Again, the Secretary has presented a reasonable interpretation that is not contrary to the statute or regulations. The "certain circumstances" referred to in 42 C.F.R. § 405.508(a) are not defined or explained in any provision of the reasonable charge regulations. If plaintiff's interpretation is accepted, however, it is unlikely that comparability could ever be applied. Physicians' customary charges act as a ceiling on the amount that Medicare will reimburse. To say that comparability cannot be applied where a carrier pays an amount under its private plan which is below the customary charge, means, in effect, that comparability could never be applied.
In sum, plaintiffs have advanced an interpretation of the statute and regulations that is not clearly supported by the plain language of the statute or any other evidence of legislative intent. Further, although plaintiffs have put forth numerous arguments challenging the Secretary's interpretation, none present compelling indications that the Secretary's interpretation is wrong. Their presentation of an alternative interpretation, no matter how reasonable it also may be, is insufficient to overcome the deference accorded the Secretary.
Accordingly, I find that the Secretary's interpretation of the comparability statute, as reflected in the HCFA policy at issue, is a permissible interpretation of the statute and regulations that is entitled to deference.
B. Application of Comparability in Locality 1.
In their fifth claim, plaintiffs argue that the Secretary arbitrarily and capriciously changed the agency's interpretation of the comparability statute, and that the application of comparability in Locality 1 is therefore invalid. In essence, plaintiffs assert that HCFA changed its comparability policy from one that would not have allowed the application of the comparability limitation in Locality 1 to one that does.
Whether an agency's action is arbitrary and capricious is governed by the Administrative Procedure Act, 5 U.S.C. § 706(2)(A). In deciding whether a particular action violates the APA, the court may not substitute its own judgment for that of the agency. Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 28 L. Ed. 2d 136, 91 S. Ct. 814 (1971). Rather, the court must determine whether the agency's action "'was based on a consideration of the relevant factors and whether there has been a clear error of judgment.'" Motor Vehicle Mfrs. Ass'n of the United States v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 77 L. Ed. 2d 443, 103 S. Ct. 2856 (1983) (quoting Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 285, 42 L. Ed. 2d 447, 95 S. Ct. 438 (1974)).
With respect to statutory interpretations, an agency must have ample latitude to adapt its rules and policies to changing circumstances. Rust v. Sullivan, 500 U.S. 173, 187, 114 L. Ed. 2d 233, 111 S. Ct. 1759 (1991) (citations omitted). The agency should be given substantial deference where there is good reason for the agency's decision to change its interpretation. Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 355-56, 104 L. Ed. 2d 351, 109 S. Ct. 1835 (1989) (holding that the agency's changed interpretation, which "came after the prior regulation had been subjected to considerable criticism," was entitled to substantial deference).
As plaintiffs themselves point out, in 1979, the General Accounting Office (GAO) issued a report criticizing HCFA's failure to provide guidance for making comparability determinations (T. at 383 & 386, Ex. 11). It stated that the current regulations are "not clear about whether all of the regulation's criteria are necessary for showing comparability, and whether meeting all these criteria always constitutes comparability" and that as a result, the provision was being inconsistently administered by HCFA (T. at 406-07). The GAO recommended that Congress should consider deleting the comparability language from the law or should clarify it (T. at 383 & 387). Congress, however, did not take any subsequent action with respect to the recommendation.
The Secretary admits that there was confusion regarding the application of comparability during the 1970s and claims that HCFA progressively clarified the issue in the Medicare Carriers Manual at § 5026(B)(2) (defining "customary charges" as used in 42 C.F.R. § 405.508(b)), its Part B Intermediary Letter No. 77-26 (stating that full payment private plans, as opposed to partial indemnity plans, are comparable to Medicare), and the current comparability policy (stating that full payment private plans are comparable regardless of the methodology used). This court notes that prior to implementation of the current policy,
the GAO's question as to whether all three factors listed in 42 C.F.R. § 405.508(b) were necessary to a finding of comparability remained unanswered.
Given the confusion that previously existed with respect to this issue, the GAO's criticisms, and Congress' inaction, I find that HCFA was sufficiently justified in changing its policy as a means of clarifying the questions raised.
In addition to their objections to HCFA's policy changes, plaintiffs also allege that the current policy has been applied arbitrarily. They base this assertion on the fact that comparability limitations are applied by only four carrier's nationwide,
and claim that this fact alone is facial evidence of inconsistent application. It cannot, however, be inferred from this fact alone that there are other carriers that have private reimbursements plans that are accepted as full payment by more than half the physicians in their service area, that those private plans reimburse at rates less than Medicare's, and that HCFA has chosen not to apply comparability limitations where those circumstances exist.
