Azar v. Allina Health Services

Supreme Court of the United States · 2019 · Administrative Law

Administrative LawMedicareNotice-and-Comment RulemakingMedicare Act42 U.S.C. §1395hh(a)(2)notice and commentstatement of policysubstantive legal standard

Facts

Medicare provides additional payments to hospitals serving a disproportionate number of low-income patients, calculated in part through a hospital's Medicare fraction. After Congress created Medicare Part C, HHS changed positions over whether Part C patients should be counted in that fraction; a 2004 rule adopting that policy was vacated, and a 2013 rule readopted it only prospectively. In 2014, HHS posted on its website the 2012 Medicare fractions for thousands of hospitals and stated that the fractions included Part C patients. Hospitals sued, arguing that HHS adopted this payment-affecting policy without the notice and comment required by the Medicare Act.

Issue

Whether HHS's 2014 announcement that counted Part C patients in the 2012 Medicare fractions established or changed a "substantive legal standard" governing payment for services under 42 U.S.C. §1395hh(a)(2), such that notice and comment was required. More specifically, the question was whether the Medicare Act incorporates the APA's exemption for interpretive rules and policy statements.

Rule

When the government establishes or changes a Medicare payment-related policy that qualifies as a rule, requirement, or statement of policy establishing or changing a substantive legal standard under 42 U.S.C. §1395hh(a)(2), it must provide notice and a 60-day comment period unless it identifies a lawful statutory excuse. The phrase "substantive legal standard" in the Medicare Act does not carry the same meaning as the APA's term "substantive rule," so the APA's interpretive-rule exception does not control §1395hh(a)(2).

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Phoenix, the Department of Health and Human Services posts a bulletin on its Medicare website announcing a new formula for calculating bonus payments to rehabilitation clinics serving low-income patients. The bulletin will reduce payments for clinics statewide, and the agency gave no advance public notice or 60-day comment period.

If the agency argues that the bulletin merely interprets existing Medicare statutes and therefore falls within the APA's interpretive-rule exception, what is the best answer?

Explanation. Under the majority opinion, §1395hh(a)(2) applies when the government issues a rule, requirement, or other statement of policy that establishes or changes a substantive legal standard governing Medicare payment. The Court rejected the argument that the APA's interpretive-rule exception limits this Medicare-specific duty. So the agency cannot avoid notice and comment merely by labeling the bulletin interpretive. (Derived from Azar v. Allina Health Services (n.d.).)