UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

BOARD OF TRUSTEES OF THE : UNIVERSITY OF ALABAMA et al., : : Plaintiffs, : Civil Action No.: 22-3367 (RC) : v. : Re Document Nos.: 17, 18 : XAVIER BECERRA, : : Defendant. :

MEMORANDUM OPINION

DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT; GRANTING DEFENDANT’S CROSS- MOTION TO DISMISS

I. INTRODUCTION

The Board of Trustees of the University of Alabama, the Health Care Authority for

Baptist Health East, an Affiliate of UAB Health System, and Health Care Authority for Baptist

Health South, an Affiliate of UAB Health System (collectively, “Plaintiffs”) filed a consolidated

action against Xavier Becerra,1 in his official capacity as Secretary of Health and Human

Services (“HHS”) (“Defendant” or the “HHS Secretary”). Plaintiffs initially pursued

administrative appeals within the Medicare program to recover underpayments for 340B

outpatient drugs. When those appeals proved unsuccessful, Plaintiffs filed separate civil actions

under

(g) and 42 U.S.C. § 1395ff to recover the underpaid amounts. Although

Defendant has since refunded the principal underpayments, Plaintiffs allege that the HHS

Secretary has failed to pay interest on those underpayments pursuant to 42 U.S.C. § 1395l(j) and

1 Robert F. Kennedy, Jr. was sworn in as the Secretary of HHS on February 13, 2025 and is automatically substituted for Xavier Becerra as a defendant in this action pursuant to Fed. R. Civ. P. 25(d).

. In this action, Plaintiffs move for summary judgment seeking an order

from this Court directing the HHS Secretary to pay outstanding interest and fully reimburse

Plaintiffs. Pls.’ Mem. Supp. Mot. Summ. J. (“Pls.’ Mot.”), ECF No. 17-1. Defendant provides

multiple justifications for declining to pay interest on Plaintiffs’ underpaid claims, but ultimately,

all of them argue that the language in 42 U.S.C. § 1395l(j) is unclear and that the HHS

Secretary’s interpretation of the statute should be given deference. Additionally, the HHS

Secretary moves to dismiss for lack of jurisdiction because he argues that Plaintiffs’ claims are

moot and Plaintiffs are not entitled to recover interest. Opp’n Pls.’ Mot. Summ. J. & Cross-Mot.

Dismiss (“Def.’s Cross-Mot.”), ECF No. 18. Plaintiffs opposed Defendant’s motion, see Pls.’

Mem. Supp. Mot. Summ. J. & Opp’n Def.’s Mot. Dismiss (“Pls.’ Reply”), ECF No. 20, which

Defendant subsequently replied to, see Reply Supp. Cross-Mot. Dismiss (“Def.’s Reply”), ECF

No. 22, and Plaintiffs responded to Defendant’s reply with an unopposed surreply that the Court

granted leave to file, see Pls.’ Surreply to Def.’s Reply Mem. Supp. Cross-Mot. Dismiss (“Pls.’

Surreply”), ECF No. 23-1. For the foregoing reasons, Plaintiffs’ motion for summary judgment

is denied and Defendant’s cross-motion to dismiss is granted.

II. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs are three hospitals that participate in the Medicare program and purchase drugs

at discounted rates under section 340B of the Public Health Service Act (“PHSA”) (the “340B

Program”). See, Compl. ¶¶ 10, 18, ECF No. 1. In 1992, Congress established the 340B Program

to reduce drug costs for certain non-profit and public hospitals and federally funded clinics

serving many low-income patients in an effort to maximize the use of limited federal funds to

reach more patients. Id. at ¶ 4. “Hospitals participating in the 340B Program purchase 340B

drugs at steeply discounted prices, and when those hospitals prescribe the 340B drugs to

2 Medicare beneficiaries they are reimbursed by HHS at [Hospital Outpatient Prospective Payment

System (“]OPPS[“)] rates.” Id. at ¶ 5 (quoting Am. Hosp. Ass’n v. Azar,

(D.D.C. 2018) rev’d on other grounds,

(D.C. Cir. 2020), rev’d and remanded, Am.

Hosp. Ass’n v. Becerra (“AHA”),

(2022). Prior to Fiscal Year (“FY”) 2018,

Medicare reimbursed all hospitals at a rate of 6% above the average sales price (“ASP”) for

outpatient drugs. 42 U.S.C. § 1395l(t)(14)(A)(iii)(II) (citing 42 U.S.C. § 1395w–3a). Beginning

in FY 2018, the HHS Secretary reduced the payment rate for separately payable 340B-acquired

drugs to 22.5% below the ASP, which Plaintiffs alleged was in violation of the explicit statutory

requirements for calculating such reimbursements. See 42 U.S.C. § 1395l(t)(14)(A)(iii)(I)–(II);

see also Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical

Center Payment Systems and Quality Reporting Programs,

, 52493–511,

52622–25 (Nov. 13, 2017) (codified at scattered parts of 42 C.F.R.) (“CY 2018 Final Rule”);

Medicare Program: Changes to Hospital Outpatient Prospective Payment and Ambulatory

Surgical Center Payment Systems and Quality Reporting Programs,

, 58079–

81 (Nov. 21, 2018) (codified at scattered parts of 42 C.F.R.) (“CY 2019 Final Rule”); Medicare

Program: Changes to Hospital Outpatient Prospective Payment and Ambulatory Surgical Center

Payment Systems and Quality Reporting Programs; Revisions of Organ Procurement

Organizations Conditions of Coverage; Prior Authorization Process and Requirements for

Certain Covered Outpatient Department Services; Potential Changes to the Laboratory Date of

Service Policy; Changes to Grandfathered Children's Hospitals-Within-Hospitals; Notice of

Closure of Two Teaching Hospitals and Opportunity To Apply for Available Slots,

, 61317–27 (Nov. 12, 2019) (codified at scattered parts of 42 C.F.R.) (“CY 2020 Final

Rule”); Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical

3 Center Payment Systems and Quality Reporting Programs; New Categories for Hospital

Outpatient Department Prior Authorization Process; Clinical Laboratory Fee Schedule:

Laboratory Date of Service Policy; Overall Hospital Quality Star Rating Methodology;

Physician-Owned Hospitals; Notice of Closure of Two Teaching Hospitals and Opportunity To

Apply for Available Slots, Radiation Oncology Model; and Reporting Requirements for

Hospitals and Critical Access Hospitals (“CAHs”) To Report COVID-19 Therapeutic Inventory

and Usage and To Report Acute Respiratory Illness During the Public Health Emergency

(“PHE”) for Coronavirus Disease 2019 (“COVID-19”),

, 86050 (Dec. 29,

2020) (codified at scattered parts of 42 C.F.R.) (“CY 2021 Final Rule”); and Medicare Program:

Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and

Quality Reporting Programs; Price Transparency of Hospital Standard Charges; Radiation

Oncology Model,

, 63644 (Nov. 16, 2021) (codified at scattered parts of 42

C.F.R.) (“CY 2022 Final Rule”).