The ALJ made no finding with respect to this allegation. That was certainly proper where this bare allegation is unsupported by any evidentiary data in the record.
While the previous questions raised issues of law, there remains the factual question of whether HCFA properly applied its policy in Locality 1.
According to the provider agreement which physicians sign to participate in Blue Shield's private insurance programs, "payment under any such contracts by Blue Shield shall constitute payment in full for the service rendered and the Participating Doctor agrees that he will make no charge to persons covered under any of such contracts in addition to the amount of such payment" (T. at 494, Ex. 12). In addition, the uncontradicted testimony at the administrative hearing was that, since the 1970s, nearly 100 percent of the radiologists practicing in Locality 1 have participated in Blue Shield's private plan, that is, they have accepted the reimbursement allowed under Blue Shield's private plan as payment in full for their services (T. at 310).
Accordingly, I find that the Secretary's determination that HCFA's comparability policy is not contrary to the law and that it was properly applied in Locality 1 is a permissible conclusion that is entitled to deference. Furthermore, there is no dispute as to whether the criteria set forth in the HCFA policy has been met in Locality 1 for the time period at issue. Therefore, plaintiffs' motion for summary judgment with respect to their first and fifth causes of action is denied and the Secretary's cross-motion is granted.
II. VALIDITY OF THE SECRETARY'S RULE MAKING.
A. Administrative Procedure Act Rule Making Provisions.
Plaintiffs assert in their second claim that the Secretary violated the notice and comment rule making provisions of the Administrative Procedure Act (APA) and the Medicare statute by failing to promulgate the HCFA comparability policy by regulation. 5 U.S.C. § 553;
42 U.S.C. § 1395hh.
They claim that the comparability policy changes or establishes a substantive legal standard governing payment for their services and that the policy is therefore subject to the rule making requirements cited.
The APA recognizes two distinct types of rules -- legislative rules and interpretive rules. Legislative rules "create new law, rights, or duties, in what amounts to a legislative act." Clarry v. United States, 85 F.3d 1041, 1048 (2d Cir. 1996) (quoting White v. Shalala, 7 F.3d 296, 303 (2d Cir. 1993). Interpretive rules, in contrast, merely "clarify an existing statute or regulation." Id. Because they do not create or destroy any substantive rights, interpretive rules are exempt from the APA's notice and comment procedures. 5 U.S.C. § 553(b)(3)(A); New York City Employees' Retirement Sys. v. SEC, 45 F.3d 7, 12 (2d Cir. 1995).
Plaintiffs maintain that in the absence of the HCFA policy, they would have been paid in accordance with the reasonable charge methodology or fee schedules based on the reasonable charge methodology. In other words, they claim that under the statute and regulations alone, their payments would not have been limited to the amount paid for comparable services under Blue Shield's private plan. Plaintiffs conclude, therefore, that the HCFA policy is a legislative rule that has a direct effect on their rights to payment for services to Medicare patients. I disagree.
Where the carrier offers a private plan, as in the present case, the statute does not give providers an unequivocal right to receive the "reasonable charge" established by Medicare for their services because of the possibility that comparability limitations may apply. In spite of plaintiffs' numerous arguments to the contrary, there is simply no indication, based on the broad and somewhat ambiguous regulatory language, that providers are guaranteed payment in accordance with Medicare's reasonable charge methodology wherever the private carrier does not use a substantially similar reimbursement method.
The Secretary's regulation governing comparability provides that the "comparable circumstances" mentioned in the statute refers to three factors, including the method the carrier uses to determine the amounts of payments under its private programs. As already discussed, the regulation does not state that the carrier must use the reasonable charge methodology or base calculations on particular data for comparable circumstances to exist. Nor does the regulation provide any specific formula or any criteria indicating how each factor is to be evaluated.
In short, there is no support for plaintiffs' conclusory assertion that but for the HCFA policy, comparability limitations could not have been applied in Locality 1. Accordingly, I find that the policy did not change any clearly established laws, rights or duties.
The term "comparable circumstances" was not defined by Congress. Given the varied interpretations advanced by the parties here, it is clear that the Secretary's own definition of that term as provided in 42 C.F.R. § 405.508 is uncertain. The HCFA policy provides one set of circumstances under which comparability limitations will be applied. Though the policy can at best be viewed as a partial clarification, I find that it explains, rather than changes, the legal standard governing the payment for services set forth in the regulation.
