Opinion for the Court filed by Circuit Judge WALD.
WALD, Circuit Judge:
In 1983 Congress radically altered the Medicare payment scheme to create a Prospective Payment System ("PPS"). At that time, new language was added to 42 U.S.C. § 1395oo (a), the statutory provision creating a Provider Reimbursement Review Board ("PRRB") to resolve disputes over payment amounts. In Health Care Financing Administration Ruling ("HCFAR") 84-1, however, the Secretary of Health and Human Services interpreted that amended provision to continue to require hospitals to await completion of a cost year and subsequent issuance of a Notice of Program Reimbursement ("NPR") before challenging PPS payments before the PRRB. The District Court below reached the same conclusion as thirteen other district courts which have considered the Secretary's interpretation,
A. The Prior Scheme: Retrospective Reimbursement
For cost reporting years beginning before October 1, 1983, hospitals were reimbursed for the "reasonable cost" of inpatient hospital services furnished to Medicare patients. 42 U.S.C. § 1395f(b) (1982). Under the "reasonable cost" system, which continues to apply to a limited class of providers, fiscal intermediaries such as Blue Cross make estimated interim payments to providers during the year and later retroactively adjust them to bring the amount paid into conformity with the actual, reasonable costs incurred by the hospital. 42 C.F.R. §§ 405.405, 405.454 (1985). At the end of a cost reporting year the hospital submits a cost report to the intermediary, which audits the report to determine which costs are reimbursable. The intermediary's conclusion as to the total amount of reimbursement due the provider is contained in a Notice of Program Reimbursement ("NPR"). Id. §§ 405.406(b), 405.453(f), 405.1803(a).
Under this retrospective payment system, a final determination of the correct amount of reimbursement cannot be made until after the end of the cost year and the issuance of the NPR. Id. §§ 405.405(b), 405.454(f)(1). Consequently, the statutory provisions controlling appeals to the Provider Reimbursement Review Board ("PRRB" or "Board") require a hospital to have "filed a required cost report" and to challenge only "a final determination of the organization serving as its fiscal intermediary ... as to the amount of total program reimbursement due the provider." 42 U.S.C. § 1395oo (a) (Supp. II 1984). Under this scheme it is clear that an appeal to the PRRB must await issuance of the NPR, which is the fiscal intermediary's "final determination ... as to the amount of total program reimbursement." See 42 C.F.R. § 405.1803(a)(1).
B. The 1983 Amendments: The Prospective Payment System
The Social Security Amendments of 1983 instituted "a major change in the method of payment under medicare for inpatient hospital services." S.Rep. No. 23, 98th Cong., 1st Sess. 47, reprinted in 1983 U.S.Code Cong. & Ad.News 143, 187. Certain types of hospitals, such as psychiatric hospitals and children's hospitals, and certain types of costs, such as medical education, continue to be reimbursed on a reasonable cost basis. 42 U.S.C. §§ 1395ww(a)(4),
Congress instituted the Prospective Payment System ("PPS") in order "to reform the financial incentives hospitals face, promoting efficiency in the provision of services by rewarding cost/effective hospital practices." H.R.Rep. No. 25, 98th Cong., 1st Sess. 132, reprinted in 1983 U.S.Code Cong. & Ad.News 219, 351. By informing hospitals in advance of the payments they will receive per patient for various types of treatment, Congress hoped to induce the hospitals to lower their costs to levels below the amount of the payments. After PPS has been phased in, hospitals will be paid according to a standard national rate calculated for each of approximately 470 treatment categories or "Diagnosis Related Groups" ("DRGs"). 42 U.S.C. § 1395ww(d); 49 Fed.Reg. 34,728, 34,780-90 (1984).
In enacting PPS, Congress provided for a transition or "phase-in period to minimize disruptions that might otherwise occur because of a sudden change in reimbursement policy." H.R.Rep. No. 25 at 136, reprinted in 1983 U.S.Code Cong. & Ad.News at 355. During this period, initially scheduled to last three years and recently extended to four years, PPS payments will be based on a blend of a "DRG prospective payment rate" and a "hospital's target amount." 42 U.S.C. § 1395ww(d)(1)(A). The hospital's target amount, referred to in the regulations as the "hospital-specific rate," is based on the hospital's actual costs during a designated "base year." 42 C.F.R. §§ 412.70-.74. Over the course of the transition period, the proportion of the per-discharge payment which is based on the hospital's costs decreases from 75% to 25% while the proportion based on DRG amounts increases accordingly.
The 1983 amendments also altered the statutory provision governing hospitals' appeals of PPS payment amounts to the PRRB. The new language provides for appeals by "any hospital which receives payments in amounts computed under [PPS]" and "is dissatisfied with a final determination of the Secretary as to the amount of payment under [PPS]." 42 U.S.C. § 1395oo (a). The meaning of these amendments to § 1395oo (a) is the central issue in this appeal.
