Respondents Brief — Agendia, Inc., Petitioner v. Xavier Becerra, Secretary of Health and Human Services

No. 21-584

In the Supreme Court of the United States

AGENDIA, INC., PETITIONER

v.

XAVIER BECERRA,

SECRETARY OF HEALTH AND HUMAN SERVICES

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

ELIZABETH B. PRELOGAR

Solicitor General

Counsel of Record

BRIAN M. BOYNTON

Acting Assistant Attorney

General

MICHAEL S. RAAB

STEPHANIE R. MARCUS

Attorneys

Department of Justice

Washington, D.C. 20530-0001

SupremeCtBriefs@usdoj.gov

(202) 514-2217

QUESTIONS PRESENTED

Part B of the Medicare program, 42 U.S.C. 1395j et

seq., provides for payment to healthcare providers and

suppliers that furnish certain healthcare items and services for Part B enrollees. Congress has generally limited Part B coverage to items or services that are “reasonable and necessary for the diagnosis or treatment of

illness or injury.” 42 U.S.C. 1395y(a)(1)(A). Congress

has directed the Centers for Medicare & Medicaid Services (CMS) to administer Part B through contracts

with Medicare Administrative Contractors, which determine in the first instance whether an item or service in

a provider’s claim should be covered by applying regulations and national coverage determinations adopted by

CMS pursuant to statutory notice-and-comment procedures. 42 U.S.C. 1395u(a), 1395ff(f )(1)(B), 1395hh(a)(1)

and (2). If no regulation or national coverage determination applies to an item or service, an Administrative

Contractor may issue a local coverage determination

specifying how that Administrative Contractor will apply the statutory “reasonable and necessary” standard

to that item or service. 42 U.S.C. 1395ff(f )(2)(B). A local coverage determination does not bind CMS or other

Administrative Contractors. The questions presented

are as follows:

1. Whether an Administrative Contractor’s local

coverage determination must be adopted pursuant to

the statutory notice-and-comment requirements applicable to CMS’s Medicare regulations.

2. Whether an Administrative Contractor’s ability

to issue a local coverage determination explaining how

that Administrative Contractor will apply the statutory

standard for coverage represents an unconstitutional

delegation of regulatory authority to a private entity.

(I)

ADDITIONAL RELATED PROCEEDINGS

United States District Court (C.D. Cal.)

Agendia, Inc. v. Azar, No. 19-cv-74 (Oct. 29, 2019)

United States Court of Appeals (9th Cir.):

Agendia, Inc. v. Becerra, No. 19-56516 (July 16, 2021)

(II)

TABLE OF CONTENTS

Page

Opinions below .............................................................................. 1

Jurisdiction .................................................................................... 1

Statement ...................................................................................... 2

Argument..................................................................................... 14

Conclusion ................................................................................... 29

TABLE OF AUTHORITIES

Cases:

Allina Health Servs. v. Price,

863 F.3d 937 (D.C. Cir. 2017),

aff ’d, 139 S. Ct. 1804 (2019) .......................................... 11, 26

Association of Am. R.R. v. United States Dep’t of

Transp., 721 F.3d 666 (D.C. Cir. 2013),

vacated and remanded, 575 U.S. 43 (2015) ....................... 28

Azar v. Allina Health Servs.,

139 S. Ct. 1804 (2019) ................................................... 13, 25

Department of Transp. v. Association of Am. R.R.,

575 U.S. 43 (2015) ............................................................... 28

Erringer v. Thompson,

371 F.3d 625 (9th Cir. 2004) ............................. 10, 12, 16, 17

Maine Med. Ctr. v. Burwell,

841 F.3d 10 (1st Cir. 2016) ................................................... 2

Schweiker v. McClure, 456 U.S. 188 (1982) .......................... 2

Sunshine Anthracite Coal Co. v. Adkins,

310 U.S. 381 (1940)........................................................ 14, 27

Constitution, statutes, and regulations:

U.S. Const. Amend. V (Due Process Clause) ..................... 10

Administrative Procedure Act,

5 U.S.C. 551 et seq., 701 et seq. .......................................... 10

5 U.S.C. 553 ...................................................................... 10

(III)

IV

Statutes and regulations—Continued:

Page

Health Insurance for the Aged Act,

Pub. L. No. 89-97, Tit. I, Pt. 1, sec. 102(a),

§§ 1831 et seq., 79 Stat. 301-313

(42 U.S.C. 1395j et seq.) .................................................... 2

Medicare Prescription Drug, Improvement, and

Modernization Act of 2003, Pub. L. No. 108-173,

sec. 731(a)(1), § 1862, 117 Stat. 2350

(42 U.S.C. 1395y(l)(5)(A))..................................................... 7

Social Security Act, Tit. XVIII,

43 U.S.C. 1395 et seq. ........................................................ 2

Pt. A, 42 U.S.C. 1395c et seq. .................................. 2, 5, 11

Pt. B, 42 U.S.C. 1395j et seq. ................................. passim

42 U.S.C. 1395k(a)(2)(A)-(C)....................................... 2

42 U.S.C. 1395k(a)(2)(G) ............................................. 2

42 U.S.C. 1395m(a)(13)................................................ 2

42 U.S.C. 1395y(a)(1)(A) .................................. passim

42 U.S.C. 1395y(l) ........................................................ 4

42 U.S.C. 1395y(l)(1)-(2) .............................................. 5

42 U.S.C. 1395y(l)(3)(A) .................................... 4, 5, 20

42 U.S.C. 1395y(l)(3)(A)-(C) ..................................... 20

42 U.S.C. 1395y(l)(3)(B) ........................................ 4, 20

42 U.S.C. 1395y(l)(3)(C) .............................................. 5

42 U.S.C. 1395y(l)(4).................................................... 5

42 U.S.C. 1395y(l)(5).................................................. 20

42 U.S.C. 1395y(l)(5)(A) ........................................ 7, 20

42 U.S.C. 1395y(l)(5)(B) ........................................ 7, 21

42 U.S.C. 1395y(l)(5)(C) ........................................ 7, 21

42 U.S.C. 1395y(l)(5)(D) ............................................ 21

42 U.S.C. 1395u(a) ....................................................... 2

42 U.S.C. 1395x(s) ........................................................ 2

42 U.S.C. 1395ff(a) ....................................................... 3

V

Statutes and regulations—Continued:

