UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

_________________________________________ ) ROCKY MOUNTAIN HEALTH ) MAINTENANCE ORGANIZATION, INC., ) ) Plaintiff, ) ) v. ) Case No. 17-cv-00242 (APM) ) ALEX M. AZAR, II,1 ) ) Defendant. ) _________________________________________ )

MEMORANDUM OPINION

I. INTRODUCTION

Plaintiff Rocky Mountain Health Maintenance Organization challenges an adverse

decision by the Administrator of the Centers for Medicare & Medicaid Services (“CMS”), finding

that Plaintiff received nearly $16 million in excess Medicare reimbursement over a four-year

period. Following an initial round of summary judgment briefing, the court declined to reach the

merits of the parties’ dispute and instead remanded the matter to the agency to resolve two issues.

The first was whether the Administrator had the authority to review and reverse the decision of

two CMS Hearing Officers, who held that CMS had not over-reimbursed Plaintiff. The second

was whether, under the relevant regulations, the Administrator’s failure to complete review of the

Hearing Officers’ ruling within 60 days caused the Hearing Officers’ decision to become final.

The Administrator answered the court’s first question “yes” and the second question “no.” In other

words, the Administrator ruled that she possessed the authority to review the CMS Hearing

1 The court substitutes Alex M. Azar, II, the current Secretary of the United States Department of Health and Human Services (“HHS”), in place of the current named Defendant, previous HHS Secretary Thomas E. Price. Officers’ decision, but that their decision did not become final merely because the Administrator

took more than 60 days to overrule it.

This case now returns to the court, with Plaintiff also contesting the Administrator’s rulings

on the two remanded issues. Once again, the court does not reach the merits of the Administrator’s

decision that Plaintiff received excessive reimbursement. Instead, the court finds that, under

controlling CMS regulations, the CMS Hearing Officers’ decision became final when the

Administrator failed to act within 60 days of Plaintiff’s receipt of the ruling. The Administrator’s

reversal determination therefore exceeded her authority. Consequently, the court grants summary

judgment in favor of Plaintiff and against Defendant.

II. BACKGROUND

A. Factual Background

A full recitation of the factual background in this matter may be found in the court’s March

22, 2018, Memorandum Opinion and Order. See March 22, 2018 Mem. Op. and Order, ECF No.

22 [hereinafter Mem. Op. and Order]. The court sets forth only an abbreviated factual background

section here.

Plaintiff is only one of 20 cost-reimbursed HMOs 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., ECF No. 15-1 [hereinafter Def.’s Mem.], at 5.

Plaintiff does not employ its own health care specialists to deliver services. Rather, it supplies

services to its members indirectly through agreements with physicians, physician groups, and other

health care specialists, who are the direct providers of medical services. Joint Appendix, ECF No.

20 [hereinafter JA], at 42.2

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

2 Plaintiff’s members include both Medicare and non-Medicare enrollees. As a cost-

reimbursed HMO, Plaintiff is entitled under the Medicare Act to reimbursement for the

“reasonable cost” of the covered services it provides to its Medicare beneficiaries. See generally

42 U.S.C. § 1395mm(h). The 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.” Id. § 1395x(v)(1)(A).

A cost-reimbursed HMO’s “cost actually incurred” is determined by a formula specified by agency

regulation. The regulation in question—the “Cost Apportionment 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 to the total charges for all such services.

(c). So, under the Cost Apportionment Regulation, cost-reimbursed HMOs do

not bill Medicare on a “paid claims” basis, that is, they do not bill Medicare for the actual amount

the HMO pays to providers for services rendered. Rather, the Regulation takes a different approach:

It employs a ratio to apportion the “costs actually incurred” between Medicare enrollees and non-

Medicare enrollees. See JA at 9.

Under this approach, a cost-reimbursed HMO calculates the sum for which Medicare is

responsible by first identifying 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

3 reimbursable “costs actually incurred.” See JA at 41–42, 46; see also

(a)

(defining “[a]llowable costs”).

The dispute at hand concerns a category of costs that Plaintiff historically has included in

its reimbursement calculations. Ordinarily, a health care supplier that contracts with Plaintiff will

send its bill for services directly to Plaintiff, which in turn pays the supplier. Sometimes, however,

instead of billing Plaintiff directly for the services rendered, a health care supplier will send its bill

to a Medicare contractor, known as a “carrier,” and the carrier will issue payment without

involving Plaintiff. JA at 42. These direct-bill transactions are known as “carrier-paid claims.”

Since 1986, Plaintiff has understood the Cost Apportionment Regulation to allow carrier-paid

claims to be included in its cost reports, even though Plaintiff incurs little or no out-of-pocket

expense for these types of claims. See

, 714–29. This practice has resulted in larger

reimbursements than if Plaintiff had excluded carrier-paid claims from the calculus. See

.

Until recently, CMS had never objected to Plaintiff’s inclusion of carrier-paid claims in its cost

reports.

CMS broke its silence in 2013. During an audit of Plaintiff’s cost reports for the 2006–

2009 fiscal years, CMS reviewed Plaintiff’s inclusion of carrier-paid claims and, for the first time

ever, deemed such claims not to be a “reasonable cost incurred.” The consequence of this decision

was to lower the apportionment ratio and thereby reduce retroactively the amount of

reimbursement due to Plaintiff during the relevant four years by nearly $16 million.

at 42–43

& n. 3, 715–29; Compl. ¶ 4, ECF No. 1 [hereinafter Compl.]. Stunned by this result, Plaintiff

sought its reversal through administrative appeal.

4 B. Procedural Background

1. Administrative Proceedings

Before recapping the administrative proceedings, some background is in order. For

purposes of appealing an unfavorable reimbursement decision, the Medicare Act makes a

distinction between “providers of services” and nonproviders of services. “Provider of services”

is a defined term that includes, among other entities, hospitals, skilled nursing facilities,

rehabilitation facilities, and hospice programs. 42 U.S.C. § 1395x(u). A provider who is

dissatisfied with a reimbursement determination has a statutory right of appeal to the Provider

Reimbursement Review Board (“Board”). See generally id. § 1395oo. The Administrator of

CMS has the power to reverse or modify the decision of the Board, but it must do so within 60 days

of the provider receiving notice of the Board’s decision, otherwise the Board’s decision becomes

final. Id. § 1395oo(f)(1).

