McGuireWoods Consulting senior vice president, Stephanie Kennan, commented on the U.S. Supreme Court decision in a recent Medicare reimbursement case in a June 3 article for Inside Health Policy.

The court rejected Centers for Medicaid and Medicare Services’ (CMS) argument that it had broad authority to issue its own legal interpretations of the Medicare statute without going through the rulemaking process.

It ruled 7-to-1 that the Department of Health and Human Services (HHS) neglected its statutory notice and comment obligations when it implemented a change to the Medicare disproportionate share hospital (DSH) payment formula.

The case centered on whether HHS has to provide a 60-day notice and comment period before making substantial legal changes in policy. The policy in question added Medicare Part C patients in the formula, which would have substantially decreased DSH payments to hospitals. Because HHS did not follow the notice and comment obligation, the policy was vacated.

The court’s ruling could throw into question the validity of various subregulatory guidance documents and could mean that CMS will have to conduct rulemaking before making certain types of technical policy changes.

“The court’s decision makes HHS and its agencies less nimble in changing policy,” Kennan said. “Many important policy changes have occurred without notice-and-comment rulemaking.”

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