ALVARADO HOSPITAL, LLC, A DELAWARE LIMITED LIABILITY COMPANY, DBA ALVARADO HOSPITAL MEDICAL CENTER, VERITAS HEALTH SERVICE, INC., A CALIFORNIA CORPORATION, DBA CHINO VALLEY MEDICAL CENTER, DESERT VALLEY HOSPITAL, INC., A CALIFORNIA CORPORATION, DBA DESERT VALLEY HOSPITAL, PRIME HEALTHCARE CENTINELA, LLC, A DELAWARE LIMITED LIABILITY COMPANY, DBA CENTINELA HOSPITAL MEDICAL CENTER, PRIME HEALTHCARE - ENCINO HOSPITAL, LLC, A DELAWARE LIMITED LIABILITY COMPANY, DBA ENCINO HOSPITAL MEDICAL CENTER, PRIME HEALTHCARE SERVICES - GARDEN GROVE, LLC, A DELAWARE LIMITED LIABILITY COMPANY, DBA GARDEN GROVE HOSPITAL MEDICAL CENTER, PRIME HEALTHCARE HUNTINGTON BEACH, LLC, ADELAWARE LIMITED LIABILITY COMPANY, DBA HUNTINGTON BEACH HOSPITAL, PRIME HEALTHCARE LA PALMA, LLC, A DELAWARE LIMITED LIABILITY COMPANY, DBA LA PALMA INTERCOMMUNITY HOSPITAL, PRIME HEALTHCARE SERVICES - LOW BUCK LLC, ADELAWARE LIMITED LIABILITY COMPANY, DBA LOWER BUCKS HOSPITAL, PRIME HEALTHCARE SERVICES - MONTCLAIR, LLC, A DELAWARE LIMITED LIABILITY COMPANY, DBA ONTCLAIR HOSPITAL MEDICAL CENTER, PRIME HEALTHCARE PARADISE VALLEY, LLC, A DELAWARE LIMITED LIABILITY COMPANY, DBA PARADISE VALLEY HOSPITAL, PRIME HEALTHCARE SERVICES - ROXBOROUGH, LLC, A DELAWARE LIMITED LIABILITY COMPANY, DBA ROXBOROUGH MEMORIAL HOSPITAL, PRIME HEALTHCARE SERVICES - SAN DIMAS, LLC, A DELAWARE LIMITED LIABILITY COMPANY, DBA SAN DIMAS COMMUNITY HOSPITAL, PRIME HEALTHCARE SERVICES - SHASTA, LLC, A ELAWARE LIMITED LIABILITY COMPANY, DBA SHASTA REGIONAL MEDICAL CENTER, PRIME HEALTHCARE SERVICES - SHERMAN OAKS, LLC, A DELAWARE LIMITED LIABILITY COMPANY, DBA SHERMAN OAKS HOSPITAL, PRIME HEALTHCARE ANAHEIM, LLC, A DELAWARE LIMITED LIABILITY COMPANY, DBA WEST ANAHEIM MEDICAL CENTER, Plaintiffs-Appellants
NORRIS COCHRAN, ACTING SECRETARY OF HEALTH AND HUMAN SERVICES, Defendant-Appellee
from the United States District Court for the Central
District of California in No. 2:15-cv-06312-R-PLA, Judge
Manuel L. Real.
Steven Hardiman, Nelson Hardiman LLP, Los Angeles, CA, argued
for plaintiffs-appellants. Also represented by John Alfred
Mills, Jonathan Winsor Radke.
Benjamin M. Shultz, Appellate Staff, Civil Division, United
States Department of Justice, Washington, DC, argued for
defendant-appellee. Also represented by Michael S. Raab,
Benjamin C. Mizer; Sean Siekkinen, Commercial Litigation
Branch, Civil Division, United States Department of Justice,
Washington, DC; EILEEN M. DECKER, Office of the United States
Attorney for the Central District of California, United
States Department of Justice, Los Angeles, CA.
Prost, Chief Judge, NEWMAN and LOURIE, Circuit Judges.
Prime Hospitals appeal from the order of the United States
District Court for the Central District of California
transferring their complaint under 28 U.S.C. § 1631 to
the United States Court of Federal Claims. Prime Hospitals
are seeking monetary relief for a breach of an alleged
settlement agreement and, in the alternative, declaratory,
injunctive, and mandamus relief from an alleged secret and
illegal policy to prevent and delay Prime Hospitals from
exhausting their administrative remedies.
