Post Acute Medical at Hammond, LLC v. Burwell ( 2018 )


Menu:
  •                               UNITED STATES DISTRICT COURT
    FOR THE DISTRICT OF COLUMBIA
    POST ACUTE MEDICAL AT HAMMOND,
    LLC,
    Plaintiff,
    Civil Action No. 16-1257 (DLF)
    v.
    ALEX M. AZAR II,
    Defendant.
    MEMORANDUM OPINION
    Post Acute Medical at Hammond, a hospital that qualifies as a provider of services under
    the Medicare Act, challenges a rule promulgated by the U.S. Health and Human Services (HHS)
    that reduced Post Acute’s reimbursement amount for services provided in 2016. Post Acute
    claims that the rule violates the Administrative Procedure Act and the Medicare Act because it is
    arbitrary and capricious and was promulgated with insufficient notice. Before the Court are Post
    Acute’s Motion for Summary Judgment, Dkt. 16, and HHS Secretary Alex M. Azar II’s Cross-
    Motion for Summary Judgment, Dkt. 17.1 For the reasons that follow, the Court will deny Post
    Acute’s motion and grant the Secretary’s motion.
    I. BACKGROUND
    Medicare is a federal health insurance program administered by HHS that primarily
    serves elderly or disabled people. Under the Medicare Act, when a long-term care hospital
    1
    Sylvia M. Burwell was HHS Secretary when Post Acute filed its complaint, but Alex M.
    Azar II has since taken that position and is automatically substituted as the defendant in this case
    under Rule 25(d) of the Federal Rules of Civil Procedure.
    discharges a Medicare beneficiary, HHS pays the hospital with predetermined standard rates
    rather than reimbursing actual costs. See Medicare, Medicaid, and SCHIP Balanced Budget
    Refinement Act, Pub. L. No. 106-113, § 123 (1999) (codified as a note to 42 U.S.C. § 1395ww)
    (directing the HHS Secretary to “develop a per discharge prospective payment system for
    payment for inpatient hospital services of long-term care hospitals”). The hospital receives a
    certain fixed amount per patient no matter what it actually spends on the patient.
    In implementing this prospective payment system, HHS calculates a long-term care
    hospital’s reimbursement amount by approximating the costs that a typical, similarly situated
    hospital would incur. HHS estimates the per patient average cost incurred by hospitals
    nationwide, then factors in several adjustments. See generally 42 C.F.R. §§ 412.513, 412.515,
    412.517, 412.523. The most prominent of these adjustments accounts for a patient’s diagnosis.
    See 
    id. § 412.515.
    Another adjustment—central to this case—is a labor-cost adjustment that
    accounts for the varying wage levels across the country. 
    Id. § 412.523(d)(4);
    see also Pub. L.
    No. 106-113, § 123 (codified as a note to 42 U.S.C. § 1395ww) (requiring the prospective
    payment system to “include an adequate patient classification system that is based on diagnosis-
    related groups . . . and that reflects the differences in patient resource use and costs”); Medicare,
    Medicaid, and SCHIP Benefits Improvement and Protection Act, Pub. L. No. 106-554,
    § 307(b)(1) (2000) (codified as a note to 42 U.S.C. § 1395ww) (“The Secretary shall examine
    and may provide for appropriate adjustments to the long-term hospital payment system,
    including adjustments to [diagnosis-related groups] weights [and] area wage adjustments.”). A
    hospital’s labor-cost adjustment does not reflect the actual wages it pays; instead the adjustment
    reflects the average wages paid by hospitals in the area. See 42 C.F.R. § 412.523(d)(4); 
    id. 2 §
    412.525(c)(1). If a particular geographic area has high hospital labor costs, a hospital in that
    area will receive a correspondingly higher Medicare reimbursement.
    To determine a hospital’s labor-cost adjustment, HHS must assign it to a geographic area.
    HHS does this by using geographic classifications issued by the Office of Management and
    Budget (OMB). The OMB defines “Metropolitan Statistical Area” as consisting of an
    “urbanized area of 50,000 or more population, plus adjacent territory that has a high degree of
    social and economic integration with the core.” Office of Mgmt. & Budget, Bulletin No. 15–01
    (July 15, 2015). Meanwhile, the OMB defines a “Micropolitan Statistical Area” identically to
    Metropolitan Statistical Areas except with a smaller urbanized area: the urbanized area contains
    at least 10,000 but fewer than 50,000 people. 
