Jimmo et al v. Health and Human Services Secretary

Filing 56

OPINION AND ORDER denying in part and granting in part 25 Motion to Dismiss for Lack of Subject Matter Jurisdiction; and denying 25 Motion to Dismiss for Failure to State a Claim Upon Which Relief May be Granted. Signed by Chief Judge Christina Reiss on 10/25/2011. (pam)

.. U.S.OISTRICT COURT
OISTRlCT OF VEJ.HWtH
.
FII.~ t. L"
p" ....

UNITED STATES DISTRICT COURT
FOR THE
DISTRICT OF VERMONT

2011 OCT 25 PH I: 32
CLERK
BY

~

DEPUTY CLERK

GLENDA JIMMO, K.R. by her guardian KENNETH
)
ROBERTS, MIRIAM KATZ, EDITH MASTERMAN,
)
MARY PATRICIA BOITANO, NATIONAL COMMITTEE)
TO PRESERVE SOCIAL SECURITY AND
)
)
MEDICARE, NATIONAL MULTIPLE SCLEROSIS
SOCIETY, PARKINSON'S ACTION NETWORK,
)
)
PARALYZED VETERANS OF AMERICA,
AMERICAN ACADEMY OF PHYSICAL MEDICINE
)
AND REHABILITATION, ALZHEIMER'S
)
ASSOCIATION, UNITED CEREBRAL PALSY, and
)
ROSALIE MCGILL, on behalf of themselves and all
)
others similarly situated,
)
)
Plaintiffs,
)
)
) Case No. 5:11-cv-17
v.
)
)
KATHLEEN SEBELIUS, in her official capacity
)
as Secretary of Health and Human Services,
)
)
Defendant.

OPINION AND ORDER DENYING IN PART AND GRANTING IN PART

DEFENDANT'S MOTION TO DISMISS FOR LACK OF SUBJECT MATTER

JURISDICTION AND DENYING DEFENDANT'S MOTION TO DISMISS FOR

FAILURE TO STATE A CLAIM

(Doc. 25)
This matter came before the court on the motions to dismiss for lack of subject
matter jurisdiction under Fed. R. Civ. P. 12(b)(1), and for failure to state a claim under
Fed. R. Civ. P. 12(b)(6). filed by Defendant, the Secretary of Health and Human Services
Kathleen Sebelius ("the Secretary") in her official capacity (Doc. 25). The Secretary
seeks dismissal of the Amended Complaint filed by six individual Medicare beneficiaries
(the "Individual Plaintiffs") and seven national organizations (the "Organizational
Plaintiffs") (collectively, "Plaintiffs"). Plaintiffs oppose dismissal.

The crux of the Amended Complaint is an allegation that the Secretary has
adopted an unlawful and clandestine standard to determine whether Medicare
beneficiaries are entitled to coverage, resulting in the wrongful termination, reduction,
and denial of Medicare coverage for beneficiaries with medical conditions that are not
expected to improve. Plaintiffs seek to certify a nationwide class and request, among
other relief, an injunction or writ of mandamus enjoining the Secretary from applying this
alleged unlawful standard.
The court heard oral argument on these motions on July 14,2011, and the parties
completed their supplemental briefing on August 8, 2011. Plaintiffs are represented by
the Center for Medicare Advocacy, Inc. and Vermont Legal Aid, Inc. The Secretary is
represented by Steven Y. Bressler, Esq. and Tamra Moore, Esq.
For the reasons set forth below, the Secretary's motion to dismiss for lack of
subject matter jurisdiction is DENIED IN PART AND GRANTED IN PART, and the
Secretary's motion to dismiss for failure to state a claim is DENIED.

I.

The Amended Complaint.
The Medicare program, established under Title XVIII of the Social Security Act,

42 U.S.C. §§ 1395-1395iii (the "Medicare Act"), "is the federal government's health­
insurance program for the elderly." Conn. Dept. a/Soc. Servs. v. Leavitt, 428 F.3d 138,
141 (2d Cir. 2005). It is administered by the Center for Medicaid and Medicare Services
("CMS"), which is a component ofHHS.
Under the Medicare Act, payment is precluded for items and services that "are not
reasonable and necessary for the diagnosis or treatment of illness or injury or to improve
the functioning of a malformed body member[.]" 42 U.S.C. § 1395y(a)(1)(A). Coverage
determinations are required by law to be conducted on an individualized basis and cannot
be the subject of rules of thumb.
In their Amended Complaint, Plaintiffs allege that the Secretary "imposes a covert
rule of thumb that operates as an additional and illegal condition of coverage and results
in the termination, reduction, or denial of coverage for thousands of Medicare
beneficiaries annually." (Doc. 13 ,-r 1.) This additional condition of eligibility, which
2

Plaintiffs allege is primarily implemented at the lower levels of Medicare's
administrative review process, denies coverage where the beneficiary needs
"maintenance services only," has "plateaued," or is "chronic," "medically stable," or not
improving.

(Id.,-r 2.) Plaintiffs refer to this "covert rule of thumb" or "clandestine

policy" as the "Improvement Standard." (Id.,-r,-r 2-3.)
Plaintiffs allege that, contrary to the Medicare Act and federal regulations, the
Improvement Standard precludes coverage for beneficiaries with conditions that are not
expected to improve or that have not improved over the course of treatment. They allege
that the Improvement Standard has been implemented without proper rulemaking
procedures against beneficiaries that have little or no understanding of its application and
no ability or reasonable opportunity to confront it. According to Plaintiffs,
[u]pon information and belief, it is the standard practice of providers,
contractors, QIOs, QICs, and IREs to apply LCDs and internal guidelines
and policies that establish the Improvement Standard as a rule of thumb on
which Medicare coverage is conditioned, in disregard of the regulatory and
manual provisions that require a coverage determination to be based on the
beneficiary's individual condition and needs.
(Id.

,-r 44.) Plaintiffs further allege that because "the Secretary is aware that the

Improvement Standard is consistently imposed by [] Medicare contractors," and because
she "has not taken action to require that the proper policies be carried out," (id.

,-r 47), the

"Improvement Standard ... amounts to a clandestine policy that is condoned and
implemented by the Secretary." (Id.,-r 3.)
As grounds for relief, Plaintiffs assert that the Improvement Standard violates the
Medicare Act and its regulations, the Administrative Procedure Act ("APA"), the
Freedom ofInformation Act ("FOIA"), and the Due Process Clause of the Fifth
Amendment. They seek a declaration that the Improvement Standard is unlawful and a
permanent injunction or writ of mandamus prohibiting the Secretary from applying the
Improvement Standard. Plaintiffs also seek an order directing the Secretary to, inter alia,
review all adverse coverage decisions for the named plaintiffs and class members that
rely on the Improvement Standard and to reissue those decisions without application of

3

the Improvement Standard. Furthermore, Plaintiffs seek a declaration ordering the
Secretary to correct any written agency materials that may endorse the Improvement
Standard. (Id. at 42-43.)
With regard to each of the named Individual Plaintiffs, Glenda Jimmo, K.R.,
Miriam Katz, Edith Masterman, Mary Patricia Boitano, and Rosalie McGill, the
Amended Complaint describes the administrative process (or lack thereof) by which each
beneficiary's claim for coverage was denied, the nature of the medical condition for
which coverage was sought, and the manner in which the alleged Improvement Standard
was invoked to deny coverage.
With regard to the Organizational Plaintiffs, National Committee to Preserve
Social Security and Medicare, National Multiple Sclerosis Society, Parkinson's Action
Network, Paralyzed Veterans of America, American Academy of Physical Medicine and
Rehabilitation, Alzheimer's Disease and Related Disorders Association, Inc. d/b/a
Alzheimer's Association, and United Cerebral Palsy, the Amended Complaint alleges the
nature of each organization, its primary activities and mission, and the approximate
number of its members who are Medicare beneficiaries. With the exception of American
Academy of Physical Medicine and Rehabilitation ("AAPM&R"), Plaintiffs allege that at
least one of their members would have standing to sue. Plaintiffs further allege that each
Organizational Plaintiff provided notice to the Secretary and Donald Berwick, the CMS
Administrator, that the Improvement Standard violates federal statutory, regulatory, and
constitutional law and demanded that the Secretary and the CMS Administrator "direct
that the Improvement Standard no longer be employed to make coverage decisions and
that appropriate steps be taken to correct its present and past application." (Id at,-r,-r 92,
101, 109, 117, 124, 132.)

II.

Conclusions of Law and Analysis.
The Secretary moves to dismiss for lack of subject matter jurisdiction under Fed.

R. Civ. P. 12(b)( 1), and for failure to state a claim upon which relief can be granted under
Fed. R. Civ. P. 12(b)(6). Because the court "lacks the statutory or constitutional power to
adjudicate" the merits of claims over which it does not have subject matter jurisdiction,
4

Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000), the court first addresses the
Secretary's Rule 12(b)(1) motion.

A.

The Secretary's Rule 12(b)(1) Motion to Dismiss for Lack of Subject
Matter Jurisdiction.

