backSupreme Court Overturns Chevron in Landmark Decision with Broad Implications for Medicare Reimbursement Litigation
On June 28, 2024, the Supreme Court issued a decision in Loper Bright Enterprises v. Raimondo that overturned the Chevron Doctrine, which requires courts to defer to agency interpretations of ambiguous statutes, thereby upending decades of judicial precedent and putting the future of countless regulations into question.
Background
The Supreme Court established the “Chevron Doctrine” in the 1984 case Chevron v. Natural Resources Defense Council. Under Chevron, if a statute was “silent or ambiguous with respect to a specific issue[,]” courts would defer to how government agencies interpret the statute. Chevron v. Natural Res. Def. Council, 467 U.S. 837, 843 (1984). So long as an agency offered “a permissible construction of the statute. . . a court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency.” Id. at 843–844.
Chevron strongly favored the statutory interpretation of agencies by forcing parties challenging regulations to prove not just that their interpretation of the statute was better, but that the agency’s interpretation was actively unreasonable. In a survey of U.S. Courts of Appeals cases involving Chevron, 70.0% of cases made it to the second step of review, whether an agency’s interpretation is reasonable. Benjamin M. Barczewski, Cong. Rsch. Serv., LSB10976, Chevron Deference in Courts of Appeals 3 (2023)(citing Kent Barnett and Christopher J. Walker, Chevron in Circuit Courts, 116 Mi. L. Rev. 1, 33 (2017)). Of those cases that made it to the second step of review, the agency prevailed 93.8% of the time. Id.
Despite Chevron’s significance, and despite decades of precedent applying Chevron, the case has been a source of controversy. Supporters of Chevron argue that deference to administrative agencies is vital “because Congress, in enacting a law, can rarely if ever predict every situation that might arise in applying or enforcing it. So [Congress] must leave details for administrators to fill in.” Laurence H. Tribe and Dennis Aftergut, Opinion: If the Supreme Court kills the Chevron doctrine, corporations will have even more power, L.A. Times (May 2, 2023), available here. In contrast, critics of Chevron argue that “[a]gencies aren’t impartial participants in these cases but have an interest in interpreting the law in ways that expand their powers.” Richard A. Epstein and Mario Loyola, The Supreme Court’s Chance to Rein in the Regulatory State, Wall St. J. (Dec. 7, 2021), available here.
The Issue in Loper Bright Enterprises v. Raimondo
The underlying issue in Loper Bright focused on the National Marine Fisheries Service’s (NMFS) enforcement of the Magnusson-Stevens Fishery Conservation and Management Act (MSA), but Loper’s repercussions reach to virtually every corner of administrative law. Plaintiffs challenged the NMFS’s mandate that fishing vessels pay for observers to monitor fisheries’ sustainability. See Loper Bright Enterprises v. Raimondo, No. 22–451 at *12–13 (2024). Both the D.C. Circuit Court of Appeals and the First Circuit Court of Appeals affirmed the NMFS’s mandate based on an application of Chevron, which Plaintiffs believe to be improper. See id. at 5–6.
The Supreme Court’s Decision
Chief Justice Roberts drafted the majority opinion for the Court. In his opinion, Justice Roberts wrote that even though the Court was often deferential to regulatory agencies in the wake of the New Deal during the 1930s and 1940s, it was still “the traditional understanding that courts must ‘decide all relevant questions of law.’” Id. at *12–13 (quoting 5 U.S.C. § 706). He further wrote that the 1946 passage of the Administrative Procedure Act (APA) codified “the unremarkable yet elemental proposition. . . that courts decide legal questions by applying their own judgement.” Id. at *14.
Chief Justice Roberts, writing for a majority of six justices, determined that “Chevron defies the command of the APA that ‘the reviewing court’—not the agency whose action it reviews—is to ‘decide all relevant questions of law’ and ‘interpret . . . statutory provisions.’” Id. at *21 (quoting 5 U.S.C. § 706). He goes on to clarify that while Congress can explicitly grant agencies discretionary authority, courts must “independently identify and respect such delegations of authority, police the outer statutory boundaries of those delegations, and ensure that agencies exercise their discretion consistent with the APA.” Id. at *26.
In summary, the Court determined that the level of deference Chevron required was incompatible with the APA. See id. at *18. Even stare decisis did not save Chevron because, in the eyes of the Court, Chevron was “fundamentally misguided” from the beginning. See id. at *29. Further the Court determined that over the past four decades Chevron became “an impediment, rather than an aid,” for judicial interpretation. See id. at 32 (quoting Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177 (1803)).
Conclusion
The effects of the overturning of Chevron will reverberate, for better or for worse, for decades. In the healthcare space alone, multiple regulations and policies that lower courts previously affirmed as being “permissible” interpretations of a statute under Chevron Step II may be reexamined to determine whether that interpretation is actually the best interpretation of the statute. While the Court stated that cases decided on Chevron would still constitute binding precedent, there remain strategies that experienced counsel can employ to hold CMS accountable to prove that those policies, too, constitute the best reading of the statute.
