 United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT



Argued November 8, 2007             Decided December 21, 2007

                         No. 06-5371

               CHIPPEWA DIALYSIS SERVICES,
                      APPELLANT

                               v.

     MICHAEL O. LEAVITT, IN HIS OFFICIAL CAPACITY AS
      SECRETARY OF HEALTH AND HUMAN SERVICES,
                      APPELLEE


                      Consolidated with
                      06-5372, 06-5373


        Appeals from the United States District Court
                for the District of Columbia
                      (No. 04cv00218)
                      (No. 04cv00219)
                      (No. 04cv00222)



    Jeffrey A. Lovitky argued the cause and filed the briefs for
appellants.

    Daniel J. Davis, Attorney, U.S. Department of Justice,
argued the cause for appellee. With him on the brief were Peter
D. Keisler, Assistant Attorney General, Jeffrey A. Taylor, U.S.
                                2

Attorney, and Thomas M. Bondy, Attorney. R. Craig Lawrence,
Assistant U.S. Attorney, entered an appearance.

   Before: HENDERSON and TATEL, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.

    Opinion for the Court filed by Circuit Judge TATEL.

     TATEL, Circuit Judge: Claiming that their patients require
atypically high-cost dialysis services, three Michigan dialysis
providers asked the Secretary of Health and Human Services to
reimburse them at higher rates than Medicare normally pays for
such services. The Secretary denied the requests, the district
court granted summary judgment to the Secretary, and the
providers now appeal. Among other things, they argue that the
standard the Secretary used to assess treatment costs qualifies as
an “interpretative rule,” “statement of policy,” and/or “guideline
of general applicability,” and therefore should have been
published in the Federal Register under the applicable statute.
Although we agree, we need not remand two of the providers’
cases because independent grounds exist to uphold the
Secretary’s decision as to them. With regard to the third
provider, we reverse and remand for further proceedings.

                                I.
     The Secretary of Health and Human Services reimburses
facilities providing dialysis services under the Medicare
program based on a “prospective determination of a rate . . . for
each mode of care based on a single composite weighted
formula.” 42 U.S.C. § 1395rr(b)(7). This “composite rate”
represents the approximate per treatment cost the Secretary
expects dialysis providers to incur for various treatments. Id.

     In unusual circumstances, providers can request exceptions
to the composite rate. Id. Under the regulations in effect at the
                                 3

time of the events at issue here, a facility providing treatment for
end stage renal disease (ESRD) could request an exception to
the composite rate if it projected it would have higher costs per
treatment than the composite rate and showed the higher costs
were attributable to certain factors, one of which, central to this
case, is “[a]typical service intensity (patient mix).” 42 C.F.R. §§
413.180(b), 413.182 (2005). To qualify for this exception, “[a]
facility must demonstrate that a substantial proportion of the
facility’s outpatient maintenance dialysis treatments involve
atypically intense dialysis services.” Id. § 413.184(a)(1).
According to the Secretary, a facility must show both an atypical
patient mix and atypically intense dialysis services, and given
that the providers nowhere challenge this interpretation, we
accept it as well. The facility bears the burden of proving it has
met the criteria and its excessive costs are reasonable. Id. §
413.180(g).

     Appellants are three Michigan dialysis providers—Alpena
Dialysis Services (“Alpena”), Northern Michigan Hospital
(“Northern”), and Chippewa Dialysis Services
(“Chippewa”)—that applied for exceptions to the ESRD
composite rate. The Centers for Medicare and Medicaid
Services (CMS), at that time known as the Health Care
Financing Administration, reviewed their exception requests.
All three providers based their exception requests on atypical
patient mix, specifically, higher than average percentages of
aged and diabetic patients. Consistent with CMS’s Provider
Reimbursement Manual (PRM), each provider sought to show
that its patients, due to their special needs, required more hours
of nursing services than did patients in other facilities. See PRM
§ 2725.1.

    CMS denied all three requests. As to atypical nursing
services, it stated that “[n]ational audited data for 1988 and
1991, the latest available, show that average direct patient care
                                4

hours . . . were 3.00 hours per treatment.” Alpena Dialysis
Servs., No. 2004-D6, Provider Reimbursement Rev. Bd. 4 (Dec.
22, 2003); N. Mich. Hosp., No. 2004-D7, Provider
Reimbursement Rev. Bd. 6 (Dec. 22, 2003); Chippewa Dialysis
Servs., No. 2004-D5, Provider Reimbursement Rev. Bd. 5 (Dec.
22, 2003). Because the per treatment hours of all three
providers fell below that level—2.78 hours for Alpena, 2.66
hours for Northern, and 2.90 hours for Chippewa—CMS
concluded they had failed to show atypical nursing services and
were thus ineligible for the exception. Alpena, No. 2004-D6, at
4; N. Mich. Hosp., No. 2004-D7, at 6; Chippewa, No. 2004-D5,
at 5.

