Visiting Nurse Ass'n Gregoria Auffant, Inc. v. Thompson

United States Court of Appeals
For the First Circuit

No. 04-2721

VISITING NURSE ASSOCIATION GREGORIA AUFFANT, INC.,

Plaintiff, Appellant,

v.

TOMMY G. THOMPSON, in his capacity as Secretary of the United
States Department of Health and Human Services; RUBEN J. KING-
SHAW, JR., as the Deputy Administrator and Chief Operating
Officer of the Centers for Medicare and Medicaid Services;
UNITED GOVERNMENT SERVICES,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. José Antonio Fusté, U.S. District Judge]

Before

Torruella and Lipez, Circuit Judges
and Gibson,* Senior Circuit Judge

Héctor J. Pérez Rivera and Carlos R. Pastrana-Torres, with
whom Goldman, Antonetti & Córdova, P.S.C., were on brief, for
appellants.
Maryalice Kozak, Assistant United States Attorney, with whom
José M. Pizzaro-Zayas, Assistant United States Attorney, and H.S.
García, United States Attorney, were on brief, for appellees.

May 8, 2006

*
Of the Eighth Circuit, sitting by designation.
 LIPEZ, Circuit Judge. Medicare, a health insurance

program, is administered by the Secretary of Health and Human

Services through the Centers for Medicare and Medicaid Services.

The Secretary is entrusted by the Medicare Act with the authority

to issue regulations that are necessary for the administration of

the health insurance program. Under the Act, providers are

reimbursed the lesser of their charges or their reasonable costs

incurred in providing covered services to Medicare beneficiaries.

42 U.S.C. § 1395f(b). The Act requires the Secretary to promulgate

regulations to interpret "reasonable costs".

This case involves a challenge to the applicability of

interpretive regulations adopted by the Secretary that provide for

the reimbursement of "necessary and proper" costs related to

patient care under the Medicare program. The case also raises a

related issue involving the timing of the Secretary's decision

denying reimbursement of the costs at issue in this case. We

affirm the district court's ruling affirming the decision of the

Secretary.

I.

A. Factual and Procedural Background

Plaintiff-Appellant Visiting Nurse Association Gregoria

Auffant, Inc. ("Plaintiff" or "VNA") is a non-profit corporation

organized and existing under the laws of the Commonwealth of Puerto

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Rico.1 For the time period at issue here, VNA was a Home Care

Medicare provider within the meaning of the Medicare Act, 42 U.S.C.

§ 1395, et seq. Plaintiff owns three subsidiary providers in the

Medicare program: VNA Hato Rey, VNA Bayamón, and VNA Carolina.

Defendant-Appellee Tommy G. Thompson was the Secretary of the

Department of Health and Human Services.2 Defendant-Appellee Ruben

J. King-Shaw, Jr. is the Deputy Administrator and Chief Operating

Officer of the Centers for Medicare and Medicaid Services ("CMS").

King-Shaw (the "Administrator") signed the CMS decision at issue

here. Defendant-Appellee United Government Services ("UGS"), the

intermediary between Medicare and Plaintiff, conducted the initial

review of Plaintiff's cost reports discussed below.

In July 1994, VNA instituted a Deferred Compensation Plan

("Plan" or "DCP") for its employees pursuant to which VNA paid a

deferred "salary differential" for each employee participating in

the Plan. Plaintiff claimed these contributions to the Plan as

costs on its Medicare cost reports for fiscal years 1994-1997. UGS

reviewed Plaintiff's cost reports for those fiscal years,

determined that the Plan did not comply with Medicare rules and

1
This area of law is rife with the use of acronyms. To help
the reader understand them, we attach an appendix containing a
glossary of the less common acronyms used in this opinion.
2
Tommy G. Thompson is no longer the Secretary of Health and
Human Services. Pursuant to Fed. R. Civ. P. Rule 25(d), Michael O.
Leavitt is automatically substituted in his place.

