Shands Jacksonville Medical Center v. Burwell (139 F. Supp. 3d 240, 2015)

MEMORANDUM OPINION

RANDOLPH D. MOSS, United States District Judge

Under the Medicare system, participating hospitals are paid for services provided to Medicare-eligible patients. Medicare Part A provides compensation for services provided on an inpatient basis, while Medicare Part B provides compensation for outpatient services. In general, hospitals are paid more for inpatient stays.

Prior to 2013, Medicare guidance stated that it was generally appropriate for hospitals to admit a Medicare beneficiary as an inpatient if the patient was expected to stay for 24 hours or more. But the guidance also stressed that length of stay was not the only relevant factor in the “complex medical judgment” whether to admit a Medicare beneficiary for inpatient care. Because this open-ended approach generated uncertainty among providers and, at times, discouraged hospitals from treating Medicare beneficiaries as inpatients, in May 2013, the Department of Health and Human Services (“HHS” or “Department”) proposed a new standard for inpatient admissions. This new standard — the “2-midnight benchmark” — authorized inpatient admission if the patient’s stay was expected to span at least two midnights. See Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and Long-Term Care Hospital Prospective Payment System and Proposed Fiscal Year 2014 Rates, 78 Fed. Reg. 27486, 27645, 27648 (May 10, 2013) (proposed rules). To reduce uncertainty, the proposed rule then provided that “Medicare’s external review contractors would presume that hospital inpatient admissions are reasonable and necessary for beneficiaries who” satisfy the 2-midnight benchmark. Id. at 27645.

The Secretary of HHS predicted that in fiscal year 2014 the new 2-midnight benchmark and the related presumption would result in “a net shift of 40,000 encounters” from outpatient status to inpatient status, id. at 27649, at an estimated cost of $220 million to the Medicare program, id. She proposed to offset this cost by making adjustments that would effect an across-the-board reduction in compensation for inpatient services. Id. at 27650, 27651. The final rule — including the 2-midnight benchmark, related policies, and the reduction in compensation for inpatient services — was published in August 2013. See Medicare Program; Hospital Inpatient Prospective Payment Systems For Acute Care Hospitals ... Payment Policies Related to Patient Status, 78 Fed.Reg. 50496, 50965 (Aug. 19, 2013) (final rule), codified as amended at 42 C.F.R. § 412.3(d)(1).

Plaintiffs in these consolidated actions challenge only one aspect of the final rule: the reduction in compensation for inpatient services. They argue, among other things, that this reduction is invalid for three independent reasons: (1) it exceeds the Secretary’s general “exceptions and adjustments” authority under the Medicare Act, see 42 U.S.C. § 1395ww(d)(5)(I)(i); (2) it was promulgated without adequate notice or a meaningful opportunity to comment, in violation of the Administrative Procedure Act; and (3) it is arbitrary and capricious.

This matter is presently before the Court on Plaintiffs’ motions for summary judgment, Dkts. 15, 16, 17, 18, 19, and the Secretary’s motion to dismiss and for summary judgment, Dkt. 23. For the reasons given below, the Secretary’s motion is DENIED. The Plaintiffs’ motions for partial summary judgment are GRANTED in part and DENIED in part, and this matter is REMANDED to the Secretary for further proceedings.

I. BACKGROUND

The Medicare Act, 42 U.S.C. §§ 1395 et seq., provides medical care for the elderly and disabled. As relevant here, Medicare Part A reimburses hospitals for inpatient services on a prospective basis, see 42 U.S.C. §§ 1395c et seq., while Medicare Part B pays for services not covered by Part A, including hospital outpatient services and visits to the doctor, see 42 U.S.C. §§ 1395j, 1395Z (t); see generally Cape Cod Hosp. v. Sebelius, 630 F.3d 203, 205-07 (D.C.Cir.2011). The amount of compensation that a hospital receives from the Medicare program, as well as the cost to the Medicare beneficiary, varies in part depending on whether the beneficiary was admitted to the hospital as an outpatient or an inpatient.

Under the Medicare Inpatient Prospective Payment System (“IPPS”), hospitals are prospectively compensated for inpatient services at a fixed rate that is not based on the actual cost of the services provided. See Methodist Hosp. of Sacramento v. Shalala, 38 F.3d 1225, 1226-27 (D.C.Cir.1994) (explaining that Congress enacted the prospective payment system to promote efficiency and discourage the provision of unnecessary services); Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 405-06, 406 n. 3, 113 S.Ct. 2151, 124 L.Ed.2d 368 (1993). The rates used to calculate these payments are set annually by the Secretary according to the Medicare Act’s “ ‘complex statutory and regulatory regime.’ ” Methodist Hosp., 38 F.3d at 1226 (quoting Good Samaritan, 508 U.S. at 404,113 S.Ct. 2151).

One important element in the statutory scheme is the “standardized amount,” which is set each year by the Center for Medicare and Medicaid Services (“CMS”), acting on behalf of the Secretary. See 42 U.S.C. § 1395ww(d)(3). Roughly speaking, the standardized amount represents the average per-patient operating costs across all hospitals, see 42 C.F.R. § 412.64, modified to account for various economic and other factors. Most hospitals are compensated for Medicare inpatient services according to the “federal rate,” which is “a formula that takes [the] standardized base amount ... and' multiplies it by a weight associated with a diagnosis-related group.” Adirondack Med. Ctr. v. Sebelius (“Adirondack”), 740 F.3d 692, 694 (D.C.Cir.2014); see also Methodist Hosp., 38 F.3d at 1227, 42 U.S.C. § 1395ww(d)(3)(D). A “diagnosis-related group” (“DRG”) is “a category of inpatient treatment.” Adirondack, 740 F.3d at 694 n. 1; see 42 U.S.C. § 1395ww(d)(4)(A). Each group is assigned a weight reflecting the relative amount of resources expended with respect to discharges in that group. See id. § 1395ww(d)(4)(B). “The upshot of applying a DRG weighting factor is that a hospital will be paid more for patients diagnosed with a heart condition requiring surgery than for those diagnosed with a sprained ankle.” Adirondack Med. Ctr. v. Sebelius, 29 F.Supp.3d 25, 30 (D.D.C.2014) (quotation marks and citation omitted). A 2007 rule refined the DRG system by implementing “Medicare severity diagnosis related groups” (“MS-DRGs”), which are intended to better account for severity of illness in Medicare payments. See generally Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2008 Rates, 72 Fed.Reg. 47130 (Aug, 22, 2007) (final rule).

A minority of hospitals, including those providing treatment to underserved communities, are compensated based in part on “hospital-specific rates.” See Adirondack, 740 F.3d at 694-95; 42 U.S.C. §§ 1395ww(d)(5)(D) & (G). These “hospital-specific rates” are calculated using a hospital-specific base amount that reflects historical per-patient operating costs at that particular hospital. See Adirondack, 740 F.3d at 695. The Secretary also sets a “Puerto Rico-specific rate” which is calculated using a Puerto Rico-specific base amount. See 42 C.F.R. § 412.212; 42 U.S.C. § 1395ww(d)(9)(A).

