Finality of Interpretive Guidance and the Scope of Medicaid “Hold Harmless” Rules: Commentary on Florida AHCA v. CMS (11th Cir. 2025)

Finality of Interpretive Guidance and the Scope of Medicaid “Hold Harmless” Rules:
A Commentary on Florida Agency for Health Care Administration v. CMS (11th Cir. 2025)

I. Introduction

This Eleventh Circuit decision sits at the intersection of federal administrative law and Medicaid financing. It addresses two major questions:

  • Administrative law: When does nonbinding agency “guidance” – specifically, a CMS Informational Bulletin – qualify as a reviewable “final agency action” under the Administrative Procedure Act (APA)? And how does that relate to the distinction between legislative and interpretive rules?
  • Medicaid financing: How far does the Medicaid “hold harmless” prohibition reach when states use provider taxes and complex directed payment programs that involve private redistribution of Medicaid funds among providers?

The plaintiffs, the Florida Agency for Health Care Administration and the State of Florida (collectively “Florida”), challenged a 2023 CMS Informational Bulletin on “Health Care-Related Taxes and Hold Harmless Arrangements Involving the Redistribution of Medicaid Payments.” Florida alleged that the Bulletin misinterpreted the Medicaid statute, was arbitrary and capricious, and was promulgated without required notice and comment.

The underlying substantive dispute arises from Florida’s Directed Payment Program, which relies heavily on local hospital assessments and Medicaid managed care payments to generate billions in nonfederal funds and associated federal matching contributions. CMS warned in the Bulletin that private redistribution of Medicaid payments among providers to offset provider taxes can violate the federal “hold harmless” rule, threatening deferral or disallowance of federal Medicaid funds.

The district court dismissed Florida’s suit, holding that the Bulletin was not “final agency action” under the APA, and therefore not reviewable, and denied Florida’s preliminary injunction motion for lack of jurisdiction. On appeal, the Eleventh Circuit:

  • Reversed the dismissal, holding that the Bulletin is reviewable final agency action and that Florida’s challenge is ripe.
  • Affirmed the denial of a preliminary injunction, but on the merits: Florida failed to show a substantial likelihood of success on any of its APA theories.
  • Remanded for further proceedings, with the complaint reinstated but no interim relief.

The decision therefore does two important things at once:

  1. It strengthens judicial review of agency guidance by recognizing that even interpretive bulletins can be “final” when they carry real-world legal consequences.
  2. It substantively endorses CMS’s broad reading of the Medicaid “hold harmless” rule to reach private redistribution arrangements that effectively reimburse providers for provider taxes using Medicaid funds, even without an explicit governmental promise.

Judge Newsom authored the majority opinion, joined by Judge Corrigan (sitting by designation). Judge Jordan concurred in full on the jurisdictional and merits issues, but wrote separately to question the panel’s blanket reliance on de novo review of legal issues in preliminary injunction appeals.

II. Summary of the Opinion

A. The Issues

The Court addressed four main questions:

  1. Final Agency Action: Is the 2023 CMS Informational Bulletin “final agency action” under APA § 704?
  2. Ripeness: Is Florida’s pre-enforcement challenge ripe, or must Florida wait for CMS to actually disallow funds?
  3. Substantive Validity: Does the Bulletin’s interpretation of 42 U.S.C. § 1396b(w)(4)(C)(i) (the “hold harmless” rule) exceed CMS’s statutory authority or violate Spending Clause clarity requirements?
  4. Procedural Validity: Is the Bulletin invalid because it is a legislative rule adopted without notice and comment, or because it is arbitrary and capricious?

B. The Holdings

  1. The Bulletin is “final agency action.”
    Although styled an “Informational Bulletin” and characterized as reiterating existing policy, the document:
    • concretely announces CMS’s interpretation of the hold-harmless statute,
    • demands that states gather and provide information and “make clear” to providers that certain arrangements are impermissible,
    • threatens enforcement through deferral or disallowance of federal Medicaid funds, and
    • is followed by concrete enforcement-related steps (financial management review of Florida, new information conditions in waiver terms, and a later bulletin on enforcement discretion).
    These are “direct and appreciable legal consequences” sufficient to satisfy Bennett v. Spear’s second finality prong.
  2. The challenge is ripe.
    Florida faces immediate compliance pressures and enforcement risk, and no further factual development is needed to resolve the predominantly legal dispute over statutory meaning. Thus, Abbott Laboratories-style pre-enforcement review is appropriate.
  3. Florida is unlikely to succeed on the merits.
    The Court reaches, and resolves, three APA merits theories:
    • Statutory authority: CMS’s interpretation of § 1396b(w)(4)(C)(i) – extending the “hold harmless” prohibition to private post-payment redistributions that effectively reimburse providers for provider taxes – fits the text and is superior to Florida’s narrower, intent-focused reading.
    • Arbitrary and capricious: CMS did not change its position sub silentio. The Bulletin applies CMS’s longstanding 2008 interpretation; the 2019 proposed rule and 2021 withdrawal confirm continuity rather than a policy flip.
    • Procedural (notice-and-comment): The Bulletin is an interpretive rule that “simply states what the administrative agency thinks the statute means” and therefore does not require notice and comment under APA § 553(b)(A).
  4. Preliminary injunction denied.
    Because Florida cannot show a substantial likelihood of success on any of its theories, the Court affirms the denial of a preliminary injunction without reaching the other equitable factors.

