Court Deference to Agency Interpretations of Ambiguous Regulations: How Much is Too Much?

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adrienneBy Jessica L. Gustafson, Esq. and Adrienne Dresevic, Esq. of The Health Law Partners, P.C.

On March 27, 2019, the U.S. Supreme Court is scheduled to hear argument in the case of Kisor v. Wilkie, which is a case arising from a veteran’s claim for disability benefits that the U.S. Department of Veterans’ Affairs (VA) denied. The underlying case centered on the VA’s construction of its own regulation regarding veteran disability benefits.  In particular, the dispute centered on the meaning of the term “relevant” as used in 38 C.F.R. Section 3.156. In deciding the case below, the court of appeals acknowledged that both the VA and appellant James L. Kisor had advanced reasonable, albeit irreconcilable, interpretations of the regulation. On that basis alone, the court found the regulation ambiguous and held that, under the Auer deference standard, the case ought to be resolved in favor of the VA’s interpretation. The sole issue on appeal to the Supreme Court is the fate of the Auer deference standard (which is sometimes also referred to as the Seminole Rock deference standard). Under the Auer deference standard, an agency’s interpretation of its own regulation is “controlling unless plainly erroneous or inconsistent with the regulation.” The Auer deference standard is often raised by governmental agencies in the context of health care litigation.

The healthcare industry is replete with sub-regulatory guidance that serves to interpret an agency’s’ regulations. Such guidance documents include, but are not limited to: OIG Fraud alerts, Advisory Opinions and Special Bulletins; CMS Manuals and coverage articles; and Local Coverage Determinations. Additionally, as the VA did in Kisor v. Wilkie, an agency will at times advance an interpretation of its own regulation in the course of litigation or other dispute, without first publishing a guidance document.

The Auer deference standard has proven controversial. Supporters of Auer deference say that the agency that drafted a regulation is in the best position to know what it means. Supporters also argue that it makes it easier for courts to review challenges to an agency’s interpretation of its regulations, because they only must determine whether the agency’s interpretation is reasonable, rather than whether it is the best interpretation.

On the other hand, criticisms of the Auer deference standard also exist. First, by deferring to an agency’s interpretation of its own regulation, an agency is arguably incentivized to adopt broad and vague regulations in order to maximize its interpretive freedom. An agency is potentially able to exploit ambiguities in a regulation and change its policy (and thus a provider or supplier’s compliance responsibilities) through its “interpretation,” which could easily change from time-to-time. Second, the Constitutional principle of separation of powers is not supported by Auer deference. Auer arguably represents a transfer of judicial power to an agency to interpret its own regulation. The Constitution vests judicial power with the judiciary, which requires the exercise of independent judgement to interpret the law.

In recent years, the Supreme Court has repeatedly questioned whether it ought to reconsider the Auer deference standard. As a practical matter, governmental agencies (such as CMS and the OIG) will continue to issue sub-regulatory guidance and other interpretations of its regulations.  However, radiology providers and suppliers should closely monitor the outcome of this case, as it will serve to resolve the deference to which these interpretations will be entitled by the courts.

A copy of the Petition for Writ of Certiorari is available here.


Jessica L. Gustafson, Esq. graduated from Wayne State University Law School. Practicing healthcare law, she concentrates on representing providers in the Medicare, Medicaid and third party payor audit appeals processes, compliance with federal and state healthcare regulations, and reimbursement matters.

Adrienne Dresevic, Esq. is a Founding Shareholder of The Health Law Partners, P.C., a nationally recognized healthcare law firm with offices in Michigan and New York.Practicing in all areas of healthcare law, she devotes a substantial portion of her practiceto providing clients with counsel and analysis regarding compliance, Stark Law, Anti-Kickback Statute, and compliance related issues. Ms. Dresevic serves on the American Bar Association Health Law Section’s Council, which serves as the voice of the national health law bar within the ABA. Ms. Dresevic also serves as the ABA Health Law Section’s Co-Chair of the Physicians Legal Issues Conference Committee, Vice Chair of the Programs Committee (Executive Leadership), and Vice Chair of the Sponsorship Committee. She is licensed to practice law in Michigan and New York, and can be contacted at adresevic@thehlp.com

The authors are members of The Health Law Partners, P.C. and may be reached at (248) 996-8510 or (212) 734-0128, or at www.thehlp.com.

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