HENRY H. KENNEDY, JR., District Judge.
Plaintiff UPMC Mercy ("UPMC"), a hospital located in Pittsburgh, Pennsylvania, brings this action against Kathleen Sebelius ("the Secretary") in her official capacity as Secretary of the Department of Health and Human Services ("DHHS"), seeking review of a DHHS decision regarding the accrual of interest on underpayments by the government to Medicare providers. Specifically, UPMC challenges a determination that interest does not begin to accrue on amounts owed to providers by the government until certain steps are taken by the fiscal intermediaries who are responsible for dispensing payments to providers. Before the Court are the parties' cross-motions for summary judgment [# 22, 25]. Upon consideration of the motions, the oppositions thereto, and the record of this case, the Court concludes that UPMC's motion must be granted and the Secretary's motion must be denied.
A. The Hurry-Up-and-Pay Statute and the Implementing Regulations
Under the Medicare Act, 42 U.S.C. § 1395 et seq., hospitals that provide certain inpatient services to Medicare patients are reimbursed for their costs by the government via fiscal intermediaries, usually insurance companies that serve as the Secretary's agents for this purpose. See In re Medicare Reimbursement Litig., 414 F.3d 7, 8 (D.C.Cir.2005). Hospitals seeking reimbursement file "cost reports" with the intermediaries, which then audit those reports and issue "notices of program reimbursement" ("NPRs") that state the amount owed to the hospitals by the government. If a hospital disagrees with the contents of an NPR, it may appeal to the Provider Reimbursement Review Board ("PRRB" or "the Board"). PRRB determinations are in turn subject to review by the Administrator of the Centers for Medicare and Medicaid ("CMS"). Hospitals may seek judicial review of decisions by either the Administrator or the PRRB under 42 U.S.C. § 1395oo(f).
In 1983, Congress amended the Medicare Act to incentivize prompt correction of underpayments and overpayments under this scheme. Congress added a provision, 42 U.S.C. § 1395g(d), referred to as the Hurry-Up-and-Pay Statute, that provides for the accrual of interest—at a high rate—on "the balance of [any] excess or deficit not paid or offset" within 30 days of a "final determination" of an underpayment or overpayment. Significantly, the statute does not define "final determination."
In order to implement the Hurry-Up-and-Pay Statute, CMS issued a regulation, which took effect concurrently with the statute, defining "final determination." During the events at issue in this case, the regulation provided that:
42 C.F.R. § 405.378(c)(1) (1998). As further discussed below, the original regulation was adopted in 1982 without a notice-and-comment period, although CMS subsequently issued a revised version in 1984 that included changes based on comments received after the rule was issued. CMS also made some alterations to the language of this provision without notice and comment in 1991.
B. Factual Background
The events that gave rise to this case began in 1991, when Blue Cross of Western Pennsylvania ("Blue Cross"), acting as the Secretary's fiscal intermediary, recouped over $9,700,000 in alleged overpayments from UPMC. UPMC timely appealed Blue Cross's assessment of its costs to the PRRB. In 1998, the Board issued its decision, ordering Blue Cross to reclassify a number of UPMC's expenses. J.A. at 88-171 (PRRB Hearing Decision 98-D26, Jan. 28, 1998).
The Board's January 1998 decision was interpreted differently by UPMC and Blue Cross. Blue Cross issued a revised NPR based on the Board's decision and paid UPMC the full amount specified by that NPR. According to UPMC, however, the revised NPR and resulting payment did not adequately reflect the amount UPMC was owed pursuant to the Board's decision. Thus, UPMC appealed to the Board again. In 2008, while that appeal was still pending, Blue Cross finally conceded that it had miscalculated the amount owed to UPMC, issued another NPR, and paid the remainder. The question remained, however, whether UPMC was entitled to receive interest on the amount that had gone unpaid from 1998 to 2008. Accordingly, UPMC revised its PRRB appeal to address that question.