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regulations, and disallowed reimbursement of costs in the amount of

$353,521.3

Plaintiff appealed UGS's decision to the Provider

Reimbursement Review Board ("PRRB" or the "Board"), which held a

hearing on November 19, 2001. On August 9, 2002, the Board

reversed UGS's decision. The Board concluded that VNA was entitled

to reimbursement for its contributions to the Plan, finding that:

(1) UGS never informed VNA that the Plan was invalid; (2) VNA used

outside advisors and consultants to establish the Plan; (3) the

Plan's terms were contained in the personnel by-laws; and (4) VNA

created the Plan intending it to be a permanent arrangement. In

summary, the Board reversed UGS's decision on the grounds that the

Plan was in "substantial compliance" with the provisions of the

Medicare Provider Reimbursement Manual ("PRM" or the "Manual"); and

any non-compliance of the Plan from the requirements set forth in

the Manual was de minimus.

On August 16, 2002, pursuant to 42 C.F.R. § 405.1875,

which provides specifically for appeals from decisions of the

Board, UGS requested a review of the Board's decision, alleging

that the decision was contrary to the rules and standards contained

in the Manual. On August 26, 2002, the Administrator notified the

3
UGS initially reviewed VNA's cost reports for fiscal years
1996 and 1997 only. After finding non-compliance in these reports,
UGS reopened the cost reports for 1994 and 1995, adjusting those
costs related to the Plan.

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parties of its intention to review the Board's decision. VNA was

also notified that the Administrator would issue his decision,

which constitutes the Secretary's final decision, within sixty (60)

days of VNA's receipt of the Board's decision.

On October 8, 2002, the Administrator reversed the

decision of the Board, finding that the Plan did not qualify as a

formal DCP. Specifically, the Administrator found that VNA had not

deposited its contributions with an appropriate funding agent; the

Plan was contingent rather than permanent in nature; and the Plan

did not meet the requirements for Medicare reimbursement as a

formal DCP for the 1994-97 period. On October 10, 2002, the

Administrator's decision was sent to VNA by certified mail.

On December 3, 2002, VNA requested review of the

Administrator's decision in federal district court pursuant to the

Administrative Procedures Act ("APA"), 5 U.S.C. §§ 701-06. VNA

eventually moved for summary judgment; Defendants opposed the

motion and submitted a cross-motion for summary judgment. On

September 30, 2004, the district court issued an order denying

VNA's summary judgment motion and granting Defendants' motion,

affirming the decision of the Secretary. This appeal followed.

B. Standard of Review

We review a district court's grant of summary judgment de

novo. Dominguez-Cruz v. Suttle Caribe, Inc., 202 F.3d 424, 428

(1st Cir. 2000). However, "this rubric has a special twist in the

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administrative law context." Associated Fisheries of Maine, Inc.

v. Daley, 127 F.3d 104, 109 (1st Cir. 1997). "Because the APA

standard affords great deference to agency decisionmaking and

because the Secretary's action is presumed valid, judicial review,

even at the summary judgment stage, is narrow." Id. Pursuant to

42 U.S.C. § 1395oo(f)(1), judicial review of the reimbursement

decision is governed by the standards detailed in the APA. Thus,

we may only set aside agency actions, findings, and conclusions if

they are "arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with law" or "unsupported by

substantial evidence". 5 U.S.C. § 706(2). Substantial evidence

means "more than a mere scintilla. It means such relevant evidence

as a reasonable mind might accept as adequate to support a

conclusion." Richardson v. Perales, 402 U.S. 389, 401 (1971).

Additionally, in the situation here, the district court acts as an

intermediate appellate court. Therefore, "when reviewing agency

action, we apply the same legal standards that pertain in the

district court and afford no special deference to that court's

decision." Associated Fisheries, 127 F.3d at 109.

