“Chevron1 is overruled.”
The U.S. Supreme Court’s June 28 decision in Loper Bright Enterprises v. Raimondo and its companion case, Relentless v. Department of Commerce2, will have enormous effects on the healthcare sector.
For the past 40 years, the “Chevron Doctrine” has required courts to defer to administrative agencies for interpreting ambiguities in the statutes they administer—effectively allowing the agencies to fill in the gaps, even where a court might arrive at a different interpretation. The Loper Bright decision means that courts are now permitted to exercise their independent judgment in deciding whether an agency has exceeded its statutory authority. It also means that a court does not have to defer to an agency’s legal interpretation simply because a statute is ambiguous[3].
What does this decision bode for the healthcare industry?
Likely, the industry will face increased disruption. Federal administrative agencies such as HHS and its constituent parts (e.g. CMS, OIG, HRSA, FDA, CDC, OCR, and others) govern numerous federal health care programs established by Congress via statute, among them Medicare, Medicaid, and the Affordable Care Act. These agencies and offices collectively issue and enforce numerous implementing regulations and sub-regulatory guidance that set the tone for the entire U.S. healthcare system. All of this has been exposed to fresh legal challenges by Loper Bright. A boom in litigation over the various agency edicts and actions taken thereunder is virtually certain.
The scales will no longer tip in agencies’ favor for resolving ambiguities in their governing statutes. Courts may now substitute their own legal interpretations whenever they decide the statutes are unclear. In effect, the power of agencies such as CMS and its administrative contractors, for example, Noridian, to interpret or extend federal (and perhaps even enforce) healthcare laws they administer has been curtailed. Challengers of agency actions will likely enjoy greater success in court. Litigants may also seek the most favorable courts and judges, resulting in potentially conflicting rulings.
In response, the agencies will likely move more slowly and may be hesitant to issue new rules, especially on controversial healthcare topics that Congress has not specifically addressed. They may choose to issue prospective supervisory guidance rather than legally binding regulations. Agencies may also opt to pursue further enforcement activities rather than engage in formal rulemaking.
Some parties may welcome a slower agency pace and improved odds for litigants who challenge agency rules and actions, but the healthcare industry will probably encounter new questions about how to interpret the rules and be compelled to wait longer for resolutions. In addition, even agency rulings that healthcare providers regard in a positive or neutral light may be more vulnerable to attack by opponents. All this likely means increased unpredictability over the next few years.
Where do we expect to see the greatest impacts in the near term?
- Reimbursement. CMS is already subject to annual challenges on the rates it pays healthcare providers and suppliers for services, supplies and equipment, and prescription drugs. Expect to see more challenges in front of more judges and in more courtrooms. Resolutions might take longer.
- Enforcement of fraud, abuse, and health information privacy laws. The end of the Chevron deference opens a fresh examination of the myriad sub-statutory rules and guidance agencies have issued to delineate their regulatory powers. The texts of the statutes themselves, Congress’s intent in drafting them, and relevant court decisions will be of renewed relevance; defendants and challengers may assert that the agency (in this context, the Office of the Inspector General or the Office for Civil Rights) has exceeded its statutory authority or acted arbitrarily or capriciously.
It may take years to determine the effects of Chevron’s demise on the healthcare industry. However, in the near term, it is reasonable to expect increased cautiousness on the part of federal agencies, more legal challenges to existing agency rules and policies, and perhaps more unpredictable processes and outcomes.
What can healthcare organizations do?
- Anticipate continued disruption and stay flexible.
- Stay current on developments in the law and consult with legal counsel.
- Be ready to update internal policies and procedures more often and more rapidly.
