In late December 2017, the U.S. Court of Appeals for the District of Columbia Circuit issued two significant administrative law decisions in the cases of Safari Club Int’l and Nat’l Rifle Assoc. of Am. v. Zinke (decided December 22, 2017) and Clarian Health West, LLC, v. Hargan (decided December 26, 2017). The unanimous rulings in both cases were written by Senior Circuit Judge Edwards, and involved the application of the procedural strictures of the Administrative Procedure Act (APA) to actions taken by two very different departments: The Department of the Interior and the Department of Health and Human Services.
In the Safari Club Int’l case, one of the issues was whether certain “enhancement findings” made by the U.S. Fish and Wildlife Service (Service) pursuant to its authority under the Endangered Species Act (ESA) regarding the controlled importation of African elephant trophies were “rules” subject to the APA’s notice and comment provisions. Whether such trophies can be lawfully be imported depends on whether the killing of these threatened species redounds to the survival of the species. Depending on the evidence submitted to the Service, the importation of such trophies may or may not be permitted.
In 2014 and 2015, the Service concluded that the evidence showed that the numbers of these threatened species were declining, and its enhancement findings precluding importation were made and implemented, without first proceeding through the APA’s notice and comment procedures. Judge Edwards’ opinion reversed the U.S. District Court for the District of Columbia, and held that in this instance, these enhancement findings were rules subject to the APA because they were forward looking and had a general application; contrary to the District Court, they were not the result of an individual “adjudication” which is not subject to the APA. The case was remanded to the District Court, which was instructed to have the Service initiate appropriate rulemaking proceedings.
A few days later, the Court of Appeals released its opinion in the Clarian Health West matter. This is a complex Medicare hospital reimbursement case, and the issue was whether the decision of the U.S. Department of Health and Human Services Department (HHS) to set forth certain reimbursement policies in the HSS’s Medicare Claims Processing Manual (Manual) should have been subject to the APA; these policies were not preceded by any notice and comment. The District Court held that the development of these policies was subject to both the APA and the special procedures of the Medicare Act, and ruled in favor of the hospital, which is located in Avon, IN.
The hospital was determined by the Provider Reimbursement Review Board to be eligible to receive only $700,000 and not $2.8 million in so-called outlier payments. Believing the Manual’s reimbursement policies employed by the HSS Review Board were illegal in that they were not subject to notice and comment, the hospital challenged the application of these policies in the District Court and the District Court agreed. On appeal, the Court of Appeals held that these policies were simply “general statements of policy,” setting forth HSS’s enforcement priorities and “have no binding legal effect.” The District Court’s ruling on the APA issue was reversed, with the Court of Appeals also noting that this holding does not preclude any future challenge in later enforcement proceedings the HHS may commence.