Opinion ID: 560346
Heading Depth: 2
Heading Rank: 3

Heading: Irregularities in Adoption of HCFA Ruling 86-1

Text: 38 Appellants urge that their challenges before the agency to the sample auditing procedure were rejected on the strength of HCFA Ruling 86-1 even though that ruling was issued after their overpayment assessments were made. If Ruling 86-1 changed HHS procedures, then its use here indeed would be impermissibly retroactive. See Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 109 S.Ct. 468, 471-74, 102 L.Ed.2d 493 (1988). However, the Ruling was not the source of administrative authority in these cases but merely explained and reaffirmed the Department's long-standing and well-established practice of conducting sample audits. While the past frequency of such audits is unclear, the practice appears to have been in use as early as 1972. See Mount Sinai Hosp., 517 F.2d at 333; Daytona Beach General Hosp., 435 F.Supp. at 892-93. The audits at issue in Mile High Therapy Centers, 735 F.Supp. at 985, were undertaken in the early 1980s, and the sample audits in the cases before us on appeal also predated HCFA Ruling 86-1. Moreover, sample auditing is referenced in internal agency manuals. See Medicare Intermediaries Manual, Sec. 3799.5 (quoted above); Medicare Carrier's Manual Sec. 7150 (discussed in Mile High, 735 F.Supp. at 985-86). In light of this evidence that sample adjudication represents a long-standing HHS procedure, we reject appellants' retroactivity objection. 39
40 Appellants finally contend that HCFA Ruling 86-1 was adopted without the notice and comment procedures required by the Administrative Procedure Act (APA). See 5 U.S.C. Sec. 553 (1988). The sole question is whether Ruling 86-1 is excepted from the APA requirements as an interpretive rule. See Sec. 553(b)(A); American Hosp. Ass'n v. Bowen, 834 F.2d 1037, 1044-47 (D.C.Cir.1987). Appellants argue that HCFA Ruling 86-1 is a legislative rule, and not just an advisory statement, because it is binding both by its own terms and as used by the Department in the proceedings below. The Department responds that it has been performing sample audits for nearly two decades and that HCFA Ruling 86-1 simply states what the agency thinks it can do under the statute and reminds parties of their existing duties. See Mile High, 735 F.Supp. at 985-86 (holding that HCFA Ruling 86-1 is an interpretive rule not subject to notice and comment rulemaking requirements); cf. McCown v. HHS, 796 F.2d 151, 157 (6th Cir.1986) (policy statement concerning offset policies for social security disability benefits was interpretive), cert. denied, 479 U.S. 1037, 107 S.Ct. 893, 93 L.Ed.2d 845 (1987). The dispute, therefore, boils down to the previously-resolved question of whether sample adjudication for Part A overpayments was a longstanding practice or a brand new scheme ushered in by HCFA Ruling 86-1. As explained above, we agree that it was the former.