King & Spalding will be hosting a webinar within the next few weeks to explore those areas and opportunities. Please look for an invitation in next week’s edition of Health Headlines.
The Supreme Court’s full decision can be found here.
Reporter, Gregory Fantin, Washington DC, +1 202-626-9271, GFantin@kslaw.com.
HHS Finalizes Disincentives for Healthcare Providers That Have Committed Information Blocking
Last week, HHS published its final rule outlining disincentives for certain healthcare providers that have committed information blocking (the Final Rule). The Final Rule also provides information related to OIG’s investigation of claims of information blocking and establishes a process by which information will be shared with the public about healthcare providers and other actors (e.g., health IT developers or other entities offering certified health IT, health information exchanges, and health information networks) that OIG determines have committed information blocking.
Information Blocking Disincentives
The 21st Century Cures Act (Cures Act) states that sharing electronic health information (EHI) is expected throughout the health care industry. Information blocking occurs when an “actor” interferes with the access, exchange, or use of EHI. Actors include health care providers, health IT developers of certified health IT, and health information exchanges / health information networks. (For further background, ONC’s information blocking rule is available here.)
OIG previously finalized rules governing the imposition of civil monetary penalties (CMPs) on non-healthcare provider actors violating the information blocking rule (the OIG CMP final rule is available here). The Cures Act provided for a different sanctions process for providers through imposition of so-called “disincentives” rather than CMPs. HHS previously published its proposed disincentives rule on November 1, 2023 (available here).
HHS’s Final Rule now establishes several disincentives for (1) eligible healthcare providers that are also Medicare-enrolled providers or suppliers and (2) critical access hospitals (CAHs) found by OIG to have committed information blocking and referred by OIG to CMS. Eligible “healthcare providers” are defined at 42 U.S.C. § 300jj (available here) and includes, but are not limited to, hospitals, skilled nursing facilities, nursing facilities, home health entities or other long term care facilities, and more.
Key disincentives are listed below. Additional disincentives may be established through future rulemaking.
- Medicare Promoting Interoperability Program: An eligible hospital or CAH that has committed information blocking and is referred to CMS by OIG will not be a meaningful electronic health record (EHR) user during the calendar year of the EHR reporting period in which OIG refers its determination to CMS. If the eligible hospital is not a meaningful EHR user, the eligible hospital will not be able to earn three quarters of the annual market basket increase they would have been able to earn for successful program participation; for CAHs, payment will be reduced to 100 percent of reasonable costs instead of 101 percent. This disincentive will be effective thirty days after publication of the Final Rule.
- Merit-based Incentive Payment System (MIPS) Promoting Interoperability performance category: An eligible clinician (including a group practice) who has committed information blocking will not be a meaningful EHR user during the calendar year of the performance period in which OIG refers its determination to CMS. If the MIPS eligible clinician is not a meaningful EHR user, then they will receive a zero score in the MIPS Promoting Interoperability performance category. The MIPS Promoting Interoperability performance category score is typically a quarter of an individual MIPS eligible clinician’s or group’s total final score in a performance period/MIPS payment year, unless an exception applies and the MIPS eligible clinician is not required to report measures for the performance category. CMS has modified its proposed rule for this disincentive to clarify that if an individual eligible clinician is found to have committed information blocking and is referred to CMS, the disincentive under the MIPS Promoting Interoperability performance category will only apply to the individual, even if they report as part of a group. This disincentive will be effective 30 days after publication of the Final Rule.
- Medicare Shared Savings Program: A health care provider that is an Accountable Care Organization (ACO), ACO participant, or ACO provider or supplier who has committed information blocking may be ineligible to participate in the program for a period of at least one year. Consequently, the ACO-affiliated health care provider may not receive revenue that it might otherwise have earned through the Shared Savings Program. This disincentive will be effective thirty days after publication of the Final Rule; however, any disincentive under the Shared Savings Program would not be imposed until after January 1, 2025.
Investigation Priorities and Public Posting
OIG has discretion to choose which information blocking complaints to investigate. As the Final Rule explains, to maximize efficient use of resources, OIG generally focuses on selecting cases for investigation that are consistent with its enforcement priorities and intends to apply that rationale to its approach for selecting information blocking complaints for investigation.
For investigations of health care providers, these priorities include alleged information blocking activities that: (1) resulted in, are causing, or have the potential to cause patient harm; (ii) significantly impacted a provider’s ability to care for patients; (iii) were of long duration; and (iv) caused financial loss to Federal healthcare programs, or other government or private entities. These priorities are informational only and are not binding on OIG decision making.