C. The Concurrence

Judge Jordan fully agrees that:

  • The Bulletin is final and the case is ripe.
  • Florida has not shown a substantial likelihood of success on the merits.

His separate opinion focuses on the standard of appellate review in preliminary injunction appeals. He questions the majority’s categorical statement that underlying legal issues in such appeals are always reviewed de novo, pointing out:

  • Supreme Court cases such as Ashcroft v. ACLU and Doran v. Salem Inn apply abuse-of-discretion review even when the “likelihood of success” prong turns on legal questions.
  • Earlier former Fifth Circuit/Eleventh Circuit precedents likewise applied abuse-of-discretion review, and under circuit law the earlier line of cases should control in case of conflict.

Nonetheless, he deems it appropriate in this appeal to address the merits of likelihood of success because the issues are purely legal, the factual record is not in dispute, and resolving the legal dispute avoids delay.

III. Detailed Analysis

A. Procedural Background and the Stakes

Florida’s Directed Payment Program works roughly as follows:

  1. Local governments (e.g., Broward County) impose special assessments (provider taxes) on private hospitals – designed to be “broad based” to satisfy federal rules.
  2. The assessments are pooled in “Local Provider Participation Funds” and transferred to Florida’s Medicaid agency to count as state Medicaid expenditures.
  3. Those expenditures attract federal matching funds under Medicaid’s matching formula (FMAP).
  4. Florida then pays those combined funds to Medicaid Managed Care Organizations (MCOs), which in turn pay hospitals.

The arrangement is financially significant: for fiscal year 2023–24, Florida anticipated raising approximately $1.1 billion in nonfederal Medicaid funding through these local funds, yielding about $2 billion more in federal matching funds.

CMS became concerned that, within these structures, private redistribution agreements among hospitals or between MCOs and hospitals might exist, whereby hospitals that benefit from enhanced Medicaid payments share those funds with hospitals that suffer net losses from the provider tax or serve few Medicaid patients. Such private redistribution could effectively reimburse providers for the provider tax, triggering the federal “hold harmless” prohibition and endangering federal matching funds.

After CMS sent Florida a letter signaling concern and then issued the 2023 Bulletin, it launched a Financial Management Review of Florida’s Local Provider Participation Funds, explicitly suggesting there may be “pre-arranged agreements” redirecting Medicaid payments from high-Medicaid to low-Medicaid or non-Medicaid hospitals.

Florida sued under the APA and sought a preliminary injunction prohibiting CMS from enforcing the Bulletin or disallowing funds based on it. The district court:

  • Held that the Bulletin was not “final agency action,”
  • Dismissed for lack of subject-matter jurisdiction, and
  • Denied preliminary relief on that jurisdictional ground.

On appeal, the Eleventh Circuit faced the threshold question whether the case could even be heard, and then whether CMS’s legal position in the Bulletin can stand.

B. Final Agency Action: Guidance as Reviewable, Even if Interpretive

1. The Bennett v. Spear framework

Under APA § 704, courts may review only “final agency action.” The Supreme Court’s test in Bennett v. Spear has two elements:

  1. The action must mark the “consummation” of the agency’s decision-making process; and
  2. The action must be one from which “rights or obligations have been determined, or from which legal consequences will flow.”

Here, no one disputed that the Bulletin satisfied the “consummation” prong: it expressed CMS’s definitive view, not a tentative or preliminary one.

The critical dispute was the second prong: whether this ostensibly “informational” bulletin actually carried legal consequences.

2. CMS’s “interpretive = nonfinal” argument, and Perez

CMS argued that the Bulletin was merely a restatement of an “already-existing policy or interpretation,” and therefore akin to nonfinal letters and policy statements held nonreviewable in cases like:

  • Clayton County v. FAA (11th Cir. 2018), where an FAA letter merely reiterated a pre-existing position; and
  • Independent Equipment Dealers Ass’n v. EPA (D.C. Cir. 2004), where an EPA letter explained a longstanding interpretation.

