On September 27, 2018, the U.S. Supreme Court granted certiorari to review the D.C. Circuit’s decision in favor of hospitals in Allina Health Services, et al. v. Price, 863 F.3d 937 (D.C. Cir. 2017) (Allina II).The Court’s review will focus on whether the Medicare Act requires the Department of Health and Human Services (HHS) to conduct notice-and-comment rulemaking before providing instructions to a Medicare Administrative Contractor (MAC) making initial determinations of payments due under Medicare.

The substantive dispute in Allina II is whether patient days associated with patients enrolled in a Medicare Advantage plan under Medicare Part C (i.e., Part C days) are nonetheless days entitled to benefits under Medicare Part A for purpose of disproportionate share hospital (DSH) payments. In Allina I, the D.C. Circuit invalidated on procedural grounds the Secretary’s 2004 regulation in which the Secretary adopted a policy to treat Part C days as days entitled to benefits under Part A. See Allina Health Services v. Sebelius, 746 F.3d 1102, 1107-09 (D.C. Cir. 2014). Allina II presented the follow-up question of whether the Secretary could, in the absence of a regulation, continue to apply the same policy, or whether the Secretary was required to undertake new rulemaking before doing so.

The D.C. Circuit, in a decision issued July 25, 2017 authored by Judge Brett Kavanaugh, found that the law “required HHS to engage in notice-and-comment rulemaking before deciding to include Part C days in the 2012 Medicare fractions.” A primary factor in the court’s decision was its holding that the Medicare Act creates a more stringent standard for notice-and-comment rulemaking than that imposed by the Administrative Procedure Act. In particular, the D.C. Circuit held that the Medicare Act does not contain an exception to notice-and-comment rulemaking for “interpretative rules.” In reaching that conclusion, the court created an ostensible split with the First, Sixth, Eighth, and Tenth Circuits. The Supreme Court will now resolve that split.

King & Spalding will publish updates on the Supreme Court’s consideration and decision as they become available over the coming months.

Click here to read the petition for certiorari and here to read the order granting certiorari in Azar v. Allina Health Services, et al., No. 17-1484. The D.C. Circuit opinion is available here.