FLORIDA MEDICAL ASS'N v. DEPT. OF HEALTH, ED., ETC. No. 78-178-Civ-J-S.
479 F.Supp. 1291 (1979)
FLORIDA MEDICAL ASSOCIATION, INC., a Florida Corporation, on behalf of its members, Louis C. Murray, M.D., Jack McCris, M.D., Jere Annis, M.D., O. William Davenport, M.D., Robert E. Windom, M.D., and Charles H. Berchert, M.D., on behalf of themselves and all others similarly situated, Plaintiffs, and American Medical Association, on behalf of its members, and Robert B. Hunter, M.D., Frank J. Jirka, Jr., M.D., Lowell H. Steen, M.D., Harold Gurgone, Walter E. Schrange, Plaintiffs (Intervenors), and Broward County Medical Society, Amicus Curiae, v. DEPARTMENT OF HEALTH, EDUCATION & WELFARE, Patricia R. Harris, Secretary of Health, Education & Welfare, Blue Shield of Florida, Inc., a Florida Corporation, and Group Health, Inc., a Florida Corporation, Defendants.
United States District Court, M. D. Florida, Jacksonville Division.
October 22, 1979.
William H. Adams, III, Peter L. Dearing, Stephen D. Lobrano, Jacksonville, Fla., for Florida Medical Assoc.
Newton N. Minow, Jack R. Bierig, Bernard D. Hirsh, B. J. Anderson, Chicago, Ill., for American Medical Assoc.
William DeF. Thompson, Fort Lauderdale, Fla., for amicus curiae.
John Power, Sr., Vice President Group Health, Inc., Coral Gables, Fla., for Group Health, Inc.
John Slye, Jacksonville, Fla., for Blue Shield of Florida.
Steve J. Cohen, Miami, Fla., for Broward County Medical Society.
Ernst D. Mueller, Asst. U. S. Atty., Jacksonville, Fla., for HEW.
Barbara Allen Babcock, Leonard Schaitman, Linda Cole, Terrence Jackson, Dept. of Justice, Washington, D. C., Henry R. Goldberg, Vicki Schulkin, Dept. of Health, Ed. & Welfare, Washington, D. C., for defendants.
CHARLES R. SCOTT, Senior District Judge.
This case presents the question whether the Secretary (`the Secretary') of the United States Department of Health, Education & Welfare (`HEW') may disclose information concerning the annual amounts of reimbursements paid to Medicare providers in a way that would individually identify at least some of those providers. This question
Parties and Status of the Case
Plaintiff, Florida Medical Association (`FMA') is a voluntary, nonprofit professional association incorporated in the State of Florida. FMA's members are physicians licensed to practice medicine in Florida. FMA has more than 14,000 members who represent approximately 97% of practicing, licensed physicians in the State of Florida. The individual plaintiffs, Louis C. Murray, M.D., Jack McCris, M. D., Jere Annis, M. D., O. William Davenport, M. D., Robert E. Windom, M. D., and Charles E. Berchert, M. D., are physicians residing in the State of Florida and licensed to practice medicine in Florida. Defendant HEW, is an agency of the Executive Branch of the United States government. Defendant, Patricia R. Harris, is the current Secretary of HEW, and was automatically substituted pursuant to Fed.R.Civ.P. 25(d)(1) for Joseph A. Califano, Jr., the former Secretary of HEW. Defendants, Blue Shield of Florida, Inc., (`Blue Shield') and Group Health, Inc., (`Group Health') are Florida corporations licensed to do business in Florida as health insurers. Blue Shield has its principal place of business in Jacksonville, Florida. Broward County Medical Society (`BCMS') is a professional association of physicians practicing in Broward County, Florida, and has been permitted to appear as Amicus Curiae on behalf of plaintiffs in this case.
On April 28, 1978, a temporary restraining order was issued, which was extended on May 8, 1978. By agreement of the parties, the temporary restraining order remained in effect until the Court's ruling in this case or June 6, 1978, whichever occurred first. Plaintiffs' preliminary injunction motion was referred to, and heard by, the Magistrate who issued findings and recommendation on May 8, 1978. The parties filed written objections to those findings and recommendation, and the Court heard arguments concerning those objections on May 16, 1978. Additionally, the defendants and plaintiffs have filed cross-motions for summary judgment which are before the Court. Finally, the parties stipulated that the Court should consolidate its ruling on the merits in this case with its consideration of plaintiffs' preliminary injunction motion, pursuant to Fed.R.Civ.P. 65(a)(2). That stipulation provided that the Court, in ruling on the merits in this case, may consider all the evidence admitted at the hearing on plaintiffs' preliminary injunction motion before the Magistrate, as well as all of the pleadings and other documents in the record in this case.
Meanwhile, on June 12, 1978, the American Medical Association (`AMA'), on behalf of its members, and three individual physicians, as well as two individual patients, were all allowed to intervene as plaintiffs in this case against HEW and the Secretary. The AMA and the individual plaintiffs had ten days earlier commenced an action virtually identical to this one in the United States District Court for the Northern District of Illinois. A temporary restraining order against the Secretary had been issued on June 5, 1978, by the Northern District of Illinois, and extended on June 12, on the condition that the AMA and the individual plaintiffs "explore appearing in this case." The AMA is a national, voluntary professional association whose membership exceeds 200,000 licensed physicians in all 50 states, four territories, and the District of Columbia.
