The Federal Circuit issued its opinion earlier this month in Metropolitan Area EMS Authority v. Secretary of Veterans Affairs, a veterans case we have been following because it attracted an amicus brief. In this case, the Federal Circuit reviewed a rule promulgated by the Secretary of Veterans Affairs that permitted VA to pay the lesser of the actual charge or the Medicare fee schedule (MFS) amount for all non-contract ground and air ambulance transports. The petitioners in this case sought review of this rule. In an opinion authored by Judge Stoll and joined by Judges Lourie and Stark, the Federal Circuit granted the petition and set aside the rule as not in accordance with law given the governing statute. This is our opinion summary.
Judge Stoll began by outlining the procedural and factual background of the case:
Congress has enacted an independent statutory regime for the coverage and payment of veterans’ healthcare benefits via Title 38 of the United States Code. This coverage and payment regime includes 38 U.S.C. § 1728 . . . and . . . § 111 . . . which in relevant part relate to ambulance services for VA beneficiaries. Pursuant to § 1728, the Secretary of the VA reimburses or makes direct payments for veterans with service-connected conditions for certain emergency medical expenses. Section 1728(a) incorporates § 111, which gives the Secretary discretionary authority to pay for certain travel expenses incurred by eligible beneficiaries for medical purposes like examination, treatment, or care. The provisions from § 111 most relevant here include: (a) Under regulations prescribed by the President pursuant to the provisions of this section, the Secretary may pay the actual necessary expense of travel . . . of any person to or from a Department facility or other place . . . . Actual necessary expense of travel includes the reasonable costs of airfare if travel by air is the only practical way to reach a Department facility. . . . (b)(3)(C) In the case of transportation of a person to or from a Department facility by ambulance, the Secretary may pay the provider of the transportation the lesser of the actual charge for the transportation . . . unless the Secretary has entered into a contract for that transportation with the provider. . . . The Secretary implements § 111 through 38 C.F.R. Part 70, Subpart A . . . . Pursuant thereto, the VA pays the “actual cost of a special mode of transportation for eligible beneficiaries. . . . [T]he Secretary published a proposed change to the current version of 38 C.F.R. § 70.30(a)(4) on November 5, 2020. The Secretary subsequently published the Final Rule . . . . The impact of the Final Rule is that, instead of paying the actual costs of ambulances services, the VA will now pay the lesser of the actual charge or the [Medicare fee schedule (MFS)] amount for all ambulance transports—including those to and from places other than department facilities—unless the VA has entered into a contract with the ambulance vendor. . . . Petitioners seek review of the Final Rule. We have jurisdiction to review challenges to the VA’s rulemaking . . . .
Judge Stoll began her analysis for the Federal Circuit by explaining that the court reviews petitions “in accordance with the standard set forth in the Administrative Procedure Act,” requiring the court to “‘hold unlawful and set aside agency action’ that is ‘arbitrary and capricious, an abuse of discretion, or otherwise not in accordance with law.'”
Next, Judge Stoll outlined the parties’ arguments. “Petitioners contend that the Final Rule is ‘not in accordance with law’ because it exceeds the statutory authority granted to the VA under § 111(b)(3)(C),” while VA, in response, “asserts that Petitioners forfeited their challenge to its statutory authority under § 111(b)(3)(C) because no party raised this issue . . . during the notice and comment period of the rulemaking.”
Turning first to VA’s forfeiture argument, Judge Stoll noted that “VA urges this court to adopt the D.C.’s Circuit’s rule that a party will forfeit an argument that was not raised to an agency during the notice and comment period of rulemaking.” She highlighted, however, “even if we were to adopt the D.C. Circuit’s forfeiture rule, we would also adopt the D.C.’s Circuit’s exception to that rule,” which includes the “key assumption” doctrine. Under that doctrine, Judge Stoll explained, “an agency has the ‘duty to examine key assumptions as part of its affirmative burden of promulgating and explaining a non-arbitrary, non-capricious rule.'” She found that doctrine applied to this case because “VA had a duty to examine whether it in fact had the authority to promulgate the rule under the statutory section the VA explicitly relied on as the basis for the rulemaking.” Thus, she concluded, “no comment was necessary to preserve Petitioners’ challenge to the VA’s authority to promulgate the Final Rule under § 111(b)(3)(C).”
After rejecting VA’s forfeiture argument, Judge Stoll turned to “Petitioners’ merits challenge to the VA’s statutory authority under § 111(b)(3)(C) and their arguments as to why the Final Rule exceeds that authority.” Looking first to the text, she noted that, “while in § 111(a) Congress authorized the Secretary to ‘pay the actual necessary expense’ for travel ‘to or from a Department facility or other place,’ Congress only authorized the Secretary in § 111(b)(3)(C) to apply the ‘lessor of’ payment methodology for transports ‘to or from a Department facility by ambulance.'” Since the Federal Circuit will “assume Congress means what it says and says what it means,” Judge Stoll explained, the court “can only conclude that the omission of the ‘or other place’ language from § 111(b)(3)(C) was deliberate on the part of Congress.” Thus, she found, “VA’s rulemaking extending the ‘lessor of’ methodology to all noncontract ambulance transports—instead of only noncontract ambulance transports ‘to or from a Department facility‘—in the Final Rule exceeds the discretionary authority granted to the VA by Congress.” As a result, she concluded, the “Final Rule is ‘not in accordance with law’ and must be vacated.”
Judge Stoll next addressed VA’s two counterarguments. First, she explained, VA challenged Petitioners’ interpretation of “a Department facility” in § 111(a). Judge Stoll rejected the argument. VA’s argument, she explained, “does not change our reasonable conclusion that ‘a Department facility or other place’ is a broader phrase with a different meaning than just ‘Department facility.'” The difference, she explained, suggests Congress “inten[ded] that the VA only pay for airfare to or from a ‘Department facility.'” In fact, she found, “it is easy to see why Congress may have made such a policy choice” because “VA would have a compelling reason to limit commercial airfare to non-VA facilities because VA facilities are going to most likely provide the same non-emergent care that non-VA facilities would provide.”
Judge Stoll next addressed VA’s second argument, that even though Congress used the term “a Department facility” in the second sentence’ of § 111(a),” Congress meant the term “as shorthand for ‘a Department facility or other place’ within Section 111.” First, she explained, precedent relied upon by VA “addressed ‘the rule of the last antecedent'” But, she noted, “[t]his case does not address an antecedent problem, and the VA does not contend otherwise.” Moreover, she continued, reading “‘a Department facility’ to mean something different than ‘other place'” would not lead to an absurd result.
As a result of Judge Stoll’s analysis, the Federal Circuit held “that the Final Rule ‘is not in accordance with law,’ as it exceeds the discretionary authority Congress granted the VA under 38 U.S.C. § 111(b)(3)(C).” Thus, the Federal Circuit granted the petition and set aside the rule.