Prime Hospitals' breach of contract claim is
fundamentally a suit to enforce a contract and it does not
arise under the Medicare Act, we hold that the Court of
Federal Claims has exclusive jurisdiction over that claim
under the Tucker Act, 28 U.S.C. § 1491. We also hold
that the Court of Federal Claims does not have jurisdiction,
however, over Prime Hospitals' alternative claims seeking
declaratory, injunctive, and mandamus relief. Accordingly, we
affirm the district court's transfer order in-part,
reverse-in-part, and remand for further proceedings.
Medicare program, which provides health insurance for the
elderly and disabled, is administered by the United States
Department of Health & Humans Services ("HHS")
through its agency, the Center for Medicare & Medicaid
Services ("CMS"). 42 U.S.C. §§ 1395
et seq. Medicare Part A covers hospital inpatient
services and Medicare Part B covers outpatient services,
including emergency room services for patients who do not
require a hospital admission. See id. § 1395d,
k. Under both Part A and Part B, providers submit individual
claims for payment to private contractors who make an initial
determination as to what payment, if any, should be made on
the claim. See id. § 1395ff(a)(1)-(2). A
provider dissatisfied with the initial determination can
bring a challenge through an administrative appeals process
provided under the Medicare Act. See id. §
provider may first seek a redetermination by the private
contractor. Id. § 1395ff(a)(3). If still
dissatisfied, the provider may then seek reconsideration by
an independent entity under contract with HHS. Id.
§ 1395ff(b)-(c), (g). If the provider is dissatisfied
with the reconsideration decision, the provider may request a
hearing before an administrative law judge. See id.
§ 1395ff(b)(1), (c)(3)(C)(ii), (d)(1). The Medicare
Appeals Council, which is part of the Departmental Appeals
Board within HHS, provides the final level of administrative
review. Id. § 1395ff(d)(2).
provider that obtains a final decision from the Medicare
Appeals Council is entitled to judicial review of that
decision. Id. §§ 405(g), 1395ff(b)(1)(A).
Under § 405(g), the provider may file suit in district
court, and the Act mandates that "[n]o findings of fact
or decision of the [Secretary] shall be reviewed by any
person, tribunal, or governmental agency except as"
provided under the Act. Id. §§ 405(h),
Hospitals are sixteen acute care hospitals that are part of
Prime Healthcare Services, Inc. and Prime Healthcare
Foundation, a national healthcare system that owns and
operates thirty-five for-profit and non-profit hospitals in
ten different states. Prime Hospitals provide inpatient
hospital services under Medicare Part A to patients covered
under the Medicare program.
Hospitals, like other Medicare providers, submit individual
claims for payment to private contractors, who make initial
reimbursement determinations for the inpatient hospital
services provided. Prime Hospitals alleged that, although the
private contractors generally processed and paid their
individual claims, many of their claims for one-day inpatient
stays (known as "short-stay claims") were
subsequently subject to post-payment review and denied. In
response, Prime Hospitals ap- pealed the denials of these
Medicare short-stay claims through the Medicare
administrative appeal process.
Hospitals alleged the audits of short-stay claims were not
limited to Prime Hospitals but were part of a larger
initiative that resulted in a substantial increase in
hospital claim denials. As a result of this increase, Prime
Hospitals alleged, CMS became overwhelmed by the number of
hospital appeals of inpatient claim denials. Prime
Hospitals' complaint states that these appeals caused
"the number of appeals received ... to soar from 1, 250
per week in January 2012 to more than 15, 000 per week in
December 2013. The yearly number of. . . appeals more than
quintupled from 59, 600 appeals in 2011 to 384, 151 appeals
in 2013." J.A. 33.
effort to reduce the backlog of hospital appeals of Medicare
short-stay claim denials and ease the administrative burden
for all parties, CMS began offering health care providers the
opportunity to resolve their eligible appeals through
settlement. In its letter announcing the offer and
corresponding settlement parameters, CMS indicated that it
was proposing "to make a partial payment (68 percent of
the net payable amount of the denied inpatient claim) in
exchange for hospitals agreeing to the dismissal of any
associated appeals and accept[ing] the settlement as final
administrative and legal resolution of the eligible
claims." J.A. 46. CMS subsequently explained in a letter
to Congressman Kevin Brady that
[t]his settlement is intended to ease the administrative
burden for all parties. The settlement offers an opportunity
for the government to reduce the pending appeals backlog by
resolving a large number of homogeneous claims in a short
period of time. In addition, the settlement offers an
opportunity for hospitals to obtain payment now for rendered
services, rather than waiting a considerable amount of time
with the associated risk of not prevailing in the appeals
Hospitals alleged that, under its settlement offer, CMS
agreed to pay all such Medicare short-stay appeal claims if a
hospital accepted the offer of partial payment on or before
October 31, 2014, by submitting (1) a spreadsheet of eligible
claims to CMS by October 31, 2014, and (2) an executed copy
of the CMS administrative settlement agreement. Prime
Hospitals also alleged that "[s]ubject to checking the
spreadsheets to ensure that the claims were eligible
Short-stay Appeal Claims, CMS expressly and unconditionally
agreed to execute the settlement agreement and process the
eligible claims if the Prime Hospitals accepted its offer by
timely submitting the spreadsheet and an executed settlement
agreement." J.A. 34.