Page

42 U.S.C. 1395ff(b)(1)(A) ............................................. 6

42 U.S.C. 1395ff(c)(3)(B)(ii)(I) .............................. 4, 19

42 U.S.C. 1395ff(c)(3)(B)(ii)(II) ............................ 6, 18

42 U.S.C. 1395ff(c)(3)(B)(ii)(III) .............................. 17

42 U.S.C. 1395ff (f )(1)(A)(ii) ........................................ 5

42 U.S.C. 1395ff (f)(1)(A)(iii)-(v).................................. 5

42 U.S.C. 1395ff (f )(1)(B) ............................................. 4

42 U.S.C. 1395ff (f)(2) ................................................... 5

42 U.S.C. 1395ff (f)(2)(A) ............................................. 6

42 U.S.C. 1395ff (f)(2)(B) ................................. 5, 16, 17

42 U.S.C. 1395ff (f)(5) ................................................... 5

42 U.S.C. 1395hh ............................................... passim

42 U.S.C. 1395hh(a) ................................................... 20

42 U.S.C. 1395hh(a)(1) .......................................... 3, 15

42 U.S.C. 1395hh(a)(2) ..................................... passim

42 U.S.C. 1395hh(a)(3) .............................................. 15

42 U.S.C. 1395hh(b) ............................................. 15, 20

42 U.S.C. 1395hh(b)(1) ................................................ 4

42 U.S.C. 1395hh(c) ................................................... 15

42 U.S.C. 1395kk-1(a)(1) ............................................. 2

42 U.S.C. 1395kk-1(a)(4) ............................................. 2

21st Century Cures Act, Pub. L. No. 114-255,

sec. 4009(a) 1862(l)(5), 130 Stat. 1185

(42 U.S.C. § 1395y(l)(5)(D)) ................................................. 7

1 C.F.R. 5.4(c) ........................................................................ 23

42 C.F.R.:

Pt. 405:

Section 405.920 ............................................................. 3

Section 405.940 ............................................................. 3

Section 405.960 ............................................................. 3

Section 405.968(b)(2) ....................................... 6, 18, 19

VI

Regulations—Continued:

Page

Section 405.968(b)(3) ................................................. 19

Section 405.1002 ........................................................... 3

Section 405.1060(a)(4)........................................ 4, 5, 19

Section 405.1062(a) .......................................... 6, 18, 19

Section 405.1062(b) ............................................... 6, 19

Section 405.1063(a) ...................................................... 3

Section 405.1100 ........................................................... 3

Section 405.1110(a) ...................................................... 3

Section 405.1110(b)-(e) ................................................ 3

Section 405.1136 ........................................................... 6

Pt. 426:

Section 426.400 et seq. ................................................. 6

Miscellaneous:

Centers for Medicaid & Medicare Services,

U.S. Dep’t of Health & Human Services,

MCD Search Results, https://go.usa.gov/xet6F

(last visited Dec. 22, 2021) .............................................. 24

H.R. Conf. Rep. No. 391, 108th Cong.,

1st Sess. (2003) ...................................................................... 7

In the Supreme Court of the United States

No. 21-584

AGENDIA, INC., PETITIONER

v.

XAVIER BECERRA,

SECRETARY OF HEALTH AND HUMAN SERVICES

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1-33)

is reported at 4 F.4th 896. The order of the district

court (Pet. App. 34-59) is reported at 420 F. Supp. 3d

985. The decision of the Medicare Appeals Council (Pet.

App. 60-84) is unreported.

JURISDICTION

The judgment of the court of appeals was entered on

July 16, 2021. A petition for rehearing was denied on

September 2, 2021 (Pet. App. 85-86). The petition for a

writ of certiorari was filed on October 19, 2021. The jurisdiction of this Court is invoked under 28 U.S.C.

1254(1).

(1)

2

STATEMENT

1. a. Part B of the Medicare program, established in

1965 by Title XVIII of the Social Security Act (Medicare

Act), see Health Insurance for the Aged Act, Pub. L. No.

89-97, Tit. I, Pt. 1, sec. 102(a), §§ 1831 et seq., 79 Stat.

301-313 (42 U.S.C. 1395j et seq.), provides for payment

by the federal government to healthcare providers and

suppliers who furnish covered items or services to Part

B enrollees. Part B covers a range of services and other

items, such as certain physician services, home health

services, outpatient physical therapy, durable medical

equipment, diagnostic tests, and related services. See

42 U.S.C. 1395k(a)(2)(A)-(C) and (G), 1395m(a)(13),

1395x(s). Congress has generally limited Part B (and

Part A) coverage, however, to services and items that are

“reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of

a malformed body member.” 42 U.S.C. 1395y(a)(1)(A).

The Centers for Medicare & Medicaid Services (CMS)

within the Department of Health and Human Services

(HHS) administers the Medicare program. See Maine

Med. Ctr. v. Burwell, 841 F.3d 10, 13-14 (1st Cir. 2016);

see also Schweiker v. McClure, 456 U.S. 188, 189 (1982).

Congress has specified that “[t]he administration of

[Part B] shall be conducted through contracts with

[M]edicare administrative contractors.” 42 U.S.C.

1395u(a). Congress has authorized CMS to “enter into

contracts with” Medicare Administrative Contractors

(Administrative Contractors) to perform a variety of functions, including processing claims presented by and making payment to providers and suppliers that have furnished items or services to Part B enrollees. 42 U.S.C.

1395kk-1(a)(1); see 42 U.S.C. 1395kk-1(a)(4). CMS has

3

entered such contracts with Administrative Contractors, which are assigned to process Part B claims in particular geographic regions.

Among other functions, Administrative Contractors

render initial determinations about whether Part B covers items or services for which payment is sought by (or

on behalf of ) a Part B enrollee. 42 U.S.C. 1395ff(a);

42 C.F.R. 405.920. If an Administrative Contractor denies

a claim, an individual beneficiary—or, as in this case, a

provider or supplier representing a beneficiary or presenting a claim assigned by a beneficiary—can appeal

that denial pursuant to a four-level scheme of administrative review: (1) redetermination by the Administrative

Contractor that made the decision, 42 C.F.R. 405.940;

(2) reconsideration by a different, independent contractor, 42 C.F.R. 405.960; (3) a hearing before an administrative law judge (ALJ), 42 C.F.R. 405.1002; and (4) an appeal

to the Medicare Appeals Council (Appeals Council),

42 C.F.R. 405.1100. In addition, “CMS or any of its contractors may refer a case to the [Appeals] Council,” and the

Council itself may review a determination on its own motion. 42 C.F.R. 405.1110(a); see 42 C.F.R. 405.1110(b)-(e).

b. In determining whether Medicare Part B covers

an item or service for which a supplier claims payment,

every adjudicator in the Part B claims-review process,

from an Administrative Contractor to the Appeals Council, is bound by the Medicare Act—including the provision limiting coverage to services and items that are

“reasonable and necessary,” 42 U.S.C. 1395y(a)(1)(A).

42 C.F.R. 405.1063(a). Those adjudicators also are

bound by CMS’s regulations, ibid., which the Medicare

Act expressly authorizes the agency to promulgate “as

may be necessary to carry out” the Medicare program.

