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September 30, 1996

HELEN NECKETOPOULOS, STANLEY KUNITZ, BRUCE W. KONRAD, JOHN ROTTKAMP, INDRA ANANDASAPAPATHY, and MASSIMO DE GIARDE, and 90 other Medicare claimants listed on Schedule "1" attached hereto, individually and on behalf of all others similarly situated, Plaintiffs, against DONNA E. SHALALA, in her capacity as Secretary of the Department of Health and Human Services, and BRUCE VLADECK, in his capacity as Administrator of the Health Care Financing Administration, Defendants.

The opinion of the court was delivered by: CEDARBAUM


 This case involves claims for reimbursement for anesthesia services under Part B of the Medicare Program. In certain regions of the country prior to 1989, reimbursement was based, in part, on a patient's age and physical condition. In 1989, the Secretary of the Department of Health and Human Services issued a regulation which provided that reimbursement would no longer be based on these factors. Plaintiffs claim that when issuing the regulation, the Secretary exceeded her statutory authority, acted arbitrarily and capriciously, and failed to observe appropriate procedures. Plaintiffs have moved for summary judgment pursuant to Fed. R. Civ. P. 56 and for class certification. Defendants have moved for judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c). For the reasons that follow, plaintiffs' motion is denied and defendants' motion is granted.

 Undisputed Facts

 Part B of the Medicare Program is a voluntary, federally subsidized program of supplemental medical insurance for the aged and disabled, generally reimbursing participants, or their assigned health care providers *fn1" , eighty percent of the reasonable cost of certain doctors' services, x-rays, lab tests and other medical services. 42 U.S.C. §§ 1395j-1395w-4 (1994). The Secretary, through the Health Care Financing Administration ("HCFA"), contracts with private insurance carriers to administer the Part B claims process. See 42 U.S.C. §§ 1395h & 1395u (1994); 42 C.F.R. § 421.5 (1995).

 On December 22, 1987 Congress passed the Omnibus Budget Reconciliation Act of 1987 ("OBRA 1987"), Pub. L. No. 100-203, 101 Stat. 1330 (1987). Section 4048(b) of OBRA 1987 provides that:

The Secretary of Health and Human Services, in consultation with groups representing physicians who furnish anesthesia services, shall establish by regulation a relative value guide for use in all carrier localities in making payment for physician anesthesia services furnished under part B of title XVIII of the Social Security Act on and after January 1, 1989. Such guide shall be designed so as to result in expenditures under such title for such services in an amount that would not exceed the amount of such expenditures which would otherwise occur.

 101 Stat. at 1330-90. In June and August of 1988, HCFA officials met with representatives of the American Society of Anesthesiologists ("ASA"). (Pls.' 3(g) Statement PP 29-30; Defs.' Resp. Pls.' 3(g) Statement PP 8-9.) ASA proposed a relative value guide that included modifier units. ASA later amended its proposal to define more precisely the specific conditions that would warrant modifier units. 54 Fed. Reg. 3,794, 3,796 (1989).

 On January 26, 1989, the Secretary issued a notice of the proposed interim rule to implement section 4048(b). 54 Fed. Reg. 3,794 (codified at 42 C.F.R. § 405.553 (1990)). The proposed uniform relative value guide, scheduled to take effect on March 1, 1989, eliminated modifier units. *fn2" Interested persons were given until February 27, 1989 to submit comments.

 In the notice of the proposed interim rule, the Secretary stated that it was her belief that elimination of modifier units would not have a substantial adverse effect on individual anesthesiologists. Approximately thirty-five percent of Medicare carriers did not recognize modifier units, and anesthesiologists in those carrier areas would not experience any change. In addition, modifier units were a relatively minor portion of the total number of relative value units for anesthesia services. Finally, modifier units would be significant only if there were substantial differences in the distribution of patients among anesthesiologists. This would occur if, for example, there were anesthesiologists who consistently see patients who qualify for modifier units more than other anesthesiologists in the same area. Although the ASA contended that anesthesiologists in some hospitals, particularly teaching hospitals, are more likely to see patients who qualify for modifier units, the Secretary noted that there was no evidence that this was the case to any substantial degree. To the extent that there are differences in patient mix, the Secretary noted that such differences are already largely accounted for by differences in base and time units. Id. at 3796-97.

 The notice of the proposed interim rule stated two additional considerations that influenced the decision to eliminate modifiers. First, the Secretary was concerned that budget neutrality could not be preserved if the ASA's proposed modifier unit policy were adopted. The Secretary pointed out that it would be difficult for each carrier to estimate the number of modifier units that would be reimbursed under a new modifier unit policy. Second, the Secretary was concerned that continuing to recognize modifiers might establish a precedent for other specialties. Id. at 3797.

 In February 1989, the Secretary issued a modification to the Medicare Carriers Manual instructing carriers not to recognize modifier units after March 1, 1989. (Pls.' 3(g) Statement P 23; Defs.' Resp. Pls.' 3(g) Statement P 3.) The interim rule, which eliminated modifiers, took effect on March 1, 1989.

