Ropes & Gray attorneys share their analysis of administrative and court litigation, regulatory developments, key developments affecting federal program payments to hospitals and health systems, and other reimbursement-related issues.
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Supreme Court Overrules Chevron and Directs Federal Courts to "Exercise Independent Judgment" In Construing Statutory Meaning
Given the significant financial implications within the health care industry, the issuance of regulations and other related administrative decisions governing federal health care reimbursement often lead to legal challenges against the U.S. Department of Health and Human Services ("HHS") and its agency, the Centers for Medicare & Medicaid Services ("CMS"). For decades, HHS appeared to have an upper hand in these cases, as courts employed the so-called "two-step framework" established in the landmark Supreme Court case Chevron v. Natural Resources Defense Council, 467 U.S. 837 (1984) ("Chevron"), which required federal courts to defer to "reasonable" agency interpretations of ambiguous statutory provisions when challenged under the Administrative Procedure Act ("APA"). This June, however, the Supreme Court explicitly overruled Chevron. In Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024) ("Loper Bright"), an opinion that has attracted significant attention in the health care industry, the Court held that courts are responsible for interpreting statutes without giving deference to agency interpretations of ambiguous provisions. While courts have only just begun to explore how Loper Bright may impact administrative litigation, the landmark decision has the potential to reshape reimbursement litigation by providing a more level playing field to parties who challenge federal agency actions, which may also influence the process by which HHS develops and writes regulations.
As discussed in our previous client alert, the Loper Bright decision held that courts "must exercise their independent judgment" when determining the meaning of statutes rather than presumptively deferring to reasonable agency interpretations, as was required under Chevron. The Supreme Court stated that "statutes, no matter how impenetrable, do—in fact, must—have a single, best meaning[,]" and courts are required to "use every tool at their disposal to determine the best reading of the statute" and resolve any ambiguity. The Supreme Court ruled that this is true even when a statutory ambiguity implicates technical matters within an agency's subject matter expertise. Under Loper Bright, technical complexity does not absolve a court of its responsibility to interpret statutes. The Court explained that "Congress expects courts to do their ordinary job of interpreting statutes, with due respect for the views of the Executive Branch[,]" and although an agency's expertise may inform the court's judgment, an agency's interpretation cannot bind a court.
Loper Bright has the potential to alter dramatically how HHS and CMS operate—including in matters of reimbursement—by making it more difficult for the government to prevail in APA actions challenging agency interpretations.
Case Study on Loper Bright's Potential Impact on Health Care Reimbursement Litigation: Lake Region Healthcare Corp. v. Becerra, 113 F.4th 1002 (D.C. Cir. 2024)
Loper Bright has already begun to reshape legal challenges to health care reimbursement regulations. This feature spotlights Lake Region Healthcare Corp. v. Becerra, 113 F.4th 1002 (D.C. Cir. 2024) ("Lake Region Healthcare"), which illustrates one example of how the Supreme Court's overruling of Chevron can materially change—or even completely reverse—the outcome of Medicare reimbursement litigation.
In Lake Region Healthcare, a Minnesota hospital ("Lake Region") challenged CMS's interpretation of a Medicare statute that entitles qualifying hospitals to receive so-called "volume-decrease adjustment" ("VDA") payments, alleging that the government's calculation methodology failed to "fully compensate" the hospital for "fixed costs" that it incurred during the relevant period, to which it was entitled under the statute. In its pre-Loper Bright decision, the district court, applying Chevron, deferred to the agency's interpretation of the Medicare statute and granted the agency's motion for summary judgment. After the hospital appealed this decision, but before the circuit court ruled on the appeal, the Supreme Court issued its opinion in Loper Bright, and the circuit court—no longer bound by Chevron—reversed the district court's decision and granted the hospital's (rather than the agency's) motion for summary judgment.
