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No. 00-558

In the Supreme Court of the United States


DONNA E. SHALALA, SECRETARY OF HEALTH
AND HUMAN SERVICES, PETITIONER

v.

OHIO HOSPITAL ASSOCIATION, ET AL.



ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT



REPLY BRIEF FOR PETITIONER



SETH P. WAXMAN
Solicitor General
Counsel of Record
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217


REPLY BRIEF FOR PETITIONER



1. Respondents do not dispute that this case turns on
the proper construction of 42 U.S.C. 405(h), which (as
incorporated into the Medicare Act by 42 U.S.C. 1395ii)
provides that "[n]o action against the * * * the
[Secretary of Health and Human Services] * * * shall be
brought under [28 U.S.C. 1331 or 1346] to recover on any
claim arising under [the Medicare Act]." 42 U.S.C. 405(h).
Nor do respondents dispute that, after the court of
appeals issued the decision below, this Court clarified
Section 405(h)'s preclusive scope in Shalala v. Illinois
Council on Long Term Care, Inc., 120 S. Ct. 1084 (2000).
In Illinois Council, the Court reaffirmed its prior holdings,
in Weinberger v. Salfi, 422 U.S. 749 (1975), and Heckler v.
Ringer, 466 U.S. 602 (1984), that Section 405(h) channels
virtually all private party challenges to the Secretary's
Medicare policies and regulations through the specific
administrative and judicial review mechanisms set out in
the Medicare Act itself. See Illinois Council, 120
S. Ct. at 1092, 1094. And it clarified that the exception to
Section 405(h)'s bar on review under 28 U.S.C. 1331
previously recognized in Bowen v. Michigan Academy of
Family Physicians, 476 U.S. 667 (1986)applies only
where barring suit under Section 405(h) would not merely
delay judicial review, but instead would preclude judicial
review altogether. 120 S. Ct. at 1096-1097.


Respondents concede that the question in this case is
whether respondents may bring suit under 28 U.S.C. 1331
to challenge the Secretary's policies despite the bar
provided by Section 405(h). Br. in Opp. i. And they
effectively concede that Illinois Council bears strongly on
the answer to that question. They argue, however, that
this Court need not grant the petition, vacate the
judgment, and remand the case for further consideration
in light of Illinois Council because the decision below is
consistent with Illinois Council. Br. in Opp. 12. In
particular, they argue that applying Section 405(h) to bar
this suit would have the effect of precluding judicial
review entirely. Id. at 13. As explained below (pp. 4-6,
infra) and in our opening brief (at 3-5, 21-22 nn.13-14),
that assertion is incorrect; respondents can obtain judicial
review of any adverse action taken against them by the
Secretary or the Attorney General. More important for
present purposes, however, the court of appeals' decision
does not address the extent to which permitting
respondents to proceed with this suit is consistent (or
inconsistent) with this Court's decision in Illinois Council;
and for good reason, since that decision was announced
months before this Court decided Illinois Council. Under
such circumstanceswhere this Court issues a potentially
dispositive decision after the court of appeals has issued
its decisionthis Court's traditional practice is to grant
the petition, vacate the judgment of the court of appeals,
and remand for further consideration in light of the
intervening precedent. We see no reason to depart from
that practice here.


2. Respondents, in any event, err in asserting that the
court of appeals' decision is consistent with this Court's
decision in Illinois Council. As we explain in the petition
(at 19-20), the decision below appears to hold that Section
405(h) does not apply here because respondents' challenge
to the Secretary's Medicare policies does not concern
"individual claimants * * * seeking a judgment directing
the payment of benefits." Pet. App. 11a. And, as we also
explain in the petition (at 19-20), this Court rejected that
rationale in Illinois Council. Section 405(h), the Court
held, cannot be limited "to claims for monetary benefits."
120 S. Ct. at 1094.


