YALE-NEW HAVEN HOSPITAL, Giovanni Avallone, Fardi Balk, Louis Bonaventura, Joseph Bottone, Charles Bradbury, Mary Caccone, Sally Cassidy, John Christie, Mary Coons, Stanley Cornell, Charles Deluca, Theodore Demmerte, Ralph Derubertis, Richard Flaig, Karl Fritz, Edward Grosso, Alfred Hamann, William Horodeck, Warren Ivey, Marion Johnson, Alvin Karchere, Andrew Mancuso, Charles Mattia, Vincent McCarthy, James Miller, John Nurczyk, Romano Orlando, Bert Scott, Joseph Telesco, Stanley Gingolaski, Edith Howard, Raymond Hovino, Edward Jurczak, John King, Sherman Platt, Philip Kishel, Louise Kocak, Stephanie Lebell, Thomas Prall, Solon Robbins, Harry Sands, Felix Snopkoski, David Sprague, Joseph Vanek, Jack Warren, James Waters, Plaintiffs-Appellees, Cross-Appellants, v. Michael O. LEAVITT, U.S. Department of Health Human Services, Defendant-Appellant, Cross-Appellee.
Docket No. 05-1224-CV-LEAD
Docket No. 05-1434-CV-XAP
United States Court of Appeals, Second Circuit.
Argued: February 6, 2006. Decided: November 16, 2006.
470 F.3d 71
Leonard C. Homer (Ray M. Shepard, on the brief), Ober, Kaler, Grimes & Shriver, Baltimore, MD, for Plaintiffs-Appellees, Cross-Appellants.
Before JACOBS, Chief Judge, POOLER, and GIBSON,s Circuit Judges.
JACOBS, Chief Judge.
Michael O. Leavitt, the Secretary of the United States Department of Health and Human Services (the “Secretary” of “HHS“), appeals from the decision of the United States District Court for the District of Connecticut (Dorsey, J.), which reversed on motion for summary judgment a final decision of the Secretary denying to Yale-New Haven Hospital (“Yale“) Medicare coverage for treatment involving investigational cardiac devices provided to 48 patients. The Secretary denied reimbursement on the ground that the devices had not received premarket approval from the FDA; in the district court, Yale successfully argued that the denial of the claims on the categorical ground of FDA classification was predicated on a rule altering the previous Medicare practice of conducting device-by-device review of safety and efficacy, and that the rule change was improperly adopted. We agree with the district court that the new rule is unenforceable because the Secretary did not satisfactorily explain his reasons for its promulgation. Nevertheless, we vacate the judgment of the district court (which reversed) and remand the case to the district court with instructions to remand to the Secretary for proceedings consistent with this opinion.
I
A. Medicare Reimbursement Procedures
Medicare, which at the time of the events at issue was administered by the Health Care Financing Administration (“HCFA“)1 on behalf of the Secretary, see Cedars-Sinai Med. Ctr. v. Shalala, 939 F.Supp. 1457, 1460 (C.D.Cal.1996), is the federally subsidized health insurance program for the elderly and disabled established by Title XVIII of the Social Security Act,
Under certain circumstances, see
C. Medicare Coverage Standards
With a few exceptions, the Medicare Act does not specify which devices are covered or excluded from coverage. Broad wording excludes from Medicare Part A coverage “any expenses incurred for items or services [which] are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.”
The Medicare reimbursement manuals issued to fiscal intermediaries in July 1986, see Yale-New Haven Hosp., 162 F.Supp.2d at 59, announced that only medical devices that had received FDA premarket approval for commercial distribution were covered under Medicare. The FDA is authorized to regulate medical devices by the Medical Devices Amendments Act of 1976 (“MDA“),
In 1980, the FDA promulgated regulations establishing an investigational device exemption (“IDE“), which authorizes the lawful sale—to hospitals and physicians, for use in clinical trials—of certain devices that have not obtained premarket approval. See
Devices Not Approved by FDA.—Medical devices which have not been approved for marketing by the FDA are considered investigational by Medicare and are not reasonable and necessary for the diagnosis or treatment of illness or injury . . . . Program payment, therefore may not be made for medical procedures or services performed using devices which have not been approved for marketing by FDA.