As a cost-reimbursed HMO, Plaintiff does not meet the statutory definition of “provider of

services.” It therefore cannot seek Board review of an unfavorable reimbursement determination.

Cost-reimbursed HMOs are not without recourse, however. CMS regulations grant

“nonproviders,” like Plaintiff, “some other hearing” to challenge a reimbursement decision.

(b)(2)(iii). CMS Hearing Officers conduct the “some other hearing,” not the

Board. Yet, the regulations provide that the “procedural rules for a Board hearing set forth in”

subpart R of CMS regulations3 apply to nonprovider hearings “to the maximum extent possible.”

§ 405.1801(b)(2)(iv). One of the rules set forth in subpart R is that a Board decision becomes

final no later than 60 days after a provider receives the Board’s decision. Id. §§ 405.1871(b)(1);

405.1875(a)(1). The Administrator nevertheless takes the position that this 60-day rule does not

3 The court uses “subpart R” as shorthand for the subpart titled “Provider Reimbursement Determinations and Appeals,” located at

to 405.1889.

5 apply to her review of nonprovider hearing decisions. Such rulings, unlike Board rulings, remain

non-final even after the passage of 60 days, according to the Administrator.

In this case, Plaintiff invoked its right to “some other hearing” and administratively

appealed the auditor’s decision to exclude carrier-paid claims from its reimbursement

calculation. Plaintiff received a hearing before a panel of two CMS Hearing Officers. See JA

at 40–49. In a decision dated September 22, 2016, the Hearing Officers concluded that a “literal

reading” of the Cost Apportionment Regulation allows carrier-paid claims to 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 CMS was aware of Plaintiff’s practice of including carrier-paid claims in its apportionment

ratio—an argument based on CMS’ approval of all reimbursement requests since 1986. See

at 43 n.3. In the end, based on their reading of the Cost Apportionment Regulation, the Hearing

Officers ruled in favor of Plaintiff and against CMS.

Plaintiff’s victory turned out to be short-lived. CMS appealed the Hearing Officers’ ruling

to the CMS Administrator, who reversed. In a decision issued on December 8, 2016—77 days

after the Hearing Officers’ ruling—the Administrator found 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. JA at 2, 14. Although she issued her

ruling more than 60 days after the Hearing Officers’ decision, the Administrator nevertheless

stated that she had conducted her review “during the 60-day period mandated in § 1878(f)(1) of

the Social Security Act [42 U.S.C. § 1395oo(f)(1)].” See id. at 2.

6 2. This Action

On February 3, 2017, Plaintiff filed this action under the Administrative Procedure Act

(“APA”). See generally Compl. The Complaint advances three grounds for vacating the

Administrator’s ruling. See generally Pl.’s Mem. First, it avers that the Administrator’s

interpretation of the Cost Apportionment Regulation is contrary to the Regulation’s plain text and

thus the decision to remove carrier-paid claims from its reimbursement requests must be overturned.

Id. at 24–31. Second, Plaintiff contends that, even if the Administrator’s interpretation of the

Cost Apportionment Regulation is held to be reasonable, the “fair notice doctrine” forecloses

CMS from applying that interpretation to the four years in question. See id. at 31–39. Under the

“fair notice” doctrine, before an agency’s interpretation can operate as a penalty, the affected

party must have “fair notice” of that interpretation before its application. 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). Finally, Plaintiff advances two process challenges to the

Administrator’s decision. Plaintiff maintains that the Administrator lacked the power to overturn

the Hearing Officers’ decision, because the Medicare Act does not expressly provide for such review.

Additionally, Plaintiff avers that the Administrator’s failure to act within 60 days rendered the

Hearing Officers’ decision final and unreviewable. See Pl.’s Mem. at 39–45. As to the latter

argument, Plaintiff acknowledges that the 60-day rule reflected in the Medicare Act does not apply

directly to cost-reimbursed HMOs, as such entities do not qualify as “providers” under the Act;

instead, Plaintiff contends, because CMS regulations make nonprovider hearings subject to the same

procedural rules as Board hearings to the “maximum extent possible,” the 60-day time limitation on

Administrator review of Board hearing decisions likewise applies to review of nonprovider hearing

decisions. See

7 Because the court rests its decision on the Administrator’s failure to act within 60 days, this

Memorandum Opinion does not address any of the other grounds advanced by Plaintiff to overturn

the Administrator’s decision.

3. March 22, 2018 Decision

On March 22, 2018, the court issued an opinion that did not reach the merits of Plaintiff’s

contentions. Instead, the court remanded the matter to the agency to address two issues that

Plaintiff had raised but the Administrator had failed to address: (1) “whether the Administrator

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

failure to complete [her] review within 60 days of the Hearing Officers’ ruling caused the Hearing

Officers’ decision to become final.” See Mem. Op. and Order at 2. With regard to this second

question, the court reminded the Administrator that, absent valid justification, the APA requires

agencies to treat similarly situated persons similarly and thus, “if the Administrator concludes that

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

‘a reasoned explanation’ for that determination.”

at 16–17.

4. Remand Decision

On June 11, 2018, the CMS Administrator issued her decision on remand. See Pl.’s Supp.

Br., ECF No. 25, Ex. 1, ECF No. 25-1 [hereinafter Remand Decision]. As to the first question,

the Administrator concluded that she “is authorized to conduct final agency review in this case.”

Remand Decision at 23. The Administrator found that, “[p]ursuant to section 1876(h) of the Social

Security Act and the [ ] general authority delegated to administer the Medicare program, the

Administrator has been delegated the authority to determine, inter alia, whether cost items claimed

by an HMO contracting on a reasonable cost basis are allowable for reimbursement and the

authority to determine the exact dollar amount of payment to an HMO.” Remand Decision at 11.

8 That delegation “includes the authority . . . to make final settlement on a cost-reimbursement basis

as reflected at

.”

As a natural extension of these powers, the Administrator

concluded, she has the authority to finally “determine the amount owed the cost based HMO” on

a nonprovider appeal.

.

With respect to the second question, the Administrator began her analysis with a correction.