The Medicare Act does riot define the term “inpatient” or specify when inpatient admission is appropriate. The Secretary, however, has issued both formal and informal guidance on the subject. Her regulations specify that certain procedures should be provided on an inpatient basis. See 42 C.F.R. § 419.22(n), She has also issued guidance explaining that patients should be admitted on an inpatient basis only where the admitting physician determines that certain, criteria are satisfied. Prior to 2013, the Secretary advised physicians to “use a 24-hour period as a benchmark” and to “order [inpatient] admission for patients who are expected to need hospital care for 24 hours or more.” See AR 1451 (Medicare Benefit Policy Manual, CMS Pub. 100-02, Ch. 1, § 10 (2003)). The guidance acknowledged that the admitting physician’s decision involves “complex medical judgment” and should not be made solely on the expected length of hospitalization, see id., but cautioned that a hospital stay expected to last “only a few hours .(less than 24)” did not justify inpatient admission, even if it was expected to be an overnight stay. See id. (explaining that patients with known diagnoses admitted for less than. 24 hours should be admitted as “outpatients, for coverage purposes regardless of: .... whether they remained in the hospital past midnight”) (emphasis in original); see also 78 Fed.Reg. at 27645, 27648 (describing the Secretary’s prior policy on inpatient admissions).

The Secretary became concerned, however, that there were systemic problems with inpatient-admissions under the 24-hour benchmark. In 2012 she observed an increase in the number of Medicare beneficiaries who were kept as outpatients. for long periods of observation. See Hospital Outpatient. Prospective and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs, 77 Fed.Reg. 45061, 45155 (July 30, 2012) (proposed rule). Admissions for long periods of outpatient observation may have “significant financial implications for Medicare beneficiaries,” because the patient’s copayments, deductibles, and eligibility for certain post-hospitalization services will depend in part on whether the patient was admitted as an inpatient or an outpatient. Id. at 45156. The Secretary had “heard from various stakeholders that hospitals appear to be responding to the financial risk of admitting Medicare beneficiaries for inpatient stays that may later be denied upon contractor review, by electing to treat beneficiaries as outpatients receiving observation services, often for longer periods of time, rather than admit them.” Id.; see also AR 3509-3510 (public comment in a subsequent rulemaking describing ongoing concerns that inpatient claims would be denied). A 2012 review of Medicare claims found a high rate of payment denials associated with short inpatient stays. See 78 Fed.Reg. at 27647-27649 (describing findings of the Secretary’s Comprehensive Error Rate Testing contractor). In 2013, the Secretary observed that Medicare contractors had “recovered more than $1.6 billion in improper payments because of inappropriate beneficiary patient status.” Id. at 27649.

Against this backdrop, the Secretary solicited public comments on “[potential policy changes ... to improve clarity and consensus among, providers, Medicare, and other stakeholders regarding the relationship between admission decisions and appropriate Medicare payment, such as when a Medicare beneficiary is appropriately admitted to the hospital as an inpatient and the cost to hospitals associated with making this decision.” 77 Fed.Reg. at 45155. She asked whether “alternative approaches to defining inpatient status” could provide clarity, “considering] opportunities for inappropriately taking advantage of the Medicare system that time-based ... criteria for patient status may create.” Id at 45157. The Secretary received over three hundred public comments on this issue. 78 Fed.Reg. at 27649; see also Medicare and Medicaid Programs: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs, 77 Fed.Reg. 68210, 68430-68431 (Nov. 15, 2012) (summarizing comments).

In May 2013, the Secretary proposed a new rule “to clarify our longstanding policy on how Medicare review contractors review inpatient hospital admissions for payment under Medicare Part A [and] issue revised guidance to physicians and hospitals regarding when a hospital inpatient admission should be ordered.” 78 Fed.Reg. at 27647. She observed that “there [had] been considerable variation in the interpretation” of her prior inpatient admissions guidance and the 24-hour benchmark, see 78 Fed.Reg. at 27648, and that “[t]he majority of improper payments under Medicare Part A for short-stay inpatient hospital claims have been due to inappropriate patient status (that is, the services furnished were reasonable and necessary, but should have been furnished on a hospital outpatient, rather than hospital inpatient, basis),” id.- at 27647. “Inpatient hospital short-stay claim errors are frequently related to minor surgical procedures or diagnostic tests. In such situations, the beneficiary is typically admitted as a hospital inpatient after the procedure is completed on an outpatient basis, monitored overnight as an inpatient, and discharged from the hospital in the morning. Medicare review contractors typically find that while the underlying services provided were reasonable and necessary, the inpatient hospitalization following the procedure was not.” Id. at 27647.

To address these issues, the Secretary proposed a new inpatient admissions policy based on a “2-midnight benchmark.” See id. at 27645-27649. Under the 2-midnight benchmark, “in addition to services designated ... as inpatient only, surgical procedures, diagnostic tests, and other treatment would be generally appropriate for inpatient hospital payment under Medicare Part A when the physician expects the patient to require a stay that crosses at least 2 midnights and admits the patient to the hospital based on that expectation.” Id. at 27648. “Conversely, when a patient enters a hospital” for care not specified as inpatient only and the stay is expected to last “a limited period of time that does not cross 2 midnights, the services would be generally inappropriate for payment under Medicare Part A.” Id.

To provide increased predictability, the Secretary also proposed a “2-midnight presumption” ,to be applied by Medicare reviewers. See id. at 27645-27649. It provided that reviewers “would presume that inpatient hospital admissions are reasonable and necessary for beneficiaries” whose hospital stay “cross[ed] 2 ‘midnights,’ ” unless the hospital was found to be “abusing this 2-midnight presumption.” Id. at 27645; 27648-27649. For shorter stays, reviewers would consider whether the attending physician who authorized the inpatient admission reasonably expected the patient’s stay to last at least two midnights. See id. The 2-midnight benchmark and the 2-midnight presumption were included in the final rule published in August 2013.. See 78 Fed.Reg. at 50965, codified as amended at 42 C.F.R. § 412.3(d)(1).

This action does not challenge the 2-midnight benchmark, the 2-midnight presumption, or the other aspects of the final rule that relate to the Secretary’s inpatient admissions guidance. Rather, Plaintiffs challenge a different aspect of the final rule: an across-the-board reduction in payments to hospitals for inpatient services. This reduction was premised on the Secretary’s expectation that, in fiscal year 2014, the new rule would result in “a net shift of 40,000 encounters” from outpatient to inpatient status. 78 Fed.Reg. at 27649.