Plaintiffs assert jurisdiction under 42 U.S.C. § 405(g), which provides the court
with jurisdiction to review the Secretary's "final decision]s]" on claims arising under the
Medicare Act. Plaintiffs also invoke federal question jurisdiction under 28 U.S.C. §
1331, and mandamus jurisdiction under 28 U.S.C. § 1361.
With regard to Plaintiff Edith Masterman, the Secretary argues she has failed to
satisfy the non-waivable requirement of presentment. With regard to Plaintiffs Miriam
Katz,' Mary Patricia Boitano, and Rosalie McGill, the Secretary alleges they must
exhaust their administrative remedies before § 405(g) can provide jurisdiction over their
claims. With regard to Plaintiffs Glenda Jimmo and K.R., the Secretary argues that while
they have exhausted their administrative remedies, they lack Article III standing to bring
suit, and therefore this court cannot constitutionally adjudicate their claims.
The Secretary contends that 28 U.S.C. § 405(h) specifically excludes § 1331 as
an avenue for judicial review of claims arising under the Medicare Act. Further, the
Secretary argues that the nature of Plaintiffs' allegations and their requested relief renders
the remedy of mandamus inappropriate in this case.
Finally, the Secretary argues that this court lacks subject matter jurisdiction over
the Organizational Plaintiffs' claims because (1) Plaintiffs have not sufficiently alleged
associational standing; and (2) even if standing is assumed, the Organizational Plaintiffs
have not and cannot establish § 405(g) jurisdiction by presenting their claims to the
Secretary and exhausting their administrative remedies.
Plaintiffs bear the burden of establishing this court's subject matter jurisdiction
over their claims. See Lujan v. Defenders of Wildlife, 504 U.S 555, 561 (1992). When
deciding a Rule 12(b)(1) motion "at the pleading stage" before any "evidentiary hearings
1 As

the named executor in her deceased husband David Katz's will, Plaintiff Miriam Katz is
prosecuting this litigation on his behalf. (Doc. 13 ,-r 64.)

5

have been held," the court "must accept as true all material facts alleged in the [Amended
C]omplaint and draw all reasonable inferences in [Plaintiffs'] favor." Conyers v.

Rossides, 558 F.3d 137, 143 (2d Cir. 2009) (internal quotation marks and citation
omitted). "Nevertheless, even 'on a motion to dismiss, courts are not bound to accept as
true a legal conclusion couched as a factual allegation.'" Id. (quoting Sharkey v.

Quarantillo, 541 F.3d 75, 83 (2d Cir. 2008) (other internal quotation marks omitted)).
1.

42 U.S.C. § 405(g) Jurisdiction.

The Secretary seeks dismissal on the grounds that all Plaintiffs (with the exception
of Ms. Jimmo and K.R.) have failed to establish jurisdiction under 42 U.S.C. § 405(g).
42 U.S.C. § 405(h), made applicable to the Medicare Act by 42 U.S.C. § 1395ii, provides
that 42 U.S.C. § 405(g) "to the exclusion of28 U.S.C. § 1331, is the sole avenue for
judicial review for all 'claim[s] arising under' the Medicare Act." Heckler v. Ringer, 466
U.S. 602, 614-15 (1984) (quoting 42 U.S.C. § 405(h)).2 A claim arises under the
Medicare Act when that statute "provides both the standing and the substantive basis for"
the claim. Weinberger v. Salji, 422 U.S. 749, 760-61 (1975). Section 405(g), in tum,
provides that:
Any individual, after any final decision of the [Secretary] made after a
hearing to which he was a party, irrespective of the amount in controversy,
may obtain a review of such decision by a civil action commenced ... in
the district court of the United States for the judicial district in which the
plaintiff resides[.]
42 U.S.C. § 405(g). The requirement ofa "final decision by the [Secretary]" consists of
two elements: (1) the "jurisdictional," non-waivable requirement that a claim has been
presented to the Secretary, and (2) the "waivable" requirement that the administrative
remedies prescribed by the Secretary have been exhausted. See Mathews v. Eldridge, 424
U.S. 319, 328-30 (1976); Salji, 422 U.S. at 764-65. The exhaustion requirement may be

As applied to the Medicare Act by 42 U.S.C. § 1395ii, § 405(h) provides that: "No findings of
fact or decision of the [Secretary] shall be reviewed by any person, tribunal, or governmental
agency except as herein provided. No action against the United States, the [Secretary], or any
officer or employee thereof shall be brought under section 1331 or 1346 of Title 28 to recover on
any claim arising under [the Medicare Act]."
2

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waived by the Secretary, or, in appropriate circumstances, by the court. See City a/New
York v. Heckler, 742 F.2d 729, 736 (2d Cir. 1984) (internal citations omitted).

a. The Individual Plaintiffs' Claims under § 405(g).
The Secretary seeks dismissal of Ms. Katz, Ms. Masterman, Ms. Boitano, and Ms.
McGill's claims for failure to establish subject matter jurisdiction under the Medicare Act
pursuant to § 405(g). Plaintiffs do not dispute that their claims "arise under" the
Medicare Act, and thus the exclusivity provisions of § 405(g) would normally apply.
They point out that, with the exception of Ms. Masterman, the Individual Plaintiffs have
all presented their claims to the Secretary. They also concede that with the exception of
Ms. Jimmo and K.R., they have not exhausted their administrative remedies and received
the Secretary's final decision with regard to their claims. However, based on the nature
of their claims, they argue that the court should waive the exhaustion requirement.
Because presentment is non-waivable, the court turns first to Plaintiffs' contention
that the exclusivity of § 405(g), as prescribed by § 405(h), should not apply to Ms.
Masterman's claims because such application would deny her judicial review.'
i.

Ms. Masterman's Presentment Requirement.

According to the Amended Complaint, the only home health agency ("HHA") in
Ms. Masterman's geographic area refused to accept her as a patient because "Medicare
will not pay for a chronic problem," and she needs long term care. (Doc. 13 ,-r 71.) As a
result, no services have been provided, and no claim for coverage has been presented to
the Secretary. Since only providers can seek an initial coverage determination, Ms.
Masterman argues that the refusal to provide services effectively bars her from the
administrative process, rendering it impossible for her to satisfy the jurisdictional
presentment requirement of § 405(g).
The Secretary disagrees, arguing that Ms. Masterman has the ability to trigger
administrative review by forcing her provider to make a claim for benefits. Although the

In the alternative, Plaintiffs allege federal question jurisdiction for Ms. Masterman's claims
under 28 U.S.C. § 1331.
3

7

Secretary concedes this procedure would require Ms. Masterman to assume liability for
the cost of any uncovered services, the Secretary argues that this financial risk is
insufficient to justify federal question jurisdiction.
In Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1 (2000), the
Court interpreted Bowen v. Mich. Acad. ofFamily Physicians, 476 U.S. 667 (1986), to
hold that § 405(h) "does not apply ... where application of § 405(h) would not simply
channel review through the agency, but would mean no review at all." Illinois Council,
529 U.S. at 19. Other courts have explained that this exception "applies not only when
administrative regulations foreclose judicial review, but also when roadblocks practically
cut off any avenue to federal court[;] ... [t]he difficulties must be severe enough to
render judicial review unavailable as a practical matter." Am. Chiropractic Ass 'n v.

Leavitt, 431 F.3d 812, 816 (D.C. Cir. 2005). Under such circumstances, a plaintiff may
invoke federal question jurisdiction under § 1331 to bring claims arising under the
Medicare Act.
Although this case presents a close question, the court cannot conclude, based
upon the record before it, that judicial review is unavailable to Ms. Masterman as a
practical matter. As the Secretary points out, Ms. Masterman can force her HHA to
submit a claim through a procedure known as "demand billing." A "demand bill" is a
"claim submitted by an HHA to [CMS] for services or items that the HHA believes are
not covered but which the HHA must submit to [CMS] at the request of the
beneficiary[.]" Lutwin v. Thompson, 361 F.3d 146, 149 (2d Cir. 2004) (internal quotation
marks and alterations omitted). To require submission of a demand bill, the beneficiary
must agree to pay the HHA for services that CMS determines are not covered by
Medicare. See id. A beneficiary has this option when an HHA "prospectively decline [s]
to provide ... services ... when it conclude[s]," as Ms. Masterman's HHA did here,
"that [CMS] would not cover those services. Id. 4 This would "trigger the administrative

When an HHA declines to provide services because it believes that such services will not be
covered by Medicare, eMS requires it to provide the beneficiary with a "Home Health Advance
Beneficiary Notice." On this notice, the beneficiary may trigger demand billing by selecting the
4

8

process, at the end of which is judicial review of the Secretary's final decision." Am.
Chiropractic Ass 'n, 431 F.3d at 817. Some potential difficulty or financial hardship is

generally not enough. See Ringer, 466 U.S. at 622, 625 (holding that Ringer's claim
arose under the Medicare Act and required presentment even though "some ... surgeons
may well decline to perform the requested surgery because of fear that the Secretary will
not find the surgery 'reasonable and necessary' and thus will refuse to reimburse them.").
Here, Ms. Masterman has not established that she is financially unable to
reimburse her HHA in the event services are not covered or that demand billing is not
available to her. She has thus not established that applying § 405(h) to her claims renders
judicial review unavailable. Accordingly, Ms. Masterman is required to present her
claims to the Secretary, and jurisdiction under both § 405(g) and § 1331 is not available.
The Secretary's motion to dismiss Ms. Masterman's claim for lack of subject matter
jurisdiction is therefore GRANTED.

ii.

