UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

_________________________________________ ) ROCKY MOUNTAIN HEALTH ) MAINTENANCE ORGANIZATION, INC., ) ) Plaintiff, ) ) v. ) Case No. 17-cv-00242 (APM) ) THOMAS E. PRICE, ) ) Defendant. ) _________________________________________ )

MEMORANDUM OPINION AND ORDER

This case concerns how much federal money Plaintiff Rocky Mountain Health

Maintenance Organization is entitled to in reimbursement for delivering Medicare services.

Plaintiff is a “cost-reimbursed” Health Maintenance Organization (“HMO”) that contracts with

Defendant, the Secretary of Health and Human Services, to provide hospital, doctor, and patient

care services to Medicare beneficiaries who are enrolled in its health care plans. Unlike some

HMOs, Plaintiff does not directly deliver patient services to enrollees. Rather, it contracts with

physicians and other suppliers for that purpose. Defendant reimburses Plaintiff for the “reasonable

cost” of those services using a formula that estimates their total price tag.

The manner in which Plaintiff calculates its federal reimbursement requests is at the heart

of this dispute. Defendant takes issue with Plaintiff’s inclusion of so-called “carrier-paid claims”

within Plaintiff’s cost reports that Plaintiff submitted to secure final reimbursement. These types

of claims are deviations from the norm. Ordinarily, Plaintiff directly pays health care providers

for patient care. In a minority of cases, however, the health care provider bills a Medicare

contractor, known as a carrier, who processes the claim and pays the provider directly, thus leaving Plaintiff out of the payment process. This latter situation is known as a “carrier-paid claim.”

Plaintiff included carrier-paid claims in its cost reports for a four-year period, which, according to

Defendant, resulted in Plaintiff receiving a roughly $15.75 million windfall. Plaintiff, on the other

hand, believes that the controlling Medicare regulation,

(c) (“the Regulation”),

allows the inclusion of carrier-paid claims in its reimbursement calculations. Therefore, Plaintiff

asserts, it was entitled to receive the amount in dispute.

In proceedings before the agency, Plaintiff challenged an auditor’s decision to reduce

Plaintiff’s allowed reimbursements by $15.75 million for the four-year period on the ground that

carrier-paid claims are not reimbursable. At first, Plaintiff found success. It convinced a panel of

two Hearing Officers with the Centers for Medicare & Medicaid Services (“CMS”) that its

interpretation of the Regulation was the correct one. Defendant, however, appealed the Hearing

Officers’ decision to the CMS Administrator, who reversed. The CMS Administrator concluded

that Defendant’s interpretation of the Regulation was sound and therefore Plaintiff had to repay

the government for the overpayment. Plaintiff then filed this action challenging the

Administrator’s determination, contesting both the substance of the decision and the process used

to reach it.

For the reasons that follow, the court grants Plaintiff’s Motion for Summary Judgment in

part and remands this matter to Defendant to resolve two issues that Plaintiff raised during the

agency proceedings but which the Administrator did not address: (1) whether the Administrator

had the authority to review the Hearing Officers’ decision; and (2) whether the Administrator’s

failure to complete its review within 60 days of the Hearing Officers’ ruling caused the Hearing

Officers’ decision to become final. As a result of the decision to remand this matter, the court

declines at this time to consider the parties’ remaining contested disputes.

2 II. BACKGROUND

A. Factual Background

Plaintiff is an HMO that delivers medical services to its enrollees not directly, but through

agreements with suppliers, physicians, and physician groups. Joint Appendix, ECF No. 20

[hereinafter JA], at 42.1 Plaintiff’s health care plans include both Medicare enrollees and non-

Medicare enrollees.

. As described below, Plaintiff’s coverage of both types of insureds

affects its total Medicare reimbursement.

Plaintiff participates in the Medicare program as a cost-reimbursed HMO—one of only

about 20 such organizations in the country.

