964 F.3d 1230
D.C. Cir.2020Background
- Medicare paid higher OPPS (hospital) rates for services provided at off-campus provider-based departments (PBDs) than for the same services at freestanding physician offices; evaluation & management (E&M) visits were a prominent example.
- MedPAC and HHS found a large shift of E&M volume from physician offices to off-campus PBDs after hospitals acquired practices, and Congress in 2015 (section 603) limited OPPS payment for newly established PBDs but left preexisting PBDs' payments unchanged.
- HHS concluded the payment differential caused unnecessary volume growth and, under 42 U.S.C. § 1395l(t)(2)(F), promulgated a rule reducing E&M payments for off-campus PBDs to the Physician Fee Schedule equivalent and implemented the cut on a non-budget-neutral, two-year phase-in.
- The American Hospital Association and multiple hospitals sued; the district court held the rate cut exceeded HHS’s statutory authority and vacated that part of the rule.
- The D.C. Circuit reversed, concluding the statute is at least ambiguous and that HHS reasonably interpreted §1395l(t)(2)(F) to permit a service-specific, non-budget-neutral rate reduction to control unnecessary volume; because that action falls within (2)(F), judicial review is precluded under §1395l(t)(12)(A).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HHS’s E&M reimbursement cut is a “method for controlling unnecessary increases in the volume” under 42 U.S.C. § 1395l(t)(2)(F) | The rate cut is not a (2)(F) method; (2)(F) only authorizes analytical methodologies, not direct, service-specific, non-budget-neutral rate reductions | (2)(F) authorizes methods to control unnecessary volume, and a service-specific rate cut that removes a payment-driven incentive is a permissible method | HHS acted within (2)(F); the cut is a permissible, reasonable method to control unnecessary volume |
| Whether § 1395l(t)(12)(A) bars judicial review of the Hospitals’ challenge | The judicial-review bar does not apply because the action is not a (2)(F) method; thus courts have jurisdiction | If the action is a (2)(F) method, § (t)(12)(A) precludes review; courts must analyze merits to decide jurisdiction | Because the cut qualifies under (2)(F), review is precluded; jurisdiction is lacking to decide discretionary/arbitrary-and-capricious claims |
| Whether Chevron deference applies to HHS’s statutory interpretation | Hospitals argued Chevron should not apply (e.g., agency inconsistency, forfeiture, or heightened scrutiny because of the jurisdictional merger) | HHS is entitled to Chevron deference for interpretations of the OPPS statute; prior statements do not foreclose (2)(F) authority | Chevron applies; the court deferred to HHS’s reasonable interpretation |
| Whether the Bipartisan Budget Act § 603 (2015) forbids reducing payments to preexisting off-campus PBDs | Section 603’s exemption of pre-2015 PBDs means Congress intended to leave their payment rates untouched | Section 603 simply changed treatment for new PBDs and did not immunize preexisting PBDs from other OPPS authorities like (2)(F) | § 603 does not bar HHS from using (2)(F) to reduce E&M payments for preexisting PBDs |
Key Cases Cited
- Amgen, Inc. v. Smith, 357 F.3d 103 (D.C. Cir. 2004) (OPPS precedent: preclusion-of-review provision merges with merits and agency adjustments may be reviewed only to the extent authority is lacking)
- Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837 (1984) (establishes agency-deference framework for statutory ambiguities)
- COMSAT Corp. v. FCC, 114 F.3d 223 (D.C. Cir. 1997) (discusses merger of jurisdictional bar with merits analysis)
- Leedom v. Kyne, 358 U.S. 184 (1958) (ultra vires/limited judicial review doctrine for certain statutory violations)
- DCH Regional Medical Center v. Azar, 925 F.3d 503 (D.C. Cir. 2019) (clarifies stringent Kyne requirements for exceptions to preclusion)
- Good Samaritan Hosp. v. Shalala, 508 U.S. 402 (1993) (recognizes Chevron deference to HHS interpretations of Medicare statutes)
- Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117 (2016) (agency inconsistency argument may undermine deference in some contexts)
- Utility Air Regulatory Group v. EPA, 573 U.S. 302 (2014) (discusses limits of deference and Chevron step-two analysis)
- National Ass’n of Clean Water Agencies v. EPA, 734 F.3d 1115 (D.C. Cir. 2013) (application of Chevron step two and reasonableness review)