 On August 7, 1990, the Secretary issued a notice of the final rule implementing section 4048(b). 55 Fed. Reg. 32,078 (1990) (codified at 42 C.F.R. § 405.553 (1991)). The final rule, which took effect on September 6, 1990, also eliminated modifier units. *fn3" In the notice of the final rule, the Secretary responded to the hundreds of comments she had received in response to the notice of the proposed interim rule. The majority of the comments came from anesthesiologists who argued that modifier units better measured anesthesia risk and the complexity of the illness, and thus made the system patient specific and more appropriately compensated for increased anesthetic risk. Id. at 32,081-82. The Secretary reiterated the concerns discussed in the notice of the proposed interim rule and added that "the use of modifier units appears to be subjective and difficult for carriers to validate in claims review operations without substantial cost and effort." Id. at 32,079. The Secretary also noted that several organizations had recommended the elimination of modifier units and that the modifier unit policy prior to March 1, 1989 may have overvalued some anesthesia services. Id. at 32,082.

 The Secretary concluded that, other than anecdotal evidence, there was no evidence that anesthesiologists in teaching hospitals or tertiary care centers or who specialize in cardiac anesthesia or who treat more complex cases would be significantly disadvantaged by the elimination of modifiers. Id. One state anesthesiology society indicated that the elimination of modifier units would be balanced by the payment of time units because those factors that are the basis for modifier units are generally factors that contribute to the length of time required for an anesthesia procedure. (Admin. Rec. at 279.) Moreover, the Secretary noted that carriers in the New England and Middle Atlantic regions, Florida and Michigan, which had not recognized modifier units, did not receive significant complaints from anesthesiologists in teaching hospitals about the absence of modifier units. 55 Fed. Reg. at 32,082.

 The Secretary rejected the ASA modifier proposal because she lacked the data to prove that the ASA proposal would be budget neutral or produce budget savings. Moreover, she was concerned that the ASA proposal, which attempted to maintain budget neutrality at the national level, would have distributional consequences across regions. The ASA proposal would increase payments to anesthesiologists in regions where carriers had not previously recognized modifiers, and it might decrease payments in areas that had previously recognized a more generous modifier policy. Id.

 Plaintiffs are anesthesiologists with assigned claims and individual Medicare Part B participants with unassigned claims who provided or received anesthesia services between March 1, 1989 and December 31, 1991. (Am. Compl. PP 37, 40, 43-46.) One anesthesiologist also presented a claim for services provided after January 1, 1992. (Pls.' Opp'n Defs.' Cross Mot. at 8 & Addendum A.) In light of 42 C.F.R. § 405.553, Medicare carriers refused to reimburse plaintiffs for modifier units. (Am. Compl. PP 38, 41, 43-46.) Each of these decisions has been affirmed by an administrative law judge ("ALJ"). (Id. PP 39, 42-46.) The Department of Health and Human Services Appeals Council concluded that it does not have the authority to rule upon the validity of 42 C.F.R. § 405.553. (Id., Ex. B at 1.) Effective January 1, 1992, 42 C.F.R. § 405.553 was repealed and replaced with a new provision, 42 C.F.R. § 414.46(b), which did not specifically mention modifier units. 56 Fed. Reg. 59,502 (1991). *fn4" Effective January 1, 1996, the Secretary amended section 414.46(b), specifically excluding modifier units. 60 Fed. Reg. 63,124, 63,152 (1995). *fn5"


 I. Did the Secretary exceed her statutory authority when issuing 42 C.F.R. § 405.553?

 Plaintiffs argue that the Secretary exceeded her statutory authority when she issued 42 C.F.R. § 405.553. They argue that the Secretary's decision to eliminate modifiers is inconsistent with the legislative history of section 4048(b). The Secretary argues that the language of section 4048(b) does not address the issue of modifiers and the legislative history is ambiguous.

 The initial question when reviewing an agency's construction of a statute which it administers is whether Congress has spoken to the precise question at issue. Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43, 81 L. Ed. 2d 694, 702-03, 104 S. Ct. 2778 (1984). In determining whether Congress has spoken, a court must look to the particular statutory language at issue, and must employ the traditional tools of statutory construction, including, where appropriate, legislative history. Chemical Mfrs. Assn. v. EPA, 287 U.S. App. D.C. 49, 919 F.2d 158, 162 (D.C. Cir. 1990). If Congress has spoken on the particular issue, its expressed intent must be given effect. Chevron, 467 U.S. at 842-43, 81 L. Ed. 2d at 702-03. If, however, the statute is silent or ambiguous, the agency's interpretation will be deferred to if it is reasonable and consistent with the statute's purpose. Id. at 844-45, 81 L. Ed. 2d at 703-04. A court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the agency. Id. at 844; 81 L. Ed. 2d at 703; see also Connecticut Dep't of Income Maintenance v. Heckler, 471 U.S. 524, 532, 85 L. Ed. 2d 577, 584, 105 S. Ct. 2210 (1985) ("agency's construction need not be the only reasonable one in order to gain judicial approval").

 Section 4048(b) directs the Secretary to establish by January 1, 1989 a nation-wide uniform relative value guide that is budget neutral. The language of section 4048(b) is silent on the issue of whether modifier units should be included in the uniform relative value guide. Section 4048(d)(1) directs the General Accounting Office to conduct a study

(A) to determine the average anesthesia times reported for medicare reimbursement purposes,
(B) to verify those times from patient medical records,
(C) to compare anesthesia times to average ...

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