Community Oncology Alliance , Inc. v. Office of Management and Budget , Et Al .

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued January 9, 2020 Decided February 16, 2021
No. 19-5116
COMMUNITY ONCOLOGY ALLIANCE , I NC.,
APPELLANT
v.
OFFICE OF M ANAGEMENT AND BUDGET , ET AL .,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:18-cv-01256)
Laurence S. Shtasel, pro hac vice, argued the cause for
appellant. With him on the briefs was Alan M. Freeman.
Courtney L. Dixon, Attorney, U.S. Department of Justice,
argued the cause for appellees. With her on the brief was Alisa
B. Klein, Attorney.
Before: P ILLARD and KATSAS , Circuit Judges, and
SENTELLE , Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge KATSAS .
KATSAS , Circuit Judge: The plaintiff here seeks to
challenge a reduction in Medicare drug reimbursement rates

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caused by a sequestration order under the Balanced Budget
Act. We hold that the district court lacked subject-matter
jurisdiction over the case.
I
Through the Medicare program, the federal government
pays for health care for the elderly and disabled. 42 U.S.C.
§ 1395 et seq. Under Part B of Medicare, the government
reimburses physicians who provide covered outpatient services
and drugs to beneficiaries. The Medicare Modernization Act
establishes a reimbursement formula for certain Part B drugs:
Section 1395w-3a of Title 42 provides that “the amount of
payment determined under this section” is 106% of the drug’s
average sales price, as calculated under a statutory formula.
See id. § 1395w-3a(b)(1). Section 1395w-3a further provides
that “[t]here shall be no administrative or judicial review” of
“determinations of payment amounts under this section.” Id.
§ 1395w-3a(g)(1).
The Balanced Budget and Emergency Deficit Control Act
of 1985 (Balanced Budget Act) sets forth various spending
targets designed to reduce the federal budget deficit. 2 U.S.C.
§§ 901–03. When the targets are not met, the Act requires the
President to order automatic spending cuts known as
sequestration. Id. § 904(f)(5). The Act contains special rules
for “individual payments for services” covered by Medicare
Part B, id. § 906(d)(1)(A), which cannot be reduced by more
than two percent, id. § 901a(6)(A).
In 2013, Congress failed to reach a budget agreement. As
a result, the President issued a sequestration order that required
a two percent reduction in all Medicare reimbursements. This
order has been extended many times and is now set to remain
effective through 2030.

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Community Oncology Alliance is an association of
oncologists. The government reimburses many of its members
for the cost of cancer drugs provided to patients through
Medicare Part B. In this lawsuit, Community Oncology
contends that sequestration does not apply to these drugs,
which it says must be reimbursed at the full amount specified
by the Medicare Modernization Act. Community Oncology
invoked a private cause of action in the Balanced Budget Act,
2 U.S.C. § 922(a)(2). It requested declaratory and injunctive
relief barring application of the sequestration order to Medicare
Part B drugs.
Community Oncology moved to convene a three-judge
court under the Balanced Budget Act. The district court denied
the motion on the ground that section 922(a)(2) does not
encompass its claims.
The district court then dismissed the case for lack of
jurisdiction. It held that section 1395w-3a(g)(1) bars judicial
review of Community Oncology’s claim for increased
reimbursement of Part B drugs. Cmty. Oncology All., Inc. v.
OMB, No. 18-cv-1256, 2019 WL 1440132, at *2–3 (D.D.C.
Mar. 31 2019). The court did not reach the government’s
alternative argument that 42 U.S.C. § 405(h), another Medicare
provision, independently bars judicial review by stripping the
district court of its federal-question jurisdiction. We have
appellate jurisdiction under 28 U.S.C. § 1291.
On appeal, Community Oncology contends that the district
court had subject-matter jurisdiction under the Balanced
Budget Act and the federal-question statute, 28 U.S.C. § 1331.
It also contends that the Balanced Budget Act required
convening a three-judge district court. We review these legal
questions de novo. See Am. Hosp. Ass’n v. Azar, 895 F.3d 822,

