[00:00:02] Speaker 08:
Case number 16-5098.

[00:00:04] Speaker 08:
Regents of the University of California, on behalf of its participating Plaintiff Hospitals at L Appellant, versus California Pacific Medical Center Davies Campus at L, versus Tom Price, Secretary, Department of Health and Human Services.

[00:00:18] Speaker 08:
Mr. Seagroves for the Appellants, Mr. Clare for Appellee Price.

[00:01:09] Speaker 03:
Good morning, Your Honors, and may it please the Court, James C. Groves on behalf of the Appellant Hospital.

[00:01:16] Speaker 03:
The Supreme Court has made clear that while agencies have the discretion typically to change their rules, with that authority and ability comes a baseline requirement that at a minimum the agency must be forthright when it is changing its rules.

[00:01:38] Speaker 03:
That, of course, is primarily established by the Fox Television decision.

[00:01:44] Speaker 03:
The primary question presented in this case is whether the Secretary of Health and Human Services' 2005 rulemaking complied with Fox Television.

[00:01:55] Speaker 03:
Now, as an initial matter, the Secretary dedicates a significant portion of her brief – excuse me, his brief.

[00:02:01] Speaker 03:
We have had a change in Secretary.

[00:02:04] Speaker 03:
to arguing that this issue is not properly before the court because of comment waiver.

[00:02:10] Speaker 03:
As we explain in some detail in our reply brief, we think that that argument should be rejected for three reasons, the first of which being that circuit precedent established under Murphy Exploration is still very much good law, has not been rendered or abrogated

[00:02:25] Speaker 02:
Assume it's properly before us.

[00:02:27] Speaker 02:
Why is it unreasonable for the agency to have proceeded as it did here?

[00:02:33] Speaker 02:
It sees a problem in a program.

[00:02:37] Speaker 02:
Inspector General Port tries to fix the problem going forward.

[00:02:42] Speaker 03:
At the most basic level, Your Honor, the unreasonableness is that the Secretary determined or asserted in the rulemaking that the cause of that problem

[00:02:55] Speaker 03:
was the failure of hospitals to comply with a 2003 manual revision, that as we explain in our briefs, as a matter of law, could not have amended or altered the 1994 rule, notice and comment rule.

[00:03:12] Speaker 02:
Say there had been no 2003 manual.

[00:03:15] Speaker 02:
Let's just hypothesize that for a second.

[00:03:17] Speaker 02:
What's wrong with them changing it in 2005?

[00:03:24] Speaker 03:
Yeah, as a hypothetical, there certainly is nothing wrong with them wanting to change the rules.

[00:03:32] Speaker 03:
The problem comes in, in this case, in that the Secretary historically has a practice of when she changes the accounting standards that are to be utilized for purposes of calculating the wage index.

[00:03:47] Speaker 03:
that as reflected in the 1994 rulemaking, the Secretary has a policy – or had a policy of delaying implementation of such changes.

[00:03:56] Speaker 03:
And of course, in the 1994 rulemaking, there was no question that the Secretary was changing the rules.

[00:04:03] Speaker 02:
So I agree that that's a decent argument for you that there's been done differently before.

[00:04:09] Speaker 02:
But if they see, let's call it, I'll call it a loophole, and you may disagree with that characterization, I understand that, but for present purposes, a loophole, and they want to close the loophole going forward, why do they need to give as much lag time as they did in 94?

[00:04:28] Speaker 03:
Well, I, it's not a loophole in the following sense.

[00:04:32] Speaker 03:
Right, that's... Everything

[00:04:35] Speaker 03:
that the hospitals reporting their pension and other deferred compensation costs using GAAP was not only permissible under GAAP, the secretary in implementing the GAAP rule in 1994 specifically envisioned the situation and said, look, there are benefits to using a Medicare accounting principles

[00:04:59] Speaker 03:
funding-relevant accounting system.

[00:05:03] Speaker 03:
But there also are benefits to using GAAP, which, as we explained in the briefing, the Secretary explained in 1994, has the benefit of there not being wild fluctuations year over year based upon the peculiarities of a particular hospital's funding decisions vis-a-vis its pension plan.

