Opinion ID: 685568
Heading Depth: 2
Heading Rank: 2

Heading: Validity of Section 2203

Text: 20 The Hospital further argues that section 2203 of the PRM is invalid, as it is inconsistent with the governing regulations and was improperly promulgated. Appellant reasons that the term customary is used in other Medicare regulations to refer to a provider's own usual practice rather than to the common practice of all providers in a state, see, e.g., 42 C.F.R. Sec. 405.503(a) (1993) (customary charge refers to uniform amount which the individual physician charges in the majority of cases), and that section 2203's interpretation of the term customarily as used in 42 C.F.R. Sec. 405.452(b) is thus inconsistent with the meaning it has been given in other Medicare regulations. Based on the purportedly novel definition of customarily, the Hospital argues that the provisions of section 2203 are actually substantive in nature, not merely interpretive of the regulations codified in 42 C.F.R., and therefore should have been published in conformance with the rulemaking requirements of the Administrative Procedure Act, 5 U.S.C. Sec. 553. See Joseph v. United States Civil Serv. Comm'n, 554 F.2d 1140, 1153-54 (D.C.Cir.1977) (regulations invalid where notice and comment procedures not followed). 21 Insofar as the Hospital's challenge calls into question the Secretary's interpretation of her own regulations, we apply a still more deferential standard than that afforded under Chevron. [P]rovided an agency's interpretation of its own regulation does not violate the constitution or a federal statute, it must be given controlling weight unless it is plainly erroneous or inconsistent with the regulation. Stinson v. United States, --- U.S. ----, ----, 113 S.Ct. 1913, 1919, 123 L.Ed.2d 598 (1993) (internal quotations omitted; citations omitted). The PRM provisions challenged by the Hospital reflect the application of the regulation codified at 42 C.F.R. Sec. 405.452(b), which defines ancillary services as those services for which charges are customarily made in addition to routine services. Incorporation of state-wide custom into section 2203 of the PRM is not a plainly erroneous interpretation of section 405.452(b). Indeed, courts have recognized that the common practice of similar providers in the same state is an appropriate basis upon which to classify costs as ancillary or routine. See, e.g., Creighton Omaha Regional Health Care Corp. v. Bowen, 822 F.2d 785, 792 (8th Cir.1987); Charter Peachford Hosp., Inc. v. Bowen, 803 F.2d 1541, 1548 (11th Cir.1986). 22 Nothing of merit remains of the Hospital's claim that section 2203 is a substantive rule requiring notice and comment promulgation. As discussed in American Hospital Association v. Bowen, 834 F.2d 1037, 1045 (D.C.Cir.1987), substantive rules are those which grant rights, impose obligations, or effect a change in existing policy. By contrast, interpretive rules are those that merely clarify or explain existing laws or regulations. Id. In American Postal Workers Union v. United States Postal Service, 707 F.2d 548, 558-60 (D.C.Cir.1983), cert. denied, 465 U.S. 1100, 104 S.Ct. 1594, 80 L.Ed.2d 126 (1984), we held that the Postal Service's change in the method of annuity computation was an interpretive, rather than a substantive, rule because it solely concerned an agency's interpretation of the term average pay. Likewise, in this case, section 2203 solely sets forth the agency's interpretation of the term ancillary as it relates to hospitals' charging practices. While the spectrum between a clearly interpretive rule and a clearly substantive one is a hazy continuum, Bowen, 834 F.2d at 1045, section 2203 falls well within the interpretive end of the spectrum. Thus it was not subject to the rulemaking requirements of the Administrative Procedure Act. See 5 U.S.C. Sec. 553(b) (rulemaking requirements do not apply to interpretative rules); Creighton Omaha Regional Health Care Corp., 822 F.2d at 791 (provisions in the PRM are interpretive rules not subject to the rulemaking process of the Administrative Procedure Act).