As explained in the notice of proposed rulemaking,

Our actuaries have estimated that our proposed policy.... would increase IPPS expenditures by approximately $220 million. These additional expenditures result from an expected net increase in hospital inpatient encounters due to some encounters spanning more than 2 midnights moving to the IPPS from the [Outpatient Prospective Payment System (“OPPS”)], and some encounters of less than 2 midnights moving from the IPPS to the OPPS. Specifically, our actuaries examined FY 2009 through FY 2011 Medicare claims data for extended hospital outpatient encounters ■ and shorter stay hospital inpatient encounters and estimated that approximately 400,000 encounters would shift from outpatient to inpatient and approximately 360,000 encounters would shift from inpatient to outpatient, causing a net shift of 40,000 encounters.

78 Fed.Reg. at 27649. The predicted “net shift of 40,000 encounters” “represented] an increase of approximately 1.2 percent in the number of shorter stay hospital inpatient encounters.” Id. Because hospitals are typically paid more for inpatient stays, the Secretary estimated that this “net shift of 40,000 encounters” would cost the Medicare program an additional $220 million over the course of the fiscal year. Id: at 27649-27650.

The Secretary reasoned that the additional cost of the new rule should’ be offset by an across-the-board reduction to payments for inpatient services. Thus, she proposed to use her “exceptions and adjustments authority” under the Medicare Act, see 42 U.S.C. § 1395ww(d)(5)(I)(i), “to offset the estimated $220 million in additional ... expenditures” by adopting 0.2 percent reductions to “the operating IPPS standardized amount, the hospital-specific rates, and the Puerto Rico-specific standardized amount.” Id. at 27651. Likewise, she proposed to invoke her “broad authority” under § 1395ww(g) to reduce “the national capital Federal rate and Puerto-Rico specific capital rate” by 0.2 percent. 78 Fed.Reg. at 27651.

“Commenters generally did not support the proposed -0.2% payment adjustment.” 78 Fed.Reg. at 50953. The comments raised two principal concerns of relevance here. First, they questioned whether the Secretary possessed the statutory authority to make the proposed across-the-board reductions. Id:, see AR 4411 (“it is questionable whether CMS has the authority to reduce the standardized amount by 0.2 percent”); AR 4998 (“these reductions are an inappropriate use of CMS’s special exceptions and adjustments authority”); AR 4265 (same); AR 5672 (noting that this authority “has been used exceedingly sparingly” and its use “in this context, ... seems unprecedented”); see also AR 4528, 4497, 4713, 5473. ■ Second, they questioned the underlying basis for the reductions, specifically, the Secretary’s prediction that the new policy would cause a net increase in inpatient cases at a cost of $220 million in 2014.

With respect to the latter concern, the commenters raised a number of different objections. As noted in the final rule, they argued that the Secretary’s analysis was “unsupported and insufficiently explained to allow for meaningful-. comment.” 78 Fed.Reg. at 50953; see AR 5010 (“CMS has not been transparent in identifying the criteria used by the actuaries to identify the patient status .shifts that would occur.”); AR 5312 (“we are very concerned that CMS has not released any data or even its methodology for determining that a -0.2% payment adjustment is warranted”); AR 4654-4655;' 4411. Some, com-menters asked for additional information, see AR 4883-4884, 5672, while others attempted to replicate the Secretary’s analysis without success, see AR 4653-4655; see also AR 4411 (observing that “it has not been possible to replicate the [Secretary’s] finding[s]”), AR 5235 (similar). The com-menters also criticized the prediction resulting from that analysis. They argued that “CMS has profoundly underestimated the volume of [outpatient] encounters” that would result from the two-midnight rule, see AR 4654; predicted that there would instead be a net increase in outpatient encounters, see id., see■ also AR 5010; and argued that Medicare reimbursement to hospitals would decrease significantly if inpatient rates were cut, see AR 4306. ■

The notice of final rulemaking did not engage with these comments in detail. The Secretary expressed her view that in light of the “widespread impact” of the new 2-midnight policy, the proposed adjustments were an- appropriate use of her statutory exceptions and adjustments authority. See 78 Fed.Reg. at 50953. She explained that “while we generally agree with commenters that it js not necessary to routinely estimate utilization shifts to ensure appropriate IPPS payments, this is a unique situation. Policy clarifications such as this do not usually result in utilization shifts of sufficient magnitude and breadth to significantly impact the IPPS.” Id. at 50953-50954. The Secretary did not receive any comments “that specifically addressed [her] proposal to make the -0.2 percent adjustment to 'the national capital Federal rate and Puerto Rico-specific capital rate.” Id. at 50746.

With respect to the methodology used to predict the net shift and its cost, the Secretary acknowledged' that “there is a certain degree of uncertainty surrounding any cost estimate,” but maintained that “our actuaries have determined that the methodology, data, and assumptions used are reasonable for the purpose of estimating the overall impact of our proposed policy.” Id. at 50953. She further stated that “we specifically discussed the methodology used and the components of the estimate” and “[i]n addition to the opportunity to comment on the estímate, ány component of the estimate, or the methodology, com-menters had an opportunity to provide alternative estimates for us to consider.” Id.

In addition, the Secretary revealed two aspects of her methodology that were not disclosed in the notice of proposed rule-making. First, she explained that when estimating the number of cases expected to shift from outpatient to inpatient status under the new rule, her actuaries excluded “[c]laims not containing observation or a major procedure”:

In determining the estimate of the number of encounters that would shift from outpatient to inpatient, oür actuaries examined outpatient claims for observation or a major procedure. Claims not containing observation or a major procedure were excluded....

Id. (emphasis added). Second, when calculating the number of cases expected to shift in the opposite direction, her actuaries excluded different claims. In particular, they examined claims involving surgical MS-DRGs, and .excluded claims involving medical MS-DRGs:

In determining the estimate of the number of encounters- that would shift from inpatient to outpatient, our actuaries examined inpatient claims containing a surgical MS-DRG. Claims containing medical MS-DRGs were excluded ____

Id. (emphasis added). ;

On the same day that the final rule was published, the CMS Office of the Actuary issued a memorandum entitled “Estimated Financial Effects of Two Midnight Policy,” which “summarizes [its] financial estimate for clarifying inpatient vs. outpatient hospital services when all stays which span two midnights will be presumed to be inpatient.” AR 2046-2048. The memorandum explains that “[s]everal assumptions were made to estimate the financial impact of this policy change.” AR 2047 (describing these “key assumptions”). Notably, when calculating the number of cases expected to shift from outpatient to inpatient status, “stays ,.. not for observation care or for a major procedure were excluded because it was assumed that these cases would be unaffected by the policy change,” id., and when calculating the cases expected to shift from inpatient to outpatient status, claims containing a medical MS-DRG were excluded “because it was assumed that those’ cases would be unaffected by the policy change,” see id. The memorandum did not explain, however, why the áetuar-ies assumed • that the excluded- case's “would be - unaffected by the • policy change.” Id.