[00:05:22] Speaker 03:
And so for the Secretary to – and I certainly think it's fair to characterize the tone of the 2005 rulemaking as suggesting that there is a loophole that we're trying to close – is as a matter of administrative law.

[00:05:38] Speaker 03:
incorrect because, again, the characterization of a loophole, which is perhaps understandable given, I think, if one looked at the OIG memorandum that was in the rulemaking record, that not only did the Office of Inspector General inform the Secretary that her 2005, excuse me, 2003 manual revision was not consistent with the 1994 rule, which I think an easier way of saying that would be inconsistent with

[00:06:08] Speaker 03:
The Office of Inspector General, when one looks at that, and it's of course reproduced in the Joint Appendix, the Office of Inspector General characterized the 2003 manual provision as a requirement, treated it as if it was a notice and comment rule.

[00:06:29] Speaker 03:
whether the secretary agreed with that characterization or acquiesced in it.

[00:06:33] Speaker 03:
And certainly, I think it's fair to say that when the Inspector General, certainly within HHS, when the Inspector General of an agency tells the head of an agency, hey, you've got a problem and it's causing

[00:06:46] Speaker 03:
in the IG's terminology in this case, it is causing the over-reporting and potential skewing of the Medicare wage index.

[00:06:56] Speaker 03:
That's a big deal.

[00:06:57] Speaker 03:
And certainly, can I be surprised that an agency head in that context might not want to admit that, well, geez, we're kind of responsible for this because of this 2003 manual provision?

[00:07:10] Speaker 03:
You know, human nature is human nature.

[00:07:12] Speaker 02:
And so there was no... But put aside...

[00:07:17] Speaker 02:
how they characterize things in the 2003 manual.

[00:07:25] Speaker 02:
What you need, what your...

[00:07:27] Speaker 02:
concerned about, I think, is that you did things in 2003 and 2004 that you would have done differently had you known the 2005 rule was coming.

[00:07:39] Speaker 02:
I think that's, in the end, the thrust of what you're concerned about.

[00:07:44] Speaker 02:
And what I'm trying to, on that argument, which is that it was unreasonable for the agency to change this without a further lag time, it seems to me you have to show

[00:07:55] Speaker 02:
at least what exactly you would have done differently in 2003 and 2004, and I don't see it.

[00:08:02] Speaker 03:
And certainly I cannot point to a statement in the record that demonstrates that, gosh, if we had really known that.

[00:08:10] Speaker 02:
Well, then what's the concern?

[00:08:11] Speaker 02:
Right, so here's the reasonable reliance.

[00:08:13] Speaker 02:
Yeah, what's the secondary retroactivity problem if there isn't such?

[00:08:16] Speaker 03:
I think it is in the sense that

[00:08:19] Speaker 03:
The assertion here is not that hospitals have a reasonable reliance interest on keeping GAP in place.

[00:08:26] Speaker 03:
The reasonable reliance interest that if the Secretary is going to turn the ship, at a minimum, she's going to address the fact that she's turning the ship.

[00:08:37] Speaker 03:
And here are the ramifications.

[00:08:38] Speaker 03:
And here is why, despite those ramifications.

[00:08:42] Speaker 02:
Well, you know the ship's turned in 2005, though.

[00:08:46] Speaker 03:
I think that's certainly, in the comments, University of California and the Federation certainly said that.

[00:08:52] Speaker 03:
They said this is a substantial turning of the ship.

[00:08:54] Speaker 02:
This is changing, this is turning the ship.

[00:08:56] Speaker 03:
But this is a cruise liner and not a schooner.

[00:08:59] Speaker 03:
This is a ship that, at least historically, the Secretary went.

[00:09:02] Speaker 02:
But that's where I get to the point of, well, what would you have done differently?

[00:09:06] Speaker 02:
They're allowed to turn the ship.

[00:09:08] Speaker 02:
So the question then becomes, on the retroactivity argument, what would you have done differently

[00:09:15] Speaker 02:
in 2003 and 2004 to show that the way they turned the ship and didn't give the lag time was so unreasonable as to violate the Administrative Procedure Act.

