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Capitol Correspondence - 07.30.18

Court Rules Posting Documents on Agency Website Insufficient Process to Change Medicaid Policy

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According to Bloomberg Government:

“The government can’t change Medicaid policy by just posting documents on an agency website, a federal appeals court ruled.

The policy changes challenged by a Virginia children’s hospital have to be vetted through the administrative notice-and-comment process before they can trigger compliance obligations, the court said. The U.S. Court of Appeals for the Fourth Circuit July 23 ruled that the Centers for Medicare & Medicaid Services [CMS] can’t create binding policy based on answers on the agency’s Frequently Asked Questions page.

The hospital challenged the agency’s policy after it realized the methodology would require it to repay $19.1 million it received from Medicaid for serving a high proportion of poor patients. The ruling is the most recent in a series of decisions in which courts have found certain agency policies are legislative in nature, as opposed to merely ‘interpretive,’ and must go through notice-and-comment rulemaking.”

The case, which focused on DSH payments is titled Children’s Hospital of the King’s Daughters v. Azar, and the full opinion with more details on facts of the case is available online. In summary, in 2008 CMS finalized regulations on auditing and reporting of DSH payments. However, in 2010 CMS posted a series of FAQs on its website on the 2008 regulation, including one that was specific to how states made payment adjustments to DSH hospital and which included substantive changes to the 2008 methodology. The Children’s Hospital of the King’s Daughters argued this change could not be made without federal notice and comment and the federal court agreed.