backU.S. Supreme Court Allows Trump Administration to Proceed with Termination of $783 Million in NIH Funding Grants
On August 21, 2025, the United States Supreme Court allowed the federal government to proceed with the cancelation of $783 million in funding grants from the National Institutes of Health (“NIH”) to universities and research institutions. Previously, a federal district court declared the government’s cancellation of the grants, and the NIH guidance documents on which it relied to cancel those grants, to be unlawful and the United States Court of Appeals for the First Circuit denied the government’s application to stay the district court’s rulings pending appeal. A closely divided Supreme Court left in place the district court’s ruling vacating the guidance documents while simultaneously staying the district court’s order that invalidated the government’s move to terminate the funding grants.
The justices issued a complicated series of opinions relating to the court’s order. Justice Amy Coney Barrett wrote for the majority, concluding that the Court’s split opinion was necessary to ensure the government’s claims are channeled to the appropriate venue in the lower courts. Justice Barrett said the government’s claim regarding its ability to cancel the funding grants belonged before the U.S. Court of Federal Claims (“CFC”), which handles contract disputes involving the federal government. But Justice Barrett said the challenge to the NIH’s guidance documents was properly before the federal district court. “Two-track litigation,” she wrote, “results from the jurisdictional scheme governing actions against the United States, which often requires plaintiffs to file two actions in different courts to obtain complete relief in connection with one set of facts.”
The Court also stated in its opinion that the government must be allowed to cancel the funding grants because the funds may not be recoverable after the recipients expended them. The Court reasoned that “the plaintiffs’ contention that they lack the resources to continue their research projects without federal funding is inconsistent with the proposition that they have the resources to make the Government whole for money already spent.”
Justices Thomas, Alito, Gorsuch, and Kavanaugh agreed with Justice Barrett to the extent the Court vacated the district court’s order terminating the NIH funding grants, but they would have also stayed the portion of the district court’s order that declared the NIH’s guidance documents unlawful.
In his separate opinion, Justice Gorsuch rebuked the district court (and other district courts) for failing to follow Supreme Court precedent. Justice Gorsuch wrote that “[l]ower court judges may sometimes disagree with this Court’s decisions, but they are never free to defy them.”
Chief Justice Roberts did not agree that the district court was required to split the case into two parts. Justices Sotomayor, Kagan, and Jackson agreed that the plaintiffs were not required to proceed before separate courts.
Justice Jackson, in a sharply worded opinion, criticized the Court for “sending [the] plaintiffs on a likely futile, multivenue quest for complete relief.” She did not agree that the Court’s precedents required allowing the government to terminate the funding grants. She also expressed concern that the government’s rushed cancellation of funding grants would halt life-saving biomedical research.
A copy of the Court’s opinion is available here.
Reporter, Doug Comin, Atlanta, GA, +1 404 572 3525, dcomin@kslaw.com.
Medicare Patients are Increasingly Leaving Hospitals Against Medical Advice
On August 21, 2025, HHS OIG published a Data Brief, Report No. A-04-24-03003, which analyzed the frequency and outcomes for Medicare enrollees who chose to leave acute-care hospitals against medical advice (“AMA”). OIG found that Medicare enrollees are leaving acute-care hospitals AMA at steadily rising rates, which could have a negative effect on patient health outcomes and a negative financial impact on the Medicare program.
Among most of the demographics analyzed—including enrollee type, hospital size, population density, and medical condition—OIG reported finding the following:
- Rising Rates: The rate at which Medicare patients leave AMA from acute-care hospitals (in lieu of remaining for further care until discharge or transfer is medically advised) increased by nearly 50% between 2006 and 2023. The rate peaked during the COVID-19 public health emergency before dropping back down in 2023 to a rate still slightly higher than pre-pandemic levels.
- Poor Health Outcomes: Medicare patients who left AMA were more than twice as likely to be readmitted or die within 30 days of leaving AMA than patients discharged home.
- Hospital Quality Link: Lower-rated hospitals (based on the Medicare Star Rating System) saw higher rates of Medicare patients leaving AMA. Patients at the lowest-rated hospitals were nearly three times as likely to leave AMA as those at top-rated facilities.
- Vulnerable Groups: Dual-eligible beneficiaries (patients who are enrolled in both Medicare and Medicaid) and patients with mental health diagnoses were significantly more likely to leave AMA than other enrollees.