     CMS also found that Northern and Chippewa had failed to
substantiate atypical patient mix. As to Northern, it found that
although the provider had a higher than average percentage of
patients sixty-five or older, its percentage of diabetic patients,
properly calculated, virtually matched the national average. N.
Mich. Hosp., No. 2004-D7, at 4-5. In addition, Northern’s
mortality rate and average length of stay both fell below national
averages. Id. at 5. As to Chippewa, CMS found that although
the provider served higher than average percentages of diabetic
patients and patients sixty-five or older, its average length of
stay, percentage of patients with hypertension, and average age
of patients all fell below national averages. Chippewa, No.
2004-D5, at 4. CMS made no finding about patient mix
regarding Alpena, resting its decision instead on the provider’s
failure to demonstrate atypical nursing services. Alpena, No.
2004-D6, at 3.

     Challenging (among other things) CMS’s use of the 3.0
hours per treatment standard, all three providers appealed to the
Provider Reimbursement Review Board (“Board”). At the
hearing before the Board, a CMS Health Insurance Specialist
testified as to the source of what the Board referred to as the
                                5

“3.0 hours per treatment standard.” Alpena, No. 2004-D6, at 8;
N. Mich. Hosp., No. 2004-D7, at 9; Chippewa, No. 2004-D5, at
8. According to the witness, the supporting data was “primarily
obtained from audited cost reports of freestanding ESRD
facilities for fiscal years 1988 and 1989. The data was selected
based upon a stratified random sample that was statistically
representative of freestanding facilities in the United States.”
Alpena, No. 2004-D6, at 8; N. Mich. Hosp., No. 2004-D7, at 9;
Chippewa, No. 2004-D5, at 8. Relying on various government
reports, the witness further testified that 3.5 hours was “a more
realistic standard, and that the application of the 3.0 hours
threshold in denying the Provider[s’] exception request[s] was
a very generous and liberal standard.” Alpena, No. 2004-D6, at
8; N. Mich. Hosp., No. 2004-D7, at 10; Chippewa, No. 2004-D5,
at 8.

       The Board rejected the providers’ challenge to the 3.0 hours
per treatment standard, noting that “[a]lthough the Provider[s]
cited various deficiencies in the data and methodology employed
by [CMS] in establishing the 3.0 hours per treatment standard,
. . . the Provider[s] did not present alternative data which would
support the use of another standard.” Alpena, No. 2004-D6, at
14; N. Mich. Hosp., No. 2004-D7, at 14; Chippewa, No. 2004-
D5, at 13. By contrast, CMS demonstrated that “a more realistic
contemporary standard for the duration of a dialysis session may
have increased to 3.5 hours.” Alpena, No. 2004-D6, at 13; N.
Mich. Hosp., No. 2004-D7, at 14; Chippewa, No. 2004-D5, at
13.

    The Board also affirmed CMS’s conclusion that Northern
and Chippewa had failed to show an atypical patient mix,
explaining that although the providers’ patient populations may
have contained higher than average percentages of aged and
diabetic patients, “the variations did not reflect a substantial
deviation from the national norms.” N. Mich. Hosp., No. 2004-
                                6

D7, at 13; Chippewa, No. 2004-D5, at 12. According to the
Board, the providers had also failed to consider other factors
CMS addressed in reviewing patient mix, “i.e., mortality rate,
length of stay for patients requiring inpatient admission, average
age of patient population, and individual patient diagnosis.” N.
Mich. Hosp., No. 2004-D7, at 13; Chippewa, No. 2004-D5, at
12.

     Although the Board found that CMS erred by failing to
determine whether Alpena had an atypical patient mix, it went
on to make that determination for itself. Employing the same
language it used in rejecting Northern’s and Chippewa’s
appeals, the Board found that Alpena’s higher percentages of
aged and diabetic patients “did not reflect a substantial deviation
from the national norms” and that the provider had failed to
consider other factors, “i.e., mortality rate, length of stay for
patients requiring inpatient admission, average age of patient
population, and individual patient diagnosis.” Alpena, No.
2004-D6, at 12. Accordingly, the Board affirmed the denial of
Alpena’s request.

