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Top Ten 2025: Loper Bright—How the Demise of Chevron Deference Will Affect Medicare Reimbursement Litigation

• American Health Law Association

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Based on AHLA's annual Health Law Connections article, this special series brings together thought leaders from across the health law field to discuss the top ten issues of 2025. In the first episode, Hilary Isacson, Assistant General Counsel, Sutter Health, speaks with Daniel J. Hettich, Partner, King & Spalding LLP, about the impact that the Supreme Court’s Loper Bright decision is having on Medicare reimbursement. They discuss the impact on CMS’ approach to rulemaking and whether providers will have more opportunities to challenge CMS actions, how providers should navigate this new environment, and important cases to follow. From AHLA's Regulation, Accreditation, and Payment Practice Group.

Watch the conversation here.

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Speaker 1:

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Speaker 2:

A HLA is pleased to present this special series highlighting the top 10 health law issues of 2025, where we bring together thought leaders from across the health law field to discuss the major trends and developments of the year. To stay updated on all the major health law news, subscribe to ALA's New Health Law Daily podcast, available exclusively for premium members@americanhealthlaw.org slash daily podcast .

Speaker 3:

Hi, I'm Hillary Isaacson, in-house counsel at Sutter Health in Sacramento, California, and I'm here today with Dan Ick to talk about the reimbursement implications of the low or bright decision. Dan?

Speaker 4:

Hello everyone. Nice to meet you. Um, I'm a partner at King and Spalding resident in Washington DC Uh, not surprisingly, I focus my practice on Medicare reimbursement litigation. Uh, solo Bright was , uh, obviously a big development for all agencies, but , uh, but particularly within the land of Medicare, as, as I think we'll be discussing , uh, today.

Speaker 3:

So, Dan, how soon do you think we will see in the healthcare industry, especially as providers and impact from this decision?

Speaker 4:

Yeah, I, I think we've already started to see, to see it. Hillary . Um, the decision that came out, I believe was last June, or I mean this June. So , uh, what is that, five months ago or so? Um, and, you know, as I alluded to at, at the opening, obviously the decision , um, and just to set the table for those, I , I , I think everybody's familiar with it 'cause it was a pretty big deal. But , um, Loper Bright overturned the Chevron doctrine, right, the doctrine that said agencies get , uh, deference in interpreting , um, their statutes. And in particular, unless in , unless one can prove that the agency's interpretation is kind of actively unreasonable, the agency wins. So it , it , it , under Chevron, it wasn't the question of who has the best interpretation. It was, you know , was the agency's interpretation reasonable? So I think, you know, obviously it was, and , you know , long anticipated, as soon as the court granted , um, cert for , for that , um, case it was clear that Chevron was gonna be at issue. I think the general thinking was the court did not accept cert simply to rubber stamp Chevron and say, everything's going fine. They were gonna do something with it. Um, so folks were watching it, obviously, you know, when it was argued while waiting for a decision. So as soon as it came out , um, like I , in my article, I mentioned that that one case, it's a little bit of a sleeper issue, but, but an important one about the definition of patient days. Um, and that had been briefed before Loper Bright came out. And so the government was defending its position, it was a dish case, what a patient day means for purposes of the disproportionate chair payments. Um, and the government in his briefing, again before Loper Bright was saying, our interpretation was reasonable. There was reasonable justifications. Uh, after Loper Bright came out, the judge in that case , uh, called it a, you know, Loper a seismic shift and said, you guys guys need to redo the briefing. You know, this is, you argued under the Chevron standard. Um, so already there's no decision in that case yet, but already you can kind of see , um, the , um, the shift, if you will. And then there was one case that also alluded to in, in the , um, top 10 article that I've been involved with having to do with the agency's calculation of volume decrease adjustments, just an adjustment that , um, so community hospitals and Medicare dependent hospitals, if they have more than a 5% decrease in, in inpatients from one year to the next mm-hmm <affirmative> . The statute says they should be fully reimbursed for their fixed costs. Um, and I won't go into the details of the case, but suffice to say, hospitals have been challenging that issue for some time under the Chevron standard, they were losing , um, including in the eighth circuit, including in the DC District Court. Um, and it wasn't until , uh, the DC circuit's decision after Loper Bright came out where the court said before, we have to defer to the agency's position as long as it's reasonable. Now we can employ our own , um, judgments and, and, you know, statutory tools. Uh, and they decided in favor of the hospitals after, you know, several cases had gone the other way. So I think that's one , uh, that's another example of Loper already , uh, having a , a significant impact. And having said all that, I do think, you know, these cases move slowly. I do think it's in this coming year, you know, 2025, where we'll really start to see the contours of , uh, of the impact of, of the Loper decision.

