Opinion ID: 867899
Heading Depth: 3
Heading Rank: 1

Heading: CMS Acted Pursuant to a Lawful Regulation

Text: Fox claims there is an inconsistency between the statute and the regulation by comparing the language of the statute with the language of the regulation in effect at the time of the termination. Under the statutory scheme, when terminating a contract, CMS ordinarily must give reasonable notice, an opportunity for a hearing, and a chance to cure defects. 42 U.S.C. § 1395w-27(h)(1) (incorporated by 42 U.S.C. § 1395w-112(b)(3)(F)). CMS, however, is authorized to terminate a contract immediately if a delay “would pose an imminent and serious risk” to the health of plan enrollees. 42 U.S.C. § 1395w-27(h)(2). FOX INS. CO. V. CENTERS FOR MEDICARE/MEDICAID 17 The regulation implementing this statutory scheme, 42 C.F.R. § 423.509(a)(5), as it existed in 2010, authorized CMS to terminate a contract immediately in situations where the sponsor’s financial difficulties create a risk to health or the sponsor is not delivering services for other reasons that create a risk to health. The relevant regulatory language provides that CMS may terminate if the sponsor [e]xperiences financial difficulties so severe that its ability to provide necessary prescription drug coverage is impaired to the point of posing an imminent and serious risk to the health of its enrollees, or otherwise fails to make services available to the extent that a risk to health exists. 42 C.F.R. § 423.509(a)(5) (2008). In such situations, “[i]mmediate termination of [the] contract by CMS” is authorized. 42 C.F.R. § 423.509(b)(2) (2008). Fox’s argument, in comparing the statute with the regulation, focuses on the last phrase of the regulation that refers to “a risk to health.” The statute provides that CMS may terminate a contract immediately where delay “would pose an imminent and serious risk to the health of individuals enrolled.” 42 U.S.C. § 1395w-27(h)(2). According to Fox, because the last phrase of the regulation omitted the words “imminent and serious,” the regulation purported to give the agency power the statute does not: to terminate upon a finding of a risk to health, not a risk that is “imminent and serious” as provided in the statute. This, however, is not the way that the agency has interpreted or applied the regulation. CMS has explained that 18 FOX INS. CO. V. CENTERS FOR MEDICARE/MEDICAID it has interpreted the regulation’s reference to a “risk to health” as incorporating the statutory standard of “imminent and serious” risk as set forth in 42 U.S.C. § 1395w-27(h)(2) and in the preceding clause of the regulation. More important, this is the interpretation CMS actually used when it terminated Fox’s contract in this case. CMS, in its termination letter to Fox, said that Fox’s deficiencies “expose[d] Fox’s enrollees to imminent and serious risk to their health, thus warranting the immediate termination of Fox’s contract with CMS.” (emphasis added). The language of the disputed last phrase of the regulation has now been changed, perhaps as a result of this litigation, and now expressly contains the same words as the statute. The regulation thus now permits CMS to terminate a contract immediately where CMS determines that “a delay in termination . . . would pose an imminent and serious risk to the health of the individuals enrolled with the Part D plan sponsor,” or where the “plan sponsor experiences financial difficulties so severe that its ability to make necessary health services available is impaired to the point of posing an imminent and serious risk to the health of its enrollees, or otherwise fails to make services available to the extent that such a risk to health exists.” 42 C.F.R. § 423.509(b)(2)(i) (emphasis added). The key point for our purposes is that CMS’s interpretation of the regulation as it applied it in this case is fully consistent with the relevant statutory language. CMS told Fox its conduct exposed its enrollees to “imminent and serious risk.” 42 U.S.C. § 1395w-27(h)(2). Fox cannot legitimately complain that it is a victim of governmental overreaching. FOX INS. CO. V. CENTERS FOR MEDICARE/MEDICAID 19