U.S. Supreme Court Affirms Hospital Position in Allina Case
June 03, 2019
In a ruling with significant procedural implications for the implementation of the Medicare Act, the U.S. Supreme Court today affirmed the importance of allowing an opportunity for stakeholders to comment on proposed rules through notice-and-comment rulemaking relative to the Medicare Disproportionate Share Hospital (DSH) program, which provides resources for hospitals that serve a high volume of low-income patients.
A District of Columbia (D.C.) Circuit Court decision in the Allina Health Services, et al. v. Price, 863 F.3d 937 (D.C. Cir. 2017) (Allina II) reversed the Center for Medicare & Medicaid Services’ (CMS) attempt to cut Medicare DSH payments (by approximately $3-4 billion) through changing the agency’s interpretation of the term “entitled.” More importantly, the D.C. Circuit Court ruled that CMS must follow notice and comment procedures any time it changes policies that substantively affect Medicare payments and that there is no exception for “interpretive” rules. The government appealed that ruling for consideration before the U.S. Supreme Court.
In its 7-1 opinion, the U.S. Supreme Court found that—because the U.S. Department of Health and Human Services (HHS) had not provided for a sufficient comment period—potentially affected hospitals were unable to review and prepare for the proposed rule change. In its majority decision, Justice Neil Gorsuch underscored the magnitude of impact that any change to the Medicare program would have on its recipients. As a result, HHS must give impacted parties ample opportunity to weigh in on proposed changes.
Specifically, the Supreme Court’s review in the Allina case considered whether the Medicare Act requires HHS to conduct notice-and-comment rulemaking before providing instructions to a Medicare Administrative Contractor (MAC) making initial determinations of payments due under Medicare.
Consistent with briefs filed by national hospital groups, including the American Hospital Association, HAP joined fourteen state hospital associations in submitting a “friend of the court” brief, stating:
“Losses in government funding, including DSH funding, can force hospitals to cut services or close altogether. Notice and comment procedures are an essential component of rule-making for the DSH program. Without notice-and-comment, HHS may fail to fully understand the range of consequences that a rule-change will have on hospitals. Put simply, notice and comment is vital to the successful administration of the DSH program.”
Hospitals had cautioned that if the ruling were overturned, CMS would be able to change payment policies without giving hospitals advance notice and an opportunity to try and shape policy through the public comment process.
HAP currently is reviewing the court decision to discern the reach of the ruling.
For questions, please contact Jolene Calla, HAP’s vice president health care finance and insurance.