The reduction to the 340B reimbursement rate was challenged in the lawsuit AHA.

. In AHA, the plaintiff hospital association argued that the HHS Secretary lacked the

authority to set such a reduced payment rate, contending that it violated the Social Security Act

and the Administrative Procedure Act (“APA”). Pls.’ Mot. at 4; see AHA, 596 U.S. at 734.

After years of litigation, the Supreme Court ruled in favor of AHA in 2022, holding that the HHS

Secretary’s reduced reimbursement rate for the 340B Program was unlawful. 596 U.S. at 739.

The Supreme Court found that the HHS Secretary failed to reimburse 340B hospitals at the

statutorily prescribed rate and further determined that changing the reimbursement rate for 340B

hospitals in 2018 was impermissible. Id. The Supreme Court remanded the case for further

4 proceedings, leaving unresolved the issue of how to address the underpayments to the affected

hospitals. Id.

In separate proceedings, Plaintiffs initiated administrative appeals for reimbursement, but

the HHS Secretary argued that their claims were not eligible for administrative review. Pls.’

Mot. at 4. As a result, Plaintiffs separately filed these lawsuits to challenge aspects of the

agency’s 340B payment policy from calendar years 2018 through 2022. See generally, Compl.

Those cases were consolidated on April 8, 2024. Min. Order, Bd. of Trs. of the Univ. of Ala. et

al. v. Becerra, No. 22-cv-3367 (D.D.C.) (granting Plaintiffs’ unopposed motion to consolidate

cases for briefing and trial). Plaintiffs bring this consolidated action under the Social Security

Act,

, et seq. (the “Medicare statute”) and the APA,

, et seq.,

alleging that the HHS Secretary “exceeded his scope of authority under the Medicare statute in

contravention of Congressional intent, as well as acted arbitrarily and capriciously, by reducing

reimbursement payment for drugs purchased by Plaintiffs under the 340B Program.” Compl.

¶ 3. Like the plaintiff’s efforts in AHA, Plaintiffs in this action sought to expedite the timeline

for addressing administrative remedies by filing these actions, but the Court stayed Plaintiffs’

cases while awaiting a resolution on AHA. Def.’s Cross-Mot. at 1.

After the Supreme Court’s ruling in AHA, the HHS Secretary took administrative action

to rectify the underpayments. See Medicare Program; Hospital Outpatient Prospective Payment

System: Remedy for the 340B-Acquired Drug Payment Policy for Calendar Years 2018–2022

(“Final Remedy Rule”),

, 77172 (codified at 42 C.F.R. pt. 419) (Nov. 8,

2023). He calculated the underpayments by comparing the amounts that 340B Program hospitals

received with what they should have received under the ASP plus 6% rule.

(the

payments amounted to “the difference between what an affected 340B covered entity hospital

5 received for 340B-acquired drugs . . . and what they would have received for 340B-acquired

drugs if the 340B adjustment had not been in place.”). The HHS Secretary then issued lump sum

payments to said hospitals for the underpaid amounts from 2018 to 2022.

However, the

remaining issue to be resolved by the Court in this case is whether the HHS Secretary owes

interest on these now reimbursed underpayments given the delayed payment. Pls.’ Mot. at 4.

Although the HHS Secretary acknowledged the underpayment by providing Plaintiffs with lump

sum payments, he declined to pay interest on the refunded amounts because he did not believe

the law required payment of interest on these underpayments.

In short, the HHS Secretary

asserts that the Supreme Court’s decision in AHA was not a “final determination” under the

statute that Plaintiffs claim triggers the HHS Secretary’s obligation to pay interest under the

Social Security Act. Def.’s Cross-Mot. at 1.

III. STATUTORY AND REGULATORY FRAMEWORK

Part A of the Medicare statute covers inpatient hospital care, home health care, and

hospice services. See 42 U.S.C. § 1395c. This case centers on Medicare Part B reimbursements

for outpatient drugs provided by hospitals. Specifically, it involves the interpretation and

implementation of statutory provisions governing those reimbursements and related interest

payments. Part B of Medicare offers supplemental coverage for additional types of care,

including outpatient hospital care. Id. §§ 1395j–1395k. 42 U.S.C. § 1395l requires the HHS

Secretary to reimburse hospitals for outpatient drugs according to the ASP formula. Id. § 1395l.

Congress instructed the HHS Secretary to make payments from the Federal Supplementary

Medicare Insurance Trust Fund (commonly known as the Part B Trust Fund) for services that are

“payable under” § 1395l, in accordance with the formulas outlined in § 1395l. Id. § 1395l(a).

Section 1395l(t)(14)(A)(iii)(II) further requires the Secretary to reimburse hospitals for

6 separately payable outpatient drugs at a rate of ASP plus 6%. Id. § 1395l(t)(14)(A)(iii)(II)

(mandating the HHS Secretary to pay a drug’s ASP when there is no hospital acquisition cost

survey). In addition to prescribing reimbursement formulas, Congress also clarified that

[w]henever a final determination is made that the amount of payment made . . . under this part …was in excess of or less than the amount of payment that is due, and payment of such excess or deficit is not made . . . within 30 days of the date of the determination, interest shall accrue on the balance of such excess or deficit not paid or offset.

Id. § 1395l(j) (emphasis added).

The implementing regulation,

(b), applies to Medicare Part B

reimbursements and requires the HHS Secretary to pay interest on underpayments that occur

after a “final determination.”

