Dive Brief:
- Hackensack Meridian Health filed a lawsuit against HHS Secretary Xavier Becerra on Friday — the same day that the Supreme Court overturned the Chevron doctrine — targeting the implementation of Medicare.
- The lawsuit, filed in a Washington D.C. federal court, challenges the formula for disproportionate share hospital payments, and says the agency deprived hospitals of sufficient data to check their reimbursement rates.
- The suit was triggered by the Supreme Court’s 6-3 decision to overturn a decades-old policy allowing federal agencies to interpret vague statutes when crafting regulations. Experts, including credit agency Moody’s Ratings, predict the ruling would usher in a wave of new healthcare litigation.
Dive Insight:
The Chevron doctrine was enshrined in 1984 to offer deference to subject matter experts when challenges arose over ambiguous laws.
In Supreme Court Justice Elena Kagan’s dissenting opinion, she wrote that the doctrine ought to have remained in place, stating, “Congress knows that it does not — in fact cannot — write perfectly complete regulatory statutes. It knows that those statutes will inevitably contain ambiguities that some other actor will have to resolve, and gaps that some other actor will have to fill. And it would usually prefer that actor to be the responsible agency, not a court.”
However, the court’s conservative justices disagreed.
“A statutory ambiguity does not necessarily reflect a congressional intent that an agency, as opposed to a court, resolve the resulting interpretive question. Many or perhaps most statutory ambiguities may be unintentional,” wrote Chief Justice John Roberts for the majority opinion. He added, “Perhaps most fundamentally, Chevron’s presumption is misguided because agencies have no special competence in resolving statutory ambiguities. Courts do.”
In the Hackensack suit, the health system seeks to raise its DSH payments — reimbursements for hospitals serving a high proportion of low-income patients — and broaden the interpretation of what constitutes a low-income patient. The lawsuit is part of an ongoing controversy over DSH calculations — the Supreme Court has twice heard cases about how the CMS calculates DSH reimbursements in recent years, once in 2019 and again in 2022.
Healthcare organizations, including the American Academy of Pediatrics and the American Cancer Society, have warned in the days following the Chevron decision that increases in litigation could have destabilizing effects across the sector, including in publicly funded health insurance programs and the healthcare and food and drug review systems.
However, while litigation is expected to increase, analysts from Moody’s said in a research note that the short-term impact is likely to be “muted” as cases take time to work through the courts.
The long-term impact for providers could be mixed, as hospitals are likely to use lawsuits in an attempt to challenge policies that diminish their reimbursement rates — like Hackensack — or otherwise raise expenses.
However, insurers, pharmaceutical groups and patient advocacy groups are equally likely to pursue litigation, which could raise provider costs, according to Moody’s.
