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What You Want to Know about the Supreme Court’s Recent Allina Decision

In a landmark decision on June 3, 2019, the Supreme Court held that the Department of Health and Human Services (HHS) was required to engage in notice and comment rulemaking before publishing methodology (Medicare Fractions) that affected the Medicare reimbursement amounts owed to hospitals that serve a significantly disproportionate number of low income patients.  And, the implications of the decision are much broader than that.  The decision is Azar v. Allina Health Servs., No. 17-1484, 587 U.S. __, 2019 WL 2331304 (2019).

Here are key takeaways about this Supreme Court decision from three different perspectives:

Know this if you are a hospital who serves a disproportionate number of low income patients:

In 2014, HHS published an instruction as to the Medicare Fractions to be used in calculating adjustments paid to hospitals that served a disproportionate number of low income patients for fiscal year 2012.  At the top of the spreadsheet containing those fractions, HHS noted that it had included Medicare Part C (Medicare Advantage) days in the Medicare Fractions – a practice that had not undergone notice and comment rulemaking and that reduced payments to hospitals.  In Allina, the Supreme Court held that HHS could not use the 2014 instruction to place Part C days in hospitals’ Medicare Fractions because the instruction had not undergone notice and comment rulemaking.

Know this if you want to know how the Supreme Court decision marks a departure in its analysis of rulemaking requirements under the Medicare Statute versus the APA:

The analysis of whether an agency is required to undergo notice and comment rulemaking is different depending whether the applicable standard is that set forth in the Administrative Procedure Act (APA) (applicable to many agencies but not to public benefit programs like Medicare), or the Medicare Statute (applicable to Medicare rules and policies).  The APA requires notice and comment rulemaking for “substantive rules,” whereas the Medicare Statute requires notice and comment rulemaking for “substantive legal standards.”  In Allina, the Supreme Court held that“substantive rules” are notthe same as “substantive legal standards.” 

Know this if you are interested in challenging Medicare reimbursement policies that have not undergone notice and comment rulemaking:

In Allina, the Supreme Court chose not to disturb the D.C. Circuit’s holding that an HHS standard must undergo notice and comment rulemaking if it requires Medicare Administrative Contractors (fka fiscal intermediaries) to apply a new or different standard that impacts a hospital’s right to receive payment from the Medicare program.  This holding provides hospitals and their representatives new legal arguments against reimbursement policies implemented without notice and comment rulemaking, and requires HHS to give affected parties advance notice of potential changes in the law and an opportunity to be heard on those changes.  The U.S. District Court for D.C. – where the vast majority of challenges to Medicare rules and policies are brought – is bound by the D.C. Circuit’s holding.  Other jurisdictions may be inclined to follow suit.

© 2020 Foley & Lardner LLPNational Law Review, Volume IX, Number 158

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About this Author

Lori A. Rubin, litigation lawyer, false claims act, attorney, Foley law firm
Senior Counsel

Lori Rubin is an associate and litigation lawyer with Foley & Lardner LLP. Ms. Rubin’s practice focuses on False Claims Act investigations and litigation. She also has particular experience in website compliance with the Americans with Disabilities Act and the Rehabilitation Act. She is a member of the Business Litigation & Dispute Resolution Practice, the Government Enforcement Compliance & White Collar Defense Practice, and the Health Care Industry Team.

202-295-4760
Donald H. Romano, Foley Lardner, Of Counsel, Health Care Lawyer,
Of Counsel

Don Romano is of counsel and a practicing health care lawyer with Foley & Lardner LLP. Mr. Romano has extensive experience counseling hospitals, skilled nursing facilities and academic medical centers and health systems on compliance, reimbursement and litigation issues involving the complex array of federal regulations governing relationships with physicians. He counsels clients on payment issues relating to the Medicare and Medicaid programs, and regulatory compliance matters, particularly those pertaining to the Anti-Kickback Statute, the physician self-referral statute (Stark Law), HIPAA, and the Medicare enrollment regulations.

202-945-6119