Furthermore, "[w]here Congress has entrusted rulemaking

and administrative authority to an agency, courts normally accord

the agency particular deference in respect to the interpretation of

regulations promulgated under that authority." South Shore Hosp.,

Inc. v. Thompson, 308 F.3d 91, 97 (1st Cir. 2002); see also Bowles

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v. Seminole Rock & Sand Co., 325 U.S. 410, 414 (1945). "Courts

withhold such deference only when the agency's interpretation of

its regulation is plainly erroneous or inconsistent with its

language." South Shore Hosp., 308 F.3d at 97 (internal citations

and quotation marks omitted). "In situations in which the meaning

of regulatory language is not free from doubt, the reviewing court

should give effect to the agency's interpretation so long as it is

reasonable, that is, so long as the interpretation sensibly

conforms to the purpose and wording of the regulations." Martin v.

Occupational Safety & Health Review Comm'n, 499 U.S. 144, 150-51

(1991)(internal citations and quotation marks omitted).

However, pronouncements in manuals like the PRM, which do

not have the force of law, are entitled to less deference than an

interpretation arrived at after a formal adjudication or notice-

and-comment rulemaking. See Christensen v. Harris County, 529 U.S.

576, 587 (2000) (explaining that administrative interpretations

receive Skidmore deference rather than Chevron deference). We

proceed with these standards in mind.

II.

A. Timing of the Decision of the Administrator for the Centers for
Medicare and Medicaid Services

42 U.S.C. § 1395oo(f)(1) states in relevant part that

"[a] decision of the [PRRB] shall be final unless the Secretary, on

his own motion, and within 60 days after the provider of services

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is notified of the Board's decision, reverses, affirms, or modifies

the [PRRB]'s decision." In turn, 42 C.F.R. § 405.1875(g) states in

relevant part:

(1) If the Administrator has notified the parties and CMS
that he or she has decided to review a [PRRB] decision,
the Administrator will affirm, reverse, modify or remand
the case.
(2) The Administrator will make this decision within 60
days after the provider received notification of the
[PRRB] decision and will promptly mail a copy of the
decision to each party and to CMS.

Both the statute and the regulations implementing the statute

require the Administrator -- who acts with the authority of the

Secretary -- to conduct and conclude his review of a Board decision

within a 60-day period. VNA asserts that the Administrator failed

to make his decision within that 60-day period. As a result, VNA

argues that the Board decision is final, and the Administrator's

silence constitutes approval of the Board's decision.

There is no factual dispute that: (1) the Board issued

its decision on August 9, 2002; (2) the Administrator signed and

dated his decision on October 8, 2002; and (3) the Administrator's

decision was mailed to VNA on October 10, 2002. Plaintiff contends

that 42 C.F.R. § 405.1875(g)(2) requires the Administrator to make

his decision and mail that decision within the 60-day window. The

relevant dates for this proposition would be August 9, 2002, and

October 10, 2002; sixty-one (61) days would have elapsed using this

scenario. With the Secretary not having complied with the

applicable time requirements, the Board's decision would be final.

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 However, Plaintiff's argument is predicated on an

unnatural reading of the regulatory language. 42 C.F.R. §

405.1875(g)(2) reads that "the Administrator will make this

decision within 60 days . . . and will promptly mail a copy." If

the regulation required the Administrator to make his decision and

mail it within 60 days, the regulation would have placed "within 60

days" at the end of the regulation. Then the 60-day period would

apply to both the making of the decision and its mailing. However,

the plain language of the regulation states that the Administrator

need only make his decision within the 60-day period. He must then

mail his decision promptly thereafter, which is what the

Administrator did. The date the Administrator signed his decision

is the appropriate date to use in calculating whether the

Administrator complied with the 60-day period. Using that day,

October 8, 2002, the Administrator made his decision in fifty-nine

(59) days, within the 60-day period detailed in both the statute

and the regulations. As a result, the CMS Administrator's decision

was properly before the district court.4

4
Defendants also argue, in the alternative, that the day the
60-day window began should be August 13, 2002, not August 9, 2002,
asserting that the 60 days begins to run when a plaintiff receives
actual notice of the Board's decision. Defendants based this
argument on our decision in Hospital San Jorge v. Secretary of
Health, Education, and Welfare, 616 F.2d 580 (1st Cir. 1980).
There, we held that the 60-day time period under 42 U.S.C. §
1395oo(f)(1) commences the date the party receives notice of the
decision through the mail. Id. at 585 n.6. In that case, we
assumed that a mailing took four days. Id. In light of Hospital
San Jorge, the district court found Defendants' alternative timing