Accordingly, plaintiffs' motion for summary judgment on the ground that the Secretary violated the APA's notice and comment rule making provisions is denied. The government's cross-motion is granted.
B. Publication of Interpretive Rules.
In their third claim, plaintiffs assert that, should the court determine that the HCFA policy is an interpretive rather than a legislative rule, the policy is invalid because the Secretary failed to publish it in the Federal Register as required by 42 U.S.C. § 1395hh(c)(1).
The HCFA policy at issue was articulated in HCFA's Part B Intermediary Letter No. 77-26, dated June 1977, which states in pertinent part as follows:
The Part B payment mechanism, which incorporates the reasonable charge criteria and the comparability provision, seeks to achieve parity between the Medicare program's payments for covered medical and other health services and those made by private insurers under their own health plans for similar services provided to their policyholders and subscribers. Thus, where a Medicare carrier has a comparable private health plan, which seeks to achieve full payment (exclusive of any deductible or coinsurance) of charges for covered services received by policyholders, as opposed to only partial indemnity payment, the payment levels under that plan, if lower than the Medicare reasonable charge screens, should set the limit on the amounts allowed for covered services rendered to Medicare beneficiaries.
(Item 28, Ex. D). This interpretive rule or guideline clearly predated the enactment of 42 U.S.C. § 1395hh(c)(1) by more than a decade. Omnibus Budget Reconciliation Act of 1987, Pub. L. No. 100-203, 101 Stat. 1330-78 (1987) (enacted December 22, 1987). Section 1395hh(c)(1) does not apply retroactively.
Therefore, the Secretary's alleged failure to publish the HCFA policy does not render the policy invalid.
The parties disagree as to whether Part B Intermediary Letter No. 77-66 was, in fact, ever published in the Federal Register. Given my finding that publication was not required, however, their dispute is not material to a decision on the pending motion. Accordingly, plaintiffs' motion for summary judgment is denied and the Secretary's cross-motion is granted.
III. ALJ QUINN'S FINDINGS.
As their fourth claim, plaintiffs allege that ALJ Quinn's June 25, 1992 decision contains certain findings of fact that are not supported by any evidence in the record, and are in fact contrary to the evidence presented.
Primarily, plaintiffs take issue with the fact that, in reaching her determination that comparability exists in Locality 1, Judge Quinn found that Blue Shield's private plan is comparable to Medicare because it "takes into account" physician's customary charges in setting reimbursement rates. Plaintiffs claim that the evidence establishes conclusively that Blue Shield does not "take into account" customary charges, and that in any event, for comparability to exist, a private plan must "base its payments upon" customary charges.
ALJ Quinn discussed customary charges in reaching her determination that "the absence of comparability has not been established here" (T. at 117). The ALJ noted that while the method of determining payment under Blue Shield's private plan is not identical to Medicare's, " nor is there a requirement that they should be, prevailing charges and cost factors are elements taken into account for determining Blue Shield's private plan reimbursement rate" (T. at 117-118 (emphasis added)). After noting that nearly 100 percent of the radiologists in Locality 1 accept Blue Shield's private plan reimbursement as payment in full, ALJ Quinn stated that she was unable to find that comparability did not exist (T. at 118).
On review of the record, there is substantial evidence to conclude that Blue Shield does, in some manner, take customary charge data "into account." Mr. Gregory Brodnick, a Vice President at Blue Shield of Western New York, testified at the administrative hearing. He stated that although Blue Shield did not employ any specific formula in setting reimbursement rates, it looked at many factors, including what doctors were actually billing (T. at 303-304). He further stated that Blue Shield collects billing data on all doctors in Western New York, and not just those that participate in its private insurance plan (308). Brodnick went on to remark that "[we] need to take a look at all the billings," which he described as the physician's customary and usual charges (309). I find that this is substantial evidence on which the ALJ could base her statement.
Plaintiffs also claim that ALJ Quinn acknowledged in her decision that a private insurance plan must base payment on the UCR methodology to be considered "comparable" to Medicare.
However, upon reading the ALJ's decision in its entirety, it is clear that the sentence quoted by plaintiffs is simply a prelude to the ALJ's rejection of plaintiffs' argument that private plans must employ the UCR payment methodology before comparability can exist.
In the same paragraph, ALJ Quinn went on to state that:
If, for comparability to exist, the methodology of determining payment for the private sector plans had to be the same, or identical, this would have been reflected in the statute and/or the regulation, and is not (Social Security Act Section 1842(b)(3)(F) and 42 CFR 405.508(b)(1)).