(b).

In cases in which a[] [Notice of Payment Reconciliation (“]NPR[”)] is not used as [the] notice of determination (that is, primarily under part B), one of the following constitutes a final determination— (A) A written determination that an overpayment exists and a written demand for payment; or (B) A written determination of an underpayment.

§ 405.378(c)(1)(ii) (emphasis added). This regulation requires the “pay[ment of] interest on

underpayments” accruing “from the date of the final determination as defined in paragraph (c) of

this section . . . for each full 30-day period that payment is delayed.” Id. § 405.378(b)(1)–(2). In

light of this statutory and regulatory framework, the present dispute centers on whether the

Supreme Court’s decision in AHA constituted a “final determination” that triggered the HHS

Secretary’s obligation to pay interest. While Plaintiffs argue that the Supreme Court’s decision

in AHA constitutes a “final determination” under the statute and regulation triggering the HHS

Secretary’s obligation to pay interest, Defendant argues that the Supreme Court’s decision in

AHA cannot be considered a “final determination” because it was not an administrative decision

from the HHS Secretary or one of his intermediaries. See generally, Def.’s Cross-Mot.

7 Although the Supreme Court in AHA concluded that the disparate payment rates violated

the APA, it did not propose a remedy for the underpayment suffered by 340B program hospitals.

Instead, the matter was remanded, and the HHS Secretary proposed a rule to remedy the

underpayments from 2018 through 2022. In November 2023, the HHS Secretary published the

Final Remedy Rule, which detailed how the underpayments would be reimbursed to affected

hospitals.

(Final Remedy Rule detailing the resolution of the OPPS 340B-

acquired drug payment policy for calendar years 2018–2022, including the amounts owed to

affected hospitals and the timeline for repayment). The Final Remedy Rule specifies the

compensation process for the OPPS 340B-acquired drug payment policy for the years 2018-

2022, detailing the payments owed to the affected hospitals and providing a timeline for the

repayment.

However, although other plaintiffs have voluntarily dismissed their claims as a

result of the Final Remedy Rule and the reimbursement payments made pursuant thereto,

Plaintiffs in these actions have not because they claim they are entitled to interest payments on

the delayed reimbursement payments. Pls.’ Mot. at 9–10 (arguing that 42 U.S.C. § 1395l(j) does

not limit the HHS Secretary’s obligation to pay interest to underpayments identified by the

agency or its intermediaries, and does not bar interest payments following what Plaintiffs

contend is a final court ruling in their favor).

IV. LEGAL STANDARDS

A. Rule 56

In a motion for summary judgment under the APA, “the standard set forth in Rule 56(a)

does not apply due to the court’s limited role in reviewing the administrative record.” Coe v.

McHugh,

(D.D.C. 2013) (citations omitted). “Summary judgment is an

appropriate procedure for resolving a challenge to a federal agency’s administrative decision

8 when review is based upon the administrative record.” Bloch v. Powell,

, 30–

31 (D.D.C. 2002) (internal quotation marks omitted) (quoting Fund for Animals v. Babbitt,

(D.D.C. 1995)). Under the APA, the Court must invalidate agency actions that

are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”

. “[T]he scope of review under the ‘arbitrary and capricious’ standard is narrow,

and a court is not to substitute its judgment for that of the agency.” Motor Vehicle Mfrs. Ass’n v.

State Farm Mut. Auto. Ins. Co.,

(1983). “Arbitrary and capricious” review is

“highly deferential” and “presumes the agency’s action to be valid.” Envt’l. Def. Fund, Inc. v.

Costle,

(D.C. Cir. 1981). “[T]he court considers whether the agency acted

within the scope of its legal authority, whether the agency has explained its decision, whether the

facts on which the agency purportedly relied have some basis in the record, and whether the

agency considered the relevant factors.” Fund for Animals,

(citing Marsh v.

Or. Nat. Res. Council,

(1989)) (other citations omitted). Only a “brief

statement” is required, as long as the agency explains “why it chose to do what it did.” Tourus

Recs., Inc. v. Drug Enf’t Admin.,

(D.C. Cir. 2001) (citations omitted).

B. Rule 12(b)(1)

“Federal courts are courts of limited jurisdiction[,]” and it is presumed by law that “a

cause lies outside this limited jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am.,

(1994); St. Paul Mercury Indem. Co. v. Red Cab Co.,

, 288–89 (1938); see

also Gen. Motors Corp. v. Envt’l. Prot. Agency,

(D.C. Cir. 2004) (stating that

“[a]s a court of limited jurisdiction, we begin, and end, with an examination of our jurisdiction”).

“[B]ecause subject-matter jurisdiction is both an ‘Art[icle] III as well as a statutory

requirement[,] no action of the parties can confer subject-matter jurisdiction upon a federal

9 court.’” Akinseye v. District of Columbia,

(D.C. Cir. 2003) (quoting Ins.

Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee,

(1982)). Rather, a

plaintiff must establish by a preponderance of the evidence that the court has subject-matter

jurisdiction in response to a motion to dismiss under Rule 12(b)(1). Lujan v. Defs. of Wildlife,

(1992).

As subject-matter jurisdiction pertains to the court’s authority to hear the claim, the court

must scrutinize the plaintiff’s factual allegations more closely when addressing a Rule 12(b)(1)

motion than it would for a Rule 12(b)(6) motion for failure to state a claim. Macharia v. United

States,

(D.C. Cir. 2003); Grand Lodge of Fraternal Ord. of Police v.

Ashcroft,

(D.D.C. 2001). Therefore, the court is “not limited to the

allegations [in] the complaint.” Hohri v. United States,

(D.C. Cir. 1986),

vacated on other grounds,

(1987). When appropriate, “the court may consider the

complaint supplemented by undisputed facts evidenced in the record,” or a combination of

“undisputed facts [and] the court’s resolution of disputed facts.” Herbert v. Nat’l Acad. of Scis.,

(D.C. Cir. 1992).

