Health Law Daily HHS reporting rule for laboratory test payments cannot be reviewed by courts
Monday, September 24, 2018

HHS reporting rule for laboratory test payments cannot be reviewed by courts

By Leah S. Poniatowski

A laboratory trade association’s challenge to HHS regulations requiring reporting of pricing information lacked subject matter jurisdiction because the governing statute explicitly precluded judicial review and the reporting requirement is "inextricably intertwined" with the whole statute. In dismissing the lawsuit, the federal district court for the District of Columbia ruled that the regulations did not affect the "primary conduct" of the labs (American Clinical Laboratory Association v. Azar, September 21, 2018, Jackson, A.).

Protecting Access to Medicare Act. Congress revised how it calculates the Clinical Laboratory Fee Schedule for Medicare Part B coverage by implementing a market-based approach through the Protecting Access to Medicare Act of 2014 (PAMA) (P.L. No. 113-93). One provision, section 216 of PAMA, provides that the amount Medicare will pay for clinical diagnostic laboratory tests will depend upon the amounts private payors provide for these types of tests. In order to determine those amounts, "applicable laboratories" must report the amount and volume of private sector payments received for these tests, data which had not been collected prior to PAMA. Section 216 is comprised of eight subsections: (a) requires labs to report private payor payments received for tests; (b) requires the HHS Secretary calculate the Medicare payment rates using the private payor data; and (h) provides that there is no "administrative or judicial review . . . of the establishment of payment amounts under this section."

"Applicable laboratory." In the regulations promulgating PAMA, "applicable laboratory" is defined as one that "[b]ills Medicare Part B under its own National Provider Identifier (NPI)." The American Clinical Laboratory Association, which represents clinical and anatomic pathology laboratories, filed a lawsuit against the HHS Secretary, challenging that the regulation’s definition of "applicable laboratory" was contrary to the PAMA and, thus, violates the Administrative Procedures Act. The Secretary asserted that subsection (h) of PAMA bars judicial review of the regulation (42 U.S.C. § 1395m-1(h)(1)).

Judicial review bar. The trade association argued that subsection (h) did not apply to subsection (a) or the final rule, but this reading is not consistent with the spirit or the letter of the statute, the court explained, particularly as there was no legislative history to provide additional clarification. Subsection (a) of section 216 is but one part of the whole, and the data labs must report under subsection directly affects the payment calculation set out in subsection (b), the court observed, also noting that the data is not being collected for any other purpose. The data collected under subsection (a) meets the case law "inextricably intertwined" standard and, thus, the data collection requirement is not distinct from the rest of section 216. Moreover, the reporting requirement does not regulate the "primary conduct" of the labs. The court explained that the objective of the regulation is to provide HHS with data necessary to calculate Medicare payment amounts, and the civil penalties for noncompliance do not impact the labs’ primary conduct. Therefore, the lawsuit was dismissed for lack of subject matter jurisdiction.

The case is No. 17-2645 (ABJ).

Attorneys: Ashley Charles Parrish (King & Spalding LLP) for American Clinical Laboratory Association. Kate Bailey, U.S. Department of Justice, for Alex M. Azar, II.

Companies: American Clinical Laboratory Association

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