. Recognizing that her initial decision stated that she had conducted her review of the

Hearing Officers’ decision “during the 60-day period mandated in § 1878(f)(1),” JA at 2, the

Administrator declared that statement to be an “error,” Remand Decision at 9. According to the

Administrator, this original text was “a typographical proofing error” that “needlessly confused

the matter.” Id. at 10. Instead, the introductory language of the opinion should have said: “This

case is before the Administrator, Centers for Medicare & Medicaid Services (CMS), for review of

the CMS Hearing Official’s decision pursuant to 42 CFR 417.576(d)(4).” Id. at 9.

The Remand Decision then addressed whether the original decision was invalid because it

was issued after 60 days. The Administrator began by recognizing that, under 42 U.S.C. § 1395oo,

cost-based HMOs like Plaintiff do not have a statutory right to appeal a CMS contractor’s decision

to the Board, because that statutory provision applies only to “providers” and cost-based HMOs

do not meet the definition of “provider.” Thus, by extension, the statutory 60-day rule contained

in 42 U.S.C. § 1395oo(f) does not apply to nonproviders like Plaintiff. Id. at 12.

Though nonproviders have no statutory right of review, the Administrator explained, the

agency’s regulations provide “an appeal mechanism for cost based HMOs as a matter of

administrative ‘grace.’” Id. Specifically,

(b)(2) makes “some other hearing”

available to nonproviders. It further states that, “[f]or any nonprovider hearing, the procedural

rules for a Board hearing set forth in this subpart are applicable to the maximum extent possible.”

9 According to the Administrator, these regulations do not mean, however that the same 60-day rule

that applies to providers applies equally to nonproviders. The Administrator relied on both the

text of the regulations and their historical development to hold that “[this] language [

(b)(2)] does not implicate the Administrative review process [found] at 42 CFR

405.1875,” which is the regulation that reflects the statutory 60-day rule on finality of Board

decisions. See Remand Decision at 12–20.

Finally, with respect to the differential treatment of providers and nonproviders, the

Remand Decision merely states that such treatment “is due to the statutory basis for the provider

of services appeals, which does not exist for the nonprovider cost base[d] HMO.”

. The

Remand Decision also notes that “CMS has treated the cost based HMO involved in this case

consistent with like parties (i.e. other cost based HMOs) and other nonprovider entities for which

the 60 day timeframe of 42 CFR 405.1875 is not applied.”

at 24–25. The Administrator offered

no other reason why the provider/nonprovider distinction warrants different treatment with respect

to the 60-day rule.

III. LEGAL STANDARD

Plaintiff challenges the Administrator’s original and remand rulings under the APA. 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 not in

accordance with 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.

10 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. ANALYSIS

The court’s analysis establishing the applicability of the 60-day rule of finality to

nonprovider hearing decisions requires three sub-inquiries. The first concerns the degree of

deference the court owes the Administrator’s Remand Decision under Auer v. Robbins,

(1997). The second relates to the measure of persuasiveness of the Administrator’s Remand

Decision. And, the third pertains to the court’s interpretation of the relevant agency regulations.

The court takes each of these sub-parts in turn.

A. Auer Deference is Not Warranted

The parties contest the degree of deference the court should afford the agency’s

interpretation of the relevant regulations. The agency argues that, so long as its interpretation is

not “plainly erroneous or inconsistent with the regulation,” the court must accord the agency

substantial deference and its interpretation controlling weight. See Def.’s Supp. Br., ECF No. 26,

at 14 (quoting Thomas Jefferson Univ. v. Shalala,

(1994)). Plaintiff, on the

other hand, contends that the agency is not owed any deference, characterizing the Administrator’s

ruling as a “made-for-litigation decision . . . [that] bears none of the indicia that would entitle it to

deference.” Pl.’s Supp. Br., ECF No. 25 [hereinafter Pl.’s Supp. Br.], at 30.

11 Courts ordinarily must defer to an agency’s interpretation of its own ambiguous regulation.

See Auer, 519 U.S. at 462–63. But “this general rule does not apply in all cases.” Christopher v.

SmithKline Beecham Corp.,

(2012). When an agency’s interpretation is “plainly

erroneous or inconsistent with the regulation,” a court owes no deference.

(citation omitted).

Additionally, a court need not give an agency’s interpretation controlling weight “when there is

reason to suspect that the agency’s interpretation ‘does not reflect the agency’s fair and considered

judgment on the matter in question.’”

(quoting Auer,

). Such suspicion might

arise when the agency’s interpretation conflicts with a prior interpretation, or when it appears that

the agency’s interpretation is either a convenient litigating position or a “post hoc rationalization

advanced by an agency seeking to defend past agency action against attack.”

(quoting Auer,

). Finally, as in Christopher, a court need not defer to an agency interpretation

where the agency failed to provide the regulated party adequate warning of the conduct prohibited

or required by the agency’s interpretation.

at 155–59.

Here, the court finds that the Administrator’s Remand Decision is not entitled to deference

for two key reasons. First, the Administrator’s Remand Decision bears the hallmarks of a “post

hoc rationalization advanced by an agency seeking to defend past agency action against attack.”

Id. at 155. For starters, the very circumstances of the remand gave rise to the “danger that an

agency, having reached a particular result, may become so committed to that result as to resist

engaging in any genuine reconsideration of the issues.” Food Mktg. Inst. v. I.C.C.,

,

1290 (D.C. Cir. 1978). Unless the Administrator here was genuinely prepared to abandon her prior

ruling, she had to take the position that the 60-day rule does not apply to review of nonprovider

hearing decisions. To reach the opposite conclusion—i.e., the 60-day rule does apply—would

mean that the Hearing Officers’ decision in this case was final and the Administrator’s reversal

12 was invalid. Thus, it is perhaps not surprising that the Administrator’s remand decision starts with

professing an error. The Administrator now backs away from her previous statement that she

reviewed the CMS Hearing Officers’ decision “during the 60-day period mandated in § 1878(f)(1)

of the Social Security Act,” JA 2; see also Remand Decision at 9. She now says that statement

“was the result of a typographical proofing error.” Remand Decision at 10. An agency’s summary

dismissal of its previously stated grounds of review authority as a mere scrivener’s error is unusual,

to say the least. Courts should proceed cautiously before granting Auer deference when an agency

admits to such a foundational miscue.

Perhaps in different circumstances, the court might have taken the “typographical error” at

face value. After all, even a carefully reasoned agency decision, like a judicial opinion, might

contain an honest mistake. But the Administrator’s decision bears another telltale sign of post hoc

decision-making: shifting rationales for the agency’s position. See Akzo Nobel Salt, Inc. v. Fed.