C. Rule 12(b)(6)

The Federal Rules of Civil Procedure require plaintiffs to properly “state a claim upon

which relief can be granted.” Fed. R. Civ. P. 12(b)(6). A motion to dismiss under Rule 12(b)(6)

does not test a plaintiff’s ultimate likelihood of success on the merits. See Scheuer v. Rhodes,

(1974), abrogated on other grounds by Harlow v. Fitzgerald,

(1982). Instead, a court considering a Rule 12(b)(6) motion presumes that the complaint’s

factual allegations are true and construes them in the light most favorable to the plaintiff. See,

e.g., United States v. Philip Morris, Inc.,

(D.D.C. 2000). Nevertheless,

10 “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as

true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal,

(2009) (quoting Bell Atl. Corp. v. Twombly,

(2007)). To that end, a plaintiff’s

factual allegations “must be enough to raise a right to relief above the speculative level, on the

assumption that all allegations in the complaint are true (even if doubtful in fact).” Twombly,

(citations omitted). “Threadbare recitals of the elements of a cause of action,

supported by mere conclusory statements,” are insufficient to withstand a motion to dismiss.

Iqbal,

. A court need not accept a plaintiff’s legal conclusions as true, see

nor

must a court presume the veracity of legal conclusions that are “couched as [] factual

allegation[s,]” see Twombly,

(internal quotation marks omitted) (quoting

Papasan v. Allain,

(1986)).

V. ANALYSIS

In their motion for summary judgment, Plaintiffs argue that the HHS Secretary owes

them interest for the delayed payment of the 340B Program reimbursements, asserting that the

statute’s plain language requires interest to be paid “[w]henever a final determination is made

that the amount of payment made under this part . . . to a provider of services . . . was in excess

of or less than the amount of payment that is due.” 42 U.S.C. § 1395l(j). Plaintiffs contend that

the Supreme Court’s decision in AHA was precisely such a final determination, where the Court

concluded that the HHS Secretary “acted unlawfully by reducing the reimbursement rates for

340B hospitals,” and thus underpaid those hospitals. AHA, 596 U.S. at 736; see also Pls.’ Mot.

at 10–16.

In response, the HHS Secretary denies that he is required to make such interest payments

because (1) Congress has not waived sovereign immunity to require interest payments arising

11 from judicial rulings (rather than administrative determinations), such as the Court’s decision in

AHA, (2) the Supreme Court’s ruling does not constitute a final determination of underpayment

because it did not specifically calculate the amount owed to Plaintiffs, and (3) a judicial ruling

can only be considered a written determination of an underpayment if it is the result of a request

for Expedited Access to Judicial Review (“EAJR”) pursuant to a specific statutory provision that

explicitly provides for interest payments. Def.’s Cross-Mot. at 10–16, 19–22; see also Def.’s

Reply at 4–8. The HHS Secretary further argues that (1) Plaintiffs’ claims should be dismissed

because their claims are moot given that the repayments they received have provided them all the

relief to which they are entitled, and (2) Plaintiffs are not entitled to interest because their

complaint does not challenge any agency decision regarding interest having been brought before

the HHS Secretary’s interest determination. At the center of the HHS Secretary’s overlapping

arguments is the argument that any claim for interest lacks merit because the AHA opinion is not

a “final determination” because it does not meet the statutory requirements in 42 U.S.C.

§ 1395l(j). See generally Def.’s Cross-Mot. The motions are ripe for review, and the Court will

address the parties’ arguments in turn.

A. Mootness of Plaintiffs’ Claims

The Court will begin by considering the HHS Secretary’s position that Plaintiffs’ actions

should be dismissed for lack of jurisdiction because Plaintiffs’ claims for reimbursement are now

moot. See Def.’s Cross-Mot. at 7. The HHS Secretary explains that Plaintiffs in these

consolidated actions challenged HHS’s 340B payment policy for the years 2018 through 2022,

which they argued unlawfully reduced Medicare reimbursement rates for drugs purchased by

certain hospitals under the 340B Program. Id. However, because the HHS Secretary has

modified the 340B reimbursement policy to conform with the prospective relief in AHA and has

12 already reimbursed Plaintiffs for the amounts due under the prescribed reimbursement formula,

the HHS Secretary contends that Plaintiffs’ claims are moot. Id. Plaintiffs respond that their

claims are not moot and that the HHS Secretary “ignores that the Plaintiffs have requested

interest since the beginning of this litigation six years ago.” Pls.’ Mot. at 1. Plaintiffs argue that

the HHS Secretary’s “refusal to pay interest on those belated payments to Plaintiffs . . . is

precisely why this case remains a live dispute; Plaintiffs seek a judgment for meaningful relief

from this Court through an order that the Secretary honor his statutory duty to pay interest.” Id.

at 4–5. For the foregoing reasons, the Court finds that Plaintiffs’ claim for interest is not moot.

Mootness is an Article III jurisdictional doctrine that “limits federal courts to deciding

actual, ongoing controversies.” Am. Bar Ass’n v. FTC,

(D.C. Cir. 2011)

(quoting Clarke v. United States,

, 700–01 (D.C. Cir. 1990) (en banc)). The same

Article III case-or-controversy requirement that underpins the standing doctrine means that

federal courts lack jurisdiction to decide moot cases. See Noble v. Nat’l Ass’n of Letter Carriers,

AFL-CIO,

(D.D.C. 2018). “A case or claim is moot ‘when the issues

presented are no longer live or the parties lack a legally cognizable interest in the outcome.’”

(quoting Schmidt v. United States,

(D.C. Cir. 2014)). Thus, mootness

deprives the court of jurisdiction and requires dismissal when “intervening events make it

impossible to grant the prevailing party effective relief, or when the [c]ourt’s decision will

neither presently affect the parties’ rights nor have a more-than-speculative chance of affecting

them in the future.”

(cleaned up and citations omitted). “The party seeking jurisdictional

dismissal must establish mootness, while the opposing party has the burden to prove that

a mootness exception applies.” Reid v. Hurwitz,

(D.C. Cir. 2019). Courts

must “evaluat[e] mootness ‘through all stages’ of the litigation in order to ensure there remains a

13 live controversy.” 21st Century Telesis Joint Venture v. FCC,

(D.C. Cir.

2003) (quoting Lewis v. Cont’l Bank Corp.,

(1990)).

