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University of Colorado Health at Memorial Hospital v. Burwell

United States District Court, D. Columbia.

November 9, 2015

UNIVERSITY OF COLORADO HEALTH AT MEMORIAL HOSPITAL, et al., Plaintiffs,
v.
SYLVIA M. BURWELL, Secretary, United States Department of Health and Human Services, Defendant

          For University of Colorado Health at Memorial Hospital, formerly known as MEMORIAL HOSPITAL OF COLORADO SPRINGS, Banner Heart Hospital, Banner Baywood Medical Center, Banner Estrella Medical Center, Banner Gateway Medical Center, Banner Good Samaritan Medical Center, Banner Thunderbird Medical Center, Banner Desert Medical Center, Banner Mesa Medical Center, Banner Del E. Webb Medical Center, Banner Boswell Medical Center, Cape Coral Hospital, Charleston Area Medical Center, Denver Health Medical Center, Boulder Community Hospital, Halifax Community Health System, also known as HALIFAX MEDICAL CENTER, Sarasota Memorial Hospital, West Virginia University Hospitals, Allina Health, for benefit of ABBOTT NORTHWESTERN HOSPITAL, for benefit of BUFFALO HOSPITAL, for benefit of CAMBRIDGE MEDICAL CENTER, for benefit of MERCY HOSPITAL, for benefit of OWATONNA HOSPITAL, for benefit of UNITED HOSPITAL, for benefit of UNITY HOSPITAL, Banner Health, for benefit of NORTH COLORADO MEDICAL CENTER, for benefit of MCKEE MEDICAL CENTER, Lee Memorial, for benefit of GULF COAST MEDICAL CENTER, Lee Memorial Hospital, Allina St. Francis Regional Medical Center, Valley View Hospital, Parkview Medical Center, Billings Clinic Hospital, Good Samaritan Hospital Los Angeles, Cabell Huntington Hospital, Plaintiffs: Stephen P. Nash, SQUIRE PATTON BOGGS, Denver, CO USA.

         For Sylvia M. Burwell, Secretary, U.S. Department of Health and Human Services, Defendant: Caroline Lewis Wolverton, LEAD ATTORNEY, U.S. DEPARTMENT OF JUSTICE, Civil Division, Federal Programs Branch, Washington, DC USA.

         Re Document No.: 29

         MEMORANDUM OPINION Granting in Part and Denying in Part Plaintiffs' Motion to Compel Production of the Complete Administrative Record

         RUDOLPH CONTRERAS, United States District Judge.

         I. INTRODUCTION

         This case is one in a series of cases in which various hospitals have challenged regulations promulgated by the Department of Health and Human Services (" HHS" ) to implement the Outlier Payment System, which provides for supplemental Medicare payments to hospitals when a particular patient's hospitalization and care is unusually costly. Plaintiffs here, a group of thirty-five acute care hospitals, seek review of the Medicare reimbursements awarded to them under that system. Before the Court is Plaintiffs' motion to compel production of the complete administrative record (ECF No. 29). This issue is well-traveled ground. In several other cases challenging HHS's outlier payment regulations, courts in this district have similarly considered motions to supplement the administrative record that sought many of the same materials Plaintiffs seek here. See generally Lee Mem'l Hosp. v. Burwell, No. 13-643, 109 F.Supp.3d 40, 2015 WL 3631811 (D.D.C. June 11, 2015); Dist. Hosp. Partners v. Sebelius, 971 F.Supp.2d 15 (D.D.C. 2013), aff'd, 786 F.3d 46 (D.C. Cir. 2015); Banner Health v. Sebelius, 945 F.Supp.2d 1 (D.D.C. 2013). Upon consideration of the parties' filings, and for the reasons stated below, the Court will grant in part and deny in part Plaintiffs' motion to compel production.

