detailed findings and assurances, it still must analyze any proposed revisions to ensure that they comply with the statutory language.
We can deal summarily with defendant's motion concerning Rite Aid's "substantive" claim that the revised reimbursement rates are too low to satisfy the statutory requirements. Whether the rates are consistent with efficiency, economy, and quality of care requires further development of the record.
Defendant's motion for judgment on the pleadings concerning plaintiff's procedural and substantive claims under 42 U.S.C. § 1396a(a)(30)(A) concerning the methodology for reaching the new reimbursement rates and concerning the propriety of the rates themselves will be denied.
2. Medical Care Advisory Committee
In Count I plaintiff also claims defendant failed to consult with MAAC, Pennsylvania's medical care advisory committee. In addition to ensuring the opportunity for public participation in the rate change process, the regulations accompanying the Medicaid Act also require consultation with a medical care advisory committee. See 42 C.F.R. § 431.12(e). According to this regulation, "The committee must have an opportunity for participation in policy development and program administration, including furthering participation of recipient members in agency programs." Id. The Department admits that MAAC did not meet between October 24, 1994 and October 1, 1995. (Compl. at P 24; Answer at P 24). The extent of any consultation cannot be determined at this early stage of the case. Consequently, defendant's motion for judgment on the pleadings with respect to this alleged violation of the regulation will be denied.
III. Count II: Public Notice
Both defendant and plaintiff have filed motions for judgment on the pleadings for each portion of Count II. In that Count, Rite Aid alleges three distinct violations of the public notice requirements found in 42 C.F.R. § 447.205. First, Rite Aid claims that the Department did not provide public notice of any "proposed" changes to the rates as required by § 447.205(a). (Compl. at P 17, 20). Second, Rite Aid asserts that the defendant did not publish notice of the change 60 days before the effective date. (Compl. at P 19). According to Rite Aid this violates § 447.205. (Pl. Br. in Opp'n of Def. Mot. for J. on the Pleadings at 22-26). Third, Rite Aid contends that the content of the Department's notice was deficient. (Compl. at PP 21-23).
The Department, at the outset, asserts that HCFA's approval of the amended State Plan is sufficient to support its motion on all aspects of Count II. Defendant's view is misplaced. Agency approval of the Plan will not absolve the Department if the facts reveal that defendant did not comply with the regulations. Although courts grant deference to an agency's interpretation of its own regulations, we retain the ability and duty to apply the law. See, e.g., St. Margaret Mem'l Hosp. v. NLRB, 991 F.2d 1146, 1154 (3d Cir. 1993); Mississippi Hosp. Ass'n, Inc. v. Heckler, 701 F.2d 511, 520-21 (5th Cir. 1983). Given the record in this case, we cannot rely solely on HCFA's approval of the amended plan to decide that the Department, or HCFA, complied with the law.
1. Publication of the "Proposed" Change
Rite Aid alleges that while the Department published a public notice of changes to the regulations, it did not do so for any "proposed" change. According to Rite Aid, the Department only provided public notice of the final change to the regulations prior to the October 1, 1995 effective date. (Compl. at P 20). The regulations clearly require notice of any "proposed" change. Section 447.205(a) states that "the agency must provide public notice of any significant proposed change in its methods and standards for setting payment rates."
Defendant contends that its notice of August 26, 1995, satisfied this requirement. See 25 Pa. Bull. at 3540. This notice stated that the Department "will amend" the reimbursement rates and provided a brief synopsis of the changes. Id. Defendant argues that the regulations were still "proposed" on August 26, 1995, since they were not deemed adopted by Pennsylvania's Independent Regulatory Review Commission ("IRRC") until September 8, 1995. (Br. of Def. in Opp'n to Rite Aid of Pa. Mot. for J. on the Pleadings at 3). Rite Aid counters that the regulations were final because the agency closed its public comment period, completed its review, and submitted the regulations to the IRRC as "final-form" regulations. If they were final, Rite-Aid claims the notice does not satisfy § 447.205(a).
The IRRC was created by the Regulatory Review Act of 1982. See Pa. Stat. Ann. tit. 71, § 745.1. The Act itself sets forth the legislative intent. It states in relevant part:
The General Assembly finds that it must provide a procedure for oversight and review of regulations adopted pursuant to this delegation of legislative power to curtail excessive regulations and to establish a system of accountability so that the bureaucracy must justify its use of the regulatory authority before imposing hidden costs upon the economy of Pennsylvania. It is the intent of this act to establish a method for continuing and effective review, accountability and oversight. It is the further intent of this act to provide for primary review by a commission with sufficient authority, expertise, independence and time to perform that responsibility. It is the further intent of this act to provide ultimate review by the General Assembly of those regulations.
Id. at § 745.2. The IRRC has the authority to approve or disapprove any regulation subject to the right of the General Assembly to overrule it. Id. at §§ 745.5-745.7. In addition, the Governor has the right to veto any General Assembly resolution. Id. at § 745.7(d).
In carrying out its duties, the IRRC may hold "public hearings." Id. at 745.11. Moreover, it "shall act as a clearinghouse for complaints, comments and other input from members of the General Assembly and from the public regarding regulations, proposed regulations and administrative procedures." Id. at § 745.12.
Neither party provides support for its definition of "proposed." Theoretically, a regulation could be proposed any time before its effective date. Defendant argues it is proposed pending final approval by the various Commonwealth entities as required by law. Rite Aid asserts the regulation is no longer proposed once the Department closes its public comment period and submits the regulation for further approval. We need not decide the outer boundaries of what may constitute a "proposed" regulation. We conclude that a "proposed" change under the federal regulations means, at the very least, any change that is still subject to approval or disapproval by any state agency before it can become effective. On August 26, 1995, when the notice of a change was published, the IRRC, which is open to public comment, had yet to pass upon and approve the amended regulation. This publication clearly was not the last step in the regulatory process before implementation.
The August 26, 1995 publication gave notice of a "proposed change," satisfying the requirement of § 447.205(a). We will grant defendant's motion for judgment on the pleadings.
2. Public Comment Period
Each side moves for judgment on the pleadings in connection with Rite Aid's claim concerning the length of the public comment period. The federal regulations require that the notice "must ... be published before the proposed effective date of the change." § 447.205(d)(1). Rite Aid argues that the Department's failure to provide 60 days of public comment before changing the reimbursement rates violated Pennsylvania regulations found in 55 Pa. Code § 1101.70 (West 1997). (Compl. at P 19; Answer at P 19). It provides:
Federal regulations at 42 CFR 447.205 require the Department ... to give a 60 day public notice of proposed Statewide changes in any method or level of MA [Medical Assistance] reimbursement that would affect program expenditures by 1% or more during the 12 months following the effective date of the change.