After the intervention of the AMA and the individual plaintiffs, the Court recertified this case as a class action, redefining the class in view of the additional plaintiffs who had been permitted to intervene. The recertified class is all physicians licensed to practice in Florida (including those who are members of the FMA and those who are not, and including those who are members of the AMA and those who are not) and all other members of the AMA who are not Florida physicians, if (1) they are providers of Medicare services within the meaning of
Although by consent of the original parties, the temporary restraining order in this case had been extended through June 19, 1978, once the AMA and the new individual plaintiffs had intervened in this case, the Court issued a temporary restraining order on their behalf, which was extended for an additional ten days. In the interim, the Secretary had obtained extensions of time in which to file an additional memorandum of law. Faced with the likelihood that its limited subject matter jurisdiction might vanish by the Secretary's unrestrained disclosure of the information that he proposed to release, the Court, while waiting for the Secretary's memorandum of law, issued what it termed `an Ancillary Writ of Injunction' which the Court believed was derived from its ancillary jurisdiction attendant to the Court's original subject matter jurisdiction over this case, and from the Court's all writs jurisdiction under 28 U.S.C. § 1651(a). Since that time, however, the Fifth Circuit Court of Appeals has determined that the ancillary and all writs jurisdiction of the Court to fashion equitable, injunctive relief, is curtailed by the provisions and requirements for issuing temporary restraining orders and preliminary injunctions under Fed.R.Civ.P. 65. Florida Med. Ass'n v. HEW, 601 F.2d 199, 203 (5th Cir. 1979), vac'g 454 F.Supp. 326 (M.D.Fla.1978).
The federal program of health insurance for eligible aged and disabled persons is known as `Medicare'. 42 U.S.C. § 1395 et seq. The HEW Secretary is responsible for administering the Medicare program. Part A of the program
Enrolled beneficiaries can submit two kinds of claims for reimbursement of reasonable health care costs: assigned and unassigned. Assigned claims are transferred to the provider or other individual (such as a physician) who renders health services. The provider or physician submits the claim for reimbursement of reasonable costs to a carrier; and, in accordance with the contract between the carrier and HEW, 80% of the reasonable costs are paid directly to the provider or physician. Unassigned claims are submitted by the patient to the carrier for reimbursement of 80% of the reasonable costs; but the patient must pay the physician or provider directly for the entire amount charged. The effect of the distinction between assigned and unassigned claims is that while a physician or provider is guaranteed payment for services under assigned claims, remuneration is limited to 80% of the reasonable costs; but, without the security of remuneration from federal funds, a physician or provider can require the full amount of charges under unassigned claims, although the patient is limited to reimbursement from the government of reasonable costs
In March, 1977, the Hew Secretary publicized a list containing the names of physicians or groups of physicians whose services rendered during 1975 totaled $100,000.00. With each name on the list was correlated the gross amount of 1977 reimbursements for Medicare claims, both assigned and unassigned. That information was widely publicized in the news media. Although it was later determined that the information published was inaccurate in many ways, plaintiffs do not challenge the accuracy of the Secretary's disclosure of such information. Also in March, 1977, the Secretary published in the Federal Register (42 Fed. Reg. 14703) an interim amendment to the rules for disclosure of Social Security records, contained in 20 C.F.R. § 401.1 et seq., in order to conform the current regulations to the most recent requirements of the Freedom of Information Act. The effect of the amendment to 20 C.F.R. § 401.1 et seq. was to adopt the principles of the Freedom of Information Act as guiding rules for the disclosure of information by HEW. 42 Fed. Reg. at 14704. See 20 C.F.R. § 401.3(a). In November, 1977, the Secretary directed the various carriers with whom HEW had contracted to prepare and publish by April 30, 1978, a list of all physicians and providers for whose services Medicare reimbursements had been paid in 1977. The list was to include full names of the physicians and providers, their addresses, the net total amount of Medicare reimbursement paid for assigned claims to each physician or provider, and the net total amount of Medicare reimbursements paid to beneficiaries for unassigned claims for services furnished by each physician or provider. The Secretary took steps to ensure the accuracy of the information, by requiring each carrier to notify the affected physicians and providers of the information intended to be disclosed. The carriers received complaints, with changes and corrections, concerning the information intended to be disclosed about each physician and provider. Plaintiffs and plaintiffs-intervenors have brought this action on behalf of themselves and the class represented, seeking the Court to enjoin the Secretary's disclosure of this information, and to declare that the proposed disclosure is unlawful.
Although the Court has not otherwise previously reached the merits of this case, in order to justify the purported exercise of its ancillary jurisdiction when fashioning the equitable, injunctive relief that was labeled `Ancillary Writ of Injunction', which the Fifth Circuit vacated, Florida Med. Ass'n v. HEW, 601 F.2d 199 (5th Cir. 1979), the Court found it necessary to determine at the outset whether its limited subject matter jurisdiction had been genuinely invoked. The Court concluded that it had. Florida Med. Ass'n v. HEW, 454 F.Supp. at 332 and n. 6.