Yale-New Haven, 162 F.Supp.2d at 59. Prior to the FDA‘s adoption of the IDE in 1980 (and promulgation of the per se rule against IDE reimbursement in the 1986 Manual Provision), Medicare had issued coverage guidelines for “investigational” (or “experimental“) medical devices in a letter to fiscal intermediaries in 1977 (“1977 intermediary letter“). The letter instructed Medicare fiscal intermediaries to respond to coverage inquiries concerning investigational medical devices by explaining that:
a basic consideration [in making a coverage decision] is whether the service has come to be generally accepted by the professional medical community as an effective and proven treatment for the condition for which it is being used. If it is, Medicare may make payment. On the other hand, if the service or treatment is one that is not yet generally accepted, is rarely used, novel or relatively unknown, then authoritative evidence must be obtained to establish it is safe and effective before Medicare may make payment.
The 1986 Manual Provision, or similar initiatives, evidently provoked some congressional disapproval. A (non-retroactive) 1987 amendment to the Medicare Act,
In 1995, the 1986 Manual Provision was superseded by published final regulations governing coverage of IDE devices (“1995 Regulations“). Under the 1995 Regulations, the Medicare coverage determination was made to depend on an exquisite adjustment in the FDA status-classification system, which was developed by the FDA in conjunction with HCFA. See
This case arises out of the efforts of the Secretary to recover $1.5 million paid to reimburse Yale for 49 Medicare claims (involving 48 individual beneficiaries) that Yale submitted between 1994 and 1995. All the claims were on behalf of patients participating in clinical trials who had received implantable cardioverter-defibrillator devices (ICDs), which are cardiac devices for treatment of an irregular heart rhythm. The FDA had granted these devices IDEs, but had not conferred premarket approval.
These claims have been embroiled in prolonged litigation. Yale, along with 131 other hospitals, was a defendant in a sealed qui tam action brought in 1994, alleging that the hospitals violated the False Claims Act by knowingly submitting false Medicare claims for payment of services involving investigational cardiac devices.4 In addition, Yale and 24 other hospitals filed a separate action challenging the 1986 Manual Provision as unlawful under the Administrative Procedure Act (“APA“). See Cedars-Sinai, 939 F.Supp. at 1459. In an April 1996 decision, the district court agreed with the hospitals, ruling that the 1986 Manual Provision was a legislative rule that was invalid because the Secretary failed to promulgate it pursuant to notice-and-comment rulemaking under
The allegations in the qui tam action prodded the Secretary to seek information from Yale about Medicare claims submitted for services involving ICDs. Yale‘s Medicare fiscal intermediary ultimately determined that Yale had been improperly reimbursed for treatment involving the ICDs, and informed Yale that the erroneous payments would be recouped from the ongoing stream of Medicare reimbursements. Yale, joined by the Medicare beneficiaries who received ICDs, successfully requested hearings before an ALJ. In June 1996, the ALJ—observing that the 1986 Manual Provision had been held invalid in Cedars-Sinai—found that Yale had presented sufficient evidence to demonstrate that the ICDs were “reasonable and necessary” to each beneficiary‘s treatment. Accordingly, the ALJ ruled in favor of Yale and the beneficiaries on each of the claims. The Appeals Council reviewed the ALJ‘s decision sua sponte, and reversed the ALJ in a single consolidated decision issued in October 1999. By that time, the Ninth Circuit had vacated the district court decision in Cedars-Sinai that had invalidated the 1986 Manual Provision (the Appeals Council having stayed its decision to await the Ninth Circuit ruling). The Appeals Council sustained the denial of Medicare reimbursement on the grounds that the 1986 Manual Provision (i) remained in effect as a valid rule, (ii) was applicable to the devices at issue, and (iii) was entitled to deference. See Appeals Council Decision at 5-6. In the alternative, the Appeals Council ruled that a remand to the ALJ would otherwise be needed because the record evidence did not support the conclusion that the devices had been shown to be “safe and effective” or “generally accepted.” Id. at 6 n. 3.