; see Pl.’s Mot. for Summ. J., ECF No. 14,

Mem. in Supp., ECF No. 14-1 [hereinafter Pl.’s Mem.], at 3–4; Def.’s Cross-Mot. for Summ. J.,

ECF No. 15, Def.’s Mem. in Supp. [hereinafter Def.’s Mem.], ECF No. 15-1, at 5. As a cost-

reimbursed HMO, Plaintiff is entitled by statute to reimbursement for the “reasonable cost” of the

covered services it provides to its Medicare beneficiaries. See generally 42 U.S.C. § 1395mm(h)

(setting terms for “reasonable cost reimbursement contract[s]”). The Medicare Act defines the

“reasonable cost” of reimbursable services, in relevant part, as “the cost actually incurred,

excluding therefrom any part of incurred cost found to be unnecessary in the efficient delivery of

needed health services.” 42 U.S.C. § 1395x(v)(1)(A). The “cost actually incurred” is to “be

determined in accordance with regulations establishing the method or methods to be used, and the

items to be included.” Id. The Medicare Act also requires that regulations “provide for the making

of suitable retroactive corrective adjustments” in instances where a provider’s reimbursement

under the methodology is “inadequate or excessive.” Id.; see also

(containing

rules concerning “final settlement” of payments made to HMOs).

1 Citations to the Joint Appendix are to the page numbers in the administrative record.

3 Consistent with the Act, a cost-reimbursed HMO’s “cost actually incurred” is determined

by a formula. See

(c). The controlling regulation,

(c)

(“the Regulation”), provides:

Medical services furnished under an arrangement that provides for the HMO . . . to pay on a fee-for-service basis. The Medicare share of the cost of Part B physician and supplier services furnished to Medicare enrollees under arrangements, and paid for by the HMO . . . on a fee-for-service basis, is determined by multiplying the total amount for all such services by the ratio of charges for covered services furnished to Medicare enrollees for the total charges for all such services.

Thus, instead of calculating reimbursement on a “paid claims” basis—that is, billing Medicare

for the actual amount the HMO pays to providers for services rendered 2—the Regulation uses a

different approach: It employs “service statistics” to apportion the “costs actually incurred” between

Medicare enrollees and non-Medicare enrollees. See JA at 9. To determine the sum for which

Medicare is responsible, per the Regulation, a cost-reimbursed HMO begins by calculating the total

cost of all services, which includes both: (1) the direct costs associated with furnishing services to

Medicare and non-Medicare enrollees, and (2) certain indirect costs, such as enrollment and

operations costs.

(c). That sum is then multiplied by the ratio of charges for

covered services furnished to Medicare enrollees relative to the total charges for all covered

services.

The product of that calculation results in the HMO’s reimbursable “costs actually

2 When it was first adopted in 1985, the Regulation reflected a new approach to Medicare reimbursement for cost- reimbursed HMOs. Before the Regulation, such HMOs were reimbursed on a “paid-claims” basis. See

(c)(2)(ii) (1984) (providing that the government’s share of Medicare Part B services furnished by an HMO to Medicare enrollees on a fee-for-service basis is “the charges pursuant to the terms of the agreement for these covered services”). This meant that an HMO would be reimbursed for the actual amount the HMO paid for the covered services that its Medicare enrollees received. See JA at 42 n.2; see also

(c)(2)(ii) (1984); Pl.’s Mem. at 5. Defendant moved away from this “paid-claims” methodology out of “concern[ ] that some cost HMOs (not Rocky Mountain specifically) could have attempted to ‘game’ the apportionment system ‘by agreeing to pay physicians and suppliers more for a service furnished to a Medicare enrollee and less for the same service furnished to others.’” JA at 42 n.2.

4 incurred” under the Medicare Act. See JA at 41–42, 46; see also

(a) (defining

“[a]llowable costs”).

The issue at the heart of this case concerns an exception to the normal billing process for a

cost-reimbursed HMO. Typically, physicians and other providers bill the HMO directly for the

services rendered to the HMO’s Medicare enrollees and, in turn, receive payments from the HMO.

JA at 42. (The HMO later is reimbursed for those costs.) In a minority of cases, however,

providers send their bills directly to Medicare carriers, rather than the HMO.

In these instances,

the carriers pay the providers without involvement of the HMO.

Thus, the HMO incurs no

out-of-pocket costs for those services, except perhaps a residual sum. Instances where a carrier

pays providers directly, without the HMO’s involvement, are known as “carrier-paid claims.” See,

e.g.,

This case concerns four years of reimbursement requests—2006 through 2009—during

which Plaintiff included carrier-paid claims in its cost reports. See

, 714–29. To be more

precise, for those years, Plaintiff included the costs of carrier-paid claims in both the numerator

and the denominator of the ratio discussed above. As a result, Plaintiff’s reimbursement requests

were larger than they would have been had Plaintiff not included carrier-paid claims in its

calculations. See

.

