5 U.S.C. § 553(b)(B). The APA also requires that publication or service of a substantive rule shall not be less than thirty days prior to its effective date, except "as otherwise provided by the agency for good cause found and published with the rule." Id. § 553(d)(3). UHS argues that the guidelines are procedurally invalid because the Secretary, without an adequate showing of good cause, failed to engage in notice and comment rulemaking prior to promulgation of the guidelines.
On September 6, 1990, the Secretary published his guidelines as interim final rules, which became effective immediately without notice or the opportunity for public comment. 55 Fed. Reg. 36,753, 36,754 (Sept. 6, 1990). In the statement accompanying the interim rules, the Secretary expressly invoked the good cause exception of § 553(b)(B) and provided an explanation for his decision to forego notice and comment, concluding that delay in issuance of the guidelines would be contrary to the public interest. See 55 Fed. Reg. at 36,765-66. The Secretary explained that immediate publication of the guidelines was necessary to enable hospitals to timely apply for reclassification for fiscal year 1992 and to allow the Board to render its reclassification decisions by the statutory deadline of March 30, 1991. Id. at 36,765. The Secretary further explained that timely adjudication of reclassification requests was essential to ensure budget neutrality for fiscal year 1992. Id. at 36,766. These same concerns, according to the Secretary, justified making the interim rules effective upon publication. Id. The Secretary did, however, provide for a sixty-day comment period following publication of the interim rules. Id. at 36,754, 36,766. Comments were received and responses were published with the final rules on June 4, 1991. See 56 Fed. Reg. 25,457 (June 4, 1991).
The good cause exception to the APA's notice and comment requirement is to be "narrowly construed and only reluctantly countenanced." New Jersey v. EPA, 200 U.S. App. D.C. 174, 626 F.2d 1038, 1045 (D.C. Cir. 1980). "Strict congressionally imposed deadlines, without more, by no means warrant invocation of the good cause exception." Petry v. Block, 238 U.S. App. D.C. 46, 737 F.2d 1193, 1203 (D.C. Cir. 1984). At the same time, the Court is "duty bound to analyze the entire set of circumstances" surrounding the agency rulemaking to determine whether the agency justifiably invoked the good cause exception. Petry, 737 F.2d at 1203.
The Court has considered the circumstances surrounding the Secretary's promulgation of the reclassification guidelines and finds that the Secretary had good cause to proceed without notice and comment. The OBRA of 1989 was a major, complex legislative scheme which imposed numerous and complex administrative duties upon the Secretary. See id. at 1200-01 (complexity of statutory scheme and magnitude of responsibility placed upon agency relevant in determining whether agency properly invoked "good cause" exception). The Secretary's obligation to appoint and promulgate substantive guidelines for the newly-created Board, see 42 U.S.C. § 1395ww(d)(10)(B)(ii), (D), was but one of the Secretary's many statutory duties. See Pub. L. No. 101-239, §§ 6001-6901, 103 Stat. 2106-2301 (1989). The 1989 OBRA also required the Secretary to perform these complex tasks in relatively short order: the 1989 OBRA was passed on December 19, 1989 and required the Secretary to appoint a Board and issue guidelines by July 1990. See id.
Unfortunately, the Secretary did not meet his statutory deadlines, his interim guidelines not being issued until September 6, 1990. UHS argues that this delay undermines the Secretary's argument that he had good cause to dispense with notice and comment. According to UHS, if the Secretary had published his guidelines by July 1990, he could have provided for a notice and comment period and still have complied with the Act's timetable for reclassification rulings. UHS contends that the Secretary's delay in issuing his guidelines precludes him from relying upon the good cause exception of § 553(b)(B) and that the guidelines must be struck down.
Although the Secretary's dilatoriness should not be condoned, the Court disagrees that the delay in promulgating the guidelines requires that they be struck down.
To invalidate the Secretary's administrative scheme at this point would undermine congressional intent in amending the Act. Retroactively striking down the guidelines would call into question previous reclassification decisions, possibly denying many hospitals the increased Medicare reimbursement that they are entitled to under the Act. Alteration or revocation of past reclassification approvals would also disturb budget neutrality in previous fiscal years and may make it impossible for the Secretary to ensure budget neutrality in fiscal year 1992. To hold that the Secretary's delay in promulgating the guidelines precludes a finding that he had good cause to proceed without notice and comment would "utterly frustrate Congress' intent . . . and would, in effect, create a penalty, which is at complete odds with Congress' mandate, for the [Secretary's] failure to promulgate the rules in a timely fashion." Petry, 737 F.2d at 1202 n. 19.