    Id. HHS defines
    Metropolitan Statistical Areas as
    urban areas and all other areas as rural areas. 42 C.F.R. § 412.503. For a hospital located within
    a Metropolitan Statistical Area, HHS classifies the hospital’s labor-market area as that
    Metropolitan Statistical Area. For a rural hospital, HHS classifies the hospital’s labor-market
    area as the entirety of the rural area of the state. See Fiscal Year 2003 Rule, 67 Fed. Reg. 55,954,
    56,015–19, 56,057–75 (Aug. 30, 2002). HHS collects wage data from acute care hospitals to
    determine the labor-cost adjustment for each labor-market area. See Fiscal Year 2016 Rule, 80
    Fed. Reg. 49,326, 49,797 (Aug. 17, 2015).
    This system has been in place for more than a decade. More recently, HHS’s only
    relevant changes have been in response to OMB’s reclassification of the country’s geographic
    areas based on the 2010 census. With the new census, certain areas moved between the
    Metropolitan Statistical Area and rural categories. HHS adopted these reclassifications for fiscal
    year 2015. See Fiscal Year 2015 Rule, 79 Fed. Reg. 49,854, 50,180–85, 50,391–96 (Aug. 22,
    3
    2014).2 The Rule challenged here, which concerns fiscal year 2016, carried over the geographic
    classifications from the 2015 fiscal year (that were based on the 2010 census). See 80 Fed. Reg.
    49,326.
    Post Acute is located in Tangipahoa Parish, Louisiana, and was reclassified from a rural
    category into the Hammond, Louisiana Metropolitan Statistical Area after the 2010 census. For
    fiscal year 2014—the last year with the pre-census classifications—the Louisiana statewide rural
    labor-market area wage index was .7585. Dkt. 17-1. For fiscal year 2015, the Hammond wage
    index was .9452. Dkt. 17-2. For fiscal year 2016, the Hammond wage index was .8167. Dkt.
    17-6. In sum, Post Acute’s labor-costs adjustment rose significantly when it transitioned from
    rural to urban, but dropped from fiscal year 2015 to fiscal year 2016. The labor-cost adjustment
    for 2016 resulted in a reimbursement approximately $1,046,874 lower than it would have been
    with the 2015 Hammond wage index (though approximately $983,840 higher than it would have
    been with the 2016 Louisiana rural index). See Post Acute Mot. Summ. J. at 19, Dkt. 16; Dkt.
    17-7. The fluctuation is explained partly by the fact that the Hammond Metropolitan Statistical
    Area has only two acute care hospitals from which HHS collects wage data. Dkt. 17-8. The
    smaller the number of hospitals going into the calculation, the more volatile an area’s wage index
    will be—the shifting wages of a single hospital will have a more noticeable effect.
    Post Acute filed this suit in June 2016. It claims that in promulgating the Fiscal Year
    2016 Rule, HHS violated the notice-and-comment requirements of the Administrative Procedure
    2
    Immaterial to this suit, HHS created a one-year transition period in which long-term care
    hospitals that experienced a decrease in their wage index as a result of being reclassified received
    a blended wage index for 2015 that averaged the wage index under their new classification with
    the wage index under their old classification. 79 Fed. Reg. 49,854, 50,180–85, 50,391–96. Post
    Acute did not receive a blended wage index for 2015 because its reclassification caused its wage
    index to increase in 2015.
    4
    Act and the Medicare Act. See 5 U.S.C. § 553; 42 U.S.C. § 1395hh(b)(1). Specifically, the
    complaint alleges that HHS failed to provide adequate notice of the “potential for significant
    variability in the wage index for hospitals that are located in regions with only a few hospitals”
    resulting from HHS’s “decision to retain for [fiscal year] 2016 the revised labor market
    delineations that were adopted in the [fiscal year] 2015 final rule.” Compl. ¶ 43, Dkt. 1. Post
    Acute also claims that HHS acted arbitrarily and capriciously (1) by failing to adopt policies to
    reduce year-to-year wage-index volatility for areas with few hospitals; and (2) by categorizing
    long-term care hospitals in Micropolitan Statistical Areas as rural (and thus decreasing their
    year-to-year wage index volatility) while not decreasing the wage-index volatility for hospitals
    like Post Acute located in Metropolitan Statistical Areas with few hospitals. 