The notice of final rulemaking confirmed that “after consideration of the comments we 'deceived ... we are finalizing a reduction to the standardized amount, the hospital specific rates,, and the Puerto Rico-specific standardized amount of -0,2 percent to offset the additional $220 million in expenditures,” 78 Fed.Reg. at 50954; see also id. at 50746, and similarly “finalizing the proposed 0.2 percent reduction ... to the national capital Federal rate and Puer-to Rico-specific capital rate,” id. at 50756.

After the final rule was published, the Plaintiff hospitals timely challenged the 0.2 percent reduction “to the ... standardized amount, the hospital-specific rates, and the Puerto Rico-specific standardized amount” (collectively, “the 0.2 percent reduction”). 78 Fed.Reg. at 50746. The Provider Reimbursement Review Board granted Plaintiffs’ requests for expedited judicial review pursuant to 42 U.S.C. § 1395oo(f)(l). AR 1-7. Plaintiffs then filed these actions against the Secretary in her official capacity, pursuant to the Administrative Procedure Act (“APA”) and the Medicare Act. See Case No. 14-cv-263, Dkt. 1; Case No. 14-cv-503, Dkt. 1; Case No. 14-cv-536, Dkt. 1; Case No. 14-cv-607, Dkt. 1; Case No. 14-cv-976, Dkt. 1; Case No. 14-cv~ 1477, Dkt. 1.

The Court consolidated the actions and set a schedule for dispositive briefing. See May 23, 2014, Minute Order; July 23, 2014, Minute Order; Aug. 13, 2014, Scheduling Order; Sept. 9, 2014, Minute Order. Plaintiffs moved for summary judgment, see Dkts. 15, 16, 17, 18, 19,. and the Secretary cross-moved for summary judgment, and — with respect to the St. Helena Plaintiffs only — moved to dismiss for failure to state a claim, see Dkt. 23.

On August 3, 2015, the Court held oral argument on the parties’ cross-motions. At the oral argument, the Court raised the issue of appropriate remedy should it conclude that the Secretary promulgated the 0.2 percent reduction in violation of the APA, and it invited the parties to submit supplemental briefs on that issue. The parties filed supplemental briefs, see Dkts. 42, 43, and replies, see Dkts. 44, 45, 47. The Secretary moved for leave to file a surreply, Dkt. 49, which the Court granted, see Sept. 21,2015, Minute Order.

II, DISCUSSION

Plaintiffs’ motions for summary judgment present three principal arguments. First, they argue that the Medicare Act does not authorize the Secretary to make an across-the-board 0.2 percent reduction to compensation for inpatient services. Second, they argue that the Secretary failed to comply with the procedural requirements of the APA, 5 U.S.C. § 706(2)(A), in promulgating the 0.2 percent reduction, because she failed to disclose critical information about her methodology, and thus deprived Plaintiffs of a meaningful opportunity for comment; she failed to offer meaningful responses to substantial comments; and she failed to offer a reasoned basis for her final rule. Third, they argue that the 0.2 percent reduction is arbitrary and capricious and that it is ineffective because it merely appeared in the preamble to the final regulation. The Court starts with Plaintiffs’ challenge to the Secretary’s statutory authority.

A. The Secretary’s “Exceptions And Adjustments” Authority

The Medicare inpatient prospective payment system is governed by a complex statutory scheme. See 42 U.S.C. § 1395ww(d). Among other things, § 1395ww(d)(3) instructs the Secretary how to set the standardized amount that is used to calculate inpatient prospective payments for most hospitals. Section 1395ww(d)(5) authorizes her to make additional payments, exceptions, and adjustments, most of which relate to atypical circumstances or particular types of hospitals. For example, the Secretary is authorized to “provide for an additional payment” (an “outlier” payment) when the duration of a patient stay exceeds that typical for patients with that diagnosis group. See 42 U.S.C. § 1395ww(d)(5)(A). She is also authorized to make additional payments to hospitals serving “a significantly disproportionate number of low-income patients,” see id. § 1395ww(d)(5)(F)(i)(I), -and to teaching hospitals, see id. § 1395ww(d)(5)(B). And she is authorized to make “exceptions and adjustments” to payments to “rural referral” hospitals, see id. § 1395ww(d)(5)(C)(i); and to make “adjustments ... to take into account the unique circumstances of hospitals located in Alaska and Hawaii,” see id. § 1395ww(d)(5)(H).

The provision at issue in this case, § 1395ww(d)(5)(I)(i), is a catch-all provision that the Court of Appeals has described as a “broad-spectrum grant of authority.” Adirondack, 740 F;3d at ,694. The provision states:

The Secretary shall provide by regulation for such other exceptions and adjustments to such payment amounts under this subsection as the Secretary deems appropriate.

42 U.S.C. § 1395ww(d)(5)(I)(i). According to the Secretary, this “exceptions and adjustments”- provision unambiguously authorizes her to effect an across-the-board 0.2 percent reduction to the standardized amount, the hospital-specific rates, and the Puerto Rico-specific rate. In the Secretary’s view, if Congress did not intend to include such adjustments in § 1395ww(d)(5)(I)(ii)’s “broad-spectrum grant of authority,” see 740 F.3d at 694, it would have included express language to that effect, see Dkt. 35 at 11 (“nothing in the statute precludes the Secretary from making an across-the-board adjustment”).

' Plaintiffs, for their part, argue that this provision does not authorize the Secretary to make an across-the-board reduction by adjusting the standardized amount. They concede that § 1395ww(d)(5)(I)(i) does not expressly exclude adjustments to the standardized amount, but argue that the Secretary errs by .reading § 1395ww(d)(5)(I)(i) in isolation. See Dkt. 17-1 at 20-26; Dkt. 15 at 34-35; Dkt. 18-1 at 22-27. They point out that other. provisions in § 1395ww(d)(5) only authorize the Secretary to adjust reimbursement rates in unique circumstances or to avoid disproportionately affecting certain kinds of hospitals. Thus, they argue, basic tenets of statutory interpretation compel the conclusion that the general exceptions and adjustments provision does not confer the sweeping authority that the Secretary invoked here. Plaintiffs further argue that to the extent the statutory language is ambiguous, the Secretary’s broad interpretation is irreconcilable with the rest of the Medicare Act’s inpatient payment scheme, because it. enables her to override the mandatory payment-setting framework established in § 1395ww(d)(3). For these reasons, they argue that the Act, read as a whole, unambiguously does not authorize the challenged 0.2 percent reduction.