[00:09:24] Speaker 03:
Well, I think at a minimum, if the Secretary had been forthright, and that's terminology from Fox Television, the FCC there was forthrightly acknowledged, I believe, as Justice Scalia's terminology.

[00:09:36] Speaker 02:
And what's the remedy for that, suppose?

[00:09:39] Speaker 02:
Yeah.

[00:09:40] Speaker 02:
Okay, so they go back and we say, okay, we'll be forthright.

[00:09:42] Speaker 02:
Yes, we've changed, not just clarified.

[00:09:45] Speaker 03:
I think the remedy for that is the traditional remedy for an arbitrary and capricious violation, which is, depending upon the panel of this court, is vacate and remand or remand without vacator.

[00:09:59] Speaker 03:
I think that what the

[00:10:16] Speaker 03:
in 2017, 2018, talking about changing a rule applicable to fiscal years 2007 and 2008.

[00:10:21] Speaker 03:
And certainly, 1395HH imposes some limitations on the Secretary.

[00:10:27] Speaker 03:
We would perhaps be going back into a primary retroactivity argument.

[00:10:31] Speaker 03:
But let's assume for the sake of discussion that the Secretary would have statutory authority to do that.

[00:10:36] Speaker 03:
I think that it's not clear to me that the Secretary – if the Secretary had really understood the state of play as – in the sense that if the Secretary had understood that this manual revision really, as a matter of law, didn't change the 1994 rule, certainly I think it's possible that the Secretary might look at this and say, you know what, the hospitals have a point here.

[00:11:01] Speaker 03:
we're going to address.

[00:11:02] Speaker 03:
I mean, certainly the remedy in this kind of situation upon remand can get somewhat messy.

[00:11:08] Speaker 03:
But I think that it's possible that I could see perhaps another notice and comment process.

[00:11:12] Speaker 03:
Certainly that's what the University of California and the Federation said the Secretary should do.

[00:11:17] Speaker 02:
And how much money is involved here?

[00:11:22] Speaker 03:
According to the exhibits to the board's decision, which I think in the record is the clearest quantification, we're talking about $75 million for the plaintiff appellants in this case.

[00:11:33] Speaker 03:
There have been hospitals who chose not to appeal from the district court's decision, so that would go down.

[00:11:39] Speaker 03:
We also, of course, are talking about statutory interest.

[00:11:43] Speaker 03:
But we would be also, I think, in a situation where the secretary would have various options available to her, and certainly the hospitals would

[00:11:53] Speaker 03:
be able to perhaps look from a rational business standpoint and think, do we really want to drag this out for another six years?

[00:12:00] Speaker 03:
I mean, we are talking about litigation that's been pending for quite some time.

[00:12:05] Speaker 03:
If there are no further questions at this point, I'll reserve the remote for my time to rebuttal.

[00:12:10] Speaker 02:
Thank you.

[00:12:16] Speaker 00:
Good morning, Your Honors.

[00:12:17] Speaker 00:
May it please the Court, I'm Jeffrey Clare Council for the Secretary in this matter.

[00:12:21] Speaker 00:
Your Honor, $75 million sounds like a lot of money.

[00:12:24] Speaker 00:
It sounds like the sort of money where if you have a problem with the agency's rulemaking, if you have a problem with the manner in which the rulemaking is conducted,

[00:12:34] Speaker 00:
a procedural objection or some concern that the agency hasn't sufficiently articulated what it's doing, that's the kind of concern that has to be presented to the agency in the rulemaking, not to have the party's way to an administrative proceeding where the administrative tribunal has no authority to question the validity of the regulation.

[00:12:59] Speaker 02:
I thought you could always challenge a rule in an adjudication.

[00:13:04] Speaker 00:
Well, Your Honor, I think that the underlying principle of the waiver doctrine is that the objections have to be raised before the agency at a time appropriate to its administrative process.

[00:13:17] Speaker 00:
And when you have an adjudication or an enforcement proceeding,

[00:13:20] Speaker 00:
where the a priori rules are that the validity of a regulation cannot be considered or contested in that proceeding.

