1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ) UNITEDHEALTHCARE INSURANCE ) COMPANY, et al. , ) ) Plaintiffs, ) ) v. ) Civil Case No. 16-157 (RMC) ) ALEX M. AZAR II, in his official ) capacity as Secretary of the ) Department of Health and Human ) Services, et al. , ) ) Defendants. ) )
MEMORANDUM OPINION ON MOTION TO SUPPLEMENT THE ADMINISTRATIVE RECORD The UnitedHealthCare Insurance Company challenges a formal rule issued by the Centers for Medicare and Medicai d Services (CMS). When CMS fil ed the administrative record, Plaintiffs protested the absen ce of two documents which had bee n released by CMS under the Freedom of Information Act in a nother matter. CMS contends tha t the two documents are not properly part of the administrat ive record for this rulemaking and that they are privileged by the deliberative process privilege. T he Court concludes that the d ocuments, as redacted upon release, are no longer privileg ed and should be made part of th e record here.
I. BACKGROUND Plaintiffs in this case are Medic are Advantage organizations in the UnitedHealth Group family of companies, the nati on’s leading provider of Med icare Advantage health benefits plans (United). Under the Medica re Advantage program (MA), als o known as Medicare Part C, private insurance companies provide Medicare insurance coverage to eligible indi viduals and are2 reimbursed by CMS on a pre-set, per-member-per-month basis, peg ged to a dollar value for health care attributed to each diagnostic code submitted by med ical 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 insurer s at rates that ensure “actuari al equivalence” with what Medicare pays directl y for similar health care to par ticipants 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 c overing all manner of diagnoses are used by Medicare and MA to identify the illnesses or c onditions affecting the covered p opulations. Given the millions of participants in Medicare, it is only to be expected that some d iagnostic 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, i t is inevitable that Medicare experiences an error rate—that is, a proportion of diagnosis co des that are unsupported in underlying medical charts—that ca n be actuarially calculated an d/or predicted. CMS sets the rates to be paid to M A insurers according to the a mounts Medicare itself pays directly to providers for the same diagnoses, witho ut regard to the Medicare error rate for unsupported diagnoses. In J anuary 2014, CMS published a no tice 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 accur acy.” Id. at 1918. After receiving comments, CMS published aFinal Rule concerning MA ov erpayments. 79 Fed. Reg. 29844 (May 23, 2014) (2014 Overpayment Rule). The 2014 Overpay ment Rule, challenged here, requires MA insurers to ret urn to CMS payments that were based on incorrect diagnostic3 codes once the insurer discove rs, or through reasonable diligen ce should have discovered, the error in any individu al patient’s chart. See id. at 29923-24. Failure to do so exposes an insurer to a charge of having violated t he False Claims Act, 31 U.S.C.A . § 3729, which can lead to treble damages, civil penalties, and deba rment from federal contracts. Since a similar no-error standard is not applied by CMS in paying trad itional Medicare providers, United alleges that MA insurers are not being reimbursed on an actua rially equivalent rate and that the 2014 Overpayment Rule must, perforce, be vacated. CMS studied just such an issue in a separate 2012 rulemaking, w hich concerned an audit program to determine the diagnostic accuracy of medica l charts for MA beneficiaries. In these “risk adjustment data validation,” or RADV, audits, CM S reviews the medical records of a small sample of the patient s covered by an MA insurance co ntract and then extrapolates the error rate of the sample to t he entire population covered by th at 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 organizat ions can be validated by supporting medical record documentation. . . . Diagnoses that cannot be validate d contribute to a payment error rate.” Notice of F inal Payment Error CalculationMethodology for Part C Medicare Advantage Risk Adjustm ent Data Validation Contract-Lev el Audits (Feb. 24, 2012) (Notice of Final Method ology), AR 005311. On December 20, 2010 , CMS posted on its website a request for comments titled “Medicare Advantage Risk Adjustme nt Data Validation (RADV) Notice of Payment Error Calcula tion Methodology for Part C Orga nizations Selected for Contract-Level RADV Audits: R equest for Comment.” AR 005020. After receiving more than 500 comments, CMS determined that it needed to include a “Fee-f or-Service Adjuster” (FFS Adjuster) in the RADV audit process: when an RADV audit result s in a determination that an4 MA insurer was paid based on unsuppor ted diagnosis codes, the r epayment the MA insurer owes to the government is adjusted dow nwards based on an estimated t raditional Medicare payment

error rate. 1 CMS explained the rationale f or 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 sta ndard used to develop the Part C risk-adjustment model (FFS claims). The actual amount of the adjuster will be calculated by CMS based o n a RADV-like review of records subm itted to support FFS claims dat a. Notice of Final Methodology, A R 005314-15. This explanation re flected 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 develo p 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 a dopted the FFS Adjuster in th e context of RADV audits forms the basis for the motion to augment the admin istrative record for the 2014 Overpayment Rule. United obtain ed two documents originally dis closed to a thir d party through a request under the Freedom of I nformation Act (FOIA), 5 U.S.C. § 552, seeking records comprised of meeting materials i n the files of certain named in dividuals, all but one of whom served as senior decisionmake rs at CMS between the years 2011 a nd 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.