In reviewing the Secretary’s interpretation of the Medicare Act, the Court follows the two-step framework set forth in Chevron, U.S.A., Inc. v. Nat’l Res. Defense Council, 467 U.S. 837, 842-45, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), see, e.g., Cape Cod Hosp. v. Sebelius, 630 F.3d 203 (D.C.Cir.2011), and first asks “whether Congress has directly spoken to the precise question at issue,” Chevron, 467 U.S. at 842, 104 S.Ct. 2778. If so, the Court must “give effect to the unambiguously expressed intent of Congress.” Id. at 843, 104 S.Ct. 2778. If the statute is “silent or ambiguous with respect to the specific issue,” the Court next.,asks “whether.the agency’s answer is based on a permissible construction of the statute.” Id.

1. Whether The “Exceptions And Adjustments” . Provision Is Ambiguous

“In evaluating the first Chevron inquiry, [courts] use ‘traditional tools of statutory construction’ to determine whether Congress has unambiguously expressed its intent.” Serono Labs., Inc. v. Shalala, 158 F.3d 1313, 1319 (D.C.Cir.1998) (quoting Chevron, 467 U.S. at 843 n. 9, 104 S.Ct. 2778). To this end, the Court looks to the statute as a whole, recognizing that “[t]he meaning — or ambiguity — of certain words or phrases may only become evident when placed in context.” FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132, 120 S.Ct. 1291, 146 L.Ed.2d 121 (2000); see also Cnty. of Los Angeles v. Shalala, 192 F.3d 1005, 1014 (D.C.Cir.1999) (“Under Chevron step one, [courts] consider not only the language of the particular provision under scrutiny,- but also the structure and context' of the statutory scheme of which it is a part.”) (quotation marks omitted). -

The plain language of'the general exceptions and adjustments provision is sweeping. As long as she acts by regulation, the Secretary is authorized to make “such other exceptions and adjustments to [the] payment.amounts under this subsection as [she] deems appropriate.” 42 U.S.C. § 1395ww(d)(5)(I)(i). Given its plain meaning, this language includes adjustments to the standardized amount: the standardized amount is a “payment amount[ ] under this subsection,” id. and it is evident that the word “adjustments” can describe modifications to the standardized amount, because Congress uses it that way elsewhere, see 42 - U.S.C. §§ 1395ww(d)(5)(I)(ii), 1395ww(d)(3)(A)(vi). Although Congress, spoke with particularity in defining the scope of other adjustments authorized by § 1395ww(d), including other adjustments to the standardized amount, see id. §§ 1395ww(d)(5)(I)(ii), 1395ww(d)(3)(A)(vi), the only limit contained in the general exceptions and -adjustments provision is that the. exception or adjustment must be “appropriate.” The plain language of this provision thus supports the Secretary’s contention that she has the authority to make the adjustments at issue here.

"Notwithstanding this broad language, Plaintiffs contend that the Secretary’s authority is more limited. In particular, they seek to turn the contrast between the broad , language of § 1395ww(d)(5)(I)(i) and the more specific provisions elsewhere in the statute to their favor, arguing that limits on the Secretary’s general exceptions and adjustments authority can — and should — be inferred from the very detail contained in these other provisions. In support of this contention, they first rely on the ejusdem generis canon, which posits that “where general words follow specific words, the general words are construed to embrace only objects similar in nature to those objects enumerated by the preceding specific words.” -Cement Kiln Recycling Coalition v. EPA, 493 F.3d 207, 221 (D.C.Cir.2007) (quotation marks and alterations omitted). They contend that ejusdem generis is applicable here because “[t]he provision for ‘other exceptions and adjustments’ in (d)(5)(I) follows a list of specific exceptions and adjustments that are enumerated in (d)(5),” and “[a]ll of these exceptions or adjustments relate to particular categories of hospitals or unique eases.” Dkt. 17-1 at 22. For this reason, they argue, the “adjustments” , authorized by § 1395ww(d)(5)(I)(i) must be similarly limited.

It is difficult to- reconcile Plaintiffs’ characterization of the general exceptions and adjustments authority as the final item on a list of specific terms with the actual hodgepodge of provisions gathered under the umbrella of § 1395ww(d)(5). Section 1395ww(d)(5) occupies almost seven pages of the U.S.Code. It contains dozens of subparagraphs. It deals with subjects big and small. Not .all the provisions in § 1395ww(d)(5) relate to unique circumstances or special . types of hospitals; §, 1395ww(d)(5)(E)(ii), for example, authorizes an “adjustment” of general applicability. Other provisions do not speak to “adjustments” but, rather, authorize “additional payment[s].” See 42 U.S.C. § 1395ww(d)(5)(A)(i). The “[cjanons of construction,” moreover, are merely “aids in the process of statutory construction, nothing more, nothing less.” Eagle-Picher Indus. v. United States EPA, 759 F.2d 922, 927 n. 6 (D.C.Cir.1985). Here, the ejusdem generis canon reveals little, if anything, about congressional intent, and it certainly does not provide sufficient clarity to foreclose the Secretary’s interpretation at Chevron step one. See Chevron, 467 U.S. at 842-43, 104 S.Ct. 2778.

Second, and more persuasively, Plaintiffs rely on the canon against surplusage. But they still fail to show that Congress unambiguously foreclosed the Secretary’s interpretation. See id. In particular, they argue that the Secretary’s construction of the first clause of. § 1395ww(d)(5)(I) renders the second clause meaningless. Added by Congress in 1994, see Pub.L, No. 103-432, tit. I, § 109, the second clause expressly confers on the Secretary the authority, when ; making, adjustments for “transfer cases,” to- adjust the standardized amounts to achieve budget neutrality:

(ii) In making adjustments under clause (i) for transfer cases (as defined by the Secretary) in a fiscal year, not taking in account the effect of subparagraph (J), -the Secretary may make adjustments to each of the average standardized amounts determined under paragraph (3) to assure that the aggregate payments made under this subsection for such fiscal year are not greater or lesser than those that would-.'have otherwise been made in such fiscal year.

42 U.S.C. § 1395ww(d)(5)(I)(ii). Plaintiffs argue that this- clause would be superfluous, and -the amendment adding it unnecessary, if the first clause already authorized adjustments to the standardized amounts to achieve budget neutrality. They urge a narrow construction of the first clause to avoid this anomaloüs result.