First, the Court found that its federal question subject matter jurisdiction, under 28 U.S.C. § 1331, was properly and genuinely invoked over the issues in this case. The Court noted that a recent en banc court of appeal's decision, Dr. John T. MacDonald Foundation, Inc. v. Califano, 571 F.2d 328 (5th Cir. 1978) (en banc), cert. denied 439 U.S. 893, 99 S.Ct. 250, 58 L.Ed.2d
Then the Fifth Circuit followed its en banc decision with American Ass'n of Councils of Med. Staffs of Private Hosps., Inc. v. Califano, 575 F.2d 1367 (5th Cir. 1978). Once again the Court of Appeals held that there was no federal question jurisdiction to challenge HEW regulations issued under the Medicare Act affecting the eligibility of smaller institutions (hospitals, skilled nursing facilities, and home health agencies) under the Medicare Act, unless they used extra-institution utilization review committees. Id. at 1369. The Fifth Circuit held that it did not have subject matter jurisdiction to review the statutory and constitutional issues raised. Id. at 1372.
Still later, in Moody Nursing Home, Inc. v. Califano, 578 F.2d 1158 (5th Cir. 1978), the Fifth Circuit, following its en banc decision in Dr. John T. MacDonald Foundation, Inc. v. Califano, supra, held that there is no federal question jurisdiction for the district court to review a decision by the HEW Secretary, concerning the scope and amounts of Medicare reimbursements allowable to the plaintiff-nursing home. Id. at 1159.
And most recently, the Court of Appeals once again adhered to its decision in Dr. John T. MacDonald Foundation, Inc. v. Califano, supra. Alabama Hosp. Ass'n v. Califano, 587 F.2d 762 (5th Cir. 1979), cert. denied, ___ U.S. ___, 100 S.Ct. 48, 62 L.Ed.2d 32 (1979), was a case where the plaintiff-hospital association sued the HEW Secretary and Alabama Blue Cross and Blue Shield. HEW had decided that amounts of reimbursements paid to the provider-hospitals (who were members of the association) under the Medicare Act "were unnecessary" and therefore those amounts should be recouped. Id. at 763. Plaintiff-association contended that such a unilateral, administrative decision amounted to a taking of property without due process, in violation of the Fifth Amendment. Id. The Fifth Circuit, however, consistently ruled that the Medicare Act did not allow federal question jurisdiction "to review the validity of HEW's reimbursement procedures." Id.
Nevertheless, the Court continues to adhere to its decision that the present case is not controlled by those decisions. None of the statutorily-grounded or constitutionally-based claims in the present case challenge any decision made by the HEW Secretary pursuant to the Medicare Act.
Florida Med. Ass'n v. HEW, 454 F.Supp. at 333 n. 6. The Court continues to so hold.
Furthermore, 28 U.S.C. § 1331(a) also supplies federal question subject matter jurisdiction for review of plaintiffs' claim that the Secretary's decision, and proposed conduct, do not measure up to the appropriate standard for agency action under the review provided by the Administrative Procedure Act. 5 U.S.C. § 706. See Chrysler Corp. v. Brown, 441 U.S. 281, 315 and n. 47, 99 S.Ct. 1705, 1724 and n. 47, 60 L.Ed.2d 208, 234 and n. 47 (1979); Califano v. Sanders, 430 U.S. 99, 106-07, 97 S.Ct. 980, 984-985, 51 L.Ed.2d 192, 200 (1977).
Florida Med. Ass'n v. HEW, 454 F.Supp. at 334 n. 6. Cf. Chrysler Corp. v. Brown, 441 U.S. at 287, 99 S.Ct. at 1710, 60 L.Ed.2d at 216. The Court's conclusion that it has subject matter jurisdiction over the claims and issues raised in this case remains firm.
A. The Trade Secrets Act; 18 U.S.C. § 1905
Plaintiffs argue that the Secretary's proposed disclosure would violate the Trade
B. The Social Security Act; 42 U.S.C. § 1306
Plaintiffs also argue that the ban on disclosure of information obtained by the Secretary, under the Social Security Act, forbids his proposed disclosure of the information in this case. 42 U.S.C. § 1306 provides in pertinent part:
The statute prohibits disclosure of information unless it is authorized under regulations issued by the Secretary. Westchester Gen. Hosp., Inc. v. HEW, 464 F.Supp. at 254; Parkridge Hosp., Inc. v. Blue Cross & Blue Shield of Tenn., 430 F.Supp. 1093, 1097 (E.D.Tenn.1977). Consistently throughout the statute's legislative history, both its prohibition and its exception have applied to a broad range of information "formerly or presently possessed by the HEW Secretary (or his predecessors in interest) and his agents." Westchester Gen. Hosp., Inc. v. HEW, 464 F.Supp. at 254 n. 7. Furthermore, "judicial interpretation of the statute has uniformly ascribed to it a broad coverage of information possessed by the HEW Secretary and his agents." Id. and n. 8.
Hence, in accordance with the authority of the statute, the Secretary expressly issued regulations, 20 C.F.R. § 401.1 et seq., to implement the statute, "while accommodating the requirements of the FOIA as it applies to information covered
Consequently, to the extent that the Secretary bases the authority for her proposed disclosure upon the regulations, 20 C.F.R. § 401.1 et seq., implementing the Social Security Act, 42 U.S.C. § 1306, that statute would not prohibit, but would permit, such disclosure.
