Medicare “Guidance” Subject to Challenge Under Supreme Court Decision

July 11, 2019

On June 3, 2019, the United States Supreme Court issued a 7-1 decision in Azar v. Allina Health Services,^[1] which will have far-reaching implications for the validity of the Centers for Medicare and Medicaid Services’ (CMS) sub-regulatory guidance governing Medicare payments to providers of rehabilitative services and devices. Although this case concerned a nuanced issue involving the manner in which CMS calculates Medicare disproportionate share hospital (DSH) payments, the case ultimately hinged upon the interpretation of a Medicare statute, which requires CMS to engage in notice-and-comment rulemaking. The Court held that CMS must use notice-and-comment rulemaking before issuing guidance that establishes or changes a substantive legal standard governing Medicare payment for services.

The Supreme Court rejected the government’s argument that the Medicare statute’s notice-and-comment rulemaking requirements do not apply to “interpretive” guidance that impacts Medicare payment, which CMS has historically issued through policy manuals and instructions to Medicare contractors. This ruling opens the door to challenging other Medicare sub-regulatory guidance—such as the Medicare Benefit Policy Manual (MBPM) and the Program Integrity Manual, both of which CMS issued without notice and an opportunity to comment. In short, guidance documents issued by CMS or its contractors, which impact payment and involve substantive standards (as opposed to procedural standards) are newly subject to challenge. Significant follow-on litigation is expected to be filed against CMS on a wide variety of guidance documents that are not on unstable footing. 

For instance, claims for inpatient rehabilitation hospital services that are denied based on the failure of the IRF to comply with MBPM guidance that is not also established in regulations, may now be challenged. In addition, CMS contractors’ decision to not cover or reimburse seat elevation or standing feature power wheelchairs because they do not qualify as durable medical equipment, is also subject to challenge under the Allina holding. A raft of additional issues that impact physiatry are implicated by this important decision. AAPM&R will be utilizing this new legal argument in our future advocacy efforts to advance the AAPM&R health policy agenda.