UPMC, counting from the date of the Board's 1998 decision, calculated that it was owed over $9,000,000 in interest as of March 2008. Pl.'s Mem. at 22. The Board, however, disagreed, ruling that its own 1998 decision had not been a "final determination" of an underpayment for the purposes of the Hurry-Up-and-Pay Statute's interest provision. Rather, the Board concluded that although it had "identified specific amounts for reallocation in its  decision, the final determination of the amount due could only be determined by [Blue Cross] via revisions to the cost report and [the issuance of] a revised NPR." J.A. at 11 (PRRB Hearing Decision 2009-D22, May 8, 2009). Thus, because Blue Cross had paid UPMC within 30 days of issuing its revised NPR in 1998, the Board concluded that the statute's interest provision had never been triggered and UPMC was due no interest.
II. LEGAL STANDARD
Summary judgment is the proper mechanism for deciding, as a matter of law, whether an agency action is supported by the administrative record and consistent with the APA standard of review, which requires a reviewing court to "hold unlawful and set aside agency action, findings, and conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A); see Stuttering Found. of Am. v. Springer, 498 F.Supp.2d 203, 207 (D.D.C.2007) (citing Richards v. INS, 554 F.2d 1173, 1177 & n. 28 (D.C.Cir.1977)). Because, however, "the district judge sits as an appellate tribunal" in such cases, Am. Bioscience, Inc. v. Thompson, 269 F.3d 1077, 1083 (D.C.Cir.2001), the usual summary judgment standard does not apply. Rather, "it is the role of the agency to resolve factual issues to arrive at a decision that is supported by the administrative record, [and] `the function of the district court is to determine whether or not as a matter of law the evidence in the administrative record permitted the agency to make the decision it did.'" Stuttering Found., 498 F.Supp.2d at 207 (quoting Occidental Eng'g Co. v. INS, 753 F.2d 766, 769-70 (9th Cir.1985)).
UPMC deploys an impressive array of arguments to challenge the Board's decision that UPMC was not entitled to interest, including that the Board's decision was inconsistent with the text of the interest-payment regulation, incompatible with the text and purpose of the Hurry-Up-and-Pay Statute, and would effectively allow the government to take interest-free loans from Medicare providers like UPMC. The Court does not reach the majority of these arguments, however, because it agrees with UPMC's alternative argument that the applicable section of the interest-payment regulation was amended without notice and comment in violation of the APA.
A. UPMC Has Abandoned or Conceded Its Claim That the Regulation Was Originally Promulgated in Violation of the APA's Notice and Comment Procedures
The Secretary understands UPMC to challenge the validity of the interest-payment regulation not only on the basis of its 1991 amendment (discussed below), but also because of the process by which it was originally enacted in 1982. See Def.'s Opp'n at 32-36. The Secretary understandably reaches this conclusion on the basis of UPMC's complaint, which states: "[T]he Secretary's hurry-up-and-pay interest regulation is entitled to no deference because it was both promulgated, and later amended in pertinent part, without notice and an opportunity for comment and without a logical (or other) explanation. . . ." Compl. ¶ 145 (emphasis added). None of UPMC's three subsequent filings, however, addresses the validity of the regulation's original promulgation, focusing only on its 1991 amendment. See Pl.'s Mem. at 43-45; Pl.'s Opp'n at 44-45; Pl.'s Reply at 25. Accordingly, it appears that UPMC
Further, even if UPMC has not deliberately abandoned its challenge to the regulation's original enactment, the Court concludes that UPMC has conceded the Secretary's arguments on this point. The Secretary asserts that the regulation was originally adopted without notice and comment pursuant to the good-cause exception of 5 U.S.C. § 553(b)(B), or, in the alternative, that any initial failure to provide notice and comment was subsequently cured by post-comment amendments. Def.'s Opp'n at 32-34. UPMC has not responded to any of these arguments; accordingly, the Court deems them conceded. See Lewis v. District of Columbia, 2011 WL 321711, at *1 (D.C.Cir. Feb. 2, 2011) ("It is well understood in this Circuit that when a plaintiff files an opposition to a dispositive motion and addresses only certain arguments raised by the defendant, a court may treat those arguments that the plaintiff failed to address as conceded." (quoting Hopkins v. Women's Div., Gen. Bd. of Global Ministries, 284 F.Supp.2d 15, 25 (D.D.C.2003), aff'd 98 Fed.Appx. 8 (D.C.Cir.2004)) (internal quotation marks omitted)). Accordingly, the Court turns to UPMC's argument regarding the 1991 amendment of the regulation.