Yale and the Medicare beneficiaries sought judicial review of the Secretary‘s decision. On cross-motions for summary judgment, the district court granted judgment for Yale, reversed the Secretary‘s recoupment decision, and directed the Secretary to reimburse Yale. See Yale-New Haven Hosp., Inc. v. Shalala, 2004 WL 5040035 (D.Conn. Dec. 29, 2004) (order granting summary judgment) (Dorsey, J.). As a threshold matter, the district court (following its reasoning in In re Cardiac Devices, 221 F.R.D. at 350-51) decided that the manual provision was promulgated and applied as a rule that was interpretive, and as a result was not subject to the procedures governing notice-and-comment rulemaking. However, the district court went on to hold that: (i) the 1986 Manual Provision was entitled to little deference because the categorical reliance on FDA premarket approval in determining Medicare coverage of medical devices constituted a shift from historical practice (i.e., the 1977 letter) that the Secretary did not adequately explain; (ii) in light of the limited deference owed to the 1986 Manual Provision, the Appeals Council failed to explain adequately its reasons for following the FDA‘s premarket approval decision in determining that Yale‘s claims were not covered by Medicare, thus rendering that determination arbitrary and capricious; and (iii) substantial evidence did not support denial of Yale‘s claims because the unrebutted evidence submitted by Yale was sufficient to demonstrate that the ICDs in question had achieved the requisite level of safety and acceptance in the medical community. Finally, the court ruled that remand for further evidentiary findings by the agency was not warranted because, under the circumstances, it would be inappropriate to afford the agency “a second bite at the apple.”
II
“On appeal from a grant of summary judgment in a challenge to agency action under the APA, we review the administrative record and the district court‘s decision de novo.” Bellevue Hosp. Ctr. v. Leavitt, 443 F.3d 163, 173-74 (2d Cir. 2006); see Abbott Radiology Assocs. v. Shalala, 160 F.3d 137, 139 (2d Cir.1998).
The district court‘s jurisdiction over Yale‘s challenge to the Secretary‘s determination arises under
Section 1395ff(b) specifies
Yale has challenged the validity of the 1986 Manual Provision on the grounds that
(i) it is a legislative rule that is void because its promulgation did not comply with the notice-and-comment rulemaking requirements of the APA,
(ii) it is an impermissible interpretation of the Medicare Act, see Chevron U.S.A., Inc. v. Natural Resources Defense Council Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984); Skidmore v. Swift & Co., 323 U.S. 134, 139-40, 65 S.Ct. 161, 89 L.Ed. 124 (1944); United States v. Mead Corp., 533 U.S. 218, 228, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001); and
(iii) in promulgating the 1986 Manual Provision, the Secretary acted arbitrarily and capriciously,
We conclude that the 1986 Manual Provision was adopted in a manner that is arbitrary and capricious. This conclusion moots Yale‘s other challenges.7
A. Arbitrary and Capricious Review Under State Farm
The inquiry into whether the promulgation of the 1986 Manual Provision was arbitrary and capricious is guided by the criteria established in State Farm:
the agency must examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made. . . . Normally, an agency rule would be arbitrary and capricious if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise. The reviewing court should not attempt itself to make up for such deficiencies; we may not supply a reasoned basis for the agency‘s action that the agency itself has not given. We will, however, uphold a decision of less than ideal clarity if the agency‘s path may reasonably be discerned.
