Azar v. Allina Health Services

2019-06-03

Headline: Medicare payment change blocked — Court upholds requirement for public notice and comment, invalidating an online posting that retroactively reduced hospital payments by counting Medicare Advantage patients.

Holding: The Court affirmed the court of appeals, holding the agency's 2014 online announcement counting Medicare Part C enrollees in hospital payment calculations violated the Medicare Act by skipping required public notice and comment.

Real World Impact:

Prevents agencies from changing Medicare payment rules online without prior public notice.
Restores protections for hospitals serving low-income patients when counting methods are unlawful.
Signals agencies must use formal rulemaking before making substantial Medicare policy changes.

Topics: Medicare payments, public notice and comment, hospital funding, Medicare Advantage, government rulemaking

Summary

Background

A group of hospitals challenged a 2014 government internet posting that announced hospital payment numbers for fiscal year 2012. The posting included people enrolled in Medicare Part C (also called Medicare Advantage) when calculating a hospital’s payment fraction. Hospitals said counting those enrollees cut their payments and that the agency never gave the public advance notice or a chance to comment as the Medicare statute requires.

Reasoning

The key question was whether the Medicare law forces the agency to give public notice and a 60-day comment period before adopting any change that “establishes or changes a substantive legal standard” for payments. The Court concluded the agency’s argument — that the law borrowed a separate administrative-law exception for mere “interpretive” guidance — was wrong. The Court explained that the Medicare statute’s wording and structure do not allow the agency to avoid notice-and-comment simply by calling a policy a statement of policy or an interpretive action. Because the agency announced and applied the counting policy without the required notice and comment, the announcement cannot stand.

Real world impact

The decision invalidates the agency’s 2014 posting and supports the lower court’s ruling for the hospitals. It confirms that important Medicare payment policies cannot be adopted retroactively via informal internet postings when the statute requires formal notice and comment. The Court limited its ruling to the specific statutory question presented and left other related legal questions for future cases.

Dissents or concurrances

Justice Breyer dissented. He would have read the statute to cover only substantive, binding rules and would have remanded to let the lower court decide if the agency’s action was a substantive rule or an interpretive one.