CMS tried to fuse two concepts:

  • Finality (APA reviewability, governed by Bennett and Hawkes, focusing on practical consequences), and
  • Rule type (legislative vs. interpretive, governed by APA § 553(b)(A) and cases like Perez v. Mortgage Bankers Association).

The government’s chain of reasoning was essentially:

  1. Interpretive rules only restate existing obligations.
  2. Restatements do not produce new legal consequences.
  3. Without new legal consequences, there is no final agency action.
  4. Therefore, interpretive rules are generally unreviewable.

The Eleventh Circuit rejected this move, correctly distinguishing between:

  • Whether a rule has the force of law (legislative vs. interpretive), and
  • Whether a rule is final and reviewable (pragmatic assessment of consequences under Bennett and Hawkes).

Drawing on Perez, the Court underscored that interpretive rules can be final and reviewable: Perez itself recognized that a revised interpretive rule would be subject to APA review even though interpretive rules “do not have the force and effect of law.” Thus, the test for finality is independent of the test for whether a rule is interpretive or legislative.

3. The pragmatic finality analysis and the Bulletin

Consistent with Hawkes and D.C. Circuit precedent like POET Biorefining and Appalachian Power, the Eleventh Circuit looked to the “practical, concrete consequences” of the Bulletin:

  • It directed states to:
    • “make clear” to providers that private redistribution arrangements are impermissible;
    • “make available” detailed information to CMS about provider taxes and related arrangements; and
    • expect inquiries and financial management reviews.
  • It threatened enforcement through:
    • deferral or disallowance of federal financial participation (FFP), i.e., federal matching funds; and
    • “enforcement action as necessary” if CMS discovered impermissible practices.
  • It was followed by real-world implementation:
    • CMS initiated a Financial Management Review targeting Florida’s Local Provider Participation Funds, expressly referencing suspected redistribution arrangements;
    • a later 2024 Bulletin announced CMS’s exercise of enforcement discretion regarding existing arrangements; and
    • CMS required Florida, in new waiver Special Terms and Conditions, to provide copies of any provider agreements related to local taxes and payments funded by those taxes.

Taken together, these facts show that the Bulletin is not a “purely informational” restatement like the letters in Clayton County or Independent Equipment Dealers. It is, in the Eleventh Circuit’s words, CMS giving states their “marching orders” with a clear expectation that they comply, backed by tangible funding risks.

The Court also rejected CMS’s contention that the Bulletin is nonfinal because Florida can raise its objections later as defenses in an enforcement action. Citing the Supreme Court’s Frozen Food Express line (as summarized in Hawkes), the Court emphasized that an order that specifies the agency’s legal position and threatens penalties for noncompliance is reviewable even if enforcement is still prospective and contingent.

Thus, the Bulletin meets Bennett’s second prong: it is an action “from which legal consequences will flow.” Finality is therefore established.

C. Ripeness: Pre-enforcement Review Is Appropriate

The ripeness analysis tracks—and largely overlaps with—the finality reasoning, consistent with Eleventh Circuit and treatise commentary that the two doctrines often converge in administrative law cases.

Applying Abbott Laboratories and Ohio Forestry, the Court considered:

  1. Hardship of withholding review: Florida already faces the burden of compliance, data collection, reeducation of providers, and the looming threat of FFP disallowance. This is “significant practical harm.”
  2. Fitness for judicial decision: The dispute is overwhelmingly legal (what § 1396b(w)(4)(C)(i) means), and does not require further factual development.
  3. Interference with administrative process: The Bulletin states CMS’s “refined, non-tentative views,” not a preliminary plan subject to further change. Judicial review would not disrupt an ongoing policy formulation process.

Accordingly, the challenge is ripe, and the Court proceeds to the merits—which it chooses to do in the interests of judicial economy, given the purely legal nature of the issues and the completeness of the record.

D. Substantive Legality: Interpreting the Medicaid “Hold Harmless” Rule

1. Statutory framework: § 1396b(w)(4)(C)(i)

Medicaid’s “hold harmless” rule is a limit on how states may use health-care-related taxes (especially provider taxes) to generate their share of Medicaid spending. In broad terms:

  • States may levy “broad-based” health care-related taxes and use those revenues as the state share for Medicaid expenditures.
  • But if the tax is accompanied by a “hold harmless provision” that effectively refunds or offsets the tax burden, CMS must exclude those revenues from the federal matching calculation. See 42 U.S.C. § 1396b(w)(1)(A)(iii), (3)(A).

Section 1396b(w)(4) provides four alternative tests for when a hold-harmless provision is “in effect” with respect to a broad-based health-care-related tax. The case turns on subparagraph (C), especially clause (i):

(C)(i) The State or other unit of government imposing the tax provides (directly or indirectly) for any payment, offset, or waiver that guarantees to hold taxpayers harmless for any portion of the costs of the tax.