[00:13:29] Speaker 00:
That suggests to me that the appropriate time under the agency's practice has to be when the rulemaking is underway.

[00:13:36] Speaker 00:
Now, Your Honor, I read Judge Suntel's opinion for the court in Murphy, carefully, especially carefully, when I found out Judge Suntel would be on the panel this morning.

[00:13:46] Speaker 00:
And I think, let me offer, if I can, a couple of reasons why I think that decision should not be controlling here.

[00:13:51] Speaker 00:
The regulation you had at issue- You're talking about Murphy too?

[00:13:55] Speaker 00:
Well, including the modification of the opinion after the petition for a hearing.

[00:14:00] Speaker 00:
Yes, Your Honor.

[00:14:01] Speaker 00:
With the rule at issue in Murphy, there was a statute that said if a sort of mineral extraction royalty dispute had been pending before the Department of Interior for a certain amount of time without a final decision, then a grief party could go right into a court without awaiting a final decision.

[00:14:20] Speaker 00:
The agency adopted a rule that purported to say what types of administrative proceedings could go forward in court.

[00:14:27] Speaker 00:
So it was a rule that was addressed to the court's jurisdiction.

[00:14:31] Speaker 00:
As the Murphy opinion notes, that is not a situation where sort of Chevron deference principles come into play.

[00:14:39] Speaker 00:
It's not a situation where the agency's interpretation of its organic statute is at issue or where

[00:14:47] Speaker 00:
sort of considerations of having the agency's view on a question are really important to the adjudication of the case.

[00:14:56] Speaker 00:
This is a very different kind of case.

[00:14:58] Speaker 00:
This is a rule that is a challenge that is directed to the sufficiency of the administrative process.

[00:15:04] Speaker 00:
It is moreover a rule that as the sort of amount of money at stake

[00:15:09] Speaker 00:
makes clear, it is a rule that is almost always a vital concern to a hospital.

[00:15:14] Speaker 00:
Medicare reimbursement is the lifeblood for virtually every major hospital institution.

[00:15:21] Speaker 00:
These prospective payment rules come out every year in August.

[00:15:26] Speaker 00:
They are well known to the regulated community.

[00:15:28] Speaker 00:
They are watched carefully.

[00:15:30] Speaker 00:
There is every notice and opportunity for regulated parties to object.

[00:15:36] Speaker 01:
The difficulty with us issuing an opinion is that our opinions tend to be precedent for more than the case in front of us.

[00:15:44] Speaker 01:
Of course, sir.

[00:15:45] Speaker 01:
And it's not always the case that a person, an entity, which is regulated by a rule, knows that it has standing to challenge a change in a rule until it is applied to that entity.

[00:15:57] Speaker 01:
Sure, and I think the... You understand what I'm saying?

[00:16:01] Speaker 01:
the coming waiver means you didn't find the plea at any point.

[00:16:07] Speaker 00:
I think all that is certainly correct and consistent with the court's precedent.

[00:16:11] Speaker 00:
But this is a case where the issues are already right at the time of the rulemaking.

[00:16:17] Speaker 00:
It's not a case where you need to know how the rule is applied before you understand what its parameters are and how it's going to affect you.

[00:16:26] Speaker 00:
These litigants, in fact, participated in this rulemaking.

[00:16:31] Speaker 07:
Well, the University of California.

[00:16:40] Speaker 00:
That I don't know, Your Honor, or a hundred, but the lead plaintiff, the one making the principal arguments to the court here, is making the arguments.

[00:16:50] Speaker 00:
And I think as Judge Williams concurrence in Coretta suggests, there may be occasions where smaller parties can't rely on a larger party to present these comments to the agency.

[00:17:01] Speaker 00:
But in this case, the larger party, the mover, the principal mover on the wage index question is making the arguments to the court and is protecting those... I think this would be a pretty significant shift in our...

[00:17:14] Speaker 02:
So at least from my perspective, so maybe I could ask you about the merits.

[00:17:19] Speaker 00:
I'd be happy to move on at this juncture.

[00:17:21] Speaker 00:
Your Honor, what's been missing in my opposing counsel's presentation is any consideration of the statute.