42 U.S.C. 1395hh(a)(1). The Medicare Act requires such

4

regulations to be adopted pursuant to a specified noticeand-comment process, including publication of a proposed regulation in the Federal Register, followed by a

public comment period of at least 60 days. 42 U.S.C.

1395hh(b)(1). The Medicare Act generally makes such

regulations the exclusive means by which CMS may adopt

a “rule, requirement, or other statement of policy * * *

that establishes or changes a substantive legal standard

governing,” among other things, “the scope of benefits”

and “the payment for services.” 42 U.S.C. 1395hh(a)(2).

In addition to regulations, however, the Medicare

Act provides for two other mechanisms by which CMS

or its contractors may explain how they intend to apply

the statute and regulations to adjudication of claims for

particular items or services. First, CMS itself may issue “national coverage determination[s],” which identify on a nationwide basis whether particular items or services are covered. 42 U.S.C. 1395ff(f )(1)(B). Like CMS’s

regulations, national coverage determinations are binding

on all contractors and agency adjudicators. See 42 U.S.C.

1395ff(c)(3)(B)(ii)(I); 42 C.F.R. 405.1060(a)(4). Also like

regulations, the Medicare Act requires CMS to provide

advance public notice of national coverage determinations and to invite and consider public comment, but the

notice-and-comment procedures that Congress specified for national coverage determinations differ from

those applicable to regulations. See 42 U.S.C. 1395y(l).

Section 1395y(l) provides that CMS must post proposed

national coverage determinations on its website or make

them public by “other appropriate means,” and must provide for a 30-day public-comment period. 42 U.S.C.

1395y(l)(3)(A) and (B). That provision also requires

CMS to make public the factors it considers in deciding

whether to adopt national coverage determinations, to

5

respond to requests for national coverage determinations and render a final decision within specified periods,

and to consult with outside experts in certain circumstances. See 42 U.S.C. 1395y(l)(1)-(2), (3)(A), (C), and (4).

The Medicare Act expressly excludes national coverage

determinations from the requirement that CMS proceed

by regulation to “establish[ ] or change[ ] a substantive legal standard governing the scope of benefits, the payment

for services,” and certain other topics. 42 U.S.C.

1395hh(a)(2). The Medicare Act provides for administrative and judicial review of a national coverage determination, see 42 U.S.C. 1395ff(f)(1)(A)(iii)-(v) and (5), but a national coverage determination cannot be set aside on the

ground that it was not promulgated in the manner required for regulations, see 42 U.S.C. 1395ff(f )(1)(A)(ii).

Second, if no CMS regulation or national coverage

determination applies, an Administrative Contractor

may issue a “[l]ocal coverage determination.” 42 U.S.C.

1395ff(f)(2) (emphasis omitted). The Medicare Act defines a local coverage determination as a “determination

* * * respecting whether or not a particular item or

service is covered on an intermediary- or carrierwide basis under [Medicare Parts A and B], in accordance

with section 1395y(a)(1)(A).” 42 U.S.C. 1395ff(f )(2)(B), As

noted above, Section 1395y(a)(1)(A) is the provision limiting coverage to items and services that are “reasonable

and necessary.” 42 U.S.C. 1395y(a)(1)(A).

Unlike regulations and national coverage determinations, which are binding on the agency and all of its contractors, 42 C.F.R. 405.1060(a)(4), a local coverage determination binds only the specific Administrative Contractor (i.e., “intermediary”) that issued it. 42 U.S.C.

1395ff(f)(2)(B). If a party seeks reconsideration of an

6

Administrative Contractor’s claim determination (following a redetermination) by an independent contractor, the Administrative Contractor’s “local coverage determination * * * shall not be binding on [that] independent contractor,” but the independent contractor

“shall consider” it. 42 U.S.C. 1395ff(c)(3)(B)(ii)(II). And

CMS’s regulations expressly provide that “ALJs and attorney adjudicators and the [Appeals] Council are not

bound by [local coverage determinations].” 42 C.F.R.

405.1062(a). Instead, an independent contractor or an

agency adjudicator must give “substantial deference” to

an Administrative Contractor’s local coverage determinations in reviewing claims determined by that contractor, but the adjudicator may “decline[ ] to follow” a local

coverage determination “in a particular case,” so long

as the adjudicator “explain[s] the reasons why the [local

coverage determination] was not followed.” 42 C.F.R.

405.968(b)(2), 405.1062(b).

The Medicare Act also provides for administrative

and judicial review of a local coverage determination.

An aggrieved party—i.e., a beneficiary or the estate of

a beneficiary who is in need of coverage for an item or

service that was denied based on a local coverage

determination—may seek review before an ALJ, whose

decision can be reviewed by the Departmental Appeals

Board and, in turn, by a court. See 42 U.S.C.

1395ff(f)(2)(A); 42 C.F.R. 426.400 et seq. Although a

provider or supplier itself cannot directly challenge a

local coverage determination, it may argue in an appeal

from the denial of a particular claim for payment that

the local coverage determination should not be applied

in that specific case, see 42 U.S.C. 1395ff(b)(1)(A);

42 C.F.R. 405.1136, as petitioner did here, see Pet. App.

5-6.

7

In 2003, Congress directed the agency to “develop a

plan to evaluate new local coverage determinations to

determine which determinations should be adopted nationally and to what extent greater consistency can be

achieved among local coverage determinations.” Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, sec. 731(a)(1),

§ 1862, 117 Stat. 2350 (42 U.S.C. 1395y(l)(5)(A)). Congress instructed CMS to require that contractors in a

given area “consult” with one another “on all new local

coverage determinations within the area” and directed

the agency to “serve as a center to disseminate information on local coverage determinations” among its

contractors. Ibid. (42 U.S.C. 1395y(l)(5)(B) and (C));

see H.R. Conf. Rep. No. 391, 108th Cong., 1st Sess. 733

(2003).

In addition, in 2016—after the period covering the

claims at issue in this case—Congress specified procedures for Administrative Contractors to promulgate local coverage determinations. See 21st Century Cures

Act, Pub. L. No. 114-255, sec. 4009(a), § 1862(l )(5),

130 Stat. 1185 (42 U.S.C. § 1395y(l)(5)(D)). Those procedures require an Administrative Contractor to provide notice of the determination on its own website and

“on the Medicare Internet website, at least 45 days before the effective date” of that determination. Ibid. The

notice must include the determination itself, a statement of “[w]here and when the proposed determination

was first made public,” “[h]yperlinks to the proposed

determination and a response to comments,” “[a] summary of evidence that was considered,” and “[a]n explanation of the rationale that supports [the] determination.” Ibid.