B. Procedural Background

1. Administrative Proceedings

CMS discovered Plaintiff’s inclusion of carrier-paid claims during an audit of Plaintiff’s

cost reports for the four years in question.

at 42–43 & n. 3, 715–29. The auditors deemed the

carrier-paid claims not to be a “reasonable cost incurred” and removed them from Plaintiff’s

5 reimbursement request for those years, resulting in a demand that Plaintiff repay CMS nearly

$16 million. 3 See

, 715–29.

Plaintiff challenged the auditor’s determination, bringing it before a two-person CMS

hearing panel. Initially, Plaintiff succeeded. The Hearing Officers examined the text of the

Regulation,

(c), and relevant agency guidance to determine whether “carrier

paid claims” should have been removed from Plaintiff’s cost reports. See JA at 41, 44–45, 49.

In a decision dated September 22, 2016, the Hearing Officers concluded that a “literal reading”

of the Regulation requires carrier-paid claims be included in the “ratio of charges for covered

services furnished to Medicare enrollees.”

at 45 (quoting

(c)). At the

same time, the Hearing Officers rejected Plaintiff’s contention that Defendant was aware of

Plaintiff’s practice of including carrier-paid claims in its ratio—an argument based on

Defendant’s prior approval of all reimbursement requests since 1986, when the regulation came

into effect, each of which contained carrier-paid claims. See

at 43 n.3. The Hearing Officers

found: “As a general rule, the Hearing Officers agree with CMS that the fact that it does not

identify and issue an adjustment in response to an otherwise disputable cost report claim in the

complex and detailed cost report does not automatically equate to a ratification of past claims or

establish new agency policy.”

But the Hearing Officers did not have the final say. Defendant appealed the Hearing

Officers’ ruling to the CMS Administrator. 4 In a decision issued on December 14, 2016, the CMS

Administrator reversed, finding that Defendant’s interpretation of the reimbursement regulation

3 Although not entirely clear from the parties’ briefs, it appears that Plaintiff received from CMS the $15.75 million and that CMS later sought to have Plaintiff pay back the amount. See Joint Appendix, ECF No. 20, at 717, 721, 725, 729 (statements from CMS to Plaintiff identifying the “Balance Due CMS”). 4 Technically speaking, the “appellant” from the Hearing Officers’ decision was CMS’ Division of Capitated Plan Audits. JA at 41 n.1. But for ease of reference the court simply refers to Plaintiff’s opponent during the administrative appeal as “Defendant.”

6 was the better one.

at 2–14. The Administrator explained:

If Medicare, instead of the HMO, directly incurs the cost of service furnished to the Medicare enrollee through the payment of the claim by the carrier, instead of the HMO incurring the costs of those services, the plan should not include statistics for those services in its apportionment calculations. That would amount to inappropriate cost shifting [from non-Medicare enrollees to Medicare enrollees]. Medicare can only reimburse costs that are actually incurred and necessary in the efficient delivery of patient care services.

. Thus, in reversing the Hearing Officers’ decision, the Administrator confirmed that the

auditors had correctly determined that Plaintiff’s inclusion of carrier-paid claims was improper

and that the $16 million adjustment for the four years in question was appropriate.

Finally, as relevant here, the Administrator stated that it had conducted its “review during

the 60-day period mandated in § 1878(f)(1) of the Social Security Act” and that its ruling

constituted a final agency action. JA at 2, 14. In fact, the Administrator took 77 days from the

date of Hearing Officers’ ruling to issue its decision. See id. at 14, 39.

2. This Action

On February 3, 2017, Plaintiff filed suit under the Administrative Procedure Act (“APA”),

(2), to set aside the Administrator’s decision. See generally Compl., ECF No. 1.

Plaintiff advances three grounds for vacating Defendant’s decision. See generally Pl.’s Mem. First,

it argues that the Administrator’s interpretation of the Regulation is unreasonable and thus the

decision to remove carrier-paid claims from its cost reports must be overturned.

at 24–31.

Plaintiff relies on the broad text of the Regulation, reasoning that because carrier-paid claims “are,

by definition, ‘covered’ [services],” they unquestionably should be included in reimbursement

calculations.

at 24–26.