Speaker 3:

So sort of along the same lines, do you see it opening up more opportunities for hospitals to challenge CMS action where in the past they might have just let something go?

Speaker 4:

Yeah, I think certainly , uh, even in our own assessment, you know, when we decide what issues to, to bring to our clients , um, you know, when, when Chevron was in place, that was obviously a big factor in our reasoning. Can we, can we prove not only that this isn't the best, but that the agency's interpretation is actively unreasonable, was a relatively high bar. Um, we brought many cases, we , we won several, but there were cases that we said, you know, we don't think it's the best interpretation, but we're not sure we can prove it's unreasonable. Um, so I think going forward, yes, that , uh, analysis is going to shift. Um, I think I , I mentioned the article, not, you know, not all cases have to do with questions of statutory interpretation. Sometimes the statute is ambiguous or, you know, just tells agency , um, like, like in the nursing and allied health, we do a lot of litigation that's in that space. The statute doesn't have much to say. It kind of tells CMS to figure out what the provider operated criteria are. Mm-hmm <affirmative> . So it's not gonna help across the board, but there are many cases, I think that maybe under the old paradigm would say, you know, it , it's such a high burden, we might not meet it. That, you know, now that the burden is on CMS to prove that it's the best interpretation that , uh, folks and hospitals might , might be more aggressive.

Speaker 3:

Do you also see the low or bright decision affecting CMS from their approach to rulemaking? And just generally how they relate to providers or conduct it themselves, either in rulemaking or in these kinds of disputes?

Speaker 4:

Yeah, I, I think it will. Um, and I , I think it should, you know , I almost feel bad for CMS because , um, for the past 40 years they've been operating on the Chevron. And when they passed the regulation or, or some other policy, what they had to ask themselves, and what they were asking themselves is, can we defend this as reasonable? Um, and so they enacted a whole bunch of regulations that presumably they thought could be defended under the Chevron standard as reasonable, and now all of a sudden they're told no, actually the real standard is, is it the best interpretation of the statute? Um, so I think going forward, obviously that's now gonna be the test that they employ when they , uh, put forward a regulation or a policy. Um, can we defend this as the best interpretation , um, of the statute? I think, you know, we've , um, there's been some big cases in the past couple years on rural floor on , uh, different wage index issues, et cetera , that CMS has lost. I think part of what, what happened is with the gridlock in Congress, CMS was getting tired of waiting for legislation. And so they attempted to do some things on their own, which maybe a few years earlier they had said they needed legislation to do. And again, obviously that was under Chevron, and, and they still ended up losing those cases. Um, I , I think they're gonna be, I think CMS is gonna be less aggressive in that regard. Not only 'cause they lost those cases, even on the Chevron deference, but particularly now with the higher bar with , uh, with Loper , I think , um, I think they're going to think carefully before they take , uh, aggressive positions or aggressive interpretations of the statute.

Speaker 3:

Yeah, I've noticed that with, with some CMS rules, they will come out and say, we are clarifying our longstanding position mm-hmm <affirmative> . And whenever they say that, it actually means they're changing something. So there's some

Speaker 4:

Significant change , they will

Speaker 3:

Probably feel more constrained in terms of things like that.