The key statutory question is whether private redistributions of Medicaid payments among providers—enabled by state Medicaid payments but arranged via private agreements—can fall within this language.

2. The grammar and structure of (C)(i)

The Court begins with close textual analysis. Florida’s reading hinges on an asserted “grammatical link” between the government “provid[ing]” something and the “guarantee” language—arguing that the same governmental actor must “provide” the guarantee. In Florida’s view, clause (C)(i) is triggered only when the government itself intentionally guarantees reimbursement (e.g., by promising to refund the tax).

The Court rejects that reading as grammatically unsound. Properly parsed:

  • The subject of “provides” is “the State or other unit of government imposing the tax.”
  • The object of “provides” is “for any payment, offset, or waiver …”
  • The phrase “that guarantees to hold taxpayers harmless” is a restrictive relative clause modifying “payment, offset, or waiver,” not “State or other unit of government.”

Thus, the structure is:

State/local government provides for a payment/offset/waiver
that guarantees to hold taxpayers harmless.

Crucially, the statute does not say that the State itself must directly “guarantee” anything. Instead, the payment/offset/waiver must operate as the guarantee.

3. CMS’s interpretation vs. Florida’s: “result in” vs. “guarantee”

In 2008, CMS stated in the preamble to a final rule that a “direct guarantee” exists under (C)(i) when:

a State payment is made available to a taxpayer or a party related to the taxpayer … in the reasonable expectation that the payment would result in the taxpayer being held harmless for any part of the tax.

The 2019 proposed rule (later withdrawn) applied this understanding to private redistributions, emphasizing that the private nature of the rerouting does not change the essential character of the arrangement as a state-enabled hold-harmless scheme.

Florida seized on the difference between “guarantees” (statutory text) and “result in” (CMS gloss), arguing that “guarantee” implies an intentional promise or undertaking by the state—something an inanimate “payment” cannot do, and something different from merely causing a result.

The Court responds in two ways:

  1. Common usage: In ordinary language, inanimate things can “guarantee” outcomes. For example:
    • a bail deposit guarantees court appearance;
    • a title document guarantees ownership; and
    • gravity guarantees that dropped objects will fall.
    By analogy, a payment structure can “guarantee” that taxpayers are made whole for a tax, irrespective of anyone’s subjective intent.
  2. Reading the statute as effects-based: Florida’s insistence on an intent requirement would make (C)(i) uniquely intent-focused in a subsection otherwise concerned with effects.
    • Subparagraph (A) looks to positive correlation between taxes and payments.
    • Subparagraph (B) looks to payment variation based only on the tax amount.
    • Clause (C)(ii) imports a purely quantitative test from 42 C.F.R. § 433.68(f)(3)(i): a specified tax rate and a 75%/75% reimbursement threshold.
    By contrast, Florida’s reading would require probing governmental intent uniquely in (C)(i), introducing asymmetry without textual warrant.

The Court therefore finds CMS’s reading – that a payment “results in” providers being held harmless and thus “guarantees” them against the tax – to be consistent with the statutory language and structure.

4. Alleged superfluity: overlap with (A), (B), and (C)(ii)

Florida next argues that CMS’s reading of (C)(i) renders subparagraphs (A) and (B) and clause (C)(ii) essentially redundant, violating the canon against surplusage. In its view, any arrangement covered by those provisions would also be captured under the broad “payment that guarantees to hold taxpayers harmless” standard.

The Court’s response has two elements:

  1. Overlap is expected, not fatal: Section 1396b(w)(4) is explicitly designed as a set of alternative tests for the same underlying concept: whether a hold-harmless provision is “in effect.” Some redundancy in coverage is therefore unsurprising. The key is that each subparagraph and clause uses a different method or lens to detect such arrangements (correlation, variation, direct guarantee, indirect guarantee).
  2. Even Florida’s reading does not eliminate overlap: Consider a state-run scheme where the state imposes a provider tax and directly reimburses hospitals that would otherwise lose money under the tax. That scheme would likely be covered by:
    • (A) – because payments are correlated with tax amounts or differences between tax and Medicaid payments; and
    • (C)(i) – because the state is providing payments that guarantee hospitals are held harmless.
    Thus, surplusage concerns exist even on Florida’s narrower construction.

The Court concludes that while there is substantial overlap in which arrangements get captured, there remains meaningful diversity in how those arrangements are identified. That level of redundancy does not justify departing from the better reading of the text.

5. Which “unit of government”? State vs. local governments

Florida also attempts to exploit the distinction between state and local governments:

  • The statute refers to “the State or other unit of government imposing the tax.”
  • Florida’s design delegates the taxing function to localities (counties and municipalities), while the state Medicaid agency manages the Medicaid payments.
  • Florida argues that the same “unit of government” must both impose the tax and “provide for” the guarantee; because the state (not the local government) disburses Medicaid payments, clause (C)(i) should not be triggered.