Mine Safety & Health Review Comm’n,

, 1304–05 (D.C. Cir. 2000) (noting that “the

flip-flops here mark the [agency’s] position as the sort of ‘post hoc rationalizations’ to which

courts will not defer” (citing Martin v. Occupational Safety & Health Review Comm’n,

(1991))). This is evident in two ways. During the pre-remand litigation, the agency took

the position that the 60-day rule did not bind the Administrator’s review of nonprovider appeals

primarily because

(b)(2)(iv)’s “maximum extent possible” provision

“allow[s] flexibility in the exact procedural rules used to facilitate review” following a nonprovider

hearing. Def.’s Mem. at 44–45. The agency also argued that “CMS’s previous regulations

governing hearings by fiscal intermediaries is of limited relevance because those regulations were

amended in 2008” to reflect that “the proper analogue” is the Board hearing, not an “intermediary

hearing.” Def.’s Reply, ECF No. 19 [hereinafter Def.’s Reply], at 24 (emphasis added). Stated

13 differently, the agency took the position that its historic treatment of nonprovider review shed little

or no light on the applicability of the 60-day rule in this case.

On remand, however, the Administrator either reversed or modified these key positions.

The remand ruling continues to adhere to the view that the “maximum extent possible” provision

affords the Administrator “reasonable flexibility in the application of the Board hearing

procedures,” but that reasoning is now a secondary textual consideration. Remand Decision at 24.

Instead, the Administrator’s main explanation for why the 60-day rule does not apply is that the

phrase “the procedural rules for a Board hearing” contained in § 405.1801(b)(iv) is “a specific and

limited technical term” that applies only to those rules that govern the actual Board hearing itself,

but “does not implicate the Administrator review process at 42 CFR 405.1875.” Id. at 19; id. at

24. This “specific and technical” textual interpretation was not presented pre-remand to the court.

Additionally, contrary to its prior position before the court, the Administrator now relies heavily

on the regulations before 2008 and believes that her interpretation “comports with the

Administrator’s historical practice.” Def.’s Supp. Br. at 23. The Remand Decision includes an

extensive, seven-plus-page analysis of the historical development of § 405.1801(b), see Remand

Decision at 13–21, culminating in the conclusion that the review process for nonprovider hearing

determinations before 2008 “did not implicate the 60-day time frame of 42 CFR 405.1875,” id. at

18; see also id. at 20 n.24, 24 (resolving that the agency’s decision in 2008 not to adopt a 60-day

rule for review of “intermediary” hearings supports not applying the 60-day rule for the

Administrator’s review of nonprovider hearing decisions). That is a far cry from the agency’s

previous statement that regulatory history was of “limited relevance.” These material shifts in

reasoning counsel against affording deference to the agency’s current interpretation of its

regulations.

14 The court declines to defer to the Administrator’s Remand Decision for yet another, and

perhaps more fundamental, reason: The Administrator’s Remand Decision is logically inconsistent

and premised on a basic misunderstanding of the history of nonprovider hearings. The court

discusses these flaws in detail below. But for present purposes, suffice it to say that Auer deference

is not warranted here because the agency’s interpretation “does not reflect the agency’s fair and

considered judgment on the matter in question.” Auer,

.

B. The Agency’s Interpretation is Unpersuasive

Having declined to accord Auer deference to the Remand Decision, the court will give the

agency’s interpretation “a measure of deference proportional to the thoroughness evident in its

consideration, the validity of its reasoning, its consistency with earlier and later pronouncements,

and all those factors which give it the power to persuade.” Christopher,

(internal

quotation marks and citations omitted). Here, the agency’s interpretation of its regulations is

fundamentally flawed and therefore requires no “measure of deference.” The Remand Decision’s

textual analysis is illogical and turns on a critical error of interpretation. And, its historical analysis

misreads the agency’s past treatment of nonprovider hearings and appeals of such hearing

decisions. These are the two pillars on which the Remand Decision stands and, without them, it

crumbles.

1. The Remand Decision Misreads the Relevant Regulations

To explain the error in the Administrator’s textual analysis, the court must start with the

Administrator’s confession of error. As discussed, the Administrator acknowledges that the Initial

Decision’s “reference to section 1878 of the Act [42 U.S.C. § 1395oo] was an error.” Id. Instead,

she explains, “the first sentence [of the Initial Decision] should have read: ‘This case is before the

Administrator, Centers for Medicare & Medicaid Services (CMS), for review of the CMS Hearing

15 Official[s’] decision pursuant to 42 CFR 417.576(d)(4).” Remand Decision at 9 (emphasis added).

But this newly invoked basis for authority says nothing about Administrator review. Instead,

section 417.576(d)(4) simply imposes a notice requirement upon CMS. It provides that, when

noticing final settlement of a cost report, CMS must “[i]nform the HMO . . . of its right to a hearing

in accordance with the requirements specified in § 405.1801(b)(2) of this chapter.”

(d)(4). Section 405.1801(b)(2) in turn tersely states that “[s]ome other hearing will be

available to nonprovider entities, if the amount in controversy is at least $1,000.”

§ 405.1801(b)(2)(iii). Section 405.1801(b)(2) does not expressly say that the Administrator

has the power to review the decision that results from “some other hearing.” That section only

generally states that the “some other hearing” will be subject to “the procedural rules for a Board

hearing set forth in this subpart” to the “maximum extent possible.” Id. § 405.1801(b)(2)(iv).

Notwithstanding the regulation’s silence, the agency says that the “Secretary has interpreted the

text of

(b)(2), as providing for the cost based HMO to have access to ‘[s]ome

other hearing’ for nonprovider entities to appeal reimbursement determinations, through an initial

review by the CMS Hearing Official review, subject to the Administrator’s review . . .” Remand

Decision at 12 (emphasis added). Thus, although lacking any express reference to “Administrator

review” in § 405.1801(b)(2), the Administrator interprets the “some other hearing” made available

to nonproviders as “subject to” the Administrator’s final review authority.

The Administrator is not, however, willing to go where this interpretation naturally leads.

The term “Administrator review” is defined by regulation. It means “that review provided for in

section 1878(f) of the Act (42 U.S.C. § 1395oo(f)) and § 405.1875.”