While hospitals are generally compensated by the Medicare program through fixed, prospectively determined payments based on diagnosis-related groups ("DRGs"), the Medicare statute entitles hospitals classified as Sole Community Hospitals ("SCHs") to VDA payments for "fixed costs" they incur in providing inpatient hospital services while experiencing a qualifying decrease in cases. To comply with 42 U.S.C. § 1395ww(d)(5)(D)(ii), these VDA payments must "fully compensate" SCHs for their fixed costs, including the "reasonable cost of maintaining necessary core staff and services," though Congress did not prescribe a specific method for calculating the VDA. Historically, CMS has used several different methodologies for calculating VDA payments: the "fixed-total" approach, "fixed-fixed" approach, and a third method not at issue in Lake Region Healthcare. Under the fixed-total approach, the VDA is the difference between the hospital's fixed costs for treating Medicare beneficiaries and the total DRG payments the hospital has received. In contrast, the fixed-fixed approach permits higher VDA payments by defining the VDA as the difference between the hospital's fixed costs for treating Medicare beneficiaries and an estimated portion of its DRG payments allocable to its fixed costs.
In FFY 2013, Lake Region experienced a qualifying decrease in Medicare inpatient discharges and sought a VDA payment calculated using the fixed-fixed approach. The Medicare Administrative Contractor ("MAC") denied Lake Region's request, using a fixed-total calculation method to conclude that Lake Region had already been fully compensated for its fixed costs. The Provider Reimbursement Review Board ("PRRB") reversed the MAC's decision, and granted Lake Region the full requested VDA. The CMS Administrator subsequently reversed the PRRB, affirming the MAC's denial of Lake Region's VDA request.
Lake Region sought judicial review, arguing HHS failed to fulfill its mandate under 42 U.S.C. § 1395ww(d)(5)(D)(ii). The U.S. District Court for the District of Columbia ("D.C. District Court") ruled for the government on cross-motions for summary judgment. Adhering to pre-Loper Bright precedent as required at the time, the D.C. District Court granted Chevron deference to HHS's statutory construction after finding the agency's interpretation to be "reasonable, even if it might not be the best[.]"
The D.C. District Court was not the first court to deny a hospital's challenge to the fixed-total calculation method on the grounds that HHS's interpretation of the statute was reasonable under Chevron. For example, in Trinity Reg'l Med. Ctr. v. Azar, No. 17-CV-03029 LRR, 2018 WL 1558451 (N.D. Iowa Mar. 19, 2018), report and recommendation adopted in part, No. 17-CV-3029-LRR, 2018 WL 4295290 (N.D. Iowa Sept. 10, 2018), an Iowa acute care hospital requested a VDA which was denied by the MAC and appealed the MAC's decision to the PRRB which, applying the fixed-fixed method, granted the hospital a VDA payment, only for the CMS Administrator to apply the fixed-total method and conclude that the hospital was not entitled to a VDA payment. The hospital sought judicial review, arguing that HHS's methodology for calculating VDA payments violated the plain language of the statute and was thus arbitrary and capricious. The magistrate judge conceded that the hospital's preferred interpretation "seems more in line with the purpose of the VDA payment" but concluded that HHS's interpretation of the statute "[was] reasonable and thus owed deference[.]" Similarly, in St. Anthony Reg'l Hosp. v. Azar, 294 F. Supp. 3d 768 (N.D. Iowa 2018), aff'd sub nom. Unity HealthCare v. Azar, 918 F.3d 571 (8th Cir. 2019), a hospital challenged the CMS Administrator's application of the fixed-total calculation method as unlawful. As the statute does not directly address the question of how the VDA payment should be calculated, the court found that this left "an explicit gap" in the statute for HHS to fill. Applying Chevron, the court then found that the fixed-total calculation method was reasonable and, as such, Chevron required the agency's reasonable interpretation to be given controlling weight. In Stephens Cnty. Hosp. v. Becerra, No. 19-CV-3020 (DLF), 2021 WL 4502068 (D.D.C. Sept. 30, 2021), the D.C. District Court had similarly found for the government. The court invoked Chevron and upheld the CMS Administrator's decision, stating that the statute did not prescribe a formula to calculate the VDA payment and that the agency's interpretation was reasonable.