1 See 42 U.S.C. § 1320a-7m(i)(5) (“The te rm ‘Medicare fee-for-service program’ means the original medicare [ sic ] fee-for-service program under Parts A and B of title XVIII of the Social Security Act (42 U.S.C. § 1395(c) et seq. ).”). In traditional Medica re, CMS directly pays health care providers for services t o Medicare beneficiaries.5 Jan 15, 2016), ECF No. 30 (noting that t he request included “me eting materials dated after January 1, 2012” of these decisionmakers). 2 The two FFS Adjuster Documents, a slideshow and a bullet-point-style briefing me morandum, describe the reasonin g behind the FFS Adjuster for RADV audits. Neither document is included in the Administrativ e Record submitted by CMS for the 2014 Overpayment Rule. United moves to add both documents t o the administrative record . Mot. for Leave to File Suppl. to the Admin. R ecord (Mot.) [Dkt. 44]. Defendan ts 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 S uppl. to the Admin. Record (Reply) [Dkt. 48]. Defendants also m oved to file a surreply in opposit ion. 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 court s to “set aside agency action, findings, and conclusions found to be . . . arbi trary, capricious, abuse of discretion, or otherwise not in a ccordance 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 fu ll 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

2 An investigative journalist, una ffiliated with this matter, su bmitted the original FOIA request in response to which the two docum ents at issue were released by C MS. A separate third party submitted a follow-on request for t he same records, which were then circulated to, inter alia , United. See Meron Decl. ¶¶ 4-6.6 (1977). The full administrative record “include[s] all docume nts and materials that the agency directly or indire ctly 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 a gency 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, supplementat ion of the record is appropriate wh ere certain “unusual circumstanc es” 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 ha s found “at least three” circums tances in which such “unusual circumstances” might exist: “(1 ) the agency deliberately or ne gligently excluded documents that may have been adverse to its decisi on; (2) the district court n eeded to supplement the record with background information in order to d etermine whether the agency considered all of the relevant factors; or (3) the agency fa iled to explain administrative act ion so as to frustrate judicial review.” Dist. Hosp. Partners, L.P. v. Burwell , 786 F.3d 46, 55 (D.C. Cir. 2015) (quoting American Wildlands v. Kempthorne , 530 F.3d 991, 1002 (D.C. Cir. 2008)); see also City of
Dania Beach v. FAA , 628 F.3d 581, 590 (D.C. Cir. 2010). “[A movant] must do more than sim ply assert ‘that materials wer e relevant or before an agency when it made its decision.’” Univ. of Colo. Mem’l Hosp. , 151 F. Supp. 3d at 13 (quoting Marcum , 751 F. Supp. 2d at 78). Instead, the party “must identify re asonable, nonspeculative grounds for its belief that the documents were cons idered by the agency and not7 included in the record.” Marcum , 751 F. Supp. 2d at 78 (emphasis omitted) (quoting Pac. Shores Subdivision Cal. Water Dist . v. U.S. Army Corps of Eng’rs , 448 F. Supp. 2d 1, 6 (D.D.C. 2006)). The party “must identify t he materials allegedly omitt ed with sufficient specificity, as opposed to merely proffering broad categories of documents and data that are ‘likely’ to exist.” Lee Mem’l Hosp. , 109 F. Supp. 3d at 47. It must “intr oduce concrete evidence to prove that the specific documents allegedly mi ssing from the record were befor e the actual decisionmaker involved in the chall enged agency action.” Id. “[A]n agency may exclude arguabl y relevant information that is not contained in the agency’s files but that may be available from third parties ” and “generally may exclude material that reflects internal deliberations.” Fund for Animals v. Williams , 391 F. Supp. 2d 191, 197 (D.D.C. 2005); see also Oceana, Inc. v. Ross , 290 F. Supp. 3d 73, 82-83 (D.D.C. 2018) (“[M]aterials that fall withi n the scope of the deliberative pr ocess privilege ar e not part of the administrative record.”).