[00:17:29] Speaker 00:
The statute that governs the wage index says that the labor-related share of the reimbursement formula has to be adjusted for wage-related costs.

[00:17:40] Speaker 00:
not wage-related liabilities.

[00:17:43] Speaker 00:
At no point in the history of the administration of this statute has the agency had a policy that said you can get credit in the wage index for liabilities, whether you've paid them or not.

[00:17:56] Speaker 00:
Now, the adoption of the GATT rule didn't have a specific requirement that

[00:18:02] Speaker 00:
that liabilities be liquidated in a timely fashion, I think your honor is correct.

[00:18:07] Speaker 00:
And at least characterizing the agency's conception of that is something of a loophole.

[00:18:13] Speaker 00:
It never intended to create a regulatory scheme in which providers could claim credit in the wage index for expenses that they simply had not paid and were not likely to pay in the future.

[00:18:27] Speaker 00:
And in terms of whether the agent, when the agency set out to fix this problem,

[00:18:31] Speaker 00:
in the 2005 rulemaking, it traced this issue in the development of the agency's policy all the way back to the 1994 rule.

[00:18:41] Speaker 00:
It explained why it had adopted GAAP in the first instance.

[00:18:44] Speaker 00:
It explained what problems had emerged in applying GAAP, this problem of providers simply not liquidating their liabilities.

[00:18:53] Speaker 00:
in a timely fashion.

[00:18:55] Speaker 00:
It noted that in 1995, the agency had made clear in a regulation governing hospitals paid on a cost basis that these liabilities had to be liquidated in a timely fashion.

[00:19:06] Speaker 00:
It promulgated a manual provision in 2003 that specifically stated that would be the same rule for hospitals reimbursed under the prospective payment system.

[00:19:19] Speaker 00:
And then in the rulemaking at issue here,

[00:19:21] Speaker 00:
It enshrined that requirement in a regulation that would be binding on regulated parties.

[00:19:27] Speaker 06:
Can you in a nutshell give me the difference between, say GAP, is there a particular FASB that governs the accounting, financial accounting for these pension liabilities?

[00:19:42] Speaker 00:
I believe that GAAP and FASB have somewhat different rules for accounting for pension liabilities.

[00:19:48] Speaker 00:
The problem that I think the secretary didn't realize about GAAP was that GAAP is simply about how liabilities were recognized.

[00:19:57] Speaker 00:
It wasn't a set of procedures that dealt with whether liabilities were properly discharged.

[00:20:03] Speaker 00:
So GAAP has in it no timely liquidation requirement.

[00:20:07] Speaker 05:
But the secretary is- Listen, the GAAP is not designed to

[00:20:11] Speaker 05:
to do what has to be done under Medicare.

[00:20:15] Speaker 00:
Right, Your Honor, and I think that was what the Secretary came to that realization after GAP was adopted.

[00:20:21] Speaker 00:
It was never the intent that that be the rule for Medicare when the Secretary realized that there had been effectively this inadvertent loophole by adopting

[00:20:31] Speaker 00:
gap it has set out on a course to fix it.

[00:20:34] Speaker 00:
And when it adopted the rule that's at issue here, it traced the entire development of the rule.

[00:20:40] Speaker 00:
This is not a situation where the agency demonstrated no awareness of what the prior policy had been or failed to explain why that prior policy was not sufficient for Medicare purposes.

[00:20:53] Speaker 00:
All this discussion about the agency represented that it was clarifying

[00:20:58] Speaker 00:
at prior policy rather than adopting a new policy.

[00:21:02] Speaker 00:
Respectfully, I think it's somewhat beside the point here.

[00:21:05] Speaker 00:
Whether it is a clarification or not, the agency went back to the prior policy.

[00:21:11] Speaker 06:
There's no requirement under FOX or any other case that the agency has to say we're changing rules.

[00:21:16] Speaker 00:
I agree.

[00:21:17] Speaker 00:
The agency has to offer reason basis for its decision.

[00:21:21] Speaker 00:
It has to look at the relevant factors.

