## Facts

- The Council for Urological Interests (CUI) is an association of physicians who lease urological equipment (including lithotripters) to hospitals and are paid on a per-use (“per-click”) basis.
- CUI members also perform procedures using the leased equipment and refer Medicare patients to the hospitals for those procedures.
- The Stark Law generally bars physician self-referrals for designated health services (DHS) when the physician has a financial relationship with the entity furnishing the DHS, subject to statutory exceptions.
- One exception permits equipment leases if conditions are met, including that payments are set in advance, reflect fair market value, and do not take into account the volume or value of referrals or other business generated; the statute also authorizes the Secretary to add “other requirements” needed to prevent abuse.
- CMS promulgated regulations (1) prohibiting per-unit (per-click) rental charges in equipment leases when the physician-lessor refers patients for services using the equipment, and (2) interpreting “entity that furnishes” DHS to include physician groups that perform the procedures, not only the entity that bills Medicare.
- CUI sued challenging the regulations as exceeding statutory authority and as unlawful under the Administrative Procedure Act (APA) and the Regulatory Flexibility Act (RFA).
- The district court granted summary judgment to the Secretary; CUI appealed.

## Issues

1. Whether the Stark equipment-lease exception is ambiguous regarding per-click rental charges, permitting agency interpretation under Chevron step one.
2. If ambiguous, whether CMS’s prohibition of per-click leases was reasonably explained and non-arbitrary under Chevron step two and the APA.
3. Whether CMS reasonably interpreted “entity that furnishes” DHS to include physician groups that perform DHS, not only billing entities.
4. Whether the agency satisfied the RFA’s requirements when issuing the challenged regulations.

## Decision

- The court affirmed in part, reversed in part, and remanded.
- A majority held the equipment-lease exception is ambiguous as to per-click (per-use) rental charges, leaving room for regulation.
- A different majority held CMS’s explanation for banning per-click leases was inadequately reasoned and therefore arbitrary and capricious under the APA; the per-click lease rule was remanded to the agency for further proceedings.
- The court unanimously upheld CMS’s interpretation that physician groups performing DHS may be “entities” subject to the Stark Law.
- The court unanimously rejected the RFA challenge, concluding the agency complied with the statute’s procedural requirements.

## Legal Principles

- When a statute is ambiguous on a specific regulatory question, courts may defer to an agency’s reasonable interpretation within delegated authority (Chevron framework).
- Even within a zone of statutory ambiguity, an agency must provide a reasoned explanation connecting the rule to the problem addressed; a conclusory or insufficiently supported rationale can render a rule arbitrary and capricious under the APA.
- Under the Stark Law, “entity that furnishes” DHS may reasonably be interpreted to include entities that perform the services, not only entities that submit Medicare claims.
- Compliance with the RFA turns on whether the agency adequately considered and disclosed the impact of the rule on small entities and satisfied required analytical steps.

## Conclusion

The D.C. Circuit sustained CMS’s broad interpretation of “entity” under the Stark Law and rejected the RFA challenge, but remanded the per-click equipment-lease prohibition because the agency’s justification did not meet APA reasoned-decisionmaking requirements.


Council for Urological Interests v. Burwell, 790 F.3d 212 (D.C. Cir. 2015)