         II. FACTUAL BACKGROUND

         A. The Outlier Payment System

         To comprehend the parties' dispute about the administrative record's contents, one must have a keen understanding of the complex, and at times technical, Medicare Outlier Payment System. Hospitals were originally reimbursed under Medicare for the " reasonable costs" that they incurred when treating patients. See Dist. Hosp. Partners, L.P. v. Burwell, 786 F.3d 46, 49 (D.C. Cir. 2015). Under that model, " [t]he more [hospitals] spent, the more they were reimbursed." Id. (first alteration in original) (quoting Cnty. of L.A. v. Shalala, 192 F.3d 1005, 1008, 338 U.S.App.D.C. 168 (D.C. Cir. 1999)). By 1983, however, Congress had determined that a reasonable cost system failed to provide adequate incentives for hospitals to operate efficiently. Id. To remedy the potential for over-spending and to reward cost-effective hospital practices Congress passed as section 1886(d) of the Social Security Act (" Section 1886(d)" ) what is called the Inpatient Prospective Payment System (" IPPS" ), administered by the Centers for Medicaid and Medicare Services (" CMS" ). See Cape Cod Hosp. v. Sebelius, 630 F.3d 203, 205, 394 U.S.App.D.C. 59 (D.C. Cir. 2011); see also 42 U.S.C. § 1395ww(d). Instead of reimbursing a hospital simply for its reasonable costs, Congress directed CMS to calculate a " standardized amount" representing the average operating cost for inpatient hospital services. Cape Cod Hosp., 630 F.3d at 205. Section 1886(d) then provides that Medicare reimbursements made to hospitals are to be based on that standardized amount, regardless of the particular costs a hospital incurs in an individual case. See id.

         Congress did recognize that different illnesses may necessarily involve more or less costly care, however. To account for those variations, Congress also directed the Secretary of Health and Human Services (the " Secretary" ) to modify the standardized amount based on a number of diagnosis-related groups (" DRGs" ). DRGs are " group[s] of related illnesses to which the Secretary assigns a weight representing 'the relationship between the costs of treating patients within that group and the average cost of treating all Medicare patients.'" Dist. Hosp. Partners, 786 F.3d at 49 (quoting Cape Cod Hosp., 630 F.3d at 205-06).

         Congress further recognized that, notwithstanding the standardized reimbursement system, " health-care providers would inevitably care for some patients whose hospitalization would be extraordinarily costly or lengthy." Cnty. of L.A., 192 F.3d at 1009. To account for those situations, Congress created the Outlier Payment Program, which permits a hospital to recoup an additional payment, referred to as an " outlier payment," if the costs incurred during the care of a particular patient exceed a certain dollar amount. Id. As relevant here, section 1886(d) provides that a hospital " may request additional payments in any case where charges, adjusted to cost, . . . exceed the sum of the applicable DRG prospective payment rate . . . plus a fixed dollar amount determined by the Secretary." 42 U.S.C. § 1395ww(d)(5)(A)(ii). That fixed dollar amount--referred to as the " fixed loss threshold" --" serves as the cutoff point triggering eligibility for outlier payments." Banner Health, 945 F.Supp.2d at 8.

         Section 1886(d) further mandates that the aggregate amount of outlier payments made in any one fiscal year " may not be less than 5 percent nor more than 6 percent of the total payments projected or estimated to be made based on DRG prospective payment rates for discharges in that year." 42 U.S.C. § 1395ww(d)(5)(A)(iv). During each fiscal year at issue in this case, the Secretary has endeavored to establish payment rates and policies that will produce outlier payments equaling 5.1% of total projected IPPS payments.[1]

         Hence, it is somewhat of an understatement to say that " calculating outlier payments is an elaborate process." Dist. Hosp. Partners, 786 F.3d at 49. For simplicity's sake " three particular numbers are important: (1) the cost-to-charge ratio, (2) the fixed loss threshold, and (3) the outlier threshold." Id. The cost-to-charge ratio, or " CCR," is calculated on an individual hospital level and represents the average differential between the charges that a particular hospital lists on a patient's invoice and the actual costs that hospital incurs in treating a patient. In essence, the figure represents the hospital's " average markup" on its services. Id. at 50. To calculate a hospital's CCR, the Secretary considers the hospital's " most recent settled cost report or the most recent tentative settled cost report, whichever is from the latest cost reporting period." See 42 C.F.R. § 412.84(i)(2).