III. ANALYSIS United asserts that the FFS Adjuster Documents meet the criteri a for supplementation. It argues tha t these two documents, known to senior CMS decisionmakers, must have been considered at leas t indirectly by them in the co urse of developing the 2014 Overpayment Rule. Notably, the administ rative record for the 2014 Overpayment Rul e includes a plethora of material relating to the FFS Adjuster, including, inter alia , CMS’s December 2010 request for comments on its propose d payment-error calculation methodology for RADV audits; nearly 300 pages of comments it received on that proposal; and its February 2012 announcement of the final payment-error cal culation methodol ogy, in which itincluded the FFS Adjuster. United contends that “[i]t is simply not credible to suppose th at in 2014 CMS reviewed the8 public comments concerning the FFS Adjuster but not its own sen ior staff analysis of those
comments. . . .” Mot. at 11. CMS denies that the FFS Adjuster Documents were considered by a ny of its decisionmakers when promulgati ng the 2014 Overpayment Rule, and states further that, even if the documents had been considered, they are the product of inte rnal deliberations and subject to the deliberative process privilege. See Lee Mem’l Hosp. , 109 F. Supp. 3d at 49 (noting that “materials reflecting an agency’ s internal delib erations should not be part of an administrative record” because it c ould “discourage ca ndid discussion within t he agency”). A party moving to include additi onal documents in the administr ative record “must identify reasonable, non-sp eculative grounds for its beli ef that the documents were considered by the agency,” Marcum , 751 F. Supp. 2d at 78 (emphasis omitted) (quoting Pac. Shores , 448 F. Supp. 2d at 6; and “must id entify the materials allege dly omitted with sufficient specificity, as opposed to merel y proffering broad categories o f documents and data that are ‘likely’ to exist.” Lee Mem’l Hosp. , 109 F. Supp. 3d at 47. Here, by limiting its request to two documents, obtained through a FOIA request targeted towards sen ior decisionmakers in the relevant CMS office, United has me t the “specifi city” requireme nts to support its request. The questions are whether CMS decisionmakers could be said to have considered the documents, directly or indirec tly, and whether, noneth eless, they are priv ileged and properly excluded from the administrative record. CMS does not dispute that the Adm inistrative Record for the 201 4 Overpayment Rule includes the CMS origin al proposed RADV methodology, the p ublic comments it received on that proposal, and its final d ecision that included an FFS A djuster in RADV audits. The FFS Adjuster Documents at issue address important considerations in volved in that final decision.9 Nonetheless, CMS insists that th ese FFS Adjuster Documents were not considered, even indirectly, during promulgati on of the 2014 Overpayment Rule, a nd argues that “[i]f the agency wanted the views of its senior staff as to issues involved in t he earlier proceeding and their bearing on the later proceeding, i t could have just asked them. ” Opp’n at 10-11. One assumes, of course, th at senior staff of CMS were consulted before the 2014 Overpayment Rule was promulgat ed, at least in some fashion. See id. at 10 (acknowledging that “many of the same CMS staff memb ers were involved in the creati on of the RADV sampling methodology and the Overpayment R ule”). These staff members’ k nowledge of the FFS Adjuster concept inevitably w ould have been informed by the rec ent work presenting the FFS Adjuster Documents to explain th e identical issues to executive management, with which the 2014 Overpayment Rule arguably co nflicts. There is no real dis pute about the provenance of the FFS Adjuster Documents or that CM S chose to include in the Admi nistrative Record the public comments that appear to have led t o the agency’s analysis refle cted in the FFS Adjuster Documents. These facts strongly suggest that CMS at least cons idered the FFS Adjuster Documents indirectly when prom ulgating the 2014 Overpayment Rul e. See Lee Mem’l Hosp. , 109 F. Supp. 3d at 46 (noting an adminis trative record appropri ately includes “all documents and materials directly or in directly considered”). In addition, a district court ma y need “to supplement the recor d with background information in order to determine whether the agency considered all of the