The Court denies the HHS Secretary’s motion to dismiss for mootness because the issues

of mootness and the merits are inextricably intertwined. At the heart of this action is Plaintiffs’

claim that they are entitled to interest on belated payments. Pls.’ Mot. at 9–10. If Plaintiffs have

a legal right to that interest, then their claim remains live and capable of meaningful judicial

relief. If, however, they are not entitled to such interest, then they have already received the full

extent of the remedy to which they are due, and their claims would be moot. Thus, the merits

and mootness questions are two sides of the same coin.

This is precisely the situation in which courts have cautioned that jurisdictional dismissal

is improper. In assessing mootness at the pleading stage, a court must assume that the plaintiff

will “prevail on the merits.” Boose v. District of Columbia,

(D.C. Cir.

2015); see also Steel Co. v. Citizens for a Better Env’t,

(1998) (“It is firmly

established in our cases that the absence of a valid (as opposed to arguable) cause of action does

not implicate subject-matter jurisdiction.”), abrogated on other grounds by Riley v. Bondi,

,

(2025); Gates v. Towery,

(7th Cir. 2005) (“A bad

theory (whether of liability or of damages) does not undermine federal jurisdiction.”). These

principles underscore that mootness cannot be decided by assuming that the HHS Secretary is

correct on the merits. In fact, at the motion to dismiss stage, the Court must assume that

Plaintiffs are entitled to interest payments.

The HHS Secretary argues that the case is moot because Plaintiffs have already received

payments consistent with the revised 340B payment policy. Def.’s Cross-Mot. at 1–2 (arguing

that Plaintiffs are not entitled to interest payments because they did not challenge an agency

14 decision, they were paid within the statutory 30-day window, and the AHA decision was a

judicial ruling in a different case, not a statutory “final determination”). But as Plaintiffs point

out, and as the Court acknowledges, they have sought interest on those delayed payments from

the outset of the litigation. Pls.’ Mot. at 1. Whether that interest is required by law is precisely

the disputed legal issue. The HHS Secretary’s argument that there is no further relief the Court

can grant simply assumes that Plaintiffs have no right to interest—i.e., that they will lose on the

merits. This is the very type of “confus[ion of] mootness with the merits” that the Supreme

Court cautioned against in Chafin v. Chafin,

(2013). In Chafin, the Court

reiterated that a case is not moot simply because a party believes no further remedy is warranted.

. Rather, a case “becomes moot only when it is impossible for a court to grant

any effectual relief whatever to the prevailing party.” Knox v. SEIU, Loc. 1000,

(2012) (cleaned up and citations omitted). Here, if Plaintiffs are correct that they are entitled

to interest, a court order awarding that interest would plainly constitute “effectual relief.”

This situation mirrors the reasoning in Hurry v. FDIC, where the Court rejected the

agency’s mootness argument because it was premised entirely on its own view of the merits.

Hurry v. Fed. Deposit Ins. Corp.,

, at *4 (D.D.C. 2024). There, the FDIC

claimed that its closure of a file constituted final agency action, thus mooting the plaintiff’s claim

for compelled action.

But the Court held that “the FDIC’s mootness argument is premised

on the contention that there is no relief for the Court to grant because the agency has already

taken a final agency action,” which went “directly to the merits of Hurry’s claim.”

That

argument was not that the Court is unable to provide relief, but rather that the Court should

decide that it is unnecessary to do so.

(citing Chafin,

). Similarly, here, the

HHS Secretary argues that the Court need not act because the agency has fulfilled its obligations.

15 But that is the contested legal issue. As in Hurry, this “goes directly to the merits,” see

and

thus the Court must assume that Plaintiffs are entitled to the interest they claim in determining

whether the controversy is live. Accordingly, the HHS Secretary’s motion to dismiss for lack of

jurisdiction on mootness grounds must be denied.

B. The Court’s Interpretation of 42 U.S.C. § 1395l(j)

Having determined that the issue of mootness and the issue of the merits are entirely

intertwined, the Court will now turn to the merits. The issue at hand is whether the AHA

decision qualifies as a “final determination” that triggers interest payments pursuant to 42 U.S.C.

§ 1395l(j). In AHA, the Supreme Court ruled that the HHS Secretary’s reduced reimbursement

rate for 340B drugs was unlawful, and it remanded the case for further proceedings. AHA, 596

U.S. at 736, 739. However, the Court did not specifically address whether this ruling constitutes

a “final determination” triggering interest payments and the parties have contrasting views on

that based on their respective interpretation of the statute. If the AHA decision is considered a

“final determination” under § 1395l(j), the HHS Secretary would be obligated to pay interest on

the underpaid amounts with accrual beginning thirty days after issuance of that decision; and if

not, Plaintiffs would not be entitled to interest under the current statutory framework because the

HHS Secretary reimbursed the underpayment within 30 days of the issuance of the Final Remedy

Rule, which the HHS Secretary argues is the date of his “final determination.” Def.’s Reply at

17 n.4.

Given the parties’ disagreement over the interpretation of 42 U.S.C. § 1395l(j), the Court

first examines the statute’s text, structure, purpose, and history. The tools of statutory

interpretation all favor the HHS Secretary’s reading: that the phrase “final determination” in 42

U.S.C. § 1395l(j) refers exclusively to an administrative decision issued by the HHS Secretary or

16 a fiscal intermediary, rather than a judicial ruling. Accordingly, the Court finds that the Supreme

Court’s decision in AHA does not qualify as a “final determination” under the statute.

Courts are required to “interpret statutes . . . based on the traditional tools of statutory

construction,” regardless of the surrounding context. Pac. Gas & Elec. Co. v. FERC,

, 947 (D.C. Cir. 2024) (quoting Loper Bright Enters. v. Raimondo,

(2024)). In keeping with established interpretive principles, the analysis “begin[s] with the text”

of the statute and turns to “the ordinary meaning of its key terms.” Id. at 948 (first quoting City

of Clarksville v. FERC,

(D.C. Cir. 2018); then quoting Novartis Pharms.

Corp. v. Johnson,

, 460 (D.C. Cir. 2024)). When the statutory language is clear,

courts are bound to “enforce [it] according to its terms.” Hardt v. Reliance Standard Life Ins.

