3. Chevron Review
Judicial review of an agency's construction of a statute it administers is guided by the two-pronged analysis established in Chevron U.S.A., Inc. v. National Resources Defense Council, Inc., 467 U.S. 837, 81 L. Ed. 2d 694, 104 S. Ct. 2778 (1984). First, if Congress has directly and unambiguously expressed its intent regarding the disputed issue, the Court must "give effect" to that intent. Id. at 842-43. Second, if both the statute and the congressional intent are ambiguous as to the disputed issue, the Court must determine whether the agency's action was based upon a "permissible construction of the statute." Id.
In the instant case, Cullman acknowledges that Congress has neither specified particular wage data to be included in HCFA wage surveys nor outlined a process that assures consideration, for reclassification purposes, of properly submitted corrections to wage data. Cullman concedes, therefore, that Congress has not clearly demonstrated its intent with respect to the challenged policies. Thus, the issue before the Court is whether the challenged policies are permissible interpretations of the Medicare Act.
Under the Chevron permissible construction standard, the Court grants substantial deference to the Secretary's decisions, particularly in light of the complex and far-reaching policy issues involved in promulgating reclassification regulations. Universal Health, supra, 770 F. Supp. at 718. See also Chevron, supra, 467 U.S. at 844-45 (quoting United States v. Shimer, 367 U.S. 374, 382, 383, 6 L. Ed. 2d 908, 81 S. Ct. 1554 (1984)). For the following reasons, the Court concludes that the challenged policies fall well within the bounds of agency discretion and accord those affected due process of law.
B. Substantive Challenges
1. The Interplay of the Wage Data Correction and Geographic Reclassification Processes
Cullman challenges the Secretary's wage data correction policy as failing to assure that properly submitted data corrections are considered in geographic reclassification determinations. Cullman claims that those policies are impermissible interpretations of the Medicare statutes and that the procedures thus established violate due process. For the following reasons, the Court concludes that the disputed policy is reasonable and well within the bounds of due process required by the Constitution.
First, the only wage data considered in reclassification decisions is taken from the current version of the HCFA wage survey, including any corrections formally processed by the time of decision. 42 C.F.R. § 412.30(e)(2); 56 Fed. Reg. 25477 (June 4, 1991); 55 Fed. Reg. 36760 (September 6, 1990). Giving due deference to the Secretary's discretion to promulgate guidelines that promote policy interests such as accuracy, this Court finds that the Secretary's consideration of only current and properly approved data is a reasonable exercise of agency discretion. See Universal Health, 770 F. Supp. at 718. Accuracy is a particularly significant interest given that the Medicare Act bars re-adjudication of individual reclassification applications. 42 U.S.C. § 1395ww(d)(10)(CC)(iii)(II).
When Cullman submitted its reclassification application on September 25, 1991, it ought to have been well aware of the applicable federal regulations, which had been published at least two months earlier. However, Cullman gave no indication that its data was incorrect until March 10, 1992, when it attempted informally to explain discrepancies between its 1988 HCFA Wage Survey data and the data submitted to the MGCRB with its reclassification request. Cullman still took no formal action to have its data amended until June 11, 1992, when its fiscal intermediary forwarded Cullman's proposed data corrections to OPP. Thus, OPP did not receive Cullman's wage data corrections until nearly nine months after Cullman first submitted its application for reclassification and roughly two months after it submitted its appeal to the HCFA Administrator. Thus, Cullman was clearly dilatory in prosecuting its own cause.
Second, the Court finds that the Secretary's policy of processing wage data corrections as they are received is an eminently reasonable procedure for considering data corrections in reclassification adjudications. Deposition of HCFA official Anne Rudolph at 26 (requests for wage revisions were considered "as they came in"). To review corrected data in the order in which it is received promotes procedural fairness. Indeed, to give preference to Cullman's request for corrections over others would be to put Cullman "at the head of the queue" and move the others in line one step back. See In re Barr Labs., 289 U.S. App. D.C. 187, 930 F.2d 72, 75 (D.C. Cir. 1991); cert. denied, 502 U.S. 906, 116 L. Ed. 2d 241, 112 S. Ct. 297, 112 S. Ct. 298 (1991). Further, unless Cullman can demonstrate that it has been singled out for unfavorable or discriminatory treatment or that its wage data corrections are "plainly more urgent" than other hospitals, this Court has "no basis for reordering agency priorities." 930 F.2d at 75-76. Again, the Court recognizes that substantial deference must be paid to the Secretary's "unique and authoritative position." Id. at 76.