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B. The Applicability of the Provider Reimbursement Manual

Plaintiff makes two attempts to avoid the applicability

of the Manual to the Plan. VNA first argues that the Manual is

just a "codified interpretation" of the Employee Retirement Income

Security Act ("ERISA"). Since the Plan complied with ERISA,

according to Plaintiff, it was entitled to Medicare reimbursement.

This argument is unsupported by any authority.

The Manual anticipates different types of retirement

plans that a Medicare provider may offer to its employees. In §§

2140.1-2140.6, the Manual sets forth the rules governing the broad

category of retirement plan involved in this case -- the deferred

compensation plan. In subsequent sections, specifically §§ 2141.1-

2141.7 and §§ 2142.1-2142.7, the Manual sets forth the rules

governing two subcategories of a DCP, the "defined contribution

deferred compensation plan" and the "pension plan", respectively.

In support of its position that the PRM "codifies" ERISA,

Plaintiff asserts that "[n]owhere in the PRM is a conceptual link

between said Manual and ERISA more clearly suggested and easily

apparent, than in Section 2141.1 of the PRM." In § 2141.1, the

Manual states in relevant part that: "Defined contribution deferred

compensation plans include profit sharing, stock bonus, and other

such defined contribution deferred compensation plans that meet

argument also valid. We agree with the district court that this
decision supports equally well the conclusion that the
Administrator's decision was issued within the 60-day period.

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Internal Revenue Service ("IRS") or [ERISA] requirements as

qualified plans and have been so approved by the IRS."

First, § 2141.1 defines the DCP subcategory of "defined

contribution deferred compensation plans" only; the Plan at issue

here does not fall into that category. As noted, the Plan at issue

here falls into the general category of a deferred compensation

plan, which is governed by §§ 2140.1-2140.6. Those sections do not

refer to ERISA. Second, and more importantly, the reference to

ERISA in § 2141.1 is only used to distinguish a deferred

compensation plan that qualifies as a "defined contribution

deferred compensation plan" from one that does not. Even for the

defined contribution deferred compensation plan, there is no

suggestion that the PRM is simply a codified interpretation of

ERISA. Indeed, whether for a "regular" deferred compensation plan

or for a defined contribution deferred compensation plan, the

question of Medicare reimbursement would be determined by the

Medicare Act and its related regulations, not ERISA. ERISA is

irrelevant to the issue of Medicare reimbursement for contributions

to a DCP.

In a second attempt to avoid the applicability of the

Manual to the Plan, Plaintiff argues that the Manual was preempted

by ERISA. ERISA states in relevant part that "[n]othing in this

subchapter shall be construed to alter, amend, modify, invalidate,

impair, or supersede any law of the United States . . . or any rule

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or regulation issued under any such law." 29 U.S.C. § 1144(d).

The plain language of the statute exempts from preemption any

federal law, and any rule or regulation issued under federal law.

VNA asserts that the Manual, as a whole or in part, is not a valid

rule or regulation issued under federal law, and hence it is not

protected from ERISA preemption.5

VNA's reliance on ERISA is again misguided. If the

provisions of the Manual at issue are invalid on the basis of

familiar administrative law principles (which Plaintiff contends),

they would not apply to the Plan on that basis alone, irrespective

of ERISA. If the provisions are valid, they are protected from

ERISA preemption.6 Thus, the critical question in this appeal is

whether the particular sections of the PRM relied on by the

Administrator are valid rules of the Secretary.

