Supreme Court Ruling Could Be ‘Sea Change’ for Healthcare
By Greg Freeman
The Supreme Court ruling reversing the earlier Chevron determination giving deference to federal agencies to interpret rules will have a significant impact on the healthcare industry, but the effects will not come all at once, says Jacob J. Harper, JD, partner with the Morgan Lewis law firm in Washington, DC.
“This isn’t going to be something where suddenly, tomorrow, we have this tsunami of litigation. Rather, it’s going to be a little bit more insidious in the sense that I think the agencies will probably react pretty substantially in how they do business,” he says. “That’s going to impact the tenor of how things get done when it comes to healthcare, in particular with Medicare payment and compliance issues.”
Agencies probably will be less willing to provide compliance interpretation in the way they have up to now, Harper says. “They may not give us all that information because they’re worried that it’s going to be overturned, that it will go to court and their determination is not going to be upheld,” he says. “That that kind of soft interpretation that is really critical for a lot of the things that we do is going to be harder to obtain. The forum that that’s going to get decided in now is going to be active litigation in a courtroom, as opposed to calling the agency and seeing what they want and how they want to do things.”
Although the ruling might be seen as protecting healthcare organizations from capricious instructions from federal agencies, the actual result might be to introduce uncertainty and variation into compliance efforts, says Michael Young, co-founder of Lindus Health, a clinical research organization in New York City.
“The thing that matters most to businesses is certainty, and this basically removes that certainty because any court can go and challenge the interpretation given by one of the federal agencies. If that’s the FDA [Food and Drug Administration], you don’t have that certainty because the FDA word isn’t final,” he says. “It also potentially leads to the proliferation of completely different rules across different states based on different state-level rulings.
“I’d definitely be concerned if I was a multistate healthcare group that I’m going to have to be following different rules for the first time in different states,” Young says.
Paradigm Shift
The Supreme Court’s decision is “an enormous sea change, a complete paradigm shift,” says Douglas A. Grimm, JD, partner with the Arentfox Schiff law firm in Washington, DC.
“If you have an annual rulemaking, and it’s subject to challenge every year, and the courts are left with it, how are you going to figure that out? The judges are just not positioned to understand this stuff, nor should they, in some cases, be expected to figure it out from scratch,” Grimm says. “That’s what the agencies are there for.”
On the other hand, Grimm is hopeful that federal agencies will see this ruling as reason to be clearer in their rulemaking.
“If they engage in reasoned decision-making and they put forth a rule that is well explained and rational, then I don’t think the loss of Chevron deference will have that much of an effect,” he says. “The court will still take the statute, take the regulation, look at them together and be able to come to a decision that would be the same or similar to what would otherwise exist with or without Chevron.”
The Loper Bright decision affects all federal rulemaking, but it will have a particularly significant effect on healthcare, says Brett W. Rector, JD, partner with the Bracewell law firm in Dallas, TX. He notes that Justice Elena Kagan wrote a long dissent in which she offered five examples of regulations in which Chevron deference had been applied over the last four decades. Of those five examples, two of them involved healthcare.
“[One of] the two examples she offered was a particular reimbursement program under Medicare having to do with how differences in hospital wage levels were analyzed by geographic area. And then she also pointed to an FDA rule regulating biological products,” he says. “The dissent identified examples of what Chevron’s overruling would do, and almost 50% of them were healthcare. That just shows you how important it is.”
Rector suggests that healthcare organizations should consider the Supreme Court ruling when contesting federal rule compliance.
“Healthcare entities need to take a hard look at potential challenges to new rules and regulations. Under the old Chevron regime, the chances of succeeding with litigation were often lower because there was a thumb on the scale in favor of agency interpretation in many instances,” he says. “Now, under Loper Bright, that thumb is off the scale. Where, in past cases, a healthcare entity may not have elected to pursue litigation because they didn’t think they would succeed, now there needs to be a rethinking among healthcare entities about what litigation is worth pursuing.”
Still Need to Comply
It is important to note that the Supreme Court ruling does not change any current compliance obligations, says Robert E. Wanerman, JD, attorney with the law firm of Epstein Becker Green in Washington, DC. The ruling could lead to court challenges that will be beneficial to healthcare organizations at some point, but for now, it is business as usual, he says.
“There may be multiple challenges to a regulation and two different courts look at the same regulation, coming out with different opinions. It’s a gray area,. We don’t know what will happen,” he says. “For now, when there’s a regulation you use, the better course is still to follow the regulation unless and until there is a definitive determination by a court and that it applies not just to the parties, but nationwide.”
The ruling could eventually have an impact on False Claims Act cases, says Noam B. Fischman, JD, an attorney with the Akerman law firm in Washington, DC.
“We’re in the wild, wild West of figuring out how the Loper Bright decision is going to shape a post-Chevron risk management structure. I think it’s going to fundamentally increase litigation, and I think it could create False Claims Act arguments for defendants who want to challenge the materiality of rules that are at the epicenter of the cases,” Fischman says. “It’s going to be hard to argue that a failure to comply with an agency rule is the heart of a False Claims Act case if the agency rule isn’t valid to begin with. Because if it’s not the best interpretation of a statute, then all of a sudden the False Claims Act case becomes a house of cards.”
Sources
- Noam B. Fischman, JD, Akerman, Washington, D.C. Telephone: (202) 824-1725. Email: [email protected].
- Douglas A. Grimm, JD, Partner, Arentfox Schiff, Washington, DC. Telephone: (202) 857-6370. Email: [email protected]
- Jacob J. Harper, JD, Partner, Morgan Lewis, Washington, DC. Telephone: (202) 739-5260. Email: [email protected].
- Brett W. Rector, JD, Partner, Bracewell, Dallas, TX. Telephone: (214) 758-1680. Email: [email protected].
- Robert E. Wanerman, JD, Epstein Becker Green, Washington, DC. Telephone: (202) 861-1885. Email: [email protected].
- Michael Young, Co-Founder, Lindus Health, New York City. Email: [email protected].
The Supreme Court ruling reversing the earlier Chevron determination giving deference to federal agencies to interpret rules will have a significant impact on the healthcare industry, but the effects will not come all at once.
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