Speaker 4:

Right. I , I will say, Hilary , I think it's, you know, and maybe folks don't appreciate it. There , there's a little bit of a two-way street. I mean, for the most part, I think it's a great development for hospitals anyway. I know there's broader debates in environmental context, et cetera , about the demise of Chevron. But in the land of Medicare reimbursement anyway, and for our hospital clients, it's, it's a good thing. I will say though, recently there's been a couple of policies that CMS has adopted where it's benefited some hospitals and disadvantaged, disadvantaged others , the low wage index policy with A three 40 B. And in those cases, the hospitals that benefited from CM S'S policy, they would like CMS to get substantial deference because they like the policy. Um, and actually both of those policies have been struck down. Um, so, so in those limited cases, and again, most instances, CM S'S policies will financially disadvantage hospitals and doesn't advantage other hospitals. It's kind of, you know, it's a net loss for the industry, or not even a net loss. It's , it's just a loss for the industry. Um, but in some of these other cases, like the two I alluded to mm-hmm <affirmative> . There's winners and losers , um, yeah. Here

Speaker 3:

In California, we are definitely losers on the wage index, especially in Northern California.

Speaker 4:

Right, right. Yes. That, that would be something, right, you would've, you would like CMS to have gotten more deference , uh, on, and the policy upheld. So there's a little bit of a two-way street going on, but I, I think 90% I'd say is, is favorable for hospitals.

Speaker 3:

Yeah. So we've been mostly talking about hospital reimbursement appeals, but are there other kinds of provider disputes with CMS or I could see it with other HHS agencies, like the OIG , um, that might change in light of the lo or bright decision?

Speaker 4:

Yeah, so I mean, my , my area of expertise is on the Medicare reimbursement size , so I'm most familiar with that. And, and the focus of my article was, was that, but obviously local BRI itself, as I said, is, you know, far reaching all, all agencies , uh, EPA, you know, FDA , um, every one of them is, is affected by , um, you know, no longer getting Chevron deference , um, within, within healthcare. I think anytime there's a question of statutory interpretation, and again, you know, to be clear, that's kind of the, the key triggering point. There's a whole separate doctrine about the deference an agency gets interpreting its own regulation. That's the, our , uh, our deference au ER , um, that was litigated a few years ago, and Supreme Court left it intact and just like limited the circumstances in which it would apply , uh, that was in the Kaiser decision. Um, so, so it's not, it's not, again, it's not all cases, but I think any case, whether it's Medicare reimbursement or as you said , um, some case , you know, sounding in, in other areas , uh, Medicaid, in addition to Medicare , um, anytime a statutory interpretation is at issue, I think low or bright again before, you know, as long as the interpretation was reasonable, it would be valid and , and could be enforced presumably. But if there's an argument that it's, while, while reasonable, it might not be the best interpretation, I think , um, entities in that case could bring a challenge and say, you shouldn't be enforcing this, or, this isn't valid because it's not the best interpretation of what, of what Congress said.

Speaker 3:

Um , or you saying , seeing any issues that are, I would, I would call them reimbursement or cost report type issues that affect non-hospital providers. Um, like, you know, anything from, you know, home Health SNF Rural Health Clinic. Um,

Speaker 4:

Yeah. Yeah. So certainly , uh, I'm not specifically involved in those, but I know historically there were many cases, you know, very similar to, you know, hospital reimbursement cases where the underlying question was a statutory interpretation, whether, you know, whether it's enforcing Yeah . The home health or , um, uh, sniff requirements, et cetera. Whether it was a valid interpretation of, of the statute. Um, and obviously in prior years, again, you know, all those cases had a thumb on the scale in favor of the agency. Um, now with that thumb removed, I think, you know, equally so again, I'm most involved in, in the hospital space mm-hmm <affirmative> . And I think a lot of the, you know, some of the bigger impacts are there, but there's no reason why it wouldn't extend equally to any other , uh, type of provider, whether, you know, subacute or post-acute. Mm-hmm

Speaker 3:

<affirmative> . What kind of things are you or others in your firm telling your clients , um, in terms of kind of like messaging and what are the top two or three things that the business people need to know about this decision?