Second, Plaintiff contends that, even if the Administrator’s interpretation of the

Regulation is held to be reasonable, Defendant cannot apply that interpretation to the cost reports

7 for the four years in question under the “fair notice doctrine.” See

at 31–39. Rooted in the

Fifth Amendment’s Due Process clause, the “fair notice” doctrine requires that, when an

agency’s interpretation would operate as a penalty, the affected party must have “fair notice” of

that interpretation before it can be applied. See Howmet Corp. v. EPA,

, 553–54

(D.C. Cir. 2010); Ark. Dep’t of Human Servs. v. Sebelius,

, 120–22 (D.D.C.

2011). Plaintiff’s contention that the “fair notice” doctrine applies here rests on the 19 years for

which Defendant approved Plaintiff’s reimbursement requests, even though, as with the 2006 to

2009 cost reports at issue here, Plaintiff had included carrier-paid claims in its calculations. See

Pl.’s Mem. at 32. Plaintiff maintains that it would be unfairly and disproportionately penalized

by the application of Defendant’s interpretation of the Regulation. See

at 31–34.

Third, Plaintiff challenges Defendant’s decision on grounds that: (1) the Administrator

lacked the power to overturn the Hearing Officers’ decision, and (2) the Administrator’s decision

was untimely, thereby making the Hearing Officers’ decision the final agency action. See

at 39–

45. Plaintiff contends that the statutory provision invoked by the Administrator—Section 1878(f)(1)

of the Social Security Act, 42 U.S.C. § 1395oo(f)(1)—as the source of its review authority does not

apply to appeals concerning a cost-reimbursed HMO’s disputed cost report. Moreover, Plaintiff

argues that even if the Administrator had review authority, the decision needed to be issued within

60 days, which Defendant did not do. Pl.’s Mem. at 39–40 (citing

(b)(2)(iv),

405. 1875). By operation of the Medicare Act and implementing regulations, the Administrator’s

untimely decision, Plaintiff claims, renders the Hearing Officers’ ruling the final agency action.

III. LEGAL STANDARD

The APA requires a reviewing court to “hold unlawful and set aside agency action,

findings, and conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise

8 not in accordance with the law.”

(2)(A). A claim under the APA presents questions

of law that may be considered in a motion for summary judgment. Marshall Cty. Health Care

Auth. v. Shalala,

(D.C. Cir. 1993).

In cases that involve the review of final agency action under the APA, Rule 56 of the

Federal Rules of Civil Procedure, the ordinary standard for summary judgment, does not apply.

See Stuttering Found. of Am. v. Springer,

(D.D.C. 2007). Instead, the

district court “sits as an appellate tribunal” and “the entire case on review is a question of law.”

Am. Bioscience, Inc. v. Thompson,

(D.C. Cir. 2001) (internal quotations

omitted). The court’s review is limited to the administrative record, and “its role is limited to

determining whether or not as a matter of law the evidence in the administrative record permitted

the agency to make the decision it did.” Philip Morris USA Inc. v. U.S. Food & Drug Admin.,

(D.D.C. 2016) (cleaned up).

IV. DISCUSSION

For the reasons that follow, Plaintiff’s third argument—that the Administrator lacked

authority to review the Hearing Officers’ favorable ruling and, in any event, the Administrator’s

decision was untimely—necessitates a remand of this matter to Defendant for further

consideration. Thus, the court’s decision starts and ends with its analysis of the third issue.

A. Whether Plaintiff Preserved the Question of the Administrator’s Review Authority

Before delving into the substance of Plaintiff’s argument, the court addresses Defendant’s

threshold contention, made in a footnote, that Plaintiff did not preserve for consideration the

question of the Administrator’s authority to review the Hearing Officers’ ruling. See Def.’s Mem.

at 42 & n.9. That argument is unconvincing.

“[O]bjections to agency proceedings must be presented to the agency ‘in order to raise

9 issues reviewable by the courts.’” Salt Lake Comm. Action Program, Inc. v. Shalala,

(D.C. Cir. 1993) (quoting United States v. L.A. Tucker Truck Lines, Inc.,

(1952)); accord Orion Reserves Ltd. P’ship v. Salazar,

(D.C. Cir. 2009).

When a party fails to object, a party waives its right to raise that issue before a reviewing court.

See Salt Lake,

. Merely raising “the same general issue” is insufficient. A plaintiff

can press only the “same argument” that it presented to the agency. Koretoff v. Vilsack,

(D.C. Cir. 2013); accord Nat’l Res. Def. Council, Inc., v. U.S. Envtl. Prot. Agency,

(D.C. Cir. 1994). The “same argument” need not, however, be made expressly.

