Federal Regulatory Update and Recent Litigation

For more information about this blog post, please contact Khaled J. KleleLatoya Caprice Dawkins, or Ryan M. Magee.

The Department of Health and Human Services (HHS) recently published 84 FR 59549, requiring annual inflation-related increases to the civil monetary penalties associated with the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the Act).  The Act aims to improve the effectiveness of civil monetary penalties and to maintain a deterrent effect against violations of federal statutes or regulations.

  The regulation adjusts those civil monetary penalties to account for annual inflation, increasing civil monetary penalties using consumer price index and cost-of-living data for year 2019.  This final rule became effective on November 5, 2019.

The Centers for Medicare & Medicaid Services (CMS) also published 84 FR 59529, finalizing payment methodologies associated with Basic Health Plans (BHP) under the Affordable Care Act for years 2019 and 2020.  Currently, states pay a portion of BHP costs each year.  However, the proposed change in BHP methodology will shift an additional portion of BHP costs from the federal government to the states, with a potential increase in beneficiary contributions and potential decreases in provider payment rates (including rates to standard health plans in the BHP).  This final rule becomes effective January 6, 2020.

Recent Litigation

Missouri Hospital Assoc. v. Azar, No. 18-1778 (8th Cir. 2019):  In this matter, the Eighth Circuit held that an HHS rule requiring Medicaid reimbursements for Disproportionate Share Hospitals (DSH) (i.e., hospitals that serve a number of low-income patients) to be reduced based on payments they receive from Medicare and private insurers is valid.  At the district court below, the Missouri Hospital Association (MHA) challenged the rule’s definition of “costs incurred” and the discretion it delegated to the Secretary of HHS to include payments by Medicare and private insurance in the DSH payment calculation.  The Eighth Circuit reversed the district court’s grant of summary judgment for MHA. 

The Eighth Circuit’s reversal follows a U.S. Court of Appeals for the District of Columbia Circuit decision we previously covered in August of this year, Children’s Hospital Association of Texas, et al. v. Azar.  In that decision, the D.C. Circuit held that Congress “did not intend to exclude Medicare and private insurance payments” from the methodology used to reduce payments for hospitals serving low-income patient populations.