8

2. a. Petitioner is a clinical laboratory that uses

methods of molecular diagnostic testing for breast cancer, known as the “MammoPrint,” “BluePrint” and

“TargetPrint” tests, and furnishes such tests to doctors.

Pet. App. 61; see id. at 5, 37. In 2011, the Administrative

Contractor for petitioner’s region at the relevant times

(Palmetto GBA) developed a Molecular Diagnostic Services Program (Molecular-Testing Program) “to identify and establish coverage and reimbursement for molecular diagnostic tests.” Pet. App. 37-38. Under that Program, Palmetto “request[ed] clinical information about a

test to determine if [the] test meets Medicare’s reasonable and necessary requirement.” Id. at 38.

Palmetto then issued Local Coverage Determination

L32288, which explained that Palmetto would not find a

molecular diagnostic test to be covered by Medicare

Part B unless the test either (i) was expressly covered

by a national coverage determination, another local coverage determination, or a Palmetto Coverage Policy Article, or (ii) had been approved through the MolecularTesting Program. Pet. App. 38. Palmetto considered

molecular diagnostic tests that satisfied none of those

criteria to be “investigational and not a covered service.” Ibid.

b. Between June 2012 and January 2013, petitioner

submitted claims for all three tests that it had provided

to patients. Pet. App. 61. The claims for petitioner’s

MammoPrint tests were covered and paid. Ibid. Palmetto denied petitioner’s claims for BluePrint, TargetPrint, or both tests that it provided to 86 patients. Id.

at 37-38. Those two tests were not covered by an existing national or local coverage determination or any Palmetto Coverage Policy Article; both had been reviewed

through Palmetto’s Molecular-Testing Program but

9

had not been approved. Id. at 38, 80. And a Palmetto

Policy Article indicated that there was “insufficient evidence to support” finding that petitioner’s BluePrint

test met the reasonable-and-necessary standard. Ibid.

c. After unsuccessfully seeking redetermination by

Palmetto, petitioner sought reconsideration by an independent contractor, which was also denied. C.A.

Supp. E.R. 36; see Pet. App. 38-39, 62-64 & n.3.

Petitioner requested a hearing before an ALJ, who

ruled for petitioner. Pet. App. 6, 65-68. The ALJ declined to defer to Local Coverage Determination

L32288. Instead, the ALJ reviewed medical literature

and testimony presented by petitioner and concluded

that they “offered evidence” that petitioner’s tests

“were medically reasonable and necessary,” and therefore were covered under Part B. Id. at 65 (citation omitted).

d. The Appeals Council, on its own motion, reviewed

the ALJ’s decision and reversed that decision. Pet.

App. 60-83. The Appeals Council held that the ALJ had

erred by failing to accord appropriate deference to Local Coverage Determination L32288. Id. at 80. The Appeals Council recognized that neither it nor the ALJ

was “bound by” that or any local coverage determination. Id. at 78. But it “f [ound] no reason to not apply

substantial deference” to that local coverage determination in the circumstances of this case. Id. at 81.

The Appeals Council explained that “[t]he purpose

of ” Palmetto’s Molecular-Testing Program “is specifically to analyze and review the analytical validity, clinical validity, and clinical utility of molecular diagnostic

tests.” Pet. App. 80. The Appeals Council observed

that the Program “is specialized for molecular diagnostic tests, considers applicable statutory and regulatory

10

requirements, and includes review of scientific literature by independent subject matter experts.” Ibid.

The Appeals Council explained that petitioner’s tests

had been reviewed through that specialized process—in

which petitioner “would have submitted all of the clinical studies available at the time”—and had been found

“to not have sufficient evidence” that the tests were

reasonable and necessary. Id. at 81.

3. Petitioner sought review in the district court,

which granted summary judgment to petitioner. Pet.

App. 34-59. The court rejected petitioner’s contention

that the development by Administrative Contractors of

local coverage determinations is an unconstitutional

delegation of regulatory authority to private entities in

violation of Due Process Clause of the Fifth Amendment. Id. at 45-49. The court also determined that Palmetto’s issuance of Local Coverage Determination

L32288 did not violate the notice-and-comment requirements of the Administrative Procedure Act (APA),

5 U.S.C. 551 et seq., 701 et seq., applicable to agency regulations, see 5 U.S.C. 553. The court explained that local coverage determinations are “interpretive” in nature because they “simply ‘interpret the reasonable and

necessary standard’ ” in the Medicare Act, and therefore are not subject to the APA’s requirements. Pet.

App. 52-53 (quoting Erringer v. Thompson, 371 F.3d

625, 631 (9th Cir. 2004)).

The district court concluded, however, that local coverage determinations were required, but had failed, to

comply with the Medicare Act’s own notice-and-comment

requirements, set forth in 42 U.S.C. 1395hh. Pet. App.

54-58. The court held that those requirements applied

to Local Coverage Determination L32288 because, in

the court’s view, that determination “established * * *

11

a substantive legal standard” about the coverage of particular services. Id. at 57 (citing Allina Health Servs. v.

Price, 863 F.3d 937 (D.C. Cir. 2017), aff ’d, 139 S. Ct.

1804 (2019) (emphasis omitted); see id. at 56-58. The

court acknowledged that local coverage determinations

are “not binding on the agency,” but noted that they do

bind the Administrative Contractors that issue them and

“are entitled to substantial deference in the administrative process.” Id. at 57.

4. The court of appeals reversed. Pet. App. 1-33.*

a. The court of appeals rejected petitioner’s contention that local coverage determinations are “subject to

the § 1395hh notice-and-comment process.” Pet. App.

9; see id. at 8-14. The court explained that “such determinations” fall outside Section 1395hh because they “do

not ‘establish[ ] or change[ ] a substantive legal standard.’ ” Id. at 9 (quoting 42 U.S.C. 1395hh(a)(2)) (brackets in original). The court found it unnecessary to “define

the outer boundaries of ‘substantive legal standard’ ” in

this case “because only one standard is potentially implicated here”: the Medicare Act’s requirement that “an

item or service must be ‘reasonable and necessary’ for a

provider to have a right to payment” under Part A or Part

B. Ibid. (quoting 42 U.S.C. 1395y(a)(1)(A)). The court

explained that “[a] local coverage determination does

not ‘establish[ ] or change[ ]’ that standard” but merely

“guides the application of that legal standard in a particular claim adjudication.” Ibid. (citations omitted;

second and third sets of brackets in original).

* The court of appeals construed petitioner’s constitutional argument as an alternative basis for affirmance, Pet. App. 7 n.3, which it

rejected, id. at 14-17; see p. 13-14, infra.

12

The court of appeals observed that a local coverage

determination “reflects [an Administrative Contractor’s] view of what qualifies as reasonable and necessary, and accordingly it controls that [Administrative

Contractor’s] claims determinations,” but it does not

bind other contractors or agency adjudicators. Pet.

