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Supreme Court Contemplates Overturning Chevron Doctrine: Implications for Healthcare Industry Hang in the Balance

March 16, 2024

By: Cristina Rodriguez

As seen in Law.com

The U.S. Supreme Court continues to build its legacy of jettisoning well-established principles and practices. In two companion cases—Loper-Bright v. Raimondo (Docket No. 22-451) and Relentless, Inc. v. Department of Commerce (Docket No. 22-1219)—the Court could overturn a doctrine that has served as a bedrock principle in administrative law for 40 years.  Although the cases involve commercial fishing groups challenging a federal herring fishing regulation, the long-reaching effects of the Court’s decision would reach the healthcare industry, which is regulated by several federal administrative agencies.

The target doctrine is “Chevron Deference,” named for the 1984 decision from which it originated—Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837.  Chevron involved the Reagan Administration’s interpretation of ambiguous provisions of the Clean Air Act.  According to Justice Stevens, who authored the unanimous decision, courts must employ a two-part test when considering how federal agencies interpret ambiguous statutes that they administer.  First, courts must determine if the statute is silent or ambiguous on a specific issue.  If so, courts must then uphold the agency’s reasonable interpretation of the statute. 

Chevron was not controversial when it was decided.  The Chevron court simply reasoned that because administrative agencies employ highly-trained experts in their respective areas, they are best equipped to interpret and carry out the federal laws under which they operate.  The late Justice Scalia, who was one of the greatest champions of Chevron, described it as a protection for expert agencies from the whims of nonelected judges serving lifetime appointments. 

Chevron has become one of the most significant rulings in federal administrative law, having been cited over 18,000 times to support agency actions and interpretations.  Its prolific jurisprudence inevitably drew numerous critics.  Over the years, the U.S. Supreme Court tweaked and limited Chevron’s application. 

As a result, the deference afforded to agencies under Chevron is not unfettered.  Chevron does not require deference where Congress’ intent is clear from statutory language.  Nor do courts apply Chevron to questions regarding an agency’s jurisdiction or scope of authority.  Further, Chevron only affords deference if the agency interpretation is reasonable and a part of a formal agency action, not informal guidance.  Chevron does not apply to major questions of national significance or matters of profound economic or political importance under the major questions doctrine.  Because these limitations preserve separation of powers and promote judicial review of agency action, Chevron should not result in “reflexive deference” as many critics contend.

For several years, the Supreme Court repeatedly denied certiorari petitions seeking reconsideration of Chevron.  The increasingly conservative Court changed course in 2023, however, when it agreed to review the Loper-Bright and Relentless petitions.

The plaintiffs in Loper-Bright and Relentless characterize Chevron as “egregiously wrong” and “unworkable,” which are two factors that courts consider in determine whether to apply stare decisis.  Stare decisis literally means “to stand by things decided” and it is the legal principle of deciding legal issues based on precedent.  As a decades-old decision cited in thousands of cases, Chevron is the most established precedent in administrative law.  Yet, with jurists questioning its legal underpinnings, its reversal remains a distinct possibility.

Justice Gorsuch, one of the most outspoken critics of Chevron, has repeatedly advocated for it eradication, claiming that the doctrine “deserves a tombstone no one can miss.”  See Buffington v. McDonough, 143 S. Ct. 14 (2022).  Justice Gorsuch also described Chevron as judicial abdication and a disservice to the law.  Id. While he was still a judge in the Tenth Circuit, Justice Gorsuch wrote that Chevron allowed the executive branch to “swallow huge amounts of power” from the judicial and legislative branches.  Gutierrez-Brizuela v. Lynch, 834 F.3d 1142 (10th Cir. 2016).  Not surprisingly, his stance on Chevron was a focal point of his confirmation hearings before the U.S. Senate. 

Chevron was also a key area of inquiry during Justice Kavanaugh’s confirmation hearings.  Justice Kavanaugh criticized Chevron as inviting agencies to push the legal envelope.  And Justice Thomas currently opines that Chevron precludes judges from exercising their independent judgment.  Chief Justice Roberts has also indicated a preference for imposing context-specific limitations on Chevron. 