     The three providers sought review in the district court, and
both sides moved for summary judgment. The district court
granted the Secretary’s motion for summary judgment as to
Northern and Chippewa, but initially denied it as to Alpena.
Alpena v. Leavitt, No. 04-218, slip op. at 34 (D.D.C. Sept. 18,
2006). The court found that because CMS had failed to base its
Alpena decision on patient atypicality, “the Board erred by
deciding Alpena’s case on the issue of patient atypicality
without giving the facility an adequate opportunity to present
arguments on that issue.” Id. at 24. After the Secretary moved
for reconsideration, however, the district court granted his
motion for summary judgment, finding that regardless of
whether Alpena had an atypical patient mix, it was unqualified
for the exception because it had failed to establish atypical
                                7

nursing services. See Alpena v. Leavitt, No. 04-218, slip op. at
4 (D.D.C. Nov. 15, 2006). “[R]emand would serve no useful
purpose,” the district court concluded, because “independent,
legally sufficient ground[s] for denial of Alpena’s exception
request” existed. Id.

     The providers now appeal. All three challenge the Board’s
use of the 3.0 hours per treatment standard, arguing that the
Medicare Act required the Secretary to publish it in the Federal
Register. 42 U.S.C. § 1395hh(c)(1). In addition, they argue that
the 3.0 hours per treatment standard is unsupported by
substantial evidence. Northern and Chippewa also dispute the
Board’s conclusion that they failed to demonstrate atypical
patient mix. Alpena contests the Board’s atypical patient mix
finding, arguing that it had no notice that the Board would
decide the issue itself.

     “Because the district court entered a summary judgment, we
review its decision de novo and therefore, in effect, review
directly the decision of the Secretary.” St. Luke’s Hosp. v.
Thompson, 355 F.3d 690, 693 (D.C. Cir. 2004) (quoting
Lozowski v. Mineta, 292 F.3d 840, 845 (D.C. Cir. 2002)). “[W]e
will set aside the [Secretary’s] factual findings only if
unsupported by substantial evidence on the record as a whole;
we will set aside the [Secretary’s] legal conclusions only if
‘arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with the law.’” Proffitt v. FDIC, 200 F.3d 855, 860
(D.C. Cir. 2000) (quoting 5 U.S.C. § 706(2)(A), (E)).
                                8

                                II.
     We begin with the issue common to all three
providers—whether the Secretary should have published the 3.0
hours per treatment standard in the Federal Register. The
Medicare Act requires that “[t]he Secretary shall publish in the
Federal Register, not less frequently than every 3 months, a list
of all manual instructions, interpretative rules, statements of
policy, and guidelines of general applicability.” 42 U.S.C. §
1395hh(c)(1). The statute does not define these terms, nor, as
far as we are aware, has any court interpreted them as used in
this statute. We have, however, fleshed out two of the
phrases—interpretative rules and statements of policy—as used
in the Administrative Procedure Act, 5 U.S.C. § 553(b)(A). In
Syncor International Corp. v. Shalala, 127 F.3d 90 (D.C. Cir.
1997), we explained that an interpretative rule “typically reflects
an agency’s construction of a statute that has been entrusted to
the agency to administer.” Id. at 94. An interpretative rule,
Syncor explains, can also “construe an agency’s substantive
regulation.” Id. By contrast, a statement of policy “represents
an agency position with respect to how it will treat—typically
enforce—the governing legal norm. By issuing a policy
statement, an agency simply lets the public know its current
enforcement or adjudicatory approach.” Id. Although nothing
in the APA requires agencies to publish interpretative rules and
statements of policy, we nonetheless think that Syncor’s
definition of those phrases is helpful in the context we face here.
Indeed, we have observed that, “as the Medicare Act was drafted
after the APA,” the reference to interpretative rules—and by
extension policy statements—in the Medicare Act suggests that
Congress intended the terms to be “at least similar in scope” to
identical provisions in the APA. See Monmouth Med. Ctr. v.
Thompson, 257 F.3d 807, 814 (D.C. Cir. 2001).

    Issued pursuant to the Medicare Act, the relevant
regulation, 42 C.F.R. § 413.184(a)(1) (2005), states that in order
                                 9

to qualify for the atypical patient mix exception, providers must
show “that a substantial proportion of the facility’s . . . dialysis
treatments involve atypically intense dialysis services.” Id. The
regulation, however, includes no standard for measuring
“atypically intense dialysis services.” Because the 3.0 hours per
treatment standard fills this gap, it looks a lot like an
“interpretative rule.” To use Syncor’s language, the standard
reflects the agency’s “construction of a statute that has been
entrusted to the agency to administer.” Syncor, 127 F.3d at 94.
The 3.0 hours per treatment standard also informs the public of
the agency’s adjudicatory approach to determining exception
requests based on nursing hours. In this sense, it could qualify
as a “statement of policy,” given that it “represents an agency
position with respect to how it will treat . . . the governing legal
norm.” Id.