App. 9; see id. at 9-10. The court noted that, if local coverage determinations “ ‘did not exist,’ ” the statutory

“reasonable and necessary standard would remain unaltered,” and Administrative Contractors “ ‘would still

have an overarching duty to deny claims for items and

services’ ” that fall short of that standard. Id. at 10 (quoting Erringer, 371 F.3d at 631).

The court of appeals further explained that “the

structure of the statute” reinforces that interpretation.

Pet. App. 10. The court noted that Congress has “created a special notice-and-comment process for national

coverage determinations” that is streamlined, requiring

drafts of those determinations to be posted online with

a 30-day comment period. Id. at 10-11. The court found

it incongruous to subject local coverage determinations

to “the more arduous,” “more demanding” “notice-andcomment process” under Section 1395hh, “from which

national coverage determinations are expressly exempt.” Id. at 11. The court noted the parties’ agreement

that local coverage determinations “have never undergone th[at] § 1395hh notice-and-comment process,” and

observed that petitioner’s position would “make[ ] all local coverage determinations invalid.” Id. at 8-9.

The court of appeals additionally observed that Congress’s 2016 amendment specifying procedures for the development of local coverage determinations—although

not retroactively applicable here—provided further ev-

13

idence that Section 1395hh’s procedures have never applied to local coverage determinations. Pet. App. 11 n.6.

The court explained that, in prescribing those new procedures, “Congress sought to ‘increase transparency’ in

the development of local coverage determinations,” indicating that such determinations were not already governed by Section 1395hh’s more demanding notice-andcomment requirements. Id. at 12 n.6 (citation omitted).

The court of appeals rejected petitioner’s contention

that this Court’s decision in Azar v. Allina Health Services, 139 S. Ct. 1804 (2019), compelled a contrary conclusion. Pet. App. 13. The court of appeals explained

that this Court in Allina had held “only that the § 1395hh

notice-and-comment process does not contain the same

exception for interpretative rules as does the [APA].”

Ibid. The court noted that Allina had “explicitly left

open” the argument that the government advanced in

this case: “ ‘that the policy at issue . . . didn’t “establis[h] or chang[e]” a substantive legal standard.’ ” Ibid.

(quoting Allina, 139 S. Ct. at 1816) (brackets in original).

The court of appeals also rejected petitioner’s contention that Section 1395hh(a)(2)’s express exclusion of

national coverage determinations implies that local coverage determinations are subject to that provision. Pet.

App. 14. The court observed that, “[b]ecause local coverage determinations clearly do not ‘establish[ ] or

change[ ] a substantive legal standard, there was no reason for Congress to exempt them from a requirement

that does not, by its plain terms, apply.” Ibid. (brackets

in original).

b. The court of appeals rejected petitioner’s separate contention that Administrative Contractors’ “ability to issue local coverage determinations reflects an unconstitutional delegation of regulatory power to private

14

entities.” Pet. App. 14; see id. at 14-17. The court explained that “[t]he statutory and regulatory scheme is

constitutional because the contractors ‘function subordinately’ to the Secretary.” Id. at 14 (quoting Sunshine

Anthracite Coal Co. v. Adkins, 310 U.S. 381, 399 (1940)).

The court observed that “[t]he Secretary retains the

relevant decision-making power” because the agency’s

adjudicators (ALJs and the Appeals Council) are not

bound by local coverage determinations, and they “can

refuse to apply” one so long as “they adequately explain

their reasons.” Id. at 15. In addition, the court noted,

the agency can “prescribe requirements for contractors

issuing local coverage determinations,” supersede them

by issuing national coverage determinations, and review a local coverage determination directly at the request of a Medicare beneficiary. Ibid.

c. District Judge Block, sitting by designation, dissented in part. Pet. App. 18-33. Judge Block agreed with

the majority’s rejection of petitioner’s constitutional

challenge to Administrative Contractors’ authority to issue local coverage determinations. Id. at 20. But he disagreed with the majority’s conclusion that local coverage

determinations are not subject to Section 1395hh’s

notice-and-comment requirements that govern regulations. Id. at 18-33. In Judge Block’s view, local coverage

determinations do “ ‘establish’ a standard at the initial

stage of review and ‘change’ the standards applied on appellate review.” Id. at 20 (citation omitted).

ARGUMENT

Petitioner contends (Pet. 15-19) that a local coverage

determination under Medicare Part B—in which a Medicare Administrative Contractor explains how it will apply the statutory reasonable-and-necessary standard in

its own adjudication of individual claims, and which bind

15

only that contractor—should be subject to the same

notice-and-comment procedures as CMS’s Medicare

regulations under 42 U.S.C. 1395hh. Petitioner further

contends (Pet. 19-23) that an Administrative Contractor’s ability to issue a local coverage determination is an

unconstitutional delegation of regulatory authority to a

private entity. The court of appeals correctly rejected

both contentions, and its decision does not conflict with

any decision of this Court or of another court of appeals.

Further review is not warranted.

1. The court of appeals determined that a local coverage determination issued by a Medicare Administrative Contractor is not subject to the rulemaking procedures set forth in Section 1395hh applicable to CMS’s

Medicare regulations. Pet. App. 8-14. That conclusion

is correct and does not warrant review.

a. Section 1395hh of the Medicare Act authorizes the

Secretary to issue regulations to administer the Medicare program, 42 U.S.C. 1395hh(a)(1), and it prescribes

the procedures by which the agency may do so, see

42 U.S.C. 1395hh(a)(3), (b), and (c). Section 1395hh generally makes those rulemaking procedures the exclusive avenue by which the agency may make certain determinations. Section 1395hh(a)(2) provides that “[n]o

rule, requirement, or other statement of policy (other

than a national coverage determination) that establishes or changes a substantive legal standard governing the scope of benefits, the payment for services,” or

certain other specified topics, “shall take effect unless

it is promulgated by the Secretary by regulation under

[Section 1395hh(a)(1)].” 42 U.S.C. 1395hh(a)(2). The

court of appeals correctly determined that Section

1395hh’s notice-and-comment rulemaking procedures

16

do not apply to a local coverage determination that embodies only the views of, and is binding only upon, the

particular Administrative Contractor that issued it.

A local coverage determination is not an agency

“rule, requirement, or other statement of policy” that

“establishes or changes a substantive legal standard.”

