Courting Healthcare Reimbursement Ambiguity

  • by: Peter Pitts |
  • 02/22/2024
When it comes to 21st-century medical progress are the Centers for Medicare and Medicaid Services (CMS) an accelerator or anchor for innovation? If the former, how can it do even better? If the latter, how big of a sea change is required?
Blaming CMS for every setback, frustration, or failure is neither factual nor helpful in working across the health care ecosystem to find new attitudes and pathways that can shine light on and address healthcare reimbursement roadblocks. However, for CMS to do a better job, we must advance the public health together as allies rather than adversaries. Don’t fix the blame, fix the problem. 

Problem #1 is regulatory ambiguity. As with many other areas of government policy, peculiar bureaucratic intervention and lack of clarity are causing harm to the entire healthcare ecosystem. Nowhere is this more evident than in the world of therapeutic use of tissue allografts – an exciting and evolving arena of 21st century medicine and one of the many areas of medical products regulated by the FDA. And, as with many other areas of the agency’s jurisdiction, peculiar bureaucratic intervention and lack of clarity are causing harm to patients and costing American jobs. To phrase it less politely, this small case is about a big issue -- whether it’s acceptable for the federal regulation of healthcare in America to be arbitrary and capricious.

The bad news is that, in a recent test case of the powers of the Chevron Deference Doctrine, the United States Court of Appeals for the District of Columbia Circuit thinks otherwise. In its February 14, 2024 decision in the case of Row 1 Inc. D/B/A Regenative Labs v. Xavier Becerra, Secretary of Health and Human Services, the Court affirmed dismissal of Regenative’s case against CMS.

This may seem like a small case of bureaucratic lassitude at best or over-reach at worst. It’s not. This small case is about a big issue -- whether it’s acceptable for the federal regulation of healthcare in America to be arbitrary and capricious where substantive actions are taken sub rosa rather than in view of the public eye, as Congress requires.

The particulars of the case are very geeky. (All the details can be found in the Appellant brief and this recording of the oral arguments held on October 6, 2023.)  The gist of the case is that CMS decided Uncle Sam wasn’t going to pay for a certain class of products, which includes Wharton's Jelly Tissue Allografts (human connective tissue used to repair, replace, or supplement missing, damaged, or non-properly functioning tissues, manufactured by Regenative Labs). The Court agrees. The Court is wrong and Regenative is considering petitioning for certiorari to the Supreme Court.

Why? Because CMS must use various on-the-books rules and guidances promulgated by the Food and Drug Administration. (“Promulgated,” is another one of those $50 words. It means, “formal proclamation or the declaration that a new statutory or administrative law is enacted after its final approval.”). The reason this is important, is that we’re not talking about vague or unwritten regulatory practice. We’re talking about what’s already on the books – literally the letter of the law. And feigning ignorance of the rules does not provide an excuse.

CMS’ approach in the Regenative case seeks to avoid any review at all and creates a two-tiered health system where people with money pay cash and get access to interventions that can help address serious and painful problems while Medicare patients suffer the consequences of arbitrary and capricious decisions by nameless, faceless government bureaucrats. Such behavior must not stand and Regenative should continue to stand up against agency overreach and denial of due process.

Advancing healthcare reimbursement policies through less formal and more regular conversations requires not fewer rules but new ones. And those rules must equally apply to everyone. New approaches require well-considered rules because, as Victor Hugo reminds us, “Where the disposal of time is surrendered merely to the chance of incidence, chaos will soon reign.” And, for patients, it’s a reign of terror.

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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