Healthcare ‘avalanche’, other legal challenges likely as regulatory agency powers unravel

Three high-profile Supreme Court rulings are likely to unleash an “avalanche” of new cases challenging the authority of federal health regulators and other agencies, testing the authority of judges and court capacity in what one justice warned could spell “chaos.”

There are reasons to both rejoice and fear that the door to wide-ranging regulatory scrutiny will soon be opened, legal experts said. McKnight’s Long-Term Care News Tuesday.

The Supreme Court rulings undermine the authority of administrative agencies in such a variety of ways that lower courts are almost certain to see a surge in the number of regulated entities challenging the authority of their regulators, said Varu Chilakamarri, a partner in the Washington office of global law firm K&L Gates.

“There’s a lot more incentive for litigants to file cases. … It’s something that people who are in litigation now can start to address in cases, or if they’re in district court, in appellate court or in arbitration with the agency. You can see that playing out,” Chilakamarri said, noting potential short-term capacity issues.

“I suspect there will be a race to the courts,” she said. “Once the court makes a decision on the rule or what the proper interpretation of the statute is, that should be the final word. Agencies can’t go back and change their position through rulemaking because the court said what the law is.”

Quick interest in supplier

Healthcare providers will be no exception when it comes to reaching the front lines, added Gabe Scott, a partner at K&L Gates in North Carolina who focuses on healthcare regulations and transactions.

“There’s already a lot of interest in the provider community about these decisions. I think they’re going to take some of the initial approaches that you would expect. In terms of rulemaking, I think there’s going to be more and more questioning of the agency’s interpretation or whether it has the authority to implement the policies that it’s proposing or finalizing,” Scott said. McKnight.

“Providers, especially the more sophisticated ones, will look at regulations they disagree with or that have caused them harm and consider whether the Loper and Corner Post opinions offer an opportunity to challenge agency policy in a way that might be beneficial.”

This may mean questioning not only the regulations, but also the sub-regulatory guidelines that are intended to help surveyors interpret them.

In the blog following Loper Light In ruling to overturn the courts’ presumed deference to administrative powers, Hogan Lovells partner Sean Marotta encouraged providers to think “creatively” about how they will frame the challenges.

“Litigants should seek ways to further push the already ‘blurry’ boundary between statutory provisions (which are subject to notice and comment) and interpretative provisions (which are not),” he wrote.Chevron encouraged agencies to use notice-and-comment procedures because only notice-and-comment rules were generally eligible for deference. Without deference, agencies are likely to increasingly seek less formal processes. Consider arguing that an agency’s alleged “interpretive” rule is in fact legislative and impermissibly bypasses the notice-and-comment process.”

Decisions, decisions

Groundbreaking decisions include:

• Securities and Exchange Commission v. Jarkesy, in which the court stripped the SEC of its authority to use administrative agency judges to enforce fraud complaints. Experts said the decision could have implications for other agencies that impose civil penalties through administrative proceedings.
• Loper Bright Enterprises v. Raimondo, in which the majority held that courts do not have to rely on the expertise of regulators, but that judges can make rules that go beyond any specific authority granted by Congress.
• Corner Post, Inc. v. Board of Governors, in which the court waived the six-year statute of limitations to allow any newly affected entity to challenge a final regulation issued by a federal agency.

IN Corner postIn one of the court’s final opinions this term, the justices ruled in favor of a grocery store that sought to challenge a debit card rule enacted years before the store opened. Justice Amy Coney Barrett wrote for the majority that businesses harmed by federal regulations should be able to challenge them in court, regardless of how long the rules have been in effect.

But in her dissenting opinion, Judge Ketanji Brown Jackson said the majority decision “throws caution to the wind” and requires Congress to take action to “prevent the coming chaos” in the courts.

“At the end of an important term, one thing is clear: a tsunami of lawsuits against agencies that the court found invalid in this case and Loper Light “The authorized action has the potential to destroy the functioning of the federal government,” Jackson wrote.

This Corner post The decision opens the door to an “avalanche” of litigation involving the agency’s final actions, according to the University of Cincinnati Law Review, which said the ruling reduces the federal statute of limitations to “meaningless words.”

All of this means that it will be easier for long-term care providers to challenge enrollment regulations, payment disputes and appeals based on noncompliance and survey results. For example, these new reviews give a facility facing Medicare disenrollment “a new approach that they wouldn’t have had in the past or would be less willing to take,” Scott said.

Will Congress intervene?

Already, the phrases about “congressional intent” and “agency authority” appear in standard communications with CMS from supplier groups, including a letter sent late last week to Chiquita CEO Brooks-LaSure demanding that it withdraw a proposal to expand civil monetary penalties.

How much of a disruption of the administrative state would be enough to force Congress to step in and grant more power to an agency like CMS? That may depend in part on the majority party, but also, perhaps, on the impact of inverted power on consumers and public safety.

“You can imagine a case that goes to the Supreme Court and ends with an outcome that the public finds unpleasant,” Scott said. “There could be a backlash that would prompt Congress to take action.”

Scott acknowledged that it’s more likely that the crush of activity is causing “judicial paralysis” and overwhelming systems like CMS’s existing administrative law judge appeals process, which is often already overwhelmed.

Continuing comment during the rulemaking process can have a similar effect, both in persuading rulemakers to proceed more cautiously and in bringing to Congress’s attention provisions that most would not want to see changed.

“In light of Loper’s decision to ensure enforcement of agency interpretations, Congress will need to consider how to improve the Medicare and Medicaid laws to expand the scope of agency authority and address provisions that may be unclear,” Scott said.