42 U.S.C. 1395hh(a)(2). The Medicare Act defines a local coverage determination as “a determination by a fiscal intermediary or a carrier under part A or part B, as

applicable, respecting whether or not a particular item

or service is covered on an intermediary- or carrierwide basis under such parts, in accordance with section

1395y(a)(1)(A).” 42 U.S.C. 1395ff(f )(2)(B). As the court

of appeals recognized, the cross-referenced statutory

provision itself supplies the relevant “ ‘substantive legal

standard’ ”: “an item or service must be ‘reasonable and

necessary’ for a provider to have a right to payment.’ ”

Pet. App. 9 (quoting 42 U.S.C. 1395y(a)(1)(A)). “A local

coverage determination does not,” and cannot, “ ‘establish[ ] or change[ ]’ that standard”; it merely “guides the

application of that standard” by the Medicare Administrative Contractor that issued the determination when

it adjudicates a claim involving that item or service.

Ibid. (citation omitted; brackets in original). By issuing

a local coverage determination, an Administrative Contractor simply articulates its “view of what qualifies as

reasonable and necessary.” Ibid.

As the court of appeals additionally observed, that

“understanding of the effect of local coverage determinations” is confirmed by considering how claims adjudications would proceed “if such determinations ‘did not

exist.’ ” Pet. App. 10 (quoting Erringer v. Thompson,

371 F.3d 625, 631 (9th Cir. 2004)). “[I]f local coverage

17

determinations ceased to exist,” Administrative Contractors “would still have an overarching duty to deny

claims for items and services that are not ‘reasonable

and necessary.’ ” Ibid. (quoting Erringer, 371 F.3d at 631,

in turn quoting 42 U.S.C. 1395y(a)(1)(A)). And Administrative Contractors would bring their own judgment to

bear in determining whether an item or service satisfies

that statutory standard in the context of an individual

claim adjudication. Cf. 42 U.S.C. 1395ff(c)(3)(B)(ii)(III)

(providing that, “[i]n the absence of * * * a national

coverage determination or local coverage determination,” an independent contractor conducting reconsideration “shall make a decision with respect to the reconsideration based on applicable information, including

clinical experience and medical, technical, and scientific

evidence”). Petitioner does not suggest that an Administrative Contractor’s reasoning in determining in such

an adjudication whether an item or service is reasonable

and necessary itself constitutes a “rule, requirement, or

other statement of policy * * * that establishes or

changes a substantive legal standard governing” a topic

listed in Section 1395hh(a)(2) that must be promulgated

pursuant to that provision’s notice-and-comment procedure. 42 U.S.C. 1395hh(a)(2). The same conclusion follows for local coverage determinations, which merely

provide advance notice of a contractor’s views that it will

apply in individual cases, enhancing the transparency,

predictability, and consistency of its adjudications.

Moreover, although an Administrative Contractor

that has issued a local coverage determination is bound

to apply it while the determination remains in effect, no

other adjudicator is bound by it. Because local coverage

determinations by definition apply on an “intermediaryor carrier-wide basis,” 42 U.S.C. 1395ff(f)(2)(B), they do

18

not apply to claims adjudicated by other Administrative

Contractors. And even on review of a claim adjudication

made by the Administrative Contractor that issued a local coverage determination, the determination does not

bind the agency or third-party adjudicators. Congress

has specified that a local coverage determination “shall

not be binding” on an independent contractor conducting reconsideration of an Administrative Contractor’s

decision. 42 U.S.C. 1395ff(c)(3)(B)(ii)(II); see 42 C.F.R.

405.968(b)(2). And CMS’s regulations confirm that

“ALJs and attorney adjudicators and the [Appeals]

Council are not bound by [local coverage determinations].” 42 C.F.R. 405.1062(a). An individual contractor’s statement of how it will apply the statutory

reasonable-and-necessary standard in adjudicating a

claim in the first instance, which every adjudicator at

all subsequent levels of review can decline to apply, does

not “establish[ ] or change[ ] a substantive legal standard

governing the scope of benefits, the payment for services,” or other topics specified in Section 1395hh(a)(2).

42 U.S.C. 1395hh(a)(2).

Petitioner errs in contending (Pet. 19) that a local

coverage determination issued by a particular Administrative Contractor does establish or change a substantive legal standard because other adjudicators must accord the determination “deference.” To be sure, Congress has directed independent contractors to “consider

[a] local coverage determination” when conducting reconsideration of an Administrative Contractor’s decision.

42 U.S.C. 1395ff(c)(3)(B)(ii)(II). And CMS’s regulations direct independent contractors, ALJs, and the Appeals Council to accord “substantial deference” to local

coverage determinations at later stages of review.

19

42 C.F.R. 405.968(b)(2), 405.1062(a). But at the same

time the regulations make clear that each of those subsequent adjudicators may “disregard” and “decline[ ] to

follow” a local coverage determination, so long as they

“explain the reasons why the [local coverage determination] was not followed.” 42 C.F.R. 405.1062(b); see

42 C.F.R. 405.968(b)(2) and (3). That a subsequent adjudicator must give a local coverage determination appropriate consideration does not transform the determination into a binding legal standard, especially where

that adjudicator is free to reject the determination.

Indeed, as the court of appeals noted, “[t]he ALJ reviewing [petitioner’s] claims did precisely that.” Pet.

App. 15 n.7; see id. at 65-68. Although the Appeals

Council “ultimately concluded that the ALJ’s reasoning

was unpersuasive,” id. at 15 n.7, it recognized that it and

the ALJ “are not bound by [local coverage determinations],” id. at 78. The Appeals Council simply “f [ound]

no reason to not apply substantial deference to” Palmetto’s Local Coverage Determination L32288 “or to

question the [Molecular-Testing Program’s] findings”

with respect to petitioner’s particular tests. Id. at 80.

b. The statutory structure and history strongly reinforce the conclusion that local coverage determinations are not subject to Section 1395hh’s rulemaking

procedures. Pet. App. 10-11 & n.6.

As the court of appeals observed, Congress has expressly excluded national coverage determinations—

which are issued by CMS itself, are binding on all contractors and agency adjudicators, and apply nationwide, see

42 U.S.C. 1395ff(c)(3)(B)(ii)(I); 42 C.F.R. 405.1060(a)(4)—

from Section 1395hh’s rulemaking procedures, and instead subjected them to a less formalized, more streamlined public-comment process. Pet. App. 10-11; see

20

42 U.S.C. 1395y(l )(3)(A) and (B), 1395hh(a)(2). In contrast to Section 1395hh’s procedures—which entail publication in the Federal Register, a 60-day comment period,

and adherence to a predetermined regulatory timeline developed in ongoing consultation with the Office of Management and Budget, 42 U.S.C. 1395hh(a) and (b)—

Congress provided for CMS to post draft national coverage determinations on its website (or make them available

by “other appropriate means”), allow 30 days for public

comment, and issue a decision addressing comments received, see 42 U.S.C. 1395y(l)(3)(A)-(C). Given Congress’s

decision to exclude national coverage determinations

from the Section 1395hh rulemaking protocol applicable

to regulations and instead to craft a more streamlined

procedure for such determinations, it is implausible that

Congress intended to subject local coverage determinations to Section 1395hh’s “more demanding procedure

than their national, binding counterparts.” Pet. App. 11.