C. FOIA & Mandatory Disclosure
That the FOIA is exclusively a statute of sweeping, mandatory disclosure is by now beyond question. Chrysler Corp. v. Brown, 441 U.S. at 290, 99 S.Ct. at 1712, 60 L.Ed.2d at 219; Westchester Gen. Hosp., Inc. v. HEW, 464 F.Supp. at 238-39. Therefore, despite the absence of a particular requester under the FOIA for the information at issue in the present case, unless the disclosure of that information falls within the scope of one of the FOIA's exemptions, it may not be prohibited. In addition, even if the information which the Secretary proposes to disclose should fall within one of the exemptions to the FOIA's obligatory disclosure provisions, those exemptions do not provide a legal basis for enjoining disclosure. In other words, the disclosure provisions of the FOIA are mandatory; but the exemptions from mandatory disclosure, in themselves, are discretionary. In short, the FOIA exemptions do not forbid the disclosure of information, and therefore do not authorize an inverse-FOIA action for injunctive relief. Chrysler Corp. v. Brown, 441 U.S. at 285, 290-294, 99 S.Ct. at 1709, 1712-1714, 60 L.Ed.2d at 215, 219-20; Westchester Gen. Hosp., Inc. v. HEW, 464 F.Supp. at 238-39.
D. FOIA & Exemption 3
Although Exemption 3 of the FOIA allows certain qualifying nondisclosure statutes to override the obligatory disclosure provisions of the FOIA, none of the other statutes that plaintiffs rely on qualifies as the kind of statute to which Exemption 3 applies. 5 U.S.C. § 552(b)(3) provides:
The latter two qualifying conditions were added by Congress in a 1976 amendment to the statute. Act of Sept. 13, 1976 Pub.L. No. 94-409, 90 Stat. 1241. In order for a
The Trade Secrets Act, 18 U.S.C. § 1905, does not qualify under Exemption 3 to override the FOIA's obligatory disclosure provisions. It is a general, unlimited delegation of discretionary authority, to withhold disclosure of information "to any extent not authorized by law." Consequently, when Congress amended Exemption 3 of the FOIA in 1976, it expressly declared that the Trade Secrets Act did not qualify under the amended Exemption 3. See H.Rep. No. 880, 94th Cong. 1st Sess. at 23, U.S.Code Cong. & Admin.News, pp. 2183, 2205 (1976). The Trade Secrets Act, therefore, is subject to the overriding mandatory disclosure provisions of the FOIA. Westchester Gen. Hosp., Inc. v. HEW, 464 F.Supp. at 242-43.
Neither is the Social Security Act, 42 U.S.C. § 1306, a statute which overrides the obligatory disclosure provisions of the FOIA, by means of Exemption 3. That statute is a broad, general nondisclosure statute, prohibiting the release of information unless such disclosure is authorized by regulations issued by the HEW Secretary. When it amended Exemption 3 of the FOIA in 1976, Congress expressly declared that "Another example of a statute whose terms do not bring it within this exemption [Exemption 3] is section 1106 of the Social Security Act (42 U.S.C. § 1306)." H.Conf. Rep. No. 1441, 94th Cong. 1st Sess. 14, 25, U.S.Code Cong. & Admin.News at 2244, 2261. As a direct result of the 1976 amendment to Exemption 3 of the FOIA, therefore, a general, discretionary nondisclosure statute like 42 U.S.C. § 1306 no longer qualifies as the kind of authority to withhold information by virtue of Exemption 3, in the face of the FOIA's liberal disclosure requirements.
Neither the Trade Secrets Act nor the Social Security Act operates through Exemption 3 to forbid disclosures required under the FOIA. Hence, to the extent that the Secretary has based her decision to disclose the information at issue in this case upon the conclusion that the FOIA requires such disclosure, the Trade Secrets Act and the Social Security Act are not available to override that conclusion by means of Exemption 3.
E. FOIA & Exemption 4
Exemption 4 of the FOIA permits "trade secrets and commercial or financial information obtained from a person and privileged or confidential" to be withheld from disclosure if warranted. Although Exemption 4 primarily applies to trade secrets, it also protects individuals from disclosure of commercial or financial information that is privileged or confidential. For information other than trade secrets to qualify for Exemption 4 of the FOIA, three essential criteria must be met: (1) the information must be commercial or financial, (2) obtained from a person, and (3) privileged or confidential. Westchester Gen. Hosp., Inc. v. HEW, 464 F.Supp. at 245. In the absence of a statutory definition of the term "confidential" for commercial or financial information, the courts have universally accepted the twofold, objective test set forth in National Parks & Conservation Ass'n v. Morton, 162 U.S.App.D.C. 223, 228, 498 F.2d 765, 770 (D.C.Cir.1974):
See Westinghouse Elec. Corp. v. Schlesinger, 542 F.2d 1190, 1207 n. 55 (4th Cir. 1976); Charles River Park "A", Inc. v.
It is clear that the information at stake in the present case does not qualify as confidential commercial or financial information, under the universally accepted, twofold test. It simply cannot reasonably be concluded that the Secretary's proposed disclosure would result in an impairment to the government's ability to obtain similar, necessary information in the future. The reason is that such information is compiled by the government as it reimburses Medicare providers under the act. Neither can it reasonably be concluded that the Secretary's proposed disclosure would cause plaintiffs-providers substantial harm to their competitive positions.
