CMS Internal Memorandum Explains Allina’s Impact on Enforcement

Kelly Cleary, the Deputy General Counsel and Chief Legal Officers at CMS, recently issued an internal HHS memorandum clarifying that the recent Supreme Court ruling in Allina may limit HHS’s enforcement practices.  Consistent with Allina, the memo clarifies that subregulatory guidance issued without notice-and-comment rulemaking may not be used as the sole basis for an enforcement action when it creates or changes a substantive legal standard.

The CMS memorandum references Allina and notes that CMS payment rules often form the basis for enforcement actions. It also acknowledges that guidance and policies promulgated without notice-and-comment rulemaking procedures may not be documents upon which the Agency can predicate enforcement actions.  The memorandum specifically points to Internet-Only Manuals and preamble text published with final rules, both commonly cited in enforcement actions.  It explains that, to the extent that these texts are closely tied to existing statutory or regularity requirements, they can be relevant in enforcement actions; in that case, because such subregulatory guidance does not substantively establish or change a legal standard, it satisfies Allina because it merely aids in the evaluation of whether parties have failed to meet the statutory or regulatory requirements.  But, where such manuals and guidance issued without notice-and-comment set forth payment rules that are not closely tied to statutory or regularity language, the memorandum warns that they are not validly issued under Allina and therefore cannot be used as the sole basis for enforcement. Thus, the critical question is whether the enforcement action can be brought absent the guidance document.  This is consistent with a recent decision from the Eastern District of Pennsylvania, which held that similar guidance that was not passed through notice and comment cannot serve as a basis for False Claims Act liability.  

December 6, 2019