Other provisions of the Medicare Act enacted in 2003

bolster that conclusion. Section 1395y(l)(5)(A) directs

CMS to “develop a plan to evaluate new local coverage

determinations to determine which determinations

should be adopted nationally,” i.e., to become national

coverage determinations. 42 U.S.C. 1395y(l )(5)(A); see

p. 7, supra. It would be incongruous to require more

formalized rulemaking procedures for local coverage

determinations that serve as the raw material for future

national coverage determinations than for national coverage determinations themselves.

In addition, the next two subparagraphs of Section

1395y(l)(5) direct CMS to require its contractors

“providing services within the same area to consult on

all new local coverage determinations within the area,”

and instruct CMS to “serve as a center to disseminate

21

information on local coverage determinations among

[contractors] to reduce duplication of effort.” 42 U.S.C.

1395y(l )(5)(B) and (C). If local coverage determinations

were already subject to Section 1395hh’s rulemaking

procedures, as petitioner contends (e.g., Pet. 19), those

additional provisions would be perplexing. Section

1395hh’s notice-and-comment process, including publication of proposed and final rules in the Federal Register, would render unnecessary those provisions calling

for coordination among contractors at the local or regional level and for CMS to serve as a clearinghouse for

information. Under the court of appeals’ interpretation,

in contrast, those provisions make perfect sense.

Similarly, Congress’s enactment in 2016 of a specific

process for Administrative Contractors to follow in

promulgating local coverage determinations reinforces

the conclusion that local coverage determinations have

never been subject to Section 1395hh’s more formalized

approach. See 42 U.S.C. 1395y(l)(5)(D). That process for

local coverage determinations differs starkly from Section

1395hh’s more formalized approach, and it is even more

streamlined than the procedure Congress crafted for national coverage determinations. An Administrative Contractor must post a local coverage determination on the

Internet at least 45 days before it takes effect, along

with information about where and when the proposed

determination was made public, a response to comments, and the evidence and rationale on which it is

based. Ibid.; see p. 7, supra.

As the court of appeals recognized, although that 2016

amendment postdated and does not apply to the claims

here, it strongly indicates that local coverage determinations are not and have never been subject to Section

1395hh’s more rigorous rulemaking procedures. Pet.

22

App. 11 n.6. The 2016 “amendment is part of a pattern of

congressional actions adding procedural requirements

for local coverage determinations,” which “suggests that

Congress passed the 2016 amendment with the understanding that local coverage determinations were not subject to any notice-and-comment requirements under the

pre-amendment regime.” Id. at 12 n.6. No sound basis

exists to conclude that Congress enacted that amendment

to reduce procedural requirements, which would be at

odds with Congress’s purposes of increasing accountability and transparency. Ibid. Moreover, if Congress had

viewed local coverage determinations as previously covered by Section 1395hh(a)(2) and intended the 2016

amendment to remove them from that provision, Congress

presumably would have amended Section 1395hh(a)(2) to

exclude local coverage determinations expressly—as it

has done for national coverage determinations—rather

than remove them from its scope by oblique implication.

Ibid. The far more plausible explanation is that Congress in 2016 accurately perceived that the Medicare Act

did not specify particular procedures for adopting local

coverage determinations and amended the statute to establish such procedures—and that, in keeping with the

nature of local coverage determinations as the work of

individual contractors and not binding on other adjudicators, Congress fashioned a correspondingly less formal

process to be undertaken by the contractor, not CMS.

Petitioner contended below that, given the express

exclusion of national coverage determinations in Section 1395hh(a)(2), the omission of a similar express exclusion of local coverage determinations shows that

they are covered by that provision. Pet. App. 14. The

dissenting opinion below embraced that argument. See

id. at 24-26. As the court of appeals majority explained,

23

however, that omission is unremarkable. Id. at 14. Local coverage determinations do not fall within the category of agency actions that Section 1395hh(a)(2) identifies in the first place, because they “clearly do not ‘establish[ ] or change[ ]’ a substantive legal standard.”

Ibid. And “there was no reason for Congress to exempt” local coverage determinations “from a requirement that does not, by its plain terms, apply.” Ibid.

Moreover, when Section 1395hh(a)(2) was enacted in

1987, the Medicare Act did not refer directly to local

coverage determinations at all. It is especially unsurprising that Congress did not find it necessary to state

expressly that a type of contractor determination not

mentioned elsewhere in the statute, and that does not

satisfy Section 1395hh(a)(2)’s criteria, is not covered.

c. The practical implications of petitioner’s contrary

approach further support the conclusion that the court of

appeals’ interpretation is sound. Requiring publication

in the Federal Register of each proposed local coverage

determination by each individual Administrative Contractor, and inviting input from the nationwide public at

large, would needlessly complicate and render more burdensome an already-complex process. That approach

also might create the misimpression that local coverage

determinations embody CMS’s official position rather

than the non-binding view of a single contractor. Cf.

1 C.F.R. 5.4(c) (“The Director of the Federal Register

may not accept any document for filing and publication

unless it is the official action of the agency concerned.”).

Difficulties would arise, moreover, if multiple Administrative Contractors were to propose inconsistent local

coverage determinations on the same item or service.

The interpretation adopted by the district court,

which petitioner defended in the court of appeals, would

24

compound those difficulties. The district court posited

that the procedures enacted in 2016 for adopting local

coverage determinations and the rulemaking procedures in Section 1395hh are not mutually exclusive, but

complementary, and that Congress intended to require

an Administrative Contractor to “comply with both

§ 1395hh and § 1395y.” Pet. App. 56; see id. at 55-56.

Petitioner endorsed that interpretation below. Pet.

C.A. Br. 15 (“[T]he district court correctly held that the

promulgation process of Section 1395hh and the new processes specific to [local coverage determinations] are not

mutually exclusive and each must be followed.”). That

approach would subject local coverage determinations

going forward to two separate notice-and-comment processes, with different timelines and procedures. Neither petitioner nor the district court has identified any

reason why Congress would adopt those duplicative,

conflicting processes for local coverage determinations.

Finally, as the court of appeals noted, it is common

ground that “local coverage determinations have never

undergone the § 1395hh notice-and-comment process.”

Pet. App. 8. Petitioner’s position “that this procedural

error makes all local coverage determinations invalid,”

id. at 8-9, would call into question approximately one thousand such determinations currently in force. See CMS,

HHS, MCD Search Results, https://go.usa.gov/xet6F.

