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Kavanaugh Already May Be Influencing Medicare Payment Appeal

Aug. 30, 2018, 6:36 PM

Judge Brett Kavanaugh could influence the trajectory of a pending Medicare reimbursement case worth potentially billions to hospitals before he ever dons a Supreme Court robe.

That is because Kavanaugh’s opinion in Allina Health Servs. v. Azar, which found the Department of Health and Human Services violated the Medicare Act when it changed the reimbursement formula for disproportionate share hospitals (DSH), is the subject of a pending Supreme Court petition. DSH hospitals are those that treat larger numbers of poor and low-income patients.

The federal government asked for high court review of that decision in April and the Supreme Court is scheduled to meet to discuss whether to hear the case on Sept. 24. But the possibility that the court will start its next term with only eight justices, as well as the likelihood that Kavanaugh would not participate if he is confirmed and review is granted, raises the possibility that the court will decide not to review the case at all.

“We saw what it was like when, before the [Justice Antonin] Scalia vacancy on the court was filled, an eight-justice court shied away from deciding some of the more closely contested cases,” A.E. Dick Howard, a professor at the University of Virginia School of Law who focuses on the Supreme Court, told Bloomberg Law. “If the justices saw themselves as likely to be evenly divided on the merits in Allina, they could well decide to leave the issue for another day.”

Hearings on Kavanaugh’s nomination to be a Supreme Court justice begin Sept. 4.

Risk of a Split

Tradition suggests that, if confirmed, Kavanaugh should recuse himself from hearing the case. That means only eight justices would hear the government’s appeal, which is the same scenario if the Senate refuses to confirm Kavanaugh and there is further delay in confirming someone else. The high court could choose not to take the case if it feels the eight-justice panel would be deadlocked and leave the D.C. Circuit’s decision in place.

The Supreme Court has declined to review cases it feels may end up in a 4-4 split. Such decisions do not offer any guidance to litigants or federal judges on the underlying legal issues.

“If you’re not going to get a determinative outcome, why take the case at that point?” Stuart Gerson, an attorney in Epstein, Becker, Green’s health-care practice in Washington, asked. “Leave it in the circuits and see what happens,” Gerson told Bloomberg Law.

“It’s never possible to know it for sure, but there are cases where they’re influenced by what’s likely to happen and postpone hearing it,” he added. Gerson previously served as an acting attorney general.

It would be impossible to know for sure if the possibility of a 4-4 split was the reason the high court turned down review of a case because the Supreme Court rarely explains why it denies review. The high court only chooses to hear between 100-150 of the more than 7,000 petitions it receives on a yearly basis, according to the Administrative Office of the U.S. Courts.

If Kavanaugh is confirmed, the possibility an eight-person Supreme Court would hear the case if the court decides to grant the petition is relatively high. Kavanaugh would be expected to adhere to a long tradition in which justices recuse themselves from participating in cases they already ruled on in a lower court.

This, too, suggests the high court may be inclined to defer review until the issue is presented again in another case.

Billions on the Line

In its petition for review, the federal government emphasized that $3 billion to $4 billion in Medicare reimbursement between 2005 and 2013 is at stake.

The case involves a 2014 decision in which the HHS told Medicare intermediaries to consider Medicare Part C (managed care) patient days as being entitled to Medicare Part A (hospital) benefits, which lowered the hospitals’ DSH reimbursements. The D.C. Circuit ruled the Centers for Medicare & Medicaid Services overstepped its bounds by making the change without a notice-and-comment period.

The case is Allina Health Servs. v. Azar, U.S., No. 17-1484, scheduled for conference 9/24/18.

To contact the reporter on this story: Matt Phifer in Washington at mphifer@bloomberglaw.com

To contact the editor responsible for this story: Peyton M. Sturges at psturges@bloomberglaw.com