New Developments in Medicare Enforcement Actions: Impact of Allina

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

Medicare enforcement includes multiple actions, which may range from overpayment demands to enforcement of False Claims Act violations. Such actions oftentimes are predicated not only on a health care provider’s compliance with laws and regulations, but also on its compliance with sub-regulatory guidance. On October 31, 2019, the Office of General Counsel (OGC) for the Department of Health and Human Services (HHS) issued an internal memorandum advising the Center for Medicare and Medicaid Services (CMS) of its analysis regarding a recent United States Supreme Court decision’s impact on HHS’s proper use of sub-regulatory guidance in Medicare enforcement actions.

Azar v. Allina Health Services

By way of background, on June 3, 2019, the Supreme Court issued its decision in the case of Azar v. Allina Health Services. Allina involved a hospital’s suit against HHS, in which the hospital alleged that HHS violated the Medicare Act by not engaging in notice-and-comment rulemaking before changing a substantive legal standard (ie, changing the Medicare formula for calculating disproportionate share hospital (DSH) payments, resulting in a reduction in hospitals’ payments for treating low-income Medicare patients).

The Medicare Act mandates that the government provide notice-and-comment on any “rule, requirement, or other statement of policy” that “establishes or changes a substantive legal standard governing… the payment for services.” Applying the Medicare Act to the facts before it, the Court determined that HHS’s change in methodology for calculating DSH payments involved a “payment for services” and set forth a “statement of policy.” The Court next found that whether or not HHS was required to go through notice-and-comment rulemaking turned on whether HHS’s actions “established or changed a substantive legal standard.” Ultimately, the court decided that HHS’s actions constituted a change in a substantive legal standard.

The OCG Memorandum

As radiology providers and suppliers are aware, the healthcare industry is replete with sub-regulatory guidance. Such guidance includes, but is not limited to, CMS Manuals and coverage articles; National Coverage Determinations (NCDs); Local Coverage Determinations (LCDs); and Stark Law Advisory Opinions. Following Allina, the OGC was queried regarding the impact the case would have on future Medicare enforcement actions.

Accordingly, on October 31, 2019, the OGC issued its memorandum, which set forth CMS’s legal position regarding its ability to bring enforcement actions based on sub-regulatory guidance. In sum, the memorandum found that any policy that established or changed a substantive legal standard requiring notice-and-comment rulemaking under Allina, as opposed to a mere interpretation of an existing statutory or regulatory standard, could not serve as the basis for an enforcement action. As noted within the memorandum, “The critical question is whether the enforcement action could be brought absent the guidance document. If the answer is no, then the guidance document establishes a norm and, under Allina, is invalid unless issued through notice-and-comment rulemaking.” The memorandum provides the following examples:

  • Internet-Only Manuals (IOMs) and Preamble text. To the extent an IOM or preamble published with a final rule is closely tied to statutory or regulatory requirement (and thus serve only to interpret such requirement), an enforcement action based on such guidance can be brought. However, if the IOM or preamble is not closely tied to statutory or regulatory standards, the government cannot use violations of such guidance in enforcement actions.
  • Local Coverage Determinations (LCDs). LCDs reflect payment determinations of a specific Medicare Administrative Contractor and are not binding on HHS (to the contrary, NCDs are binding). Accordingly, it is the position of the OGC that LCDs do not establish or change substantive legal standards (and thus notice-and-comment is not required prior to their implementation). The memorandum notes that as a result of Allina, government enforcement actions based solely on LCDs are “generally unsupportable.” However, note that even if a guidance document may not serve as the basis for a Medicare enforcement action, the guidance document may be relevant for other purposes, such as to establish intent or materiality.
  • Stark Law Advisory Opinions. The OGC also advised that Stark Law Advisory Opinions generally do not establish or change a substantive legal standard, but instead aide in “demonstrating that the standards in the relevant statutory and regulatory requirements have been or have not been satisfied.”

Note that this new memorandum is in line with previous pronouncements issued by the United States Department of Justice (DOJ). In December 2019, the Justice Manual of the DOJ was revised to state that, “Criminal and civil enforcement actions brought by the Department must be based on violations of applicable legal requirements, not mere noncompliance with guidance documents issued by federal agencies, because guidance documents cannot by themselves create binding requirements that do not already exist by statute or regulation.”


 Radiology providers and suppliers that are faced with various Medicare enforcement actions should carefully examine the authorities upon which such action is based. If a Medicare enforcement action is initiated based on a policy that runs afoul of the Allina decision, the provider or supplier should challenge such reliance in defending itself against such action.

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

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.

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

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