MEMORANDUM OPINION ON MOTION TO SUPPLEMENT THE
ADMINISTRATIVE RECORD
ROSEMARY M. COLLYER UNITED STATES DISTRICT JUDGE
The
UnitedHealthCare Insurance Company challenges a formal rule
issued by the Centers for Medicare and Medicaid Services
(CMS). When CMS filed the administrative record, Plaintiffs
protested the absence of two documents which had been
released by CMS under the Freedom of Information Act in
another matter. CMS contends that the two documents are not
properly part of the administrative record for this
rulemaking and that they are privileged by the deliberative
process privilege. The Court concludes that the documents, as
redacted upon release, are no longer privileged and should be
made part of the record here.
I.
BACKGROUND
Plaintiffs
in this case are Medicare Advantage organizations in the
United Health Group family of companies, the nation's
leading provider of Medicare Advantage health benefits plans
(United). Under the Medicare Advantage program (MA), also
known as Medicare Part C, private insurance companies provide
Medicare insurance coverage to eligible individuals and are
reimbursed by CMS on a pre-set, per-member-per-month basis,
pegged to a dollar value for health care attributed to each
diagnostic code submitted by medical providers, and adjusted
based on demographic data. CMS undertakes various efforts to
review and audit these reimbursements to ensure their
accuracy.
By law,
CMS is to pay MA insurers at rates that ensure
“actuarial equivalence” with what Medicare pays
directly for similar health care to participants in
traditional Medicare, also called
“fee-for-service” or FFS Medicare, or Medicare
Part A and Part B. 42 U.S.C. § 1395w-23(a)(1)(C)(i).
Codes covering all manner of diagnoses are used by Medicare
and MA to identify the illnesses or conditions affecting the
covered populations. Given the millions of participants in
Medicare, it is only to be expected that some diagnostic
codes will be reported in error for a patient who does not
have that illness or condition; in addition, Medicare suffers
from some rate of fraud whereby health care providers
intentionally report erroneous diagnoses to increase their
repayments. As a result of these two factors, it is
inevitable that Medicare experiences an error rate-that is, a
proportion of diagnosis codes that are unsupported in
underlying medical charts-that can be actuarially calculated
and/or predicted.
CMS
sets the rates to be paid to MA insurers according to the
amounts Medicare itself pays directly to providers for the
same diagnoses, without regard to the Medicare error rate for
unsupported diagnoses. In January 2014, CMS published a
notice of proposed rulemaking to affect MA insurers.
See 79 Fed. Reg. 1918-01 (Jan. 10, 2014). “The
proposed rule also include[d] several provisions designed to
improve payment accuracy.” Id. at 1918. After
receiving comments, CMS published a Final Rule concerning MA
overpayments. 79 Fed. Reg. 29844 (May 23, 2014) (2014
Overpayment Rule). The 2014 Overpayment Rule, challenged
here, requires MA insurers to return to CMS payments that
were based on incorrect diagnostic codes once the insurer
discovers, or through reasonable diligence should have
discovered, the error in any individual patient's chart.
See Id. at 29923-24. Failure to do so exposes an
insurer to a charge of having violated the False Claims Act,
31 U.S.C.A. § 3729, which can lead to treble damages,
civil penalties, and debarment from federal contracts. Since
a similar no-error standard is not applied by CMS in paying
traditional Medicare providers, United alleges that MA
insurers are not being reimbursed on an actuarially
equivalent rate and that the 2014 Overpayment Rule must,
perforce, be vacated.
CMS
studied just such an issue in a separate 2012 rulemaking,
which concerned an audit program to determine the diagnostic
accuracy of medical charts for MA beneficiaries. In these
“risk adjustment data validation, ” or RADV,
audits, CMS reviews the medical records of a small sample of
the patients covered by an MA insurance contract and then
extrapolates the error rate of the sample to the entire
population covered by that contract to determine whether the
insurer had received an aggregate overpayment. As explained
by CMS, “RADV audits determine whether the diagnosis
codes submitted by MA organizations can be validated by
supporting medical record documentation. . . . Diagnoses that
cannot be validated contribute to a payment error
rate.” Notice of Final Payment Error Calculation
Methodology for Part C Medicare Advantage Risk Adjustment
Data Validation Contract-Level Audits (Feb. 24, 2012) (Notice
of Final Methodology), AR 005311. On December 20, 2010, CMS
posted on its website a request for comments titled
“Medicare Advantage Risk Adjustment Data Validation
(RADV) Notice of Payment Error Calculation Methodology for
Part C Organizations Selected for Contract-Level RADV Audits:
Request for Comment.” AR 005020. After receiving more
than 500 comments, CMS determined that it needed to include a
“Fee-for-Service Adjuster” (FFS Adjuster) in the
RADV audit process: when an RADV audit results in a
determination that an MA insurer was paid based on
unsupported diagnosis codes, the repayment the MA insurer
owes to the government is adjusted downwards based on an
estimated traditional Medicare payment error
rate.[1] CMS explained the rationale for including
an FFS Adjuster in auditing payments to MA insurers:
The FFS adjuster accounts for the fact that the documentation
standard used in RADV audits to determine a contract's
payment error (medical records) is different from the
documentation standard used to develop the Part C
risk-adjustment model (FFS claims). The actual amount of the
adjuster will be calculated by CMS based on a RADV-like
review of records submitted to support FFS claims data.