(a). So,

if the “some other hearing” afforded a nonprovider is “subject to the Administrator’s review,” as

the Administrator claims, see Remand Decision at 12, that means the nonprovider hearing is

16 subject to “that review provided for in section 1878(f) of the Act (42 U.S.C. § 1395oo(f)) and

§ 405.1875.” The problem for the Administrator is that both 42 U.S.C. § 1395oo(f) and

say that the Administrator’s review must be completed within 60 days, or the decision

becomes final. Therefore, a straightforward textual reading of the regulations subjects the

Administrator’s nonprovider hearing review to the same 60-day rule applicable to review of Board

rulings. But the Administrator is unwilling to embrace this reading. Instead, she is left in the

position of saying that the “some other hearing” decision for a nonprovider is “subject to” the

“Administrator review” “provided for in 1878(f) of the Act and § 405.1875,” but not the 60-day

rule contained within those provisions. Evidently, for nonproviders “Administrative review”

includes some rules governing that process but not others. As Plaintiff points out, when the

Administrator announced that she would review the CMS Hearing Officers’ decision in this case,

she invoked both the review criteria and the notice and timing elements contained in § 405.1875.

See Pl.’s Supp. Br. at 19 (citing AR 29, 31, which reference §§ 405.1875(b)(1), (b)(4), (c)(3)(i),

(c)(4)(i)). Yet, that regulation also contains the 60-day rule, which the Administrator claims does

not apply. See id. § 405.1875(a)(1).

So, then, how does the Administrator reconcile the position that the “some other hearing”

granted nonproviders under § 405.1801(b)(2)(iii) is subject to “Administrator review,” yet the

Administrator is not required to complete her review within 60 days? To try to harmonize these

positions, the Administrator shifts her focus from the “some other hearing” provision in

subparagraph (iii) of § 405.1801(b)(2) to subparagraph (iv), which states: “For any nonprovider

hearing, the procedural rules for a Board hearing set forth in this subpart are applicable to the

maximum extent possible.” Id. § 405.1801(b)(2)(iv). With respect to that provision, the

Administrator says that the term “Board hearing” is defined in § 405.1801(a) and thus “is a specific

17 and limited technical term” and so, too, “is the phrase ‘procedural rules for a Board hearing.’”

Remand Decision at 19. The Administrator interprets “procedural rules” to include only “rules

such as discovery, oral hearing, submission of papers, etc.” Id. In other words, “procedural rules”

as used in the regulation are those rules applicable to proceedings before the Board, as distinct

from those that apply at the next level of Administrator review. Based on that reading, the

Administrator concludes, the “language [of § 405.1801(b)(2)(iv)] does not implicate the

Administrator review process at 42 CFR 405.1875,” including the 60-day rule. Id. Later, she

similarly reasons that “[t]he definition of a ‘Board hearing’ does not include the Administrator

review procedures and, hence, by definition 42 CFR 405.1801(b) is only addressing the type of

‘hearing’ the nonprovider is to receive. The 60[-]day review mandate of 42 CFR 405.1875 is not

implicated by this language and is not applicable in this case.” See id. at 24

There are multiple problems with the Administrator’s logic. First, the Administrator is

inconsistent in how she interprets silence in the regulations. On the one hand, when she defines

the scope of “some other hearing” under § 405.1801(b)(2)(iii), the absence of express reference to

Administrative review presents no impediment to the nonprovider hearing being “subject to

Administrative review.” On the other hand, when she wishes to distance herself from the 60-day

rule, the Administrator uses the absence of express reference to “Administrative review” under

§ 405.1801(b)(2)(iv) as evidence that the 60-day rule is not meant to apply. Thus, under the

Administrator’s reading, the regulation’s silence in one sub-clause vests her with review authority,

but in the very next sub-clause it limits her obligations on such review. The Administrator cannot

have it both ways.

Second, the Administrator’s interpretation improperly cherry picks which term to treat as

a term of art. Both “Board hearing” and “Administrator review” are defined terms in

18 § 405.1801(a). Yet, the Administrator considers only “Board hearing” to be a “specific and limited

technical term.” Remand Decision at 19. “Administrative review,” on the other hand, evidently

has a more malleable meaning because that Administrator construes that term to exclude the 60-

day rule for nonproviders, even though the very definition of “Administrator review” cross-

references both the statute and regulation that contain the 60-day rule. The Administrator cannot

logically embrace the definition of one “specific and limited technical term” but not the other.

Third, if the court were to credit the Administrator’s reading it would create an

asymmetrical right to Administrator review. The Administrator writes: “The definition of a ‘Board

hearing’ does not include the Administrator review procedures and, hence, by definition 42 CFR

405.1801(b) is only addressing the type of ‘hearing’ the nonprovider is to receive.” Remand

Decision at 24. Taken literally, that interpretation means that the nonprovider has no recourse to

the Administrator in the event of unfavorable decision by CMS Hearing Officers because “‘Board

hearing’ does not include the Administrator review procedures.” Yet, the Administrator cites the

very same provision as the source of her authority to review a nonprovider hearing decision.

See Remand Decision at 12 (citing

(b)(2)). If her view were correct, it would

mean that the same regulation that grants the Administrator review authority also denies it to the

nonprovider. That makes no sense. After all, the regulations provide that either the Administrator

or the provider may seek review of a Board decision. See

(a) (“The

Administrator may exercise this discretionary review authority on his or her own motion, or in

response to a request from . . . a party to the Board appeal . . .”) (emphasis added). The same

must hold true of an appeal from a CMS Hearing Officers’ decision for a nonprovider.

Finally, there is yet another critical defect in the Administrator’s textual analysis: Her

understanding of the term “procedural rules” as used in § 405.1801(b)(2)(iv) is simply wrong.

19 Recall, the Administrator defines the term “procedural rules” narrowly to mean “rules for Board

hearings,” such as “discovery, oral hearing, submission of position papers, etc.” Remand Decision

at 19 (emphasis added). But that interpretation is incorrect. Prior to 2008, the word “procedural”

did not appear in § 405.1801(b)(2) to modify the word “rules.” Instead, that sub-section stated

that, “[a]lthough [nonprovider] entities do not qualify for Board review, the rules as set forth in

this subpart with respect to intermediary hearings are applicable to the entities to the maximum

extent possible . . .”