5
In its appellate brief, VNA seems to challenge the Manual,
which is comprised of many provisions, as a single rule. The
relevant cases that we have found involve challenges to a
particular section or provision of the Manual. See, e.g., Shalala
v. Guernsey Mem'l Hosp., 514 U.S. 87 (1995). Given the focus of
Plaintiff on the sections of the Manual that the Administrator
applied -- PRM §§ 2140.1-2140.3, the sections regulating
reimbursement of DCPs -- we interpret VNA's position as a challenge
to the validity of the specific provisions of the Manual at issue.
6
Although Plaintiff argues that the provisions of the PRM are
not interpretive rules, the clearly are, as the ensuing discussion
demonstrates. See Shalala v. Guernsey Mem'l Hosp., 514 U.S. 87, 99
(1995).

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 In Shalala v. Guernsey Memorial Hospital, 514 U.S. 87

(1995), the Supreme Court found that § 233 of the Manual7 "is a

prototypical example of an interpretive rule issued by an agency to

advise the public of the agency's construction of the statutes and

rules which it administers." Id. at 99. The Court continued:

"[i]nterpretive rules do not require notice and comment . . . they

also do not have the force and effect of law and are not accorded

that weight in the adjudicatory process."8 Id. Finally, the Court

held that if § 233 had "adopted a new position inconsistent with

any of the Secretary's existing regulations," the APA's notice-and-

comment rulemaking process would be required. Id. at 100. So long

as an interpretive rule does not "effec[t] a substantive change in

the regulations," notice-and-comment is not required and the

interpretive rule is valid. Id.; see also Levesque v. Block, 723

F.2d 175, 182 (1st. Cir. 1983) (citing Skidmore v. Swift & Co., 323

U.S. 134, 139-40 (1944)).

In Christensen, the Supreme Court "confront[ed] an

interpretation contained in an opinion letter, not one arrived at

7
Section 233 of the PRM describes the way in which a cost
associated with capital indebtedness should be recognized, "whether
the loss should be recognized at once or spread over a period of
years." Guernsey, 514 U.S. at 97. Section 233 requires that
"defeasance losses should be amortized." Id.
8
There is no dispute that the provisions of the Manual were
not subject to the notice-and-comment rulemaking procedures of the
APA.

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after, for example, a formal adjudication or notice-and-comment

rulemaking." 529 U.S. at 587. The Court concluded that:

[I]nterpretations contained in policy statements, agency
manuals, and enforcement guidelines, all of which lack
the force of law -- do not warrant Chevron-style
deference. Instead, interpretations contained in formats
such as opinion letters are "entitled to respect" under
our decision in Skidmore v. Swift & Co., but only to the
extent that those interpretations have the "power to
persuade."

Id. (internal citations and quotation marks omitted). While it is

true that rules found in manuals such as the PRM are entitled to

less deference than interpretations arrived at after a formal

adjudication or notice-and-comment rulemaking, this does not mean

that the rules in the Manual are not entitled to any deference at

all. If an interpretive rule is neither inconsistent with

promulgated regulations, nor outside of the coverage of the Act, it

is valid. Furthermore, as the Supreme Court stated in Thomas

Jefferson University v. Shalala, 512 U.S. 504 (1994), "broad

deference [to the administrative agency] is all the more warranted

when, as here, the regulation concerns a complex and highly

technical regulatory program." Id. at 512 (internal citations and

quotation marks omitted); see also Auer v. Robbins, 519 U.S. 452

(1997) (holding that an agency's interpretation of its own

ambiguous regulation is entitled to deference); Bowles v. Seminole

Rock & Sand Co., 325 U.S. 410 (1945). Medicare certainly qualifies

as such a "technical regulatory program".

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 Plaintiff challenges the contention that §§ 2140.1-2140.3

of the PRM are valid interpretive rules whose requirements

determine whether contributions to a DCP were necessary, proper,

and reasonable -- and therefore reimbursable -- under the Medicare

Act and its implementing regulations. Section 2140.2 of the PRM

states:

Provider contributions for the benefit of employees under
a deferred compensation plan are reimbursable when, and
to the extent that, such costs are actually incurred by
the provider. Such costs are found to have been incurred
only if the requirements of sections 2140ff[]9 are met .
. . . Provider payments under unfunded deferred
compensation plans are considered an allowable cost only
when actually paid to the particular employee and only to
the extent considered reasonable.