F. FOIA & Exemption 6
Exemption 6 relieves from the mandatory disclosure provisions of the FOIA "personnel and medical files and similar files" when such disclosure "would constitute a clearly unwarranted invasion of personal privacy." 5 U.S.C. § 552(b)(6). To determine whether the exemption applies, a two-step analysis is used by the courts; and that determination is made de novo, not bound in any way by prior, administrative views. Department of Air Force v. Rose, 425 U.S. 352, 379, 96 S.Ct. 1592, 1607, 48 L.Ed.2d 11, 31-32 (1976).
First, the courts must determine whether the particular information in question qualifies prima facie as "personnel and medical files and similar files" which Exemption 6 covers. For information that is purely and patently contained in personnel files and medical records, there is no question about the presumptive applicability of Exemption 6. Most of the cases in which the question of the applicability of Exemption 6 has arisen, however, have involved a determination about whether the information at issue was included within the term "similar files" of the exemption.
The legislative history indicates that the exemption was intended by Congress to apply to information within the Veterans Administration, the HEW Department, the Selective Service Administrative, and the United States Bureau of Prisons. S.Rep. No. 813, 9; H.Rep. No. 1497, 89th Cong. 2d Sess., 11, U.S.Code Cong. & Admin.News, pp. 2418, 2428 (1966); Department of Air Force v. Rose, 425 U.S. at 375 n. 14, 96 S.Ct. at 1606 n. 14, 48 L.Ed.2d at 29 n. 14; Pacific Molasses Co. v. NLRB, 577 F.2d 1172, 1178-79 and nn. 3 and 4 (5th Cir. 1978). In addition, the term "similar files" should be given a broad interpretative scope in order to protect the persons for whom it was designed, and to trigger the second, more crucial step in the Court's analysis: whether the disclosure of the information would amount to "a clearly unwarranted invasion of personal privacy." Pacific Molasses Co. v. NLRB, 577 F.2d at 1179-81; Committee on Masonic Homes v. NLRB, 556 F.2d 214, 219-20 (3d Cir. 1977), vac'g & remanding 414 F.Supp. 426 (E.D.Pa.1976); Wine Hobby USA, Inc. v. IRS, 502 F.2d 133, 135 (3d Cir. 1974); Rural Housing Alliance v. United States Dep't of Agric., 162 U.S. App.D.C. 122, 126 and n. 13, 498 F.2d 73, 77 and n. 13 (D.C.Cir.1971).
Courts must look past mere appearances and beneath labels, to the actual character and nature of the information in question. Department of Air Force v. Rose,
Additionally, information which would otherwise be disclosable readily after redaction, deleting any personally identifying details that could cause embarrassment, is precisely what Exemption 6 was intended, at least presumptively, to cover. See Department of Air Force v. Rose, 425 U.S. at 373-74, 96 S.Ct. at 1604-1605, 48 L.Ed.2d at 28-29; Chamberlain v. Kurtz, 589 F.2d 827, 842 (5th Cir. 1979), cert. denied, ___ U.S. ___, 100 S.Ct. 82, 62 L.Ed.2d 54, (1979); Committee on Masonic Homes v. NLRB, 556 F.2d at 220; Campbell v. United States Civ. Service Comm'n, 539 F.2d 58, 61-62 (10th Cir. 1976). There can be no doubt that the list of annual reimbursements to Medicare providers which the HEW Secretary proposes to disclose is information included within the term "similar files" of Exemption 6 of the FOIA. Such information is obviously stored with, and compiled by the HEW Department. Furthermore, the fact that the Secretary is unwilling to disclose the same information in a way that would omit the personally identifying details which might cause embarrassment, emphasizes the presumptive inclusion of that information within the term "similar files" of Exemption 6.
The second step in the Court's analysis of Exemption 6 requires a balancing, in order to determine whether disclosure of the information in question would "constitute a clearly unwarranted invasion of personal privacy." In necessitating such a balancing procedure, Exemption 6 is unique among the exemptions of the FOIA. Rural Housing Alliance v. United States Dep't of Agric., 162 U.S.App.D.C. at 126, 498 F.2d at 77; Getman v. NLRB, 146 U.S.App.D.C. 209, 213 n. 10, 450 F.2d 670, 674 n. 10 (D.C.Cir.1971). As a result, there is no blanket or per se applicability of the exemption. Congressional News Syndicate v. United States Dep't of Justice, 438 F.Supp. 538, 543 (D.D.C.1977); Sonderegger v. United States Dep't of Interior, 424 F.Supp. at 853.
The Court must decide whether there is an invasion of personal privacy in the proposed disclosure; and there surely is. Then, the Court must identify and balance the competing public and private interests at stake. The Secretary asserts the public's interest in knowing the amounts of public funds spent in reimbursing Medicare providers annually, especially in light of the ongoing legislative debate over national health insurance. That concern is unquestionably one of legitimate and important interest.