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825 (D.C. Cir. 2018); Indep. Inst. v. FEC, 816 F.3d 113, 115
(D.C. Cir. 2016).
II
To establish the district court’s original jurisdiction,
Community Oncology first invokes 2 U.S.C. § 922(a)(2), a
provision of the Balanced Budget Act. It states that “[a]ny
Member of Congress, or any other person adversely affected
by any action taken under this title, may bring an action, in the
United States District Court for the District of Columbia, for
declaratory judgment and injunctive relief concerning the
constitutionality of this title.” By affording review specifically
in our district court, section 922(a)(2) both confers subject-
matter jurisdiction on that court and creates a private right of
action. See Wagner v. FEC, 717 F.3d 1007, 1011–13, 1012 n.5
(D.C. Cir. 2013); City of Rochester v. Bond, 603 F.2d 927, 931
(D.C. Cir. 1979).
The Balanced Budget Act authorizes three types of
declaratory or injunctive claims. Any Member of Congress
may sue “on the ground that any order that might be issued
pursuant to section 904 ... violates the Constitution.” 2 U.S.C.
§ 922(a)(1). Any Member of Congress also may sue “on the
ground that the terms of an order issued under section 904 ...
do not comply with the requirements of this title.” Id.
§ 922(a)(3). Finally, as noted above, any Member of Congress
“or any other person adversely affected by any action taken
under this title” may seek relief “concerning the
constitutionality of this title.” Id. § 922(a)(2). As quoted in the
provisions above, the phrase “this title” refers to Title II of
Public Law 99-177—i.e., the Balanced Budget Act. See Pub.
L. No. 99-177, § 200(a), 99 Stat. 1037, 1038 (1985). 1
1 The purported authorization of suits by individual members
of Congress raises questions under Article III of the Constitution, see

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This scheme permits private parties to raise facial
constitutional challenges to the Balanced Budget Act, but not
as-applied challenges to individual sequestration orders.
Section 922(a)(2), the only provision of the Act that allows
private litigation, permits Members of Congress and private
parties to raise claims “concerning the constitutionality of this
title”—i.e., of the Balanced Budget Act itself (emphasis
added). In contrast, section 922(a)(1) permits Members of
Congress to claim that an “order that might be issued pursuant
to” the Balanced Budget Act “violates the Constitution”
(emphasis added). Section 922(a)(2) most naturally denotes
facial challenges to the statute, while section 922(a)(1) most
naturally denotes as-applied challenges to individual
sequestration orders. Moreover, we must presume that these
different formulations—sharply juxtaposed in immediately
adjacent causes of action—mean something different. See,
e.g., DHS v. MacLean, 574 U.S. 383, 391–92 (2015); Russello
v. United States, 464 U.S. 16, 23 (1983).
A broader reading of section 922(a)(2) would make
nonsense of the statutory structure. If section 922(a)(2) were
read to permit challenges to individual sequestration orders,
then section 922(a)(1) would be entirely unnecessary.
Members of Congress could challenge sequestration orders
under either provision, and section 922(a)(1) would reach no
farther than section 922(a)(2). We should avoid interpretations
that “treat statutory terms as surplusage,” Babbitt v. Sweet
Home Chapter of Cmtys. for a Great Or., 515 U.S. 687, 698
(1995), much less interpretations that treat entire causes of
action as such.
Community Oncology resists the charge of surplusage by
emphasizing the phrase “might be issued” in section 922(a)(1).
Raines v. Byrd, 521 U.S. 811 (1997), but this case provides no
occasion for confronting them.

