Legal Alert by Lamb McErlane attorneys Vasilios J. Kalogredis, Esq. and Sonal Parekh, Esq.

Friday June 28, 2024 marked a massive change in legislative history. The United States Supreme Court overturned a longstanding legal precedent that required courts to defer to the expertise and reasonable interpretation of federal agencies in carrying out laws passed by Congress.

The “Chevron Doctrine” arises from the 1984 U.S. Supreme Court case of Chevron v. Natural Resources Defense Council. Under the Chevron Doctrine, if Congress has not directly spoken to the precise question at issue expressing its unambiguous intent, courts must give deference to an administrative agency’s interpretation of a statute so long as the interpretation is (i) issued by the agency charged with administering that statute; (ii) generally rational or reasonable; and (iii) given in a form that would have the force of law, such as an adjudication or formal notice-and-comment rulemaking. Critics of the Doctrine argue that it violates constitutional separation-of-powers principles by removing the judiciary’s ability to independently interpret laws and allowing the executive branch to assume legislative power from Congress, which has not explicitly been given to them. Proponents of the Doctrine say it allows specialized agencies to fill gaps in ambiguous statutes to establish uniform rules in their areas of expertise.

The Supreme Court decided two almost identical cases, Loper Bright Enterprises v. Raimondo, No. 22-451, and Relentless v. Department of Commerce, No. 22-1219. Both cases involved a 1976 federal law that requires herring boats to carry federal observers to collect data used to prevent overfishing. Under a 2020 regulation interpreting the law, owners of the boats were required not only to transport the observers, but also to pay approximately $700 a day for their oversight. Fishermen in New Jersey and Rhode Island sued claiming that the law did not authorize the federal agency, the National Marine Fisheries Service (NMFS), to impose the fee. The two United States Court of Appeals in the District of Columbia Circuit and the First Circuit, in Boston, respectively ruled that the deference called for by Chevron required a ruling for the government.

In its ruling, the Supreme Court overturned the Chevron. With a vote of 6 to 3, the court split along ideological lines in the dispute, with Chief Justice John Roberts writing of the conservative majority, and Justices Elena Kagan, Sonia Sotomayor and Ketanji Brown Jackson in dissent. As Justice Roberts indicated, with Chevron overruled, courts must now exercise their independent judgment in deciding whether an agency has acted within its statutory authority as the Administrative Procedure Act requires.

There have been 70 Supreme Court decisions and tens of thousands of lower court decisions relying on the Chevron. The reach of the Chevron Doctrine is so great that any industry subject to federal regulations, such as health care, can and is likely to be impacted by the Supreme Court’s decision. With Chevron now overturned, it begs the question – What happens going forward?

The ruling could cast doubt on underlying agency positions that have been relied upon by regulated entities to operate their businesses. It is likely that lower courts will have to interpret the Supreme Court’s decision to assess the new state of the law. This may result in a rush of litigation to test the new limits of agency deference, develop new precedents, and/or revisit prior decisions. Particularly, prior decisions addressing agency actions under Chevron may now be called into question. Legislative drafting going forward may need to become more robust to expressly define the scope of agency authority.

Health care is one of the most highly regulated industries. Therefore, the impact from this ruling could be significant in numerous ways. Agencies under the U.S. Department of Health and Human Services (HHS), such as the Centers for Medicare and Medicaid Services (CMS), Office for Civil Rights (OCR), Office of Inspector General (OIG), Food and Drug Administration (FDA), National Institutes of Health (NIH), Substance Abuse and Mental Health Services Administration (SAMHSA), among others are known to have a complex set of rules, regulations, and other guidance. Many argue these agency actions go beyond authority granted by Congress. With Chevron overruled, health care providers, associations, and other private parties could challenge regulations and other determinations by these agencies, which would severely impact the health care industry as a whole.

The Supreme Court’s ruling could likely impact several areas of health care including, but not limited to, Medicare Reimbursement; Medicare and Medicaid Coverage Disputes; Administration of Medicare and Medicaid; Nondiscrimination under the Affordable Care Act; FDA decision-making under the Federal Food, Drug, and Cosmetic Act; Social Security and Disability Benefits; Health Care Fraud and Abuse laws such as the Anti-Kickback Statute, Stark law, False Claims Act, and Civil Monetary Penalties Law; Long-Term Care Survey and Certification Enforcement; Medicare drug price negotiations under the Inflation Reduction Act; surprise medical billing rules under the No Surprises Act; preventive health care services under the Affordable Care Act, rules and regulations regarding the COVID-19 pandemic; and patients’ data protection and privacy under the Privacy Rule of the Health Insurance Portability and Accountability Act (HIPPA).

With the overturning of Chevron, we can expect to see several changes in the health care industry, among others. Health care providers should stay tuned for updates to federal regulations that might be subject to change and engage with legal counsel to develop a strategy for potential regulatory challenges and new compliance requirements. We will continue to keep posting updates so stay tuned!

If you have any questions or if we may be of further assistance regarding compliance in light of the Supreme Court’s ruling, or other health law matters, please feel free to contact Bill Kalogredis, Esq. or Sonal Parekh, Esq.

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Vasilios J. (Bill) Kalogredis, Esq. has been advising physicians, dentists, and other healthcare professionals and their businesses as to contractual, regulatory and transactional matters for 50 years. He is Chairman of Lamb McErlane PC’s Health Law Department. Bill can be reached by email at bkalogredis@lambmcerlane.com or by phone at 610-701-4402.

Sonal Parekh, Esq., is an associate at Lamb McErlane PC who focuses on healthcare transactional matters and a broad range of healthcare regulatory-related issues on behalf of healthcare systems, physicians, dentists, and other healthcare providers, and is a pharmacist by education and training. Sonal can be reached by email at sparekh@lambmcerlane.com or by phone at 610-701-4416.

*This alert is for educational purposes only and is not intended to be legal advice. Should you require legal advice on this topic, any health care matter, or have any questions or concerns, please contact Vasilios J. (Bill) Kalogredis, Esq. or Sonal Parekh, Esq.