On the other hand, plaintiffs point out that (1) the annual amounts of Medicare reimbursements received by individuals are traditionally confidential and personal information about at least part of those individuals' gross incomes; (2) in accepting the provisions of the Medicare Act, and its implementing regulations, it was never contemplated by those individual providers that they and their annual amounts of reimbursements would be identifiably disclosed; and (3) the public interest goals which the Secretary aims to further are no less benefited and satisfied by disclosure in
The Court finds that the national debate over putative legislative activity involving national health insurance may well be served by disclosing the annual amounts of public funds expended for reimbursement of providers of services under the Medicare Act. But that public concern is no further advanced by revealing the identity of individual providers and their annual reimbursement amounts; neither is that concern diminished by omitting such personally identifying details. The Court, therefore, holds that the Secretary's proposed disclosure, at least in the individually identifying manner that she intends, is included within Exemption 6 of the FOIA, because it amounts to "similar files the disclosure of which would constitute a clearly unwarranted invasion of personal privacy."
G. Exemption 6 & the Privacy Act
As one court has commented, Sears, Roebuck & Co. v. GSA, 180 U.S.App.D.C. 202 at 207, 553 F.2d 1378 at 1383, the Privacy Act does not affect the initial, secondstep balancing analysis used in determining the applicability of Exemption 6 of the FOIA to particular information in question. If the tilt in favor of disclosure is tipped contrariwise by the interests of personal privacy, the shift in the scales should occur independently of, and without any impact from, the Privacy Act. On the other hand, once the balance has been weighed and found to favor exemption from disclosures that "constitute a clearly unwarranted invasion of personal privacy," the relationship of Exemption 6 to the Privacy Act becomes significant. Information exempted under Exemption 6, from the mandatory disclosures provisions of the FOIA, becomes protected from disclosure by the Privacy Act, unless that information should be disclosable under rules implementing the Privacy Act.
The Privacy Act is essentially a House carcass under a Senate hide. During the Ninety-third Congress, two bills were introduced to enact privacy legislation, one in the House and one in the Senate (H.R. 16373 and S. 3418, respectively). Late into the Second Session of the Ninety-third Congress, each congressional house continued to advocate its own bill. The bills, however, were markedly different from each other in many of their provisions and aims. Cf. Cell Assoc., Inc. v. National Institutes of Health, 579 F.2d 1155, 1160-61 and n. 1 (9th Cir. 1978); Local 2047, Amer. Fed. of Gov't Employees v. Defense Gen. Supply Center, 423 F.Supp. 481, 485 and n. 9 (E.D.Va.1976), aff'd 573 F.2d 184 (4th Cir. 1978). Cf. also, H.R. 16373 and accompanying H.Rep. No. 1416 (Oct. 2, 1974), with S. 3418 and accompanying S.Rep. No. 1183 (Sept. 26, 1974), U.S.Code Cong. & Admin.News, p. 6916 et seq. (1974). Because of the lateness in the legislative day, and the strong bipartisan concern for legislation that would protect the personal privacy of the nation's citizens, cf. 120 Cong.Rec. S. 19854 (Nov. 21, 1974), the usual joint, House-Senate conference committee was not convened to resolve differences and report out a single bill. Instead, both bills shuttled back and forth,
Language in the House report illuminates the relationship between the Privacy Act and Exemption 6 of the FOIA.
Thus, since the Privacy Act expressly defers to the mandatory disclosure provisions of the FOIA, 5 U.S.C. § 552a(b)(2), information which is not exempt under Exemption 6 from disclosure would receive no Privacy Act protection. But if the release of information would "constitute a clearly unwarranted invasion of personal privacy," entitling that information to the benefit of Exemption 6, then that same standard would apply to the Privacy Act's bar against disclosure without "the prior written consent of, the individual to whom the record pertains." 5 U.S.C. § 552a(b). Cf. Davidson, The Privacy Act of 1974: Exceptions and Exemptions, 34 Fed. Bar J. 323, 324 (1975). It is not that the Privacy Act was intended to establish any absolute right of privacy, cf. H.Rep.No. 1416 at 10; but for those personal privacy rights which would be invaded in a clearly unwarranted manner by the disclosure of individually identifying information, not only does Exemption 6 of the FOIA relieve that information from obligatory disclosure, but the Privacy Act forbids its disclosure without the affected individual's "prior written consent."