         As indicated above, the fixed loss threshold is the " fixed dollar amount" above the DGR prospective payment rate that the cost of a patient's care must exceed before a hospital becomes eligible for an outlier payment. 42 U.S.C. § 1395ww(d)(5)(A)(ii). The fixed loss threshold " 'acts like an insurance deductible because the hospital is responsible for that portion of the treatment's excessive cost' above the applicable DRG rate." Dist. Hosp. Partners, 786 F.3d at 50 (quoting Boca Raton Cmty. Hosp., Inc. v. Tenet Health Care Corp., 582 F.3d 1227, 1229 (11th Cir. 2009)). A hospital is simply expected to absorb the additional costs that fall above the DGR but below the fixed loss threshold. The fixed loss threshold is calculated annually and a new threshold is set for each fiscal year. Id. at 50.

         The third number, the " outlier threshold," is calculated by adding the DRG rate for a particular illness to the fixed loss threshold. Id. Any costs a hospital incurs above the outlier threshold may be reimbursed through an outlier payment, although CMS only reimburses a hospital for a fixed percentage of the hospital's costs above that outlier threshold. Since at least 2003, CMS has reimbursed hospitals for 80% of their adjusted costs above the outlier threshold. Id. (citing Medicare Program; Changes to the Hospital Inpatient Prospective Payment System and Fiscal Year 2004 Rates, 68 Fed.Reg. 45,346, 45,476 (Aug. 1, 2003); 42 C.F.R. § 412.84(k)).

         It is important to note that outlier payments do not provide hospitals with additional funding that is not already allocated to the Medicare program. Instead, outlier payments simply redistribute a portion of IPPS payments that would normally flow to hospitals as reimbursement for typical DRG patients to those hospitals that treat outlier patients. See 42 U.S.C. § 1395ww(d)(3)(B). To compensate for the anticipated percentage of outlier payments to be made during the fiscal year, the reimbursements that hospitals receive for ordinary cases under the IPPS program are therefore subject to a percentage reduction " by a factor equal to the proportion of [outlier] payments." Id.

         B. The Challenged Regulations

         Plaintiffs' claims implicate two types of regulations that HHS has promulgated to implement the outlier payment system. The first is the 2003 Outlier Payment Regulations (the " Payment Regulations" ),[2] which establish the general model for calculating whether a hospital's treatment of a particular patient qualifies for an outlier payment. See Medicare Program; Change in Methodology for Determining Payment for Extraordinarily High-Cost Cases (Cost Outliers) Under the Acute Care Hospital Inpatient and Long-Term Care Hospital Prospective Payment Systems, 68 Fed.Reg. 34,494 (June 9, 2003) [hereinafter " 2003 Payment Regulations" ].

         As noted above, IPPS payments are based on the costs a hospital incurs in treating a patient, not the charges as actually listed on a patient's invoice. Dist. Hosp. Partners, 786 F.3d at 49-50. CMS adjusts a hospital's charges to reflect actual costs using a hospital's cost reports. Id. at 49-50, 51. But there is an inevitable time delay between the charges a hospital incurs today and the point at which those charges, as adjusted to cost, will be reflected in a cost report. See 2003 Payment Regulations, 68 Fed.Reg. at 34,496. By 2003, it became clear that several hospitals had learned how to exploit this time lag. Id. Specifically, if a hospital " dramatically increased charges between past cost reports and the patient costs for which reimbursement is sought, [that hospital's] cost-to-charge ratio would be too high and would overestimate the hospital's costs." Dist. Hosp. Partners, 786 F.3d at 51 (internal quotation marks omitted). Such overestimation " may result in some cases receiving outlier payments when th[ose] cases, in actuality, are not high-cost cases." 2003 Payment Regulations, 68 Fed.Reg. at 34,497. This practice is referred to as turbo-charging. Dist. Hosp. Partners, 786 F.3d at 51.

