Azar v. Allina Health Services, 139 S. Ct. 1804

Medicare pays hospitals additional "disproportionate share" (DSH) amounts based on a "Medicare fraction" whose denominator historically counted patients "entitled to benefits under" Part A and whose numerator counted low-income Part A patients. 1997 created Medicare Part C (Medicare Advantage), raising whether Part C enrollees count in the denominator.
The HHS agency historically vacillated: initially excluded Part C, proposed exclusion in 2003, then issued a final 2004 rule counting Part C (later vacated or limited by courts), and promulgated a prospective 2013 rule reading the policy in again.
In 2014 the agency posted on its website a spreadsheet showing 2012 Medicare fractions that included Part C enrollees; it did so without notice-and-comment rulemaking.
A group of hospitals sued, arguing HHS violated 42 U.S.C. § 1395hh(a)(2), which requires notice-and-comment for any "rule, requirement, or other statement of policy" that "establishes or changes a substantive legal standard governing ... the payment for services." The D.C. Circuit sided with the hospitals.
The Supreme Court granted certiorari to resolve whether the Medicare-specific notice-and-comment statute incorporates the APA interpretive-rule exemption (i.e., excludes interpretive rules/statements of policy) or instead requires notice-and-comment for any agency action that establishes/changes a "substantive legal standard."

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether § 1395hh(a)(2) requires notice-and-comment for agency "statements of policy" that establish or change a "substantive legal standard" (i.e., does the Medicare statute adopt the APA interpretive-rule exemption?)	Hospitals: "substantive legal standard" should be read broadly (substantive vs. procedural) so that counting Part C patients is substantive and triggers § 1395hh(a)(2)'s notice-and-comment requirement.	Government: Congress used "substantive" like the APA (substantive vs. interpretive); interpretive rules/statements of policy are exempt and so no § 1395hh(a)(2) process was required.	Court: Affirmed D.C. Circuit — the Medicare phrase does not mirror the APA's interpretive-rule exemption; the agency cannot avoid § 1395hh(a)(2) by labeling policies interpretive or statements of policy.
Whether the agency's 2014 website posting of 2012 Medicare fractions (including Part C) was lawful without notice-and-comment	Hospitals: Posting established/changed a substantive legal standard governing payment and required pre-promulgation notice and comment.	Government: The posting was an interpretive statement or otherwise not subject to § 1395hh(a)(2), so notice-and-comment not required.	Court: The posting fell within § 1395hh(a)(2) coverage; because HHS offered no lawful excuse for skipping notice-and-comment, the policy could not stand.

Allina Health Servs. v. Price, 863 F.3d 937 (D.C. Cir. 2017) (D.C. Circuit decision upholding hospitals below and discussing Part C counting dispute)
Northeast Hosp. Corp. v. Sebelius, 657 F.3d 1 (D.C. Cir. 2011) (opinion about retroactivity and counting Part C patients)
Clarian Health W. LLC v. Hargan, 878 F.3d 346 (D.C. Cir. 2017) (discusses Medicare notice-and-comment practice)
Perez v. Mortgage Bankers Ass'n, 575 U.S. 92 (2015) (distinguishes substantive rules from interpretive rules under the APA)
Chrysler Corp. v. Brown, 441 U.S. 281 (1979) (identifies the central substantive vs. interpretive distinction in administrative law)
Syncor Int'l Corp. v. Shalala, 127 F.3d 90 (D.C. Cir. 1997) (defines "statement of policy" as advising the public of agency's adjudicatory approach)
American Hosp. Ass'n v. Bowen, 834 F.2d 1037 (D.C. Cir. 1987) (discusses substantive/legislative rules and interpretive exceptions)
General Motors Corp. v. Ruckelshaus, 742 F.2d 1561 (D.C. Cir. 1984) (agency label is relevant but not dispositive when characterizing an action)