Co.,

(2010). Even when a statute is ambiguous, courts must independently

assess whether an agency has acted within the limits of its statutory authority. Loper Bright,

. Here, 42 U.S.C. § 1395l(j) provides:

[w]henever a final determination is made that the amount of payment made . . . under this part . . . was in excess of or less than the amount of payment that is due, and payment of such excess or deficit is not made . . . within 30 days of the date of the determination, interest shall accrue on the balance of such excess or deficit not paid or offset.

42 U.S.C. § 1395l(j) (emphasis added). The implementing regulation,

(b),

governs Medicare Part B reimbursements and mandates that the HHS Secretary pay interest on

underpayments that occur after a “final determination.”

(b). The regulation

stipulates that:

In cases in which a[] [Notice of Payment Reconciliation (“]NPR[”)] is not used as [the] notice of determination (that is, primarily under part B), one of the following constitutes a final determination— (A) A written determination that an overpayment exists and a written demand for payment; or (B) A written determination of an underpayment.

17

§ 405.378(c)(1)(ii) (emphasis added). Plaintiffs argue that “[t]he plain language of § 1395l(j)

requires the Secretary to make an interest payment pursuant to the Supreme Court’s

determination of an underpayment in AHA.” See Pls.’ Mot. at 10–16. They contend that the

plain language of the statute requires the HHS Secretary to pay interest whenever a final

determination of an underpayment is made, and the judicial decision in AHA constitutes a final

determination for the purposes of this action. Id. Plaintiffs assert that because the Supreme

Court found that the underpayments under the 340B Program were unlawful in their holding in

the AHA opinion, § 1395l(j) mandates the HHS Secretary to pay interest on the underpaid

amount. Id.; see also 42 U.S.C. § 1395l(j). They also claim that, contrary to the HHS

Secretary’s argument, the statute does not restrict interest payments to administrative

determinations, asserting that judicial decisions such as AHA can trigger the interest obligation.

See Pls.’ Mot. at 11–12. On the other hand, the HHS Secretary argues that 42 U.S.C. § 1395l(j)

does not apply to the AHA decision because it was a judicial ruling and that the statute’s interest

provision is triggered only by an administrative determination by the HHS Secretary or one of

his intermediaries. Def.’s Cross-Mot. at 13. Defendant also contends that, because the AHA

decision did not calculate the specific amount of underpayment, that judicial opinion does not

constitute a final determination that can trigger the interest requirement. Id. at 16.2

2 The HHS Secretary separately argues that Plaintiffs cannot seek judicial review of interest payments under 42 U.S.C. § 1395l(j) because their complaint fails to identify any final agency action denying interest, and therefore, the interest issue is outside the scope of their claims. See Def.’s Cross-Mot. at 8–9. This raises a separate issue of whether a final agency action, such as a specific denial of interest, has been alleged in the Complaint and is properly subject to review under the APA. Notably, the current complaint was filed before the HHS Secretary’s Final Remedy Rule was issued, which arguably is the final agency action that could be properly reviewed. This issue is distinct from Plaintiffs’ claim that they have consistently sought interest payments, and it does not contest that they have sought interest from the outset of this action. Instead, it questions whether the operative Complaint in this case alleges a final agency action that is properly before the Court for review under § 706 of the APA. Because this

18 The regulation implementing § 1395l(j)’s interest provision,

(c),

defines “final determination” in the context of administrative determinations about over- or

underpayment, without reference to judicial decisions. See § 405.378(c)(1)(ii) (“A written

determination that an overpayment exists and a written demand for payment; or [a] written

determination of an underpayment.”). The regulatory history, including the 1991 regulation,

clarifies that “[t]he definition of final determination in § 405.376(c) [subsequently renumbered to

implementing regulation

(c)]3 applies to administrative, not judicial,

determinations.” Medicare Program; Changes Concerning Interest Rates Charged on

Overpayments and Underpayments,

, 31335 (1991). This interpretation has

remained consistent over decades of administrative and judicial decisions. See e.g., Cosgrove v.

Sullivan,

(2d Cir. 1993) (“However, the mention of subsequent judicial

decisions relates only to stopping rather than starting the accrual of interest. There is thus

nothing in the regulations indicating that judicial decisions are final determinations commencing

the accrual of interest on underpayments, and the Preamble is consistent with the regulations.”

(emphasis in original)); see also Hospice of N.M., LLC v. Sebelius,

, at *2

(D.N.M. July 13, 2020) (“In the Court’s opinion, however, § 1395l(j) refers to a final

‘administrative’ determination of benefits, not a final judicial or appellate determination. In

other words, [§] 1395l(j) requires the payment of interest on any excess or deficit not refunded to

HHS or paid to the service provider within thirty days of HHS having made a final

issue is one of the adequacy of the pleadings and can be easily remedied through amendment of the pleadings (for which leave to do so is to be liberally granted), the Court declines to rule on this basis. 3

(c) was subsequently renumbered to implementing regulation

(c). See

(noting that the regulation was “[r]edesignated at

Dec. 2, 1996;

July 30, 2004;

Sept. 16, 2009”).

19 administrative determination of benefits.”). This view also aligns with sovereign immunity

concerns: for interest to attach against the agency, Congress must speak clearly. See Tex.

Clinical Labs, Inc. v. Johnson,

, at *5 (N.D. Tex. June 4, 2009). Here,

§ 1395l(j) fails that test, because Congress has not explicitly waived the government’s sovereign

immunity subjecting it to interest payments that accrue upon the issuance of a judicial opinion,

rather than an agency decision.

Given that the statute does not define “final determination” and is ambiguous on whether

judicial decisions such as AHA qualify, the Court recognizes that 42 U.S.C. § 1395l(j) grants the

HHS Secretary broad discretion to define what qualifies as a “final determination” for purposes

of triggering interest payments. This interpretation reflects the HHS Secretary’s long-held

administrative position supported by regulatory action and judicial precedent. See Kisor v.

Wilkie,

, 577–79 (2019). The agency’s implementing regulation at

(c)(1)(ii) defines “final determination” as an administrative, not judicial, decision.

Therefore, the Court interprets this regulation to mean that judicial decisions do not trigger the

interest provision under § 1395l(j).