[00:21:25] Speaker 00:
If there has been a prior policy, well, the reason for the change may be a relevant factor, but that was plainly considered here by the agents.

[00:21:34] Speaker 00:
And in the agency's view, this had been the policy all along.

[00:21:38] Speaker 00:
Was it enshrined in a binding rule?

[00:21:41] Speaker 00:
Well, that's why they went through the 2005 regulation.

[00:21:45] Speaker 00:
But the notion that the agency didn't grapple with the prior policy, explain its deficiency, explain the basis for imposing a new rule simply isn't borne out by the rule.

[00:21:57] Speaker 02:
The only weak part of what you just said or the weak is that it had been

[00:22:01] Speaker 02:
the same policy all along.

[00:22:03] Speaker 02:
I mean, I just think that's a little bit of a reach here.

[00:22:06] Speaker 00:
Well, Your Honor, I think it was certainly the intention of the agency to have that policy, and that's clearly demonstrated in the 2003 manual provision where the agency said,

[00:22:17] Speaker 00:
You're going to have to timely liquidate your liabilities for credit in the wage index in the prospective payment system.

[00:22:25] Speaker 02:
I understand why people like to say clarify when they're really saying something different.

[00:22:32] Speaker 02:
Usually that's a tip-off.

[00:22:33] Speaker 00:
Perhaps, Your Honor, but in any event, whether there's a clarification, whether this was a clarification or a new rule, the agency satisfied the State Farm FOXV FCC requirements of the rulemaking that it reasonably explained its position.

[00:22:50] Speaker 00:
Your Honors, unless there are further questions, I will rest on the bench.

[00:22:52] Speaker 00:
Thank you.

[00:22:52] Speaker 00:
Thank you.

[00:22:53] Speaker 00:
We'll give you two minutes for rebuttal.

[00:22:59] Speaker 02:
Actually, I think I owe you more than two minutes, so we'll go till.

[00:23:03] Speaker 03:
It's a long day, I understand.

[00:23:09] Speaker 03:
When Congress enacted the APA in 1946, they didn't say that arbitrary and capricious means something if it's a $75 million case or a $1 case.

[00:23:19] Speaker 03:
They said it's the same standard.

[00:23:23] Speaker ?:
Excuse me.

[00:23:25] Speaker 03:
Congress, moreover, has established the judicial review provisions in the Medicare Act understanding that there could be situations in which the Secretary makes a mistake.

[00:23:35] Speaker 03:
That means that money has to be paid out.

[00:23:39] Speaker 03:
And I think that if we are going to alter the arbitrary and capricious standard depending upon the amount of money at issue, I think what we do is we deprive one of the incentives for the Secretary to play it straight.

[00:23:53] Speaker 03:
This is an important rulemaking process each year.

[00:23:56] Speaker 02:
The money's point helped you in the sense of it's a lot of money involved, all the more reason to be concerned about the government playing fast and loose with things.

[00:24:09] Speaker 02:
That's your characterization.

[00:24:11] Speaker 03:
I also believe that we have a lot of federal taxpayers in this room, and we all understand where money comes from.

[00:24:17] Speaker 03:
I could say that there have been, in the grand scheme of things, $75 million in a Medicare case is... Change.

[00:24:27] Speaker 03:
Well, true, but, you know, we look at LA County, which was a decision involving outliers.

[00:24:31] Speaker 03:
I mean, we're talking about hundreds of millions of dollars, I think, in that case.

[00:24:38] Speaker 03:
I think the most essential point that was made by my friend on the other side was that the Secretary never imagined, envisioned, intended

[00:24:47] Speaker 03:
for hospitals not to liquidate their line of buildings.

[00:24:51] Speaker 03:
That assertion cannot be reconciled, we respectfully submit, with the page in the, excuse me, the final rule from 1994, in which the Secretary looked specifically at this issue and said, here's why we're not, here's why we're going with CAP.

[00:25:10] Speaker 03:
And not a funding-based

[00:25:14] Speaker 03:
methodology, because up until that point, the Secretary had followed a funding-based methodology from 1983, approximately to 1994.

[00:25:22] Speaker 03:
That was the rule.

