Foreign Providers Must Exhaust Medicare Advantage Remedies Before Suing: Hospital Quirurgica Del Sur v. Martin's Point Health Care

1. Introduction

In Hospital Amerimed Cancún S.A. de C.V. & Hospital Quirurgica del Sur v. Martin’s Point Health Care, Inc., Nos. 24-1815/1816 (1st Cir. Aug. 19 2025), the United States Court of Appeals for the First Circuit confronted two Mexican hospitals’ attempts to recover more than USD 2.6 million for emergency treatment rendered to American tourists enrolled in Martin’s Point Medicare Advantage (“MA”) plans.

The district court dismissed the actions for lack of subject-matter jurisdiction, holding that the claims “arose under” the Medicare Act and were therefore subject to the statute’s mandatory administrative-exhaustion scheme. On appeal, the hospitals argued (i) that tort-style claims for negligent misrepresentation and promissory estoppel do not “arise under” the Medicare Act, and (ii) that foreign hospitals are incapable of accessing Medicare’s administrative review channels, rendering exhaustion futile. The First Circuit rejected both contentions, reaffirming the broad sweep of § 405(h) (as incorporated into Part C) and establishing an important precedent for foreign health-care providers and MA organizations alike.

2. Summary of the Judgment

• Holding. Claims by non-contract foreign hospitals seeking reimbursement from a Medicare Advantage Organization (“MAO”) are “inextricably intertwined” with Medicare benefits determinations; therefore they “arise under” the Medicare Act, triggering the jurisdiction-stripping and exhaustion requirements of 42 U.S.C. §§ 405(g)–(h) & 1395w-22(g)(5).
• Exhaustion Not Excused. The Illinois Council exception—permitting direct judicial review where agency channels would mean “no review at all”—was deemed waived and, in any event, unproven. The hospitals’ foreign status, standing alone, does not bar them from invoking Medicare Part C’s appeals process.
• Result. Affirmance of the district court’s Rule 12(b)(1) dismissals and denial of Rule 59(e) motions.

3. Analysis

3.1 Precedents Cited and Their Influence

• Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1 (2000) – Established the “channeling” principle and the narrow futility exception. The First Circuit distinguished but ultimately applied its core holding: all claims “arising under” Medicare must pass through agency review unless doing so forecloses review entirely.
• Heckler v. Ringer, 466 U.S. 602 (1984) – Source of the “inextricably intertwined” test: courts look to substance, not labels. The panel relied heavily on this to pierce the hospitals’ tort framing.
• Global Rescue Jets, LLC v. Kaiser Foundation Health Plan, Inc., 30 F.4th 905 (9th Cir. 2022) – Treated MAOs as federal officers for § 405(h) purposes. Although not binding, the First Circuit noted the case in explaining why § 405(h) bars diversity suits against MAOs.
• Caris MPI, Inc. v. UnitedHealthcare, Inc., 108 F.4th 340 (5th Cir. 2024) & RenCare, Ltd. v. Humana, 395 F.3d 555 (5th Cir. 2004) – Invoked by the hospitals, but distinguished because those disputes turned on independent contract rights or post-payment recoupments, not initial benefits determinations.
• Additional authorities (Midland Psychiatric, Bodimetric, etc.) were surveyed to underscore the uniform expansion of “arising under” to non-statutory causes when recovery hinges on Medicare benefits.

3.2 Court’s Legal Reasoning

1. Nature of the Claims. Regardless of tort labels, success required a court to decide whether the MA plans provided “unlimited” overseas coverage—precisely the organization determination Martin’s Point had already made. That factual overlap rendered the claims “inextricably intertwined” with a benefits dispute.
2. Statutory Channeling. 42 U.S.C. § 1395w-22(g)(1)–(5) directs that disagreements over MA coverage follow the same multilevel administrative path as Parts A/B. Section 405(h) (incorporated by § 1395ii) then strips jurisdiction over any alternative civil action.
3. Futility / Illinois Council. The hospitals offered only a conclusory affidavit asserting that CMS “rejects” appeals from foreign hospitals. The panel criticized the lack of legal analysis or regulatory text proving exclusion. Waiver doctrine also barred late introduction of this theory.
4. Diversity Jurisdiction Irrelevant. Even though the complaints invoked 28 U.S.C. § 1332 (rather than § 1331 or § 1346), the court deemed § 405(h)’s bar applicable because the hospitals never argued otherwise and, substantively, § 405(h) is not limited to federal-question suits.

3.3 Likely Impact

• Clarifies Reach of Medicare Part C. Confirms that supplemental benefits (e.g., emergency care abroad) are still “Medicare benefits” and disputes over them must go through CMS’s appeal structure.
• Foreign Provider Guidance. Hospitals outside U.S. territory now know that common-law theories cannot circumvent Medicare exhaustion. They must either (a) secure written contracts with MAOs detailing reimbursement, or (b) navigate the Part C appeal path—potentially via patient assignment.
• Litigation Strategy. MAOs can invoke this precedent to obtain early dismissal of state-law reimbursement suits; providers will be driven toward administrative remedies or private contracting.
• Reinforces Broad “Arising Under.” The First Circuit joins other circuits in treating virtually any claim whose resolution depends on a benefits determination as subject to § 405(h), even when couched as misrepresentation, estoppel, or consumer-protection claims.
• Diversity Actions Limited. Parties cannot rely on § 1332 to sidestep Medicare channeling; this may reduce forum-shopping by foreign or out-of-network providers.

4. Complex Concepts Simplified

• Medicare Part C (Medicare Advantage). A program allowing beneficiaries to receive Medicare services through private insurers (MAOs). MAOs get a fixed monthly payment and must provide all “basic” benefits of traditional Medicare, plus any “supplemental” benefits they elect to offer (e.g., overseas emergency coverage).
• Organization Determination. The MAO’s initial decision about whether a service is covered and to what extent it will pay. A refusal to pay in whole or part constitutes such a determination.
• Administrative Exhaustion. Before suing, parties must pursue five escalating administrative steps: (1) reconsideration by the MAO; (2) independent review entity; (3) ALJ hearing; (4) Medicare Appeals Council; (5) judicial review in federal court if the amount-in-controversy threshold is met.
• § 405(h) Jurisdiction Bar. Originally from the Social Security Act, incorporated into Medicare. It strips courts of jurisdiction over claims that “arise under” the Act unless the claimant completes the prescribed administrative process.
• Illinois Council Exception. Claimants may bypass exhaustion only if agency review is literally unavailable (e.g., statutory exclusion) and thus would “mean no review at all.” Mere inconvenience, delay, or speculative futility is insufficient.
• Provider vs. Non-Provider. Under 42 C.F.R. § 422.2, a “provider” must be licensed in a U.S. state. A foreign hospital can still interact with an MAO either as an enrollee’s representative or via assignment, but its status affects payment rates and appeal mechanics.

5. Conclusion

The First Circuit’s decision cements a robust understanding of “arising under” in the Medicare Advantage context. Foreign providers cannot rely on creative state-law pleadings or diversity jurisdiction to collect alleged underpayments from MAOs; they must first tread the well-worn administrative path Congress prescribed. The ruling promotes uniform interpretation of MA plan benefits, curbs piecemeal litigation, and signals to overseas medical facilities that partnering contracts or formal appeals—not tort litigation—are the proper avenues for reimbursement disputes.

Key Takeaway: When the essence of a claim is that an MA plan should have paid more, exhaust the plan’s Medicare appeal process first—no matter where the care was rendered or how the complaint is styled.