Supreme Court makes certiorari determinations on two Medicare-related cases

A number of health care related cases have come before the United States Supreme Court this session, including two cases on topics we have previously reported on: Medicare’s site-neutral payment policy for off-campus provider-based departments and Medicare reimbursement for certain drugs purchased under the 340B drug discount program.

The Supreme Court will not review challenge to Medicare site-neutral payment policy for grandfathered off-campus provider-based departments

On June 28, 2021, the Supreme Court denied, without any commentary or explanation, the American Hospital Association’s (AHA) petition for writ of certiorari seeking review of the D.C. Circuit Court’s decision finding that the Department of Health and Human Services’ (HHS) and the Centers for Medicare & Medicaid Services’ (CMS) policy of paying grandfathered off-campus provider-based department clinic visit services (HCPCS code G0463) at the same rate as physician offices for evaluation and management (E&M) services was proper. In challenging the payment policy, the AHA argued that HHS had overstepped its authority. The district court agreed with the AHA, but on appeal, the D.C. Circuit Court reversed the lower court’s decision, deferring to the agency’s interpretation of a Medicare provision and finding that the reduced Medicare reimbursement for HCPCS code G0463 for the grandfathered off-campus provider-based clinics during calendar year 2019 was reasonable. 

On appeal to the Supreme Court, the question the AHA presented was whether administrative agencies should be given deference when the law they are interpreting precludes a court’s ability to weigh the lawfulness of a particular agency action. The AHA case challenging the Medicare site-neutral payment policy was seen as significant because, depending on the Supreme Court’s decision, it might have limited the scope of what is often referred to as Chevron deference to administrative agencies. Chevron deference is a principle of administrative law requiring courts to defer to interpretations of statutes made by government agencies charged with enforcing those statutes, unless such interpretations are unreasonable. The principle is named for the 1984 Supreme Court case Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., which involved a dispute over the Environmental Protection Agency’s interpretation of a provision of the Clean Air Act Amendments of 1977. Chevron stands for the proposition that a court must defer to an agency’s statutory interpretation, so long as it is reasonable. The agency’s interpretation does not have to be the only interpretation or even the best to receive deference – it just needs to be a reasonable interpretation.

Though broad, Chevron deference to administrative agency decisions is not without limits. At issue specifically in the AHA lawsuit was whether Chevron deference applies when the same statutory provision at issue determines both the lawfulness of the agency’s action being challenged and a court’s jurisdiction. The Supreme Court had previously declined to defer to agency determinations that interpreted a court’s jurisdiction, holding that agencies cannot “regulate the scope of the judicial power vested by the statute” and that the “scope of judicial review … is hardly the kind of question that the Court presumes that Congress implicitly delegated to an agency.” (See Adams Fruit Co. v. Barrett, 494 U.S. 638 (1990) and Smith v. Berryhill, 139 S. Ct. 1765 (2019)). Despite these prior Supreme Court decisions, there is a circuit split on whether Chevron deference is appropriate where the same statutory provision determines both the courts’ jurisdiction and the lawfulness of the agency action under challenge, with the D.C., Second, Third, Eighth and Eleventh Circuits holding that the deference applies while the Fourth, Fifth, Seventh and Ninth Circuits hold that Chevron deference does not apply. With the Supreme Court’s denial of certiorari, the circuit split on whether Chevron deference applies in such situations remains.

The AHA currently has a second lawsuit challenging the 2020 Medicare payment rule that continued the payment policy that the AHA initially challenged in 2019. The 2020 challenge was held in abeyance by the district court pending the outcome of the 2019 case. With the Supreme Court declining to review the Medicare payment policy for 2019, hospitals should expect CMS to continue to set the Medicare reimbursement for HCPCS code G0463 at the same rate as physician office E&M services.

The Supreme Court will review AHA’s challenge of the Medicare reimbursement cut for drugs purchased through the 340B drug discount program

On July 2, 2021, the Supreme Court announced that it would review the D.C. Circuit Court decision that reversed the lower court’s decision and reinstated HHS’s 28.5 percent reduction in Medicare reimbursement for outpatient drugs at hospitals that participate in the 340B drug discount program. In addition to granting the AHA’s petition for a writ of certiorari, the Supreme Court also directed the parties to brief and argue whether the AHA’s challenge to HHS’s adjustments is precluded by 42 U.S.C. §1395l(t)(12), a subsection of the Medicare statute establishing the Outpatient Prospective Payment System (OPPS) that precludes administrative or judicial review of certain agency actions. 

The D.C. District Court had ruled in favor of the AHA, holding that the drastic cuts to Medicare reimbursement for drugs purchased through the 340B drug discount program contained in the 2018 and 2019 OPPS rules exceeded the statutory authority of the HHS secretary and were unlawful. The D.C. Circuit Court of Appeals rejected HHS’s position that the provision of the Medicare statute establishing the OPPS precludes judicial review of HHS’s adjustments to the reimbursement rate for these outpatient drugs but ruled in HHS’s favor on the merits, finding that HHS had the statutory authority to impose the 28.5 percent reimbursement cut for outpatient drugs for 340B hospitals because HHS’s interpretation of the Medicare statute’s OPPS provision was entitled to deference under the Chevron principle. It will be interesting to see whether the Supreme Court uses this case to address the possible limits of Chevron deference it declined to take up in the AHA’s challenge to site-neutral payment reductions.