Recognizing that difficulty, respondents assert (Br. in
Opp. 21) that the Sixth Circuit "did not base its decision
on whether this was a claim for benefits." Respondents'
assertion is difficult to reconcile with the court of appeals'
opinion. The court of appeals first distinguished Salfi and
Ringer on the ground that, unlike the plaintiffs in those
cases, the hospitals here "are not seeking a judgment
directing the payment of benefits." Pet. App. 12a
(emphasis added). And the court of appeals further
declared that Section 405(h) "simply seeks to preserve the
integrity of the administrative process Congress designed to deal with
challenges to amounts determinations by dissatisfied
beneficiaries." Pet. App. 13a (emphasis added). Those
assertions are at odds with Illinois Council's rejection of a
"distinction that limits the scope of § 405(h) to claims for
monetary benefits." 120 S. Ct. at 1094. See also id. at
1095 (Michigan Academy does "not limit the scope of §
405(h) itself to instances where a plaintiff, invoking § 1331,
seeks review of an `amount determination.'"); id. at 1096
(limiting Section 405(h) to "amount determinations"
would "have created a hardly justifiable distinction between `amount deter-
minations' and many other similar HHS determinations.").
To support their contrary contention, respondents
argue that the court of appeals' reference "to `amount
determinations'" in distinguishing Salfi and Ringer
simply served to "highlight[] the fact that a claimant
seeking payment of benefits quite clearly has
administrative channels" to "traverse before any judicial
review can take place." Br. in. Opp. 21. In contrast,
respondents contend (at 22) that it is "the unavailability
of such procedures in the case at hand * * * which
formed the basis for the [court of appeals'] decision."
Thus, respondents insist (at 17) that the Sixth Circuit
correctly applied the exception to Section 405(h) "subse-
quently adopted by the Illinois Council majority," even
though the court of appeals did not have the benefit of
Illinois Council to guide it. We disagree. The court of
appeals did not invoke claims for benefits as an example of
a situation where a litigant can invoke administrative pro-
cedures; the word "example" is not even used. Instead,
most naturally read, the court of appeals' decision invokes
claims for benefits as the limiting principle, i.e., it appears
to hold that, unless the suit is a claim for benefits, Section
405(h) simply does not apply. See, e.g., Pet. App. 11a, 13a.
Even if that were more doubtful, however, the court of
appeals should be given the opportunity to reconsider the
case and issue a decision that is more clearly consistent
with Illinois Council.
More fundamentally, respondents simply err when they
assert (Br. in Opp. 16) that this case falls within the
exception to Section 405(h)'s preclusive scope recognized
by this Court in Illinois Council. As explained above (p. 1,
supra), and in our opening brief (at pp. 20-21), Illinois
Council clarified that the exception to Section 405(h)'s
preclusive scope first recognized in Michigan Academy is
limited to instances where applying Section 405(h) to bar
suit under 28 U.S.C. 1331 would not merely delay review, but "would
mean no review at all." 120 S. Ct. at 1095-1096. In this
case, applying Section 405(h) would merely delay
reviewand would not preclude review altogetherbecause respondents could obtain judicial
review of any governmental action taken against them
based on the Secretary's Medicare policies. For example,
as the court of appeals acknowledged, any time the
Secretary makes a reimbursement determination or seeks
recoupment for overpayments based on the challenged
policies, respondents will be able to seek administrative
and then judicial review pursuant to Sections 405(b) and
(g), as incorporated into Medicare by 42 U.S.C.
1395ff(b)(1). See Pet. App. 4a, 33a. Moreover, if the
Attorney General were to rely on the Secretary's policies
in proceeding against respondents through a False Claims
Act suit, 31 U.S.C. 3729, respondents would not merely be
entitled to judicial review; they would be entitled to a
judicial determination on the issue of liability in the first
instance. Indeed, under the False Claims Act,
respondents could prevail even if they violated the
Secretary's policies; the government would be charged
with proving that respondents knowingly submitted
claims that were false. See Pet. App. 33a (noting scienter
requirement).
For that reason, the court of appeals erred in relying on
the fact that "[t]he hospitals had no opportunity to invoke
* * * administrative procedures in connection with the
disputes that led to the filing of the instant lawsuit, the
Secretary never having taken the type of administrative
action from which administrative appeals could be pro-
secuted." Pet. App. 5a. The hospitals have not had
the opportunity to invoke the administrative and judicial
review mechanisms provided by Medicare because 42
U.S.C. 1395ff(b)(1) defers judicial review until the
Secretary takes some action with respect to
reimbursement (denial or recoupment). Similarly, the
hospitals have not had an opportunity for judicial
consideration of their potential liability under the False
Claims Act because the False Claims Act provides for
judicial determinations only when and if the government
initiates an action by formally filing a suit alleging actual
liability on their part.
The court of appeals thus clearly confused the question
of the availability of review with its timing. Any time the
policies respondents seek to challenge are applied to them,
they will have the opportunity to challenge them in court;
they simply must wait for the policies to be applied to
them. Indeed, in that respect, this case is indistinguishable
from Illinois Council. See Pet. 22-24. In Illinois Council,
the plaintiff association complained that its members
could not obtain judicial review until after the Secretary
had imposed a sanction on them for violating the
regulations. See 120 S. Ct. at 1097; Pet. 23. They thus,
like respondents here, had not had an "opportunity to
invoke * * * administrative procedures in connection"
with their challenge because, in that case too, the
Secretary had not "taken the type of action from which
appeals could be prosecuted." This Court nevertheless
held that the plaintiff's members were required to await
action from the Secretary before seeking review. The
court of appeals offered no reason for the different result
it reached in this case. Nor do respondents do so in their
brief in opposition.
Moreover, in Illinois Council, this Court further ex-
plained that hardships from delay are not sufficient to
permit immediate review under 28 U.S.C. 1331, unless
they are so extreme as to convert "what appears to be
simply a channeling requirement into complete preclusion
of judicial review." 120 S. Ct. at 1098. The Court
concluded in that case that "the Council has not shown
anything other than potentially isolated instances of the
inconveniences sometimes associated with the
postponement of judicial review." Id. at 1099. The same