         In an effort to remedy this problem and to prevent turbo-charging in the future, HHS modified its payment methodology in 2003 to, among other things, provide for the use of " the most recent tentative settled cost report," in lieu of a settled cost report, when calculating a hospital's CCR. See 2003 Payment Regulations, 68 Fed.Reg. at 34,497. HHS projected that the use of tentative reports would " reduce[] the time lag for updating cost-to-charge ratios by a year or more." Id. The Payment Regulations also provided that " outlier payments would become subject to reconciliation when hospitals' cost reports are settled." Id. at 34,501. HHS did not propose to retroactively adjust the fixed loss threshold for prior fiscal years in light of the reconciled cost reports, however. Id. Instead, HHS explained that it continued to believe that the threshold " should be based on projected payments using the latest available data without retroactive adjustment." Id.

         Using this updated methodology, HHS calculates a new fixed loss threshold each fiscal year to govern hospitals' eligibility for outlier payments during that fiscal year (collectively, the " Threshold Regulations" ). The Threshold Regulations for certain fiscal years (2007, 2008, 2011, and 2012) are the second type of regulations challenged in this case. Using the fiscal year 2008 as an illustration, HHS typically arrives at the upcoming fiscal year's fixed loss threshold through the following process:[3]

         First, the agency " simulate[s] payments" that will be made under the IPPS program during the upcoming fiscal year. FY 2008 Final Rule, 72 Fed.Reg. at 47,267. In 2008, the agency simulated payments with reference to the actual cases and discharges made two years earlier (during fiscal year 2006); that data is set forth in what is called the " MedPAR file," which contains " fully coded diagnostic and procedure data for all Medicare inpatient hospital bills." Id. Before simulating the projected payments for the fiscal year, however, the agency omits inaccurate data from the file--a process that is referred to as " trimming" the data.[4] Id. The trimmed data forms the universe of cases upon which the next fiscal year's projected payments will be based. The agency then adjusts those charges for anticipated inflation. For 2008, HHS " inflated the charges on the MedPAR claims by 2 years, from FY 2006 to FY 2008." Id. at 47,417. The agency calculates " the 1 year average annualized rate-of-change in charges-per-case" by comparing the charges over the first two quarters of the relevant fiscal year (e.g., 2006) to charges over first two quarters of the following fiscal year (e.g., 2007). Id. at 47,418. That average annual rate of change is referred to as the " charge inflation factor," and that factor is applied to the 2006 cases to determine the anticipated charges in 2008. Id. at 47,417.

         Because charges submitted for reimbursement will ultimately be adjusted to costs, however, the agency also projects hospitals' CCRs for the upcoming fiscal year. The agency starts with the " most recent available data at the time of the [proposed or final] rule," as contained in a particular update to what is called the " Provider Specific File (PSF)." Id. at 47,417, 47,418. For the 2008 final rulemaking, the agency used the data contained in the " March 2007 update to the PSF." Id. at 47,418. That PSF data for all Medicaid providers is compiled into a single, aggregated electronic file referred to as an " Impact File." The Impact File provides " a static snapshot of the actual variables that CMS used in the rate-setting and payment modeling work for the rule with which the impact file is associated." See Cheng. Decl. ¶ 10, ECF No. 32-1. Those CCRs are then adjusted for anticipated inflation by applying what is called a " CCR adjustment factor." FY 2008 Final Rule, 72 Fed.Reg. at 47,418.