relevant factors . . . .” Dist. Hosp. Partners , 786 F.3d at 55. The Court finds tha t this is the case here: either CMS naturally considered its recent analysis of the FFS Adjuster an d omitted the documents in error or because they are adverse to its current position, or it fail ed to consider all of the relevant10 factors in adopting the 2014 Overp ayment Rule. In either event , the FFS Adjuster Documents properly supplement the Adminis trative Record of the 2014 Overp ayment Rule. CMS further protests that the FFS Adjuster Documents are intern al deliberative, or “pre-decisional” documents, a nd are thus privileged and exem pt from inclusion in the Administrative Record. Oceana, Inc. v. Ross , 290 F. Supp. 3d at 83. “Pre-decisional documents are those prepared in order to a ssist an agency decisionmaker i n arriving at his decision rather than to support a decision a lready made. . . . Deliberative ma terials are those that reflect[ ] the give-and-take of the c onsultative process.” Oceana, Inc. v. Pritzker , 217 F. Supp. 3d 310, 317 (D.D.C. 2016) (quoting Nat’l Ass’n of Home Builders v. Norton , 309 F.3d 26, 39 (D.C. Cir. 2002)) (quotation marks omitted). Deliberative documents are u sually excluded from an administrative record because t hey may “inaccurately reflect . . . the views of the agency, suggesting as an agency position that which is . . . only a per sonal position.” Coastal States Gas Corp. v. U.S. Dep’t of Energy , 617 F.2d 854, 866 (D.C. Cir. 1980). The deliberative process privilege “allows the government to wi thhold documents and other materials that would r eveal ‘advisory opinions, recom mendations and deliberations comprising part of a process by w hich governmental decisions an d policies are formulated.’” In re Sealed Case , 121 F.3d 729, 737 (D.C. Cir. 1997) (quoting Carl Zeiss Stiftung v. V.E.B. Carl Zeiss, Jena , 40 F.R.D. 318, 324 (D.D.C. 1966), aff’d , 384 F.2d 979 (D.C. Cir. 1967)). The D.C. Circuit has elaborated on the de liberative process privilege: The deliberative process privileg e is a qualified privilege and can be overcome by a sufficient showing of need. This need determinat ion is to be made flexibly on a case-by-case, ad hoc basis . . . . taking into account factors such as “the relevance of the evidence,” “ the availability of other evidence,” “the seriousness of the litiga tion,” “the role of the government,” and the “possibility of future ti midity by government employees.”11 Id. at 737-38 (quoting In re Subpoena Served Upon the Comptroller of the Currency , 967 F.2d 630, 632 (D.C. Cir. 1992) (internal citation omitted)). United argues that any “deliberative” nature of the FFS Adjuste r Documents is now irrelevant for two reasons: (1) while the Documents may ha ve been deliberative in the 2012 decision process that preceded a doption of the FFS Adjuster for RADV audits, they are not so related to the 2014 Overpayment R ule, as to which they were notdeliberative; and (2) the release of the FFS Adjuster Documents by C MS in response to a press FOI A request, with some redactions for truly “delibera tive” materials, indicates that t he FFS Adjuster Documents are no longer shielded by any privilege. As to the first argument, the f act that the deliberations in qu estion related to a previous rulemaking does not prec lude application of the privil ege for deliberative materials. The deliberative process exemption protects documents that are “recommendatory in nature,” or “draft[s] of what will be come a final document.” Coastal States Gas Corp. , 617 F.2d at 866. Moreover, the purpose of the deliberative process privilege—to “preserve the ‘open and frank discussion’ necessary for effec tive agency decisionmaking,” Abtew v. U.S. Dep’t of Homeland
Sec. , 808 F.3d 895, 898 (D.C. Cir. 2015) (quoting Dep’t of Interior v. Klamath Water Users
Protective Ass’n , 532 U.S. 1, 9 (2001))—could apply long a fter the deliberation s in question. United protests that “even if th e document is predecisional at the time it is prepared, it can lose that sta tus if it is a dopted, formally or informally, as the agency position on an issue . . . .” Coastal States Gas Corp. , 617 F.2d at 866. United emphasizes that CMS, in fact, adopted the FFS Adjuster for R ADV audits. CMS disagrees and co ntends that “[t]he only relevant principles that CMS act ually adopted were set out in i ts announcement of the RADV sampling methodology.” Opp’n at 10 (emphasis added). Nonethel ess, the Secretary agrees that12 CMS “stud[ied] this problem” of dueling statistic s between medi cal records and FFS claims and did adopt an FFS Adjuster. Opp’n a t 5. CMS distinguishes its FFS Adjuster from an “agency position” because the “Secretary said nothing at all about what he expected the value of this FFS Adjuster to be” when it was announced. Id. To the contrary, CMS explained that “if the payment error rate calculated by the RADV audits was smaller th an the adjustment factor that resulted from his study [ i.e. , the FFS Adjuster], then not hing would be recouped on the audi ted
