Administrative Procedure Act Claims
Plaintiffs have alleged that the HHS acted unlawfully in applying both the specific cataract surgery fee caps of § 9334(a)(3) and the general fee limitations set forth in § 9331(b). Section 9331 of OBRA-86 replaced the fee freeze established by § 2306(c) of DEFRA.
Under § 9331, non-participating physicians may charge Medicare patients no more than the "maximum allowable actual charge" (MAAC) for any procedure or service. The MAAC amount is determined by a complicated formula set forth in § 9331(c)(i), 42 U.S.C. § 1395u(j)(1)(C).
Section 9334(a)(3) addresses cataract surgeons directly. It requires that the "prevailing charge" for cataract surgery be reduced by 10 percent in 1987 and by an additional two percent in 1988. It also provides that the reductions in the prevailing charge shall not reduce the prevailing charge below 75 percent of the weighted national average of charges for the service. In localities where the prevailing charge for a service is at or below 75 percent of the weighted national average of charges for that service, the surgeons are not subject to this express fee cap. However, while in such localities OBRA-86 exempts cataract surgeons from the stricter reductions required by § 9334(a)(3), HHS has interpreted OBRA-86 to impose the more general restrictions set forth in § 9331.
Plaintiffs contend that in requiring that both provisions be applied to non-participating cataract surgeons, defendants: (1) violated rulemaking procedures mandated by the Administrative Procedure Act (APA) because HHS promulgated a substantive rule without proper notice and comment, and (2) acted in an arbitrary and capricious fashion.
Defendants argue that the APA was not violated in that if any rulemaking took place, that rulemaking was "interpretive" and not "substantive" or "legislative" and thus was exempt from the formal notice and comment requirements. Furthermore, defendants claim that such interpretation is clearly in line with the legislative goals and mandates of Congress.
Much has been written on the distinction between "legislative" or "substantive" rulemaking and "interpretive" rulemaking. Generally it is agreed that legislative/substantive rules create law, often in implementing an existing statute, while an interpretive rule advises the public of its construction and the agency's interpretation of new or existing law and announces how the agency believes the statute should be enforced. See, e.g., Gibson Wine Co. v. Snyder, 90 U.S. App. D.C. 135, 194 F.2d 329, 331 (D.C.Cir. 1952); Pickus v. United States Board of Parole, 165 U.S. App. D.C. 284, 507 F.2d 1107, 1113 (D.C.Cir. 1974); Cabais v. Egger, 223 U.S. App. D.C. 121, 690 F.2d 234, 238 (D.C.Cir. 1982); Whitney v. Heckler, 780 F.2d 963 (11th Cir. 1986); American Medical Association v. Bowen, 659 F. Supp. 1143 (N.D.Tex. 1987), vacated on other grounds, 857 F.2d 267 (1988); American Hospital Association v. Bowen, 640 F. Supp. 453 (D.D.C. 1986). Unlike legislative/substantive rules, which can only be made after extensive notice and comment as proscribed by § 553 of the APA, 5 U.S.C. § 553, interpretive rules are specifically exempt from the notice and comment requirements. See id.
HHS determined that both the specific cataract fee limitations and the general fee limitations apply to non-participating cataract surgeons. The OBRA-86 reforms are very complex and complicated. The statute does not specifically designate that both, or just the cataract provisions, should apply to the fees charged by non-participating cataract surgeons. However, it appears clear that HHS interpreted the new fee cap provisions in light of the entire statutory purpose of the OBRA-86 changes and goals, and determined that Congress meant for both provisions to be applied to cataract surgeons. As such, the decision was interpretive rather than legislative. As the Court of Appeals stated in Citizens To Save Spencer County v. United States Environmental Protection Agency, 195 U.S. App. D.C. 30, 600 F.2d 844, 877 (D.C.Cir. 1979):
Such a legal assessment of instructions of Congress . . . cannot itself be termed "legislative"; for EPA's assessment in this case created no new law, but merely followed Congress into the administrative abyss that Congress itself had created.
HHS's determination did "not create new law, rights or duties." American Medical Association v. Heckler, 606 F. Supp. at 1440. HHS simply stated "what the administrative agency thinks the statute means . . . ." General Motors, 742 F.2d at 1565 (quoting Citizens to Save Spencer County v. EPA, 600 F.2d at 876 & n. 153). Accordingly, HHS's application of both fee caps was an "interpretive rule."
Plaintiffs contend that regardless of the status of the rule, the rule itself is arbitrary and capricious. Agencies are accorded considerable deference in interpreting the purposes of a statute. See, e.g., Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837, 81 L. Ed. 2d 694, 104 S. Ct. 2778 (1984); Griffon v. United States Department of Health and Human Services, 802 F.2d 146 (5th Cir. 1986). The Court may find that HHS's actions were arbitrary and capricious only if: (1) Congress has directly spoken to the issue and HHS's construction runs counter to clear congressional intent; or (2) the construction does not contradict clear Congressional intent, but is sufficiently unreasonable. Chevron, 467 U.S. at 837; General Motors Corp. v. Ruckelshaus, 239 U.S. App. D.C. 408, 742 F.2d 1561, 1567 (D.C.Cir. 1984). The Court finds that HHS's interpretation of the general MAAC fee cap and the specific cataract fee cap provision as complementary, and thus both affecting non-participating cataract surgeons, as opposed to exclusive, was not arbitrary.
The Court finds that plaintiffs have standing to challenge the fee limitations and HHS's interpretation of the statutes. However, the Court does not find that the enactment of the fee limitations violates plaintiffs' constitutional rights, nor does the HHS's interpretation of the interaction between § 9334 and § 9331 violate the APA. Accordingly, the Court grants defendants' motion and dismisses the complaint. An appropriate Order accompanies this Memorandum Opinion.
Date: 28 November 1989
ORDER-November 28, 1989, Filed
Upon consideration of defendants' Motion for Judgment on the Pleadings and To Dismiss, plaintiffs' opposition, defendants' reply and the entire record herein, it hereby is
ORDERED, that defendants' motion is granted for the reasons set forth in the accompanying Memorandum Opinion.
Date: 28 November 1989