463 U.S. at 43, 103 S.Ct. 2856 (internal citations omitted); see also Martin v. Occupational Safety and Health Review Comm‘n, 499 U.S. 144, 158, 111 S.Ct. 1171, 113 L.Ed.2d 117 (1991) (holding that “Secretary‘s interpretation of an ambiguous regulation is subject to the same standard of substantive review as any other exercise of delegated lawmaking power,” including review of “quality of the Secretary‘s elaboration of pertinent policy considerations” under State Farm); Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971), overruled on other grounds by Califano v. Sanders, 430 U.S. 99, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977) (applying arbitrary and capricious review under
when an agency reverses its course, a court must satisfy itself that the agency knows it is changing course, has given sound reasons for the change, and has shown that the rule is consistent with the law that gives the agency its authority to act. In addition, the agency must consider reasonably obvious alternatives and, if it rejects those alternatives, it must give reasons for the rejection, sufficient to allow for meaningful judicial review. . . . Even in the absence of cumulative experience, changed circumstances or judicial criticism, an agency is free to change course after reweighing the competing statutory policies. But such a flip-flop must be accompanied by a reasoned explanation of why the new rule effectuates the statute as well as or better than the old rule.
N.Y. Council, Ass‘n of Civilian Technicians v. Fed. Labor Relations Auth., 757 F.2d 502, 508 (2d Cir.1985) (internal citations and quotation marks omitted).
The record reflects that, prior to the 1986 Manual Provision, fiscal intermediaries exercised some discretion (albeit narrow) in determining coverage for investigational medical devices. The 1977 intermediary letter instructed fiscal intermediaries that, in determining coverage of an investigational device that was neither specifically covered nor excluded from coverage, the primary consideration is whether the device has been demonstrated as “generally accepted by the professional medical community as an effective and proven treatment for the condition for which it is being used.” However, this letter also explained that Medicare would pay for an investigational or experimental treatment upon the receipt of authoritative evidence that the treatment is “safe and effective.” Thus coverage was available for a device that was safe and effective even if the device was not generally accepted within the medical community.
The 1986 Manual Provision—telling intermediaries that there is no coverage unless treatments received FDA premarket approval—was an evident change of course. Despite some hedging elsewhere,8 the 1986 Manual Provision was cast in per se terms, and would at minimum contractually bind fiscal intermediaries and be entitled to deference from the Secretary in claim adjudications. See Appeals Council Decision at 6; see also Warder v. Shalala, 149 F.3d at 82 (“`[A]n interpretative rule binds an agency‘s employees, including its ALJs, but it does not bind the agency itself.‘” (quoting Kenneth C. Davis & Richard J. Pierce, Jr., Administrative Law Treatise § 6.3, at 104 (3d ed. 1996 & Supp. 1997))).
The Secretary contends that 1986 marked no change of position, that the 1986 Manual Provision merely expressed Medicare‘s historical de facto practice, and that therefore nothing required explanation. According to the Secretary, Medicare coverage determinations were made on a device-by-device basis prior to 1976; however, as of that year—when Congress‘s enactment of the MDA conferred statutory authority on the FDA to regulate new medical devices—fiscal intermediaries were instructed to make coverage determinations for medical devices according to the FDA‘s premarket determinations.
This narrative seems at odds with the timeline in this case: why did ten years elapse between the conferral of authority on the FDA by the MDA (in 1976) and the promulgation of the 1986 Manual Provision? To answer that question, the Secretary moved in the district court to supplement the administrative record with declarations from senior agency officials.9 The district court granted Yale‘s motion to strike the declarations, see Yale-New Haven Hosp., Inc. v. Thompson, 198 F.Supp.2d 183, 184 (D.Conn.2002) (order granting motion to strike), and we affirm on the ground that the declarations are not admissible to supplement a record that is otherwise devoid of explanation for the Secretary‘s action.
