The Supreme Court’s recent ruling in Loper Bright Enterprises v. Raimondo^[1] (and its companion case, Relentless v. Department of Commerce), in which it overruled the Chevron doctrine, has received a great deal of attention since the decision was announced on June 28, 2024. We reported on it in our July 10, 2024 Health Law Observer article.

That same day, in what was likely the first lawsuit filed by a health care provider against the Department of Health and Human Services (HHS) in the post-Chevron world, three hospitals that are part of New Jersey-based Hackensack Meridian Health System (the Hackensack Hospitals) sued HHS in a case involving disproportionate share payments.

Just a few days later, three federal district court judges issued preliminary injunctions stopping HHS from implementing and enforcing its May 24, 2024 Final Rule issued under authority that HHS asserts has been delegated to it by the Affordable Care Act (ACA) and under which HHS defines the prohibition of discrimination on the basis of sex to include discrimination on the basis of gender identity.

Loper plays a prominent part in each of these cases as discussed below, and they illustrate in many respects how litigation post-Chevron is likely to proceed.

Also, in the aftermath of Loper, the Chairs of Congress’s House Committee on Oversight and House Ways and Means Committee issued letters to HHS (and 28 other agencies) in which they requested the submission of a substantial amount of information relating to HHS and Chevron and Loper, also as discussed below.

Background Concerning Chevron and the Decision in Loper

As explained by Justice Roberts writing the majority opinion in Loper, the Chevron doctrine that was first announced in 1984 in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.,467 U.S. 837 (1984) provided that where a regulatory agency is interpreting a statute in a case in which the statute is silent or ambiguous with respect to the specific issue at hand, a reviewing court could not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Instead, the court had to defer to the agency if the agency had offered a permissible construction of the statute, even if not the reading the court would have reached if the question initially had arisen in a judicial proceeding.

In overruling Chevron, the Court in Loper cites the Administrative Procedures Act, 5 U. S. C. §551 et seq. (APA) as requiring courts, consistent with their powers and responsibilities under Article III of the Constitution, to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and courts may not defer to an agency’s interpretation of the law simply because a statute is ambiguous.^[2]

The Impact of Loper on Health Care Providers

With Chevron overruled, it will undoubtedly be easier for health care providers to challenge agency actions.^[3] At the same time, this will presumably result in agencies taking longer to promulgate regulations, including ones that providers need to effectively operate.

Moreover, placing statutory interpretation squarely in the hands of the courts will likely result in it taking considerably longer to resolve important questions of statutory interpretation and the outcomes will almost certainly end up being different in different judicial districts. This in turn will encourage forum-shopping and clog district courts and appeals courts with litigation, while pushing more cases in the direction of the Supreme Court, which takes only a limited number of cases in any particular year. (It is also quite possible that situations will arise in which one group of providers supports a regulation and another group is prepared to challenge it.)^[4]

As discussed in our July 10, 2024 Health Law Observer article, there are many areas in which the elimination of the Chevron doctrine will likely result in more regulatory challenges. Some obvious examples include:

• Disputes concerning Medicare reimbursement rates and limits, including frequently litigated issues pertaining to disproportionate share payments (see the Hackensack case), coverage requirements and determinations, conditions of coverage and participation, staffing requirements, requirements pertaining to Graduate Medical Education and Indirect Medical Education, Section 340 issues and quality reporting issues
• Disputes pertaining to the proper interpretation and application of requirements under the ACA (see the below discussion of the district court cases now being litigated pertaining to the nondiscrimination rules under that Act)
• Issues pertaining to the scope and interpretation of fraud and abuse laws – the Anti-Kickback Statute, False Claims Act, Stark Law, Civil Monetary Penalties Law and Medicare/Medicaid Office for Civil Rights

The Recent Court Cases

The decision in Loper and the overruling of Chevron are already playing a prominent role in cases involving HHS’s regulatory authority.

In the Hackensack case, the Hackensack Hospitals challenge the manner in which the Centers for Medicare & Medicaid Services (CMS) computes the hospitals’ disproportionate share for purposes of disproportionate share payments (namely that CMS improperly interprets Medicare beneficiaries “entitled to” the supplemental security income [SSI] component of the disproportionate share hospital determination to include only those who, during the month of their inpatient stay, actually received an SSI cash payment, as opposed to interpreting the phrase “entitled to” to mean eligibility for rather than payment of Medicare benefits).

In laying out the groundwork for the adjudication of the challenge and at the outset of the complaint, the Hackensack Hospitals, referencing Loper state:

With Chevron deference overruled, courts may no longer routinely uphold the decisions of agencies in technical fields simply because of the complexity of the statutory schemes they oversee. Rather, statutes, no matter how impenetrable … must … have a single, best meaning … And it is the job of the Court to discern the best reading … In this new paradigm, more than ever, the Secretary’s actions at issue here must fall, and the Hospitals are entitled to the relief they seek.

As for the three pending district court cases involving suits by various states seeking injunctions to stop HHS from implementing and enforcing the May 24, 2024 Final Rule, the district courts, in deciding each case in favor of the plaintiff-states, were guided at the outset by Loper and the overruling of Chevron.

In issuing a preliminary injunction in Tennessee et.al. v. HHS (U.S. District Court, Southern District Mississippi) and in concluding that the plaintiff-states had a substantial likelihood of success on the merits, Judge Louis Guirola, Jr., in part quoting Loper, writes:

The Supreme Court recently held that agencies are no longer entitled to deference pursuant to Chevron …because Chevron “allow[ed] agencies to change course even when Congress had given them no authority to do so” … Thus, Chevron “foster[ed] unwarranted instability in the law, leaving those attempting to plan around agency action in an eternal fog of uncertainty.”