(b)(2) (2007) (emphasis added). CMS undertook a

sweeping update of the regulations in 2004, which became final in 2008. See

(June 25, 2004);

(May 23, 2008). That update included adding the term

“procedural rules” to § 405.1801(b)(iv). When CMS discussed that amendment in 2004, it

explained exactly what it meant by the new term “procedural rules.”

[W]e believe that non-provider hearings before a CMS reviewing official are more analogous to a Board hearing than an intermediary hearing. . . . Accordingly, we propose to revise § 405.1801(b)(2) to state that if a hearing is available to a non-provider entity on an amount in controversy of at least $1,000, the procedural rules for a Board hearing under this subpart are applicable to the maximum extent possible. The phrase “procedural rules” in proposed § 405.1801(b)(2) would have the same meaning as the phrase “rules of agency organization, procedure, or practice” in the Administrative Procedure Act,

(b)(3)(A).

69 Fed. Reg. at 35,721 (emphasis added). As the italicized text makes clear, CMS used the term

“procedural rules” to connect the amended regulation to the APA, not to the narrow the types of

rules applicable to nonprovider hearings, as the Administrator now contends. Under the APA,

“procedural rules” is a term of art. It is meant to signify the types of internal rules of process that

are not subject to the APA’s notice-and-comment requirements. See Mendoza v. Perez,

(D.C. Cir. 2014) (using “procedural rules” as “the general label” for “rules of agency

organization, procedure, or practice”). “The ‘critical feature’ of a procedural rule ‘is that it covers

20 agency actions that do not themselves alter the rights or interests of parties, although it may alter

the manner in which the parties present themselves or their viewpoints to the agency.’” Nat’l Min.

Ass’n v. McCarthy,

(D.C. Cir. 2014) (citation omitted). Such rules “ensure ‘that

agencies retain latitude in organizing their internal operations.’” Am. Hosp. Ass’n v. Bowen,

(D.C. Cir. 1987) (citation omitted).

Understood in this proper context then, the Administrator’s interpretation error becomes

clear. CMS did not use the term “procedural rules of the Board” in § 405.1801(b)(2)(iv) to

distinguish between rules governing proceedings before the Board and rules governing

Administrator review. Rather, the phrase “procedural rules of the Board” was intended broadly to

encompass the internal rules of “organization, procedure, and practice,” Mendoza,

, “set forth in this subpart,” i.e. subpart R,

(b)(2)(iv), that are not subject

to notice-and-comment under the APA. The rules relating to Administrator review of a Board

decision, including the 60-day rule, are “set forth in the subpart” and thus are applicable “to the

maximum extent possible” for “any nonprovider hearing.”

Had CMS intended to circumscribe

the review rights of nonproviders, as the Administrator now claims, employing the specialized

phrase “procedural rules” would not have accomplished that objective. See Nat’l Min. Ass’n,

. The Administrator’s interpretation of “procedural rules” in the Remand decision is

simply inaccurate and, therefore, entitled to no deference.

2. The Administrator Misconstrues the History of Nonprovider Hearings

To bolster her conclusion that the 60-day rule does not apply to Administrator review of

nonprovider hearing decisions, the Administrator relied heavily on the historical development of

§ 405.1801(b)(2). Remand Decision at 13–20. She misreads this history.

21 The Administrator began her historical survey by reaching back 45 years. She noted that

from 1975 through 2007, although cost-based HMOs like Plaintiff were not entitled to a Board

hearing, CMS regulations provided nonproviders with an “intermediary hearing,” and further

provided that “the rules as set forth in this subpart with respect to intermediary hearings shall be

applicable to such entities to the maximum extent possible . . .”

(b) (1975)

(emphasis added);

(b) (2007). See Remand Decision at 13–18. Intermediary

hearings at the time differed from Board hearings in three basic respects. First, intermediary

hearings were available to providers if the amount in controversy was greater than $1,000 but less

than $10,000. See

(2007). Second, such hearings were “conducted by a

hearing officer or panel of hearing officers designated by the intermediary,” not the Administrator.

§ 405.1817 (2007) (emphasis added). And, third, the Administrator retained the right to review

intermediary hearing decisions but not directly in the same manner as Board decisions. Rather, a

“CMS official,” as a designee of the Administrator, reviewed intermediary hearing decisions, see

Remand Decision at 16–17 (citing section 2917 of the Provider Reimbursement Manual, Part 1),

and the CMS official’s decision was final and binding on the parties, see

(f)

(2007). The Administrator did not retain the right to review the CMS official’s decision. Thus,

prior to 2008, nonproviders were entitled to a hearing, but such hearing bore little resemblance to

a hearing before the Board.

CMS made two critical changes in 2008, and it rejected one important amendment.

Starting with the changes, CMS inserted the term “some other hearing” to clarify that only

providers qualified for a Board hearing or an intermediary hearing. 69 Fed. Reg. at 35,721. Thus,

no longer would nonproviders receive an intermediary hearing to appeal a reimbursement decision.

Next, CMS amended the regulations to state that the “some other hearing” for nonproviders would

22 be conducted pursuant to the “procedural rules for a Board hearing set forth in this subpart . . . to

the maximum extent possible.” Compare

(b)(2)(iv), with

(b)(2) (2007) (providing that nonprovider hearings would be subject to “the rules as set

forth in this subpart with respect to intermediary hearings . . . to the maximum extent possible”).

CMS made this change because it “believe[d] that nonprovider hearings before a CMS reviewing

official are more analogous to a Board hearing than an intermediary hearing.” 69 Fed. Reg. at

35,721. CMS noted, by way of example, that “non-provider hearings before a CMS reviewing

official are adversarial, which is also true of Board hearings but not intermediary hearings.” Id.

(citations omitted). As for the rejected amendment, CMS declined to impose a 60-day limitation

on the CMS reviewing official responsible for reviewing intermediary hearing decisions. See id.

at 35,727 (“It is not necessary for the CMS reviewing official to issue his or her decision within

such 60-day period.”). CMS explained that it decided against imposing such time restraint because

it “believe[d] that the statutory provision that mandates the Administrator both accept review and

render a decision within 60 days of the provider’s receipt of the Board’s decision is unusual and

not the optimal procedure for taking review.” Medicare Program; Provider Reimbursement

Determinations and Appeals,

, 30,204 (May 23, 2008).