Waiver of Exhaustion for Remaining Individual
Plaintiffs.

Plaintiffs ask the court to waive the requirement that they exhaust their
administrative remedies for all Individual Plaintiffs who have not done so. The Secretary
opposes this request, asserting that exhaustion is required before § 405(g) provides
jurisdiction for judicial review. The Secretary argues that Plaintiffs' claims, although
framed as resulting from a "clandestine policy," are merely claims that the services the
Individual Plaintiffs received are "reasonable and necessary" under the Secretary's valid
regulations and thus are in essence claims of "an aggregation of individual errors without
more." (Doc. 25-1 at 31 (citing Kildare v. Saenz, 325 F.3d 1078, 1083 (9th Cir. 2003))
("[A]ll that is alleged is a series of claimed irregularities in individual cases that is
entirely dependent on the ... underlying claims for benefits[.] An aggregation of
individual errors without more does not meet the collaterality requirement as articulated
in City a/New York[.]")). Thus, the Secretary argues that the Individual Plaintiffs' claims

following option: "I want the items and/or services ... and I agree to pay for the items and/or
services myself if Medicare or my other insurance doesn't pay."

9

fall squarely within the agency's expertise in implementing the Medicare Act and tum on
the sort of factual development for which the administrative process is designed. The
Secretary cites Ringer, 466 U.S. at 614, for these propositions.
In Ringer, the plaintiffs challenged the Secretary's policy of refusing coverage for
a certain surgical procedure when used to treat a particular condition. Id. at 610. The
Court declined to waive exhaustion because the plaintiffs were faulting the Secretary's
decision that the treatment was not "reasonable and necessary," and thus their claims
were substantive rather than procedural. Id. at 607,614. The Court found plaintiffs'
claims were not "collateral" because the plaintiffs sought "relief that [would] allow them
to receive benefits yet bypass [the] administrative process altogether. '" Id. at 619, 624.
Thus, despite any "procedural components" to the plaintiffs' claim, or their emphasis on
the "presumptive nature of the Secretary's ... rule," the claim was "essentially one
requesting the payment ofbenefits[.]" Id. at 620,624; see also Saenz, 325 F.3d at 1083
("[w]ithout a specific policy, and with only allegations of idiosyncratic individual errors,
whether [the defendants] committed the alleged errors must be determined in the context
of each individual [plaintiff's administrative] proceedings").
Plaintiffs here contend the instant case is distinguishable from Ringer and argue
that under Second Circuit precedent they have established everything that is required for
waiver of exhaustion.
The decision whether waiver of exhaustion is appropriate is "intensely practical,"
rather than technical or formulaic. Bowen v. City a/New York, 476 U.S. 467, 484 (1986)
(internal citation omitted). Judicial waiver is appropriate where the plaintiffs' legal
claims are collateral to their demand for benefits, where exhaustion would be futile, or
where the harm suffered pending exhaustion would be irreparable. See Mathews, 424
U.S. at 330-32. "[N]o one factor is critical," and a court must balance "the competing
considerations to arrive at ajust result under the circumstances presented." City a/New

York, 742 F.2d at 736. In deciding whether waiver is appropriate, the court must:
prevent[] premature interference with agency processes, so that the agency
may function efficiently and so that it may have an opportunity to correct
10

its own errors, to afford the parties and the courts the benefit of its
experience and expertise, and to compile a record which is adequate for
judicial review.

Mich. Acad. a/Family Physicians, 476 U.S. at 484 (quoting Salfi, 422 U.S. at 765).
As Plaintiffs correctly point out, courts have found waiver in cases where
plaintiffs have sought to eradicate a "procedural irregularity" in the administrative
appeals process, rather than challenge the application of valid regulations to their own
individual cases. For example, in City a/New York, a case involving claims for Social
Security disability benefits, the plaintiffs alleged that, "[i]n disregard of the regulatory
requirement to conduct an individualized assessment of the residual functional capacity
of each claimant, [the Secretary], informally and without public disclosure, adopted an
administrative practice that effectively imposed a presumption upon the determination of
eligibility for ... benefits." City a/New York, 742 F.2d at 732. Specifically, the
plaintiffs alleged that claimants whose mental illness did not meet particular diagnoses
were presumed to have retained the ability to perform at least light unskilled work and
were therefore ineligible for benefits. Id. The Second Circuit found that the plaintiffs'
claim was "substantially collateral" to their individual claims for benefits because they
complained "fundamentally ofa procedural irregularity and not of the Secretary's
substantive standards of eligibility," and because the suit did not seek an adjudication of
the merits of the underlying claims. Id. at 737. The Second Circuit further found:
Moreover, under the circumstances of this case, exhaustion of
administrative remedies would have been futile. Although exhaustion
might have resulted in recovery of retroactive benefits for some members of
the class, as was also true in Eldridge, the administrative process cannot
vindicate the procedural rights asserted in this litigation. The class
members complain of a procedural irregularity-the failure of the Secretary
to base eligibility determinations on individualized assessments of a
claimant's residual functional capacity. This procedural right, guaranteed
by the Secretary's regulations, cannot be vindicated by an ultimate
determination of eligibility. For that reason further exhaustion justifiably
may be waived.

Id.
11

In City a/New York, the Second Circuit additionally observed that it could
"discern no legitimate interest to be advanced by requiring plaintiffs to travel through the
administrative maze as a prerequisite of a judicial hearing. This is not a case ... where
the claim asserted could benefit from further factual development or from the agency's
'experience and expertisej.]" "[n]or is this a case where exhaustion serves to 'prevent/]
premature interference with agency processes' or to allow the agency 'an opportunity to
correct its own errors." Id. (internal citations omitted). The court pointed out that, "[a]s
in Eldridge it is not realistic to 'expect that the Secretary would consider substantial
changes in the current administrative review system at the behest of a single aid recipient
... in an adjudicatory context." Id. (quoting Eldridge, 424 U.S. at 330).5
A similar approach was adopted in New York v. Sullivan, 906 F.2d 910,914-18
(2d Cir. 1990), and Fox v. Bowen, 656 F. Supp. 1236, 1244 (D. Conn. 1987). In Sullivan,
another Social Security disability case, the plaintiffs challenged the Secretary's exclusive
reliance on certain treadmill testing, rather than the unique condition of each claimant, to
determine the claimants' ability to work. See Sullivan, 906 F.2d at 914. In Fox, as here,
the plaintiffs alleged that "the Secretary denies Medicare benefits on the basis of informal
'rules of thumb' that fail to take into account each claimant's individualized need[.]"

Fox, 656 F. Supp. at 1244. For the same reasons set forth in City a/New York, the courts
in both cases granted judicial waiver of § 405(g)'s exhaustion requirement.
Here, as alleged in the Amended Complaint, the Improvement Standard is
sufficiently analogous to the challenged policies in City a/New York, State a/New York,

The Secretary argues that City ofNew York is distinguishable because in that case the
challenged policy was unlawful as applied to every claimant, regardless of the circumstances
underlying each individual claim. By contrast, in this case, the Secretary contends that, pursuant
to applicable regulations, there are circumstances in which it is perfectly acceptable for the
Secretary to consider a beneficiary's stability and to deny Medicare coverage when there is no
reasonable expectation that the beneficiary's condition will change. Plaintiffs, however, allege
that the Improvement Standard is applied without regard to the particular services for which
coverage is sought and without regard to the unique condition of each beneficiary. As alleged,
the Improvement Standard thus constitutes the same "procedural irregularity" at issue in City of
New York.
5

12

and Fox to warrant a conclusion that Plaintiffs' claims are substantially collateral to their
individual claims for benefits. See Abbey v. Sullivan, 978 F.2d 37, 45 (2d Cir. 1992)
(rejecting request for § 405(g) waiver, but noting that the case would be different had the
plaintiffs alleged that "the Secretary [had] adopted a clandestine policy that violates the
Medicare Act"). Unlike in Ringer, where a successful lawsuit would have meant that
only "ministerial details" remained before the plaintiffs would receive benefits, 466 U.S.
at 615, Plaintiffs have no guarantee of coverage even if they succeed on their claims.
More importantly, Plaintiffs do not ask the court to adjudicate the merits of their
individual claims or award them benefits; rather, they seek declaratory, injunctive, and
mandamus relief. See David v. Heckler, 591 F. Supp. 1033, 1039 (S.D.N.Y. 1984)
(noting "[t]he instant case is distinguishable [from Ringer] since plaintiffs seek
prospective relief against a continuing illegal practice rather than specific benefits.").
Moreover, requiring Plaintiffs to pursue their claims at the administrative level
would be futile even if they eventually obtained favorable decisions because such an
outcome would not address the thrust of their Amended Complaint which is the use of the
Improvement Standard in the lower levels of coverage determinations. Although the
Secretary points to various instances in which the Medicare Appeals Council ("MAC")
has overturned ALJ decisions because the ALJ failed "to conduct the kind of
individualized inquiry called for by the applicable regulations and manual provisions,"
and improperly denied coverage because there was no expectation of improvement in the
beneficiary's condition, see Doc. 25-1 at 32, as the Supreme Court has explained, "[s]uch
observations ... merely serve to remind us why exhaustion is the rule in the vast majority
of cases; they do not aid the Court in deciding when exhaustion should be excused."