The Court rejects this textual gambit:

  • Again, Florida conflates actors: it is the payment that “guarantees” harmlessness, not the governmental unit itself.
  • Florida’s construction would allow an easy evasion: a state could always avoid (C)(i) by assigning the tax to local governments while centralizing the payments—undermining Congress’s clear intent to prevent hold-harmless schemes.

6. Extra-textual objections: administrability and Spending Clause clarity

Florida advances two policy-based or constitutional-style arguments:

  1. Administrability: It is allegedly unreasonable to condition the legality of a state’s funding program on “private behavior” (providers’ post-payment redistribution), which the state cannot control.

    The Court is unpersuaded:
    • States already have reporting obligations and close contractual relationships with Medicaid providers and MCOs; they are not operating in informational darkness.
    • In practice, these arrangements are often the product of collaborative design between providers and government, not independent unilateral private acts.
    • States voluntarily enter Medicaid as a cooperative federalism program and accept conditions like the hold-harmless rule as part of the “bargain.”
  2. Spending Clause clarity (Pennhurst doctrine): Florida invokes the requirement that Congress must speak unambiguously and “with a clear voice” when imposing conditions on federal funds.

    The Court, however, finds § 1396b(w)(4) sufficiently clear under the best textual reading. Because the statute is not ambiguous (in the Court’s view), there is no need to apply a tie-breaking presumption in favor of the state under Spending Clause doctrine.

Accordingly, on the core statutory question—whether CMS’s interpretation of § 1396b(w)(4)(C)(i) to reach private redistribution arrangements is lawful—the Court holds that Florida is not likely to prevail.

E. Arbitrary and Capricious Review: Did CMS Change Policy Without Acknowledgment?

Even if the statute allows CMS’s reading, Florida argues that CMS acted arbitrarily and capriciously by:

  • Changing its interpretation of § 1396b(w)(4)(C)(i) in the 2023 Bulletin; and
  • Doing so without acknowledging the change or grappling with reliance interests.

Under FCC v. Fox and Regents of the University of California, an agency must:

  • Recognize and explain when it changes position;
  • Provide a reasonable explanation; and
  • Consider serious reliance interests engendered by its prior policy.

1. Continuity from 2008 to 2023

The Court’s central holding here is that CMS did not change its interpretation in any relevant sense:

  • 2008 Final Rule Preamble: CMS explicitly adopted the “reasonable expectation that the payment would result in” being held harmless test for direct guarantees under (C)(i).
  • 2019 Proposed Rule: CMS applied that same understanding to arrangements involving private redistributions, stating that such arrangements are already “inconsistent with existing statutory and regulatory requirements” and that the proposed rule merely “codified currently prohibited practices.”
  • 2021 Withdrawal Notice: CMS withdrew the proposed rule but emphasized that the withdrawal “does not affect existing federal legal requirements or policy that were merely proposed to be codified in regulation.”
  • 2023 Bulletin: The Bulletin again “reiterates our longstanding position,” applying the same logic to current provider-tax and redistribution structures.

In the Court’s view, the Bulletin represents a shift in enforcement emphasis and specificity—not a change in CMS’s legal interpretation. Under Wages & White Lion, shifts in enforcement priorities alone do not create the sort of “serious reliance interests” that trigger heightened requirements.

2. Non-CMS statements are not controlling

Florida cited:

  • Two HHS Office of Inspector General statements;
  • An HHS Departmental Appeals Board decision; and
  • An internal email chain referencing a call with the Director of CMS’s Financial Management Group.

The Court finds these unpersuasive as evidence of a contrary CMS position. Drawing on Kisor v. Wilkie, it emphasizes that:

  • Interpretations must emanate from actors and vehicles understood to make authoritative agency policy.
  • The Inspector General and Appeals Board are institutionally independent or separate for many purposes and cannot be assumed to speak for CMS’s policy arm.
  • “A few casual communications in the guise of informal calls and a staff email” are insufficient to establish an authoritative interpretation.

Because the only authoritative CMS materials (2008 preamble, 2019 proposal, 2021 withdrawal, 2023 Bulletin) are consistent, Florida cannot show that CMS changed course in a way that triggers a Fox/Regents-type explanation requirement. The arbitrary-and-capricious claim is therefore unlikely to succeed.

F. Procedural Validity: Interpretive vs. Legislative Rules and Notice-and-Comment

Finally, Florida argues that the Bulletin is procedurally invalid because CMS did not use notice-and-comment rulemaking. The key question is whether the Bulletin is:

  • a legislative rule—creating new law, rights, or duties, and therefore subject to § 553 notice and comment; or
  • an interpretive rule—advising the public of the agency’s construction of existing statutes and rules.

