September 27, 2023

Healthcare regulations could be thrown into question following a Supreme Court decision last month that curtails a different agency’s authority to interpret laws.

While the ruling may not have much of an immediate impact on healthcare, it creates a landscape of uncertainty that could hamper healthcare companies that need regulatory clarity to plan ahead.

The Supreme Court ruled that a method the Environmental Protection Agency created to cap emissions went beyond the scope of the agency’s congressionally delegated authority. The 6-3 opinion written by Chief Justice John Roberts indicates the current court majority believes big policy questions need to be left to the legislative branch.

“Agencies have only those powers given to them by Congress…. We presume that ‘Congress intends to make major policy decisions itself, not leave those decisions to agencies,'” Roberts wrote in his opinion for West Virginia v. EPA, quoting a court document from a separate 2017 case.

Although the decision doesn’t explicitly affect healthcare policy, it could have ramifications for the Health and Human Services Department and the entities it regulates, said Michael Tuteur, a partner at law firm Foley & Lardner.

The Supreme Court’s opinion rests on the “major questions” doctrine. Essentially, courts can look at any regulation brought in front of it and decide whether the substance of the rule qualifies as a “major question” over which Congress—not an agency—should have authority. The Supreme Court has relied on this framework for over two decades, but last month’s ruling indicates the current court is skeptical of the administrative state, Tuteur said.

The Supreme Court ruled the EPA policy counted as “major” because of its economic impact. But the high court didn’t rely on this doctrine in decisions this term on whether HHS correctly interpreted the law for disproportionate share hospital payments or the 340B drug discount program, each of which is worth billions of dollars, said Robert Wanerman, an attorney at law firm Epstein Becker Green.

This lack of clarity could spell trouble for healthcare organizations, which are highly regulated by HHS and the Centers for Medicare and Medicaid Services, Tutuer said. CMS alone submitted about 50 regulations to the White House Office of Management and Budget last year.

“Speaking cynically, I think that you could certainly argue [the Supreme Court] decided to use the major questions doctrine because they didn’t like the thing that they were looking at, and that, in the future, they’ll use this when they don’t like the policy,” Tutuer said.

Crowell & Moring partner Tom Lorenzen agreed that companies should prepare for uncertainty about regulations as a result of the ruling. It might take five to 10 years to figure out the decision’s consequences for healthcare regulation, he said.

“You really don’t know whether these rules will survive judicial review until it’s over,” Lorenzen said. “Even if the agency’s construction seems reasonable…if it’s a really big deal, the courts are going to look at that rulemaking with some skepticism.”

While overturning some federal regulations could help companies, uncertainty is generally bad for business, Tuteur said.

Because the Medicare and Medicaid payment systems are governed by complex regulations and claims can take years to process, healthcare organizations need certainty to make financial plans, and to know that the rules aren’t going change abruptly, Tuteur said.

“They’re looking at a payment stream that is many, many years out. And from their own perspective—from planning, from figuring out where are they going to get their sources of revenue—it’s better just to know what you can expect,” Tuteur said.

But the fuzziness of the major questions doctrine also means it can’t be seen as an automatic win for those trying to challenge health regulations they don’t like, Waneman said. “You’re probably gambling a bit if that’s what you’re going to hang your hat on,” he said.

Whether something is a major question is a “tough call to make because the vast majority of what CMS does already fits within either an express congressional mandate or it fits within a long-recognized area where they have regulated for many years,” Waneman said.

Waneman doesn’t believe the EPA decision and its repercussions for judicial review of regulations will have much of an immediate effect on healthcare regulation. But he does anticipate the ruling will prompt more challenges to federal rules. HHS and CMS are likely to pay closer attention to statutory text when writing regulations, he said. Regulators may also be more specific when advising congressional committees on healthcare legislation, he said.

“They may say, ‘All right, we kind of see this coming. We want to build in more specific language so that we don’t get hamstrung by litigation,'” Waneman said.

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