(T. at 115). ALJ Quinn concluded further on in her decision, that even where physicians' charges were but one of numerous factors examined in setting reimbursement rates, the application of comparability in Locality 1 was not contrary to the applicable law. She reached this conclusion after acknowledging that Blue Shield does not employ any specific rate-setting formula, so that there is no way to ascertain to what degree physicians' charges are considered.
In any event, these were not "factual findings" made in the course of an evidentiary determination. Rather, they were part of the ALJ's reasoning in reaching her legal conclusion that "the application of comparability limitations to payment and HCFA's interpretation of such policy is not against laws and regulations as established by Congress and the Secretary" (T. at 123). As has already been discussed above, I find that this conclusion is entitled to substantial deference.
Accordingly, plaintiffs' motion for summary judgment on their fourth cause of action is denied and the Secretary's cross-motion is granted.
IV. REQUEST FOR REOPENING.
In their sixth cause of action, plaintiffs seek reopening of all claims related to their radiologist services rendered between October 1, 1985 and March 29, 1989. They claim that their request for reopening was supported by good cause and that the Secretary's denial was therefore arbitrary and capricious and not supported by substantial evidence.
As ALJ Quinn noted in her decision, carrier amount determinations for services rendered under Medicare Part B prior to January 1, 1987 are not subject to review. The opportunity for a hearing as provided in 42 U.S.C. § 405(b) with respect to such claims was first provided in the Omnibus Budget Reconciliation Act of 1986, Pub. L. No. 99-509, 100 Stat. 1874, 2037 (1986) (codified at 42 U.S.C. 1395ff). The effective date provision governing the amendment of Medicare appeal rights specifically provides that "the amendments made by subsection (a) shall apply to items and services furnished on or after January 1, 1987." 101 Stat. 2036, § 9341(b).
Accordingly, I find that ALJ Quinn's decision not to reopen cases from October 1, 1985 through December 31, 1986 is in accordance with the law.
As to claims for services rendered from January 1, 1987 through March 29, 1989, ALJ Quinn stated that because of her decision that the application of comparability limitations in Locality 1 was valid, there was no good cause to reopen the previous carrier determinations. The Secretary argues that the ALJ's decision on this matter is not subject to judicial review. Plaintiffs disagree.
The Social Security Act provides that "any individual, after any final decision of the Secretary made after a hearing . . . may obtain a review of such decision by a civil action" within the time allowed by the Secretary. 42 U.S.C. § 405(g). In Califano v. Sanders, 430 U.S. 99, 51 L. Ed. 2d 192, 97 S. Ct. 980 (1977), the Supreme Court held that, in the absence of a constitutional claim, judicial review of a decision not to reopen is foreclosed. Because a request to reopen may be denied without a hearing, it is not "a final decision of the [Commissioner] made after a hearing" as provided in the Act. Id. at 107. See also Latona v. Schweiker, 707 F.2d 79, 81 (2d Cir. 1983); Grant v. Secretary of Health & Human Servs., 1995 U.S. Dist. LEXIS 7150, No. 93-CV-0124E(F), 1995 WL 322589 (W.D.N.Y. March 13, 1995).
Plaintiffs, relying on Oregon v. Bowen, 854 F.2d 346 (9th Cir. 1988), claim that federal courts do have jurisdiction to review such requests. In Oregon, the Ninth Circuit found that both the Provider Reimbursement Review Board and the federal courts have jurisdiction to review carrier determinations not to reopen Medicare Part A claims. Plaintiffs argue that the Court's reasoning is equally applicable to Medicare Part B claims and the issue of whether an ALJ has jurisdiction to review carrier determinations not to reopen. Though not specifically stated, I presume plaintiffs wish to extend this reasoning to judicial review of ALJ determinations as well.
There is no need to explore this premise further, as the Second Circuit has recently rejected the Oregon holding. Good Samaritan Hosp. Regional Med. Ctr. v. Shalala, 85 F.3d 1057 (1996); see also, Binghamton Gen. Hosp. v. Shalala, 856 F. Supp. 786 (S.D. 1994).
In any event, good cause for reopening exists only where new and material evidence is furnished, a clerical error occurred in the computation of benefits, or a review of the evidence on which the determination was made shows on its face that an error was made. In light of all of the foregoing findings, it is clear that good cause does not exist for reopening plaintiffs' reimbursement determinations.
For the foregoing reasons, plaintiffs' motion for summary judgment (Item 22) is DENIED, the Secretary's cross-motion for summary judgment (Item 27) is GRANTED, and the claim dismissed.
DATED: Buffalo, New York
November 20, 1997
CAROL E. HECKMAN
United States Magistrate Judge