From the foregoing history, the Administrator drew two key conclusions. The first is that,

before 2008, “[w]hen [the] cost based HMO appeals process was established, the CMS hearing

official conducted intermediary like hearings”4 over which the Administrator retained review

authority “by a CMS official,” which “did not implicate the 60-day time frame of 42 CFR

405.1875.” Remand Decision at 18. Put differently, the Administrator understood that, before

4 This partial finding is plainly inaccurate. Before 2008, CMS officials were not tasked with conducting intermediary hearings. Such hearings were “conducted by a hearing officer or panel of hearing officers designated by the intermediary.”

(2007). CMS officials likewise do not conduct intermediary hearings today. See

.

23 2008, review of intermediary hearing determinations for nonproviders was not time-constrained.

The second conclusion the Administrator drew is that the 2008 amendments did not change the

practice of unlimited time to review nonprovider hearing decisions. By specifically rejecting a 60-

day mandate for review of intermediary hearing officer determinations, the Administrator

reasoned, CMS continued to be unencumbered by the 60-day review rule when it came to review

of nonprovider hearing decisions after 2008.

(noting that the “Administrator retains” a

reviewing role “in these cases” and “[c]onsistent with that, CMS specifically rejected the

application of the 60-day Secretary review time period”); see also Def.’s Suppl. Br. at 24 (noting

that, prior to 2004, the decision from an intermediary was, and remains, subject to review by the

Secretary’s designee, “without any constraint on timing”).

These historical lessons are flawed in multiple respects. For starters, the textual changes

made by CMS in 2008 support the very opposite conclusion that the Administrator reached. The

2008 revisions actually show that CMS intended to harmonize nonprovider rights of review with

those afforded to providers. That inference follows from the following observation made by CMS

when it proposed the new regulations:

It is our longstanding policy that only the procedural rules in subpart R apply to non-provider hearings before a CMS reviewing official. In addition, we believe that non-provider hearings before a CMS reviewing official are more analogous to a Board hearing than an intermediary hearing. . . . Accordingly, we propose to revise § 405.1801(b)(2) to state that if a hearing is available to a non- provider entity on an amount in controversy of at least $1,000, the procedural rules for a Board hearing under this subpart are applicable to the maximum extent possible.

69 Fed. Reg. at 35,721. As this passage shows, CMS intended for the revised regulations to signal

a decisive break from its then-practice of treating providers and nonproviders differently. See id.

at 35,743 (“[W]e propose to revise § 405.1801(b)(2) to clarify the specific applicability of subpart

24 R to non-provider entities.”). Going forward, nonproviders would enjoy the same Board-like

process as providers “to the maximum extent possible.” Both types of entities would receive

similar hearings—albeit providers would be before the Board, while nonproviders would be before

CMS Hearing Officers. And, importantly, after 2008, the Administrator would now directly have

final say over rulings on nonprovider reimbursement disputes; such decisions would not longer be

left to a CMS official. Compare Remand Decision at 12 (interpreting the text of the current

§ 405.1801(b)(2) to make nonprovider hearing decisions “subject the to Administrator’s review”),

with 69 Fed. Reg. at 35,727 (“Consistent with current procedures . . . [proposed] § 405.1834(f)

would state that a CMS reviewing official decision . . . is final and binding on each party and on

the intermediary, unless reopened, and is not subject to further appeal.”). These changes manifest

a clear agency pivot in 2008 toward granting nonproviders the same appeal rights and process

available to providers to dispute a reimbursement determination. Nothing in the history of

§ 405.1802(b)(2) suggests that the 60-day rule was excluded from this development.

Additionally, the Administrator’s attempt to draw a direct connection between today’s

Administrator review of nonprovider hearing decisions to the untimed review of intermediary

hearing decisions before 2008 is misguided. The pre-2008 intermediary hearings and the post-

2008 “some other hearing” are in no sense the same. The intermediary hearing, both then and

now, is limited to disputes over small amounts between $1,000 to $10,000 and is conducted before

an official designated by the CMS contractor. And, likely because of the nominal fiscal

consequences of such disputes, the reviewing CMS official’s decision is final, with no further

review by the Administrator. See

(a); Remand Decision at 17–18 (citing

section 2917 of the Provider Reimbursement Manual). By contrast, the post-2008 “some other

hearing” afforded nonproviders can involve, as in this case, millions of dollars; is conducted before

25 CMS Hearing Officers; and is subject directly to final review by the Administrator, not a designee.

As these distinctions make clear, the fact that CMS in 2008 carried forward the practice of

unrestricted time for a CMS official to review a small-dollar intermediary hearing officer’s

decision is hardly surprising. But that decision does not mean that CMS decided not to apply the

60-day rule to review of nonprovider hearing decisions after 2008 that involve millions of dollars

and a process that bears resemblance to that which occurs before the Board. If anything,

CMS’ decision to largely erase the distinction between providers and nonproviders supports the

very opposition conclusion drawn by the Administrator.

* * *

In summary, the court finds that the Administrator’s textual reading and historical

interpretation of the relevant regulations are flawed. For those reasons, the agency’s interpretation

of its regulations not only is owed no deference, but also lacks any persuasive force.

C. The 60-Day Rule Applies to Administrator Review of Nonprovider Hearing Decisions

The task remains to determine whether the Administrator’s failure to complete its review

within 60 days made the Hearing Officers’ decision in this case final and unreviewable.

See Christopher,

. A straightforward application of the regulations compels the

conclusion that the Administrator’s review in this case was untimely and therefore invalid.

The text of § 405.1801(b)(2)(iv) provides the starting point. Recall that, per the 2008

amendments, the term “procedural rules” in subparagraph (iv) bears the same meaning as the

phrase “rules of agency organization, procedure, or practice” under the APA. Section

405.1801(b)(2)(iv) therefore provides that, “[f]or any nonprovider hearing,” “the rules of agency

organization, procedure, or practice” “for a Board hearing set forth in this subpart are applicable

to the maximum extent possible.” The section contains no words of exclusion or limitation, only

26 the exhortation to apply subpart R’s rules “to the maximum extent possible.” Thus, properly

construed, section 405.1801(b)(2)(iv) broadly applies to nonproviders the procedures and practices

set forth in subpart R.