Generally speaking, after-the-fact rationalization for agency action is disfavored. See SEC v. Chenery Corp., 318 U.S. 80, 87, 63 S.Ct. 454, 87 L.Ed. 626 (1943) (“The grounds upon which an administrative order must be judged are those upon which the record discloses that its action was based.“); Citizens to Preserve Overton Park, 401 U.S. at 419, 91 S.Ct. 814 (internal citations omitted) (criticizing lower court‘s reliance on “post hoc” litigation affidavits in reviewing agency action); see also Forest Watch v. United States Forest Serv., 410 F.3d 115, 119 (2d Cir.2005); Envtl. Def. Fund, Inc. v. Costle, 657 F.2d 275, 284 (D.C.Cir.1981) (“It is well settled that judicial review of agency action is normally confined to the full administrative record before the agency at the time the decision was made. . . . not some new record completed initially in the reviewing court.“). At the same time, an agency may supplement the administrative record before the reviewing court in some circumstances—among them, if “the absence of formal administrative findings makes such investigation necessary in order to determine the reasons for the agency‘s choice.” Nat‘l Audubon Soc‘y v. Hoffman, 132 F.3d 7, 14 (2d Cir.1997) (citing Overton Park, 401 U.S. at 420, 91 S.Ct. 814); see also Camp v. Pitts, 411 U.S. 138, 143, 93 S.Ct. 1241, 36 L.Ed.2d 106 (1973) (“If . . . there was such failure to explain administrative action as to frustrate effective judicial review, the remedy [is] . . . to obtain from the agency, either through affidavits or testimony, such additional explanation of the reasons for the agency decision as may prove necessary.“); Action on Smoking & Health v. Civil Aeronautics Bd., 713 F.2d 795, 798 n. 2 (D.C.Cir.1983) (“Where, as in Camp . . ., the agency‘s explanation is required to be responsive to the purposes of the enabling statute, rather than to a record developed through mandatory hearings or public comments, post hoc explanations, while undesirable, are not fatal.“) (internal citation omitted); see also Shalala v. Ill. Council on Long Term Care, 529 U.S. 1, 23-24, 120 S.Ct. 1084, 146 L.Ed.2d 1 (2000) (“[A] court reviewing an agency determination under
True, a rule that is interpretive is subject only to the basic procedural requirements imposed by arbitrary and capricious review under
The Secretary asserts that the rationales for the 1986 Manual Provision are “clearly discernible.” See also State Farm, 463 U.S. at 43, 103 S.Ct. 2856. In light of the more searching review occasioned by the Secretary‘s shift in course, we disagree.
1. The Secretary‘s Failure to Explain Linkage to FDA Standard
We cannot clearly discern why the standard adopted by the Secretary was FDA premarket approval, given that such a standard likely excludes numerous devices that would be the most appropriate treatments for certain patients.
The Secretary argues that his reasons for relying on the FDA are sufficient because they are implicit in the nature and scope of the FDA‘s regulatory power. This argument has some force. The Medicare statute itself does not limit the Secretary‘s choice of experts, and reliance on the FDA would make sense: the FDA is within HHS, and thus subject to the Secretary‘s direct supervision and control, cf. Marsh v. Oregon Nat. Res. Council, 490 U.S. 360, 378, 109 S.Ct. 1851, 104 L.Ed.2d 377 (1989) (“[The] agency must have discretion to rely on the reasonable opinions of its own qualified experts . . . .“); more important, the FDA exercises exclusive regulatory authority to determine—through a process that is “rigorous“—whether Class III medical device such as the ICDs at issue in this case are sufficiently safe and effective to be permitted on the market. Medtronic, 518 U.S. at 477, 116 S.Ct. 2240 (“Before a new Class III device may be introduced to the market, the manufacturer must provide the FDA with a `reasonable assurance’ that the device is both safe and effective.“) (quoting
Moreover, Congress has shown interest in reining in Medicare‘s rapidly rising costs.12 So it would have been reasonable for the Secretary to have considered cost-control in determining that Medicare should not cover potentially expensive and unproven investigatory treatments. See Bodnar v. Sec. of Health and Human Serv., 903 F.2d 122, 125 (2d Cir.1990) (observing that cost-effectiveness is consideration in determining whether services are “not reasonable and necessary“). At the same time, the force of a cost-control rationale for the 1986 Manual Provision is undercut by legislation in 1983 that, through implementation of the Prospective Payment System (“PPS“), see