On September 3, 2024, the U.S. Court of Appeals for the District of Columbia ("D.C. Circuit Court") reversed the lower court's decision. The D.C. Circuit Court noted that in the aftermath of Loper Bright, it was required to "exercise independent judgment" in construing the Medicare statute. No longer bound by Chevron, the D.C. Circuit Court rejected the agency's statutory interpretation, concluding that CMS's fixed-total approach failed to "fully compensate" Lake Region for its FFY 2013 "fixed costs" as required by the Medicare statute. The D.C. Circuit Court ruled that "a method that ignores all compensation for variable costs is not one that reasonably approximates full compensation for fixed costs." According to the D.C. Circuit Court, by "effectively treat[ing] all DRG payments as compensation for fixed costs, at least up to the amount of the hospital's total fixed costs[,]" the fixed-total approach endorsed by CMS leads to an overstatement of the amount of fixed costs already reimbursed by baseline DRG payments and thus ineligible for reimbursement through a VDA, "shortchanging" hospitals.
Potential Impact of Loper Bright
Lake Region Healthcare provides a dramatic example of Loper Bright altering the course of Medicare reimbursement litigation. However, trends in administrative law jurisprudence suggest that the overall impact of Loper Bright for health care reimbursement may be more muted. As the Supreme Court became increasingly skeptical of agency interpretive authority in the years prior to Loper Bright, appellate courts had already begun to bypass Chevron deference in adjudicating HHS challenges— either due to finding that Chevron deference was unwarranted because the statute at issue was unambiguous or because the agency had not explicitly requested deference. For example, despite extensive Chevron analysis in both the district court and appellate court opinions, the Supreme Court did not invoke Chevron in its opinion for Becerra v. Empire Health Found., 597 U.S. 424 (2022). Subsequently, the D.C. Circuit Court, citing Empire for the proposition that "[reviewing courts] need not apply the Chevron framework[,]" expressly rejected the district court's use of Chevron in considering a reimbursement dispute. See Advocate Christ Med. Ctr. v. Becerra, 80 F.4th 346, 351 (D.C. Cir. 2023) ("Advocate Christ"). (See our Bloomberg Law article: Implications of Loper Bright & Relentless for HHS-Regulated Entities, Bloomberg L. (May 2024)).
Several cases highlighted in this issue's Docket Updates reflect this judicial trend of declining to find ambiguity in contested statutory language, regardless of whether such language could plausibly be read in more than one way. In Advocate Christ, the D.C. Circuit Court—possibly anticipating the result of Loper Bright, in which certiorari had been granted several months prior—analyzed the contested statutory language without even mentioning Chevron. Similarly, in Am. Hosp. Ass'n v. Becerra, No. 4:23-CV-01110-P, 2024 WL 3075865 (N.D. Tex. June 20, 2024), the court struck down an HHS rule after finding that it "exceed[ed] HIPAA's unambiguous text," briefly addressing deference owed to the agency only to say that deference could not save HHS's interpretation. Following Loper Bright, the trend has continued. In Baylor All Saints Medical Center v. Becerra, No. 4:24-cv-00432 P, 2024 WL 3833278 (N.D. Tex. Aug. 15, 2024), the court acknowledged that the agency's interpretation was "far from an implausible interpretation[,]" but ultimately concluded that "the governing statute [at issue] is clear." And in Bridgeport Hosp. v. Becerra, No. 22–5249, 2024 WL 3504407 (D.C. Cir. July 23, 2024), the D.C. Circuit Court concluded that the contested section of the Medicare statute speaks with "remarkable specificity," and as a result, determined that HHS's action was unlawful.
In short, although Loper Bright certainly marks a noteworthy shift in legal doctrine, the case represents the continuation of longstanding trends in administrative law jurisprudence, not a sudden paradigm shift. Given that appellate courts' willingness to apply Chevron deference had been waning for some time, the impact of Loper Bright on how courts resolve reimbursement litigation may be more limited.
