Reported / Citable
Background
CMS adopted a final rule reclassifying most skin substitutes as “incident-to” supplies for Medicare payment purposes, rather than reimbursing them under the prior Average Sales Price framework. The change reduced reimbursement for many skin-substitute claims.
The CAMPs Initiative, joined by two physicians who use skin substitutes in their practices, challenged the rule under the Administrative Procedure Act, the Medicare statute, and the Fifth Amendment. The physicians had presented reimbursement claims to CMS but had not completed the Medicare administrative appeals process or obtained a final decision from the Secretary.
The Court’s Holding
The court granted the government’s Rule 12(b)(1) motion and dismissed the complaint without prejudice for lack of subject-matter jurisdiction. Medicare’s channeling provisions require claims arising under the Medicare Act to proceed through the agency and reach a final decision before judicial review is available.
The plaintiffs’ statutory, APA, and constitutional challenges all arose under Medicare because they were inextricably intertwined with their request for higher reimbursement of skin substitutes. Their claims were not collateral to benefits determinations, and the asserted economic harm and anticipated agency rejection did not make administrative exhaustion futile.
Key Takeaways
- Providers must complete Medicare’s administrative-review process before bringing reimbursement-related challenges in federal court.
- Labeling a Medicare challenge as APA, constitutional, or declaratory relief does not avoid the channeling requirement.
- Economic hardship and an expectation of an adverse agency decision do not establish the futility exception.
Why It Matters
The decision reinforces the Fifth Circuit’s strict application of Medicare’s exhaustion requirement. Industry-wide challenges to payment rules generally cannot proceed directly in district court when the requested relief depends on Medicare coverage or reimbursement determinations.