is true here. Nowhere did the court of appeals offer any reason why judicial review cannot be
deferred, consistent with 42 U.S.C. 1395ff(b)(1), until such
time as the Secretary takes adverse action against respon-
dents. The only hardship associated with deferring
judicial review that respondents identify here is the
possibility of being subject to a False Claims Act suit. See
Br. in Opp. 8, 19. But that does not mean that
respondents will be denied judicial review altogether. If
the Attorney General does proceed against respondents'
member hospitals under the False Claims Act, those
members will have the opportunity for a judicial
determination of their liability under the False Claims Act
itself. Moreover, the dilemma faced by respondents and
their members here is no different from that faced by all
potential civil litigants. They may wait for litigation and
maintain their defenses (risking enhanced financial ex-
posure), or they may settle to minimize risk. Pet. App.
28a.
Despite that fundamental flaw in the court of appeals'
analysis, respondents attempt to defend the court of
appeals' decision on the ground that "[t]he opinion makes
no reference to the `timing' of administrative review." Br.
in Opp. 20. But the reason why the opinion does not
mention "timing" is that it fails to recognize the
significance of the difference between the current
unavailability of judicial review (a timing issue) and a total
preclusion of review (an availability issue). Since this
Court emphasized that distinction in Illinois Council, 120
S. Ct. at 1097, the court of appeals should be given the
opportunity to reconsider its decision.
3. Alternatively, respondents argue (Br. in Opp. 17-18)
that Section 405(h) is inapplicable here because this
dispute arose in the context of a False Claims Act
investigation. Respondents argue that the Secretary
should not, "[b]y her choice of forum, * * * be permitted
to shield her action from judicial review." Br. in Opp. 18.
Respondents, however, overlook the fact that no False
Claims Act suit was ever initiated against any of
respondents' member hospitals. They also overlook the
factrecognized by the district court and the court of
appeals (Pet. App. 15a, 28a)that the Attorney General,
and not the Secretary, has exclusive enforcement
discretion under the False Claims Act. See Heckler v.
Chaney, 470 U.S. 821, 835 (1985). And they overlook the
fact that invocation of the False Claims Act would not
deny any hospital an opportunity for judicial review of
any adverse action that is actually taken against it. To the
contrary, as we have said, should a False Claims Act suit
ever be filed, the defendants will be able to obtain a
judicial determination regarding their liability under that
Act. See pp. 6-7, supra; Pet. App. 15a. Thus, the possi-
bility that the Attorney General may file a False Claims
Act suit in the future does not render judicial review
"unavailable" under this Court's decision in Illinois
Council.
4. Respondents also assert (Br. in Opp. 18) that Section
405(h) is inapplicable here because the hospitals "are not
seeking `to recover' any claim." That argument, too, is
inconsistent with Illinois Council. In Illinois Council, the
question before the Court was whether the phrase "to
recover on a claim" extends only to situations "where an
individual seeks a monetary benefit," or instead also
includes cases (like Illinois Council and this case) where a
plaintiff "who might later seek money or some other
benefit from (or contest the imposition of a penalty by) the
agency challenges * * * the lawfulness of a policy,
regulation, or statute that might later bar recovery of that
benefit (or authorize the imposition of the penalty)." 120
S. Ct. at 1092. After reviewing the statutory text and its
precedents, the Court adopted the latter, broader
construction. The phrase "to recover on a claim," the
Court held, does not limit Section 405(h)'s application to
"actual present" claims, but also includes challenges to
regulations that could lead to "potential future" claims as
well. Id. at 1094. Indeed, in Illinois Council itself, the
respondent did not seek an award of money; instead, it
sought to challenge policies and regulations which, in the
future, might have led to liability for its members.
Respondents in this case likewise challenge the
Secretary's regulations in an effort to avoid potential
future liability. See Pet. App. 31a ("At bottom, this is a
request for an adjudication of the propriety of past
payment of benefits, which * * * is a claim that arises
under the Medicare Act.").
5. Finally, respondents contend (Br. in Opp. 22-25) that
the Court should not grant the petition, vacate the
judgment below, and remand to the court of appeals in
light of Illinois Council because the court of appeals fully
considered that decision, which was brought to its
attention in a petition for rehearing. The court of appeals,
however, made no effort to reconcile its decision with this
Court's decision in Illinois Council; and respondents
themselves struggle in vain to distinguish that
intervening decision. See pp. 5-7, supra. Indeed, to the
extent the court of appeals' order denying rehearing is
relevant (see Br. in Opp. 23), it only underscores the court
of appeals' failure to address the matter. As we point out
in the petition (at 25 n.15), the court of appeals denied
rehearing on the ground that "the issues raised in the
petition were fully considered upon the original
submission and decision of the case." Pet. App. 36a. But
it is simply not possible that the court of appeals "fully
considered" this Court's decision in Illinois Council when
the case was originally submitted and decided, since
Illinois Council was decided on February 29, 2000, some
two months after the panel issued the judgment below on
December 29, 1999. In analogous situations, "where, not
certain that the case was free from all obstacles to
reversal on an intervening precedent," the Court has
"remand[ed] the case to [the rendering] court for
reconsideration." Henry v. City of Rock Hill, 376 U.S. 776,
776 (1964) (per curiam); see Thomas v. American Home
Prods., Inc., 519 U.S. 913, 915 (1996) (Scalia, J.,
concurring) (discussing Court's "routine[]" practice of
vacating and remanding to allow court of appeals to
consider intervening Supreme Court decisions); O'Leary v.
Mack, 522 U.S. 801 (1997) (vacating and remanding case
to court of appeals for further consideration in light of
intervening Supreme Court precedent); Kapoor v. United
States, 516 U.S. 801 (1995) (same); see also 28 U.S.C. 2106
("[t]he Supreme Court * * * may * * * vacate * * *
any judgment, decree, or order of a court lawfully brought
before it for review, and may remand the cause and * * *
require such further proceedings to be had as may be just
under the circumstances"). That course is likewise
appropriate here.
* * * * *
For the reasons stated above and in the petition for
writ of certiorari, it is respectfully submitted that the
petition should be granted, the judgment below vacated,
and the case remanded to the court of appeals for further
consideration in light of Shalala v. Illinois Council on
Long Term Care, Inc., 120 S. Ct. 1084.