particular, Prime Hospitals pointed to CMS's settlement
agreement where it stated that "[u]pon receipt of an
Agreement executed by the Hospital, CMS will determine
whether the list of appeals furnished by the Hospital matches
CMS's records at each level of the administrative appeals
process, " and, "[i]f so, CMS will execute the
Agreement, " and, "[i]f not, CMS and the Hospital
will use their best efforts to work together to resolve
promptly any discrepancies so that a match is achieved, at
which time CMS will execute the Agreement." J.A. 56;
see also J.A. 34.
Hospitals alleged that, on or before October 31, 2014, they
accepted CMS's offer by each submitting a spreadsheet of
their eligible Medicare short-stay appeal claims and an
executed CMS administrative settlement agreement. Thus, Prime
Hospitals contends that once they accepted the offer, under
the terms of the settlement agreement, the agency was
contractually required to pay them sixty-eight percent of the
net payable amount of their 5, 079 separate Medicare
appeals-a total sum equaling $23, 205, 245-in exchange for
their agreement that the related appeals would be dismissed.
ultimately refused to allow the Prime Hospitals to
participate in the CMS settlement because the agency
"ha[d] been made aware of one or more ongoing False
Claims Act case(s) or investigation(s) involving the
facilities." J.A. 37. Prime Hospitals alleged that the
settlement agreement did not authorize such an exclusion.
Accordingly, Prime Hospitals alleged that CMS failed to
execute the settlement agreements as required and breached
the agreement by failing to pay "the agreed-upon sum of
$23, 205, 245." J.A. 35.
on these allegations, Prime Hospitals filed a complaint in
the district court for breach of contract. In their
complaint, Prime Hospitals specifically alleged that: (1) CMS
offered them a settlement agreement; (2) Prime Hospitals
signed and otherwise accepted the agreement; (3) CMS is
estopped from claiming that its signature was required to
form a binding contract; (4) CMS agreed to settle Prime
Hospitals' pending Medicare administrative appeals for
sixty-eight percent of the net payable amounts of those
denied claims in exchange for Prime Hospitals dismissing the
appeals and their acceptance of the settlements as a final
administrative and legal resolution of the claims; and (5)
CMS breached the agreement when it failed to pay plaintiffs
the agreed-upon sum ($23, 205, 245).
Hospitals also pleaded two other independent and alternative
causes of action in their complaint. They alleged that the
seven-month delay in deciding to exclude them from CMS's
settlement program and the time in which the agency had
allegedly improperly stayed their short-stay appeals amounted
to "a secret and illegal policy to prevent and delay
[Prime Hospitals] from exhausting their administrative
remedies under the Medicare appeals process with respect to
their Medicare short-stay claim denials." J.A. 41.
Prime Hospitals' second alternative cause of action,
Prime Hospitals requested declaratory and injunctive relief
from this scheme because it violated the Medicare Act and
their right to procedural and substantive due process. In
Prime Hospitals' third alternative cause of action for a
writ of mandamus, Prime Hospitals requested an order
compelling the Secretary to comply with the "clear,
indisputable and non-discretionary duty to provide a Medicare
appeals process for [Prime Hospitals] to administratively
appeal denials of their Medicare inpatient claims within
specified time frames." J.A. 43.
Secretary filed a motion to dismiss the complaint on various
grounds, including that the district court lacked subject
matter jurisdiction over the hospitals' breach of
contract claim because under the Tucker Act, 28 U.S.C. §
1491, the Court of Federal Claims had exclusive jurisdiction
to adjudicate this claim.
district court issued a written order that denied the
Secretary's motion to dismiss but transferred the case to
the Court of Federal Claims. According to the district court,
the Court of Federal Claims has Tucker Act jurisdiction over
the Prime Hospitals' breach of contract cause of action
because it involves questions of contract formation and
scope, not questions about Medicare reimbursement law. The
district court also concluded that, because Prime
Hospitals' second cause of action seeking declaratory and
injunctive relief and third cause of action seeking a writ of
mandamus depended on the resolution of the breach of contract
claim, those claims also arose under contract law.
jurisdiction to review the district court's decision to
transfer Prime Hospitals' case to the Court of Federal
Claims under 28 U.S.C. § 1292(d)(4)(A).
review a district court's decision to transfer a case
under the federal transfer statute, 28 U.S.C. § 1631, to
the Court of Federal Claims de novo because the district
court's underlying determination is one of jurisdiction.
