Supreme Court to Review Kavanaugh Opinion on Hospital Payments

(Bloomberg) -- The U.S. Supreme Court will hear a Trump administration appeal that aims to slash as much as $4 billion in Medicare payments to mostly nonprofit hospitals, agreeing to review a ruling written by high court nominee Brett Kavanaugh.

At issue is an effort started when Barack Obama was president to change the formula for reimbursing hospitals that serve a disproportionate number of low-income patients. Kavanaugh was part of a three-judge panel that said the Department of Health and Human Services couldn’t change the formula without a formal period for public comment.

The court acted Thursday in advance of the formal start of its new term on Monday.

In its appeal, the administration said the Kavanaugh-written ruling "threatens to undermine HHS’s ability to administer the Medicare program in a workable manner."

A group of nonprofit hospitals led by Allina Health Services is challenging the change. The group says a comment period is "critically important for determining and meaningfully considering the true impact."

Kavanaugh almost certainly won’t take part at the Supreme Court even if he overcomes allegations of sexual misconduct to win Senate confirmation. Justices routinely disqualify themselves from cases if they played a role at the lower court level.

Although the Trump administration says the case will affect $3 billion to $4 billion in funding from 2005 to 2013, the issue before the high court has limited future significance. HHS adopted the new formula going forward in 2013 after going through a formal notice-and-comment period.

The dispute turns on the method for determining the percentage of low-income Medicare patients treated by a hospital. In ruling against the government, Kavanaugh pointed to a provision in the U.S. Medicare Act requiring a notice-and-comment period for a change in a "substantive legal standard."

The case is Azar v. Allina Health Services, 17-1484.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, Laurie Asséo, Justin Blum

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