Although the parties do not cite to any legislative history that sheds light on Congress’s intent in enacting the second clause of § 1395ww(d)(5)(I), the circumstances surrounding the amendment are consistent with — but do not compel — Plaintiffs’ reading. Because a hospital discharge triggers eligibility for payments under the prospective payment system, the Medicare program was required to decide how to handle cases where a patient is transferred from one facility to another before the patient’s final discharge. See Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 1994 Rates, 58 Fed.Reg. 30222, 30244 (May 26, 1993) (proposed rule). In 1992 and 1993, the Prospective Payment Assessment Commission (“Pro-PAC”) issued two reports to Congress that included recommendations ■ regarding transfer cases. See id. at 30223, 30245. As relevant here, ProPAC recommended that the Secretary change the “flat per diem methodology” then- in use, id. at 30245, and further “recommended that Congress provide authority to the Secretary to implement a graduated per diem in a budget neutral manner,” id. In September 1993, the Secretary “noted” the Pro-PAC recommendation and stated that “we intend to seek that authority” from Congress. Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 1994 Rates, 58 Fed.Reg. 46270, 46308 (Sept. 1, 1993) (final rule). Then, in 1994, the Secretary declined “to change the transfer payment methodology absent an offsetting savings provision,” and noted that Congress had yet to act on the ProPAC recommendation. 'See Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 1995 Rates, 59 Fed.Reg. 45330, 45366 (Sept. 1, 1994). Subsequently, Congress enacted § 1395ww(d)(5)(I)(ii). ' See Pub.L. No. 103-132; tit. I, § 109 (Oct. 31, 1994). “In light of this authority,” the Secretary then acted, explaining that the amendment “authorized [her] to make adjustments to the prospective payment system standardized amounts so that adjustments to the payment policy for transfer cases do not- affect aggregate payments.” See Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 1996 Rates, 60 Fed.Reg. 45778, 45805 (Sept. 1, 1995) (final rule).

This history shows that the Secretary was not prepared to adopt a change in the methodology for calculating transfer payments, along with adjustments in the standardized amount to achieve budget neutrality, without specific congressional authorization. But nowhere along the way did the Secretary expressly disavow the authority that she now asserts under the first clause of § 1395ww(d)(5)(I), nor did Congress declare that the specific authority was required. In dealing with a massive program, where modest changes can affect hundreds of millions of dollars of federal expenditures, and where the success of the program turns on annual appropriations, it is not surprising that the Secretary would conclude that it was prudent — even if not legally required — to obtain the express approval of Congress before acting. The fact that she did so with respect to transfer payments, and the fact that Congress provided express authority, could mean that the general authority already provided in the first clause of § 1395ww(d)(5)(I) was insufficient — or it might not. As the Court of Appeals has recognized, “Congress ... sometimes drafts provisions that appear duplicative of others simply, in Macbeth’s words, ‘to make assurance double sure.’ ” Shook v. Dist. of Columbia Fin. Responsibility & Mgmt. Assistance Auth., 132 F.3d 775, 782 (D.C.Cir.1998). And just as Congress might seek “to clarify what might be doubtful,” id. at 782, the Secretary might seek comfort that a consequential administrative decision will not prompt a congressional backlash or criticism.

The Court of Appeals’ analysis of § 1395ww(d)(5)(I)(i) in Adirondack Med. Ctr. v. Sebelius, 740 F.3d 692 (D.C.Cir.2014), is instructive. Adirondack also involved a challenge to the Secretary’s use of her exceptions and adjustments authority. In that case, the Secretary made revisions to the DRG classification system and sought ways to offset the corresponding increases in aggregate payments. See 740 F.3d at 694-96; see also, e.g., Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year. 2001 Rates, 65 Fed.Reg. 47054, 47103 (Aug. 1, 2000). Congress expressly granted her the authority to make the needed offset by “adjusting] the average standardized amounts.” See Pub.L. No. 106-554, § 301(e)(1) (Dec. 21, 2000); codified at 42 U.S.C. § 1395ww(d)(3)(A)(vi). But reducing only the standardized amounts would not have reduced payments to hospitals reimbursed based on hospital-specific rates. See Adirondack, 740 F.3d at 695-96. Resolving that “the fiscal pain” resulting from the changes to the DRG classification system “should be shared,” id. at 694, the Secretary used her general adjustment authority under § 1395ww(d)(5)(I)(i) also to reduce the hospital-specific rates, .thereby achieving an across-the-board reduction. Id. at ¿94-96.

Hospitals reimbursed pursuant to the hospital-specific rate sued, arguing that the Secretary exceeded her authority under § 1395ww(d)(5)(I)(i). They first argued that, under the expressio unius canon, the express grant of statutory authority to offset “the effect of ... coding or classification changes” through adjustments to the standardized amounts, id. at 695 (quoting 42 U.S.C. § 1395ww(d)(3)(A)(vi)), impliedly precluded the use of the Secretary’s general (d)(5)(I)(i) authority to adjust the hospital-specific rate for the same purpose, see id. at 697. The Court of Appeals disagreed. The Court held that “the once-obscure grant of authority in § 1395ww(d)(5)(I)(i)” is ambiguous, and it thus deferred to the Secretary’s interpretation. Id. at 696-99, 701. In reaching this conclusion, the Court of Appeals recognized that, as here, the plaintiffs’ constrained interpretation- of § 1395ww(d)(5)(I)(i) “may be a reasonable reading of the statute.” Id. at 697. But the Court also recognized that a “reasonable” construction of a statute, standing alone, is not enough to thwart an agency at Chevron step one. Id. Even more importantly for present purposes, the Court also held that the application of the expressio unius canon “offers too thin a reed to support the conclusion that Congress has clearly resolved an issue.” Id. (quotation marks omitted). It is, in the words of an earlier opinion from the Court of Appeals, a “feeble helper in an administrative setting, where Congress is presumed to have left to reasonable agency discretion questions that it has not directly resolved.” Id. (quoting Cheney R.R. Co. v. ICC, 902 F.2d 66, 68-69 (D.C.Cir.1990)). “And when Countervailed,” as here, “by a broad grant of authority contained within the same statutory scheme, the' canon is a poor indicator of Congress’ intent.” Id.

Adirondack goes on, moreover, to offer guidance directly responsive to the Plaintiffs’ surplusage argument. ■ As Plaintiffs do here, the, Adirondack plaintiffs argued that the Secretary’s broad construction of § 1395ww(d)(5)(I)(i) rendered other “parts of the statutory scheme ...' meaningless excess.” Id. at 699. Again, the Court of Appeals rejected the plaintiffs’ contention, concluding that “[t]he surplusage canon is neither inviolable nor insurmountable,” especially “when agency authority is at stake.” Id. at 699. This conclusion, moreover, is particularly true when some sur-plusage will remain under either of the competing interpretations. Id. at 699. Because Congress may simply have intended “to clarify — not once, but twice— what the Secretary was permitted to do,” the Court of Appeals, “[a]t the. very least, ,.. remained] unconvinced the -statutory scheme [was] unambiguous in evincing Congress’ intent.” Id. at. 700.

A similar conclusion follows here. The Court of Appeals has not only held that § 1395ww(d)(5)(I)(i) is ambiguous, it has approved the same kind of broad construction that the Secretary defends here, and it has. rejected arguments that — if not identical — are indistinguishable from those Plaintiffs now make. In short, the plain language of § 1395ww(d)(5)(I)(i) grants the Secretary broad discretion to make exceptions and adjustments as she “deems appropriate.” Although various canons of interpretation may support a constrained reading of this authority, Plaintiffs offer no construction of the provision that would avoid all redundancy in the statute, and the Court of Appeals has held that, in this context, the canons offer little basis for rejecting the presumption that Congress has left the administrative agency with discretion to read the provision more broadly. Id. at 697-99. As in Adirondack, the Court, accordingly, concludes that the language is “[a]t the very’least” ambiguous for purposes of Chevron step one. Id. at 700.