Understood in this way, the 60-day time limit on Administrator review qualifies as a

“procedural rule for a Board hearing” to which the Administrator was bound in this case. The 60-

day period serves multiple procedural and practical purposes with respect to Board hearings. Most

prominently, of course, a Board decision that is not “reversed, affirmed, modified, or remanded”

within 60 days of the provider’s receipt of the Board’s decision becomes “final and binding.”

See

(b)(1). This is a statutorily derived time limit, but notably the regulations

contain no safety valve allowing the Board to extend the 60-day period, for either providers or

nonproviders. As a corollary to the 60-day rule, a Board decision is “inoperative” “during the 60-

day period for review by the Administrator.” That is true for both Board decisions on the merits,

as well as instances in which the Board finds that it lacks jurisdiction to consider a pure legal

question. See

(g)(1)(iv); 405.1871(b)(2). Thus, no right or obligation

attaches to a Board decision for at least 60 days. Relatedly, the 60-day period is critical for

determining when a provider can timely seek redress in federal court. See

(b)

(setting forth different accrual dates depending on the Administrator’s action or inaction). The

regulations provide that the 60-day periods for both Administrator review and judicial review of

any final Board decision “begin to run on the same day.” See

§ 405.1877(b)(2). “[V]arious

actions or inaction by the Administrator within the 60-day review period determine the scope and

timing of any right a provider may have to judicial review . . .” Id. For instance, if the

Administrator declines to review a Board decision, a provider must file suit no later than 60 days

after the date of receipt of the Board’s decision. See id. § 405.1877(b)(2). On the other hand, if

27 the Administrator does timely reverse, affirm, or modify a Board decision, the provider must file

suit within 60 days of receipt of the Administrator’s decision. See id. § 405.1877(b)(3)(i). As

these provisions demonstrate, the 60-day period is a foundational principle of practice and

procedure with respect to appeals taken before the Board. It therefore qualifies as a “procedural

rule for a Board hearing set forth in” subpart R that must be applied to nonprovider hearings.

That the Board’s procedural rules apply “to the maximum extent possible” does not change

this result, even though the Administrator thinks otherwise. In her view, “maximum extent

possible” are words of limitation that “allow[ ] for reasonable flexibility . . . in the review not

[otherwise] possible were it a provider of services appealing under section 1878 of [the] Act.”

Remand Decision at 24. There are two problems with this reading. First, the phrase “maximum

extent possible” does not imply “flexibility,” as the Administrator would have it, but rather

imposes a duty on the agency to apply subpart R’s procedural rules unless it is not feasible or is

impracticable to do so. The word “possible” means “being within the limits of ability, capacity,

or realization,” Possible Definition, MERRIAM-WEBSTER.COM, https://www.merriam-

webster.com/dictionary/possible (last visited Apr. 29, 2019), or “that [which] can be done or

achieved, or that can exist,” Possible Definition, DICTIONARY.CAMBRIDGE.COM,

https://dictionary.cambridge.org/us/dictionary/english/possible (last visited Apr. 29, 2019). Thus,

by directing nonprovider hearings to mirror Board hearings “to the maximum extent possible,” the

the regulation compels the Administrator to complete her review within 60 days, unless doing so

would not be feasible or is impracticable. Courts have treated similar hortatory phrases in the very

same way. See, e.g., Am. Textile Mfrs. Inst., Inc. v. Donovan,

, 508–09 (1981)

(holding that the text “to the extent feasible” required agency to adopt a standard “limited only by

the extent to which this is ‘capable of being done’”); Ashton v. Pierce,

(D.C. Cir.

28 1983) (“In plain language Congress commanded that if it is “practicable” to eliminate an

immediate hazard, that hazard must be eliminated. The statute admits of no exceptions to the

required elimination procedures on the basis of the degree of practicability.”); Fund for Animals

v. Babbitt,

(D.D.C. 1995) (“[T]he phrase ‘to the maximum extent practicable’

does not permit an agency unbridled discretion. It imposes a clear duty on the agency to fulfill the

statutory command to the extent that it is feasible or possible.”).

Second, the Administrator’s reading that “maximum extent possible” allows her to opt out

of procedural rights and protections under subpart R that are not expressly prescribed by the

Medicare Act collapses under its own weight. See Remand Decision at 24 (stating the “the phrase

‘maximum extent possible’ provides flexibility in the process not possible for a provider of

services appeal pursuant to section 1878 of the Act”). By the Administrator’s logic, she could

declare other basic procedural rights granted by the Medicare Act, such as the right to be

represented by counsel, to introduce evidence, and to examine and cross-examine witnesses,

inapplicable to nonproviders merely because those protections are statutorily afforded only to

providers. See 42 U.S.C. § 1395oo(c). That would be an absurd result. There is simply no textual

or historical basis to define the term “maximum extent possible” as drawing a line between

procedural rights created by statute versus those granted by regulation.

Even if the court were to accept the Administrator’s rationale that the regulations vest her

with some degree of flexibility with respect to nonprovider hearings, she offers no valid

explanation for why the 60-day rule is inapplicable to nonproviders, as opposed to any other

procedural rule. In the Remand Decision, the Administrator says the non-application of the 60-

day rule can be explained by the statutory difference between providers and nonproviders.

Remand Decision at 24–25. To be sure, that is a distinction, but it is not one that bears any rational

29 relationship to why she deems the 60-day rule categorically inapplicable to nonproviders, but

presumably deems other rules as inviolate, such as the right to call and cross-examine witnesses.

The Administrator cannot exercise “flexibility” based on a reason that bears no relationship to the

choices that she makes. Drawing such unprincipled distinctions is the hallmark of arbitrary and

capricious decision-making.

Finally, the court agrees with Plaintiff that applying the 60-day rule to Administrator

review of nonprovider appeals is more consistent with the Medicare Act’s and the CMS

regulations’ interest in finality. See Pl.’s Supp. Br. at 25–27. The 60-day deadline exists to

promote timely and efficient review of reimbursement determinations, so that providers can have

certainty with respect to fiscal decision-making. The Administrator’s interpretation fails to

recognize that this important policy objective applies with equal force to nonproviders.

V. CONCLUSION

For the foregoing reasons, the court grants Plaintiff’s Motion for Summary Judgment and

denies Defendant’s Motion for Summary Judgment. A final order accompanies this Memorandum

Opinion.

Dated: April 29, 2019 Amit P. Mehta United States District Court Judge

30