Mich. Acad. ofFamily Physicians, 476 U.S. at 486.
Finally, in this case, the purposes of administrative review would not be served by
requiring exhaustion because Plaintiffs allege violations of a procedural right-that is, the
right to a coverage determination process free from the allegedly unlawful Improvement
Standard-for which they seek relief which is simply not available in the context of an
individual claim for benefits in an administrative review. As Judge Cabranes explained
13

in Fox: "It would be just as unrealistic in this case as it was in ... City ofNew York to
expect that the Secretary would consider substantial changes in the current administrative
review system at the behest of a single aid recipient ... in an adjudicatory context." Fox,
656 F. Supp. at 1244 (internal quotation marks omitted); see also Sullivan, 906 F.2d at
918 ("Although exhaustion may have resulted in some individual members receiving
benefits, the procedural right that the claimants sought to obtain, personalized
determinations, could not have been vindicated by individual eligibility decisions.")."
For the foregoing reasons, the court concludes that the exhaustion requirement
should be waived for Plaintiffs Boitano, Katz, and McGill. With the exhaustion
requirement waived, § 405(g) provides the appropriate avenue for judicial review of the
claims brought by all Individual Plaintiffs, with the exception of Ms. Masterman.

b. The Organizational Plaintiffs' Claims Under § 405(g).
Plaintiffs argue that the Organizational Plaintiffs "presented" their claims by
writing letters to the Secretary complaining about the Improvement Standard. See Doc.
13 ~~ 92, 101, 109, 117, 124, 132, 141. They argue that the court should therefore waive
exhaustion for the Organizational Plaintiffs for the same reasons supporting waiver for
the Individual Plaintiffs.
In contrast, the Secretary contends that the Organizational Plaintiffs did not and
cannot present their claims to the Secretary because the administrative review process is

The court need not find irreparable injury in order to conclude that waiver of exhaustion
is appropriate. The Secretary argues Plaintiffs' claim of irreparable injury is a mere
allegation. Plaintiffs counter that they have described "their serious chronic conditions,
their advanced ages in some instances, and their desperate need for Medicare coverage of
their health care." (Doc. 32 at 18.) As the Ringer Court observed, the "individual
hardship resulting from delays in the administrative process" must be "balanced against
the potential for overly casual or premature judicial intervention in an administrative
system that processes literally millions of claims every year." Ringer, 466 U.S. at 627.
The record before the court is not sufficient to properly perform this balancing test with
regard to the Individual Plaintiffs. The court thus leaves unresolved whether the
Individual Plaintiffs will suffer irreparable injury if the court refuses to waive exhaustion
of their administrative remedies.
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14

available only to program beneficiaries or their assignees, and the Organizational
Plaintiffs are neither. At the same time, the Secretary point out that § 405(h) is the
exclusive avenue of relief for the Organizational Plaintiffs and bars federal question
jurisdiction under § 1331. The Secretary thus concludes the Organizational Plaintiffs'
claims must be dismissed under § 405(g).
The Medicare Act's administrative appeals process is directed to appeals of
unfavorable initial determinations. The right to appeal initial determinations denying or
terminating coverage under Medicare Parts A, B, and C extends to beneficiaries and their
assignees (usually the provider of services). See 42 C.F.R. §§ 405.710(a)-(b) (Part A);
405.801(b)(1) (Part B); 422.574(b) (Part C). These standards provide no mechanism for
organizational plaintiffs to present their claims to the Secretary because they are neither
beneficiaries nor assignees of beneficiaries, and they have not received an initial
determination from which they can appeal. See Nat'l Athletic Trainers' Ass'n v. HHS,
455 F.3d 500,503-508 (5th Cir. 2006) ("The parties agree that [the plaintiff
association's] member[] [athletic trainers] cannot obtain administrative review because
they are neither beneficiaries nor providers[.]").
In Illinois Council, 529 U.S. at 5, the Court decided, 5 to 4, that an association is
neither entitled to "present" claims to an administrative agency nor entitled to establish
federal question jurisdiction under § 1331. In that case, an association of nursing homes
brought suit against the Secretary, challenging certain regulations governing the
imposition of sanctions and remedies upon nursing homes that were found to be deficient
in certain respects. Id. at 6. The plaintiff argued that federal question jurisdiction should
be allowed under § 1331 because requiring presentment and exhaustion of administrative
remedies would effectively preclude judicial review of its claims. Id. at 20. The plaintiff
pointed out that it could not access the administrative appeals process reserved for "an
institution or agency dissatisfied with a determination by the Secretary," 42 U.S.C. §
1395cc(h)(1) (governing appeals of determinations that a nursing home is noncompliant
with the regulations), and therefore could not present a claim as required by § 405(g). Id.
at 24. The Court rejected this argument, ruling that "[t]he [plaintiff] speaks only on
15

behalf of its member institutions, and thus has standing only because of the injury those
members allegedly suffer.... [i]t is essentially their rights to review that are at stake.
And the statutes that create the special [administrative] review channel adequately protect
those rights." Id. (internal citations omitted). Thus, the Court reasoned that applying §
405(g) to claims brought by associations does not preclude judicial review of such
claims, even though associations cannot themselves participate in administrative review.
Instead, their claims must be presented and exhausted by the individual members on
whose behalf the associations act.
The dissent in Illinois Council observed that the Court had not overruled Mich.
Acad. ofFamily Physicians. The dissent contended that "Michigan Academy must have
established a distinction between, on the one hand, a dispute over any particularized
determination and, on the other hand, a challeng[e] to the validity of the Secretary's
instructions and regulations." Id. at 1106-07 (quoting Mich. Acad., 476 U.S. at 680). It
characterized the claims before the Court in a manner strikingly similar to the claims of
the Organizational Plaintiffs here:
This case obviously falls into the latter category. Respondent in no way
disputes any particularized determinations, but instead mounts a general
challenge to the Secretary's regulations (and manual) ... claiming that
these were promulgated without notice and comment, are unconstitutionally
vague, contravene the Medicare Act's requirement of enforcement
consistency, and violate due process by affording insufficient
administrative review. Like the Michigan Academy plaintiffs, who
challenged the Secretary's regulation concerning the payment of benefits
for physician's services ... respondent may proceed in District Court under
general federal-question jurisdiction.
Ill. Council, 529 U.S. at 38-39 (Thomas, J., dissenting). Justices Stevens, Kennedy, and
Scalia joined in this portion of the dissent.
In this case, the Organizational Plaintiffs neither seek a fact dependent coverage
determination nor a monetary recovery on their own behalf or on behalf of their members
either now or in the future. Instead, they challenge the present and future use of the
Improvement Standard in Medicare coverage determinations, which adversely impacts
16

their members. According to the Illinois Council majority, none of these distinctions
matter:
Despite the urging of the Council and supporting amici, we cannot
distinguish Salji and Ringer from the case before us. Those cases
themselves foreclose distinctions based upon the "potential future" versus
the "actual present" nature of the claim, the "general legal" versus the "fact­
specific" nature of the challenge, the "collateral" versus "noncollateral"
nature of the issues, or the "declaratory" versus "injunctive" nature of the
relief sought. Nor can we accept a distinction that limits the scope of §
405(h) to claims for monetary benefits. Claims for money, claims for other
benefits, claims of program eligibility, and claims that contest a sanction or
remedy may all similarly rest upon individual fact-related circumstances,
may all similarly dispute agency policy determinations, or may all similarly
involve the application, interpretation, or constitutionality of interrelated
regulations or statutory provisions. There is no reason to distinguish among
them in terms of the language or in terms of the purposes of § 405(h).
Section 1395ii's blanket incorporation of that provision into the Medicare
Act as a whole certainly contains no such distinction. Nor for similar
reasons can we here limit provisions to claims that involve "amounts."
Id. at 13-14.
Under Illinois Council, the Organizational Plaintiffs are also precluded from
judicial review under § 1331 because "§ 405(g) contains the nonwaivable and
nonexcusable requirement that an individual present a claim to the agency before raising
it in court." Ill. Council, 529 U.S. at 15; see also Your Home Visiting Nurse Servs., Inc.
v. Shalala, 525 U.S. 449, 456 (1999) ("judicial review under the federal-question statute,
28 U.S.C. § 1331, is precluded by 42 U.S.C. § 405(h)").
Plaintiffs nonetheless argue that Illinois Council allows "[t]he Association or its
members [to] proceed ... through the special review channel that the Medicare statutes
create[.]" (Doc. 32 at 29 (citing Ill. Council, 529 U.S. at 5 and supplying emphasis)).
They assert that all they need to do to invoke § 405(g) jurisdiction is to present their
claims to the Secretary, and they have done so. They urge the court to adopt the
approach taken in Action Alliance ofSenior Citizens v. Johnson, 607 F. Supp. 2d 33
(D.D.C. 2009). There, the district court found that the association plaintiffs had
adequately "presented" their claims by mailing grievance letters to the Secretary, just as
17

the Organizational Plaintiffs have done here. Id. at 38-40. On appeal, the D.C. Court of
Appeals endorsed this approach, noting that the plaintiffs had "cured the jurisdictional
defect" by properly presenting their claims to the Commissioner of Social Security. See
Action Alliance ofSenior Citizens v. Sebelius, 607 F.3d 860, 862 n.l (D.C. Cir. 2010).

