Opinion ID: 375761
Heading Depth: 2
Heading Rank: 1

Heading: HEW's obligations

Text: 22 The appellants argue that HEW failed in its statutory and regulatory duties to approve and verify the payment methodology contained in the Alabama plan. The district court, believing that HEW's obligations did not extend so far as to require HEW to ensure that the payment methodology would in fact result in reasonable cost related reimbursement, determined that the plaintiffs failed to establish that the procedures utilized by HEW were improper. Because the evidence presented to the district court, when considered in light of the agency's proper statutory and regulatory duties, demonstrates that HEW failed to perform its obligations, we reverse. 23 A presumption of validity attaches to the actions of administrative agencies. Mazaleski v. Treusdell, 562 F.2d 701, 717 n. 38 (D.C.Cir.1977); Maryland-National Capital Park & Planning Comm'n v. Lynn, 514 F.2d 829, 834 (D.C.Cir.1975). See Giles Lowery Stockyards, Inc. v. Department of Agriculture, 565 F.2d 321, 326 (5th Cir. 1977), cert. denied, 436 U.S. 957, 98 S.Ct. 3070, 57 L.Ed.2d 1122 (1978). While the presumption is rebuttable, Skinner v. United States, 594 F.2d 824, 830 (Ct.Cl.1979), the burden of proof rests with the party challenging the agency's action. Mazaleski v. Treusdell, 562 F.2d at 717 n. 38; Maryland-National Capital Park & Planning Comm'n v. Lynn, 514 F.2d at 834. The appellants met that burden. 24 The evidence presented to the district court established that HEW's failure to review and validate the reimbursement methods and standards contained in Alabama's proposed plan was twofold. First, HEW failed to establish specific criteria or standards by which both state and federal officials could determine the meaning of crucial statutory and regulatory terms. In particular, HEW failed to define an efficiently and economically operated facility despite the fact that the minimum level of reasonable cost related reimbursement is to be measured by the full, actual, allowable costs of such an institution. Similarly, it neglected to formulate criteria by which to judge the reasonableness of the classes utilized in a proposed reimbursement methodology. 25 Second, HEW failed to review the payment methodology contained in the Alabama plan to ensure that all participating providers' payment rates will fall somewhere between the maximum and minimum reasonable cost related rates. 9 43 Fed.Reg. at 4,863. HEW never attempted to verify that the sixtieth percentile ceiling would, in fact, result in reasonable cost related reimbursement in Alabama. It did not require that the State of Alabama submit documentation or analysis showing that the plan's methods and standards actually produced a reimbursement rate that fell within the maximum and minimum allowable rates. Neither did it conduct an independent study or analysis to ensure that the Alabama plan complied with the statutory requirement. 10 26 Despite these failings, HEW argues that its review was legally sufficient. It argues that the evidence shows a period of constant, continuing contact and dialogue between federal and state officials that permitted an exchange of ideas and information. It contends that its approval of the plan resulted from the combined judgments of experienced individuals that the Alabama plan amendment is reasonable and legally sufficient. However, the evidence indicates that HEW's approval of the Alabama plan and its sixtieth percentile ceiling stemmed solely from the application of the agency's institutional assumption that any plan that reimburses at or above the projected billing rate of the median facility in a class meets the regulatory minimum reimbursement rate. The application of such an assumption does not satisfy the requirements of § 1396a(a)(13)(E). 27 On remand, the district court is instructed to refer the Alabama reimbursement plan to HEW for compliance with its regulatory duties. The district court should retain jurisdiction over this action to ensure that HEW develops specific criteria and standards regarding both an economically and efficiently operated facility and reasonable reimbursement classes. Additionally, the district court must ensure that HEW develops criteria and standards by which it is to determine whether the reimbursement rate specified in the December 9, 1977, Alabama plan is within the prescribed range of reasonable cost related reimbursement.