    Id. ¶¶ 53,
    58. Both
    Post Acute and the HHS Secretary filed motions for summary judgment. Dkt. 16; Dkt. 17. This
    case was transferred to the undersigned judge on December 4, 2017.
    II. LEGAL STANDARDS
    A court grants summary judgment if the moving party “shows that there is no genuine
    dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
    Fed. R. Civ. P. 56(a); see also Anderson v. Liberty Lobby, Inc., 
    477 U.S. 242
    , 247–48 (1986). A
    “material” fact is one with potential to change the substantive outcome of the litigation. See
    Liberty 
    Lobby, 477 U.S. at 248
    ; Holcomb v. Powell, 
    433 F.3d 889
    , 895 (D.C. Cir. 2006). A
    dispute is “genuine” if a reasonable jury could determine that the evidence warrants a verdict for
    the nonmoving party. See Liberty 
    Lobby, 477 U.S. at 248
    ; 
    Holcomb, 433 F.3d at 895
    .
    Here the plaintiff seeks review of an agency’s final rule, invoking the Administrative
    Procedure Act’s requirement that a court “hold unlawful and set aside” any aspect of the rule that
    is “arbitrary [and] capricious” or “otherwise not in accordance with law.” 5 U.S.C. § 706(2). In
    5
    an APA case, summary judgment “serves as the mechanism for deciding, as a matter of law,
    whether the agency action is supported by the administrative record and otherwise consistent
    with the APA standard of review.” Sierra Club v. Mainella, 
    459 F. Supp. 2d 76
    , 90 (D.D.C.
    2006). In other words, “the entire case . . . is a question of law” and the district court “sits as an
    appellate tribunal.” Am. Biosci., Inc. v. Thompson, 
    269 F.3d 1077
    , 1083 (D.C. Cir. 2001)
    (quotation marks and footnote omitted).
    In an arbitrary and capricious challenge, the core question is whether the agency’s
    decision was “the product of reasoned decisionmaking.” Motor Vehicle Mfrs. Ass’n of U.S., Inc.
    v. State Farm Mut. Auto. Ins. Co., 
    463 U.S. 29
    , 52 (1983); see also Nat’l Telephone Co-op. Ass’n
    v. FCC, 
    563 F.3d 536
    , 540 (“The APA’s arbitrary-and-capricious standard requires that agency
    rules be reasonable and reasonably explained.”). The court’s review is “fundamentally
    deferential—especially with respect to matters relating to an agency’s areas of technical
    expertise,” Fox v. Clinton, 
    684 F.3d 67
    , 75 (D.C. Cir. 2012) (quotation marks and alteration
    omitted); the court “is not to substitute its judgment for that of the agency,” State 
    Farm, 463 U.S. at 43
    . An agency action is arbitrary and capricious if the agency “entirely failed to consider an
    important aspect of the problem, offered an explanation for its decision that runs counter to the
    evidence before [it], or [the explanation] is so implausible that it could not be ascribed to a
    difference in view or the product of agency expertise.” State 
    Farm, 463 U.S. at 43
    . While an
    agency “has discretion to design rules that can be broadly applied, sacrificing some measure of
    fit for administrability,” Leather Indus. of Am. v. EPA, 
    40 F.3d 392
    , 403 (D.C. Cir. 1994)
    (internal quotation marks omitted), the agency must “examine the relevant data and articulate a
    satisfactory explanation for its action including a rational connection between the facts found and
    the choice made,” State 
    Farm, 463 U.S. at 43
    (internal quotation marks omitted). The court will
    6
    sustain the agency action, however, unless the agency has committed a “clear error in judgment.”