(Footnote added.) Under PRM § 2140.3, a provider must also:

[a]dequately communicate the proposed plan to all
eligible employees, enabling them to make an informed
decision on whether to participate in the plan. A formal
plan is one that is provided for in a written agreement
executed between the provider and the participating
employees.

Additionally, the plan must be a "permanent" one that: (1) details

the method for calculating all contributions to the fund

established under the plan; (2) is funded according to the

requirements of section 2140.3B;10 (3) designates how the plan's

9
"[S]ections 2140ff" refers to Section 2140 in its entirety,
from §§ 2140.1-2140.6. Section 2140 is the entire portion of the
PRM dealing with deferred compensation.
10
Section 2140.3B, entitled "Funding of Deferred Compensation
Plans", describes in detail the recognized ways of funding a DCP,
including commercial insurance, trust funds, and custodial bank
accounts.

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assets are to be protected; (4) provides the requirements for

benefits to vest; (5) gives the basis for the compensation of the

amount of the benefits to be paid; and (6) will continue regardless

of normal fluctuations in the provider's economic experience. PRM

§ 2140.3.

Insofar as these sections effect neither a substantive

change in the regulations nor the Medicare Act, they constitute

valid interpretive rules. While neither the Medicare Act nor the

subsequent regulations specify the requirements for DCPs, this

omission does not mean that there can be no such requirements. In

Guernsey, the Court stated that "[w]e also believe it was proper

for the Secretary to issue a guideline or interpretive rule" in the

form of a section of the PRM. 514 U.S. at 97.

The Medicare Act states that "[t]he reasonable cost of

any services shall be the cost actually incurred, excluding

therefrom any part of incurred cost found to be unnecessary in the

efficient delivery of needed health services." 42 U.S.C. §

1395x(v)(1)(A). The Act grants the Secretary broad discretion in

determining what is a "reasonable cost" under the Act, 42 U.S.C. §

1395x(v)(1)(A) ("In prescribing the regulations referred to in the

preceding sentence, the Secretary shall consider . . . ."), and in

determining what information is required from providers as a

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condition of payment, 42 U.S.C. § 1395g(a).11 The statute provides

a broad definition of "reasonable cost":

The reasonable cost of any services shall be the cost
actually incurred, excluding therefrom any part of
incurred cost found to be unnecessary in the efficient
delivery of needed health services, and shall be
determined in accordance with regulations establishing
the method or methods to be used, and the items to be
included, in determining such costs for various types or
classes of institutions, agencies, and services. . . .

42 U.S.C. § 1395x(v)(1)(A).

Regulations promulgated by the Secretary to implement the

Act state that reimbursement of these costs is "subject to

principles relating to specific items of revenue and cost." 42

C.F.R. § 413.9(a). The burden of proof is on the provider seeking

reimbursement to demonstrate whether a cost is eligible for

reimbursement. 42 C.F.R. §§ 413.20, 413.24. Payments to providers

"must be based on the reasonable cost of services covered under

Medicare and related to the care of beneficiaries." 42 C.F.R. §

413.9(a). Additionally, providers must maintain sufficient

financial records and statistical data for the accurate

determination of reimbursable costs for services to beneficiaries

11
42 U.S.C. § 1395g(a) states in relevant part:

The Secretary shall periodically determine the amount
which should be paid under this part to each provider of
services with respect to the services furnished by it .
. . . [N]o such payments shall be made to any provider
unless it has furnished such information as the Secretary
may request in order to determine the amounts due such
provider under this part for the period with respect to
which the amounts are being paid or any prior period.

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using "[s]tandardized definitions, accounting, statistics, and

reporting practices that are widely accepted in the hospital and

related fields." 42 C.F.R. § 413.20(a).