Thus far, no other Circuit has adopted this approach.
Here, in the absence of guidance from the Supreme Court or, in the alternative,
from the Second Circuit regarding how, if at all, an association may satisfy the non­
waivable requirement of "presentment," the court declines to adopt the Action Alliance
approach. Illinois Council does not permit presentment or processing of an
organization's claims under § 405(g) even if this forecloses the organization from the
administrative review process," It also precludes § 1331 jurisdiction for an organization's
claims arising under the Medicare Act. See Ill. Council, 529 U.S. at 15. In the absence
of mandamus jurisdiction, Illinois Council thus leaves organizational plaintiffs with no
means of obtaining judicial review of the Secretary's Medicare practices and procedures
even if they "present" those challenges to the Secretary.

2. 28 U.S.C. § 1361 Mandamus Jurisdiction.
As an alternative to § 405(g) and § 1331, Plaintiffs argue that mandamus
jurisdiction is available under 28 U.S.c. § 1361. The Secretary argues that the
"extraordinary remedy" of mandamus jurisdiction is not appropriate in this case.
Pursuant to 28 U.S.C. § 1361, the "district courts shall have original jurisdiction of
any action in the nature of mandamus to compel an officer or employee of the United
States or any agency thereof to perform a duty owed to the plaintiff." Mandamus "may
be awarded only if the plaintiff proves that (1) there is a clear right to the relief sought;
(2) the Government has a plainly defined and peremptory duty to perform the act in
question; and (3) there is no other adequate remedy available." Benzman v. Whitman,
523 F.3d 119, 132-33 (2d Cir. 2008). Mandamus "is an extraordinary remedy, available

? See Am. Chiropractic Ass 'n, 431 F.3d at 817 ("The Association's objection that it could not
itse1fbecome a party to the administrative proceedings is an objection the Supreme Court
rejected in Illinois Council, 529 U.S. at 24.").

18

only in extraordinary circumstances." Arefv. United States, 452 F.3d 202, 206 (2d Cir.
2006) (quoting In re United States, 10 F.3d 931, 933 (2d Cir. 1993».
Notwithstanding the high threshold for granting mandamus relief, mandamus
jurisdiction over claims arising under the Medicare Act is not foreclosed as "it is settled
in this and other circuits that, notwithstanding the sweeping language of section 405(h),
mandamus jurisdiction is available under circumstances where the writ properly would
issue." City ofNew York, 742 F.2d at 739.
In considering the secret and unlawful policy alleged in City ofNew York, the
Second Circuit explained that "[t]he first two conditions [of mandamus jurisdiction] are
obviously satisfied" because the "[Social Security] Act and the regulations enacted
thereunder establish both the right and the duty-claimants' right to have eligibility
determinations based on individualized assessments of residual functional capacity and
the Secretary's duty to make such assessments and base eligibility determinations upon
them." Id.; see also Ellis v. Blum, 643 F.2d 68, 78 (2d Cir. 1981) ("An impressive array
of cases in this and other circuits has established that § 1361 jurisdiction will lie to review
procedures employed in administering social security benefits."). Similarly here, the
Medicare Act and the Secretary's regulations afford beneficiaries the right have to
coverage determinations based on their unique medical conditions, and the Secretary has
the duty to make such assessments and base coverage determinations upon them, rather
than relying on the alleged Improvement Standard.
The Organizational Plaintiffs also satisfy the third requirement-that no other
remedy be available-because neither § 405(g) nor § 1331 provides jurisdiction over
their claims. The Second Circuit has recognized that plaintiffs who have not presented
their claims to the Secretary may nonetheless invoke mandamus jurisdiction when it is
otherwise appropriate, even though plaintiffs who have presented their claims but have
failed to exhaust their administrative remedies cannot. See City ofNew York, 742 F.2d at
739 n.7 ("If the Supreme Court were to disagree with our ruling[] that class members are
in compliance with the presentment ... requirement[] ... we believe mandamus
jurisdiction would be available. However ... if § 405(g) jurisdiction" is unavailable
19

because class members must exhaust their administrative remedies, "then mandamus
jurisdiction would also be unavailable."); Ellis, 643 F.2d at 77 n.10 ("Even if we were to
find jurisdiction under § 405(g), we might still be obliged to consider the possibility of
mandamus jurisdiction ... since § 405(g) would only furnish jurisdiction over those
members of the alleged class who presented their claims to the Secretary.").
Here, having concluded that the Organizational Plaintiffs have not and cannot
present their claims to the Secretary and thereby satisfy the non-waivable requirement of
§ 405(g), and having further found that they are foreclosed from invoking federal court
jurisdiction under § 1331, the court concludes that in the absence of mandamus
jurisdiction, the Organizational Plaintiffs would have no other remedy. In such
extraordinary circumstances, mandamus provides the only available avenue of relief.
As the Secretary points out, however, even when mandamus relief may be granted,
it remains "governed by equitable considerations and is to be granted only in the exercise
of sound discretion." Whitehouse v. Ill. Cent. R.R. Co., 349 U.S. 366, 373 (1955).
Further, when "exercising its equitable powers" in this case, the court "is bound to give
serious weight to the obviously disruptive effect which the grant of ... relief ... [i]s
likely to have on the administrative process." Sampson v. Murray, 415 U.S. 61, 83
(1974). Based on the specific requests in Plaintiffs' Prayer for Relief (e.g., "ordering
defendant ... to review all adverse coverage decisions for the ... class members that rely
on the Improvement Standard"; "ordering defendant ... to revise any rules, provisions,
... or other written material ... that supports and/or applies the Improvement Standard"),
the Secretary contends that Plaintiffs seek the sort of "wholesale improvement of the
[Medicare] program" that must be completed, if at all, "in the offices of [HHS] or the
halls of Congress, where programmatic improvements are normally made." Lujan, 497
U.S. at 891. The Secretary also warns that awarding relief in this case could have costly
consequences for the already cash-strapped Medicare program.
Plaintiffs counter that they are asking only for the correct implementation of the
Medicare program, not wholesale changes to the program. As City a/New York
explained in the context of § 405(g):
20

by ordering simply that the claims be reopened at the administrative level,
the District Court showed proper respect for the administrative process. It
did no more than the agency would have been called upon to do had it ...
been alerted to the charge that an undisclosed procedure was illegal and had
improperly resolved innumerable claims.

City ofNew York, 476 U.S. at 486; see also Fox, 656 F. Supp. at 1250 (explaining that
ordering the Secretary "to ensure that Medicare coverage determinations are made on the
basis of individual patient's medical condition ... will entail no greater fiscal and
administrative burdens for the government than are contemplated by the applicable law
and regulations.") (internal quotation marks omitted).
At the pleading stage, the court need not determine whether to grant a writ of

mandamus, it need only determine whether, after an appropriate evidentiary showing and
careful decision-making, a writ could issue. See Gulfstream Aerospace Corp. v.

Mayacamas Corp., 485 U.S. 271, 289 (1988) (the party seeking mandamus has the
"burden of showing that its right to issuance of the writ is clear and indisputable.")
(internal quotation marks and citation omitted). For purposes of surviving a motion to
dismiss for lack of subject matter jurisdiction, Plaintiffs have sufficiently alleged
mandamus jurisdiction pursuant to § 1361 over the claims of the Organizational
Plaintiffs. The Secretary's motion to dismiss the Organizational Plaintiffs' claims for
lack of subject matter jurisdiction under 28 U.S.C. § 1361 is hereby DENIED.

3. Dismissal for Lack of Standing: Plaintiffs Jimmo and K.R.
The Secretary contends that although Plaintiffs Jimmo and K.R. may seek judicial
review under 42 U.S.C. § 405(g) because they have exhausted their administrative
remedies, they lack Article III standing to challenge the Improvement Standard. The
Secretary alleges that both Ms. Jimmo and K.R. lack standing because they were denied
Medicare coverage for reasons independent of the Improvement Standard, and thus the
relief Plaintiffs seek will not redress Ms. Jimmo's and K.R.'s injuries.
Under Article III of the Constitution, federal courts have jurisdiction only over
"Cases" and "Controversies." U.S. CONST. art. III, § 2, cl. 1. Standing "is an essential
and unchanging part of the case-or-controversy requirement of Article III." Lujan, 504
21

