By Greg Freeman
Executive Summary
One year has passed since a landmark Supreme Court ruling. Legal analysts predicted at the time that it would complicate healthcare compliance.
- The fallout so far is not as bad as feared.
- Further repercussions still may be coming.
- Healthcare organizations are relying on legal expertise to respond to challenges.
A year after the Supreme Court’s ruling in Relentless v. Department of Commerce and Loper Bright Enterprises v. Raimondo, the predicted challenges to healthcare compliance have not yet materialized as fully as expected, but the effects might still be felt in coming months.
The ruling sharply reduced the power of federal agencies to interpret the laws they administer, saying courts should interpret ambiguous laws. The decision led many healthcare compliance professionals to suggest organizations could face difficulty in complying with regulations without relying on agency interpretations.
(For more information on the ruling, see “Chevron Ruling Will Bring Uncertainty to Healthcare Compliance: in the September 2024 issue of Healthcare Risk Management.)
It may still be too early to see the full effects of the Loper Bright decision, says Douglas A. Grimm, JD, partner with the ArentFox Schiff law firm in Washington, DC.
“All of us healthcare lawyers are talking amongst ourselves and wondering what will happen. The vast majority of providers have their compliance plans in place, and they haven’t rushed to change their compliance programs,” he says. “In fact, the agencies continue to emphasize that compliance investigations and compliance enforcement will continue full speed, which makes complete sense because of the return on investment of those investigations.
The rules in place before Loper Bright are still in effect, but healthcare organizations may be more willing to challenge them in the near future because they perceive the playing field as more level now, he explains.
“One balancing factor to keep in mind is that, while judges are no longer required to provide Chevron deference to agency rulemaking, judges may not have backgrounds in areas of healthcare law that are dense. Prime examples are Medicare and Medicaid reimbursement, the Medicare Part D drug pricing program, and the intersection of federal and state data privacy and security laws,” Grimm says. “When starting from scratch, it is not difficult to become quickly entangled in arcane provisions and miss the forest for the trees, which is completely understandable.”
Grimm still thinks Loper Bright could work out well for healthcare organizations.
“Their rules and the explanations for the rules in the Federal Register will need to be more clear. Areas of ambiguity will need to be resolved more quickly through sub-regulatory guidance, and that sub-regulatory guidance will need to be more clear, and that’s a good thing for the providers,” he says. “I used to run hospitals. I was hospital administrator for 10 years and, as a lawyer, we crave clarity and certainty. That clarity is not the responsibility of the providers, that clarity is the responsibility of the government.”
No Tidal Wave Yet
The tidal wave of litigation emboldened by Loper Bright has not materialized, and that is partly because Health and Human Services (HHS) and Centers for Medicare & Medicaid Services (CMS) have not been as aggressive in rulemaking as they were for the previous four years, says J. Malcolm DeVoy, JD, partner with the Holland & Hart law firm in Las Vegas.
“Right now, it’s kind of a breather period. There are no motions for judgment on the pleadings or early motions for summary judgment to decide these issues, just because there’s less litigation overall,” he says. “You’re still going to see the impacts of Loper Bright in the courts, but you’ll just have to look a little bit deeper into the woods to see them.”
Loper Bright is leading to questions about the interpretation of Medicare and Medicaid rules, notes says Lawrence W. Vernaglia, JD, partner with the Foley & Lardner law firm in Boston. Compliance officers are asking if particular rules were validly authorized by the implementing statute, or if they go well beyond it, he says.
“If so, do you treat the internally discovered violation as potentially a payment violation? Or do you now use the Loper analysis to say we don’t think that regulation is lawful? And if so, what do you do? Do you just sit on it? Do you self-disclose it and say we think it’s a Loper violation? Do you bring a claim and try to get an appeal?” Vernaglia says. “That conversation is happening every single day.”
The elimination of Chevron deference has led to increased scrutiny of regulations and a higher volume of legal challenges against existing healthcare regulations, says Paul F. Schmeltzer, JD, member with the Clark Hill law firm in Los Angeles.
For instance, CMS had implemented a policy to adjust Medicare reimbursements favoring hospitals in low-wage areas to assist with staffing challenges. However, a federal appeals court found in the Kaweah Delta Health Care District v. Becerra case that HHS exceeded its authority with this policy, ruling that it violated the Medicare law’s requirement for reimbursements to reflect regional wages, Schmeltzer says. This decision favored 53 California hospitals that claimed the policy reduced their reimbursements by $3.8 million.
“Although significant compliance challenges post-Loper Bright were expected, the actual impact has been mixed. Some regulations have been invalidated or modified following judicial review, leading to operational uncertainties for healthcare organizations,” he says. “However, not all feared disruptions have materialized, and the extent of challenges varies across different regulatory areas.”
Healthcare organizations are actively adapting to this new legal landscape by monitoring regulatory developments and court decisions more closely to anticipate and respond to changes that may affect compliance obligations, he says. They also are participating in public comment periods for proposed regulations to influence rulemaking and ensure that new rules are clear and legally sound, and challenging regulations that are perceived as overreaching or not aligned with statutory authority, leveraging the courts’ increased willingness to scrutinize agency actions.