No doubt, these inquiries are less exacting than the premarket approval process, which considers at least four factors in determining the safety and efficacy of a device: (1) the condition of the device‘s intended beneficiaries, (2) the circumstances of the device‘s use, (3) the probable risks and benefits of the device, and (4) the device‘s reliability, see
The Secretary‘s investigational drug policy, as set out in the 1977 intermediary letter, allowed Medicare coverage for investigational drugs lacking FDA premarket approval that had been approved by a hospital committee and that were administered to inpatients as part of a course of treatment that was itself covered. The 1995 Regulations, which afforded coverage for IDE devices that are refinements or replications of approved technology, were issued in light of the “increasing recognition . . . that there are devices that are refinements of existing technologies or replications of existing technologies by other manufacturers” that “could be viewed as `reasonable’ and `necessary’ under Medicare.” 60 Fed.Reg. 48418. We recognize that the Secretary cannot be expected to forecast “increasing recognition” of emerging trends and that the FDA classification of IDE devices into Categories A and B—upon which the 1995 Regulations rely—first became effective in September of 1995 (pursuant to an agreement between the FDA and the HCFA). See 61 Fed. Reg. 7011. Nevertheless, it seems unlikely that the Secretary was unaware in 1986 of a possible basis for affording coverage to the class of investigational devices that are refinements or replications of existing technologies. More generally, it is hard to say (in light of these alternative coverage methodologies) that the rationale for the Secretary‘s sole focus on FDA premarket approval, although unexpressed, should be intuited and deemed obvious.
The Secretary also fails to explain how adoption of a per se coverage standard comports with congressional purposes in enacting the Medicare Act.
It may well be that sound considerations justify the adoption of a per se approach to coverage determinations. As we reasoned in Goodman v. Sullivan, considerations of administrative convenience afford the Secretary leeway to promulgate such per se rules. 891 F.2d 449, 451 (2d Cir.1989) (“Because the government could not possibly adjudicate on a case-by-case basis whether a given procedure is `not reasonable and necessary,’ the Secretary, in order to execute faithfully the mandates of the Medicare statute, necessarily must paint with a broad brush by issuing regulations specifying certain services as per se not reasonable or necessary . . . .“). But there are other considerations. Legislative history of the Medicare Act suggests that Congress wanted Medicare patients to have access to the medical care most suited to their individual needs, see S.Rep. No. 89-404, at 1989 (1965) (explaining how determination as to whether specific treatments are reasonable and necessary is based on needs of individual patient), including innovative treatments, see S.Rep. No. 89-404, at 1967 (stating that, under Medicare, “[t]he reasonable cost of service ordinarily provided to inpatients by hospitals (other than certain items discussed subsequently), including new services and techniques as they are adopted in the future, would be paid for“). This legislative history does not bind the Secretary to provide Medicare coverage for every or any new medical device that is suited to an individual patient‘s needs, see Goodman, 891 F.2d at 451; but the statute arguably reflects a legislative preference to afford coverage, in the absence of a substantial reason to the contrary.
The unanswered questions raised by the 1986 Manual Provision—particularly in light of the Secretary‘s historical practice—demonstrate that it was not the type of self-explanatory, unremarkable application of governing law that would allow a reviewing court to exercise its limited authority to uphold an agency‘s action based on justifications that the court discerns for itself. See State Farm, 463 U.S. at 43, 103 S.Ct. 2856. And while an agency is obliged neither to answer all questions nor to pose them, the 1986 Manual Provision constituted the type of policy choice that Medicare—while it likely has the authority to undertake—must explain.
D. Remedy
Because the Secretary acted arbitrarily and capriciously under
* * *
The judgment of the district court is vacated, and the case is remanded to the district court with instructions to remand to the Secretary for proceedings consistent with this opinion.