C. HCFAR 84-1 and the Hospitals' Appeals
Relying on the new language in § 1395oo (a), hospitals began appealing intermediaries' final determinations of the hospital-specific portion of their PPS rates. The Board accepted jurisdiction over at least 31 such appeals. Joint Appendix ("J.A.") at 94-155. On May 29, 1984, however, the Secretary issued HCFAR 84-1, reversing the
49 Fed.Reg. 22,413, 22,415 (1984). An identical interpretation of § 1395oo (a) is contained in the PPS regulations. 42 C.F.R. § 412.72(b)(1) (1985).
Each of the hospitals in these consolidated cases attempted to appeal some aspect of the calculation of its target amount or hospital-specific rate to the PRRB. J.A. at 200-08.
A. Standard of Review
The Secretary argues that his interpretation of § 1395oo (a), embodied in HCFAR 84-1 and the PPS regulations, is entitled to substantial deference. The District Court declined to defer to the Secretary's interpretation, finding his position in HCFAR 84-1 to be inconsistent with other regulations and inadequately explained. 611 F.Supp. at 826-27.
A court's first task in reviewing an agency's construction of a statute is to determine "whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter." Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842, 104 S.Ct. 2778, 2781, 81 L.Ed.2d 694 (1984). If a statute is silent or ambiguous, a court may assume that Congress implicitly delegated the interpretive function to the agency, but no such delegation may be found where Congress' intent is clear. Id. at 842-44, 104 S.Ct. at 2781-82; Montana v. Clark, 749 F.2d 740, 745 (D.C.Cir.1984) ("deference to an agency's interpretation constitutes a judicial determination that Congress has delegated the norm-elaboration function to the agency" and it would be absurd to assume that "Congress delegated authority to vitiate or disregard its intent"), cert. denied, ___ U.S. ___, 106 S.Ct. 246, 88 L.Ed.2d 255 (1985). In short, "[t]he traditional deference courts pay to agency interpretation is not to be applied to alter the clearly expressed intent of Congress." Board of Governors of the Federal Reserve System v. Dimension Financial Corp., 474 U.S. ___, 106 S.Ct. 681, 686, 88 L.Ed.2d 691 (1986).
Our inquiry into congressional intent encompasses both statutory language and legislative history. In conducting this inquiry, "we are not required to grant any particular deference to the agency's parsing of statutory language or its interpretation of legislative history." Rettig v. Pension Benefit Guaranty Corp., 744 F.2d 133, 141 (D.C.Cir.1984). By independently
The District Court concluded that "the plain language added to section 1395oo (a) as part of the prospective payment system enacted by Congress in 1983 establishes that a determination such as the one made by the intermediary here is reviewable by the [PRRB] before an NPR is issued." 611 F.Supp. at 827. After independently assessing congressional intent, we reach the same conclusion, obviating any decision as to whether the District Court or the Secretary has the better of the deference debate.
B. Statutory Language
The many district courts which have interpreted § 1395oo (a) to permit PPS appeals prior to issuance of an NPR have, like the Eleventh Circuit, observed that the statute "appear[s] to set up two different avenues of appeal for hospitals receiving medicare payments." Charter Medical Corp. v. Bowen, 788 F.2d 728, 732 (11th Cir.1986) (dicta). The statute provides that [a]ny provider of services which has filed a required cost report within the time specified in regulations may obtain a hearing with respect to such cost report by a Provider Reimbursement Review Board ... and ... any hospital which receives payments in amounts computed under subsection (b) or (d) of section 1395ww of this title and which has submitted such reports within such time as the Secretary may require in order to make payment under such section may obtain a hearing with respect to such payment by the Board, if —
42 U.S.C. § 1395oo (a) (Supp. II 1984). The references to subsections (b) and (d) of § 1395ww are to provisions on calculating
Viewing the amendments as a whole, we are inescapably drawn to the same conclusion as the District Court: § 1395oo (a) "clearly contemplates two different kinds of appeal. One begins when the intermediary issues an NPR; the other, when the intermediary issues a notice of what will be paid under the PPS system." 611 F.Supp. at 825. Congress added new language to three different places in the statute in order to create parallel provisions for cost reimbursement and PPS appeals governing who may appeal, what determination may be appealed, and when an appeal must be filed. Our overall impression that Congress created a dual system to reflect the two different methods of calculating Medicare payments is further strengthened by considering the key changes separately.
The opening portion of § 1395oo (a) defines who may appeal to the PRRB.