     In the end, however, we need not decide whether the 3.0
hours per treatment standard qualifies as either an interpretative
rule or a statement of policy because we believe it most clearly
qualifies under the Medicare Act as a guideline of general
applicability. According to the record, the Secretary has applied
the standard not only to the three cases at issue here, but also to
at least three others decided in 1994. Indeed, CMS’s own
witness testified that the agency had used the 3.0 hours per
treatment standard as the threshold in the past and intended to
continue using the standard, at least until “legislation is revised.”
By contrast, the Secretary has identified no case where he
applied a different standard. As far as the record here is
concerned, then, the 3.0 hours per treatment standard serves as
the baseline by which the Secretary measures providers’
eligibility for the atypical patient mix exception. Given this, and
given that CMS and the Board both repeatedly referred to the
3.0 hours per treatment standard as a “standard,” the Medicare
Act requires the Secretary to publish it in the Federal Register.
                               10


     The Secretary’s arguments to the contrary are unpersuasive.
He insists that the 3.0 hours per treatment standard is merely an
“evaluative tool” that evolved from the data as a “reasonable
factual finding[]” during the adjudicatory process. Appellee’s
Br. 36. But guidelines of general applicability can also evolve
from data, and mere citation to the data each time the agency
applies the guideline hardly converts it into a factual finding.
Furthermore, as counsel for the Secretary conceded at oral
argument, the Secretary relied on the same data set in all six
proceedings in the record—the three providers’ requests at issue
here and the three 1994 proceedings. The Secretary also points
out that the providers challenged the 3.0 hours per treatment
standard during the administrative proceedings. This is true, but
irrelevant: a guideline does not cease to be a guideline simply
because the parties had an opportunity to challenge it. Finally,
the Secretary notes that the CMS witness suggested that an even
higher 3.5 hour baseline might be appropriate. This too is
irrelevant, for as we have said many times, agencies are
generally free to change their positions. See, e.g., Williams Gas
Processing-Gulf Coast Co. v. FERC, 475 F.3d 319, 322 (D.C.
Cir. 2006) (“[A]n agency is free to change course in a regulatory
regime provided that it offers a reasoned explanation for so
doing and is not otherwise constrained by statutory
limitations.”). That the Secretary might someday choose to alter
the 3.0 hours per treatment standard in no way suggests that the
standard need not be published in the Federal Register; it simply
means that it represents a standard the Secretary might choose
to modify.
                               11

                              III.
     Given our conclusion that the Secretary should have
published the 3.0 hours per treatment standard, and given that
the Secretary never responds to Alpena’s argument that the
provider lacked notice that the Board would address atypical
patient mix, we shall remand Alpena’s case to the district court
for further proceedings consistent with this opinion. For
Northern and Chippewa, however, we must still consider the
Board’s resolution of the atypical patient mix issue because, if
correct, it would provide an independent ground for upholding
the Board’s decision. See PDK Labs. Inc. v. DEA, 362 F.3d 786,
799 (D.C. Cir. 2004) (“If the agency’s mistake did not affect the
outcome, if it did not prejudice the petitioner, it would be
senseless to vacate and remand for reconsideration.”).

      The Board found that Northern’s mortality rate and average
length of stay were lower than national averages, and that
Chippewa’s average length of stay, percentage of patients with
hypertension, and average age of patients were also lower than
national averages. Applying a “totality of the circumstances”
test, the Board concluded that it was “not able to make a clear
determination that the [providers] had . . . atypical patient
mix[es] which justified the incurrence of additional costs per
treatment.” N. Mich. Hosp., No. 2004-D7, at 14; Chippewa, No.
2004-D5, at 12.

     The providers nowhere challenge the Secretary’s use of a
totality of the circumstances test. Instead, they point out that
Chippewa’s percentages of aged and diabetic patients exceeded
national averages and that Northern’s percentage of diabetic
patients was also higher. Acknowledging this data, however, the
Board concluded that neither provider had shown “substantial
deviation” from national averages. N. Mich. Hosp., No. 2004-
D7, at 13 (emphasis added); Chippewa, No. 2004-D5, at 12
(emphasis added). At bottom, the providers’ attack on the
                               12

Secretary’s application of the totality of the circumstances test
is woefully incomplete: they do no more than show that some of
the many factors tilt in their direction. Given this, we have no
basis for concluding that the Secretary’s decision was
unsupported by substantial evidence. See, e.g., Ass’n of Data
Processing Serv. Orgs. v. Bd. of Governors of the Fed. Reserve
Sys., 745 F.2d 677, 683-84 (D.C. Cir. 1984) (stating that an
agency decision unsupported by substantial evidence is arbitrary
and capricious). The Secretary’s failure to publish the 3.0 hours
per treatment standard was thus harmless error with regard to
Northern and Chippewa, leaving us with no need to remand their
cases.

                              IV.
    For the foregoing reasons, we affirm the district court’s
grant of summary judgment to the Secretary with respect to
Northern and Chippewa, and reverse and remand with respect to
Alpena.
                                               So ordered.
