• Seventh Circuit Holds that Agency Cannot Divest Federal Courts of Jurisdiction by Unilaterally Reopening Its Administrative Proceedings
  • August 26, 2010 | Author: Daniel J. Hettich
  • Law Firm: King & Spalding LLP - Washington Office
  • The Seventh Circuit recently held that once judicial review properly begins, the Department of Health and Human Services (the Agency) may not divest the federal courts of jurisdiction by unilaterally reopening the Agency’s administrative proceedings.  See Doctors Nursing & Rehab. Ctr. v. Sebelius, No. 08-3096 (7th Cir. July 16, 2010).

    In Doctors Nursing & Rehabilitation, a nursing home claimed that it was underpaid for pulse-oximetry tests (a means for testing oxygen levels in the blood) because the agency applied, or should have applied, a rate other than the physician fee schedule rate.  The fiscal intermediary held that the Provider’s challenge was no more than a challenge to the fee schedule rate itself, and denied the Provider’s “redetermination” request.  The Provider then requested “reconsideration” of the fiscal intermediary’s dismissal from the Qualified Independent Contractor (QIC).  The QIC affirmed the dismissal and stated that its decision was “final and not subject to any further review.”  The Provider then filed an appeal in federal district court.  While the appeal was pending in district court, the Centers for Medicare and Medicaid Services (CMS) decided that the fiscal intermediary erred in terminating the review process and sought to reopen the administrative proceedings.  CMS also filed a motion to dismiss the federal court suit for lack of jurisdiction alleging that the decision being appealed was no longer final.  The district court granted CMS's motion to dismiss and the Provider appealed to the Seventh Circuit. 

    The Court reversed the district court’s dismissal holding that “the agency may not divest the federal courts of jurisdiction by unilaterally reopening its administrative proceedings.” Id. at 7.  The Court provided three reasons for its holding.  First, as a general rule, jurisdiction is analyzed based on events as they exist at the time the case is brought and subsequent procedural events, therefore, do not divest a court of jurisdiction that exists at the outset of a suit.  In addition, Congress has spoken on the issue of when an agency may reopen administrative proceedings in 42 U.S.C. § 405(g), which permits the Court “on motion of the [agency] made for good cause shown before the [agency] files [its] answer, [to] remand the case to the [agency] for further action.”  Id.   Instead of filing a motion to dismiss for lack of jurisdiction, therefore, the Agency, prior to filing its answer, should have requested remand for good cause.  Finally, the Court held that “normal procedures of appellate review” dictate that “when one tribunal properly takes a case on appeal, the inferior tribunal transfers authority over the case.”  Id. at 8.  The Court also reasoned that the Agency’s position would open the door for agency manipulation: “If the agency became concerned that a Court of Appeals—or even the Supreme Court—might issue a decision adverse to its interests, it could reopen its proceedings and yank the case out of the courts, regardless of the amount of resources that had already been expended or the advanced stage of the case.”  Id. at 13.  The Court therefore remanded the case to the district court to consider whether to grant CMS’s motion for remand based on a showing of good cause.

    The Court’s decision, especially its statement that jurisdiction is determined at the time a suit is initiated, may have implications for CMS’s recent Ruling (CMS-1498-R) in which CMS purports to destroy PRRB jurisdiction over hundreds of DSH appeals based on CMS’s order for the fiscal intermediaries to recalculate the SSI component of the DSH calculation.