(ii) (barring review of characterization of"level of noncompliance"), 488.301 (defining "noncompliance"as the condition of not being in "substantial compliance).

20 Amici also complain that, where deficiencies are found, the statute requiresthem to post the deficiencies in a public location, and the deficienciesare listed on HCFA's website, even if they are not subject to administrativereview. AAHSA Br. 22; AHCA Br. 17-18. But nothing prevents providers fromposting their responses as well. Moreover, if a provider truly wishes tocontest the finding, it can avoid taking actions that will cause the Secretaryto forbear enforcement, and challenge the finding through administrativereview. Finally, if a provider believes that the Constitution or the Actrequires administrative review where the only effect of the finding is informational,it can raise that claim under 42 U.S.C. 405(g). See p. 17, supra. Althoughrespondent and its amici complain about administrative delay, the agencyhas an active process of adjudicating the most serious cases first, andclaims of inordinate delay can, under appropriate circumstances, be raisedunder 42 U.S.C. 405(g) as well. See Heckler v. Day, 467 U.S. 104, 110 n.14(1984).