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It argues that this language authorizes Members of Congress to
challenge proposed sequestration orders before they are issued,
whereas section 922(a)(2) permits only retrospective
challenges to “any action taken” in the past. We are not so sure,
given the obvious Article III problem presented by challenges
to orders not yet issued. See, e.g., Clapper v. Amnesty Int’l
USA, 568 U.S. 398, 409 (2013). In any event, Community
Oncology’s interpretation of section 922(a)(2) still would
create surplusage. For if that provision permits as-applied
challenges to issued sequestration orders, then it also permits
Members of Congress to bring as-applied challenges to
proposed sequestration orders. The requirement of a claim
“concerning the constitutionality” of the Balanced Budget Act
does not distinguish between those two kinds of as-applied
challenges. And while section 922(a)(2) requires private
plaintiffs to have been harmed by an action already “taken”
under the Balanced Budget Act, it imposes no such restriction
on Members of Congress. Thus, even if section 922(a)(1)
permitted prospective challenges to proposed sequestration
orders, Community Oncology’s broad interpretation of section
922(a)(2) still would reduce section 922(a)(1) to surplusage.
As we have construed it, section 922(a)(2) does not cover
the claims in this case. In its complaint, Community Oncology
challenged “the application of the sequestration to Medicare
Part B drugs that was made effective April 1, 2013.” J.A. 23.
It sought a declaratory judgment that “the sequestration cannot
be applied to alter” the formula “for reimbursement of
Medicare Part B drugs,” as well as an injunction along the same
lines. Id. at 23–25. Because Community Oncology sought to
challenge one aspect of a sequestration order under the
Balanced Budget Act, rather than the Act itself, section
922(a)(2) conferred neither subject-matter jurisdiction nor a
cause of action. And although the Balanced Budget Act
requires the merits of “[a]ny action brought under” section

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922(a)(2) to be “heard and determined by a three-judge court,”
2 U.S.C. § 922(a)(5), that provision did not bar the district
court from determining whether this action was properly
“brought under” section 922(a)(2) in the first place. See
Shapiro v. McManus, 136 S. Ct. 450, 454–55 (2015). To the
contrary, section 922(a)(5) provides for “a three-judge court in
accordance with section 2284 of Title 28,” which in turn
empowers the initial district judge to “determine[] that three
judges are not required,” 28 U.S.C. § 2284(b)(1). For these
reasons, the district court here properly declined to convene a
three-judge court.2
III
Community Oncology next contends that the district court
had federal-question jurisdiction under 28 U.S.C. § 1331,
which gives district courts “original jurisdiction of all civil
actions arising under the Constitution, laws, or treaties of the
United States.” But 42 U.S.C. § 405(h) strips the district courts
of federal-question jurisdiction “on any claim arising under”
Title II of the Social Security Act. And 42 U.S.C. § 1395ii
extends that provision to “any claim arising under” Title XVIII
of the Social Security Act, which created the Medicare program
and is popularly known as the Medicare Act. Thus, if
Community Oncology’s claims arise under the Medicare Act,
then the district court lacked federal-question jurisdiction.
2 The district court held that section 922(a)(2) does not apply
for a different reason. It viewed Community Oncology’s claim as
essentially a statutory one that the sequestration order violated the
Medicare Modernization Act. J.A. 95; see Dalton v. Specter, 511
U.S. 462, 471–76 (1994). Community Oncology objects that its
claim was a constitutional one akin to the successful challenge to the
Line Item Veto Act in Clinton v. City of New York, 524 U.S. 417
(1998). Given our disposition above, we need not decide whether
the claim is better characterized as constitutional or statutory.

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Community Oncology asserts that its claims arise under
the Balanced Budget Act rather than the Medicare Act. But as
we have shown, the Balanced Budget Act creates neither
subject-matter jurisdiction nor a cause of action that covers the
claims. And in any event, the claims also arise under the
Medicare Act, which is enough to strip away federal-question
jurisdiction.
On the latter point, Weinberger v. Salfi, 422 U.S. 749
(1975), controls our decision. The plaintiffs in Salfi challenged
the constitutionality of certain benefit restrictions under Title II
of the Social Security Act. They argued that section 405(h) did
not bar the suit because their claims arose under the
Constitution, not Title II. The Supreme Court disagreed. It
held that the “arising under” language in section 405(h) applies
to any claim for which Title II “provides both the standing and
the substantive basis for the presentation of [the plaintiffs’]
constitutional contentions.” Id. at 760–61. Thus, because the
Salfi plaintiffs sought to recover benefits under Title II, their
claims arose under Title II. Id. at 761 (“To contend that such
an action does not arise under the Act whose benefits are sought
is to ignore both the language and the substance of the
complaint.”). The Court has applied the same reasoning to bar
claims seeking increased Medicare payments on constitutional
grounds. See, e.g., Shalala v. Ill. Council on Long Term Care,
Inc., 529 U.S. 1, 11–14 (2000); Heckler v. Ringer, 466 U.S.
602, 615–16 (1984).
The claims here are plainly ones “arising under” the
Medicare Act. As to standing, Community Oncology asserts
an injury that its members have not received the full
reimbursement allegedly owed to them under 42 U.S.C.
§ 1395w-3a—a provision of the Medicare Act, see Pub. L. No.
108-173, § 303(c)(1), 117 Stat. 2066, 2239–45 (2003).
Likewise, as to the merits, Community Oncology asserts that