    Marsh v. Oregon Nat’l Res. Council, 
    490 U.S. 360
    , 378 (1989) (internal quotation marks
    omitted). The party challenging an agency’s action as arbitrary and capricious bears the burden
    of proof. Pierce v. SEC, 
    786 F.3d 1027
    , 1035 (D.C. Cir. 2015).
    III. ANALYSIS
    Post Acute challenges the Fiscal Year 2016 Rule on grounds that it was promulgated
    without sufficient notice and that it is arbitrary and capricious.
    A.      Notice
    Post Acute argues that HHS fell short of its notice obligations by failing to “adequately
    notify affected parties of the significance” of carrying over the geographic classifications from
    fiscal year 2015 into fiscal year 2016. Post Acute Mot. Summ. J. at 26. Post Acute maintains
    that HHS should have informed it of the potential volatility in its wage index that would result
    from its classification in an area with the wage data of only two hospitals. Id.; see also Post
    Acute Opp’n & Reply at 12, Dkt. 20 (“[T]he APA was designed to protect regulated parties, like
    Plaintiff, from harm that the agency could have foreseen and should have alerted them to.”).
    Because there was no way of knowing about this volatility in fiscal year 2015, Post Acute
    continues, it is the Fiscal Year 2016 Rule that is flawed. Post Acute Mot. Summ. J. at 26.
    The Administrative Procedure Act, however, does not require an agency to advise
    regulated entities as to the individualized implications of a proposed rule—particularly here,
    where the rule merely continued a longstanding policy with updates reflecting new data.3 Notice
    3
    The Medicare Act’s notice requirements track the APA’s notice requirements, and the Court
    will therefore evaluate Post Acute’s notice claims together. See Monmouth Med. Ctr. v.
    Thompson, 
    257 F.3d 807
    , 814 (D.C. Cir. 2001) (observing that the Medicare Act “places notice
    and comment requirements on the Secretary’s substantive rulemaking similar to those created by
    the APA”); 42 U.S.C. § 1395hh(a)(2), (b)(1) (requiring the HHS Secretary, with limited
    7
    need include only “(1) a statement of the time, place, and nature of public rule making
    proceedings; (2) reference to the legal authority under which the rule is proposed; and (3) either
    the terms or substance of the proposed rule or a description of the subjects and issues involved.”
    5 U.S.C. § 553(b); see also U.S. Telecom Ass’n v. FCC, 
    825 F.3d 674
    , 700 (D.C. Cir. 2016)
    (stating that the APA requires agencies to “provide sufficient factual detail and rationale for [a
    proposed] rule to permit interested parties to comment meaningfully” (quotation marks
    omitted)). Requiring agencies to explain the potential negative consequences of a proposed rule
    on each regulated entity—to act as devil’s advocate at law, in essence—would be extremely
    burdensome, and the APA does not impose any such requirement. Section 553 requires the
    agency simply to inform the public of what the rule will look like. It is up to the regulated
    entities to determine how the proposed rule would affect their welfare and to comment
    accordingly.
    In suggesting that an agency must go far beyond § 553’s requirements, Post Acute cites a
    line from a D.C. Circuit opinion stating that an agency adopting a final rule must “‘identify the
    significance of the crucial facts.’” Am. Med. Ass’n v. Reno, 
    57 F.3d 1129
    , 1132 (D.C. Cir. 1995)
    (quoting Greater Boston Television Corp. v. FCC, 
    444 F.2d 841
    , 851 (D.C. Cir. 1970)). Context
    makes clear, however, that this requirement pertains to judicial review of the agency’s reasoned
    decisionmaking, not its notice of proposed rulemaking:
    The function of the court is to assure that the agency has given reasoned
    consideration to all the material facts and issues. This calls for insistence that the
    agency articulate with reasonable clarity its reasons for decision, and identify the
    exceptions, to provide notice and comment before issuing a final rule that “establishes or
    changes a substantive legal standard governing the scope of benefits, the payment for services, or
    the eligibility of individuals, entities, or organizations to furnish or receive services or benefits”);
    Allina Health Servs. v. Sebelius, 
    746 F.3d 1102
    , 1109 (D.C. Cir. 2014) (discussing differences
    between the APA and the Medicare Act not relevant here).