Speaker 4:

Yeah, so I think it's kind of 2, 2, 2 sides to that. I think one a little bit manage expectations. 'cause you know, I've been pretty glowing, you know, this is a pretty good development for hospitals, but it's not , um, it's not a slam dunk. It doesn't mean, you know, hospitals gonna win every case far from it. As , as I alluded to in the article, all, all this does is take the thumb off the scale in favor of the agency. So the hospitals in every case still have the burden of proving that their interpretation is the best interpretation of the statute. Um, and convincing a judge that using all the tools of, you know, the cannons of statutory interpretation, et cetera. So I think, I think that that's one important proviso because there's some clients, okay, great, you know, we , we won the issue, you know, it's done. And no, all it did was level the playing field, which is huge because before the le the playing field was very unlevel. Um, but it's not an automatic win . Um, the second kind of, and kind of related that we already alluded to is the limitations, right? There are many statutes that , um, specifically give the agency wide discretion, like mm-hmm <affirmative> . Um, when, I don't know if the bad debt statute, for example, if it says , um, that, well , I think it's the regulation that says collection efforts have to be reasonable. Um, but if Congress used a similar word, like reasonable, for example, then any reasonable interpretation of the agency would be upheld 'cause the statute said mm-hmm <affirmative> . Reasonable . And yeah . And so that would give the agency wide discretion, even arguably the agency could do what it did historically in the Chevron, which is change its position. So the statute stays the same. Um, like they did this in the dish context of part C days. The statute said, include days entitled to benefits in the Part A before 2004. CMS said Part C days aren't entitled to benefits in the Part A after 2004 CMS said, part C days are days entitled to benefits on the part A. Um, and they , they could defend each of them, and, and each of them could be upheld as long as each was reasonable. 'cause again, that was the standard mm-hmm <affirmative> . So there might be multiple reasonable interpretations. And the agency under Chevron was free to kind of choose among those , um, options. So that has gone away when Congress uses prescriptive, even if ambiguous language. But again, there are many statutes that use this broader language that does give the agency discretion. Um, so in cases like that as well , uh, Loper doesn't help. So I think, I think that that's one kind of message to clients that this isn't a panacea, it doesn't win all cases. Us , US Medicare reimbursement lawyers still have to do work , uh, to win. It's just, just le levels the playing field. So that's kind of on, on the negative side. On the plus side, I, I do think the other part of the message is the more favorable one, which is that , um, there is room now as we were , as we discussed at the beginning of our conversation for hospitals to be more aggressive, for lack of a better word, if, if CMS is taking , um, a view of the statute that that isn't consistent with, again, the best reading of, of the statute , um, there's opportunities there , um, to, to bring appeals and to potentially win. Um, so I think that that sea chains, I know, again, we've won many issues. We , we've lost some issues and I know some hospitals can get frustrated 'cause this goes on for 10 years and you end up losing the issue. And that still might happen. I mean, as I said, we're not gonna win everything. But I think, you know, by shifting, by leveling the playing field, I think more of these issues will be one . Um, I think some of the frustrations, because the bar was so high, I had a couple of cases like that were clearly, you know , I'm obviously biased, but we were clearly right. You know, it was , it was mm-hmm <affirmative> . Bad interpretation status , but we still lost because the agency got so much deference . And that's very frustrating. Not just for me, but for my clients. I think that should happen less often. Mm-hmm <affirmative> . Hospitals should get a fair shake , um, and, and be able to, you know, have , um, again, not to say it over and over again, but, but that , that level playing field that we've been talking about.

