is required to supply a more reasoned analysis than that which is required where, as here, the agency addresses a particular problem for the first time.
Arbitrary and Capricious
Having determined that the Secretary's promulgation of criteria different from that developed under § 1395h(f) was proper under the statute, we turn now to review whether the Secretary's adoption of the regulation transferring hospital-based HHAs to the regional intermediaries on the basis of the stated criteria was arbitrary and capricious. It has long been settled that final agency decisions, such as the one before us, are entitled to "a presumption of regularity," National Treasury Employees Union v. Horner, 272 U.S. App. D.C. 81, 854 F.2d 490, 498 (D.C. Cir. 1988), and must be affirmed if the Secretary has articulated a "rational connection between the facts found and the choice made." FORMULA v. Heckler, 250 U.S. App. D.C. 353, 779 F.2d 743, 760 (D.C. Cir. 1985), citing Burlington Truck Lines v. United States, 371 U.S. 156, 168, 9 L. Ed. 2d 207, 83 S. Ct. 239 (1962). Applying these guidelines, we conclude that the Secretary, in fact, provided a reasoned explanation for his adoption of the final rule.
Plaintiffs assert that the basis and purpose statement accompanying the final rule contains no explanation of the relevant factual findings or evidence. See Plaintiffs' Brief at 26-31; Plaintiffs' Opposition at 11-17. We note that under the APA, the Secretary was required to provide "a concise general statement of basis and purpose," 5 U.S.C. § 553(b) (1982), to enable a reviewing court to determine the "major issues of policy [that] were ventilated . . . and why the agency reacted to them as it did." Automotive Parts & Accessories Ass'n. v. Boyd, 132 U.S. App. D.C. 200, 407 F.2d 330, 338 (D.C. Cir. 1968).
The challenged final rule was issued on May 19, 1988. It sets forth a detailed discussion of the six pertinent criteria and responses to comments received as a result of the previous notice of the proposed rule. See 53 Fed. Reg. 17,936-43; see also 52 Fed. Reg. 2424-30 (1987). We believe the rule reflects a careful and diligent consideration of the numerous comments received by the agency.
See 5 U.S.C. § 553 (c) (1982) (agency's statement of basis and purpose should include "consideration of the relevant matter presented"); 1 K. Davis, Administrative Law Treatise § 6:12, at 505-06 (1978) (agency's statement of basis and purpose should include responses to important comments). For example, contrary to plaintiffs' contention that the Secretary failed to consider available evidence regarding the regional intermediaries' previous performance in processing claims, Plaintiffs' Opposition at 12-15, the final rule observed that eight of the ten intermediaries were meeting the congressionally set standard for timely claim processing, that one was very close to meeting the standard, and that the last was experiencing problems unrelated to the absorption of HHA claims and such problems were in the process of being corrected.
See 53 Fed. Reg. at 17,941. Furthermore, the rule stated the Secretary's intention to solicit, review, and implement plans for each intermediary to hire and train additional staff to process home health claims timely and correctly without disruption of service to providers. Id.
It is plaintiffs' position that bifurcating coverage and reimbursement functions between two intermediaries, as required under the challenged regulation, will result in more costly and less efficient administration of the program; that such bifurcation has the effect of increasing the number of intermediaries each hospital-based HHA must use, without reducing the number of intermediaries serving all HHAs; and that reducing the number of intermediaries making coverage determinations will not promote effectiveness or efficiency in the absence of the clarification of coverage guidelines. See Plaintiffs' Brief at 39-43.
The Secretary responded to concerns involving the bifurcation of coverage and reimbursement functions
between two intermediaries by noting that each intermediary would be assigned "separate, clearly identifiable areas," 53 Fed. Reg. 17,940, and that procedures were being established to ensure the timely coordination of data exchange to enable each intermediary to perform its designated function. 53 Fed. Reg. at 17,941. The Secretary further found that regionalizing hospital-based HHAs would reduce administrative costs from economies of scale in bill processing and "from having to modify fewer bill processing systems when changes in the home health programs require modifications to software programs." 53 Fed. Reg. at 17,939.
Finally, the Secretary argues that whatever additional steps may be desirable regarding clarification of guidelines, administering such guidelines with respect to 10 rather than 53 intermediaries will better promote uniformity and consistency.
We find this to be entirely reasonable.
Finally, plaintiffs argue that implementation of the challenged regulations interferes with the ability of hospital-based HHAs to request an alternative intermediary, which under current regulations must be requested at least 120 days before the end of an HHA's fiscal year. See 42 C.F.R. § 421.106(a)(1). Plaintiffs note that HHAs receive 60 days notice of their transfer date under the challenged regulations. See 42 C.F.R. § 421.117(f). Plaintiffs, however, have known since the final rule was issued on May 19, 1988, well over 120 days before the first transfers were to occur on October 1, 1988, that they were required to transfer to a regional intermediary.
See 53 Fed. Reg. at 17,945. We, therefore, conclude that the challenged regulations did not unreasonably interfere with hospital-based HHAs' ability to request transfers to new intermediaries.
The final rule summarizes the Secretary's factual findings by concluding, in pertinent part that:
based on our experience with freestanding HHAs, we believe that uniform interpretation of Medicare rules, better control of administrative costs, ease of communication with HHAs, data collection and HCFA monitoring of intermediary's performance will be enhanced by virtue of reducing the number of intermediaries processing provider-based home health bills from 53 to 10. For example, it is more efficient and less costly to work with or issue instructions (or both) to 10 intermediaries than 53. We are better able to monitor performance and collect data from 10 rather than 53 intermediaries to assure there is more uniform interpretation of the Medicare rules.
53 Fed. Reg. at 17,939.
After careful consideration, we cannot conclude that the Secretary's decision was irrational in any way. Rather, we find that the Secretary carefully evaluated the record before him in the decision making process and adequately explained a "rational connection between the facts found and the choice made." Burlington Truck Lines v. United States, 371 U.S. 156, 168, 9 L. Ed. 2d 207, 83 S. Ct. 239 (1962). The Secretary's explanation that regionalization would produce more effective and efficient administration of the Medicare program reflects an exercise of judgment that we are unable to conclude is arbitrary and capricious.
In summary, having evaluated all of plaintiffs' arguments, we hold that the Secretary's approval of the regulations contravened neither § 1395h(f) of the Medicare Act nor the Administrative Procedure Act.
An order consistent with the foregoing has been entered this day.
Date December 7, 1988
ORDER - December 7, 1988, Filed
In accordance with the foregoing Memorandum Opinion, it is by the Court this 6th day of December, 1988
ORDERED that plaintiffs' Motion for Summary Judgment is denied; and it is
FURTHER ORDERED that defendants' Motion for Summary Judgment is granted.