[00:25:23] Speaker 03:
And the Secretary said, we're going to change it to GAAP.

[00:25:26] Speaker 03:
We like the benefits of that.

[00:25:28] Speaker 03:
We recognize that there are arguments on both sides of this issue.

[00:25:30] Speaker 03:
Here's where – here's why we're going with GAAP.

[00:25:33] Speaker 03:
Lastly, Judge Randolph, I thought I understood you to say that Fox Television doesn't require an agency to acknowledge or state when it's changing its rules.

[00:25:43] Speaker 03:
No, that's not what I said.

[00:25:44] Speaker 03:
I apologize that I obviously must have misunderstood.

[00:25:46] Speaker 06:
You don't have to use the word change.

[00:25:50] Speaker 03:
I think it – I would agree that the – certainly, the Supreme Court's decision doesn't say that.

[00:25:55] Speaker 03:
The Supreme Court's decisions say they have to acknowledge that they are changing.

[00:25:59] Speaker 03:
And certainly, we're not asserting that the mere use of the word clarification is an aha, there's a violation here.

[00:26:04] Speaker 03:
It's one sign.

[00:26:06] Speaker 04:
And I think what's more important is that – What if the agency just says, look, our new rule is different than the old one, and here's why we're adopting the new rule?

[00:26:16] Speaker 03:
So here's – in addition to doing that, what the agency would have done – had to have done in this case was to at least address why the Secretary was choosing to turn the ship faster than turning the ship in 1994.

[00:26:30] Speaker 03:
At least address that.

[00:26:31] Speaker 03:
Don't act like you have a bunch of scoff-law hospitals who are out here violating the law.

[00:26:36] Speaker 03:
And I think it's also telling that not even the inspector general in this case asserted that hospitals for these prior periods owed money back for following.

[00:26:47] Speaker 02:
No, the hospitals were taking advantage of the law as written, which is appropriate.

[00:26:54] Speaker 02:
one might say, and then the government says, well, no, we don't want to allow payments, that degree of payments, so we're going to change something or clarify something, and we're not going to allow it anymore.

[00:27:06] Speaker 02:
It doesn't mean there's your scoff law.

[00:27:08] Speaker 02:
It just means that you were doing what you were allowed to do, but you're no longer allowed to do.

[00:27:12] Speaker 03:
So at least the agency should be forthright that it's changing its rules.

[00:27:16] Speaker 03:
And if I may finish with this statement.

[00:27:19] Speaker 03:
When one looks at what the Secretary did in the preamble to the 2005 final rule, we see the case made by an advocate who is responding to two comments who said this is a substantial change.

[00:27:31] Speaker 03:
And the Secretary, it's not just the use of the word clarification, which is repeated something like five or six times on a single page of the Federal Register.

[00:27:40] Speaker 03:
It's the case that's made, starting out 1994, then a 1995 regulation that even the board said, well, wait a minute, that doesn't apply here.

[00:27:52] Speaker 03:
And then there's the 2003 manual revision.

[00:27:55] Speaker 03:
So the Secretary was advocating a case as to why this wasn't a change.

[00:28:00] Speaker 03:
And we think that that falls below.

[00:28:02] Speaker 02:
Well, it's before FOX.

[00:28:03] Speaker 02:
I think it's interesting.

[00:28:05] Speaker 02:
I think agencies were scared of acknowledging change before FOX because they thought they had to meet some higher crime.

[00:28:10] Speaker 03:
I mean, I think it's fair.

[00:28:11] Speaker 03:
If I may, I think it's fair to say that FOX is just an extension of State Farm at a minimum.

[00:28:16] Speaker 02:
It is, but there was confusion about exactly, or disagreement even, about what it was.

[00:28:20] Speaker 02:
It's a clarification of State Farm.

[00:28:23] Speaker 02:
Yeah.

[00:28:23] Speaker 02:
Exactly.

[00:28:23] Speaker 02:
With that, thank you very much.

[00:28:24] Speaker 02:
That's a good way to close.

[00:28:25] Speaker 02:
Thank you.

[00:28:25] Speaker 02:
The case is submitted.