         In 2008, using the 2006 MedPAR charges and the March 2007 CCRs, both as adjusted for inflation, HHS simulated payments for the upcoming fiscal year and determined that a fixed loss threshold of $22,635 would ensure outlier payments equaling " 5.1% of total IPPS payments" during the fiscal year. Id. at 47,419. Of course, the agency's projections are dependent on tentative cost reports from prior fiscal years, which may be subject to reconciliation once a final cost report is finalized. See 2003 Payment Regulations, 68 Fed.Reg. at 34,501. Despite this possibility, HHS has repeatedly elected not to adjust its annual projections to account for the possibility that a hospital's CCR and outlier payments might be reconciled once the final cost reports are settled.[5]

         C. Procedural History

         In this action, Plaintiffs have challenged both the 2003 Payment Regulations and the Threshold Regulations for the 2007, 2008, 2011, and 2012 fiscal years. See Fourth Am. Compl. ¶ ¶ 4-5, ECF No. 41[6]; see also Pls.' Mem. Supp. Mot. to Compel Produc. at 15, ECF No. 29 [hereinafter " Pls.' Mem. Supp." ]. Plaintiffs claim that the Threshold Regulations violate Section 1886(d) of the Social Security Act because they fail to comply with the statutory mandate that outlier payments fall between five and six percent of all DRG-related payments, and that the regulations are arbitrary and capricious in violation of the Administrative Procedure Act (" APA" ). See Fourth Am. Compl. ¶ ¶ 72-73, 75. Plaintiffs also contend that the 2003 Payment Regulations are procedurally invalid and that, because the later fiscal year regulations are implemented using the 2003 methodology, those regulations are also invalid. See id. ¶ 77. Plaintiffs seek an order vacating the Payment Regulations, remanding these appeals to the Secretary so that she can " recalibrate and reset" the fixed loss threshold for each fiscal year at issue, and allowing the Plaintiffs to submit amended claims for outlier payments under the recalibrated threshold levels. See Fourth Am. Compl. at 38.

         HHS initially produced to the Plaintiffs what HHS purported to be the administrative record for the 2003 Payment Regulations and the Threshold Regulations for fiscal years 2007, 2008, 2011, and 2012. See Certified List of Contents of the Rulemaking Record, ECF No. 25. With respect to the Threshold Regulations, the initial record included: the Impact Files and MedPAR data files for each fiscal year rulemaking, public comments related to those fiscal years' proposed rules, the proposed and final rulemaking notices, and, for some fiscal years, certain documents specifically referenced in each rulemaking. Id. For the 2003 Payment Regulations, the administrative record included the MedPAR data file, the public comments related to the proposed rule, and the proposed and final rulemaking notices. Id.

         Plaintiffs claim that these documents do not reflect the complete administrative record that was before the agency when it considered these regulations. Specifically, Plaintiffs have moved to compel the production of nine documents or categories of documents including: (1) an Interim Final Rule considered at the time HHS promulgated the 2003 Payment Regulations; (2) the Impact File for the 2003 Payment Regulations; (3) the formulas used to calculate the fixed loss threshold for each fiscal year at issue in this case; (4) the formulas and data used to calculate estimated outlier payments, made during the previous FYs; (5) the actuarial analysis and data upon which HHS relied to calculate the CCR adjustment factors; (6) purportedly missing data HHS used to calculate the inflation factors; (7) purportedly missing and incomplete Impact Files and related data; (8) materials supporting HHS's regulatory impact analysis considered when promulgating each Threshold Regulation; and (9) materials supporting HHS's conclusion that it need not consider reconciliation of outlier payments when setting the fixed loss thresholds. See generally Pls.' Mem. Supp. at 21-44.[7]