Conclusion
Although the full effects of Loper Bright will only become clear in time, the loss of Chevron deference may embolden litigants to challenge agencies' constructions of statutes, including in the realm of reimbursement. Lower courts will likely see an uptick in challenges to agencies' statutory constructions as regulated entities see Loper Bright as ushering in a more equal playing field for administrative litigation. However, likelihood of success will continue to depend on the agency's adherence to the statute and the strength of interpretive arguments. Because reviewing courts will be compelled to exercise independent judgment on questions of law rather than deferring to agency interpretations of ambiguous language, HHS and CMS actions that are not clearly grounded in the statutory language are at greater risk of being struck down by federal courts.
Docket Updates
1. Bridgeport Hospital v. Azar
On July 23, 2024, the D.C. Circuit Court vacated CMS's 2019 rule that increased the Medicare wage index for hospitals in the lowest quartile and offset that adjustment by reducing IPPS payments for all other hospitals (the "Redistribution Rule"). Bridgeport Hosp. v. Becerra, No. 22–5249, 2024 WL 3504407 (D.C. Cir. July 23, 2024). In the final FFY 2025 inpatient prospective payment system ("IPPS") rulemaking issued August 28, 2024, CMS renewed the low wage index policy, but stated that it was aware of the Bridgeport decision and still was "considering options" for next steps. In its subsequent September 30 interim final rule, CMS changed course, removing its low wage index policy that had increased the wage index for hospitals in the lowest quartile while simultaneously reducing payments for all other IPPS hospitals. (See Regulatory Updates )
As background, to address concerns about wage disparity between high-wage and low-wage hospitals, CMS adopted the Redistribution Rule in 2019. This rule increased Medicare reimbursement for hospitals in the lowest quartile while decreasing reimbursement for all other hospitals to maintain budget neutrality. A group of hospitals challenged the Redistribution Rule, and the D.C. District Court found that CMS had exceeded its statutory authority in adopting the Redistribution Rule. The D.C. District Court did not vacate the rule, however, deciding that the agency's deficiency was not serious enough to warrant vacatur and that vacating the policy would create significant disruption. The D.C. District Court also emphasized the deference owed to HHS in administering "such a complex statutory and regulatory regime."
On appeal, the D.C. Circuit Court affirmed the D.C. District Court's decision that CMS had exceeded its statutory authority and found that the D.C. District Court should have also vacated the Redistribution Rule. The D.C. Circuit Court highlighted that Chevron deference would not have applied in this matter even before Loper Bright because no statutory ambiguity required gap-filling. The D.C. Circuit Court reasoned that the Medicare statute speaks with "remarkable specificity" as to the intricate formulas that are used to reimburse hospitals for care. It held that the Medicare statute does not authorize HHS to depart from Congress's established formula "simply because HHS wants those favored hospitals to be able to pay their employees higher wages in the future." The D.C. Circuit Court concluded that HHS's proposed policy "distorts the [statutorily imposed] uniform factor, jettisons the definite, objective data, and departs from the actual disparities between regional and national wages. And it does so despite a mandatory duty to follow the formula Congress chose." The D.C. Circuit Court found that Congress did not paint with "broad strokes," leaving the difficult decisions to an agency. Instead, the court found that the Medicare statute is a "regime of highly specific formulas. And HHS does not 'complement' [the statute] when it jettisons one of those formulas." Rather, the D.C. Circuit Court determined that HHS replaced it with "a new regime entirely." The D.C. Circuit Court decided that vacatur of the Redistribution Rule would be the appropriate remedy, as HHS "cannot 'cure' the fact that it lacks the authority to take a certain action."
Following the Court's decision in Bridgeport, CMS initially attempted to double down on its low wage index policy, but ultimately rescinded the policy beginning with FFY 2025. 89 Fed. Reg. 80405 (Oct. 3, 2024). The end of the low wage index policy means lower payments for hospitals in the lowest quartile, while other IPPS hospitals would receive higher payments due to the removal of the corresponding budget neutrality adjustment that CMS applied when it adopted the low wage index policy.
