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Health Law Scan

Legal Insights and Perspectives for the Healthcare Industry

The US Department of Health and Human Services (HHS) Office of General Counsel (OGC) offered the healthcare industry the benefit of its legal analysis of the recent US Supreme Court opinion in Azar v. Allina Health Services (Allina) with respect to its impact on Medicare payment rules, sharing its Memorandum to the Principal Deputy Administrator & Director of the Center for Medicare dated October 31, 2019 (OGC Memo) with the public. The OGC recognized at the outset the primary directive of the decision –“The Supreme Court made clear that Congress has imposed more stringent procedural requirements for certain Medicare rules than the framework that otherwise would apply under the Administrative Procedure Act (APA).”

The OGC then offered its advice as to the legal implications associated with that directive. If HHS or CMS “issued guidance that, under Allina, should have been promulgated through notice-and-comment rulemaking, the Department's ability to bring enforcement actions predicated on violations of those payment policies is restricted.” This concept works in concert with elements of the Department of Justice's Brand memorandum, which was also referenced in the OGC Memo. The OGC Memo then attempted to draw a distinction between guidance documents that do not require notice-and-comment rulemaking versus those that do. According to the OGC Memo, the principal inquiry in distinguishing between the two is the closeness of the guidance to the relative statutory or regulatory terms.

To the extent a guidance document created a new “statutory or regulatory norm,” it would be necessary to undergo notice and comment rulemaking in order to provide a basis for enforcement. The key question in any analysis of the impact of Allina on a guidance document for payment enforcement purposes is “whether the enforcement action could be brought absent the guidance document,” according to the OGC Memo. Providers currently involved in a payment dispute with the Medicare program should ask this question, if they have not already. How much did the guidance document at issue in the dispute “fill a narrow statutory or regulatory gap” versus provide for the regulatory norm in a broad statutory or regulatory scheme? The OGC Memo opens the door to the potential resolution of certain payment disputes.

The OGC Memo clarified that the Allina decision “does not preclude CMS from enforcing payment provisions in its contracts or agreements, provided that those provisions, if in the form of a guidance document, are expressly referenced as an obligation of the party to the contract” (emphasis added). In addition, the OGC Memo indicated that the Allina limitations would not apply to local coverage determinations and Stark Law advisory opinions.

As the implications of the Allina decision unfold, the OGC Memo offers excellent insight into the agency’s application of the legal standard set forth in it to the Medicare enforcement process. Providers of all kinds should study the OGC Memo as they consider the implications of the Allina decision on their own organizations. Where payment disputes exist, careful analysis of the statutory and regulatory scheme in light of any guidance documents involved may present an Allina defense that the provider can pursue.