Instead, the argument is preserved “if the agency reasonably should have understood the full extent

of [the plaintiff’s] argument.” Haselwander v. McHugh,

(D.C. Cir. 2014)

(quotations omitted). Thus, in this matter, unless Plaintiff sufficiently raised the question of the

Administrator’s authority to review the Hearing Officers’ decision, Plaintiff is precluded from

making that argument now.

Judged against these standards, the court easily finds that Plaintiff raised—and thus

preserved—the argument. The administrative record makes this plain. In a memorandum from

Plaintiff’s counsel to the Administrator, dated November 16, 2016, Plaintiff asserted that, “while

the hearing officers’ decision should stand for the reasons stated, we submit that the

Administrator’s review of their decision, if any is allowed, should be promptly completed within

60 days.” JA at 17 (emphasis added). In the next sentence, Plaintiff continued, “[a]ssuming any

further review is authorized (and none is expressly provided), the regulations relied on by CMS in

its request for review,

(b)(2)(iv) and 405.1875, require the Administrator to

complete any review within 60 days after receipt of the hearing officers’ decision.”

(emphasis

added). Those statements are sufficient to preserve for consideration the question of the

10 Administrator’s review authority. See Koretoff,

. Therefore, the court turns to the

merits of those issues.

B. Whether the Administrator Had Authority to Issue its Decision and Whether that Decision Was Timely

In its decision overturning the Hearing Officers’ ruling, the Administrator made only

passing reference to the source of its review authority in this matter. It noted that its “review is

during the 60-day period mandated in § 1878(f)(1) of the Social Security Act.” JA at 2. Plaintiff

challenges that statement as “doubly wrong.” Pl.’s Mem. at 39. First, it argues that the cited

statutory provision applies only to “providers” like hospitals, not HMOs, and thus review by the

Administrator constitutes an ultra vires action. And, second, it contends that the Hearing Officers’

decision became final and unreviewable once the Administrator missed the 60-day deadline that

the Administrator itself said applied. Id. at 39–40. The court does not reach the merits of these

issues, however, because the Administrator did not address either of them in the first instance.

1. Whether the Administrator’s Decision Was Ultra Vires

It is well-established that the scope of a court’s review under the APA’s arbitrary and

capricious standard is “narrow,” and “a court is not to substitute its judgment for that of an agency.”

Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co.,

(1983). Rather,

courts “must judge the propriety of [an agency’s] action solely by the grounds invoked by the

agency,” and they may not “substitute[e] what it considers to be a more adequate or proper basis,”

such as by creating their own justifications to support an agency’s decision.” SEC v. Chenery

Corp.,

(1947). If the grounds articulated by the agency are “inadequate or

improper, the court is powerless to affirm the administrative action by substituting what it

considers to be a more adequate or proper basis.”

11 In this instance, the Administrator did not adequately answer Plaintiff’s contention that

the Medicare Act does not “expressly provide[ ]” authority for the Administrator to review the

Hearing Officers’ decision. JA at 17. Again, the only source of authority cited by the

Administrator was “§ 1878(f)(1) of the Social Security Act,” which is codified at 42 U.S.C.

§ 1395oo(f)(1). JA at 2. But as Defendant now admits, that statutory provision does not apply

to the administrative review in this case, because it concerns the Administrator’s authority to

review a decision of the Provider Reimbursement Review Board on a disputed claim of a

“provider,” and Plaintiff is not a “provider.” See Def.’s Mem. at 22; 42 C.F..R.

§ 405.1801(b)(2)(i). The Administrator did not acknowledge that statutory limitation, nor did it

explain why that limitation did not pose an impediment to its review of the Hearing Officers’

ruling. Thus, without any means by which “the agency’s path may reasonably be discerned” on

the question of the Administrator’s review authority, this matter must be remanded to the agency

for further consideration. State Farm,

(quoting Bowman Transp., Inc. v.

Arkansas-Best Freight Sys.,

(1974)).

Defendant tries to cure the Administrator’s failure by offering a legal justification for the

Administrator’s action. It asserts that the Administrator’s review of a cost-reimbursed HMO’s

claim is “provided as a matter of administrative grace” through regulation. Def.’s Mem. at 43;

accord Def.’s Reply in Supp. of Mot. for Summ. J., ECF No. 19 [hereinafter Def.’s Reply], at 22.