         III. LEGAL STANDARD

         When a court reviews an agency's action under the APA, it must " review the whole record or those parts of it cited by a party." 5 U.S.C. § 706; see also Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 420, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971) (" [R]eview is to be based on the full administrative record that was before the Secretary at the time he made his decision." ). A reviewing court " should have before it neither more nor less information than did the agency when it made its decision." IMS, P.C. v. Alvarez, 129 F.3d 618, 623, 327 U.S.App.D.C. 126 (D.C. Cir. 1997). Reviewing " less than the full administrative record," might " allow a party to withhold evidence unfavorable to its case," while reviewing " more than the information before the agency at the time of its decision," risks " requiring administrators to be prescient or allowing them to take advantage of post hoc rationalizations." Walter O. Boswell Mem'l Hosp. v. Heckler, 749 F.2d 788, 792, 242 U.S.App.D.C. 110 (D.C. Cir. 1984). Agencies bear the responsibility of compiling the administrative record, which must include all of the information that the agency considered " either directly or indirectly." Marcum v. Salazar, 751 F.Supp.2d 74, 78 (D.D.C. 2010). The record that an agency produces " is entitled to a strong presumption of regularity." Id.

         A party may seek to supplement the record produced by the agency, however, in " one of two ways." WildEarth Guardians v. Salazar, 670 F.Supp.2d 1, 5 n.4 (D.D.C. 2009). First, a party may seek to include " evidence that should have been properly a part of the administrative record but was excluded by the agency." Id. Where a plaintiff follows this first route, as Plaintiffs do here, supplementation is appropriate if the agency " did not include materials that were part of its record, whether by design or accident." Marcum, 751 F.Supp.2d at 78. But to overcome the presumption of regularity, " a plaintiff must put forth concrete evidence that the documents it seeks to 'add' to the record were actually before the decisionmakers." Id. To make that showing, a plaintiff must do more than simply assert " that materials were relevant or were before an agency when it made its decision." Id. " Instead, the plaintiff 'must identify reasonable, non-speculative grounds for its belief that the documents were considered by the agency and not included in the record.'" Id. (emphasis in original) (quoting Pac. Shores Subdivision Cal. Water Dist. v. U.S. Army Corps of Eng'rs, 448 F.Supp.2d 1, 6 (D.D.C. 2006)). The plaintiff must also " identify the materials allegedly omitted from the record with sufficient specificity, as opposed to merely proffering broad categories of documents and data that are 'likely' to exist as a result of other documents that are included in the administrative record." Banner Health, 945 F.Supp.2d at 17.

         Alternatively, a party may seek to supplement the record with " extra-judicial evidence that was not initially before the agency but [which] the party believes should nonetheless be included in the administrative record." WildEarth Guardians, 670 F.Supp.2d at 5 n.4. In these circumstances, a more stringent standard applies. To " justify[] a departure from [the] general rule" that review " is to be based on the full administrative record that was before the Secretary at the time he made his decision," a party must demonstrate one of three " unusual circumstances." Am. Wildlands v. Kempthorne, 530 F.3d 991, 1002, 382 U.S.App.D.C. 78 (D.C. Cir. 2008) (internal quotation marks omitted). Those circumstances include: (1) when " the agency 'deliberately or negligently excluded documents that may have been adverse to its decision,'" (2) when " background information [is] needed 'to determine whether the agency considered all the relevant factors,'" and (3) when " the 'agency failed to explain administrative action so as to frustrate judicial review.'" City of Dania Beach v. F.A.A., 628 F.3d 581, 590, 393 U.S.App.D.C. 353 (D.C. Cir. 2010) (quoting Am. Wildlands, 530 F.3d at 1002).