SETH P. WAXMAN
Solicitor General

DECEMBER 2000
Similarly, in Ringer, judicial review was available only after the
individual had undergone the medical procedure. In that case, one of
the plaintiffs asserted that the policy he sought to challenge precluded
him from undergoing the medical procedure that was a prerequisite to
administrative and judicial review; no physician would perform the
operation, he argued, in light of the Secretary's announced policy of not
paying for it, and it was the non-payment policy that he sought to
challenge. This Court nonetheless held that Section 405(h), as
incorporated into Medicare by 42 U.S.C. 1395ii, bars recourse to an
anticipatory declaratory judgment action under 28 U.S.C. 1331. 466
U.S. at 622. See also Pet. 23-24.
For the same reason, respondents' speculation (Br. in Opp. 19)
that the "[Secretary] has not and will not" actually apply the
challenged policies to the hospitalseither in an initial determination
or in a re-opening of prior payment determinationsis beside the
point. If the Secretary does not apply the challenged policies to
respondents, respondents have no basis for haling the Secretary into
court. And, if the Attorney General does rely on the challenged policies
in False Claims Act suits against one of more of respondents' member
hospitals in the future, the defendants in those suits will have an
opportunity to litigate all relevant issues in court in the context of
those suits.
Moreover, the False Claims Act seeks to vindicate governmental
interests separate and distinct from simply collecting Medicare
overpayments in an administrative recoupment proceeding. See
generally United States v. Neifert-White Co., 390 U.S. 228, 232 (1968).
Respondents' reliance on the possibility of a future False Claims
Act suit to justify this suit is particularly unpersuasive given the fact
that they cannot, by means of a declaratory judgment action, obtain
relief with respect to the mere possibility of such a suit. First,
respondents cannot identify a cause of action and corresponding waiver
of sovereign immunity that would permit them to bring legal action
against the Attorney General other than that provided by the
Administrative Procedure Act (APA),
5 U.S.C. 702-704. But the cause of action and waiver of immunity
provided by the APA only extend to suits challenging final agency
action. 5 U.S.C. 704. Here, the Attorney General has not taken final
action; there has only been an investigation. See FTC v. Standard Oil
Co., 449 U.S. 232 (1980). Moreover, the APA provides for review only if
there is no other available remedy. See 5 U.S.C. 704. Here there is a
remedycontesting in court any False Claims Act suit that is actually
brought. Nor would any action lie to contest the Attorney General's
contemplation of a False Claims Act suit, since she in the end may
decline to proceed; and such an action would in any event constitute an
anticipatory attack on the exercise of the Attorney General's
enforcement discretion, a matter committed to her discretion by law.
See 5 U.S.C. 701(a)(2).