2. Baylor All Saints Medical Center, et al., v. Becerra
On August 15, 2024, the U.S. District Court for the Northern District of Texas (the "Texas Court") struck down the provision of the FFY 2024 IPPS rule (effective October 1, 2023), that excluded patients whose care is provided through uncompensated care pools under a Section 1115 Waiver (defined herein) from the count of Medicaid-eligible days used to determine the Medicare DSH payment. Baylor All Saints Medical Center, et al., v. Becerra, No. 24-cv-432 (Aug. 15, 2024) Under Section 1115 of the Social Security Act, states can submit pilot Medicaid programs to CMS and, with the approval of the Secretary of HHS ("the HHS Secretary"), waive certain Medicaid program requirements ("Section 1115 Waivers"). 42 U.S.C. § 1315(a).
The Medicare DSH regulation historically provided that hospitals could include within the Medicaid-eligible days in the Medicare DSH calculation "all days attributable to populations eligible for Title XIX matching payments through" a Section 1115 Waiver. 42 C.F.R. § 412.106(b)(4)(ii) (2022). In the FFY 2024 IPPS final rule, however, CMS amended the DSH regulation to restrict the number of Section 1115 Waiver days that may be counted in the Medicaid fraction by excluding days of all patients whose care is provided through uncompensated care pool payments, like those in Texas (42 C.F.R. § 412.106(b)(4)(iii)), as well as patients whose Section 1115 premium assistance covers less than 100% of their premium costs (42 C.F.R. § 412.106(b)(4)(ii)(B)). The Texas Court referred to these new exclusions of patients whose care is provided via such Section 1115 Waivers under the FFY 2024 IPPS final rule as the "Exclusion Rule."
On May 10, 2024, a group of Texas hospitals filed a complaint challenging the FFY 2024 IPPS final rule as conflicting with the Medicare statute, arguing that the statute requires the HHS Secretary to include such individuals covered under Section 1115 Waivers within hospitals' Medicare DSH payments. The plaintiff hospitals moved for a preliminary injunction to stay the application of the challenged portion of the rule. In support of their motion, the hospitals asserted that the Fifth Circuit Court of Appeals' decision in Forrest General Hosp. v. Azar, 926 F.3d 221, 228–29 (5th Cir. 2019), barred the HHS Secretary's interpretation of the DSH statute. The plaintiff hospitals argued that under Forrest General, the Medicare statute requires the HHS Secretary to make Medicare DSH payments attributable to individuals he deemed to be "Medicaid-eligible" when he approved a Medicaid state waiver that grants such individuals Medicaid-like benefits. The hospitals argued that the provision of the FFY 2024 final rule excluding waiver days associated with uncompensated care pools from the DSH calculation "unlawfully carve[d] out a sub-population of patients who receive inpatient benefits through an approved [Section 1115 Waiver]," in plain violation of the Fifth Circuit's holding. The HHS Secretary argued that the statute's permissive language allowed the HHS Secretary the discretion to definitively exclude Section 1115 Waiver patient-days from the DSH calculation. Further, the HHS Secretary argued that the hospitals did not face the threat of irreparable harm and thus, were not entitled to preliminary injunction because they could seek relief from unfavorable determinations pursuant to the rule through the administrative appeals process.
The Texas Court ruled in favor of the hospitals on August 15, 2024, holding that the Fifth Circuit's decision in Forrest General settled the case – rejecting CMS's interpretation of the DSH statute to exclude Section 1115 Waiver days from the numerator of the Medicaid fraction for purposes of the DSH calculation. The court did not issue a permanent nationwide injunction but vacated the Exclusion Rule as unlawful. The court held that the Fifth Circuit's decision in Forrest General "directly control[led] the Court's inquiry—and clarifies that the Exclusion Rule contradicts the [Medicare] statute's plain text." The Texas Court followed the Fifth Circuit's reasoning and concluded that because the HHS Secretary had approved Texas's Section 1115 Waiver plan, CMS was required to include in the numerator of the Medicaid fraction patient days for those treated pursuant to the Section 1115 plan. Accordingly, the court declared as invalid the Exclusion Rule, which excluded patients treated via uncompensated care pools from the Medicaid fraction. The Texas Court's decision does not directly address a different provision of the FFY 2024 rule that limited the days associated with Section 1115 premium assistance programs that could be counted in the DSH calculation.