Turning to the AHA Supreme Court decision, it addressed the legality of HHS’s

reimbursement methodology for 340B hospitals, holding that the agency had exceeded its

statutory authority by reducing rates without conducting a survey. 596 U.S. at 739 (“We

conclude that, absent a survey of hospitals’ acquisition costs, HHS may not vary the

reimbursement rates for 340B hospitals.”). However, the Court did not direct HHS to make any

payments, nor did it specify the amount owed to any provider. Instead, the Court remanded the

matter to the Circuit, who remanded it to this Court, to determine the appropriate remedy. Id.

(remanding the action because “this Court is not the forum to resolve that policy debate”). As

20 courts in similar contexts have repeatedly recognized, judicial opinions that merely identify legal

errors in agency policy do not substitute for formal administrative determinations. See, e.g.,

Allina Health Servs. v. Sebelius,

(D.C. Cir. 2014) (“[T]he court erred by

directing the Secretary how to calculate the hospitals’ reimbursements, rather than just

remanding after identifying the error.” (internal citation omitted)); see also County of Los

Angeles v. Shalala,

, 1011 (D.C. Cir. 1999) (“Once, therefore, the district court

held that the Secretary had misinterpreted § 1395ww(d)(5)(A)(iv), it should have remanded to

the Secretary for further proceedings consistent with its conception of the statute. Not only was

it unnecessary for the court to retain jurisdiction to devise a specific remedy for the Secretary to

follow, but it was error to do so.” (internal citation omitted)).

Plaintiffs’ interpretation of § 1395l(j)’s interest triggering provision also overlooks the

Medicare statute’s structure. While § 1395l(j) does not specify whether a “final determination”

includes a judicial decision, other Medicare provisions explicitly provide interest to accrue upon

the issuance of a judicial decision. See, e.g., 42 U.S.C. § 1395oo(f)(2) (authorizing a court to

award interest when a hospital successfully seeks judicial review of a cost report payment

determination); see also § 1395ff(b)(2)(C)(iv) (granting interest to providers who successfully

make a facial challenge to a regulation or other agency policy after seeking EAJR). Clearly,

Congress knew how to provide for judicially-triggered accrual dates when it chose to, but it did

not do so in § 1395l(j), indicating an intent not to treat judicial decisions as final determinations

for purposes of interest accrual under that provision.4 Tex. Clinical Labs, Inc. v. Sebelius, 612

4 Plaintiffs also argue that the HHS Secretary’s reliance on the EAJR process as the exclusive avenue for securing interest payments is a post hoc rationalization. Pls.’ Mot. at 21– 23; Pls.’ Reply at 22–24. They assert that the HHS Secretary originally insisted that providers had no right to challenge the underpayments at all and only introduced the EAJR argument after losing in court. Id. However, the Court finds that the HHS Secretary’s reliance on the EAJR

, 775–76 (5th Cir. 2010) (“[T]he Medicare statute . . . does not define what type of

rulings constitute ‘final determinations’ upon which interest should accrue. Nor is its language

so clear as to only permit a single interpretation.”); Saad v. SEC,

, 108 (D.C. Cir.

2020) (“Given a readily available alternative reading,” courts “should avoid adopting such an

internally contradictory interpretation of a statute.”). And again, given sovereign immunity

concerns, Congress’s silence in § 1395l(j) on whether interest is to accrue upon the issuance of a

judicial opinion dictates that the statute should be narrowly construed against providing for such

interest accrual. Given the statutory context and regulatory requirements, the AHA Supreme

Court opinion cannot qualify as a “final determination” under § 1395l(j).

But even if a judicial opinion could generally constitute a “final determination,” the AHA

opinion would still not meet the statutory requirements to trigger an award of interest here. The

AHA ruling addressed only a narrow legal question: whether the statute allowed HHS the

authority to vary the reimbursement rates absent a survey. AHA, 596 U.S. at 739 (“We conclude

that, absent a survey of hospitals’ acquisition costs, HHS may not vary the reimbursement rates

for 340B hospitals.”). The Court held that such discretion did not exist, but it explicitly noted

that it “need not address potential remedies.” Id. at 734. When this Court remanded the matter

so that a remedy for the underpayments identified in AHA would be provided, it recognized that

process as the necessary procedural pathway for securing interest payments does not represent a new legal rationale for the agency’s underlying decision. Rather, it is a more detailed articulation of the agency’s longstanding position that interest is not due absent a statutory basis, and that such a basis is lacking here because Plaintiffs never pursued or received EAJR. This is consistent with the principle that “when an agency provides further explanation of its decision in the course of litigation, it is not necessarily engaging in post hoc rationalization.” Nat’l Oilseed Processors Ass’n v. Browner,

(D.D.C. 1996), aff’d in part, Troy Corp. v. Browner,

(D.C. Cir. 1997).

22 there were “multiple ways for HHS to remed[y] its underpayments” and that HHS retained

discretion in selecting a remedy. Am. Hosp. Ass’n v. Azar,

(D.D.C. 2019).

Indeed, decisions involving underpayments often conclude that Medicare owes payment

for a service but do not calculate a specific amount, and such decisions do not qualify as “final

determinations” under

. See Medicare Program: Changes to the Medicare

Claims Appeal Procedures,

, 11466 (Mar. 8, 2005) (codified at scattered parts

of 42 C.F.R.) (“ALJ decisions involving underpayments often indicate that Medicare must make

payment for a service, but do not calculate a specific underpayment amount to be made. These

determinations are not final, because the contractor must still calculate the underpayment amount

by determining the principal amount to be paid.”); see also

(“[T]he date of the final

determination for purposes of determining when interest charges on underpayments begin

accruing is the date that the contractor completes the calculation and makes the written

determination of the principal amount that Medicare owes.”). The regulation is clear: a final

determination occurs only when the contractor completes the written calculation and issues the

underpayment determination. The AHA ruling, like such ALJ decisions, did not constitute a final

determination triggering an entitlement to interest because it did not calculate a specific

underpayment.