The Eleventh Circuit applies its standard from Warshauer v. Solis:

  • Ask how the agency characterizes the rule (not dispositive, but relevant); and
  • Ask whether the rule:
    • “simply states what the administrative agency thinks the statute means,” and
    • “only remind[s] affected parties of existing duties.”

1. CMS’s characterization and the nature of the Bulletin

CMS:

  • Expressly labeled the document an “Informational Bulletin”; and
  • Stated that it “reiterates our longstanding position” on the application of the hold-harmless statutory and regulatory framework to private redistribution arrangements.

Substantively, the Court concludes:

  • The Bulletin does not purport to exercise new discretionary authority delegated by statute.
  • With respect to the central issue disputed in this litigation—whether § 1396b(w)(4)(C)(i) covers private redistribution arrangements—the Bulletin simply restates the interpretation CMS has held since 2008.
  • The statute, on this narrow question, does not confer CMS structured policymaking discretion; instead, CMS is announcing what the statute itself requires.

Referencing Loper Bright Enterprises v. Raimondo, the Court notes that while statutes can sometimes clearly delegate broad discretion to agencies, here the better reading is that the statute itself resolves the key interpretive question, and the Bulletin is an attempt to articulate that meaning. Thus, the Bulletin “does not have the force and effect of law,” but “advise[s] the public of the agency’s construction of the statutes and rules which it administers” (Shalala v. Guernsey).

Accordingly, the Bulletin is an interpretive rule exempt from notice-and-comment requirements under § 553(b)(A). Florida’s procedural APA challenge is also unlikely to succeed.

G. Preliminary Injunction: Likelihood of Success as Gatekeeper

Under Eleventh Circuit precedent, a party seeking preliminary injunctive relief must show:

  1. A substantial likelihood of success on the merits;
  2. Irreparable injury absent an injunction;
  3. That the threatened injury outweighs harm to the opposing party; and
  4. That the injunction is not adverse to the public interest.

Once the Court concluded that Florida is unlikely to succeed on any of its APA claims, it did not reach irreparable harm, the balance of equities, or public interest. The denial of the preliminary injunction is affirmed on that threshold basis.

Judge Jordan agrees on this outcome but urges that, as a matter of appellate practice, the “likelihood of success” determination—at least in some cases—should be reviewed under an abuse-of-discretion standard even when it turns on legal questions, rather than always being re-decided de novo. He cites Supreme Court and earlier circuit cases using such a deferential standard and notes that intramural precedential conflicts should be resolved in favor of earlier decisions.

IV. Precedents and Their Influence

A. Finality and Ripeness

  • Bennett v. Spear (1997): Provided the two-part test for finality (consummation plus legal consequences), which the Court applies to find the Bulletin final.
  • U.S. Army Corps of Engineers v. Hawkes (2016): Endorsed a pragmatic approach to finality and analogized here to emphasize that pre-enforcement guidance tied to enforcement threats can be final.
  • Abbott Laboratories v. Gardner (1967) and Ohio Forestry Ass’n v. Sierra Club (1998): Informed the ripeness analysis—especially the hardship of deferring review and the need for further factual development.
  • Clayton County v. FAA (11th Cir. 2018); Independent Equipment Dealers Ass’n v. EPA (D.C. Cir. 2004); General Motors v. EPA (D.C. Cir. 2004):
    • These cases distinguished nonfinal guidance or letters that merely restated longstanding positions in a purely informational way.
    • The Eleventh Circuit uses them as contrasts: here, the Bulletin is tied to concrete information demands and enforcement threats, and is followed by action.
  • Appalachian Power Co. v. EPA (D.C. Cir. 2000): The “marching orders” phrase famously used to describe binding guidance is imported to characterize CMS’s Bulletin.

B. Interpretive vs. Legislative Rules

  • Perez v. Mortgage Bankers Ass’n (2015): Affirmed that interpretive rules do not require notice and comment, but can nonetheless be reviewed under the APA.
  • Shalala v. Guernsey Memorial Hospital (1995): Provided the classic definition of interpretive rules as agency statements advising the public of the agency’s construction of statutes or regulations, which the Court applies to characterize the Bulletin.
  • Warshauer v. Solis (11th Cir. 2009): Sets out the Eleventh Circuit’s test for distinguishing legislative from interpretive rules; heavily relied upon in the Bulletin’s classification.