    8
    significance of the crucial facts, a course that tends to assure that the agency’s
    policies effectuate general standards, applied without unreasonable discrimination.
    Greater Boston 
    Television, 44 F.2d at 851
    (footnote omitted). This is the most natural reading of
    the D.C. Circuit’s precedent, and it also avoids conflict with § 553(c)’s plain text, which imposes
    no such requirement on notices of proposed rulemaking.
    Moving on to what § 553 does require, the Court concludes that HHS did more than
    enough to provide notice of the Rule’s substance. The proposed rule explained that the “OMB
    delineations are based on the best available data that reflect the local economies and area wage
    levels of the hospitals that are currently located in these geographic areas.” 80 Fed. Reg. at
    24,643. The proposed rule also referred readers to earlier rules that discussed the system’s
    underlying policies and justifications in great detail. Id.; 
    id. at 24,525.
    HHS gave notice of the
    methodology and data used to calculate each hospital’s wage index and the wage indexes
    themselves. See, e.g., 
    id. at 24,644;
    Dkt. 17-5. Because OMB had not “issued any further
    updates” after issuing the delineations used in the 2015 rule, the proposed rule retained the
    geographic classifications adopted for 2015. 80 Fed. Reg. at 24,644. The proposed rule thus
    made no changes relevant to this suit beyond updating the wage indexes based on new data. See
    
    id. at 24,525–24,554.
    As HHS points out, the proposed rule gave Post Acute all the information
    it has now.4 See HHS Mot. Summ. J. at 22, Dkt. 17.
    Furthermore, though the proposed rules for both fiscal years 2015 and 2016 made the
    potential for wage-index volatility in Hammond apparent, HHS explained the concept thoroughly
    when issuing the 2015 final rule. In an addendum to the 2015 rule, HHS observed that
    [l]abor market areas . . . with fewer providers are generally subject to less stability
    in year-to-year wage index values because there is less of an averaging effect,
    4
    The final rule actually assigned Post Acute a higher wage index than did the proposed rule. See
    HHS Mot. Summ. J. at 22, 31, Dkt. 17.
    9
    wherein even relatively minor changes in one provider’s wage data can produce a
    relatively “significant” effect on the wage index value for that area.
    79 Fed. Reg. at 50,395. And HHS cited the 2015 rule in the proposed rule for fiscal year
    2016. 80 Fed. Reg. 24,324, 24,643 (“[F]or [fiscal year] 2016, we are proposing to
    continue to use the . . . labor market area delineations currently used . . . as adopted in the
    [fiscal year] 2015 . . . final rule.”). HHS did, in fact, alert the public to the potential
    wage-index volatility in places like Hammond even though it was not required to.
    Post Acute offers two additional criticisms of HHS’s notice, neither of which
    persuade. First, Post Acute invokes the D.C. Circuit’s critical-material doctrine, which
    states that “[u]nder APA notice and comment requirements, among the information that
    must be revealed for public evaluation are the technical studies and data upon which the
    agency relies in its rulemaking.” Banner Health v. Price, 
    867 F.3d 1323
    , 1336 (D.C. Cir.
    2017) (internal quotation marks omitted). But see 5 U.S.C. § 553(b)(3) (requiring only
    that notice shall include “either the terms or substance of the proposed rule or a
    description of the subjects and issues involved”); Vermont Yankee Nuclear Power Corp.
    v. Nat. Res. Def. Council, Inc., 
    435 U.S. 519
    , 524 (1978) (“[S]ection [553] of the Act
    established the maximum procedural requirements which Congress was willing to have
    the courts impose upon agencies in conducting rulemaking procedures.”); Allina Health
    Servs. v. Sebelius, 
    746 F.3d 1102
    , 1110 (D.C. Cir. 2014) (observing a “tension between
    Vermont Yankee and our critical material doctrine”); Am. Radio Relay League, Inc. v.
