SCOTUS' overturning of Chevron to have credit effects in healthcare

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When the Supreme Court overturned the Chevron doctrine on June 28, it ended the mandate that federal courts should defer to federal agencies' interpretations when deciding on ambiguous statutes – which diminishes agency authority and shifts power to the courts, triggering ripple effects that could have widespread credit effects, according to Moody's Investors Service.

In particular, the ruling makes it more likely that existing and future climate regulations will be litigated and reversed by the courts, Moody's said. Under the Biden administration, the Environmental Protection Agency has issued a number of rules aimed at reducing greenhouse gas emissions from high emitting sectors, notably auto and power. 

Vehicle emissions standards would be at stake, for example. The EPA announced multi-pollutant emissions standards for light vehicles manufactured from 2027 to 2032, which would cause automakers to offer an increasingly greater proportion of electric and hybrid vehicles to meet these standards. But, with the ruling, Moody's contends that litigants would be emboldened to argue that the agency has overstepped its statutory authority.

This development carries mixed implications for the healthcare industry. Numerous regulations covering reimbursement, insurance eligibility and many other aspects of the industry directly affect revenue and/or expenses, Moody's said.

Potentially affected regulations include the process for determining the wage index component of Medicare reimbursement and components of the Disproportionate Share Hospital (DSH) payments, among others. In terms of increased litigation, hospitals will potentially contest regulations that pinch profit.

The effect on the healthcare industry has already been seen to some extent. In a preliminary injunction this month, a federal judge in Mississippi ruled that the Department of Health and Human Services' antidiscrimination protections for LGBTQ+ patients cannot be enforced. The ruling cited the Supreme Court's recent overturning of Chevron deference.

The Human Rights Campaign lambasted the court's decision, saying that without Section 1557 enforcement, healthcare providers who receive federal funding may be encouraged to discriminate and deny coverage and access to necessary medical services or broad swaths of patients.

Separately, on the day the Supreme Court overturned Chevron, Hackensack Meridian Health announced it was suing Health and Human Services Secretary Xavier Becerra over the calculation of Medicare reimbursement used to determine DSH payments. 

The Centers for Medicare and Medicaid Services calculations left out more than 400 patients, which reduced the amount of reimbursement Hackensack hospitals were paid, according to the lawsuit filed on June 28. 

WHAT'S THE IMPACT?

According to Moody's analysis, courts will have the primary responsibility to interpret laws when congressional legislation lacks clarity. The shift exposes existing agency regulations to potential legal disputes, and complicates new rulemaking, due to reduced flexibility. However, regulations following clear congressional directives should hold a low risk of being overturned, analysts said.

Heightened litigation will likely slow the regulatory process until the courts speak. This burden of statute interpretation may overwhelm lower courts, causing delays and potential inconsistencies, said Moody's.

In addition to healthcare, analysts also expect federal banking regulators to face increasing challenges to their rulemaking. These regulators will likely be more cautious with new rulemaking, especially as it relates to areas where congressional intent is not well defined. In addition to increased challenges over new and existing regulations, the SCOTUS rulings will likely lead to increased lawsuits over other regulatory responsibilities, such as supervision and enforcement, and mergers and acquisition, potentially weakening guardrails.

Meanwhile, the Department of Education will likely face new and stronger challenges to its rulemaking under the Higher Education Act, Moody's said. The department's Gainful Employment Rule meant to protect students from predatory programs may be harder to enforce, affecting education quality and student debt levels.

Other pending regulations, such as recently released updated Title IX rules or heightened scrutiny of online program management agreements, could be delayed or curtailed. Disputes over student debt relief are likely to intensify or grow in number, analysts said.

THE LARGER TREND

According to Moody's, Congress will hold increased responsibility to deal directly with policy issues – but congressional action often takes time. Restricting regulatory discretion could reduce regulators' agility when tackling new developments. 

In the event of a divided Congress failing to provide timely clarity on regulations or enforcement, the courts and states may step in to fill the void, analysts said. This could also lead to states reestablishing their own regulations. 

"Still, whether it is the introduction of new rules or the stripping away of old ones in a future administration, the path is likely to be anything but smooth," Moody's said.
 

Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.