Moreover, if, instead of taking wage data revision requests out of turn, the MGCRB or HCFA Administrator were to delay reclassification proceedings pending wage revision determinations, the overall process would be unwieldy. The Secretary requires that any communications between the reclassification adjudicators and wage revision personnel be in writing and that copies of the communications be sent to any affected parties and placed in the record. 42 C.F.R. §§ 412.264(c)(1), 412.278(e). Moreover, Cullman acknowledges that the regulation at issue was established to protect the interests of the hospitals. To require that determinations be made for any and all pending data corrections before ruling on reclassification applications would substantially delay the process, particularly if consideration of the applications is suspended pending final approval of such corrections. This delay would be significant given the Secretary's 180 day deadline for issuing decisions on reclassification applications and 90 day deadline for issuing decisions on appeals. 42 U.S.C. § 1395ww(d)(10)(C)(iii)(I) and (II). Further, given the fact that, at the time, the MGCRB was a new organization, it was not unreasonable for the Secretary to conclude that it should not, even for the limited purpose of geographic review, approve wage data corrections. In light of the alternatives, the Court finds that the Secretary's policy of considering wage data revision requests in the order in which they are received, without the aforementioned communication between reclassification adjudicators and wage revision personnel, is reasonable.
Third, Cullman complains about what it perceives as the lack of coordination between OPP and the MGCRB. However, the Secretary's requirement that OPP forward wage data revisions to the MGCRB or the HCFA Administrator as soon as they are granted evidences the efforts of the agency to ensure that the procedure is reasonable and coordinated. 56 Fed. Reg. 25477 (June 4, 1991). In fact, according to agency records, over the relevant period of time, March 1992 through July 1992, the Secretary released four memoranda containing more than one hundred data revisions. Defendant's Reply to Plaintiff's Opposition to Defendant's Motion for Summary Judgment, Exhibit 3. Therefore, the Secretary's procedure is not only coordinated, but also reasonably speedy.
Cullman's complaint, ironically, is that the review of the MGCRB decision denying it reclassification proceeded too quickly. Cullman apparently wants two separate offices within a large government agency to change their internal communication procedures to allow MGCRB decisions to be suspended pending wage data correction review. The courts are not in the business of ordering agencies to craft and follow hand-tailored procedures for each party who complains that it was adversely affected by existing procedures. Even assuming, arguendo, that there was some inequity in the Secretary's procedures, the fact that, on occasion, a rational, fair, and permissible procedure produces individual inequities does not justify nor compel invalidating it. Cullman was on notice of the procedure and did not vigorously pursue its cause within the parameters of that procedure.
Cullman further argues that what it perceives as the lack of coordination between OPP and the MGCRB violates due process. Due Process requires that a plaintiff have an opportunity to be heard "at a meaningful time and in a meaningful manner." Mathews v. Eldridge, 424 U.S. 319, 333, 47 L. Ed. 2d 18, 96 S. Ct. 893 (1976) (citations omitted). To determine whether an official action violates the due process clause of the Constitution, the Court must consider three factors: (1) the private interest affected by the official action; (2) the risk of "erroneous deprivation" of the private interest as a result of the official action and, if any, procedural safeguards for the action; and (3) the Government's interest, including the function involved and any additional fiscal or administrative burdens that a procedural safeguard might entail. Id. at 335. The extent of procedural due process required is thus "influenced by the extent to which he may be 'condemned to suffer grievous loss' and depends upon whether the recipient's interest . . . outweighs the governmental interest in summary adjudication." Goldberg v. Kelly, 397 U.S. 254, 262-63, 25 L. Ed. 2d 287, 90 S. Ct. 1011 (1970) (quoting Joint Anti-Fascist Refugee Comm. v. McGrath, 341 U.S. 123, 168, 95 L. Ed. 817, 71 S. Ct. 624 (1951) (Frankfurter, J., concurring)); Mathews, 424 U.S. at 333 (same).
First, the private interest at stake in the instant case is the additional amount of reimbursement that Cullman would be entitled to if it was reclassified, approximately $ 800,000. While this is a significant amount of money, there is no evidence that it would constitute a "grievous loss" to Cullman, i.e., its sole source of income, as required by Goldberg and Mathews. Thus, the Court finds that Cullman fails to assert a private interest that warrants intervention on Due Process grounds.