    FCC, 
    524 F.3d 227
    , 246 (D.C. Cir. 2008) (Kavanaugh, J., dissenting) (writing that the
    D.C. Circuit’s critical-material doctrine “cannot be squared with the text of § 553 of the
    APA” and that “the Supreme Court . . . rejected this kind of freeform interpretation of the
    APA . . . [in] its landmark Vermont Yankee decision”). The critical-material doctrine
    10
    does not apply here because Post Acute cannot point to any record evidence—or anything
    omitted from the record—suggesting that HHS failed to disclose any critical and relied-
    upon material. See Banner 
    Health, 867 F.3d at 1337
    (rejecting a critical-material claim
    because the agency had not “relied on” the undisclosed information); Am. Radio Relay
    
    League, 524 F.3d at 240
    (majority opinion) (implying that the critical-material doctrine is
    “limited to studies on which the agency actually relies to support its final rule” (internal
    quotation marks omitted)).
    Second, Post Acute invokes the logical-outgrowth doctrine: an agency “may
    promulgate a rule that differs from a proposed rule only if the final rule is a logical
    outgrowth of the proposed rule”—i.e., if “affected parties should have anticipated that the
    relevant modification was possible.” Allina Health, 
    746 F.3d 1102
    , 1107 (D.C. Cir.
    2014) (internal quotation marks omitted); see also 42 U.S.C. § 1395hh(a)(4) (“If the
    Secretary publishes a final regulation that includes a provision that is not a logical
    outgrowth of a previously published notice of proposed rulemaking or interim final rule,
    such provision shall be treated as a proposed regulation and shall not take effect until
    there is the further opportunity for public comment and a publication of the provision
    again as a final regulation.”). The logical-outgrowth doctrine does not apply here
    because the proposed rule and final Rule are materially identical. Compare 80 Fed. Reg.
    at 24,643, with 80 Fed. Reg. at 49,797.
    B.      Arbitrary and Capricious Review
    “It is black-letter administrative law that absent special circumstances, a party
    must initially present its comments to the agency during the rulemaking in order for the
    court to consider the issue.” Appalachian Power Co. v. EPA, 
    251 F.3d 1026
    , 1036 (D.C.
    11
    Cir. 2001) (internal quotation marks and alteration omitted). That is reason enough to
    reject Post Acute’s arbitrary and capricious claims: Post Acute failed to raise any
    objection to its wage index during the rulemaking process despite publication of its
    lowered wage index.
    The claims fail on their merits regardless. First, Post Acute claims that HHS
    acted arbitrary and capriciously by failing to adopt a policy to reduce year-to-year wage-
    index volatility for areas with few hospitals. Notably, Post Acute does not challenge “the
    wage index regulations,” “the most current [labor-market areas] as a basis for
    determining [a long-term care hospital’s] wage index,” “the accuracy of the specific wage
    data used to calculate its wage index,” or “the accuracy of [HHS] calculations under the
    existing methodology that determined [Post Acute’s] assigned wage index amount.” Post
    Acute Opp’n & Reply at 7. The challenge is aimed solely at the absence of a carve-out to
    reduce wage-index volatility for hospitals in areas with few acute-care hospitals.
    The D.C. Circuit has already ruled that HHS’s delineation of labor-market areas is
    reasonable. In Southeast Alabama Medical Center v. Sebelius, the Court observed that
    the Medicare Act “provides only that the [wage index] should ‘reflect[] the relative
    hospital wage level in the geographic area of the hospital compared to the national
    average hospital wage level.” 
    572 F.3d 912
    , 923 (D.C. Cir. 2009) (quoting 42 U.S.C.
    § 1395ww(d)(3)(E)). Noting that the term “geographic area” is ambiguous and could
    refer to an area “as small as a city block,” the Court concluded that “HHS’s longstanding
    policy of using Metropolitan Statistical Areas . . . to define those ‘geographic areas’ is a
    reasonable response to this ambiguity.” 
    Id. (internal quotation
    marks omitted). A
    geographic area as small as a city block would presumably contain no more than a single
    12
    hospital and would therefore cause far more wage-index violatility than even exists in
    Hammond.