POOLER, Circuit Judge, concurring.
I concur in the judgment and in the analysis of the majority opinion with the exception of its basis for holding that the district court properly excluded declarations of former Health and Human Services officials. See Majority op. 82-83. I believe the holding on this issue—that extra-record materials may be admitted only if they “illuminate[] the original record and do[] not advance new rationalizations for the agency‘s action“—creates an unnecessary tension with Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971).1-1 Id. 83. In Overton Park, petitioners contended that a decision of the Secretary of Transportation was invalid because the Secretary failed to make formal findings. Id. at 408, 91 S.Ct. 814. The Supreme Court rejected this argument. Id. at 409, 417, 91 S.Ct. 814. However, it also directed remand to the district court. Id. at 420, 91 S.Ct. 814. The Court held that on remand “it may be necessary for the District Court to require some explanation in order to determine if the Secretary acted within the scope of his authority and if the Secretary‘s action was justifiable under the applicable standard.” Id. The Court explained that where the administrator has made findings, it is ordinarily not permissible to look outside the record but added “here there are no such formal findings and it may be that the only way there can be effective judicial review is by examining the decisionmakers themselves.” Id.; see also Nat‘l Audubon Soc‘y v. Hoffman, 132 F.3d 7, 14 (2d Cir.1997) (“[A]n extra-record investigation by the reviewing court may be appropriate . . . where the absence of formal administrative findings makes such investigation necessary in order to determine the reasons for the agency‘s choice.“).
There are no formal findings explaining the Secretary‘s adoption of the 1986 Manual Provision. Therefore, Overton Park would give the district court discretion to admit and consider the declarations even if the declarants urge reasons for promulgating the provision that are not in the administrative record. Thus, I believe that the majority‘s reason for upholding the district court‘s evidentiary ruling is incorrect.
Further, the declarations are somewhat conclusory; the declarants contend that the Health Care Financing Administration, before 1986, notified its intermediaries that devices would not be covered if they were not approved for marketing by the Food and Drug Administration but fail to indicate when the notices were made, to whom they were made, or by whom they were made. Because the declarations could and should have been offered at an earlier juncture and because they are too conclusory to be probative of the Secretary‘s policy prior to the 1986 Manual Provision, the district court did not abuse its discretion by excluding them. See Overton Park, 401 U.S. at 419, 91 S.Ct. 814 (disapproving the use of litigation affidavits on administrative review); Cf. Parker v. Reda, 327 F.3d 211, 215 (2d Cir.2003) (indicating that better practice under Federal Rules of Evidence would be to exclude conclusory statements); Hillside Amusement Co. v. Warner Bros. Pictures Distrib. Corp., 224 F.2d 629, 630 (2d Cir.1955) (holding that district court did not abuse its discretion under Federal Rules of Evidence by excluding conclusory statements).
Because the district court‘s decision not to admit the declarations was not an abuse of discretion, it is not a basis for disturbing the judgment.
Notes
60 Fed.Reg. 48418 (emphasis added). Since the 1986 Manual Provision would not have bound the Secretary, the Secretary could (if he liked) characterize the superseded rule as a mere presumption against coverage for investigational devices. However, the Secretary has brought to our attention no instance in the period 1986-95 in which a beneficiary or provider successfully challenged an adverse coverage decision with respect to a device covered by an IDE. Moreover, in denying Yale‘s reimbursement claim, the Secretary invoked the 1986 Manual Provision without conducting any independent assessment of the safety and efficacy of the devices at issue. The Secretary‘s ruling in the alternative, which accepted arguendo that the 1986 Manual Provision is invalid, engaged in some individual assessment; but that assessment was said to require remand to the ALJ for further fact-finding, and thus does not support rejection of the claims (the ruling under review on this appeal).a device categorized by the FDA as being investigational served as an indication that it was not “reasonable” and “necessary” within the meaning of the Medicare program. As a general rule, these devices currently are not covered.