Pine Tree Medical Associates v. Secretary of Health and Human Services

• Citation: 127 F.3d 118
• Decision Date: 02 June 1997
• Docket Number: No. 97-1054,97-1054
• Parties: PINE TREE MEDICAL ASSOCIATES, Plaintiff-Appellant, v. SECRETARY OF HEALTH AND HUMAN SERVICES, et al., Defendants-Appellees. . Heard
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 118

127 F.3d 118

PINE TREE MEDICAL ASSOCIATES, Plaintiff-Appellant, v. SECRETARY OF HEALTH AND HUMAN SERVICES, et al., Defendants-Appellees.

No. 97-1054.

United States Court of Appeals, First Circuit.

Heard June 2, 1997.

Decided Sept. 16, 1997.

Michael A. Duddy, Bangor, ME, with whom Kozak, Gayer, & Brodek, P.A. was on brief for appellant.

Allison C. Giles, Attorney, Civil Division, Department of Justice, with whom Frank W. Hunger, Assistant Attorney General, Washington, DC, Jay P. McCloskey, United States Attorney, Bangor, ME, and Anthony J. Steinmeyer, Attorney, Civil Division, Department of Justice, Washington, DC, were on brief for appellees.

Before TORRUELLA, Chief Judge, CAMPBELL, Senior Circuit Judge, and BOUDIN, Circuit Judge.

TORRUELLA, Chief Judge.

Pine Tree Medical Associates ("Pine Tree") brought a suit for injunctive and declaratory relief against the Secretary of the Department of Health and Human Services ("the Secretary") and the Director of the Bureau of Primary Health Care (collectively, "HHS") challenging HHS's denial of Pine Tree's application requesting that Farmington, Maine be designated a "medically underserved population" ("MUP") under the Public Health Service Act ("PHSA"), 42 U.S.C. § 254b et seq. (1997 Supp.). HHS had denied Pine Tree's MUP application after applying criteria and standards that were issued by HHS in June 1995 ("the 1995 Guidelines"). Pine Tree contends that the standards in existence at the time that its application was first filed are the ones that should have been applied, and that Farmington merits MUP status under those standards. On appeal, Pine Tree repeats two legal arguments that were rejected, on summary judgment, by the district court: 1) that the 1995 Guidelines violated the notice and comment provisions of the Administrative Procedure Act ("APA"), 5 U.S.C. § 553 (1996), and the PHSA, formerly codified at 42 U.S.C. § 254c(b)(4)(B) (1991) (subsequently repealed); and 2) that the application of the 1995 Guidelines to Pine Tree's May 18, 1995 application was impermissibly retroactive. We find the first claim to be moot, and affirm the district court's holding on the retroactivity claim.

BACKGROUND

The pertinent facts were stipulated below, and are reviewed in the district court's opinion.

See Pine Tree Med. Assocs. v. Secretary of Health & Human Servs., 944 F.Supp. 38, 40-41 (D.Maine 1996). A brief overview will serve the purposes of this appeal. Pine Tree is a nonprofit corporation that provides primary health care services in Farmington, Maine. It sought MUP status for the low income population of Farmington in a May 18, 1995 application to HHS. Pursuant to the PHSA, a health care provider that serves a MUP may qualify for substantial, cost-based reimbursement under Medicare and Medicaid programs.

The PHSA directs the Secretary to establish criteria and standards for determining whether to grant MUP status, and prescribes, inter alia, that one such criterion be "the ability of the residents of an area or population group to pay for health services." See 42 U.S.C. § 254b(b)(3)(B) (Supp.1997) (formerly codified at 42 U.S.C. § 254c(b)). In 1976, following notice and comment, regulations were adopted regarding the factors to be taken into consideration by the Secretary, and these regulations have been periodically revised by the HHS without opportunity for notice and comment. In 1994, the HHS issued, without notice and comment, Summary Procedures for MUP designation. It is not disputed that Farmington qualified for MUP designation under the 1994 Procedures.