The Loper Bright decision has prompted healthcare organizations to reassess their compliance strategies, fostering a more proactive and legally engaged approach to navigating federal regulations, Schmeltzer says.
For healthcare providers, Loper Bright brought immediate concern, says Ramzy Ladah, JD, partner with the Ladah law firm in Las Vegas. There were fears of cascading legal battles, a flood of conflicting judicial interpretations, and compliance systems suddenly thrown into confusion. But what has actually happened since then is a bit more nuanced, he says.
“Healthcare organizations didn’t panic. They paused, reassessed, and began recalibrating,” he says. “There’s no denying that the decision increased legal ambiguity. Compliance teams that once relied heavily on agency guidance now face an added layer of complexity when the statute isn’t crystal clear.”
“Legal departments are now playing a much bigger role in day-to-day compliance. Many organizations have expanded internal review processes, leaned harder on outside counsel, and even developed new in-house teams just to handle regulatory interpretation,” Ladah says. “There’s been a noticeable uptick in requests for legal opinions and preemptive litigation risk assessments, even on fairly routine regulatory questions. What used to be a matter of following clear agency instructions is now a more cautious process, especially when new rules are rolled out.”
Still, the effects have not been as disruptive as some predicted, Ladah says. Courts have not entirely dismissed agency expertise, he says, and in fact, many judges still look closely at the reasoning and evidence agencies provide. A well-supported interpretation from HHS or CMS still carries weight, even if it is no longer binding, he explains.
There also has been a noticeable increase in coordination across the healthcare industry, he says. Providers, insurers, and industry associations are actively sharing best practices, publishing internal interpretations, and comparing compliance models.
That kind of collaboration, while always useful, has become essential,” Ladah says.
“What’s emerging is a more legally cautious, but still functional, approach to compliance. Risk management is tighter. Documentation is more detailed. Guidance requests are more frequent and more specific,” he says. “Many providers have built direct channels to federal and state regulators, trying to get clarity through conversation rather than formal rulemaking. That back-and-forth has helped reduce confusion in some areas, though it’s not a substitute for clear and binding guidance.”
The Loper Bright decision introduced real challenges, particularly for industries like healthcare that depend heavily on detailed regulatory frameworks, Ladah says. But the feared regulatory collapse did not happen.
“Healthcare organizations are adapting by leaning into legal expertise, focusing on internal consistency, and building stronger relationships with regulators and industry peers,” he says. “The landscape is murkier, but not unmanageable. It requires more caution and more legal input, but with deliberate strategy and ongoing collaboration, compliance is still very much achievable.”
Healthcare organizations do not seem to be developing compliance plans with the hope of relying on Loper Bright at some later date, says Khaled John Klele, JD, partner with the McCarter English law firm in Newark, NJ.
“The Loper Bright standard certainly offers a way for a provider to challenge a statute or regulation, assuming the provider is involved in an agency administration action or litigation, such as a qui tam action, that involve the provider’s compliance plan,” he says. “But I do not believe that providers have become indifferent to healthcare compliance because of Loper Bright.”
It also is possible that Loper Bright ultimately may have a positive effect when it comes to healthcare compliance, Klele says. There are a lot of gray areas because of ambiguities in statutes and regulations, and Klele hopes Loper Bright will cause Congress and agencies to be more careful and clear when drafting statutes and regulations.
“If that happens, providers can develop more effective compliance plans instead of developing plans based on a provider’s interpretation of an ambiguous statute or regulation that could ultimately be wrong at no fault to the provider,” Klele says.
Sources
- J. Malcolm DeVoy, JD, Partner, Holland & Hart, Las Vegas. Telephone: (702) 669-4636. Email: [email protected].
- Douglas A. Grimm, JD, Partner, ArentFox Schiff, Washington, DC. Telephone: (202) 857-6370. Email: [email protected].
- Khaled John Klele, JD, Partner, McCarter English, Newark, NJ. Telephone: (973) 849-4224. Email: [email protected].
- Ramzy Ladah, JD, Partner, Ladah, Las Vegas. Telephone: (702) 252-0055. Email: [email protected].
- Paul F. Schmeltzer, JD, Member, Clark Hill, Los Angeles. Telephone: (213) 417-5163. Email: [email protected].
- Lawrence W. Vernaglia, JD, Partner, Foley & Lardner, Boston. Telephone: (617) 342-4079. Email: [email protected].
Greg Freeman has worked with Relias Media and its predecessor companies since 1989, moving from assistant staff writer to executive editor before becoming a freelance writer. He has been the editor of Healthcare Risk Management since 1992 and provides research and content for other Relias Media products. In addition to his work with Relias Media, Greg provides other freelance writing services and is the author of seven narrative nonfiction books on wartime experiences and other historical events.
A year after the Supreme Court’s ruling in Relentless v. Department of Commerce and Loper Bright Enterprises v. Raimondo, the predicted challenges to healthcare compliance have not yet materialized as fully as expected, but the effects might still be felt in coming months.
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