Navigating the Post-Chevron Landscape: What Healthcare Providers Need to Know

By: Daniel Ayyash and Joe Van Horn, Wachler & Associates, P.C.
8/1/24

Overview

The United States Supreme Court’s June 28, 2024 decision in Loper Bright Enterprises v. Raimondo and Relentless v. Department of Commerce to end Chevron deference marks a pivotal shift in administrative law, with potentially significant implications for healthcare providers. Chevron deference, a doctrine that compels courts to defer to a federal agency’s interpretation of ambiguous laws, has been a cornerstone of administrative law since the Reagan administration. The end of Chevron deference means that healthcare providers must prepare for a new regulatory landscape where judicial interpretations of agency rules may assume a more prominent role. Increased legal challenges to agency actions will likely lead to uncertainty surrounding regulatory compliance, and create heightened risks for providers that depend on Medicare, Medicaid, and other federal healthcare benefit program payments to support their practice.

Chevron deference was initially established by the Supreme Court in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. 467 U.S. 837 (1984), and has served as a foundation of administrative law for over three decades. The doctrine holds that courts should defer to a federal agency’s reasonable interpretation of an ambiguous statute, providing agencies with significant discretion in implementing and enforcing laws and regulations. This deference has allowed federal agencies to leverage their presumed expertise in interpreting complex laws, especially in situations where Congress is vague or silent about how a law should be enforced or interpreted.

Impact on Healthcare Providers

The healthcare industry has relied on Chevron deference to navigate complex and evolving regulatory landscapes. Federal agencies, such as the Centers for Medicare & Medicaid Services (CMS) and the Food and Drug Administration (FDA), have used this deference to implement policies and regulations that promote broad discretion and wide operational latitude within the healthcare system. By deferring to agency interpretations, courts have allowed these federal agencies to adapt regulations to changing circumstances and new developments, without undertaking an independent judicial analysis.

However, the Supreme Court’s recent decision in Loper to eliminate Chevron deference fundamentally alters this dynamic. Without Chevron deference, courts will no longer be required to defer to federal agency interpretations of ambiguous statutes. Instead, judges will likely take a more active role in interpreting laws, potentially leading to greater variation in how regulations are implemented. While the required deference under Chevron is now absent, federal agency interpretations will likely not be disregarded entirely. This shift may result in more frequent legal challenges to federal agency administrative actions and decisions, and these agencies will likely be compelled to persuade the courts to follow their interpretation of a law rather than being granted automatic deference.

For healthcare providers, this change introduces a new layer of uncertainty and complexity. Providers must now be prepared for a regulatory environment where judicial interpretations of agency rules play a more prominent role. This could lead to increased legal and compliance consequences, as providers navigate a more fragmented and unpredictable regulatory landscape. Additionally, the lack of consistent deference to agency interpretation may result in conflicting interpretations of laws and regulations from court to court, further complicating compliance efforts.

One potential impact of the end of Chevron deference may take the form of increased scrutiny of CMS policy regarding Medicare and Medicaid programs. These programs are governed by a complex web of statutes and regulations, and CMS’ interpretations have historically played a critical role in shaping policy. Without Chevron deference, courts may be more inclined to question CMS’ interpretations, potentially leading to inconsistent application of Medicare and Medicaid rules. This is especially important for coverage and alleged overpayment disputes, where this new-found judicial flexibility may allow courts to rule in favor of providers more often than in the past.

Similarly, the FDA’s regulatory authority could be affected by the end of Chevron deference. The FDA relies on its own interpretations to implement regulations related to drug approvals, medical devices, and food safety. Without deference to the FDA’s interpretations, courts may take a more active role in evaluating regulatory decisions, potentially leading to greater variability in how rules are applied.

The end of Chevron deference also raises questions about the future of healthcare reform initiatives. Policymakers and regulators have used agency interpretations to implement and refine key components of healthcare reform, such as the Affordable Care Act (ACA). Without Chevron deference, courts may play a more significant role in shaping the implementation of healthcare reforms, potentially leading to even more legal challenges, delays, and uncertainty.

Conclusion

The Supreme Court’s decision in Loper to end Chevron deference marks a significant shift in administrative law with potentially profound implications for healthcare providers. By eliminating the requirements that courts defer to federal agency interpretations of ambiguous statutes, Loper introduces greater judicial scrutiny and uncertainty in regulatory enforcement. Healthcare providers must navigate this new landscape by staying informed about legal developments and engaging in proactive compliance strategies. As the healthcare industry adapts to this change, ongoing dialogue between regulators, stakeholders, and the judiciary will play a crucial role in addressing the uncertainty that lies ahead.