The Court also concludes that the scant legislative history cited by the pai-ties is equivocal. As originally enacted in 1983, the general exceptions and adjustments provision stated: , .

The Secretary shall provide by regulation for such other -exceptions and adjustments to such payment amounts under this subsection as the Secretary deems appropriate (including exceptions and adjustments.that may be appropriate with respect to hospitals involved extensively in treatment for and research on cancer).

Pub.L. No. 98-21, tit. VI, § .601, 97 Stat. 158 (originally codified as .42 U.S.C. § 1395ww(d)(5)(C)(iii)). The accompanying conference report explain^ that the conference agreement followed the House bill, which authorized “such exceptions and adjustments-as [the Secretary] deems appropriate (including those that may be appropriate with respect to public and teaching hospitals and hospitals involved extensively in treatment for, and research on, cancer),” but omitted “the requirement with respect to- public and teaching hospitals,” H.R.Rep, No.-- 98-47, 195 (Conf. Rep.). The conference report states that “[t]he conferees wish to make it clear that this authority permits the Secretary to provide for such exceptions and adjustments as may be appropriate with respect to hospitals experiencing special problems because of their location in a particular census division.” Id. The report thus indicates that the conferees expected the Secretary to use her authority to address payment disparities affecting certain kinds of hospitals, e.g., cancer hospitals,'see id.; but it does not indicate that the conferees intended to restrict her authority to that circumstance.

The parenthetical relating to cancer hospitals was deletéd in 1989, when cancer hospitals were removed from the prospective payment system. See Pub.L. No. 101-239, tit. VI, § 6004, 103 Stat. 2159. The Secretary argues that this amendment had, if anything, a broadening effect, but because the amendment did not reflect legislative attention to the scope of the Secretary’s adjustments authority, it does not cut either way.

Congress has, also added provisions expressly authorizing adjustments to the standardized amounts. For example,.as discussed above, in 1984 Congress provided the Secretary with authority to adjust the standardized amounts to offset transfer-related costs, see § 1395ww(d)(5)(I)(ii), and in 2000, Congress provided the Secretary with authority to adjust the standardized amounts to offset changes to the DRG classification ■ system, ■ see § 1395ww(d)(3)(A)(vi). But the legislative and administrative materials cited by the parties do not explain why the Secretary concluded that she needed express legislative authority to make these offsets, nor is it clear that Congress enacted these-provisions on the understanding that the Secretary’s general adjustment authority diff not authorize her to adjust the standardized amounts. Plaintiffs are correct that the Secretary has previously-used her authority under § 1395ww(d)(5)(I)(i) only for targeted adjustments. See, e.g., Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2005 Rates, 69 Fed.Reg. 48916, 49106-49108 (Aug. 11, 2004) (adjusting wage index assignments in light of “unique and temporary” circumstances adversely affecting small community hospitals). They cite nó case, however, holding that a “broad-spectrum grant of authority” atrophies merely because it goes unused. See Adirondack, 740 F.3d at 694, 695-96.

Accordingly, as the Court of Appeals held in Adirondack, see 740 F.3d at 700-01, the Court concludes that the general exceptions and. adjustments provision is ambiguous with respect to whether.it provides a broad grant of authority untethered from the more specific provisions of § 1395ww(d)(5), and .thus ,-proceeds to Chevron’s second step. See id.;. see, e.g., Regions Hosp. v. Shalala, 522 U.S. 448, 460, 118 S.Ct. 909, 139 L.Ed.2d 895 (1998) (“Because the Hospital’s construction is not an inevitable one, we turn to the Secretary’s position, examining its reasonableness as an interpretation of the governing legislation.”).

Finally, the St. Helena and Bakersfield Plaintiffs separately contend that the Secretary exceeded her statutory authority under 42 U.S.C. § 1395ww(g) when she reduced the national capital Federal rate and Puerto Ricó-specific capital rate by 0.2 percent. See Dkt.' 18-1 at 29-30; Dkt. 15 at 34-35; see also 78 Fed.Reg. at 27651, 50746. ■ Section 1395ww(g),’ like § 1395ww(d)(5)(I)(i),' ■ authorizes certain “exceptions” and “adjustments],” but the two provisions are not identical. The St. Helena Plaintiffs’ opening brief does not explain why the text of § 1395ww(g) compels' their reading, see Dkt. 18-1 at 29-30, and the Bakersfield Plaintiffs’ opening brief does not analyze the text of § 1395ww(g) at all, see Dkt. 15 at 34-35. The Secretary’s briefing also fails to grapple with this question. See Dkt. 23-1 at n.5, Dkt. 35 at 18-19. The Court thus concludes that this issue is not sufficiently briefed to permit resolution at this time. Accordingly, to the extent Plaintiffs raise an independent challenge to the Secretary’s. reduction of the - capital rates, the parties’ motions are denied without prejudice. - . .

2. • Whether. The Secretary’s Interpre-. tation Is Reasonable .

At -Chevrop, ’s second step the queétion for the reviewing court is whether the agency’s interpretation is a reasonable one. The court, accordingly, will “uphold the Secretary’s judgment as long as it is a permissible construction of the statute, even if it differs from how the court would have interpreted the statute in the absence of an agency regulation.” Sebelius v. Auburn Reg’l Med. Ctr., — U.S. -, 133 S.Ct. 817, 826-27, 184 L.Ed.2d 627 (2013). “[G]iven the tremendous complexity of the Medicare statute,” moreover, courts “accord particular deference to the Secretary’s interpretation” of the statute’s detailed provisions. Cnty. of Los Angeles, 192 F.3d at 1014. According to Plaintiffs, however, that usual deference is unwarranted here, because the Secretary has purportedly abandoned the “more limited interpretation of ... § 1395ww(d)(5)(I)” that she espoused in prior rulemakings. Dkt. 17-1 at 27, see also Dkt. 27 at 10-13. The Court disagrees.

An agency is “not estopped from changing” its interpretation of a statute. Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 417, 113 S.Ct. 2151, 124 L.Ed.2d 368 (1993); see also Perez v. Mortgage Bankers Ass’n, — U.S. -, 135 S.Ct. 1199, 1207-09, 191 L.Ed.2d 186 (2015). When it does so, however, the reviewing court should consider that change in position as “a factor in assessing the weight that” the agency’s new position is due. Good Samaritan Hosp., 508 U.S. at 417, 113 S.Ct. 2151. At times, the change may require that the court accord the new interpretation “considerably less deference than a consistently held agency view.” Thomas Jefferson Univ., 512 U.S. 504, 515, 114 S.Ct. 2381, 129 L.Ed.2d 405 (1994) («quotation marks and citation omitted). But, this proviso is not absolute, and its application turns on “the facts of individual cases.” Good Samaritan Hosp., 508 U.S. at 417, 113 S.Ct. 2151.