Notably, while the Baylor All Saints holding was issued following Loper Bright, the Texas Court's decision does not reference Chevron or Loper Bright at all; instead, it found that the HHS Exclusion Rule contradicts the plain text of the applicable statute, as well as the binding interpretations of the D.C. Circuit Court and Fifth Circuit of the same. However, the Texas Court also stated that HHS's interpretation was "far from an implausible interpretation," suggesting that, were it not for binding circuit precedent or Loper Bright, the court very well may have found the statute to be ambiguous, granted deference, and found in favor of the agency.
On October 15, the government appealed the decision to the Fifth Circuit. So, while the rule remains vacated pending appeal, it remains unclear whether days associated with uncompensated care pools under a Section 1115 waiver will ultimately count as Medicaid-eligible days in the DSH calculation.
3. Battle Creek Health System v. Becerra
The D.C. Circuit Court has scheduled oral argument in Battle Creek v. Becerra, No. 23-5310 (D.C. Cir.), on November 22, 2024, a case concerning whether hospitals can appeal directly from CMS's published Supplemental Security Income ("SSI") frac-tions, one of the two fractions used to calculate the Medicare DSH payment, before the agency applies the SSI fractions in a notice of program reimbursement ("NPR"). The government appealed an October 31, 2023 ruling by the D.C. District Court, holding that the PRRB had jurisdiction over the plaintiff hospitals' appeals of CMS's 2009 publication of SSI fractions for FFY 2007. The D.C. District Court, in turn, vacated the PRRB's jurisdictional decision and remanded the case to the PRRB to address the merits of the dispute. In reaching its decision, the district court found that CMS's publication of the SSI fractions at issue constituted a "final determination" within the meaning of 42 U.S.C. § 1395oo of the Medicare statute, explaining that "section 1395oo permits providers to prospectively appeal what they will, in the future, receive as a result of services provided to eligible patients" and "eliminates the requirement that [a pro-vider] file a cost report prior to appeal." The D.C. District Court also found that the providers' "injury accrues for the purposes of the relevant statutory subsection when [they] are informed that they will receive a smaller reimbursement based on a particular fractional determination," and that, "CMS . . . made a final decision with the meaning of the statute, because CMS definitively alerted providers to forthcoming reimbursements" when it published the SSI fractions in Transmittal 1774, Change Request 6530 (July 24, 2009).
On December 28, 2023, the HHS Secretary filed an appeal of the D.C. District Court's decision in Battle Creek to the D.C. Circuit Court. See Notice of Appeal to D.C. Circuit, Battle Creek Health System v. Becerra, No. 1:17-cv-0545 (D.D.C. Jan. 2, 2024). On April 30, 2024, the government filed its brief, arguing the PRRB was correct to conclude that it lacked jurisdiction over the appeal because the challenged Medicare fractions did not determine an "amount of the payment" available, and they were not "final." Battle Creek filed its response brief on July 22, 2024, arguing that "Congress expressly provided for DSH payment appeals without [NPR]," when it added DSH payments to the prospective payment system statute at 42 U.S.C. § 1395ww(d). The hospital also argues that D.C. Circuit Court precedent establishes that a hospital can pursue an appeal of a prospective payment before receiving an NPR, citing Washington Hosp. Ctr. v. Bowen, 795 F.2d 139, 145 (D.C. Cir. 1986). The hospital also relies on the Supreme Court's recognition in Azar v. Allina Health Servs. ("Allina II") that the HHS Secretary's SSI fractions are not only final determinations but affect amounts of payment. 587 U.S. 566, 572 (2019) (stating that "the government's 2014 announcement of the 2012 Medicare fractions governed 'payment for services'"). The government replied on September 3, 2024, arguing that the SSI fractions at issue amount to "a decision that merely affects—but does not finally determine" the final payment.
The D.C. Circuit Court has scheduled oral argument in the case for November 22, and a decision is expected next year.