Moreover, Plaintiffs cannot rely on the AHA decision for accrual of their right to interest

because they were not parties to that case, and, regardless, their claims involve different years

than those at issue in AHA. The AHA litigation involved the 2018 and 2019 payment years and

was limited to the hospitals that challenged HHS’s rate reduction policy. AHA, 596 U.S. at 734–

36. Plaintiffs now seek interest for 2020 through 2022; years that were not at issue in AHA. The

Supreme Court’s ruling cannot serve as a “final determination” for providers not before the

23 Court, nor for years beyond those at issue. See Taylor v. Sturgell,

(2008)

(“[O]ne is not bound by a judgment in personam in a litigation in which he is not designated as a

party or to which he has not been made a party by service of process.”) (emphasis in original)

(internal quotation omitted).

Plaintiffs challenge the above-described interpretation of the statute by arguing that the

HHS Secretary’s decision to withhold interest on underpayments while simultaneously collecting

interest on overpayments represents an impermissible statutory asymmetry. Pls.’ Mot. at 21–23;

Pls.’ Reply at 21–23.5 They argue that such differential treatment allows the HHS Secretary to

“hold underpayments for yearslong litigation,” see Pls.’ Mot. at 21, without compensating

providers, even after a judicial determination in the providers’ favor. Plaintiffs characterize this

as both substantively unfair and contrary to statutory purpose.

However, as the HHS

Secretary points out, Plaintiffs fail to point to any statute that would entitle them to interest, and

Plaintiffs mischaracterizes both the structure of § 1395l(j) and the nature of the statutory scheme

Congress enacted. Def.’s Cross-Mot. at 24–26.

In determining whether the HHS Secretary’s interpretation of § 1395l(j) is in accordance

with the law, the “court must exhaust all the traditional tools of construction”—considering the

law’s “text, structure, history, and purpose.” Kisor, 588 U.S. at 575 (internal quotation marks

and citations omitted). Here, the statutory text of § 1395l(j) is silent with respect to interest on

underpayments and expressly provides for the accrual of interest only in the context of

5 Although Plaintiffs also assert that the HHS Secretary’s reading of § 1395l(j) is “arbitrary and capricious,” see Pls.’ Mot. at 21–23; Pls.’ Reply at 21–23, their challenge is best understood as a claim that the HHS Secretary’s interpretation of § 1395l(j) is “contrary to” law.

. But as the Court has set forth, the HHS Secretary’s interpretation of § 1395l(j) is not only reasonable, but the Court has concluded it is the “single, best meaning” of that statute. Loper Bright,

.

24 overpayments. Congress’s specification that interest accrue for overpayments—but silence on

underpayments—means the Court cannot presume a waiver of sovereign immunity for interest

on underpayments. Therefore, the purported textual asymmetry of which Plaintiffs complain is

not a congressional oversight but reflects a deliberate legislative choice. Again, the statute

provides:

Whenever a final determination is made that the amount of payment made . . . was in excess of . . . the amount of payment that is due, and payment of such excess . . . is not made (or effected by offset) within 30 days of the date of the determination, interest shall accrue on the balance of such excess . . . not paid or offset.

42 U.S.C. § 1395l(j) (emphasis added). The provision does not mirror the mechanism for

underpayments, nor does it create a general entitlement to interest.

Congress’s enactment of § 1395l(j) addressed a specific concern: “the assessment of

interest [on overpayments] will provide incentives for debtors to repay overpayments more

promptly.” Cosgrove,

. Thus, any difference in treatment “does not undermine

the Secretary’s statutory interpretation” because the law was “concerned with facilitating the

recoupment of overpayments, rather than underpayments.” Def.’s Cross Mot. at 26 (quoting

Cosgrove,

). This rationale reveals that the statute was narrowly targeted at

quickly recouping funds erroneously overpaid to providers, not at compensating providers for

delays in receiving payments due. The overall structure of the Medicare Act, which contains

many provisions that promote overpayment recovery, further supports this intentionally one-

sided framework. In this context, the HHS Secretary’s interpretation of § 1395l(j)—allowing

interest to accrue only on overpayments—is not only reasonable, but also aligns with the

statute’s purpose. Cosgrove,

(emphasizing that Congress enacted § 1395l(j) to

25 encourage expedient repayment of overpayments by imposing interest to foster faster

compliance).6

In short, based on the language of 42 U.S.C. § 1395l(j), its statutory context, purpose, and

implementing regulations, the most natural reading of the provision is that the Supreme Court’s

decision in AHA does not constitute a “final determination.”7 Courts must exercise “independent

judgment in determining the meaning of statutory provisions,” rather than defer to agency

interpretations. Loper Bright,

. Only the courts, not agencies, have the

constitutional authority to conclusively interpret the law.

(“As relevant here, the APA

specifies that courts, not agencies, will decide ‘all relevant questions of law’ arising on review of

agency action, . . . even those involving ambiguous laws.”) (cleaned up). Applying that principle

here, and reading § 1395l(j) in accordance with its “single, best meaning,” id. at 400, the Court

finds that the AHA Supreme Court opinion does not constitute a “final determination” under the

statute and therefore does not trigger an interest obligation under § 1395l(j).

6 While Plaintiffs’ concerns about delayed compensation due to prolonged litigation are understandable, they do not justify departing from the statutory framework, which does not mandate interest payments on underpayments during the pendency of litigation. The APA already provides recourse for unreasonable agency delay. See

(b), 706(1). 7 The Court’s conclusion regarding its statutory interpretation of § 1395l(j) is also consistent with the doctrine of sovereign immunity, which limits the ability of individuals to recover interest from the government absent express authorization. See Libr. of Congress v. Shaw,

(1986) (“This basic rule of sovereign immunity, . . . gave rise to the rule that interest cannot be recovered unless the award of interest was affirmatively and separately contemplated by Congress.” (citing to United States ex rel. Angarica v. Bayard,

(1888) (“The case, therefore, falls within the well-settled principle, that the United States are not liable to pay interest on claims against them, in the absence of express statutory provision to that effect.”))). As set forth above, Plaintiffs have failed to identify an entitlement to interest expressly authorized by Congress.

26 VI. CONCLUSION

For the foregoing reasons, Plaintiffs’ Motion for Summary Judgment (ECF No. 17) is

DENIED and Defendant’s Cross-Motion to Dismiss (ECF No. 18) is GRANTED. An order

consistent with this Memorandum Opinion is separately and contemporaneously issued.

Dated: August 6, 2025 RUDOLPH CONTRERAS United States District Judge

27