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.

„ If a particular guidance document is intended to be used as the basis for enforcement actions, 2 it must be issued through notice-and-comment rulemaking.

„ With respect to CMS manuals, if the sub-regulatory guidance merely “aids” in demonstrating compliance with standards established by statute or regulation, CMS may use the guidance to provide additional clarity, but only to the extent that the underlying statute or regulation is narrow enough to create the standard being applied.

„ The key question in determining whether guidance is valid for use in support of (not as the sole basis for) an enforcement action is whether the action could be brought without the guidance document.

„ CMS is not precluded from enforcing payment provisions that are included in contracts or agreements that apply guidance documents, as long as those provisions are specifically referenced as an obligation of the party.

„ Guidance documents can be used to support a determination of whether noncompliance with statutory or regulatory requirements is material to the decision to make payment for purposes of enforcement actions.

„ LCDs are not required to be issued via notice-and-comment rulemaking, but they also may not be used as the sole support for an enforcement action.

The memo also addresses whether CMS may make an “endrun” around the Allina ruling simply by retroactively codifying guidance through subsequent notice-and-comment rulemaking. The memo makes clear that, while retroactivity is permitted under the Medicare program’s governing laws and regulations, it is highly disfavored. Therefore, the memo questions whether such retroactive action by CMS would truly be effective in preserving the authority of any such guidance. Implications on IRF Claims Under the analysis provided by the CMS Chief Legal Officer, some of the MBPM provisions on inpatient rehabilitation remain effective to support audits, but only to the extent that the underlying requirements are established in regulations. Conversely, to the extent that the MBPM provisions include requirements that are not tailored closely to the regulations, their applicability and enforceability are in question under Allina.

This interpretation is consistent with the general assessment set forth in our August 2019 article, following the Allina decision. However, questions remain about whether the analysis in the memo has been communicated to the various Medicare contractors and whether CMS considers manual provisions that do not tie to the explicit language of the coverage regulations to be unenforceable under Allina. The memo’s language is non-specific enough to leave room for individuals at the agency and at the contractor level to continue to assert that the MBPM provisions merely “aid” in interpreting the narrow provisions for coverage set forth in the regulations. Ultimately, any disagreement on this point between a contractor and a provider would need to be resolved through the administrative appeals process and possibly even federal court.

The IRF community will have to see how the HHS memo is incorporated and applied by CMS and its contractors. The memo can serve as additional support for IRFs that argue in the administrative appeals process that CMS and its contractors may not deny claims based solely on manual provisions that are not tied to explicit standards from the regulations, such as the MBPM’s expanded requirements for the pre-admission screening and post-admission physician evaluation. It is also possible that other health care industry sectors, especially those governed very closely by criteria established in the PIM or in individual LCDs (e.g., durable medical equipment suppliers, practitioners specializing in orthotics or prosthetics), may take up this fight. This issue warrants close monitoring going forward and we will continue to keep the rehabilitation community apprised of new developments as they occur.

Abstract Deadline: April 27, 2020

2020 Fall Educational Conference & Expo Renaissance Dallas Hotel • Dallas, TX • October 4-7

What would you like to discuss this year? Submit your abstracts for AMRPA’s 18th Annual Educational Conference & Expo!

AMRPA encourages you to share your knowledge, case studies, and experience in these 6 categories:  Business Operations and Leadership Development  Clinical Care Delivery — A Team Approach  Regulatory, Legislative and Accreditation Matters  Marketing and Relationship Management  New for 2020! Technology, Research and Innovation  Other: Topics Outside the Box

Submit your ideas today!

For more information about how to submit your abstract, visit the AMRPA website: https://amrpa.org/Education/Events/Fall-2020-Call-for-Abstracts

For questions about submitting an abstract, contact AMRPA Education Specialist Kirsten Lew at klew@amrpa.org.

PAC Market Analysis Reports

Find out where your institution stands with a Market Analysis of Medicare Post-Acute Care (PAC) Referral Patterns, Episode Spending, Performance Measures and Impact of Medicare Bundled Payment Models

Using the most recent two years of Medicare claims data, Dobson DaVanzo & Associates delivers inpatient rehabilitation providers with a general market-level analysis on their facility’s episode spending and key performance metrics across all Medicare discharges. Benchmark your facility against state and national inpatient rehabilitation providers and find out where you stand.

Dobson DaVanzo & Associates can also help you better understand how the Bundled Payment for Care Improvement (BPCI) initiative and the Comprehensive Care for Joint Replacement Payment Model (CJR) are impacting the markets.

Stay informed! Order your PAC report today. AMRPA Members Receive Reports at Discounted Rates.

Visit www.amrpa.org/PAC-Market-Analysis-Reports for more information, or contact Elizabeth Katsion, AMRPA Member Services Coordinator, ekatsion@amrpa.org.