The effect of the new language in the opening paragraph of § 1395oo (a), contrary to the Secretary's interpretation, is to eliminate the requirement that PPS recipients file a cost report prior to appeal. See Redbud Hospital District v. Heckler, Medicare & Medicaid Guide (CCH) ¶ 34,085 at 9884 (N.D.Cal. July 30, 1984) [Available on WESTLAW, DCTU database]. The pre-1983 language required the filing of "a required cost report" but the new language
Congress' intent to eliminate the NPR requirement for PPS appeals is, however, most clearly revealed in the addition of subsection (1)(A)(ii). Prior to 1983, a provider of services could appeal to the PRRB when it was "dissatisfied with a final determination of the organization serving as its fiscal intermediary ... as to the amount of total program reimbursement." 42 U.S.C. § 1395oo (a)(1)(A) (1982). As the Secretary points out, Congress had to alter this language about "reimbursement" to accommodate the new prospective payment system. This change alone, however, could have been made by adding a word or two to subsection (1)(A). Indeed, in other portions of the 1983 amendments Congress managed the switch from the language of reimbursement to that of PPS payments quite economically. See, e.g., Pub.L. No. 98-21 at § 602(h)(4), 97 Stat. at 165 (replacing "cost reimbursement" in § 1395oo (h) with "payment of providers of services"). Instead, in this instance Congress added an entire new subsection which the Secretary's interpretation would effectively reduce "to mere surplusage." 611 F.Supp. at 826.
The existing subsection on cost reimbursement appeals refers specifically to the NPR, which contains the intermediary's determination "as to the amount of total program reimbursement." By adding subsection (1)(A)(ii), which contains no such reference to NPRs, Congress expressed its clear intention to change the prerequisites for PPS appeals. The new subsection refers to a determination of "the amount of the payment under subsection (b) or (d) of section 1395ww of this title." 42 U.S.C. § 1395oo (a)(1)(A)(ii). Since everyone agrees that the phrase "amount of total program reimbursement" in subsection (1)(A)(i) refers to the NPR, the amendment referring to the "amount of the payment under [PPS]" must refer to something other than the NPR. See Wilson v. Turnage, 750 F.2d at 1091 (use of different language demonstrates that Congress intended different meanings).
The statute itself explains what Congress meant by "the amount of the
The Secretary argues that the "amount of payment" referred to in subsection (1)(A)(ii) is the total amount of PPS payments plus cost reimbursement, a figure calculated only in the NPR. The plain statutory language indicates otherwise. The subsection refers to the amount of payment under § 1395ww(d), which is the sum of a DRG per-patient rate and a target amount per patient. 42 U.S.C. § 1395ww(d)(1)(A); see also id. §§ 1395ww(a)(4), 1395ww(b)(3)(A) (target amount is per patient). In addition, differences in phrasing between subsection (1)(A)(i) on reimbursement and subsection (1)(A)(ii) on PPS payments indicate that Congress was referring to per-patient amounts in the latter subsection. Cost reimbursement appeals are from determinations of "total program reimbursement ... for the period covered by [the cost] report," while PPS appeals are from determinations of the "amount of the [PPS] payment." Id. § 1395oo (a)(1)(A) (emphasis added). Congress' omission of "total" and "period" as modifiers in subsection (1)(A)(ii) is a clear signal that the statute refers to per-patient amounts rather than the overall figures contained in the NPR.
Although the 1983 amendments are linguistically complicated, their semantic twists and turns do not obscure the fact that Congress has "unambiguously expressed its intent through its choice of statutory language." Young v. Community Nutrition Institute, ___ U.S. ___, ___, 106 S.Ct. 2360, 2364, 90 L.Ed.2d 959 (1986).
C. Legislative History
Our "plain meaning" reading of the statutory language is confirmed by the legislative history of the 1983 amendments. Although the Secretary invokes legislative history to support his interpretation in HCFAR 84-1, he focuses too narrowly on some descriptive language in the reports while overlooking the clearly-expressed purpose of the 1983 amendments as a whole.
Congress' primary purpose in switching from cost reimbursement to prospective payment was to provide hospitals with "predictibility regarding payment amounts" and "to reform the financial incentives hospitals face, promoting efficiency in the provision of services by rewarding cost/effective hospital practices." H.R.Rep. No. 25, 98th Cong., 1st Sess. 132, reprinted in 1983 U.S.Code Cong. & Ad.News 219, 351. Because the key to the PPS system is the hospital's advance knowledge of the amount of payment it will receive, payment rates must be determined with finality prior to the beginning of the hospital's cost year. Our "plain meaning" reading of the 1983 amendments effectuates the overriding congressional intent expressed in the legislative history by hastening the process of review so that a hospital will know at the earliest possible date exactly how much it will be paid per patient.