contract.” Id. Wordsmithing aside, this sounds very much like an “agency pos ition” to agree to use the FFS Adjuster in RADV audits. This debate need not be resolved, ho wever, because the Court fi nds that the deliberative process privilege no longer applies to the FFS Adj uster Documents (except as redacted upon release by CMS). T he deliberative process is notabsolute; it can be waived. See
In re Sealed Case , 121 F.3d at 740 (“[I]f we find that waiver has occurred, we n eed not proceed further.”). Such waiver is lim ited to “the document or informa tion specifically released, and not [ ] related materials.” Id. at 741. In In re Sealed Case , the D.C. Circuit held that the White House had “waived its claims of [deliberative process and execu tive] privilege in regard to the specific documents that it volun tarily revealed to third partie s outside the White House.” Id. at 741-42. The agency contends, with good reas on, that the mere fact that a document has been released under FOIA does not r equire its inclusion in an a dministrative record. The Court agrees that the questions at issu e and the deliberations that g ive rise to the privilege in question may be completely separate from a FOIA analysis. See, e.g. , State of Del. Dept. of Nat. Resources & Env’l Control v. U.S. Army Corps of Eng’rs , 722 F. Supp. 2d 535, 544 (D. Del. 2010) (“A FOIA production request i s an entirely discrete legal concept that bears no relation to13 the administrative record comp iled for a court’s review under t he APA.”). The same analysis would apply to a document obtaine d outside the FOIA process: t he mere fact that a plaintiff possesses such a document does not render it part of an adminis trative record. The D.C. Circuit has already d ecided that public disclosure of deliberative materials does not necessarily man date inclusion in the adminis trative record. See Kansas State Network, Inc. v. FCC , 720 F.2d 185, 191-92 (D.C. Cir. 1983) (in action seeking revi ew of FCC’s denial of application for tax cer tificate, refusing to consider a transcript of public deliberations regarding the application); Deukmejian v. Nuclear Regulatory Comm’n , 751 F.2d 1287, 1323-29 (D.C. Cir. 1984) (denying motion to supplement administrative r ecord and the record on appeal with transcripts of Commission’ s deliberations and finding it u nnecessary to reach the question as to whether public disclosure of t hose transcripts was requir ed under the Sunshine Act, 5 U.S.C. § 552b), vacated in part on other grounds , San Luis Obispo Mothers for Peace v. U.S. Nuclear Regulatory Comm’n , 760 F.2d 1320 (D.C. Cir. 1985). This conclusion is not surpr ising because only materials considered directly or indirectly in rul emaking should be part of the record on review. On the other hand, a document that was privileged as part of th e deliberative process can lose its privilege when revealed outside the agency

. In re Sealed Case , 121 F.3d at 741-42 (holding that the White House “waived its claims of priv ilege in regard to the specific documents that it voluntarily rev ealed to third parties outside the White House”). That is what happened here. CMS waived any delibe rative process privilege i n the FFS Adjuster Documents to the extent that information w as not redacted w hen it release d them to the public. Thus, the privilege does not prevent the FFS Adjuster Documents from bein g made part of the administrative record.14 IV. CONCLUSION The Court will grant the motion to supplement the administrativ e record, Dkt. 44. Because the Court need not reach the arguments raised by United to which the Secretary has filed a proposed surreply, the a gency’s motion for leave to fil e a surreply, Dkt. 54, will be denied as moot. A memorializing order accompanies this opinion.

Date: August 1, 2018 /s/ ROSEMARY M. COLLYER United States District Judge