U.S. at 560. If Plaintiffs lack standing, then the court has no subject matter jurisdiction to
hear their claims. See Carver v. City ofNew York, 621 F.3d 221, 225 (2d Cir. 20 I 0).
The "irreducible constitutional minimum of standing" contains three elements: (I)
the plaintiff must have suffered injury in fact: an actual or imminent invasion of a legally
protected, concrete and particularized interest; (2) there must be a causal connection
between the alleged injury and the defendant's conduct at issue; and (3) it must be
"likely," not "speculative," that the court can redress the injury. Lujan, 504 U.S. at 560­
61. However, where, as here, "plaintiffs allege injury resulting from violation of a
procedural right afforded to them by statute and designed to protect their threatened
concrete interest, the courts relax-while not wholly eliminating-the issues of
imminence and redressability but not the issues of injury in fact or causation." Ctr. for
Law & Educ. v. Dep 't ofEduc., 396 F.3d 1152,1157 (D.C. Cir. 2005).
A plaintiffs burden to establish the elements of standing "increases over the
course of litigation." Cacchillo v. Insmed, Inc., 638 F.3d 401,404 (2d Cir. 2011). At the
pleading stage, plaintiffs need only allege facts that establish a plausible claim to
standing. See Bldg. & Canst. Trades Council ofBuffalo, N. Y and Vicinity v. Downtown
Dev., Inc., 448 F.3d 138, 145 (2d Cir. 2006) ("each element of standing 'must be
supported in the same way as any other matter on which the plaintiff bears the burden of
proof, i.e., with the manner and degree of evidence required at the successive stages of
the litigation."') (quoting Lujan, 504 U.S. at 561).
The "relaxed redressability" requirement for plaintiffs alleging deprivation of
procedural rights means that "a plaintiff need not show that better procedures would have
led to a different substantive result." Renal Physicians Ass 'n v. United States Dep 't of
HHS, 489 F.3d 1267, 1278 (D.C. Cir. 2007). Nonetheless, a plaintiff must show that
better procedures could possibly lead to an administrative decision in his or her favor and
must satisfy the causation element by showing that the agency relied on the alleged
wrongful procedure in reaching the decision regarding which the plaintiff complains. See
Sugar Cane Growers Co-op ofFla. v. Veneman, 289 F.3d 89, 94-95 (D.C. Cir. 2002) ("A
plaintiff who alleges a deprivation of a procedural protection ... [must] show that the
22

procedural step was connected to the substantive result."); Banks v. Sec Y ofInd. Family
& Soc. Servs. Admin., 997 F.2d 231,239 (7th Cir. 1993) (','in order to have standing, the

plaintiffs must also establish a 'fairly traceable' causal connection between the claimed
injury and the challenged conduct of the defendant.") (quoting Duke Power Co. v.
Carolina Envtl. Study Grp., Inc., 438 U.S. 59, 72 (1978)).
In Ms. Jimmo's case, the Secretary contends that in denying coverage, the ALJ
concluded that the "wound care provided to [Ms. Jimmo] ... was not complex." (Doc.
25-3 at 7.) The ALJ further explained that Ms. Jimmo did not require observation and
assessment because she "was stable and seen for frequent follow-ups at her physician's
office for lesions and debridement. [Ms. Jimmo's] condition did not significantly
change[] during the period at issue and the plan of care did not undergo changes." Id.
On review, the MAC considered the administrative record and adopted the ALl's
decision for the same reasons. (Doc. 25-2 at 7-8.) Accordingly, the Secretary contends
that Ms. Jimmo cannot establish that the outcome would have been different in the
absence of the alleged Improvement Standard. The Secretary further argues that Ms.
Jimmo lacks standing because she has already received the care and has not been held
liable for any non-covered charges. She disagrees that any injury may be found based
upon the fact that Ms. Jimmo will be presumed to have knowledge that the denied
services will not be covered in the future.
The Secretary's argument assumes that the outcome for Ms. Jimmo would have
been the same without the alleged Improvement Standard, but Plaintiffs' allegations
support a contrary conclusion. The Amended Complaint alleges that in denying Ms.
Jimmo coverage at the redetermination level, the Medicare contractor stated that Ms.
Jimmos "condition was stable with no acute changes." (Doc. 13 ~ 50.) At the

reconsideration level of review, the denial of coverage was grounded in part upon a
conclusion that "[t]he likelihood of a change in the patient's condition requiring skilled
nursing services was not supported in the documentation." (Id. ~ 51.) The ALJ who
reviewed the denial of coverage for Ms. Jimmo similarly concluded that "[0 ]bservation
and assessment of the Beneficiary was not necessary as the Beneficiary was stable ...
23

The Beneficiary's condition did not significantly changes [sic] during the period at issue
and the plan of care did not undergo changes." (Id.

~

52.) Even the MAC decision, upon

which the Secretary relies in challenging causation, found that Ms. Jimmo's "condition
... [did not] change[] significantly during the period at issue." (Id.

~

54.) It can only be

assumed that the MAC would have denied coverage even without this conclusion.
Moreover, had the lower level adjudicators not employed an alleged Improvement
Standard, the outcome could have been different. Plaintiffs further contend that even if
Ms. Jimmo was not held financially responsible for the denied services, she suffers a
detriment as a result of that determination as it will affect claims for benefits by her in the
future.
Ms. Jimmo has sufficiently alleged that she experienced a number of coverage
determinations that were arguably tainted by an unlawful Improvement Standard,
including the Secretary's final decision. Moreover, the court cannot find, as a matter of
law, that the outcome in Ms. Jimmo's case would have been the same even if the alleged
Improvement Standard had not been applied. Ms. Jimmo has thus alleged a "'fairly
traceable' causal connection between the claimed injury and the challenged conduct" of
the defendant. Duke Power Co., 438 U.S. at 72.

The Secretary's motion to dismiss Ms.

Jimmo's claims for lack of standing is therefore DENIED.
As for K.R., the Secretary contends she can no longer present a justiciable case-or­
controversy because her claims are moot. After Plaintiffs filed the Amended Complaint,
the MAC, in what constitutes the final decision of the Secretary, found that K.R. is not
entitled to coverage because she was "not homebound" during the relevant time period.
(Doc. 39-1 at 5.) Given this ruling, the Secretary argues that K.R. cannot show that any
relief obtained in this case could potentially redress her injury. Plaintiffs argue that this
conclusion is immaterial because "standing is determined by the plaintiffs situation at
the time that the Amended Complaint is filed." (Doc. 49 at 3 n.2.) This is accurate, see
Comer v. Cisneros, 37 F.3d 775, 787 (2d Cir. 1994), but ignores the additional

requirement that, "[i]n order to satisfy the case-or-controversy requirement [of Article
III], a party must, at all stages of the litigation, have an actual injury which is likely to be
24

redressed by a favorable judicial decision." United States v. Blackburn, 461 F.3d 259,
261 (2d Cir. 2006) (quoting United States v. Mercurris, 192 F.3d 290,293 (2d Cir.
1999)). The issue thus becomes one of mootness rather than standing after the Amended
Complaint is filed. See Friends ofthe Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc.,
528 U.S. 167, 180 (2000). Accordingly, "if an event occurs during the course of the
proceedings or on appeal 'that makes it impossible for the court to grant any effectual
relief whatever to a prevailing party,' [the court] must dismiss the case." United States v.
Quattrone, 402 F.3d 304,308 (2d Cir. 2005) (quoting Church ofScientology v. United
States, 506 U.S. 9, 12 (1992)).
Here, if events subsequent to the Amended Complaint are considered, K.R. cannot
establish that she suffered an injury-in-fact as a result of the alleged Improvement
Standard or that the outcome would have been different had the Improvement Standard
not been used. However, the parties have not adequately briefed whether, if it is
demonstrated that the alleged Improvement Standard was in fact applied to K.R.'s
coverage determinations, it would still be "impossible for the court to grant [her] any
effectual relief whatever." Quattrone, 402 F.3d at 308. In other words, the parties fail to
address whether any relief remains available to K.R. even ifher eligibility determination
would not have been different. See Sugar Cane Growers, 289 F.3d at 94 ("A plaintiff
who alleges a deprivation of a procedural protection to which he is entitled never has to
prove that if he had received the procedure the substantive result would have been
altered."); see also Sullivan, 906 F.2d at 918 ("the procedural right that the claimants
sought to obtain, personalized determinations, could not have been vindicated by
individual eligibility decisions"); City ofNew York, 742 F.2d at 737 (the "procedural
right, guaranteed by the Secretary's regulations, cannot be vindicated by an ultimate
determination of eligibility. ").
Because the Secretary has framed her request for dismissal of K.R.' s claims as one
of standing, and because the court concludes that, at the time of the filing of the Amended
Complaint, K.R. sufficiently alleged standing, the Secretary's motion to dismiss K.R.'s

25

claims for lack of standing is DENIED WITHOUT PREJUDICE TO RENEW ON THE
GROUNDS OF MOOTNESS. 8

4. Dismissal for Lack of Standing to Seek Injunctive Relief.
The Secretary next argues that the Individual Plaintiffs lack standing to pursue
injunctive relief because they have not shown any likelihood that the Secretary will apply
the Improvement Standard to their claims in the future. To seek prospective injunctive
relief, a plaintiff must show either "continuing, present adverse effects" of the
defendant's unlawful conduct that could be redressed through injunctive relief, City of

Los Angeles v. Lyons, 461 U.S. 95, 102 (1983), or "a sufficient likelihood that he will be
affected by the allegedly unlawful conduct in the future." Wooden v. Bd. ofRegents of

Univ. Sys. ofGa., 247 F.3d 1262, 1283 (l1th Cir. 2001). To demonstrate the likelihood
of future harm, it is not enough that the plaintiff was harmed by the challenged conduct in
the past; the plaintiff must instead show that he "is realistically threatened by a repetition
of [the previous harm]." Lyons, 461 U.S. at 109; see also White v. First Am. Registry,
230 F.R.D. 365, 367 (S.D.N.Y. 2005) ("[W]here, as here, a plaintiff challenges an
allegedly wrongful policy, he or she must allege credibly a 'realistic threat from the
policy.''') (quoting Friends ofthe Earth, 528 U.S. at 184).
Courts agree that "when the threatened acts that will cause injury are ... part of a
policy," such as the Improvement Standard alleged in this case, "it is significantly more
likely that the injury will occur again," and the existence of an official policy therefore
supports the plaintiffs standing to pursue injunctive relief. 31 Foster Children v. Bush,
329 F.3d 1255,1266 (l1th Cir. 2003); see also Shain v. Ellison, 356 F.3d 211, 216 (2d
Cir. 2004) (explaining that "the existence of an official policy" makes repeated harm
more probable). At the pleadings stage, the Individual Plaintiffs have alleged sufficient
facts to establish standing to pursue injunctive relief.
The Secretary's motion to dismiss Plaintiffs' claims for injunctive relief for lack of
standing is hereby DENIED.
8 In so ruling, the court does not foreclose the possibility that other challenges by the Secretary
may also be renewed.

