There are dark clouds on the horizon for the American healthcare system. The Supreme Court struck down a longstanding legal doctrine called the “Chevron deference” that offered federal agencies the final word when interpreting “ambiguous” laws. The fall of Chevron promises to drastically change how healthcare regulations are interpreted and enforced in the U.S. In fact, the very same day the Supreme Court ruling came down, Hackensack Meridian Health filed a lawsuit against the Department of Health and Human Services (HHS) over the Disproportionate Share Hospital (DSH) payment formula.
Chevron Deference to Regulatory Agencies
The Chevron deference goes back to 1984. The case was Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. NRDC filed a suit challenging the Environmental Protection Agency’s (EPA) interpretation of air quality standards under the Clean Air Act. The Court sided with Chevron, and in the process established the principle that courts should defer to federal agencies’ reasonable interpretations of ambiguous statutes they administer.
The process behind federal regulations starts with Congress. Enacted laws are not entirely prescriptive, meaning that federal agencies must figure out how to interpret, implement, and enforce new laws. Agencies write regulations that they believe conform with Congress’ intent. Entities subject to new regulations tend to balk and file lawsuits. The Chevron ruling was groundbreaking because it stopped a lot of time-consuming court cases and allowed agencies to create detailed regulations within the broad framework set by Congress.
Now, with the Supreme Court’s recent decision to dismantle Chevron, federal agencies are back to the old days when they faced extreme opposition in interpreting laws. The consequences of the change are predicted to be significant.
First Domino – the Hackensack Meridian Health Lawsuit
Hackensack Meridian Health, a major healthcare provider in New Jersey, cited the fall of Chevron in their lawsuit challenging the HHS’ interpretation of how hospitals are reimbursed for low-income patients. A Disproportionate Share Hospital (DHS) serves a large number of low-income patients, which results in high, unpaid bills. DHS hospitals receive additional federal funding to help cover treatment costs for patients who are uninsured or underinsured. The DSH payment formula was designed to prop up hospitals, so they may continue to serve vulnerable populations with limited financial resources. The HHS has been unwilling to change the compensation formula, so Hackensack is hoping to push the courts into adopting a different interpretation of the rule.
Healthcare Regulatory Environment
The dismantling of the Chevron rule will likely lead to significant changes in how healthcare regulations are interpreted and enforced:
- More Legal Challenges: Healthcare providers and other stakeholders will be motivated to challenge federal regulations in court, knowing that agencies no longer have the same level of deference in interpreting ambiguous statutes. The outcome will undoubtedly be more litigation over healthcare policy.
- Regulatory Uncertainty: Courts will have to take a more active role in interpreting healthcare laws as the regulatory agencies no longer get the benefit of the doubt. Court cases take time, and meanwhile, there will be little predictability in how companies apply “ambiguous” regulations. Uncertainty will complicate compliance efforts for healthcare providers, who will navigate a confusing legal landscape.
- Policy Fragmentation: Without deference to federal agencies, healthcare regulations will be fragmented and inconsistently enforced. Courts in different regions of the country will likely vary in their interpretation of the same statutes, leading to healthcare disparities nationwide.
- Judiciary Regulation: Judges, rather than agency experts, will control the interpretation of complex healthcare laws. The shift means politics will play a more prominent role than specialized expertise, with frightening implications for healthcare regulations.
The Supreme Court’s decision to dismantle the Chevron deference is a seismic shift in healthcare regulation with profound implications for all Americans. The Hackensack Meridian Health lawsuit is just the first in what promises to be a popular challenge to any federal agencies’ interpretations of healthcare law. While courts take a more active role, healthcare providers will need help navigating the ambiguity.
The Chevron rule decision will reshape healthcare regulation and enforcement, but continuity of care and gains need not be lost. HealthTech companies like RazorMetrics are in the perfect position to bridge the gap with providers, offering the latest information about their patients’ healthcare coverage. Change is inevitable, but that change could be in a positive direction with the right application of technology.