Notice
of Final Methodology, AR 005314-15. This explanation
reflected that an RADV audit determines a payment error rate
based on actual medical records while the risk-adjustment
model on which per-diagnosis rates are developed and paid is
based on unaudited FFS claims. In 2012, CMS apparently
intended to develop RADV-like audits of its own FFS claims
data. As far as the record shows, that has not happened yet.
The
fact that CMS considered and adopted the FFS Adjuster in the
context of RADV audits forms the basis for the motion to
augment the administrative record for the 2014 Overpayment
Rule. United obtained two documents originally disclosed to a
third party through a request under the Freedom of
Information Act (FOIA), 5 U.S.C. § 552, seeking records
comprised of meeting materials in the files of certain named
individuals, all but one of whom served as senior
decisionmakers at CMS between the years 2011 and 2014 when
the RADV audit methodology was under consideration.
See Declaration of Daniel Meron (Meron Decl.) [Dkt.
44-1] ¶¶ 9-13; see also Joint Status
Report ¶ 5(b), Schulte v. HHS, No. 14-cv-887
(D.D.C. Jan 15, 2016), ECF No. 30 (noting that the request
included “meeting materials dated after January 1,
2012” of these decisionmakers).[2] The two FFS Adjuster
Documents, a slideshow and a bullet-point-style briefing
memorandum, describe the reasoning behind the FFS Adjuster
for RADV audits. Neither document is included in the
Administrative Record submitted by CMS for the 2014
Overpayment Rule.
United
moves to add both documents to the administrative record.
Mot. for Leave to File Suppl. to the Admin. Record (Mot.)
[Dkt. 44]. Defendants opposed that motion, Mem. in Opp'n
to Mot. for Leave to File a Suppl. to the Admin. Record
(Opp'n) [Dkt. 45], to which Plaintiffs replied. Reply to
Opp'n to Mot. for Leave to File Suppl. to the Admin.
Record (Reply) [Dkt. 48]. Defendants also moved to file a
surreply in opposition. Defs.' Mot. for Leave to File a
Surreply in Opp'n to Pls.' Mot. to Suppl. the Admin.
Record (Surreply Mot.) [Dkt. 54]; Proposed Surreply [Dkt.
54-1].
II.
LEGAL STANDARD
The
Administrative Procedure Act (APA) requires reviewing courts
to “set aside agency action, findings, and conclusions
found to be . . . arbitrary, capricious, abuse of discretion,
or otherwise not in accordance with law.” 5 U.S.C.
§ 706 (2012). When reviewing an agency action under the
APA, a court must “review the whole record or those
parts of it cited by a party.” Id. Review
“is to be based on the full administrative record that
was before the [agency] at the time [it] made [its]
decision.” Citizens to Preserve Overton Park, Inc.
v. Volpe, 401 U.S. 402, 420 (1971), abrogated on
other grounds by Califano v. Sanders, 430 U.S. 99
(1977). The full administrative record “include[s] all
documents and materials that the agency directly or
indirectly considered, ” Animal Legal Def. Fund v.
Vilsak, 110 F.Supp.3d 157, 159 (D.D.C. 2014), and a
court “should have before it neither more nor less
information than did the agency when it made its
decision.” Walter O. Boswell Mem'l Hosp. v.
Heckler, 749 F.2d 788, 792 (D.C. Cir. 1984).
Because
an agency is in the best position to know on what bases it
made its decision, “[t]he record that an agency
produces ‘is entitled to a strong presumption of
regularity.'” Univ. of Colo. Mem'l Hosp. v.
Burwell, 151 F.Supp.3d 1, 12 (D.D.C. 2015) (quoting
Marcum v. Salazar, 751 F.Supp.2d 74, 78 (D.D.C.
2010)). However, supplementation of the record is appropriate
where certain “unusual circumstances” exist.
Lee Mem'l Hosp. v. Burwell, 109 F.Supp.3d 40, 47
(D.D.C. 2015). The United States Court of Appeals for the
District of Columbia Circuit has found “at least
three” circumstances in which such “unusual
circumstances” might exist: “(1) the agency
deliberately or negligently excluded documents that may have
been adverse to its decision; (2) the district court needed
to supplement the record with background information in order
to determine whether the agency considered all of the
relevant factors; or (3) the agency failed to explain
administrative ...