Speaker 3:

Yeah, I've, I've noticed that some here in , in , you know, in our department and working with our reimbursement team, there are some issues where we don't agree with our Mac or we don't agree with CMS, but the effort of challenging it is greater , or has been greater than the burden of just going along with whatever it is they want us to do. I mean, we've seen, we've seen this a lot with GME and how much documentation we have to have and, and, you know, how we organize things and what does or does not count. You know, it's just been easier to go along with that , um, right . But, you know, we'll see whether in the future that's gonna be the decision that we continue to make.

Speaker 4:

Yeah. I , I mean, I , and I can commiserate because I think the statistics were quite, and I don't have them in front of me, but with something like the majority of cases, I think like over two thirds of cases, I think this is in administrative law overall , and I don't think just healthcare, but courts found the statute ambiguous under the Chevron doctrine. And of those two thirds, something like over 90% would then be upheld in the agency's favor based on, you know, the reasonableness standard . Mm-hmm <affirmative> . So as you said, it was often, it felt like tilting at, at windmills. You know, ag is gonna win 90% of the time , um, because the bar is so low. I mean, it has to be actively irrational almost for the agency to lose. You end up in that situation of really meritorious claims maybe aren't being brought because, you know, it's just, it's just not worth engaging in this, you know, rigged game, for lack of a more polite term. Um, so I think things will begin to shift, and again, this year will be important. Um , we had a few months, you know, in 2024, and as I said, we've already began to see, you know, the ramifications. I think this year will be important to see exactly how far reaching , um, this , uh, this decision is.

Speaker 3:

Yeah . What are some of the , um, cases that people should be following this year?

Speaker 4:

Uh, it's an interesting question. So I alluded to, to one of them that , uh, I think it's Baptist Healthcare is the one that has to do with the definition of patient days , um mm-hmm <affirmative> . Within Dish. Um, obviously there's another case maybe beyond the scope of this conversation. The Supreme Court is currently has another case, a healthcare specific case in front of it, advocate Christ, another dish case actually about what's , um, what it means to be entitled to SSI benefits. Um, and in particular, whether or not only patients that receive cash benefits in a particular month should be included mm-hmm <affirmative> . Or if it's a broader category. Um, now there obviously with , um, Chevron being overturned, you know, previously they basically would've been able to defend its policy, you know, it's very narrow interpretation of entitled SSI under their reasonable basis. Now they have to, you know, show that it's , um, it's the best reading. Um, so I think that case would be important overall . I mean, anytime the Supreme Court weighs in on a Medicare reimbursement issue in particular , um, we are initiating , um, a new case challenging the , um, 1985. Well, I hesitate , it's kind of a , a bigger issue. I'll know, I don't know if the 30 minutes would , would cover it, but I'll give the nutshell version, which is that in 1985 , um, there was a budget neutrality adjustment that, that was authorized by Congress. Congress said, make sure 85 payments under the inflation prospective payment system are no more than what they would've been under the reasonable cost system, which had recently been phased out. So in 85 CMS said, we need to apply negative 6% adjustment to, to make that happen. Well, CMS left that 6% adjustment in, in 86 and every year forward up , up until today. Um, and we thought even under the Chevron standard, there was good arguments that, you know, that that was not a reasonable interpretation of the statute. Now with , um, the Chevron, you know, being gone, and again, the HD has , has to prove that maintaining that almost 6% negative adjustment is actually the best interpretation of the statute. Uh, we feel even better about that case, though that's hot off the press. We'll be filing a complaint probably sometime next month. Uh, so we won't have a decision, a district court decision, probably for another year or so. Um, but again, obviously, you know, 6% of payment is, is a big deal. Um, so that was a boost , uh, in that case. And to your point, Hilary , of your question before of, you know, will it change what , um, what issues hospitals bring? We were ready to bring that case even on their, on their Chevron. Um, but some of our clients who maybe were skeptical, you know ? Yeah . How strong was the argument? Um, I think, you know, puts certainly puts additional wind , wind in the sails , really . One , one topic, and it wasn't on our list, but I think it's an interesting one, particularly for those who, who kind of get into this constitutional law type stuff and bigger a PA questions, which is the , the non delegation doctrine, right? Mm-hmm <affirmative> . Which going back to law school , uh, some folks might remember that, you know, Congress can, you know, again, everything the HC does goes back to congressional authorities, which is why the statute's so important. Um, and we were discussing how sometimes Congress uses this broad language to specifically give broad discretion. So I think there's a chance that Congress will do more of that , um, to, you know, avoid having litigation, you know, specific to , um, under the Looper standard about, you know, specific statutory terms, use broader language to say, go forth and make any reasonable, you know, rules that, that you think will be efficient and, you know , um, helpful to the, to the health of the American people or something. Mm-hmm <affirmative>. Um, but the non delegation doctrine says that there's a certain minimum guidance that Congress has to give when instructing the agency, you know, otherwise the agency is effecting , effectively acting as, as the , the legislature. Um, so I think it'll be interesting to see if , um, and I think my understanding, I'm not an expert , um, I'm familiar with, but not an expert on, on all the details of it. I think historically was a very forgiving standard, as long as it was like kind of any parameters given by Congress court said, okay, no, no violation. That that's good enough. It'll be interesting under the post Chevron world to see first if Congress, and particularly the agency gets more aggressive , um, with those kind of broad mandates, that that again, wouldn't, wouldn't implicate , uh, Loper . And similarly, whether the courts, particularly maybe the Supreme Court as it's currently constituted, maybe begins to tighten that and kind of limit exactly mm-hmm <affirmative> . How broad a discretion , um, Congress can, can give and, and still, you know, clear, clear that non delegation hurdle. So I think that's an interesting area that that's worth watching.