Defendant points out that the agency’s regulations allow non-providers recourse, in the form of

“some other hearing,” to challenge an adverse program reimbursement decision if the amount in

controversy exceeds $1,000. See Def.’s Mem. at 43 (citing

(b)(2), 417.576(d)(4)). The regulation further specifies that, for these “other

hearings,” “the procedural rules for a [Board] hearing set forth [elsewhere in

,

12 subpart R] are applicable to the maximum extent possible.”

(b)(2)(iv). Based

on this regulation, Defendant argues that “[t]he Secretary has reasonably interpreted

Section 405.1801(b)(2) to permit Administrator review of CMS hearing officer decisions of

nonprovider entity reimbursement determinations.” Def.’s Mem. at 43. But this argument comes

too late. Just as the court may not substitute its reasoning for an agency’s, the court “may not

accept . . . counsel’s post hoc rationalizations for agency actions.” State Farm,

.

Only the “proper decisionmakers”—in this case, the Administrator—may provide the rationale for

an agency action. Local 814, Int’l Bhd. of Teamsters v. NLRB,

(D.C. Cir. 1976).

Still, Defendant contends that the court can address this issue. See Def.’s Reply at 23. It

acknowledges the general principle set forth in SEC v. Chenery that “the orderly functioning of

the process of review requires that the grounds upon which the administrative agency acted be

clearly disclosed and adequately sustained.”

at 23 (quoting

(1943)).

Nevertheless, relying on D.C. Circuit authority limiting the scope of Chenery, Defendant contends

that a “determination[ ] regarding the existence of legal authority to hear a case” is a question of

law that is within the province of the court to decide and does not require any agency expertise to

answer.

at 23–24 (citing Sierra Club v. FERC,

(D.C. Cir. 2016)). So,

Defendant invites the court to consider its argument that the interpretation of Section

405.1801(b)(2) that it has put forward is reasonable and supports the Administrator’s review

authority in this case. Id. at 24.

The court declines the invitation. It is true that the D.C. Circuit has recognized that the

general principle limiting a federal court’s review of an agency action to the reasons articulated by

the agency itself applies to determinations “specifically entrusted to an agency’s expertise,” not

“legal principles.” Canonsburg Gen. Hosp. v. Burwell,

(D.C. Cir. 2015); accord

13 Shea v. Dir., Office of Workers’ Comp. Programs,

, 739 n.4 (D.C. Cir. 1991). A

reviewing court, therefore, is not constrained under Chenery when examining agency decisions

that do “not depend upon a factual determination or a policy judgment that it alone is authorized

to make.” Shea, 929 F.2d at 739 n.4.

Here, however, Defendant asks the court to interpret both the statute that Congress

entrusted the Secretary to carry out, 42 U.S.C. § 1395oo, as well as the agency’s own regulations,

. These are areas in which courts traditionally afford an agency decision

deference, particularly with respect to the Medicare program. See Thomas Jefferson Univ. v.

Shalala,

(1994) (stating that, in a Medicare case, the “broad deference” owed

to an agency’s interpretation of a regulation “is all the more warranted when, as here, the regulation

concerns ‘a complex and highly technical regulatory program’” (citation omitted)); Cmty. Care

Found. v. Thompson,

(D.C. Cir. 2003) (stating that the “the ‘tremendous

complexity’ of the Medicare program enhances the deference due” to the Secretary’s decision

(citation omitted)); see also Auer v. Robbins,

(1997) (holding that an agency’s

interpretation of its own regulations is “controlling unless plainly erroneous or inconsistent with

the regulation” (cleaned up)). Thus, Defendant’s contention that the Secretary “has reasonably

interpreted [this regulation] to permit Administrator review of CMS hearing officer decisions of

nonprovider entity reimbursement determinations,” Def.’s Mem. at 43 (emphasis added), is left to

the agency to assess in the first instance.

2. Whether the Administrator’s Decision Was Untimely

As noted, the Medicare regulations provide that the procedures governing the “some other

hearing[s]” that are afforded to nonproviders are, “to the maximum extent possible,” the same as

those applicable to hearings before the Provider Reimbursement Review Board (“Board”).

14

(b)(2)(iv). Among the “procedural rules for a Board hearing” is the

requirement that “[t]he date of rendering any decision after the review by the Administrator must

be no later than 60 days after the date of receipt by the provider of a reviewable Board decision or

action.”

