Health Law Daily Sequestration payment cuts to Medicare Part B precluded from judicial review
Thursday, April 4, 2019

Sequestration payment cuts to Medicare Part B precluded from judicial review

By Rebecca Mayo, J.D.

A district court judge held that the court did not have jurisdiction to hear a challenge to a reduction in Medicare Part B reimbursement payments even though the reduction came as a result of a sequestration order.

A challenge to sequestration payment cuts made by the Office of Management and Budget (OMB) to Medicare Part B reimbursements is still fundamentally a challenge to Medicare Part B reimbursements and subject to judicial review preclusions under the Medicare regulations. A District Court granted a motion to dismiss a claim filed against OMB and HHS challenging a reduction in Medicare Part B drug payments based on a sequestration order. The court found that the calculation of Medicare reimbursement payments was not judicially reviewable and therefore the court did not have subject matter jurisdiction (Community Oncology Alliance, Inc. V. Office of Management and Budget, et al., March 31, 2019, Chutkan, T.).

Reimbursement. Medicare reimburses physicians when they provide covered services, including the administration of some drugs and biologic products, to enrollees in Part B of Medicare. The Medicare Modernization Act (MMA) requires that payments made to providers for most drugs under Medicare Part B be calculated based on average sale price (ASP) data reported by manufacturers. Generally, Part B drugs are reimbursed at 106 percent of the ASP.

The Balanced Budget and Emergency Deficit Control Act provides sequestration provisions which are designed to reduce budgetary resources, but specifically limits reductions in spending on some Medicare programs, including individual payments for services furnished as part of Medicare Part B, to two percent. In 2013, after Congress failed to pass a budget, a sequestration calculation was ordered and Medicare payments were reduced by two percent. The sequestration cut was applied to Part B drugs, cutting the Part B drug statutory reimbursement formula from ASP plus 6 percent to ASP plus 4.3 percent. The sequestration order has been extended and is scheduled to continue in to 2027.

The challenge. Community Oncology Alliance, Inc. Is a non-profit corporation that represents more than 5,000 health care providers who are independent, community-based oncologists. Community Oncology sued the OMB and HHS, alleging that the sequestration of funds for Medicare Part B drugs was unauthorized by Congress because the language allows for a reduction only in payments for services. OMB and HHS moved to dismiss for lack of subject matter jurisdiction based on four grounds, including the provision of the MMA that precludes judicial review of claims concerning determinations of reimbursements paid by Medicare for Part B drugs.

Decision. The MMA clearly states that there shall be no administrative or judicial review of determinations of payment amounts under the applicable section. To determine whether a challenged action is covered by a statute that preclude judicial review, the question is whether the challenged action is inextricably intertwined with an action that all agree is shielded from review, regardless of where that action lies in the agency’s decision tree. Here, although Community Oncology attempts the frame the challenge as one to the sequestration provision of the Budget Control Act, the claims effectively challenge the payments made for Medicare Part B drugs. Therefore, because HHS’s reduced payments due to sequestration cuts are inextricably intertwined with HHS’s determination of payment amounts under the MMA, judicial review is precluded.

The case is No. 18-cv-1256 (TSC).

Attorneys: Alan M. Freeman (Blank Rome LLP) for Community Oncology Alliance, Inc. Vinita B. Andrapalliyal, U.S. Department of Justice, for Office of Management and Budget.

Companies: Community Oncology Alliance, Inc.

MainStory: TopStory CaseDecisions CMSNews PaymentNews PartBNews DistrictofColumbiaNews

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