While limitations to Chevron are less worrisome, its reversal is predicted to cause great upheaval. Overturning Chevron would not only dismantle agency interpretation of federal law but also any programs and regulations that flow from those interpretations. The continued viability of Chevron is critical to address the obstacles that the healthcare industry faces in the coming year. 

Several public health and medical associations filed amicus briefs advocating in favor of upholding Chevron.  In one of those briefs, the American Cancer Society (ACS) discussed Chevron’s vital role in ensuring the stability of programs like Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP), which collectively cover over 150 million Americans. ACS argues that it would simply be impossible for Congress to draft and regularly update the statutes with the “speed, technical granularity, and prescience needed to anticipate and plug every conceivable statutory hole that might be revealed as the programs are implemented.”

This enhanced administrative efficiency and flexibility that Chevron fosters becomes particularly important to agencies addressing scientific and technical issues.  One such issue is artificial intelligence (AI) and its rapidly-changing role in healthcare.  From concerns about privacy and security to the use of AI in medical devices and to evaluate reimbursement claims, the regulation of AI will require swift and decisive action for which agencies that deal with the healthcare industry on a daily basis are better equipped to take. 

For example, the Department of Health and Human Services’ (HHS) Office of the National Coordinator for Health Information Technology recently established new requirements for the use of AI in clinical, administrative, and operational contexts.  Overturning Chevron could cripple the HHS’ authority to act and interpret applicable statutory gaps to address AI and similar emerging technology.  This would leave many Americans vulnerable until Congress members gain sufficient consensus to enact legislation or judicial activists lacking the expert knowledge to weigh in on intricate technological issues.  

Chevron’s reversal could also hobble necessary agency proposals and actions that are anticipated in 2024.  The Centers for Medicare and Medicaid Services (CMS) is expected to finalize a slew of new proposals in 2024, ranging from payment analysis, maximum wait times for appointments, a quality rating system for payors, a prior authorization application program interface, mental health parity, and pharmacy benefits.  CMS will also undertake Medicare drug price negotiations introduced as part of the Inflation Reduction Act of 2022.  CMS has the scientific and technical expertise that makes it better-suited than courts or congress to implement these proposals and programs. 

The 340B Discount Drug Purchasing Program, under which non-profit hospitals treating a certain percentage of low-income Medicare and Medicaid patients can purchase certain drugs at discounted prices, could also be impacted.  The program already faces a flurry of lawsuits capitalizing on gaps in statutory language.  The ability of the Health Resources and Services Administration (HRSA), another HHS subagency, to interpret ambiguities to keep the program functional in the face of these legal challenges remains paramount.  The CMS’ interpretation of regulations and actions under the 340B program could prove crucial to continued operations of non-profit hospitals. Without Chevron deference such interpretations and guidance become vulnerable to even more direct and collateral attacks.

The Chevron Doctrine provides clarity and confidence in how statutes and regulations are interpreted and applied.  This reduces the uncertainty and legal risk for healthcare providers and hospitals.  They can rely on HHS and CMS guidance to develop compliance strategies under complex federal statutes like the Anti-Kickback Statute, Stark Law, HIPAA, and ERISA.  Chevron’s reasonableness requirement also protects healthcare providers from arbitrary and capricious agency enforcement actions and interpretations. 

In January, the Court heard oral argument in both cases for more than three hours.  A ruling is anticipated by summer.  According to the Justices’ questions and commentary, the court appears poised to limit Chevron deference but by how much or if it will completely overturn the doctrine remains uncertain.  For the sake of those in healthcare, hopefully the Court will exercise restraint.

Byline Article
Cristina Rodriguez, Senior Counsel at Wolfe Pincavage

As Senior Counsel at Wolfe Pincavage, Cristina Rodriguez represents clients in a wide range of business disputes. Cristina employs a solution-oriented approach that strengthens the firm’s dispute resolution capabilities, securing favorable judicial and arbitral decisions and advantageous settlements within the healthcare industry. She has successfully pursued claims against commercial payors and defended healthcare practitioners and providers in RICO and TCPA cases as well as breach of contract, equitable, and statutory claims in state and federal courts and in arbitrations.