26

5. Dismissal of Organizational Plaintiffs' Claims for Lack of Standing.
Finally, the Secretary argues that at least six of the seven Organizational Plaintiffs
lack standing because they have not sufficiently alleged that one of their members would
have standing to bring these claims in his, her, or its own right. See Hunt v. Wash. State

Apple Adver. Comm 'n, 432 U.S. 333, 343 (1977) ("an association has standing to bring
suit on behalf of its members when: (a) its members would otherwise have standing to
sue in their own right; (b) the interests it seeks to protect are germane to the
organization's purpose; and (c) neither the claim asserted nor the relief requested requires
the participation of individual members in the lawsuit."). Plaintiffs disagree, and argue
that they have adequately alleged associational standing at the pleading stage, with the
exception of one organization."
"Once a valid Article III case-or-controversy is present, the court's jurisdiction
vests. The presence of additional parties, although they alone could [not] independently
... satisfy Article Ill's requirements, does not itself destroy jurisdiction already
established." Ruiz v. Estelle, 161 F.3d 814,832 (5th Cir. 1998). "In accordance with this
principle, the Supreme Court has repeatedly held that if one party has standing in an
action, a court need not reach the issue of the standing of other parties when it makes no
difference to the merits of the case." Ry. Labor Execs. ' Ass 'n v. United States, 987 F.2d
806,810 (D.C. Cir. 1993) (citing Doe v. Bolton, 410 U.S. 179, 189 (1973)); see also

Horne v. Flores, 129 S. Ct. 2579, 2592-93 (2009) ("Because the superintendent clearly
has standing to challenge the lower courts' decisions, we need not consider whether the
Legislators also have standing to do so."). Here, the presence of the Organizational
Plaintiffs has no effect on the merits of the Individual Plaintiffs' claims. Accordingly, the
At oral argument, Plaintiffs conceded that AAPM&R could not independently assert standing,
because it makes no allegation that one of its members would have standing to sue other than the
conclusory statement that "Members of AAPM&R would have standing to sue in their own
right." (Doc. 13 ~ 123.) Based upon this admission, the court hereby GRANTS the Secretary's
motion to dismiss AAPM&R while GRANTING Plaintiffs leave to amend. See Fed. R. Civ. P.
15(a)(2) (instructing courts to "freely give leave [to amend the complaint] when justice so
requires."); Goldmark, Inc. v. Catlin Syndicate Ltd., 2011 WL 743568, at *5 (E.D.N.Y Feb. 24,
2011) (recognizing the "liberal spirit of Rule 15(a)" and granting plaintiff leave to amend the
breach of contract claim in complaint to add claim of bad faith).
9

27

court need not address whether they could each independently establish standing at the
pleadings stage.
For the foregoing reasons, the Secretary's Rule 12(b)(1) motion to dismiss for lack
of subject matter jurisdiction is GRANTED IN PART and DENIED IN PART. The court
concludes that Plaintiffs have sufficiently alleged subject matter jurisdiction as to all of
their claims, except for those of Ms. Masterman, which must be presented to the
Secretary, and except for those of AAPM&R, for which Plaintiffs are granted leave to
amend.

B.

The Secretary's Rule 12(b)(6) Motion to Dismiss for Failure to State a
Claim.

The Secretary argues that the Amended Complaint fails to contain sufficient
factual allegations to support a plausible claim for relief and therefore fails to satisfy Rule
8's pleading requirement. See Fed. R. Civ. P. 8(a)(2) ("A pleading that states a claim for
relief must contain. , . a short and plain statement of the claim showing that the pleader is
entitled to relief'). In particular, the Secretary contends that while all of Plaintiffs'
claims rely on the Secretary's use of the alleged "Improvement Standard," one cannot
reasonably infer from the alleged facts that the Improvement Standard exists. According
to the Secretary, this is true both because the Improvement Standard is inadequately
defined, and because there are "obvious alternative" explanations for the complained of
conduct that are far more plausible than a "clandestine" and "covert" policy. The
Secretary further points out that its own regulations and policies, "while perhaps not
using the exact term[,] effectively prohibit the use of a so-called 'Improvement
Standard' - i.e., a standard that, as plaintiffs have characterized it, would require the denial
of benefits in any case in which the treatment at issue is not expected to improve a
beneficiary's condition," (Doc. 45 at 2.)
In response, Plaintiffs argue that the Improvement Standard's existence is
supported by three categories of factual information: (I) various Local Coverage
Determinations ("LCD") and provisions of the Medicare Benefit Policy Manual
("MBPM") that suggest the use of the Improvement Standard; (2) prior judicial decisions
28

in which courts have found that the Secretary employed something akin to the
Improvement Standard; and (3) the written administrative decisions in each of the
Individual Plaintiffs' cases. In addition, Plaintiffs rhetorically question whether seven
national organizations that assist Medicare beneficiaries allegedly subject to the
Improvement Standard would have joined the lawsuit if the Improvement Standard did
not exist. See Doc. 32 at 37 ("Is the Secretary suggesting that these large and respected
organizations are dissembling about the policy and its impact on their members and
others whom they serve?,,).10
To survive a motion to dismiss under Rule 12(b)(6), the Amended Complaint
"must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is
plausible on its face.?' Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007»; see also Fed. R. Civ. P. 8(a)(2). In Iqbal,
the Supreme Court set forth a "two-pronged" approach for analyzing a Rule 12(b)(6)
motion to dismiss. Iqbal, 129 S. Ct. at 1950. First, a court must accept a plaintiffs
factual allegations as true and draw all reasonable inferences from those allegations in the
plaintiffs favor. Id. at 1949-50. However, this assumption of truth does not apply to
legal conclusions, and "[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice." Id. at 1949. Second, a court
must determine whether the Amended Complaint's "well-pleaded factual allegations ...
plausibly give rise to an entitlement to relief." Id. at 1950. Neither Iqbal nor Twombly
impose "heightened" pleading standards. See Arista Records, LLC v. Doe 3, 604 F.3d
110, 119-21 (2d Cir. 2010) (rejecting a "heightened pleading standard" under
Iqbal/Twombly and also rejecting the "contention that Twombly and Iqbal require the
pleading of specific evidence or extra facts beyond what is needed to make the claim
plausible. ").
"A claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the

10 The court does not address this claim further as it substitutes speculation for facts.
29

misconduct alleged." Iqbal, 129 S. Ct. at 1949 (citing Twombly, 550 U.S. at

556~57).

"The plausibility standard is not akin to a 'probability requirement,' but it asks for more
than a sheer possibility that a defendant has acted unlawfully." Id.
In considering whether the alleged facts "nudge" the plaintiffs' claims from
merely "speculative" to "plausible," courts are instructed to rely on common sense, and
to consider "obvious alternative explanations" to the plaintiffs' theory of liability. See
Twombly, 550 U.S. at 567. However, the courts are not empowered to weigh the
evidence, assess credibility, and choose the explanation they believe is most worthy of
belief. See Chao v. Ballista, 630 F. Supp. 2d 170, 177 (D. Mass. 2009) ("[A] complaint
should only be dismissed at the pleading stage where the allegations are so broad, and the
alternative explanations are so overwhelming, that the claims no longer appear
plausible."); see also Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985) (when
faced with a motion to dismiss for failure to state a claim, the court's task is "not to
weigh the evidence that might be presented at trial but merely to determine whether the
complaint itself is legally sufficient.").
Here, in seeking dismissal, the Secretary relies heavily on regulations and policies
which forbid the application of anything resembling the Improvement Standard. See 42
C.F.R. § 409.44(a) (explaining that, under the home health benefit, Medicare coverage of
skilled services is based on the "unique medical condition of the individual beneficiary");
MBPM, Ch. 7, § 20.3 (prohibiting the use of utilization screens or "rules of thumb" to
make coverage decisions); 42 C.F.R. § 409.44(b)(3)(iii) (providing that the determination
of whether a skilled service is reasonable and necessary "must be based solely upon the
beneficiary's unique condition and individual needs, without regard to whether the illness
or injury is acute, chronic, terminal, or expected to last a long time"); 42 C.F.R. §
409.32(c) ("Even if full recovery or medical improvement is not possible, a patient may
need skilled services to prevent further deterioration or preserve current capabilities.");
Home Health Prospective Payment System Rate Update for Calendar Year 2011, 75 Fed.
Reg. 70372, 70395 (Nov. 17,2010) ("'Rules ofthumb' in the Medicare medical review
process are prohibited.... Medical denial decisions must be based on a detailed and
30