Acceptance Ins. Co. v. United States, 503 F.3d 1328,
1332 (Fed. Cir. 2007). It is well settled that transfer of a
case to another court is only permissible if the destination
court has subject matter jurisdiction to hear the case.
Souders v. S.C. Pub. Serv. Auth., 497 F.3d 1303,
1307 (Fed. Cir. 2007) (citing 28 U.S.C. § 1631;
James v. Caldera, 159 F.3d 573, 582-83 (Fed. Cir.
1998)). Accordingly, our "crucial inquiry" is
whether the Court of Federal Claims has subject matter
jurisdiction over the claims at issue. Souders, 497
F.3d at 1307.
first discuss whether the Court of Federal Claims has
jurisdiction to adjudicate Prime Hospitals' claim for
breach of the alleged settlement agreement. This discussion
includes two parts. First, although the Court of Federal
Claims typically has Tucker Act jurisdiction over any express
or implied contract with the United States, the settlement
agreement at issue here arose from disputes under the
Medicare Act, which has its own comprehensive administrative
and judicial review scheme. We must determine, therefore,
whether the Medicare Act preempts Tucker Act jurisdiction
over the contract claim. We conclude that it does not.
Second, because the Medicare Act's own review scheme,
which places jurisdiction in the district court, provides the
sole avenue for judicial review for all claims "arising
under" the Medicare Act and the Supreme Court has
construed the "arising under" language broadly, we
must also determine whether the contract claim arises under
the Medicare Act. We conclude that it does not. In sum, we
hold that jurisdiction over the contract claim is proper in
the Court of Federal Claims.
address the question of whether the Court of Federal Claims
has subject matter jurisdiction over Prime Hospitals'
alternative claims seeking declaratory, injunctive, and
mandamus relief from the Secretary's alleged policy to
prevent and delay Prime Hospitals from exhausting their
administrative remedies. We conclude that it does not. We
take each issue in turn.
jurisdiction of the Court of Federal Claims is set forth in
the Tucker Act, 28 U.S.C. § 1491(a), which states:
The United States Court of Federal Claims shall have
jurisdiction to render judgment upon any claim against the
United States founded either upon the Constitution, or any
Act of Congress or any regulation of an executive department,
or upon any express or implied contract with the United
States, or for liquidated or unliquidated damages in cases
not sounding in tort.
Tucker Act, however, does not create any substantive right
enforceable against the United States. United States v.
Testan, 424 U.S. 392, 398 (1976). In order to come
within the jurisdictional reach of the Tucker Act, a
plaintiff must identify a separate source of substantive law
that creates the right to money damages. Fisher v. United
States, 402 F.3d 1167, 1172 (Fed. Cir. 2005) (citing
United States v. Mitchell (Mitchell II), 463 U.S.
206, 216-17 (1983); Testan, 424 U.S. at 398).
law is one such separate source of law compensable under the
Tucker Act. 28 U.S.C. § 1491(a); Higbie v. United
States, 778 F.3d 990, 993 (Fed. Cir. 2015), cert,
denied, 136 S.Ct. 37 (2015). The Supreme Court has also
recognized non-contractual bases of Tucker Act jurisdiction,
which include those claims "founded either upon the
Constitution, or any Act of Congress, or any regulation of an
executive department, " 28 U.S.C. § 1491(a).
Testan, 424 U.S. at 398. In order for a
noncontractual claim to be "cognizable under the Tucker
Act. . . the claimant must demonstrate that the source of
substantive law he relies upon can fairly be interpreted as
mandating compensation by the Federal Government for the
damages sustained." Mitchell II, 463 U.S. at
216-17 (internal quotation marks omitted). Tucker Act
jurisdiction is preempted, however, when that non-contractual
source of substantive law contains its own judicial review
scheme. United States v. Bormes, 568 U.S. 6, 12
(2012). If such a remedial scheme exists, it will establish
the exclusive framework for the monetary liability Congress
created under the statute. Id.
Medicare Act is a non-contractual source of substantive law
that mandates compensation to private parties by the Federal
Government. See, e.g., Appalachian Reg'l Healthcare,
Inc. v. United States,999 F.2d 1573, 1577 (Fed. Cir.
1993) (observing that the Medicare Act provides a substantive
right to money damages). It also contains its own judicial
review scheme. See Heckler v. Ringer,466 U.S. 602,
614-15 (1984) (explaining that 42 U.S.C. §§ 405(h),
(g), and 1395ii provide "the sole avenue for judicial
review for all 'claim[s] arising under' the Medicare
Act"). Accordingly, this court has held that ...