CMS Requests Legal Guidance from HHS on Applying Supreme Court Decision
Peter W. Thomas, JD, Principal, Powers Pyles Sutter & Verville, PC
On June 3, 2019, the United States Supreme Court issued a 7-1 decision in Azar v. Allina Health Services,1 as discussed in our August 2019 article. In its decision, the Court held that the Centers for Medicare and Medicaid Services (CMS) must use notice-and-comment rulemaking before issuing guidance that establishes or changes a substantive legal standard governing Medicare payment for services. The Court’s ruling created much uncertainty about the enforceability of Medicare guidance on inpatient rehabilitation hospitals and units (commonly referred to as IRFs). While CMS, in informal communications with representatives of the rehabilitation community, has espoused its view that the ruling does not invalidate IRF coverage guidance, no formal policy statement has been publicly issued by the Department of Health and Human Services (HHS) or CMS in response to Allina. However, an internal HHS memorandum analyzing the general impact of the ruling now sheds light on HHS’ views. Background on the Allina Case The underlying facts of the case concerned a nuanced issue involving the manner in which CMS calculates Medicare disproportionate share hospital (DSH) payments. The Court’s ruling in the case had a much broader impact, however, ultimately hinging upon the interpretation of a section of the Social Security Act (which includes the laws governing the Medicare program) that requires CMS to engage in notice-and-comment rulemaking. The Supreme Court rejected the government’s argument that the Medicare statute’s notice-and-comment rulemaking requirements do not apply to “interpretive” guidance that impacts Medicare payment, which CMS has historically issued through policy manuals and instructions to Medicare contractors. The Court determined, instead, that the Medicare statute’s notice-and-comment requirements are more expansive than those of the more broadly applicable Administrative Procedure Act (APA). In particular, the Court found that the Medicare statute does not provide an exemption for “interpretive” rules, as under the APA. This ruling opens the door to challenging other Medicare sub-regulatory guidance — such as the Medicare Benefit Policy Manual (MBPM), the Program Integrity Manual (PIM), Local Coverage Determinations (LCDs), and other guidance documents — that CMS (or its contractors) issued without notice and an opportunity to comment. The HHS Memorandum The memo, dated October 31, 2019, is from the CMS Chief Legal Officer, Kelly Cleary to Demetrios Kouzoukos, the Principal Deputy Administrator and Director of the Center for Medicare. It is specifically marked as “not releasable to the public,” but it has been available from online news sources since November 2019.
1
Azar v. Allina Health Servs., 139 S. Ct. 1804 (2019). Justice Stephen Breyer dissented, and Justice Brett Kavanaugh took no part in this decision because he authored the lower court’s decision in this case.
10 AMRPA Magazine / February 2020