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its members are entitled to additional reimbursement under the
Medicare Act. And even if Community Oncology’s claims
could be described as arising under the Constitution or the
Balanced Budget Act, all that matters under section 405(h) is
that the claims also arise under the Medicare Act. See Ill.
Council on Long Term Care, 529 U.S. at 5 (section 405(h)
covers claims for increased Medicare payments based on
“various [other] statutes”); Salfi, 422 U.S. at 760–61 (section
405(h) covers constitutional claims for increased Medicare
payments). Because Community Oncology’s claims arise
under the Medicare Act, section 405(h) stripped the district
court of its federal-question jurisdiction.
IV
Yet another provision, 42 U.S.C. § 405(g), provides a third
possible basis for judicial review in this case. Section 405(g)
authorizes the district courts to review “any final decision” of
the Secretary of Health and Human Services on claims arising
under the Medicare Act. See Am. Hosp. Ass’n, 895 F.3d at 825.
The “final decision” must be “made after a hearing to which
[the plaintiff] was a party,” and review must proceed based on
“evidence” in the administrative “record” and “findings” by
HHS. 42 U.S.C. § 405(g).
By focusing review on a “final decision” of HHS, section
405(g) “imposes two distinct preconditions for obtaining
judicial review of covered Medicare claims.” Am. Hosp. Ass’n,
895 F.3d at 825. First, to secure a reviewable “final decision”
on a claim, the plaintiff must have “presented” the claim to
HHS. See Mathews v. Eldridge, 424 U.S. 319, 328 (1976).
Second, the plaintiff must have fully exhausted all available
administrative remedies within HHS. See id.
Here, Community Oncology does not seek review of any
“final decision” on a claim that it—or any of its members—

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presented to HHS. Community Oncology states that its
members “that have presented claims for reimbursement for
Part B drugs since the effective date of the sequestration have
been reimbursed at the reduced amount” required by the
sequestration order, rather than at “the amount expressly
provided for in the Medicare Modernization Act.” Okon Dec.,
ECF No. 28-1, ¶ 5. This simply notes that some members of
Community Oncology have presented concrete reimbursement
claims to HHS. But Community Oncology identifies no such
claims; it provides no claim numbers, claim amounts, agency
dockets, agency findings, agency records, or agency decisions
of any kind. Accordingly, neither we nor HHS could determine
whether these unspecified claims satisfy other requirements for
review under section 405(g), such as complete exhaustion, see
Eldridge, 424 U.S. at 328; proper venue, see 42 U.S.C.
§ 405(g); and a timely challenge filed within sixty days of the
agency decision under review, id. Because Community
Oncology did not identify any concrete reimbursement claim
that its members presented to the agency, section 405(g) does
not confer subject-matter jurisdiction.3
3 Given our ruling that no provision conferred subject-matter
jurisdiction on the district court, we need not consider that court’s
holding that the Medicare Modernization Act bars judicial review in
this case. See 42 U.S.C. § 1395w-3a(g)(1). We also need not
consider whether section 1395w-3a(g)(1) strips jurisdiction, as the
district court concluded, or merely confers a defense on the merits.
Finally, we do not consider whether a plaintiff, once it satisfies the
presentment and other requirements of section 405(g), may seek the
kind of broad, prospective relief that Community Oncology requests.
Cf. Porzecanski v. Azar, 943 F.3d 472, 482 (D.C. Cir. 2019).

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V
The district court lacked subject-matter jurisdiction over
Community Oncology’s claims and thus properly granted the
government’s motion to dismiss.
Affirmed.

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