The opinion of the court was delivered by: PRATT
JOHN H. PRATT, UNITED STATES DISTRICT JUDGE.
This action involves a challenge to regulations promulgated by the Secretary of Health and Human Services ("the Secretary") at 42 U.S.C. § 421.117, 53 Fed. Reg. 17,936 (May 19, 1988). These regulations require that the processing of reimbursements under the Medicare Act for hospital-based home health agencies ("HHAs") be transferred from the "intermediary" of each HHA to one of ten regional intermediaries. Plaintiffs, hospital-based HHAs,
have moved for summary judgment, arguing that the adoption of the regulations violated the requirements of 42 U.S.C. §§ 1395h(f) and (e) (4) and the Administrative Procedure Act ("APA"), 5 U.S.C. § 501, et seq. The Secretary opposes plaintiffs' motion and simultaneously moves for summary judgment in his favor. The issues have been extensively briefed. For the reasons that follow we deny plaintiffs' motion for summary judgment and grant defendants' motion.
Pursuant to § 1395h(e) (4) of the Medicare Act
the Secretary promulgated regulations requiring that the processing of reimbursement claims for hospital-based HHAs be transferred to ten regional intermediaries. In approving the regulations the Secretary determined that, on the basis of six stated criteria,
the assignments would result in the more effective and efficient administration of the Medicare program. See 53 Fed. Reg. 17,936 (May 19, 1988).
Plaintiffs filed this action, along with a motion for a temporary restraining order ("TRO") and preliminary injunction on September 28, 1988, more than four months after the final regulation was issued.
After a hearing on the TRO, plaintiffs' motion for a TRO was denied on the basis that plaintiffs had failed to establish that they would suffer irreparable injury prior to a hearing and decision on the motion for preliminary injunction. New Britain General Hospital Home Health Agency v. Bowen, (September 30, 1988). The parties subsequently entered into a stipulation to resolve the case on expedited cross motions for summary judgment instead of proceeding with plaintiffs' preliminary injunction motion.
Plaintiffs argue that the regulations at issue are violative of the Medicare Act and must be enjoined because the Secretary failed to apply the statutory criteria set forth in § 1395h(f)
in determining whether the transfer of hospital-based HHAs to regional intermediaries would result in the more effective and efficient administration of the Medicare program. They also maintain that the Secretary's action was arbitrary and capricious and therefore in violation of the Administrative Procedure Act.
A. Applicability of 42 U.S.C. § 1395h(f)
Plaintiffs' principal challenge to the regulations at issue is that the Secretary was required under 42 U.S.C. § 1395h(e) (4) to apply "standards, criteria, and procedures" promulgated under 42 U.S.C. § 1395h(f) to assess whether transferring the hospital-based HHAs to the regional intermediaries would promote effective and efficient administration of the Medicare program. See Memorandum of Points and Authorities in Support of Plaintiffs' Motion for Summary Judgment ("Plaintiffs' Brief") at 7. Defendants maintain, to the contrary, that the standards, criteria, and procedures promulgated under § 1395h(f) are inapplicable to evaluating the efficiency and effectiveness of requiring hospital-based HHAs to transfer to regional intermediaries pursuant to § 1395h(e) (4). See Memorandum of Points and Authorities in Support of Defendants' Motion for Summary Judgment and in Opposition to Plaintiffs' Motion for Summary Judgment ("Defendants' Brief") at 9-24. Defendants further contend that under the plain language of § 1395h(e) (4), the Secretary was free to promulgate different criteria for determining whether assignments of hospital-based HHAs to regional intermediaries promoted effective and efficient administration of the program.
The parties agree that § 1395h(e) (4) directs the Secretary to transfer hospital-based HHAs to regional intermediaries
only if, after applying such criteria relating to administrative efficiency and effectiveness as he shall promulgate, he determines that such assignment would result in the more effective and efficient administration of this subchapter.
42 U.S.C. § 1395h(e) (4).
There is also no dispute that the Secretary is required to determine that a reassignment of hospital-based HHAs to regional intermediaries would result in more efficient and effective administration of the Medicare program prior to approving the transfer. Rather, the issue is a narrow one and involves which set of benchmarks or guidelines the Secretary is ...