§ 405.1875(a)(1) (emphasis added). The 60-day time limit is critical. It reflects a

congressional mandate embodied in the Medicare Act itself, which provides that a “decision of the

Board shall be final unless the Secretary, on his own motion, and within 60 days after the provider

of services is notified of the Board’s decision, reverses, affirms, or modifies the Board’s decision.”

42 U.S.C. § 1395oo(f)(1). Thus, for providers, the passage of 60 days from a Board ruling, absent

modification from the Secretary, renders such ruling a final action. Id.; see also Whitecliff, Inc. v.

Shalala,

(D.C. Cir. 1994) (“The Board’s decision is final agency action unless

the Secretary, within 60 days, chooses to reverse, affirm, or modify the decision.” (citing 42 U.S.C.

§ 1385oo(f)(1))).

Plaintiff argued to the Administrator that the 60-day rule applied to the Administrator’s

review of the Hearing Officers’ decision. JA at 17. The Administrator did not, however, respond

to that argument in its decision, which it issued more than two weeks after the 60-day period

expired. The Administrator did not say, for instance, that the 60-day period was inapplicable to

review of nonprovider disputes; to the contrary, it stated that its “review is during the 60-day period

mandated in § 1878(f)(1).” JA at 2. Nor did the Administrator offer a reason for why its untimely

decision did not operate to make the Hearing Officers’ ruling the final agency action. Accordingly,

for the reasons already discussed, the court must remand this matter to the Administrator to address

these issues.

Once more Defendant tries to fill the gap left by the Administrator. It points out that the

regulation establishing the availability of administrative review for nonproviders states that the

15 procedural rules applicable to the Board apply “to the maximum extent possible.” Def.’s Reply at

25 (citing

(b)(2)(iv)). “This permissive regulation,” Defendant asserts, “does

not purport to grant a court the authority to second-guess the agency’s decision as to the extent to

which those procedural rules apply to other hearings, or invalidate a decision of the Administrator

for non-compliance with the procedural rules that are only applicable ‘to the maximum extent

possible.’”

But for the reasons already discussed, because the Administrator did not itself

articulate this rationale to support the finality of its decision even though made beyond the 60-day

period, this argument comes too late. The agency must address the issue in the first instance.

Before concluding, the court notes that, on remand, the Administrator will need to address

the seeming distinction that is being drawn between the review of provider disputes versus

nonprovider disputes. If the Board’s procedural rules are to apply “to the maximum extent

possible” when reviewing nonprovider reimbursement disputes, does the 60-day rule have the

same force and effect for review of nonprovider disputes as it does for the review of provider

disputes? When the Administrator turns to that question, due consideration should be given to the

“‘long line of precedent [that] has established that an agency action is arbitrary when the agency

offer[s] insufficient reasons for treating similar situations differently.’” Cty. of Los Angeles v.

Shalala,

, 1022 (D.C. Cir. 1999) (quoting Transactive Corp. v. United States,

(D.C. Cir. 1996)); see also Petrol. Commc'ns, Inc. v. FCC,

, 1172 (D.C.

Cir. 1994) (“We have long held that an agency must provide adequate explanation before it treats

similarly situated parties differently.”); Local 777, Democratic Union Org. Comm., Seafarers Int’l

Union of N. Am., AFL–CIO v. NLRB,

(D.C. Cir. 1978) (stating that agencies

may not “arbitrarily treat similar situations dissimilarly”). Thus, if the Administrator concludes

that the 60-day time period does not apply to review of nonprovider disputed claims, it must

16 provide “a reasoned explanation” for that determination. Burlington N. & Santa Fe Ry. Co. v.

Surface Transp. Bd.,

, 776–77 (D.C. Cir. 2005).

V. CONCLUSION AND ORDER

For the foregoing reasons, Plaintiff’s Motion for Summary Judgment, ECF No. 14, is

granted in part and Defendant’s Cross-Motion for Summary Judgment, ECF No. 15, is denied.

This matter is remanded to Defendant for further consideration, consistent with this Memorandum

Opinion.

This court will retain jurisdiction over this matter. The parties shall submit a Joint Status

Report no later than June 15, 2018, updating the court on the remand proceedings and advising

whether further litigation in this matter will be necessary.

Dated: March 22, 2018 Amit P. Mehta United States District Judge

17