Second, the Court finds that there is minimal risk of error when the Secretary's policies regarding wage data corrections and their use in reclassification adjudication are followed. As discussed above, the Secretary's policies reasonably serve the interests of accuracy, fairness, and efficiency. Moreover, Cullman was on notice of the Secretary's policy of considering only data from the current wage survey and any processed corrections, since they had all been published in the Code of Federal Regulations. Despite these published guidelines, Cullman did not submit corrections to OPP until nearly nine months after submitting its reclassification application. The risk of injury to Cullman would have been slight had the hospital timely submitted its request for revision. The policy in place was clearly set forth, easy to comply with, and did not rely on determinations of credibility and veracity. See Mathews, supra, 424 U.S. at 346. Thus, the Court finds that the disputed policies created very little risk that Plaintiff would be erroneously deprived of its reimbursements.
The final inquiry in the due process analysis weighs the public interest, including the administrative burden of additional procedures. Mathews, 424 U.S. at 347. This Court finds that the Secretary's interest is substantial, given the heavy administrative burden associated with either of Cullman's suggested procedural safeguards. First, reviewing wage revision requests out of turn would impinge on the interests of fairness and efficiency. Second, communication between reclassification adjudicators and wage revision personnel so that consideration of an application could be postponed pending final approval of wage data corrections would seriously hinder the administrative process, increase transaction costs associated with review, and raise ethical issues about which the Secretary had already voiced concerns.
Thus, the Court finds that the Secretary's interest is significant, the benefit of additional safeguards minimal, and that both outweigh Cullman's interest in obtaining additional funding. Therefore, upon consideration of the three Mathews factors, the Court concludes that the disputed policy does not violate due process.
2. The Secretary's Initial Policy of Excluding Contract Wage Data
Cullman contests the Secretary's initial decision to exclude contract wage data from the 1988 HCFA wage survey. According to the Secretary, the data was excluded because it was not uniformly available at that time. Indeed, even though the Secretary did collect data for some types of contract labor, excluding management services, she eventually excluded it because of its inconsistency and unreliability. 55 Fed. Reg. 36036 (September 4, 1990) ("our analysis of the public comments and data from the 1988 survey leads us to propose excluding contract services from the current wage index. This decision stems from the industry's concern about hospitals' ability to accurately track and record contract labor hours . . ."). The Secretary found that only 50% of hospitals reported contract labor data, and that at least 11% of the remaining 50% failed to report such data because they had been unable to determine accurately the hours worked by contract personnel. Id. Therefore, in the interest of fairness to all hospitals, the Secretary ultimately decided to exclude all contract wage data from the final 1988 HCFA wage survey. Id. The Secretary further proposed to develop more detailed reporting guidelines so that reliable contract labor wage data might be incorporated into future wage surveys. Id.
The Secretary has since modified her policy and now includes all contract wage data. 59 Fed. Reg. 45330, 45355 (September 1, 1994). In particular, in response to concerns voiced after the 1988 wage survey that the exclusion of the data disadvantaged rural hospitals, the new policy includes management contract wage data. Cullman asserts that this change demonstrates that the Secretary's initial policy of excluding contract wage data was unreasonable.
The Court does not agree. It is well within the Secretary's discretion to alter existing policy in light of changed circumstances or new information. Atchison, Topeka & Santa Fe Ry. Co. v. Wichita Bd. of Trade, 412 U.S. 800, 808, 37 L. Ed. 2d 350, 93 S. Ct. 2367 (1973); International Ladies' Garment Workers' Union v. Donovan, 232 U.S. App. D.C. 309, 722 F.2d 795, 814, n.33 (D.C. Cir. 1983). The Secretary's previous exclusion of management contract labor was reasonable in light of her assessment of the inadequacy of the information available to her at that time. Further, this Court finds that the Secretary's decision to exclude the collected contract data from the final 1988 HCFA wage survey was reasonable given that the Secretary, in her considered judgment, found that data to be unreliable.
In any event, Cullman was not harmed by the Secretary's policy of excluding contract labor from the 1988 HCFA Wage Survey and revisions. When Cullman's revision request was processed, HCFA erroneously included data on Cullman's Administrator and Director of Nursing, who were both contract employees. If the Secretary's then-existing policies had been followed, the wage data would not have been revised as favorably to Cullman as it was when contract data was erroneously included.
For the reasons stated above, Plaintiff's Motion for Summary Judgment shall be denied, and Defendant's Motion for Summary Judgment shall be granted.
An Order shall accompany this Opinion.
Nov. 8, 1996
United States District Judge
This matter is before the Court on the parties' Cross Motions for Summary Judgment [27 & 28]. For the reasons stated in the Court's Memorandum Opinion, it is this 8th day of November, 1996:
ORDERED that Plaintiff's Motion for Summary Judgment  is denied; and it is further
ORDERED that Defendant's Motion for Summary Judgment  is granted.
U.S. District Judge