B. The 1991 Amendment of the Regulation Violated the APA Because the Amendment Was Not Subject to the Interpretative Rule Exception to the APA's Notice-and-Comment Requirement
As originally enacted, the provision of the interest-payment regulation that was applied by the Board in this case (which was at the time codified in section 405.376 rather than 405.378) read:
42 C.F.R. § 405.376(c)(1)(i) (1988). In 1991, the provision was amended to read:
42 C.F.R. § 405.376(c)(1)(i) (1992) (emphasis added). This change was made without the notice-and-comment procedures described in the APA.
UPMC argues that this change of subsection (i)(B) from "a written determination of an underpayment by the intermediary" to "a written determination of an underpayment is made by the intermediary" constituted a substantial and unexplained change to the meaning of "final determination." Pl.'s Mem. at 44. Prior to the change, UPMC asserts, "a `final determination' included a written determination of an intermediary's underpayment—whether the determination was made by the intermediary or another, higher-level administrative actor, such as the PRRB." Pl.'s Mem. at 44. The addition of "is made" before "by the intermediary," however, narrows the range of possible actors who can make a written determination to one—the intermediary itself. Thus, UPMC asserts, the Secretary effected a "sleight of hand" by which she materially changed the meaning of the regulation without providing notice and an
The Secretary responds that the addition of "is made" had no impact whatsoever on the meaning of subsection (i)(B). Rather, she avers, "[t]he previous language referred to a `written determination' of an underpayment `by the intermediary,' not by the PRRB, and the current regulation likewise makes reference to a written determination `by the intermediary.'" Def.'s Opp'n at 35. To her, this revision was a "minor stylistic change" that merely clarified the prior meaning of the regulation, and was thus subject to the interpretative rule exception to the APA's notice-and-comment procedures. Further, the Secretary asserts that UPMC is without standing to challenge this amendment because "the addition of `is made' had no effect on the Board's decision in this case," meaning that, even if notice-and-comment procedures were required, UPMC was not harmed by Secretary's the failure to follow them. The Secretary's arguments are unpersuasive.
The APA requires agencies to publish a notice of each proposed rulemaking and "give interested persons an opportunity to participate in the rule making through submission of written data, views, or arguments." 5 U.S.C. § 553(b), (c). This general requirement is subject to exceptions for "interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice." Id. § 553(b)(A). The interpretative rule exception applies to those agency statements or regulations that "explain ambiguous language, or remind parties of existing duties—not [those that] create new law." Sentara-Hampton Gen. Hosp. v. Sullivan, 980 F.2d 749, 759 (D.C.Cir.1992). This is not to say that interpretative rules can have no effect on the behavior of parties or their interactions with the agency; rather, "[s]uch effects are entirely permissible under the interpretative rule exception, so long as the rule represents the agency's explanation of a statutory or regulatory provision, and the rule is not intended to substantively change existing rights and duties." Id. (emphasis added). In general, the interpretative rule exception "is to be narrowly construed and only `reluctantly countenanced.'" Id. (quoting Alcaraz v. Block, 746 F.2d 593, 612 (9th Cir.1984)). Further, the courts do not defer to an agency's own characterization of a rule as interpretative, but rather engage in their own inquiry. See Sprint Corp. v. FCC, 315 F.3d 369, 374-75 (D.C.Cir.2003).
In determining whether agency material falls within the bounds of the interpretative rule exception, courts in this circuit apply a four-factor test designed to gauge whether the rule at issue has legal effect. They ask:
Am. Mining Cong. v. Mine Safety & Health Admin., 995 F.2d 1106, 1112 (D.C.Cir.1993). If any of these questions is answered in the affirmative, the rule is not interpretative and must undergo notice and comment. Id.