The Court must review the Secretary's invocation of the good cause exception in light of the circumstances under which the guidelines were promulgated. Id. at 1203. The Court finds that providing for a notice and comment period prior to promulgation of the guidelines would have delayed implementation of the reclassification provisions of the Act and would have denied provider hospitals the benefits of reclassification which were expressly made available to these hospitals under the 1989 amendments to the Act.
Further, the Secretary was not at liberty to consider reclassification requests after the commencement of the fiscal year because of his obligation to ensure budget neutrality, a budgeting task that must be performed prior to the start of the fiscal year. Under these circumstances, the Court finds, while in no way condoning the Secretary's dilatoriness, that good cause existed to promulgate the interim rules without notice and the opportunity for public comment.
The Court also finds that the Secretary's failure to engage in pre-promulgation notice and comment was at least partially cured by allowing the opportunity for post-promulgation comment. Concurrent with his publication of the final rules, the Secretary responded to comments received in the sixty-day period following publication of the interim rules. See 56 Fed. Reg. 25,457 (June 4, 1991). The Secretary summarized and addressed the concerns raised by the commentators and incorporated some suggestions as amendments to the final rules. See id. Although post-promulgation opportunity for comment is not a substitute for pre-promulgation notice and comment, failure to comply with the pre-promulgation procedures of § 553 of the APA may "be cured by an adequate later notice" if "the agency's mind remained open enough at the later stage." McLouth Steel Prods. Corp. v. Thomas, 267 U.S. App. D.C. 367, 838 F.2d 1317, 1323 (D.C. Cir. 1988). The Court finds that the Secretary adequately considered the post-promulgation comments before publishing his final rules, and that he displayed a willingness to incorporate public suggestions into the guidelines. The Court thus finds that remand to the Secretary for further rulemaking proceedings would serve no useful purpose. See Petry, 737 F.2d at 1203.
2. Basis and Purpose
UHS argues that the Secretary failed to comply with the APA's requirement that "the agency shall incorporate in the rules adopted a concise general statement of their basis and purpose." 5 U.S.C. § 553(c). The Court disagrees and finds that the Secretary has adequately fulfilled the APA's "basis and purpose" requirement. The Secretary "need not justify the rules [he] selects in every detail" so long as he "explains the general bases for the rules chosen." Connecticut Light & Power Co. v. Nuclear Regulatory Comm'n, 218 U.S. App. D.C. 134, 673 F.2d 525, 529 (D.C. Cir.), cert. denied, 459 U.S. 835, 74 L. Ed. 2d 76, 103 S. Ct. 79 (1982). The statement need not be an exhaustive, detailed account of every aspect of the rulemaking proceedings, but it should indicate the major issues of policy that were raised and explain why the agency responded in the manner that it did. Independent U.S. Tanker Owners Comm. v. Dole, 258 U.S. App. D.C. 6, 809 F.2d 847, 853 (D.C. Cir.), cert. denied, 484 U.S. 819, 98 L. Ed. 2d 39, 108 S. Ct. 76 (1987).
The inquiry into whether an agency has fulfilled the "basis and purpose" requirement of § 553(c) is substantially the same as the inquiry into whether an agency's rulemaking was arbitrary and capricious for failure to set forth a "rational connection" between facts found and rules adopted. See Connecticut Light & Power, 673 F.2d at 528. The Court has previously found the Secretary's promulgation of the guidelines not to be arbitrary and capricious, and, for substantially the same reasons discussed in Part III.A.B. of this Memorandum Opinion, the Court finds that the guidelines should not be invalidated for failure of the Secretary to adequately set forth their basis and purpose.
The Court finds that it has jurisdiction to review the Secretary's promulgation of the guidelines, and it will deny the Secretary's motion to dismiss for lack of subject matter jurisdiction. The Court further finds that the guideline's proximity requirement is not substantively invalid and that the Secretary's rulemaking was not procedurally invalid. The Court will deny UHS' motion for summary judgment and grant the Secretary's motion to dismiss UHS' first amended complaint for failure to state a claim, or, in the alternative, for summary judgment. An appropriate Order accompanies this Memorandum Opinion.
ORDER - August 21, 1991, Filed
For the reasons set forth in the accompanying Memorandum Opinion, it is by the Court this 21st day of August 1991
ORDERED that defendant's motion to dismiss plaintiff's first amended complaint for lock of subject matter jurisdiction be, and it hereby is, DENIED; and it is further
ORDERED that plaintiff's motion for summary judgment be, and it hereby is, DENIED; and it is further
ORDERED that defendant's motion to dismiss plaintiff's first amended complaint for failure to state a claim or, in the alternative, cross motion for summary judgment be, and it hereby is, GRANTED.