that the standard for judicial review of HCFAR 84-1 is one of deference to the agency's interpretation of the jurisdictional statute. Plaintiffs respond that the Secretary's interpretation of the statute is not entitled to deference at all, because it is an interpretative ruling. Plaintiffs also point out that courts are the final arbiters of statutory construction questions, and further argue that the Secretary's ruling is entitled to no deference here because it is not supported by adequate reasoning.
HCFAR 84-1 states in conclusory fashion that an intermediary's notice of base year costs (the PPS determination) "is neither a final determination of program reimbursement nor a notice of the amount of program reimbursement as required by the statute and regulations." 49 Fed. Reg. 22,415 (1984). But it fails to explain adequately why the PPS determination should be controlled by the NPR review provisions, particularly where Congress has taken the time to set up two entirely separate processes for initiating an appeal. Although the notice accompanying the ruling attempts to justify the Secretary's decision in the light of existing regulations, it does not contain any analysis of the relevant statutory language. The Secretary's proffered interpretation of the statute would reduce the 1983 additions to section 1395 oo (a) to mere surplusage. The plaintiffs correctly observe what is apparent from the face of the statute: Congress patently did not impose the appeal mechanism for the cost reimbursement system on the new prepayment system.
The plaintiffs also cite several of the Secretary's regulations and interpretations, all of which treat an intermediary's determination as being final,5 subject only to extremely narrow exceptions which are not relevant here. This administrative interpretation is important because 42 U.S.C. § 1395 oo (a)(3) plainly allows a hospital to file an appeal with the PRRB if it does so "within . . . 180 days after notice of the Secretary's final determination . . ." (emphasis added). The Notice of Base Year Costs issued to plaintiffs explicitly stated that its payment determination was "final and not subject to any change" after the beginning of the hospital's fiscal year under the PPS. Plaintiffs' Exhibit 12 at 2. Moreover, the regulations treating PPS determinations as final preceded HCFAR 84-1. See 42 C.F.R. §§ 405.474(b)(1)(iv), (v) (published at 48 Fed. Reg. 39,825 (1983)). In addition, on at least 31 separate occasions, the PRRB agreed to hear an appeal from an intermediary's determination without awaiting the issuance of an NPR. See Plaintiffs' Exhibit 5. Thus, to the extent that contemporaneous agency interpretation of a controlling statute is an issue, it is apparent that HCFAR 84-1 reflects, at best, an unreasoned reversal of what until then had been the Secretary's consistent interpretation of the jurisdictional statute. Indeed, even the Secretary's more recently promulgated regulations treat the intermediary's determination, subject to exceptions not applicable here, as final: "The intermediary's estimate of base year costs and modifications thereto is final and may not be changed after the first day of the first cost reporting period beginning on or after October 1, 1983. . . ." 50 Fed. Reg. 12,753 (1985) (to be codified at 42 C.F.R. § 412.71(d)).
The inconsistency of the Secretary's position has been described in Redbud Hospital District v. Heckler, CCH Medicare and Medicaid Guide P 34,084 (N.D. Cal. July 30, 1984). On a motion for preliminary injunction, the Redbud court faced issues virtually identical to those presented here. After a careful review of the Medicare statute, the legislative history and applicable regulations, that court concluded:
Clearly, Congress, in setting up a prepayment system and expressing special concern for hospitals in situations such as that faced by Redbud, could not have intended that such a hospital must wait to obtain review until after the end of its first year under the system, by which time it could well have been forced out of business in the event of inaccurate PPS hospital-specific target rate estimations. The Secretary, in refusing to afford review within a reasonable time frame, is in derogation of the statutory scheme provided by Congress, and has abused her discretion.