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Knapp Medical Center v. Hargan

United States Court of Appeals, District of Columbia Circuit

November 21, 2017

Knapp Medical Center, et al., Appellants
v.
Eric D. Hargan, in his official capacity as Acting Secretary of the Department of Health and Human Services, and Doctors Hospital at Renaissance, Appellees

          Argued September 19, 2017

         Appeal from the United States District Court for the District of Columbia (No. 1:15-cv-01663)

          Marc James Ayers argued the cause for appellants.

          With him on the briefs was Gregory Glen Marshall.

          Caroline D. Lopez, Attorney, U.S. Department of Justice, argued the cause for appellee Eric D. Hargan. With her on the brief was Alisa B. Klein, Attorney.

          Ryan Scarborough argued the cause for appellee Doctors Hospital at Renaissance.

          With him on the brief were John K. Villa, Enu Mainigi, and Richard A. Olderman.

          Before: Henderson and Griffith, Circuit Judges, and Williams, Senior Circuit Judge.

          KAREN LECRAFT HENDERSON, CIRCUIT JUDGE

         To prevent Medicare abuse through self-dealing, the Stark Law prohibits a physician from referring patients to a hospital or other healthcare facility in which he has a financial interest. There is an exception, however, for a physician-owned hospital, as long as the hospital complies with various reporting requirements. The Affordable Care Act amended the Stark Law to limit the ability of a physician-owned hospital to expand but carved out expansion exceptions for hospitals in medically underserved areas. As amended, the Stark Law prohibits judicial review of the procedure used to grant or deny an application for an expansion exception. The sole issue in this appeal is whether the district court correctly interpreted the preclusion-of-review provision to deprive it of subject matter jurisdiction. For the reasons that follow, we affirm.

         I.

         Title XVIII of the Social Security Act of 1935, 42 U.S.C. §§ 1395-1395lll, establishes Medicare, a medical insurance program for the elderly and disabled. Section 1877 of the Act- commonly referred to by the surname of its sponsor, former U.S. Congressman Peter Stark-forbids "self-referrals" by which a physician could profit from Medicare reimbursements to healthcare providers with which he has a financial relationship. 42 U.S.C. § 1395nn(a)(1)-(2). The "hospital ownership" exception accommodates physician-owned hospitals by allowing a physician to refer patients to a hospital in which he has an ownership interest, provided the hospital complies with reporting and disclosure requirements. 42 U.S.C. § 1395nn(d)(3)(D), (i)(1)(C)-(E), (i)(2).

         Title VI of the Patient Protection and Affordable Care Act of 2010 (ACA) amends the Stark Law to prohibit physician-owned hospitals to expand beyond "the number of operating rooms, procedure rooms and beds for which the hospital is licensed … on March 23, 2010." Pub. L. No. 111-148 § 6001(a), 124 Stat. 119, 684-689, codified as amended at 42 U.S.C. § 1395nn(d)(2)-(3), (i). The expansion restriction exempts some hospitals in medically underserved communities-"applicable hospitals" and "high Medicaid facilities"-subject to approval by the Secretary of the U.S. Department of Health and Human Services (HHS). See 42 U.S.C. § 1395nn(i)(3). As amended by the ACA, section 1395nn(i)(3) reads, in relevant part:

(A)Process. (i) … The Secretary shall establish and implement a process under which a hospital … may apply for an exception from the [nonexpansion] requirement …. [(ii)] The process under clause (i) shall provide … the community … the opportunity to provide input with respect to the application. (iii) … The Secretary shall implement the process under clause (i) on February 1, 2012. (iv) … Not ...

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