According to OIG, the purpose of this report is to serve as a resource for CMS and other stakeholders when conducting further research and developing guidance and best practices, because finding ways to reduce the rate of enrollees who leave AMA, or the poor outcomes these enrollees suffer when they do leave AMA, will likely improve the health of Medicare enrollees and save Medicare costs.
The full text of OIG Report No. A-04-24-03003 is available here.
Reporter, Jenna M. Anderson, Palo Alto, +1 650 422 6719, janderson@kslaw.com.
Court in Northern District of Texas Finds Elevance Health’s Drop in Ratings Proper
On August 18, 2025, the United States District Court for the Northern District of Texas denied Plaintiff Elevance Health’s (“Elevance”) motion for summary judgment against HHS and CMS. Elevance’s lawsuit alleges that HHS and CMS rated five of Elevance’s Medicare Advantage contracts based on calculations that were “arbitrary and capricious and contrary to law,” and ultimately in violation of the Administrative Procedure Act (“APA”).
CMS gives a “Star Rating” to every contract it has with a Medicare Advantage Organization (“MAO”), and MAOs receive funding in the form of a rebate from CMS based on the strength of those ratings. The rating system is based on “measurements related to quality of coverage, ease of access, beneficiary experience, and other aspects,” and is set to half-star increments. CMS gathers data for these measurements based on surveys from the Consumer Assessment of Healthcare Providers and Systems (“CAHPS”) and other medical record review data collected in the Healthcare Effectiveness Data and Information Set (“HEDIS” or “non-CAHPS” measures).
Elevance is an MAO. When CMS released the 2025 Star Ratings, five of Elevance’s contracts were rated either 3, 3.5, or 4 stars. At a high level, Elevance had two main arguments: (1) that CMS did not follow statutory and regulatory authority when it adjusted CAHPS scores using “case-mix adjustments”, and (2) that CMS did not follow “traditional rounding rules correctly” when it rounded Elevance’s scores to the sixth decimal place, thereby causing one of its contracts to receive 3.5 stars instead of 4 stars (contract H3655).” As the district court explained, “[c]ase-mix adjustment is the process whereby CMS adjusts a certain CAHPS measure score before converting it to a measure-level rating.” These adjustments take into consideration age, education, medical conditions, and health status. In support of Elevance’s first argument, it provided expert testimony concluding that if CMS had not made case-mix adjustments to CAHPS measures, “two of Elevance’s contracts . . . would have received a score one half-star higher.” Yet the court found that the regulations at issue referred to case-mix adjustments as if they are ongoing, although the regulations do not expressly authorize them, and therefore CMS acted within its authority when applying case-mix adjustments to CAHPS scores for 2025.
Elevance also argued that CMS “penalized” their contracts “by using a national weighted average” for relative distribution and significance testing (“RDS Testing”), which involves a set of conditions for assigning 1 star. Under this formula, CMS gives greater weight to contracts with more enrollees. Elevance argued that this application violated CMS’s regulations, but the court ruled that based on the plain language of the statute, CMS applied the regulation correctly and that “[t]he regulation directs CMS to compare a contract’s ‘average CAHPS measure score’ to ‘the national average CAHPS measure score.’”
Regarding Elevance’s rounding argument, the court found that Elevance misapplied the rounding rules. The court emphasized that the “regulations require CMS to round a contract’s score not to the nearest whole number, but to the nearest half.” As an example, Elevance claimed that one of its contracts should have received a score of 4 stars based off its raw score of 3.749565. The court disagreed, explaining how Elevance’s interpretation would require rounding twice, first to 3.75 and then to 4, which is not what the regulation requires. Instead, the court emphasized how the rounding rule only requires rounding based off the first decimal. The court concluded that “[i]n the Star Rating system, it is virtually guaranteed that there will be contracts that fall a hair’s breadth short of the next highest rating” and that while “Elevance would have preferred for those contracts to reach the next half-star tier. . . the fact that they fell short does not give rise to a claim for relief under federal law.”
The order is available here.
Reporter, Brittni Hamilton, Los Angeles, CA, +1 213-218-4083, bhamilton@kslaw.com.
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Editors: Chris Kenny and Ahsin Azim
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