Next, directly quoting Justice Roberts, Judge Guirola writes:

Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires. Careful attention to the judgment of the Executive Branch may help inform that inquiry. And when a particular statute delegates authority to an agency consistent with constitutional limits, courts must respect the delegation, while ensuring that the agency acts within it. But courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.

With this as the starting point, Judge Guirola proceeds to independently interpret the relevant statutory provisions and concludes that the prohibition of discrimination “on the basis of sex” does not include discrimination on the basis of gender identity.

In issuing the preliminary injunction in State of Florida v. HHS, District Court Judge William Lung also looks to Loper for purposes of determining whether the plaintiffs had established the requisite likelihood of success for issuance of an injunction. Quoting in part the opinion in Loper, he writes:

Respect for Executive Branch interpretation of a statute was previously “especially warranted when an Executive Branch interpretation was issued roughly contemporaneously with enactment of the statute and remained consistent over time.”

In contrast the Executive Branch interpretation of Title IX now conjured comes decades after the enactment of Title IX and, as seen below, the interpretation has changed repeatedly over time. The whole point of having a written statute is “every statute’s meaning is fixed at the time of enactment” … HHS’s attempt to alter prospectively the meaning of Title IX shows the wisdom of Loper’s statement that “agencies have no special competence in resolving statutory ambiguities. Courts do.” The Administrative Procedures Act, § 706, which is the present guidepost, “demand[s] that courts exercise independent judgment in construing statutes administered by agencies.” (As explained in footnote 2 above, Title X informs the ACA’s prohibition on discrimination “on the basis“ of sex.)

Judge Lung then interprets, without Chevron deference, the definition of the phrase “basis of sex discrimination” and preliminarily enjoins HHS from instituting or pursuing any enforcement proceedings under the May 2024 Rule based on sex discrimination applying to gender identity.

Similarly, in issuing the preliminary injunction in State of Texas and State of Montana v. HHS, District Court Judge Jeremy Kernodle, also citing Loper and the overruling of Chevron, writes:

In reviewing agency action under the APA, courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority and should set aside any action inconsistent with the law as they interpret it. A court should no longer defer to an agency’s interpretation of a statute but should decide for itself whether the law means what the agency says.

Applying that basic principle, Judge Kernolde goes on to interpret Title IX’s phrase “on basis of sex” in a manner free of Chevron and concludes it was “reasonably understood at the time the statute was enacted” and therefore did not include gender identity.

Congressional Inquiry

In the aftermath of Loper, Congress has also stepped in. On July 10, 2024 the Chairs of the House Committee on Oversight and House Ways and Means Committee wrote to HHS and 28 other agencies emphasizing their disagreement with Chevron and stating that “[t]hankfully the Court in Loper Bright has now corrected its Chevron error.”

The committee chairs go on to request that HHS provide the committee with comprehensive information. This includes lists of all:

• Pending judicial challenges to final HHS rules that may be impacted by the Loper decision
• Final agency rules not yet challenged in court that may be impacted by Loper if they are so challenged
• Pending agency rule-making in which HHS is relying on its interpretation of statutory authority that might have been eligible for Chevron deference prior to the Court’s decision in Loper
• Pending judicial challenges to final HHS adjudications that may be impacted by Loper
• Final HHS adjudications not yet challenged in court that may be impacted by Loper if they are challenged
• Pending HHS adjudications in which HHS is relying on its interpretation of statutory authority that might have been eligible for Chevron deference prior to Loper
• Pending enforcement actions in which HHS is relying on its interpretation of statutory authority that might have been eligible for Chevron deference prior to Loper
• Concluded enforcement actions in which the court deferred under Chevron to an HHS interpretation of statutory authority as a basis for its judgment against a non-agency party
• Judicial decisions not ultimately overturned by a higher court in which the court deferred under Chevron to HHS’s interpretation of a statute
• Proposed or final HHS guidance or statements containing interpretive rules likely to lead to an annual effect on the economy of $100,000,000 or more, a major increase in costs or prices or significant adverse effects on, among other things, competition, employment, investment and public health and safety

HHS’s response to the inquiry is due no later than July 24, 2024.

A final note: All of this is obviously just the beginning. There can be little doubt that there will be a great deal more in the days and months and possibly years ahead. The tip of the iceberg is now plainly in sight.

[1] 603 U.S. — , No. 22-1219, 2024 WL 3208360, at *9 (June 28, 2024)

^[2] In its opinion, the Court does state that careful attention to the judgment of the Executive Branch and its regulatory agency may help inform the inquiry as to the statute’s proper interpretation. Further, “when a particular statute delegates authority to an agency consistent with constitutional limits, courts must respect the delegation, while ensuring that the agency acts within it.”

The Court also makes clear that in overruling Chevron it does not call into question prior cases that relied on the Chevron framework. The holdings of those cases that state specific agency actions are lawful are still subject to statutory stare decisis despite the Court’s change in interpretive methodology.

^[3] Challenges will also be made easier as a result of the Supreme Court’s July 1, 2024 decision in Corner Post, Inc. v. Board of Governors of the Federal Reserve System in which the Court held that, in suits filed against an agency under the APA, the claim does not accrue for purposes of the six-year statute of limitations until the plaintiff is injured by final agency action.

^[4] All this said, it has been noted that in recent years courts have relied less on Chevron in deciding cases. In the majority opinion, Justice Roberts notes that “[t]his Court, for its part, has not deferred to an agency interpretation under Chevron since 2016.”

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