Given the enormous variety of payments to providers that

the Secretary considers in making reimbursement decisions, the

regulations that the Secretary has issued to explain "reasonable

cost" use general language by necessity. For example, 42 C.F.R. §

413.9 defines "necessary and proper costs", the type of costs at

issue here, as: "costs that are appropriate and helpful in

developing and maintaining the operation of patient care facilities

and activities. They are usually costs that are common and

accepted occurrences in the field of the provider's activity." To

give content to the concept of reasonable cost, the Manual details

the specifics of reimbursement.

The deferred plan specifications found in the Manual,

specifically §§ 2140.1-2140.3, do not contradict or conflict with

the requirements articulated in the Medicare Act and its

regulations. They detail the requirements for determining and

confirming reasonable costs under a DCP, pursuant to the

requirements of the regulations. These interpretive rules are not

beyond the pale of what other courts have found acceptable. See,

e.g., Cmty Hosp. of Monterey Peninsula v. Thompson, 323 F.3d 782,

790-93 (9th Cir. 2003) (holding that the PRM's allowable debt

reimbursements were neither arbitrary nor capricious); Mt. Sinai

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Hosp. Med. Ctr. v. Shalala, 196 F.3d 703, 709 (7th Cir. 1999)

(concluding that PRM requirements that mandate providers collect

Medicare and non-Medicare debts with the same methods were

reasonable and not violative of the APA); see also Creighton Omaha

Reg'l. Health Care Corp. v. Bowen, 822 F.2d 785 (8th Cir. 1987);

St. Mary's Hosp. of Troy v. Blue Cross and Blue Shield Assoc., 788

F.2d 888 (2d Cir. 1986). These courts accorded deference to the

Secretary's interpretive provisions contained in the Manual, and

upheld disallowances of Medicare costs based on those provisions,

despite the fact that those provisions were not expressly stated in

the regulations.

We conclude that §§ 2140.1-2140.3 are valid interpretive

rules. As a result, the Plan must satisfy the specific

requirements found in these provisions in order to qualify for

reimbursement.

C. The Administrator's decision

Finally, using the reasoning of the Board, Plaintiff

contests the district court's decision to affirm the

Administrator's decision. The Board reversed UGS's adjustments to

VNA's reimbursement, reasoning that the Plan "substantially

complied" with the Manual's requirements and any non-compliance of

the Plan to the requirements set forth in the Manual was

de minimus.

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 Plaintiff asserts that the strict application of the

Manual is inequitable, and that the Board's more relaxed

"substantial compliance" approach is proper. Here, we have found

the applicable sections of the Manual to be valid interpretive

rules implementing the Medicare Act and the Secretary's

regulations. The Secretary is charged with administering "a

complex and highly technical regulatory program in which the

identification and classification of relevant criteria necessarily

require significant expertise and the exercise of judgement

grounded in policy concerns." Thomas Jefferson Univ., 512 U.S. at

513 (internal citations and quotation marks omitted). Because the

manner in which the Manual is implemented is so integral to its

operation, it would be odd not to defer to the Secretary's method

of applying those rules, as well as those rules themselves. We,

therefore, find Plaintiff's objection to the Administrator's

"strict application" approach unpersuasive. The district court's

ruling affirming the Administrator's decision was correct.

Affirmed.

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 Appendix: Glossary

Name of Entity or Acronym Description
Document
Visiting Nurse VNA Plaintiff-Appellant
Association in this case
Centers for Medicare CMS Section of HHS that
and Medicaid administers
Medicare, and a
Defendant-Appellee
United Government UGS The intermediary
Services that performed the
initial audit of
VNA's deferred
compensation plan
Provider PRRB Entity that decides
Reimbursement Review appeals of initial
Board reimbursement
decisions
Deferred DCP The type of employee
Compensation Plan benefit plan at
issue in this case,
an arrangement in
which a portion of
an employee's income
is paid out at a
date after which
that income is
actually earned
Provider PRM Document at issue in
Reimbursement Manual this case,
containing the
Secretary's
guidelines for
implementing the
Medicare Act and
regulations,
including the
requirements a DCP
must meet in order
to be eligible for
reimbursement

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