Adopting petitioner’s position thus could result in substantial disruption of the Medicare payment process.

d. Petitioner does not contend that the court of appeals’ determination that local coverage determinations

are not subject to Section 1395hh’s notice-and-comment

rulemaking process directly conflicts with any decision

of this Court or of another court of appeals. Petitioner

suggests (Pet. 17-18) that the decision below is in tension

25

with this Court’s decision in Azar v. Allina Health Services, 139 S. Ct. 1804 (2019). That is incorrect.

Allina held that Section 1395hh, unlike the APA, does

not include an exception for interpretive rules. 139 S. Ct.

at 1810-1816. The Court determined that the CMS policy

at issue in that case was invalid because it had not been

promulgated in accordance with Section 1395hh’s procedures. See id. at 1816-1817. But as the court of appeals

observed, Pet. App. 13-14, and as petitioner acknowledges, the Allina Court expressly reserved judgment on

an argument that the government did not advance in that

case: that the policy did not “ ‘establish or change’ a substantive legal standard—and so didn’t require notice and

comment under § 1395hh(a)(2)—because the statute itself ” supplied the relevant standard. 139 S. Ct. at 1816

(brackets omitted); see Pet. 17 (“The panel majority correctly states that this Court explicitly left open [that] line

of argument,” which “HHS could have made in Allina.”).

As the court of appeals explained, the government did advance that argument in this case, and “that argument carries the day.” Pet. App. 14. Moreover, the court found it

unnecessary in this case “to define the outer boundaries

of ‘substantive legal standard’ ” within the meaning of Section 1395hh(a)(2) because the court determined that the

Medicare Act itself supplies the only standard that is “potentially implicated”: the reasonable-and-necessary requirement set forth in Section 1395y(a)(1)(A). Id. at 9.

Petitioner disagrees (Pet. 18) with the court of appeals’ conclusion that Section 1395y(a)(1)(A), not a local

coverage determination, establishes the relevant legal

standard. The court of appeals’ conclusion is correct for

the reasons explained above. In any event, petitioners’

disagreement on that point does not implicate Allina,

which expressly reserved judgment on the issue.

26

Petitioner also suggests (Pet. 15-17) that tension exists between the decision below and the reasoning of the

D.C. Circuit in the decision affirmed in Allina. See Allina Health Servs. v. Price, 863 F.3d 937 (D.C. Cir.

2017), aff ’d, 139 S. Ct. 1804 (2019). That contention does

not warrant review. In Allina, as noted, the government did not argue that the statute, not the agency’s

policy at issue there, supplied the substantive legal

standard. The D.C. Circuit thus had no occasion to address that issue.

Petitioner nevertheless asserts (Pet. 16-17) that “it

is reasonable to assume” that the D.C. Circuit would

conclude that a local coverage determination does establish or change a legal standard and so is “required to

have been issued as a regulation under Section 1395hh.”

Petitioner relies on the D.C. Circuit’s definition of a

“substantive legal standard” as “includ[ing] a standard

that creates, defines[,] and regulates the rights, duties,

and powers of parties.” Pet. 16 (emphasis omitted); see

Allina, 863 F.3d at 943. But that definition would not

encompass a local coverage determination for the reasons set out above: such a determination does not create, define, or regulate a provider’s entitlement to receive and CMS’s duty to make payment (through its

contractors). A local coverage determination embodies

only the first-line adjudicator’s view of how the statutory standard applies—a view that subsequent adjudicators in the same proceeding are free to reject. See

pp. 15-19, supra.

Petitioner’s effort (Pet. 16) to analogize a local coverage determination to the agency policy at issue in Allina also fails. That policy was one made by the agency

itself and, as petitioner acknowledges (ibid.), was binding on all contractors. See Allina, 863 F.3d at 943. A

27

local coverage determination is adopted by an individual

contractor and binds no other adjudicator. See pp.

15-19, supra. Further review is not warranted.

2. The court of appeals unanimously rejected petitioner’s separate contention that an Administrative

Contractor’s ability to develop local coverage determinations represents an unconstitutional delegation of

regulatory authority to a private entity. Pet. App.

14-17; id. at 20 (Block, J., dissenting). That conclusion

is also correct and does not warrant further review.

a. As explained above, local coverage determinations do not establish or modify substantive legal standards, but merely provide advance notice of how a particular contractor will apply the statutory reasonableand-necessary standard in its initial review of claims.

See pp. 15-19, supra. Petitioner’s argument (Pet. 19-20)

that local coverage determinations embody an exercise

of substantial regulatory power to prescribe Medicare

payment policies fails for many of the same reasons as

its contention that they are subject to Section 1395hh.

In any event, as the court of appeals recognized, Administrative Contractors that issue local coverage determinations “function subordinately” to the Secretary.

Pet. App. 14 (quoting Sunshine Anthracite Coal Co. v.

Adkins, 310 U.S. 381, 399 (1940)). Because the agency

“has authority and surveillance over the activities” of

the contractors and makes the final determination, the

“statutory scheme is unquestionably valid.” Sunshine

Anthracite Coal, 310 U.S. at 399. As the court explained,

CMS can review a local coverage determination directly

at the request of an aggrieved Medicare beneficiary.

Pet. App. 15. And although in an appeal by a provider or

supplier, the agency’s adjudicators accord deference to a

local coverage determination, those adjudicators are free

28

to reject such a determination so long as they adequately

explain their reasons. Ibid. Moreover, CMS can “prescribe requirements for contractors issuing local coverage determinations” or countermand them by issuing national coverage determinations. Ibid.

b. Petitioner does not identify any decision of this

Court or of another court of appeals that conflicts with

the court of appeals’ rejection of petitioner’s constitutional challenge to local coverage determinations. Petitioner asserts (Pet. 21) that the D.C. Circuit in Association of American Railroads v. United States Department of Transportation, 721 F.3d 666 (2013), held invalid a “delegation of regulatory power to a private entity.” But this Court vacated the decision in that case,

holding that the entity at issue (Amtrak) “is a governmental entity, not a private one, for purposes of determining the constitutional issues.” Department of

Transp. v. Association of Am. R.R., 575 U.S. 43, 55

(2015); see id. at 55-56; Pet. 22. Moreover, the D.C. Circuit concluded that the statute at issue “empower[ed]

private parties to wield regulatory authority.” Association of Am. R.R., 721 F.3d at 670-671. The statutory

framework enabling Administrative Contractors to issue

local coverage determinations does not confer such authority. See pp. 15-19, 27, supra. Further review is not

warranted.

29

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

ELIZABETH B. PRELOGAR

Solicitor General

BRIAN M. BOYNTON

Acting Assistant Attorney

General

MICHAEL S. RAAB

STEPHANIE R. MARCUS

Attorneys

DECEMBER 2021