A hospital's need to know in advance how much it will receive under PPS applies during the transition period as well. In order to ensure that PPS rates during the transition period would be determined with finality prior to the start of the fiscal year, Congress authorized the Secretary to rely on estimates of base year costs rather than to wait for issuance of the base year NPR.
Although the Secretary acknowledges this legislative history in the portions of his brief describing the PPS scheme, Brief for Appellant at 7-11, he fails to acknowledge its import in construing § 1395oo (a). Instead, he focuses on two narrower aspects of the legislative history. First, he notes that the changes in § 1395oo (a) were included among the conforming amendments in the 1983 statute. As the hospitals point out, however, changes in the timing of PRRB review were necessary to "conform" to the radical changes made in the method of calculating Medicare payments. Under PPS, hospitals receive prospectively established payments rather than retrospectively established reimbursements. Under our reading of the statutory language, § 1395oo (a) simply conforms the PRRB review process to this change in the method of calculating Medicare payments.
The Secretary relies heavily on language in the congressional reports stating that the amendments "provide for the same procedures for administrative and judicial review of payments under the prospective system as is currently provided for cost-based payments. In general, the same conditions, which now apply for review by the PRRB and the courts, would continue to apply." H.R.Rep. No. 25 at 143, reprinted in 1983 U.S.Code Cong. & Ad.News at 362; see also S.Rep. No. 23, 98th Cong., 1st Sess. 57, reprinted in 1983 U.S.Code Cong. & Ad.News 143, 197. But, as one district court has noted, "`[i]n general' implies that, `in particular', some of the conditions would change." Greenville Hospital System v. Heckler, 642 F.Supp. 15, 21 (D.S.C. 1985), appeal dismissed, No. 85-1860 (4th Cir. Dec. 18, 1985). The conditions in § 1395oo(a) were changed only to conform the basic principles of PRRB review to the new payment approach under PPS. Certainly descriptive language in congressional reports as general as these references cannot override the plain meaning of the statutory language in which Congress has directly expressed its intentions. The legislative history cited by the Secretary thus fails to alter our reading of Congress' intent in amending § 1395oo(a).
HCFAR 84-1 is contrary to congressional intent as expressed in the language and legislative history of the 1983 amendments to § 1395oo (a). The statute provides for PRRB review once there has been a final determination of the amount of payment under PPS, which during the transition period requires only a final determination of a hospital's target amount. Hospitals therefore need not wait until an NPR has been issued to challenge the hospital-specific portion of transition-period PPS rates. We hold that HCFAR 84-1 is inconsistent
Any inconsistency in the Secretary's position arises because there seem to be two different sets of regulations which address the extent to which an intermediary's determination of the hospital-specific portion is "final." Compare 42 C.F.R. § 405.1801(a) (NPR is the final PPS determination for purposes of appealability) with 42 C.F.R. § 412.71(d) (intermediary's determination of target amount is final). While these conflicting regulations need to be reconciled or rejected, see infra at 148 & n. 11, they do not represent a "reversal" in the Secretary's interpretation of § 1395oo (a).
A second consideration is the fact that § 1395oo (a) deals with procedures for challenging agency actions, not the substance of those actions. In Vanguard we rejected an agency interpretation, finding that Congress had not accorded the agency broad discretion in interpreting the statutory provision governing who could intervene in its proceedings. 735 F.2d at 596. In general, Congress is less likely to delegate interpretive authority to agencies on basic procedural matters — such as rights of access to challenge or obtain judicial review of agency rulings — than it is on substantive matters such as when and what to regulate. In Chevron, the Court was most concerned with judicial intrusion into policy battles which Congress had either inadvertently failed to resolve or intentionally left to the agency to resolve. Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 865-66, 104 S.Ct. 2778, 2793-94, 81 L.Ed.2d 694 (1984); see also Young, ___ U.S. ___, 106 S.Ct. 2360, 90 L.Ed.2d 959 (1986) (upholding an agency's interpretation of its regulatory authority under a health and safety statute). By contrast, the Supreme Court did not even cite Chevron in a recent decision which rejected the Secretary's interpretation of statutory provisions governing the availability of judicial review of Medicare Part B determinations; the Court simply assessed the language and legislative history of the provisions and concluded that the agency's interpretation was contrary to Congress' clearly expressed intent. Bowen v. Michigan Academy of Family Physicians, 476 U.S. ___, ___, 106 S.Ct. 2133, 2137, 2142, 90 L.Ed.2d 623 (1986); see also Bowen v. New York, ___ U.S. ___, ___, & n. 10, 106 S.Ct. 2022, 2027, 2029, & n. 10, 90 L.Ed.2d 462 (1986) (rejecting agency interpretation of provision governing time for seeking judicial review).