4. Advocate Christ Medical Center v. Becerra
Advocate Christ is scheduled for oral argument before the Supreme Court on November 5, 2024. 80 F. 4th 346, cert. granted, 2024 WL 2883751 (U.S. June 10, 2024) (23-715). The Supreme Court will review the D.C. Circuit Court's decision holding that the term "entitled to [SSI] benefits" extends only to Medicare beneficiaries who received SSI cash payments at the time of their hospitalization. See Advocate Christ. In a longstanding conflict with CMS, hospitals have historically challenged the inconsistent interpretation of the term "entitled to benefits" in the DSH calculation as between the Medicare program and the SSI program. In Advocate Christ, the latest iteration of this kind of challenge, the hospitals argue that the Medicare DSH statute requires that "entitled to [SSI] benefits" extends to all patients enrolled in the SSI program at the time of hospitalization, even if they did not actually receive any cash benefits under the SSI program. The hospitals argue this outcome is consistent with the Supreme Court's decision in Becerra v. Empire Health Foundation, 597 U.S. 424 (2022). The government, on the other hand, argues that entitlement to SSI benefits requires actual receipt of SSI cash benefits. The government also invoked the Court's recent holding in Loper Bright to characterize its preferred interpretation as a "contemporaneous, longstanding, and consistent agency interpretation" of a technical provision that "warrants the Court's respect." A decision in Advocate Christ is expected in the first half of next year.
5. American Hospital Assoc. v. Becerra
On June 20, 2024, the U.S. District Court for the Northern District of Texas ruled in favor of the hospital association plaintiffs in a case challenging recent HHS guidance regarding the Health Insurance and Portability and Accountability Act ("HIPAA") (the "Guidance"). See Am. Hosp. Ass'n v. Becerra, No. 4:23-CV-01110-P, 2024 WL 3075865 (N.D. Tex. June 20, 2024) ("AHA v. Becerra"). The Guidance, issued in a December 2022 Bulletin, purported to extend HIPAA's disclosure restrictions to "tracking technologies" that effectively connect an individual's IP address with a visit to an Unauthenticated Public Webpage that addresses specific health conditions or health care providers. The matter first arose in November of 2023, when the American Hospital Association ("AHA") and others brought suit against the Director of the HHS Office for Civil Rights ("OCR") and the HHS Secretary to stop enforcement of the Guidance. In its June 2024 decision, the court ruled that key portions of the Guidance were unlawful and exceeded the scope of the agency's administrative authority. The Texas Court granted the plaintiffs' motion for declaratory judgment to vacate the Guidance's classification of such information gathered from tracking technologies as "individually identifiable health information" ("IIHI"), but rejected the plaintiff's simultaneous request for a permanent injunction. Specifically, the court ruled that metadata (e.g., IP address), input by website users into a HIPAA-regulated entity's unauthenticated, publicly facing webpage does not constitute IIHI, because such information neither relates to an individual's health condition, health care or payment for health care, nor does it identify or can it be used to reasonably identify that individual. The Texas Court reasoned that "[t]o hold otherwise would empower HHS and other executive entities to take increasingly expansive liberties with the finite authority granted to them." Notably, however, the ruling does not vacate the entire Guidance, which may imply that OCR's characterization that an IP address in combination with activity on an authenticated webpage constitutes IIHI, and thus, remains enforceable. HHS initially appealed the Texas Court's ruling but withdrew its appeal on August 29, 2024. Learn more.
While the decision in AHA v. Becerra preceded the decision in Loper Bright by one week, the AHA v. Becerra court emphasized that it was the statute's text, rather than any agency deference, which ultimately led the court to its decision. By stating that any Chevron "deference does not give HHS interpretive carte blanche to justify whatever it wants irrespective of violence to HIPAA," this ruling previewed the landscape to come. AHA v. Becerra underscores that as agency authority continues to be challenged, agencies will have to more carefully consider the scope of their statutory authority before making determinations or promulgating rules that may be seen as inappropriately stretching its limits. Learn more.
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