Having concluded that the HEW Secretary's proposed disclosure, in an individually identifying manner, of the annual amounts of reimbursements to providers of services under the Medicare Act, would "constitute a clearly unwarranted invasion of personal privacy," and is therefore included within Exemption 6 of the FOIA, the Court further holds that the release of such individually identifying information, without the "prior written consent" of
H. Plaintiffs' Standing as Individuals Under the Privacy Act
The HEW Secretary challenges plaintiffs' standing to invoke the protection of, and obtain relief under, the Privacy Act. The challenge does not raise any issue about the constitutionally-required standing of plaintiffs. See, e. g., Duke Power Co. v. Carolina Environmental Study Group, Inc., 438 U.S. 59, 72-81, 98 S.Ct. 2620, 2630-2635, 57 L.Ed.2d 595, 610-16 (1978); Arlington Heights, Ill. v. Metropolitan Housing Develop. Corp., 429 U.S. 252, 261-64, 97 S.Ct. 555, 561-563, 50 L.Ed.2d 450, 462-64 (1977); Simon v. Eastern Ky. Welfare Rights Organiz., 426 U.S. 26, 37-45, 96 S.Ct. 1917, 1923-1928, 48 L.Ed.2d 450, 460-64 (1976), and 426 U.S. at 58 and n. 7, 96 S.Ct. at 1934 and n. 7, 48 L.Ed.2d at 472 and n. 7 (Brennan, J., concurring in judgment & dissenting from opinion); Warth v. Seldin, 422 U.S. 490, 498-99, 95 S.Ct. 2197, 2204-2205, 45 L.Ed.2d 343, 354 (1975); United States v. SCRAP, 412 U.S. 669, 686-87, 93 S.Ct. 2405, 2415-2416, 37 L.Ed.2d 254, 269-70 (1973); Data Processing Service v. Camp, 397 U.S. 150, 151-54, 90 S.Ct. 827, 829-830, 25 L.Ed.2d 184, 187-88 (1970). Instead, the issue raised is one concerning what the Supreme Court has termed "prudential limitations" of standing. Cf. Arlington Heights, Ill. v. Metropolital Housing Develop. Corp., 429 U.S. at 263, 97 S.Ct. at 562, 50 L.Ed.2d at 463; Warth v. Seldin, 422 U.S. at 499-502, 95 S.Ct. at 2205-2207, 45 L.Ed.2d at 355-56. The question is whether, as a matter of law, plaintiffs are excluded from the class of individuals whose interests the statute (the Privacy Act) was designed to protect. Cf. Warth v. Seldin, 422 U.S. at 499-502, 95 S.Ct. at 2205-2207, 45 L.Ed.2d at 355-56; Data Processing Service v. Camp, 397 U.S. at 154-56, 90 S.Ct. at 830-831, 25 L.Ed.2d at 189.
The Privacy Act was intended to safeguard the privacy interests of individuals. 5 U.S.C. § 552(a)(2) and (b). The term `individual' is defined as "a citizen of the United States or an alien lawfully admitted for permanent residence." 5 U.S.C. § 552a(a)(2). In choosing the word `individual' as the object of the Privacy Act's protections, Congress demonstrated its awareness and preference for the narrower scope of that term, rather than the broader scope of the term `person' to which the FOIA applies. Raven v. Panama Canal Co., 583 F.2d 169, 170-71 (5th Cir. 1978); Stone v. Export-Import Bank of United States, 552 F.2d 132, 136-37 (5th Cir. 1977), cert. denied 434 U.S. 1012, 98 S.Ct. 726, 54 L.Ed.2d 756 (1978). The legislative history of the Privacy Act indicates that the definition of `individual' by Congress was intended to exclude from the coverage of the Privacy Act those interests of foreign nationals and nonresident aliens, as well as the economic or political interests of fictional persons such as proprietorships, businesses and corporations. Dresser Inds., Inc. v. United States, 596 F.2d 1231, 1237-38 (5th Cir. 1979); Raven v. Panama Canal Co., 583 F.2d at 171; Stone v. Export-Import Bank of United States, 552 F.2d at 137 and n.7. That same definition of `individual' appeared in both the House bill, H.R. 16373, as well as in the Senate bill, S. 3418. See H.Rep. No. 1416 at 27; S.Rep. No. 1183 at 79, U.S.Code Cong. & Admin.News, pp. 6916, 6993 (1974).
There is no question that from the facial definition of the term `individual', plaintiffs appear to be included within the scope of the statute's protections. The HEW Secretary, however, points to a guideline fashioned by the Office of Management and Budget (`OMB'), as well as a corresponding HEW regulation. The OMB guideline distinguishes
Similarly, the HEW regulation declares, concerning the definition of `individual', that
Insofar as plaintiffs' individually identified privacy interests reflect economic, business concerns of their sole-proprietorship-like practices, the OMB guideline and HEW regulation would deny plaintiffs' standing to assert the protections of the Privacy Act. Hence, the legal lines of the issue are unmistakeably drawn. Only if the OMB guideline and HEW regulation are in conflict with the purpose of the statute itself are plaintiffs entitled to rely upon the Privacy Act to prevent the Secretary's proposed disclosure.
In order for administrative rules and regulations to have the substantive force and effect of law, they must have some relational basis in legislative, statutory authority. Chrysler Corp. v. Brown, 441 U.S. at 301, 304, 99 S.Ct. at 1717-1719, 60 L.Ed.2d at 225, 226; Westchester Gen. Hosp., Inc. v. HEW, 464 F.Supp. at 252. They "cannot be legally rootless" and have any binding effect, Westchester Gen. Hosp., Inc. v. HEW, 464 F.Supp. at 252, since "they are at most but offspring of statutes." United States v. Mersky, 361 U.S. 431, 437, 80 S.Ct. 459, 4 L.Ed.2d 423, 429 (1960). But the OMB guideline, and its corresponding HEW regulation, have a statutory source. Section 6 of the public law which became the Privacy Act, Pub.L. 93-579, 88 Stat. 1896, 1909-10 (Dec. 31, 1974), expressly provided that "the Office of Management and Budget shall develop guidelines and regulations for the use of agencies implementing the provisions of [the Privacy Act]." Hence, insofar as the OMB guideline and its ensuing HEW regulation purport to implement the Privacy Act, their authority is apparently derived from that statutory source.
