The Court of Appeals for the District of Columbia Circuit recently considered HHS’s authority to enact a 2008 rule that prohibited physicians who lease equipment to a hospital from doing so on a “per-click basis” while referring patients to that hospital for procedures using the equipment. 73 Fed. Reg. 48434 (Aug. 19, 2008). The regulation banned leases that charged the hospital for each use of the equipment—also referred to as leases with “per-click” payments—and instead required monthly or yearly payments for the leases. The regulation was designed to prohibit potentially self-interested referrals under the Stark Law. On June 12, 2015, in its decision Council for Urological Interests v. Burwell, the D.C. Circuit ultimately held that the rule exceeds HHS’s statutory authority, and remanded the rule for HHS to further consider whether the regulation is consistent with congressional intent.
The challenge to the 2008 rule was brought by a group of joint ventures, principally owned by urologists, that lease laser technology to hospitals. The urologists had entered into agreements with a hospital whereby the hospital paid the joint venture for the equipment on a per-click basis. The D.C. Circuit reviewed HHS’s interpretation of the 2008 regulation under the two-step test in Chevron v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), first determining whether Congress directly spoke to the precise question at issue, and second determining whether HHS’s interpretation was based on a reasonable construction of the statute. The D.C. Circuit determined that the 2008 regulation meets the first step in Chevron and that the Stark Law expressly permits HHS to impose additional conditions on equipment rental agreements and does not necessarily forbid HHS from banning per-click leases. However, the court found that the regulation does not pass step two of the Chevron test because it is inconsistent with a 1993 House Conference Report that interpreted the Stark Law. Ultimately, the court remanded the proceedings to the district court for HHS to consider whether a per-click ban on equipment leases is consistent with the 1993 Conference Report and congressional intent.