Applying the foregoing test, the Court has little difficulty concluding that the amended regulation is not an interpretative rule. The answer to the second and fourth questions is clearly yes: the amended regulation is published in the Code of Federal Regulations, and not only "effectively
The Secretary's argument that the 1991 amendment was interpretative appears to rest on the assumption that the Court's focus should rest not on the regulation as amended but rather on the specific changes that were made during amendment. Thus, the Secretary focuses solely on the addition of "is made," arguing that this change, standing by itself, fits within the interpretative rule exception. See Def.'s Opp'n at 35-36. Yet the Secretary identifies no case, nor is the Court aware of any, that has allowed changes to the actual text of a regulation that otherwise falls outside of the interpretative rule exception on the ground that those changes were merely technical or stylistic. In the absence of such precedent—and given that the interpretative rule exception is only reluctantly countenanced—the Court cannot conclude that a doctrine that forbids agencies from "constructively rewrit[ing] [a] regulation" in the guise of clarifying it allows them to literally rewrite a portion of a regulation with the same justification. See Nat'l Family Planning & Reprod. Health Ass'n, Inc. v. Sullivan, 979 F.2d 227, 236 (D.C.Cir.1992); cf. British Caledonian Airways, Ltd. v. Civil Aeronautics Bd., 584 F.2d 982, 990 (D.C.Cir.1978) (holding an agency order to be interpretative where it clarified existing rights and obligations "without any change in the content of the relevant language"). Accordingly, the Court concludes that the 1991 amendment of the interest-payment regulation without notice and comment fell outside of the interpretative rule exception and violated the APA.
The Court is likewise unpersuaded by the Secretary's argument that UPMC has no standing to challenge the lack of notice-and-comment procedures during the 1991 amendment. See Def.'s Opp'n at 36. The cases cited by the Secretary in support of that assertion involved a different type of claim. There, plaintiffs who were interested in the impact of a rule that was adopted without notice and comment argued that "the mere denial of notice and comment to a party interested in the ultimate agency rule establishes, by itself, a separate and remediable injury. . . which confers standing on that party." Renal Physicians Ass'n v. Dep't of Health & Human Servs., 422 F.Supp.2d 75, 85 (D.D.C.2006) (internal quotation marks omitted). Here, by contrast, the injury for which UPMC seeks redress is not the lack of notice and comment itself, but rather the Board's allegedly erroneous denial of UPMC's interest claim. By virtue of that injury, UPMC uncontestedly has standing to challenge the Board's decision as "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). UPMC's argument in support of that challenge—that the Board erroneously applied a regulatory provision that was amended in violation of the APA—does not constitute a separate claim for which UPMC must independently demonstrate
C. Because the Challenged Board Decision Relied on the Regulatory Provision that Was Amended in Violation of the APA, that Decision Was Arbitrary, Capricious, an Abuse of Discretion, or Otherwise Not in Accordance with Law
The fact that the 1991 amendment of the interest-payment regulation violated the APA requires the Court to grant summary judgment for UPMC and remand to the Secretary. Although subsection (i)(B) is not cited directly in the Board's decision, both parties agree that the Board applied it, see Pl.'s Opp'n at 33-34; Def.'s Opp'n at 8-9, and the language of the Board's decision closely parallels the language of the amended provision. Compare 42 C.F.R. § 405.378(c)(1)(i)(B) (1998) ("A written determination of an underpayment is made by the intermediary after a cost report is filed."), with J.A. at 11 (". . . the final determination of the amount due could only be determined by the intermediary via revisions to the cost report and a revised NPR. . . ."). Indeed, the fact that the Board's decision is almost entirely unexplained strongly suggests that the Board simply applied subsection (i)(B), which—post-amendment—plainly forecloses UPMC's interest claim.
Finally, the Court notes that vacatur is necessary here not because the result
For the foregoing reasons, UPMC's motion for summary judgment [# 22] must be granted and the Secretary's motion for summary judgment [# 25] must be denied. An appropriate order accompanies this memorandum opinion.