C. Arbitrary and Capricious Review

  • FCC v. Fox Television Stations (2009): Requires agencies to acknowledge and reasonably explain changes in policy and to consider reliance interests; used as the baseline for Florida’s challenge.
  • Department of Homeland Security v. Regents of the University of California (2020): Reinforced that agencies must consider serious reliance interests when changing course; cited to frame the standard but ultimately found inapplicable because no interpretive change is identified.
  • FCC v. Prometheus Radio Project (2021): Reiterated deferential arbitrary-and-capricious review (“reasonable and reasonably explained”); underpins the Court’s conclusion that CMS’s continuity of position passes muster.
  • Kisor v. Wilkie (2019): Cited for the requirement that an interpretation must come from actors and vehicles that make “authoritative” policy; supports the dismissal of Inspector General and Appeals Board opinions as nonbinding on CMS’s interpretive stance.

D. Spending Clause and Statutory Interpretation

  • Pennhurst State School & Hospital v. Halderman (1981): Provides the “clear voice” requirement for conditions on federal funds; Florida invokes it but the Court finds the statute sufficiently clear under its best reading.
  • West Virginia v. U.S. Department of the Treasury (11th Cir. 2023): Applies the Pennhurst principle and is cited to frame Florida’s argument that the hold-harmless condition is not clear enough.
  • Loper Bright Enterprises v. Raimondo (2024): Cited for the propositions that statutes have a “single, best meaning” and that sometimes the best reading is a delegation of discretion. Here, the Court treats § 1396b(w)(4) as not delegating open-ended discretion on the key question; instead, CMS is interpreting a determinate statutory standard.

E. Preliminary Injunction Standards and Standard of Review

  • Dream Defenders v. Governor of Florida (11th Cir. 2023); Johnson & Johnson Vision Care v. 1-800 Contacts (11th Cir. 2002): Supply the standard four-factor test and the rule that failure on likelihood of success alone can defeat preliminary relief.
  • Ashcroft v. ACLU (2004); Doran v. Salem Inn (1975); former Fifth Circuit cases (e.g., Butler v. D.A. Schulte (1933); Wooten v. Ohler (1962)): Cited in Judge Jordan’s concurrence to show a line of authority applying abuse-of-discretion review to the entire preliminary injunction decision, including legal components of the “likelihood of success” inquiry.

V. Complex Concepts Simplified

A. Medicaid Provider Taxes and “Hold Harmless” Arrangements

  • Provider tax: A state or local tax on health care providers (e.g., hospitals) used to raise the state share of Medicaid expenditures, which in turn increases federal matching payments.
  • Broad-based tax: A tax that applies uniformly to all providers in a class within a jurisdiction. If broad-based and not “hold harmless,” its revenues can generally be counted as part of the state’s Medicaid expenditure base.
  • Hold harmless provision: Any arrangement under which providers are effectively reimbursed for or insulated from the economic burden of the provider tax—so that they are not really “out of pocket.” The federal statute contains four alternative tests to identify when such a provision is “in effect.”

B. Direct vs. Indirect Guarantees

  • Direct guarantee (§ 1396b(w)(4)(C)(i)): The state or local government “provides … for any payment, offset, or waiver that guarantees to hold taxpayers harmless” for any portion of the tax.
  • Indirect guarantee (§ 1396b(w)(4)(C)(ii) and 42 C.F.R. § 433.68(f)(3)(i)): A quantitative test where:
    • tax rates exceed a specified percentage of provider revenues; and
    • a high proportion (75%) of providers receive back at least 75% of their tax costs through Medicaid or other state payments.
    In such cases, the structure is so obviously circular that the law deems there to be a “guarantee” even without an explicit refund mechanism.

C. Final Agency Action vs. Interpretive Rules

  • Final agency action (APA § 704): An agency decision that:
    • marks the end of the agency’s decision-making on the issue; and
    • alters legal rights or obligations or has concrete legal consequences.
    It can be reviewable even if it is not a regulation with the force of law.
  • Interpretive rule: An agency statement explaining how the agency understands and will apply a statute or existing regulation. It does not change legal obligations but clarifies them.
  • Legislative rule: A binding rule that creates new legal obligations or changes existing ones, made pursuant to delegated authority, and generally requiring notice and comment.

D. Arbitrary and Capricious Review

  • Courts do not ask whether the agency made the best possible policy choice; they ask whether the agency:
    • considered the relevant factors;
    • avoided clear factual or logical errors; and
    • explained its decisions in a reasonable way.
  • When an agency changes policy, it must recognize the change, explain it, and consider the impact on those who have reasonably relied on the old policy.

E. Spending Clause “Clear Voice” Requirement

  • Because Congress uses the Spending Clause to encourage states to adopt federal policy choices (through conditional funding), the Supreme Court requires that conditions on federal funds be stated unambiguously so that states can knowingly decide whether to accept them.
  • If a statute is ambiguous on a critical condition, courts may construe it narrowly in favor of the states.
  • Here, the Eleventh Circuit finds sufficient clarity in § 1396b(w)(4) under its best reading and thus does not invoke that presumption.