thorough analysis of the beneficiary's total condition and individual need for care.").
Plaintiffs acknowledge the existence ofthose regulations and policies and do not question
their validity, but argue that the Improvement Standard demonstrates they are being
ignored. The/acts they cite in support of the Improvement Standard's existence are
decidedly scant.
For example, Plaintiffs cite LCD 23604 and 28290 as evidence of the
Improvement Standard because, under the heading "Indications," it notes that "[t]here
must be an expectation that the condition ... will improve significantly within a
reasonable and generally predictable period oftime[,]" and under "Limitations" it states
that "[p]hysical therapy is not covered when the documentation indicates that a patient
has attained the therapy goals or has reached the point where no further significant
practical improvement can be expected." ld. The Secretary, however, points out that this
same LCD also states that the "design of a maintenance regimen/[home exercise plan]
required to delay or minimize muscular and functional deterioration in patients suffering
from a chronic disease may be considered reasonable and necessary[.]" Further, under
"Maintenance Therapy," the LCD states that "[w]here repetitive services that are required
to maintain function involve the use of complex and sophisticated procedures, the
judgment and skill of a physical therapist might be required for the safe and effective
rendition of such services. If the judgment and skill of a physical therapist is required to
safely and effectively treat the illness or injury, the services may be covered as physical
therapy services." ld. Thus, LCD 23604 does not, alone, establish an Improvement
Standard.
Plaintiffs cite LCD 340 as evidence of the Improvement Standard because it
provides for coverage when the "documentation supports the expectation that the
beneficiary's condition will improve significantly in a reasonable and generally
predictable period of time." ld. In the same paragraph, however, the LCD explains that
coverage also applies when the services are "necessary for the establishment of a safe and

31

effective maintenance program required in connection with a specific disease state." Id.;

see also 42 C.F.R. § 409.44(c)(2)(iii)(A)-(C).1l
On balance, the LCDs and MBPMs, regarded in the light most favorable to
Plaintiffs, do not provide sufficient factual support for Plaintiffs' allegations that an
Improvement Standard is being used for the denial of Medicare coverage. This is hardly
surprising, as Plaintiffs further allege that the Secretary's tacit endorsement of the
Improvement Standard is both "covert" and "clandestine." See Arista Records, LLC, 604
F .3d at 120 ("The Twombly plausibility standard ... does not prevent a plaintiff from
pleading facts alleged upon information and belief where the facts are peculiarly within
the possession and control of the defendant[.]") (internal quotation marks and citations
omitted).
Plaintiffs further claim that the Improvement Standard "is apparent from the
district court decisions that have repeatedly rejected the Improvement Standard over the
years." (Doc. 32 at 36) (citing Anderson v. Sebelius, 2010 WL 4273238 (D. Vt. Oct. 25,

2010); Papciakv. Sebelius, 742 F. Supp. 2d 765 (W.D. Pa. 2010); Follandv. Sullivan,
1992 WL 295230 (D. Vt. Sept. 1, 1992); Fox, 656 F. Supp. 1236; Rizzi v. Shalala, 1994

WL 686630 (D. Conn. Sept. 29, 1994)). As an initial matter, Plaintiffs fail to explain
why, in the absence ofjudicial notice, it would be appropriate for the court to consider
such cases as factual allegations on a Rule 12(b)(6) motion to dismiss, particularly when
the Amended Complaint does not mention them. At best, these cases support Plaintiffs'
argument that their allegation of an Improvement Standard is neither fanciful, fantastic,

II In their Opposition, Plaintiffs cite two additional LCDs, but neither appears to provide a basis
to infer that the Improvement Standard exists. LCD 31530, which concerns occupational
therapy, states that "[i]fthe services required to maintain function involve the use of complex
and sophisticated therapy procedures, the judgment and skill of a therapist may be necessary for
the safe and effective delivery of such services." Id. LCD 28290, under the heading "Therapy
for patients with symptoms from chronic disease," explains that Medicare covers the "design of a
home therapy regimen required to delay or minimize muscular and functional deterioration in
patients suffering from chronic disease." Id. Plaintiffs' MBPM citations, none of which are
referenced in the Amended Complaint, fare no better. They do not establish an Improvement
Standard and qualify any statement that appears to deny coverage merely because a condition is
chronic or stable.

32

nor delusional. See Gallop v. Cheney, 642 F.3d 364,368 (2d Cir. 2011) (dismissal of
complaint was appropriate where "sufficiently well-pleaded facts are clearly baseless-that
is, if they are fanciful, fantastic, or delusional.") (internal quotation marks omitted).
In any event, the court rejects Plaintiffs' invitation to look elsewhere for evidence
of the Improvement Standard and focuses instead on the allegations of the Amended
Complaint. With regard to each Individual Plaintiff, the Amended Complaint cites
Agency decisions that are arguably consistent with the imposition of an Improvement
Standard because adjudicators denied coverage based upon, inter alia, a conclusion that
the beneficiary's condition would not improve.
The Secretary counters that the similarities between these Agency decisions are
more obviously explained as legal errors in the application of valid regulations than the
product of a nationwide covert policy to deny Medicare coverage on an unlawful basis.
See Bowen v. Yuckert, 482 U.S. 137, 157 (1987) (explaining that the "Secretary faces an
administrative task of staggering proportions in applying" the Social Security Act to
process all disability benefits claims, and "[p]erfection in processing millions of such
claims annually is impossible."); Mercer v. Birchman, 700 F.2d 828, 835 (2d Cir. 1983)
("[i]t has never been expected that" a "vast" claims-processing department of government
"can achieve absolute procedural perfection."). The Secretary argues that the court must
consider this obvious alternative basis and find Plaintiffs' claim implausible in the face of
more likely and reasonable explanations. However, "[a] well-pleaded complaint may
proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and
that a recovery is very remote and unlikely." Starr v. Sony BMG Music Entm 't, 592 F.3d
314,322 (2d Cir. 2010).
Applying the lqbal/Twombley standard for a motion to dismiss under Rule
12(b)(6), the court cannot conclude as a matter of law that Plaintiffs' Improvement
Standard theory is factually implausible when it is supported by at least some evidence in
each of the Individual Plaintiffs' cases and where other plaintiffs have successfully
demonstrated the use of illegal presumptions and rules of thumb much like Plaintiffs
allege here. "Asking for plausible grounds to infer [application of the Improvement
33

Standard] does not impose a probability requirement at the pleading stage; it simply calls
for enough fact to raise a reasonable expectation that discovery will reveal evidence of
[the Improvement Standard's existence]." Twombly, 550 U.S. at 556; see also Price v.

NY. State Bd. a/Elections, 540 F.3d 101,107 (2d Cir. 2008) (dismissal is warranted only
"if the facts as alleged are insufficient to raise a right to relief above the speculative
level.") (internal quotation marks omitted). The Amended Complaint contains factual
allegations beyond mere "labels and conclusions" coupled with a "formulaic recitation of
the elements of a cause of action[,]" Twombly, 550 U.S. at 555, and "more than an
unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal, 129 S. Ct. at 1949.
Accordingly, at least with regard to the named Plaintiffs, the Amended Complaint states a
claim for relief under Fed. R. Civ. P. 8. 12 The Secretary's motion to dismiss for failure to
allege a plausible claim of relief is therefore DENIED. 13

12 The court expresses no opinion regarding whether it would reach this same conclusion on a
class wide basis.

13 In a relatively cursory manner (Doc. 25-1 at 54-59), the Secretary also seeks dismissal of
Plaintiffs' claims for failure to state a claim, arguing both the merits of Plaintiffs' claims and
Plaintiffs' failure to demonstrate a sufficient legal basis for them. See, e.g., Doc. 25-1 at 54
("Plaintiffs' claims that alleged application of an 'Improvement Standard' violates the Due
Process Clause ofthe Fifth Amendment ... are meritless."); at 55 ("In any event, the procedures
available to plaintiffs comport with due process requirements."); at 58 (arguing Improvement
Standard, if it existed, would not require notice and comment for its promulgation); at 59
(arguing the Freedom of Information Act would not require the Federal Register to publish the
Improvement Standard). In an equally cursory manner, Plaintiffs oppose dismissal. See Doc. 32
at 40-45. In the Secretary's Reply and the Plaintiffs' Surreply, the parties do not further pursue
their arguments, nor did they adequately address them at oral argument. The court thus declines
to address these alleged grounds for dismissal at this time without finding that dismissal has been
waived. See Ibarra v. City a/Chicago, 2011 WL 4583785, at *8 (N.D.IlI. Sept. 28, 2011)
("Given the complexity of the legal issues, the parties' cursory treatment of the issues, and the
current stage ofthe litigation, the Court declines to dismiss Count II at this time."); see also
Allstate Ins. Co. v. Heil, 2007 WL 4270355, at *2 n.2 (D. Haw. Dec. 6, 2007) ("Because the
parties have not briefed the Rule 702 issue in anything more than a cursory way as part of their
summary judgment arguments, the court declines to resolve the expert admissibility issues on the
record before it.").

34

r

SO ORDERED.
Dated at Rutland, in the District of Vermont, this

l:£ day of October, 2011.

ristina Reiss, Chief Judge
United States District Court

35