Speaker 3:

Yeah, I think so too. I mean, there's definitely areas I can think of, like some of the, you know, fraud and abuse type issues that we deal with in our department where that could be a double-edged sword because we rely on, for example, value-based stark exceptions, which are just a creation of CMS really, and mm-hmm <affirmative> . And part of, you know, the Stark Law just says CMS can make other exceptions as they see fit. And if they're not gonna be able to do that anymore, that could really put a crimp in a lot of health systems operations,

Speaker 4:

Right? Yeah. And in some cases you ask , you know, what constituency would would complain about that. I think in the example you gave, so in a lot of Medicare reimbursement, I said , there's a couple of issues where it does pit hospital against hospital, and so there might be a constituency. Most of it, you know, just as doesn't, doesn't, you know, it hurts some hospitals, doesn't help anybody. Um, and then there's no constituency to complain about and say, oh, this is, you know, too broad or whatever. Um, an example you gave, I think you're right. 'cause I think there could be a constituency, you know , whistleblowers come to mind. Yeah . That might claim, you know , uh, CMS didn't have the authority to, to , um, or, or rather, by giving such a broad by giving CMS such broad authority or the HHHS such broad authority, it runs a foul of the non delegation doctrine and , and therefore is invalid. Um, so it'd be an interesting, it's Chevron, I , I think I alluded to , was in place for, since 84, I believe. Um, anyway, about 40 years mm-hmm <affirmative> . So it's been a long time , um, under that kind of paradigm. It's gonna be really interesting to see, you know, how the next 40 years or, you know, even the next four years play out under what really is a radically different paradigm.

Speaker 3:

Well, thanks Dan, for a very interesting conversation. And thanks to our audience. If you are interested in hearing more about these kinds of issues, I urge you to check out the wrap practice group. WRAP stands for Regulation, accreditation and Payment, and I'm the chair of that group this year. Um, we've got a number of interesting , um, webinars and other things planned, and of course, we are always looking for more members and more participants. So on behalf of the rep group and a HLA, thanks again, Dan.

Speaker 4:

Thank you. I enjoyed it.

Speaker 2:

Thank you for listening. If you enjoyed this episode, be sure to subscribe to ALA's speaking of health Law, wherever you get your podcasts. To learn more about a HLA and the educational resources available to the health law community, visit American health law.org.