VI. Impact and Broader Significance

A. For States and Medicaid Financing

  • Broader reach of the hold-harmless prohibition: States can no longer presume that the hold-harmless rule is limited to explicit governmental refunds or formal state promises. The Eleventh Circuit endorses CMS’s view that:
    • State-funded Medicaid payments that foreseeably lead to private redistributions reimbursing provider taxes can trigger the rule.
    • States may need to police not only their own statutes and regulations, but also private side agreements among providers and MCOs that use Medicaid funds to offset taxes.
  • Increased compliance and oversight burdens: States like Florida must enhance:
    • information gathering about provider financing and side agreements, and
    • their screening of provider/MCO arrangements to ensure they do not effectively refund provider taxes.
  • Financial risk to directed payment programs: If CMS finds impermissible hold-harmless arrangements, it may disallow federal matching funds tied to those taxes, threatening large portions of state Medicaid financing. That risk may prompt:
    • restructuring of provider tax programs,
    • renegotiation or unwinding of provider-to-provider redistribution agreements, and/or
    • greater reliance on alternative nonfederal funding sources.

B. For Administrative Law and Agency Guidance

  • Finality of interpretive guidance: The decision reinforces that interpretive rules and guidance documents can be “final agency action” when they:
    • definitively state the agency’s interpretation,
    • direct regulated parties to take specific actions, and
    • are coupled with enforcement threats and subsequent implementation steps.
    It undercuts any categorical “interpretive = nonfinal” argument.
  • Pre-enforcement judicial review: States and regulated parties can seek judicial clarification of contentious agency interpretations before facing disallowances or penalties, so long as the guidance has real-world legal effects.
  • Post-Chevron statutory interpretation: In a landscape where Loper Bright has curtailed Chevron deference, this case illustrates:
    • the court independently determines the “best reading” of the statute,
    • but may still find the agency’s position persuasive and lawful, and
    • applies arbitrary-and-capricious review without deferring to the agency’s interpretive choices as binding.
  • Distinguishing interpretive from legislative rules: The case underscores that:
    • a rule may be interpretive yet final (and thus reviewable); and
    • a valid interpretive rule does not require notice and comment even if it has major practical consequences.

C. For Standards of Appellate Review of Preliminary Injunctions

Judge Jordan’s concurrence raises, but does not resolve, an important methodological issue: should appellate courts always review legal issues embedded in the “likelihood of success” prong de novo, or should they apply abuse-of-discretion review to the entire preliminary injunction decision?

He:

  • Identifies conflicting lines of Eleventh Circuit precedent, with older cases applying more deferential review.
  • Notes Supreme Court decisions that appear to treat the “likelihood of success” determination, even on constitutional questions, as subject to abuse-of-discretion review.
  • Signals that, in future cases, the standard of review question may need to be reconsidered en banc to harmonize circuit law.

While this issue does not change the outcome here (since both majority and concurrence deny preliminary relief), it may shape how future appellate panels approach mixed questions of law and fact at the preliminary injunction stage.

VII. Conclusion

This decision is significant in at least three respects.

  1. Finality and Reviewability of Agency Guidance:
    The Eleventh Circuit confirms that agency guidance labeled “informational” or “interpretive” can be final agency action when it carries real legal and practical consequences. The ruling reinforces the ability of states and other regulated parties to obtain pre-enforcement judicial review of contentious agency interpretations, even outside formal rulemaking.
  2. Broad Construction of Medicaid “Hold Harmless” Provisions:
    On the merits, the Court endorses a robust reading of § 1396b(w)(4)(C)(i): a state may violate the hold-harmless prohibition not only by explicitly refunding provider taxes, but also by structuring Medicaid payments in ways that reasonably result in private redistributions that reimburse providers for those taxes. The focus is on effects, not formal labels, and the statutory term “guarantee” is read functionally, not as an intent element.
  3. Clarification of APA Doctrine in a Post-Chevron Era:
    The decision neatly separates:
    • the question of finality (pragmatic, consequence-based, independent of rule type);
    • the question of statutory meaning (resolved de novo under the best reading approach of Loper Bright); and
    • the question of rule classification (interpretive vs. legislative, relevant to notice-and-comment requirements, not to finality).
    CMS’s Bulletin is held to be final, interpretive, and substantively lawful—a combination that both protects judicial review and preserves agency flexibility to issue interpretive guidance without formal rulemaking, so long as it stays within the statutory bounds and explains its reasoning.

For Medicaid programs nationwide, the case signals more aggressive scrutiny of provider tax and directed payment structures that rely on complex financial flows and private side deals. For administrative law, it is a clear affirmation that even nonbinding interpretive guidance can be both reviewable and valid—and that in evaluating such guidance, courts will independently interpret the statute while still according agencies a measure of respect when their readings are textually and structurally sound.

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