The Office of the National Coordinator for Health Information Technology’s (ONC) will publish on a public website information about actors that have been determined by OIG to have committed information blocking. This information includes:
For Healthcare Providers:
- Healthcare provider name;
- Business address;
- The practice found to have been information blocking and when it occurred;
- The disincentive(s) applied; and
- Where to find any additional information about the determination of information blocking that is publicly available via HHS or another part of the U.S. Government.
This information will not be posted before a disincentive is imposed and not before the completion of any administrative appeals process pursued by the healthcare provider.
For Health IT developers of certified health IT and health information networks or health information exchanges:
- Type of actor;
- Actor’s legal name, including any alternative or additional trade name(s);
- The practice found to have been information blocking and when it occurred; and
- Where to find any additional information about the determination of information blocking that is publicly available via HHS or another part of the U.S. Government.
This information will not be posted until either (1) OIG enters into a resolution of civil monetary penalty (CMP) liability or (2) a CMP has become final consistent with certain procedures established at 42 C.F.R. § 1003, subpart O.
The Final Rule is available here.
Reporter, Ahsin Azim, Washington, DC, +1 202 626 5516, aazim@kslaw.com.
Fifth Circuit Reverses District Court’s Nationwide Injunction on ACA’s Preventive Care Coverage Mandates
On June 21, 2024, a three-judge panel of the United States Court of Appeals for the Fifth Circuit issued an opinion in Braidwood Management Inc. et al. v. Xavier Becerra et al. reversing an injunction entered by the lower court that prevented the enforcement of certain ACA preventative care coverage mandates nationwide.
The case was brought by businesses and individuals with religious objections to certain of the coverage mandates (including contraception, HPV vaccines, and HIV prophylactic medications) against HHS, the Department of the Treasury, and the Department of Labor. While the plaintiffs challenged the coverage mandates on multiple grounds, the district court granted summary judgment and entered injunctive relief on the grounds that the United States Preventive Services Task Force (the Task Force) does not have the power to issue preventive-care recommendations that insurers must cover by law.
The Affordable Care Act (ACA) requires private insurers to cover certain preventive-care services without cost sharing. While the ACA does not define “preventive care,” it empowers three agencies affiliated with HHS to determine what services insurers will be required to cover under four different categories of care. The first category of mandated coverage includes “evidence-based items or services that have in effect a rating of ‘A’ or ‘B’ in the current recommendations of the United States Preventive Services Task Force.” The Task Force is a body of sixteen volunteers “with appropriate expertise” who serve four-year terms and “periodically convene” to make recommendations on covered preventive care services. Members of the Task Force are “convened” by the Directory of the Agency for Healthcare Research and Quality, which is a subagency within the Public Health Service, itself a subagency within HHS. While there are no removal protections for members of the Task Force, the ACA provides that “all members of the Task Force…shall be independent and, to the extent practicable, not subject to political pressure.”
In one of the three summary judgment rulings made in the case, the district court ruled in favor of the plaintiffs, holding that the Constitution’s Appointments Clause prohibits the Task Force from issuing binding preventive health mandates because they are “officers of the United States” who were not properly appointed under that constitutional provision. The district court entered an injunction and vacatur under § 706 of the Administrative Procedure Act (APA), which vacated all agency action taken to enforce the Task Force’s preventive-care recommendations and enjoined the Government from enforcing the preventive-care mandates against anyone. In the other summary judgment rulings, the district court ruled against the plaintiffs, holding that the Advisory Committee on Immunization Practices (ACIP) and the Health Resources and Services Administration (HRSA) do not violate the appointments clause because their recommendations are ultimately reviewable by the HHS Secretary or one of his inferior officers.
The Fifth Circuit’s review of the District Court’s opinion focused largely on the question of whether members of the Task Force are “principal” officers of the United States – who must be appointed by the President and confirmed by the Senate – or “inferior” officers who may be appointed by department heads. The Fifth Circuit held that the Task Force members are “principal” officers based largely on the fact that their recommendations are unreviewable by the HHS Secretary, and that this infirmity could not be remedied by the HHS Secretary’s purported “ratification” of the Task Force’s recommendations because the ACA is clear that the power entrusted to the Task Force was not intended to be given to or subject to the oversight of a politically accountable officer.
More significantly, the Fifth Circuit partially reversed the district court’s nationwide injunction and vacatur of any HHS enforcement actions made pursuant to the Task Force’s recommendations. The district court’s grant of relief relied on § 706 of the Administrative Procedure Act, but the Fifth Circuit held that the plaintiffs were not entitled to that broad scope of relief because the plaintiffs had not pled a claim under that provision of the APA.
On the plaintiffs’ cross-appeal challenging the district court’s grant of summary judgment on the HRSA and ACIP recommendations, the Fifth Circuit remanded to the district court to consider for the first time the plaintiffs’ APA argument against the HHS Secretary’s memo purporting to “ratify” those bodies’ actions.
The Fifth Circuit’s opinion can be found here.
Reporter, David Tassa, Los Angeles, + 213 443 4335, dtassa@kslaw.com.