    HHS gave more than enough reasoning, moreover, for its decision to maintain its
    longstanding wage-index system—which has never included a special exception for
    hospitals like Post Acute—for fiscal year 2016. HHS explained that the use of OMB
    geographic classifications ensures that its wage-index system “most appropriately
    accounts for and reflects the relative hospital wage levels in the geographic area of the
    hospital as compared to the national average hospital wage level based on the best
    available data that reflect the local economies and area wage levels of the hospitals that
    are currently located in these geographic areas.” 80 Fed. Reg. at 24,643. HHS also
    referred readers to previous iterations of the rule, in which it explained that Metropolitan
    Statistical Areas are a reasonable metric for defining labor-market areas “because they
    are based upon characteristics [HHS] believes also generally reflect the characteristics of
    unified labor market areas.” 70 Fed. Reg. at 24,184. For example, Metropolitan
    Statistical Areas “reflect a core population plus an adjacent territory that reflects a high
    degree of social and economic integration.” 
    Id. And after
    observing that “[l]abor market
    areas . . . with fewer providers are generally subject to less stability in year-to-year wage
    index values because there is less of an averaging effect,” HHS determined that this
    volatility was acceptable given that even volatile wage indexes would be calculated from
    “the most recent data available that reflect the relative hospital wage level in a geographic
    area.” 79 Fed. Reg. at 50,394–95. This decision not to “complicate matters by layering
    in” an exception for areas with few hospitals, Southeast Alabama Med. 
    Ctr., 572 F.3d at 923
    , was not arbitrary and capricious. “Whether or not it would have been desirable for
    13
    [HHS] to adjust the [Hammond wage index] on the basis of [its low number of hospitals],
    it was reasonable for it to decline to do so.” 
    Id. Second, Post
    Acute argues that HHS acted arbitrarily and capriciously by treating
    it differently than similarly situated hospitals. See Muwekma Ohlone Tribe v. Salazar,
    
    708 F.3d 209
    , 216 (D.C. Cir. 2013) (“Agency action is arbitrary and capricious if the
    agency offers insufficient reasons for treating similar situations differently.” (internal
    quotation marks omitted)). Specifically, Post Acute points out that HHS treats hospitals
    located in Micropolitan Statistical Areas—which contain smaller urban clusters than
    those of Metropolitan Statistical Areas but are otherwise identical—as rural. Hospitals
    like Post Acute that are located in Metropolitan Statistical Areas with few hospitals,
    however, are treated as urban.
    As with the others, this claim fails for an abundance of reasons. Foremost is the
    fact that the different treatment Post Acute complains of was not created by the Fiscal
    Year 2016 Rule. The claim’s object is unclear, moreover, because Post Acute does not
    want to be treated like hospitals in Micropolitan Statistical Areas—the statewide rural
    wage index is lower than that of the Hammond Metropolitan Statistical Area.
    In any event, HHS has not treated like situations differently: Hospitals in
    Metropolitan Statistical Areas and hospitals in Micropolitan Statistical Areas are not
    alike. The former includes an urban cluster of at least fifty thousand people, while the
    latter might have an urban cluster of only ten thousand people. Post Acute seizes on
    concerns noted in the rule for fiscal year 2015 that because Micropolitan Statistical Areas
    generally contain fewer hospitals than Metropolitan Statistical Areas, treating them as
    urban could cause “drastically more single-provider labor market areas,” “create
    14
    instability in year-to-year wage index values for a large number of hospitals,” and “create
    an inequitable system when so many hospitals would have wage indexes based solely on
    their own wage data, while other hospitals’ wage indexes would be based on an average
    hourly wage across many hospitals.” 79 Fed. Reg. at 50,182. Post Acute argues that
    HHS should have addressed these concerns with respect to Metropolitan Statistical Areas
    like Hammond as well. But the likelihood of an area having only one or two hospitals is
    much greater when it contains only ten thousand people than when it contains fifty
    thousand people. See HHS Mot. Summ. J. at 33–34. HHS’s decision to draw a line
    between Metropolitan Statistical Areas and Micropolitan Statistical Areas was
    reasonable.
    CONCLUSION
    For the foregoing reasons, the Court denies Post Acute’s Motion for Summary Judgment,
    Dkt. 16, and grants the HHS Secretary’s Cross-Motion for Summary Judgment, Dkt. 17. A
    separate order consistent with this decision accompanies this memorandum opinion.
    ________________________
    DABNEY L. FRIEDRICH
    United States District Judge
    Date: May 22, 2018
    15