         The Court agrees with another judge in this district in noting that the dual use of the term " supplement" has caused " some confusion" about the proper test to apply when a party seeks to supplement the administrative record. See The Cape Hatteras Access Pres. Alliance v. U.S. Dep't of Interior, 667 F.Supp.2d 111, 113 (D.D.C. 2009). " Supplement" has been used synonymously to refer to both a circumstance in which a party argues that the administrative record does not actually reflect the materials that the agency had before it when it made its decision, and a circumstance in which a party seeks to add extra-record or extra-judicial information to the record that was concededly not before the agency. Id. Perhaps because of that dual use, courts in this district have regularly invoked the language from Dania Beach and American Wildlands --and have asked whether a party has shown the existence of one of the " unusual circumstances" --even when considering claims that an agency had not produced materials that it actually had before it. Both parties similarly invoke the Dania Beach and American Wildlands language in this case. But this Court reads those cases to set forth the test for supplementation only with respect to extra-record information. Accord Cape Hatteras, 667 F.Supp.2d at 114-15. For one thing, both cases--and the D.C. Circuit precedent they rely on--involved a party's effort to introduce information that had not been before the agency when it considered the challenged rule. See, e.g., Dania Beach, 628 F.3d at 590 (seeking to introduce documents from prior environmental impact statement processes); Am. Wildlands, 530 F.3d at 1002 (seeking to introduce letters that " were written after the [Fish and Wildlife] Service issued its Reconsidered Finding" and thus were " not part of the administrative record" ); James Madison Ltd. by Hecht v. Ludwig, 82 F.3d 1085, 1095, 317 U.S.App.D.C. 281 (D.C. Cir. 1996) (seeking to introduce bank files that the party conceded " were not part of the administrative record compiled by the agency when the Senior Deputy Comptroller declared the banks insolvent" ). For another, the Court presumes that, for judicial review to be effective, materials that were before the agency should be included in the administrative record irrespective of whether those materials are " adverse to [the agency's] decision" or otherwise satisfy any of the three unusual circumstances identified in American Wildlands and Dania Beach. Similarly, the test's references to " background information" or an agency's failure to adequately explain its action both imply that the information a court is considering adding to the administrative record in those circumstances is information that was not before the agency in the first instance. If a party provides concrete, non-speculative evidence that material an agency did actually consider " either directly or indirectly" is absent from the record, Marcum, 751 F.Supp.2d at 78, however, that should be the end of the matter. In those circumstances a court need not go on to ask whether one of the three " unusual circumstances" has been shown.

         The Court acknowledges that in District Hospital Partners the D.C. Circuit recently applied the American Wildlands test when considering a party's effort to supplement the administrative record with materials similar to those the Plaintiffs seek to add to the record in this case. See 786 F.3d at 55-56. Yet, in that case the Circuit does not seem to have been confronted with materials that the parties claimed had been before the agency in the first instance. The Circuit's recitation of the test suggests as much. After reiterating that APA review must " be based on the full administrative record that was before the Secretary," the court explained that, to " ensure that [courts] review only those documents that were before the agency," a party may supplement the record only if " they can demonstrate unusual circumstances justifying a departure from this general rule." Id. at 55 (emphasis added). Thus, the Circuit appears to have been dealing with a situation in which the parties sought to add extra-record information to the administrative record.[8] As a result, the Court does not read the opinion to hold that, had the plaintiffs requested to supplement the record with materials that had been before the agency, the Circuit would nevertheless have required the plaintiffs to show an " unusual circumstance" warranting supplementation.

         Plaintiffs here seek to supplement the administrative record with materials that they claim were in fact before the agency. See Pls.' Mem. Supp. at 17 (claiming, before listing documents Plaintiffs seek, that " HHS has not produced significant additional documents which were before the agency during the rulemakings here at issue" ). Consequently, the Court need only consider whether the Plaintiffs have provided concrete, non-speculative information that the agency directly or indirectly considered the materials Plaintiffs seek in order to resolve this motion.[9]

         IV. ANALYSIS

         Plaintiffs have moved to supplement the administrative record with materials they claim are relevant to both the 2003 Payment Regulations and the annual Threshold Regulations. Generally, Plaintiffs contend that " the administrative records that HHS has produced contain only some of the data inputs and none of the formulas that the agency actually used to set the thresholds" and that " HHS had omitted a critical document from the rulemaking record for its 2003 amendments to the outlier payment regulations." Pls.' Mem. Supp. at 2. Without these materials, Plaintiffs claim that " any explanation by HHS of the path taken in arriving at the challenged agency actions will necessarily be incomplete and will thus hinder the Court's review." Id. For its part, HHS responds that Plaintiffs are seeking materials " that ...


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