Here, the Court concludes that the prior occasions when the Secretary declined to rely on her general adjustment and exception authority, and where she, instead, waited for specific congressional authorization to act, do not undercut her current claim to deference. First, unlike the cases on which they rely, Plaintiffs have not identified any prior actions in which the Secretary expressly interpreted or applied § 1395ww(d)(5)(I) in a manner that conflicts with her current reading. It is true, as discussed above, that she has previously declined to rely on that provision where, under her current reading, she might have invoked it. But the fact that the Secretary, at one time, “expressed doubts about [her] ability to” make adjustments without specific legislative authority to do so does not mean that a later, expansive construction of her general adjustment authority is not entitled to deference. Adirondack, 740 F.3d at 698. That is particularly true in this context, since the Secretary never expressly construed § 1395ww(d)(5)(I)(i) in a manner inconsistent with her current reading.

Plaintiffs invoke Dillmon v. Nat’l Transp. Safety Bd., 588 F.3d 1085, 1089-90 (D.C.Cir.2009), where the Court of Appeals held that an agency must explain its changed interpretation in order “to ensure [that] the agency’s ‘prior policies and standards are being deliberately changed, not casually ignored.’” see Dkt. 17-1 at 27. And they assert, correctly, that an agency may not “ ‘depart from a prior policy sub silentio,- or simply disregard rules that are still on the books.’ ” Dillmon, 588 F.3d at 1089 (quoting FCC v. Fox TV Stations, Inc., 556 U.S. 502, 515, 129 S.Ct. 1800, 173 L.Ed.2d 738 (2009)). Here, however, it is far from clear that the Secretary previously articulated a policy or interpretation from which she now departs. There certainly was no reasoned explanation of how the Secretary construed § 1395ww(d)(5)(I)(i) or why she read the statute in that manner. Indeed, the Sec-retaiy made no mention whatsoever of § 1395ww(d)(5)(I)(i) in the administrative actions on which Plaintiffs rely. Those actions, accordingly, hardly represent the type of established administrative policy that requires some justification to discard. See, e.g., Dillmon, 588 at 1089-90; King Broad. Co. v. FCC, 860 F.2d 465, 470 (D.C.Cir.1988) (refusing to defer to an interpretation that could not be reconciled with the agency’s prior, interpretation of the same provision); Northpoint Tech., Ltd. v. FCC, 412 F.3d 145, 152-56 (D.C.Cir.2005) (refusing to defer to an interpretation that could not- be reconciled with “prior [agency] policy and practice”).

Plaintiffs further argue that, even if entitled to deference, the Secretary’s use of her adjustment authority to adopt “an across-the-board reduction” cannot be reconciled with the overall statutory scheme. See, e.g., Dkt. 17-1 at 30. They argue that “the Secretary has made no attempt to explain how this system wide payment reduction serves any statutory purposes, rendering her interpretation unreasonable.” Id. (emphasis added). This contention, however, merely repeats the arguments already rejected at Chevron step one — and, for that matter, already rejected in Adirondack, 740 F.3d at 700. It is true that the Secretary’s reading of § 1395ww(d)(5)(I)(i) invites overlap with other portions of § 1395ww(d)(5). But a general exception or waiver authority, by its nature, will always — or will frequently — overlap with more specific authorities. At least in the context of § 1395ww(d)(5), the ■ Court of Appeals has already opined that such “superfluity” is not unreasonable. 740 F.3d at 699-700; cf. Adirondack Med. Ctr. v. Burwell, 782 F.3d 707, 710 (D.C.Cir.2015) (per curiam) (concluding that an “adjust[ment to] the hospital-specific rates” was not arbitrary and capricious because “the Secretary reasonably chose to achieve budget neutrality pursuant to a method that spreads the cost of budget neutrality fairly between ... hospitals”). And, even if the overall structure of the Medicare Act and § 1395ww(d)(5) might be read implicitly to limit this broad grant of authority, the Secretary’s decision to give the expansive language of § 1395ww(d)(5)(I)(i) its plain meaning cannot be described as “unreasonable.”

Plaintiffs also argue that the 0.2 percent reduction effectively negates payment for the additional inpatients that hospitals are expected to treat and that this violates the Medicare Act. See, e.g., Dkt. 17-1 at 23-24. In this respect, Plaintiffs argue that this case is unlike Adirondack, which involved the Secretary’s effort to address an “artificial” increase in payments to hospitals. 740 F.3d at 700. The Secretary correctly responds that nothing in the final rule departs from the per-discharge structure of the payment scheme — providers are paid for each patient treáted and discharged, and providers who treat additional inpatients are reimbursed pursuant to the inpatient prospective payment system. See Dkt. 23-1 at 25-27. It is, of course, possible that the 0.2 percent reduction does deny providers reimbursement in the aggregate for the additional inpatient stays. But, Plaintiffs point to no evidence in the record supporting actual increased provider - costs, and, in any event, to the extent those additional costs exist, they are shared across the inpatient prospective payment system. As a result, .the 0.2 percent reduction does not differ in application from the numerous other adjustments made to the standardized rate. The Secretary’s use of her general exceptions and adjustments authority in this manner may be unusual, but it is not unreasonable.

Finally, Plaintiffs argue with some force that any interpretation of - the Act that grants the Secretary unfettered adjustment authority would conflict with the overall statutory scheme, The Court agrees- that the “exceptions and adjustments” provision does not give the Secretary carte blanche to override the rest of the Act. .The Court is not persuaded, however, that the reduction at issue in this case raises that concern. Cf. Marshall Cnty. Health Care Auth. v. Shalala, 988 F.2d 1221, 1224 (D.C.Cir.1993) (holding that “[t]he Secretary may” invoke her exceptions and adjustments authority to “vary the definition” of “urban areas” under the prospective payment system, even though it was possible to “hypothesize forms of regulatory amendments that could be thought unreasonable in light of the statute”). In Amgen Inc. v. Smith, for example, the Court of Appeals held that an “adjustment .... involving only the payment amount for a single drug[ ] does not work ‘basic and fundamental" changes in the scheme’ Congress created in the Medicare Act.” 357 F.3d 103, 118 (D.C.Cir.2004) (quoting MCI Telecomm. Corp. v. Am. Tel. & Tel. Co., 512 U.S. 218, 225, 114 S.Ct. 2223, 129 L.Ed.2d 182 (1994)). The Court of Appeals reasoned that “the statutory requirement that the Secretary ‘shall’ develop certain aspects of the payment system is qualified by the Secretary’s authority to ‘adjust[]’ those payment amounts.” Id. (mod