Besides being grounded in a statutory source of authority, however, administrative rules and regulations which purport to implement a statute must also be consistent with "the statute under which they are promulgated." United States v. Larionoff, 431 U.S. 864, 873 and n. 12, 97 S.Ct. 2150, 1256 and n. 12, 53 L.Ed.2d 48, 56 and n. 12 (1977); United States Pipe & Foundry Co. v. Webb, 595 F.2d 264, 272 (5th Cir. 1979); Marshall v. Gibson's Prods., Inc., 584 F.2d 668, 677-78 (5th Cir. 1978); Westchester Gen. Hosp., Inc. v. HEW, 464 F.Supp. at 252. If the apparent scope of the administrative rule or regulation does not square against the statute's scope of authority, the administrative rule or regulation is of no effect. Cf. Western Union Teleg. Co. v. FCC, 541 F.2d 346, 354 (3d Cir. 1976), cert. denied, 429 U.S. 1092, 97 S.Ct. 1104, 51 L.Ed.2d 538 (1977); Westchester Gen. Hosp., Inc. v. HEW, 464 F.Supp. at 252.
The HEW Secretary and other advocates of the OMB guideline, and the corresponding HEW regulation, turn to the legislative history of the Privacy Act as support for the administrative redefinition of `individual'. In discussing the use of the term `individual', which was defined the same in both the House and Senate bills, the Senate report declared:
Based on that declaration in the Senate report, OMB and the HEW Secretary contend that the administrative distinction between an individual's (1) personal, nonbusiness information and (2) economic or business information, correctly reflects the legislative intent of the Privacy Act. The former kind of information is prohibited from disclosure without the individual's "prior written consent." The latter information is not.
One district court has accepted that administrative distinction as consistent with the legislative intent of the Privacy Act. Shermco Inds., Inc. v. Secretary of United States Air Force, 452 F.Supp. 306, 314-15 (N.D.Tex.1978). While the plaintiff-corporation was plainly excluded from the coverage of the Privacy Act, id. at 315, the district court held that its president and major shareholder (the individual plaintiff) was not acting in a personal capacity, but in an entrepreneurial capacity as a proprietorship or business; and therefore did "not have standing . . . under the Privacy Act." Id.
A more recent district court decision has rejected the administratively redefined distinction between the information of individuals acting in a personal capacity and the information of individuals acting in a business or economic capacity. Zeller v. United States, 467 F.Supp. 487 (E.D.N.Y.1979). The district court scrutinized the same legislative history on which the OMB guideline based its administrative redefinition of `individual'. At the same time, the district court recognized its duty to search for, and give effect to, the legislative purpose of the statute. Id. at 498. The district court found that "nothing in the statute indicates that Congress intended to apply a personal/entrepreneurial distinction to the type of information covered by the Privacy Act." Id. at 499. Accordingly, the district court rejected that administrative distinction. Id.
The OMB distinction between an individual's personal and so-called entrepreneurial information has been roundly criticized by legal commentators.
The same distinction has been rejected as an administrative artificiality superimposed upon the statutory language and legislative history which are simply and plainly to the contrary.
The predicted rejection by the courts of OMB's distinction between an individual's personal information and his economic (or entrepreneurial) information, came true in Zeller v. United States, supra. The district court declared:
In other words, any information stored within an agency's system of records, if retrievable and disclosable in a manner that would identify the individual to whom the information pertains, may not be so released without the individual's "prior written consent."
The same predicted rejection of OMB's redefined distinction must be realized in the case at hand. Legislative history of the Privacy Act reveals an underlying character in its provisions and goals that reflects a congressional intent to protect individuals (as the statute defines them) from having information in the possession of government agencies revealed in a personalized way that individually identifies them, without their prior approval. Such a legislative purpose is entirely consistent with the exemption from mandatory disclosure of information when its disclosure would "constitute a clearly unwarranted invasion of personal privacy" under Exemption 6 of the FOIA.
To the extent that the interests of fictional entities like businesses and corporations are excluded from the protection of the Privacy Act, that exclusion is consistent with the same exclusion under Exemption 6 of the FOIA. See National Parks & Conserve Ass'n v. Kleppe, 178 U.S.App.D.C. at 388 n. 44, 547 F.2d at 685 n. 44. At the same time, however, Exemption 6 is available as appropriate protection for the privacy interests of sole proprietors and other individuals concerned about disclosure of their "personalized" financial information. Id. at 388-389, 547 F.2d at 685-86.
Finally, the reason for excluding fictional business entities from the protection
There can no longer be any doubt that the Secretary's proposed disclosure of annual Medicare reimbursements amounts, in a way that will identify individual Medicare providers and their amounts of reimbursements, runs afoul of, and therefore is prohibited by, the Privacy Act. Insofar as the OMB guideline and its corresponding HEW regulation, 45 C.F.R. § 5b.1(e), would authorize such a manner of disclosure, they are inconsistent with the statute that they purport to implement; and to that extent they are null and void.
In conclusion, the Court holds that the Secretary's proposed disclosure of a list of annual reimbursements to individually identified providers of services under the Medicare Act (1) is exempt from required disclosure under the FOIA because it would "constitute a clearly unwarranted invasion of personal privacy"; (2) is prohibited by the Privacy Act from disclosure, without the prior written consent of each affected individual; and (3) if the guidelines and regulations of OMB and HEW would otherwise authorize and allow such disclosure, they are contrary to the Privacy Act and without force and effect.
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