Complexities of Administrative State Lead to Win for Regulated Community


Caring Hearts Personal Home Serv., Inc. v. Burwell, a U.S. Court of Appeals for the Tenth Circuit Medicare reimbursement case, describes the challenges confronting federal administrative agencies and the regulated community at a time when the demands on and the growth of government are somewhat astonishing. Judge Gorsuch begins his opinion as follows:

“Executive agencies today are permitted not only to enforce legislation but to revise and reshape it through the exercise of so-called ‘delegated’ legislative authority… The number of formal rules these agencies have issued thanks to their delegated authority has grown so exuberantly it’s hard to keep up. The Code of Federal Regulations now clocks in at over 175,000 pages. And no one seems sure how many more hundreds of thousands (or maybe millions) of pages of less formal or ‘sub-regulatory’ policy manuals, directives, and the like might be found floating around these days. For some, all this delegated legislative activity by the executive branch raises interesting questions about the separation of powers… For others, it raises troubling questions about due process and fair notice—questions like whether and how people can be fairly expected to keep pace with and conform their conduct to all of this churning and changing ‘law’… But what happens if we reach the point where even these legislating agencies don’t know what their own ‘law’ is?”

According to the Court, the Centers for Medicare and Medicaid Services (CMS) estimates that it issues literally thousands of new or revised guidance documents every single year which constitutes the guidance that health care providers must follow with exacting precision to be reimbursed by the government for their services. Indeed, there is so much “law” the CMS administers that the agency, concludes the Court, is confused by its own law. Here, the Court finds that the CMS was seeking reimbursement from Caring Hearts for $800,000 on the basis of rules that were not even promulgated in 2008, when the services were provided, and the CMS was unaware of this until this case was litigated. Moreover, the rule the CMS cites as authority in 2014, when this matter was first brought to Court, not only did not exist in 2008, but does not exist today—which the Court suggests may have been to an erroneous initial citation to authority. Because of this, the Court concludes that “an agency that loses track of its own controlling regulations and applies the wrong rules in order to penalize private citizens can never stand.” The Court also suggests that Caring Heart may have a very good case to recoup its legal expenses pursuant to the Equal Access to Justice Act.