The 1995 Guidelines, issued on June 12, 1995, again without notice and comment, revised the 1994 Procedures. At the time the 1995 Guidelines were issued, HHS had not yet acted on Pine Tree's May 18, 1995 application. Under the 1995 Guidelines, which altered the measurement of poverty levels by increasing the size of the overall population to be considered in the poverty calculus, Farmington was found not to qualify for MUP designation, and Pine Tree's application was denied on June 22, 1995.

On August 4, 1995, Pine Tree filed a request for reconsideration, which the HHS denied on December 8, 1995. In an explanatory letter, HHS informed Pine Tree that because the 1995 Guidelines "included a correction of analytic distortion with regard to how the poverty factor was determined," this revision was applied immediately to pending requests. See Stipulated Facts p 16.

On January 8, 1996, Pine Tree sued the defendants, seeking that the 1995 Guidelines be declared invalid for failing to comply with the notice and comment provisions of the APA and the PHSA and, in the alternative, seeking a declaration that the 1995 Guidelines were impermissibly applied retroactively to Pine Tree's application. Pine Tree also sought an order enjoining defendants from applying the 1995 Guidelines and requiring HHS to designate Farmington a MUP based on the standards in effect at the time it filed the application.

On October 21, 1996, the district court held that under the notice and comment provision of the PHSA--which has since been repealed by Congress ¹--the 1995 Guidelines were valid despite a lack of notice and comment, because they did not modify the HHS's initial 1976 regulation, and because the 1994 Procedures, which the 1995 Guidelines did indeed modify, were not regulations. See Pine Tree Med. Assocs., 944 F.Supp. at 42. The district court also held that the 1995 Guidelines fell within the ambit of the APA's explicit exception to the notice and comment requirement for interpretive rules. Id. at 43; cf. 5 U.S.C. § 553(b)(3). Finally, the district court held there were no valid retroactivity issues raised by the application of the 1995 Guidelines to Pine Tree's pending application.

DISCUSSION

We review de novo a district court's grant of summary judgment. Ionics v. Elmwood Sensors, Inc., 110 F.3d 184, 185 (1st Cir.1997).

I. Mootness of Notice and Comment Claim

On appeal, Pine Tree does not argue that the 1995 Guidelines are something other than "interpretive rules" under section 553(b)(3) of the APA, see Brief for Appellant at 9 ("The interpretive rule exception is not relevant to this case"), but rather argues that the interpretive rule exception is inapplicable Thus, as a practical matter, even were we to disagree with the district court today, and conclude that the 1995 Guidelines were invalid for failing to provide for notice and comment pursuant to the former PHSA, as the law is today HHS can simply re-issue identical guidelines without notice and comment. Given the fact that the briefs, arguments of counsel, and the record in this case reveal a firm belief on the part of HHS that the 1995 Guidelines corrected a significant error in the previous 1994 Procedures, we do not doubt that, were the 1995 Guidelines struck down, Pine Tree would find itself no closer to its desired end, namely the application of the 1994 Procedures to its MUP application. This practical matter becomes crystal clear in light of our discussion, infra, of Pine Tree's retroactivity claim, where we hold that Pine Tree was not entitled to have the 1994 Procedures apply to their application by virtue of their filing date.

                because, under the APA, an exception to the interpretive rule exception exists where "notice or hearing is required by statute."  5 U.S.C. § 553(b).  Thus, Pine Tree's claim turns on the existence of any notice and hearing requirement that is applicable to the 1995 Guidelines under the PHSA.  Unfortunately for Pine Tree, Congress deleted the notice and comment provision from the former PHSA, which was codified at 42 U.S.C. § 254c(b)(4)(B), 2 when it enacted the Health Centers Consolidation Act, Pub.L. No. 104-299, effective October 1, 1996. 3  See 42 U.S.C. § 254c historical and statutory notes (Supp.1997).  In the wake of this repeal, there is no language under the PHSA relating to notice and comment for modifications of the MUP criteria
                

An issue becomes moot if intervening events leave the parties without a "legally cognizable interest" in our resolution of the issue, Powell v. McCormack, ...