A Potential Route to RADV Judicial Review: Part III

By Reed Smith

May 2, 2023

In part I, we discussed whether federal district courts could exercise jurisdiction under the federal-question statute over legal challenges to overpayment determinations made by the Centers for Medicare & Medicaid Services (CMS) under the agency’s controversial Risk Adjustment Data Validation (RADV) program for Medicare Advantage (MA) organizations. In part II, we discussed whether MA organizations must exhaust administrative remedies before filing suit under the federal-question statute.

In this final installment, we discuss a litigation nuance of potential significance in this unique context: namely, whether a district court may find that a MA organization can only challenge a RADV overpayment determination in the United States Court of Federal Claims.

Unlike in traditional Medicare, which uses provider and supplier participation agreements, the Medicare Act expressly provides for the Secretary of Health and Human Services to enter into “contracts” with MA organizations. See 42 U.S.C. §1395w-27. The terms of such contracts are largely set by statute or regulation. For example, the standard contract between a MA organization and CMS (acting on behalf of the Secretary) contains language parroting the CMS regulatory requirement that the agency “will not implement, other than at the beginning of a calendar year, requirements ... that impose a new significant cost or burden on MA organizations or plans, unless a different effective date is required by statute.” 42 C.F.R. §422.521; see also 42 U.S.C. §1395w-26(b)(4) (“The Secretary may not implement, other than at the beginning of a calendar year, regulations under this section that impose new, significant regulatory requirements on a [MA] organization or plan.”). This contractual language and the sources of law on which it is based arguably limit CMS’s authority to implement its RADV program, including through the use of the Medicare Act’s general grant of retroactive-rulemaking authority (a topic we discussed in more detail in an earlier blog post here).

Importantly, both the contract-related nature of the MA program and the contract-specific nature of RADV audits present a potential threshold legal question not found in most disputes over federal agency action. That threshold legal question involves the interaction of two statutes: the Administrative Procedure Act (APA) and the Tucker Act.

Recall that the APA provides for judicial review of “final agency action for which there is no other adequate remedy in a court ....” 5 U.S.C. §704. As described by the Supreme Court, this provision “makes it clear that Congress did not intend the general grant of review in the APA to duplicate existing procedures for review of agency action.” Bowen v. Massachusetts, 487 U.S. 879, 903 (1988).

The Tucker Act, in turn, provides that the Court of Federal Claims in Washington, D.C., “shall have jurisdiction to render judgment upon any claim against the United States founded ... upon any express ... contract with the United States ....” 28 U.S.C. §1291(a)(1). This jurisdiction is exclusive for contract claims in excess of $10,000. See 28 U.S.C. §1346(a)(2) (providing district courts and the Court of Federal Claims with concurrent jurisdiction over contract claims against the United States “not exceeding $10,000 in amount”). And save for certain limited exceptions not relevant here, the Court of Federal Claims does not have authority to grant equitable remedies such as an injunction. See Richardson v. Morris, 409 U.S. 464, 465 (1973).

Courts have wrestled with whether the potential availability of an action in the Court of Federal Claims negates an APA action in federal district court. For example, the United States Court of Appeals for the Federal Circuit has stated that a “claimant with an alternative adequate remedy in another court, such as the Court of Federal Claims, cannot seek review of agency action in a district court under the APA.” Consol. Edison Co. of N.Y. v. United States, 247 F.3d 1378, 1383 (Fed. Cir. 2001). In so concluding, the Federal Circuit found that utilities that had paid certain assessments to the Federal Government—which the utilities alleged violated contracts with the Federal Government—could seek return of the money paid by filing suit in the Court of Federal Claims under the so-called “illegal exaction” doctrine. See id. at 1384. As a result, the Federal Circuit ruled that a federal district court erred in denying the Government’s motion to transfer the case to the Court of Federal Claims. See id. at 1386; see also 28 U.S.C. §1292(d)(4)(A) (providing that the Federal Circuit “shall have exclusive jurisdiction of an appeal from an interlocutory order of a district court ... granting or denying, in whole or in part, a motion to transfer an action to the United States Court of Federal Claims”), (B) (“When a motion to transfer an action to the Court of Federal Claims is filed in a district court, no further proceedings shall be taken in the district court until 60 days after the court has ruled upon the motion. If an appeal is taken from the district court’s grant or denial of the motion, proceedings shall be further stayed until the appeal has been decided by the Court of Appeals for the Federal Circuit.”).

It remains to be seen how courts will apply these concepts in the context of APA suits challenging RADV overpayment determinations. However, MA organizations impacted by RADV audits should consider the possibility that CMS may seek to transfer such suits to the Court of Federal Claims.