The Interconnected Economy and the Broken Leg
A physician practice does not operate in a room by itself. It operates on patients who must be able to leave their homes, in buildings its landlord controls, with supplies its distributor ships, alongside hospitals whose schedules it shares, through a workforce whose children must be in school, before courts that must be open, and across transit systems that must run. An order addressed to any one of those counterparties is an order "limiting commerce, travel, or group meetings," and where it caused a delay, interruption or termination of a portion of the practice's operation, the practice was partially suspended because of it. That is the statute's text, the Notice's own supplier rule, the United States' representation to the Ninth Circuit and the holding of Tri-State. And an operation that an order dismantled in March 2020 was not restored on the day the order's last step took effect; the clause asks whether the operation was suspended during the quarter due to orders, not whether an order was in effect on the quarter's first day, and the orders' own reopening schedules fix how long the suspension they caused continued.
The interconnected economy
The six mechanisms
Six mechanisms carry an order to an employer to which it is not addressed, and each operated on this industry in every quarter.
Supply chain and borders
The Defense Production Act orders and the scarce-materials designation directed the practice's PPE to hospitals; the FEMA allocation and export rule and its extensions controlled the flow of respirators, masks, gloves and gowns to June 30, 2021; the FDA's revocations effective June 30 and July 6, 2021 withdrew the lawful basis for the substitutes; the land-border closures of March 2020 through the third quarter of 2021 governed the distributors' cross-border freight; and the practice that could not build the inventory the resumption orders required could not resume (Ex. FED-070; Ex. FED-074; Ex. ECO-A-071; Ex. SEC-02-010; Ex. FED-078; Ex. AGY-FED-HEALTH-OTHER-049; Ex. FED-234; Ex. SEC-02-013; Ex. SEC-02-032).
Workforce, schools and child care
The stay-at-home orders confined the practice's staff; the school and child-care closures of 2020 and the remote instruction of the 2020-21 school year kept parents at home; the fourteen-day quarantine orders of Arkansas, Kansas, New Hampshire and their counterparts removed exposed staff; the Families First mandates required paid leave; the State workplace standards and the OSHA standard excluded exposed and infected staff with pay; the school mask, quarantine and exclusion orders of the third quarter of 2021 sent children home again; and the vaccination-or-testing orders removed unvaccinated staff by dates fixed by order (Ex. AR-073; Ex. NH-064; Ex. FED-170; Ex. SEC-02-047; Ex. SEC-02-001; Ex. PA-042; Ex. LA-053; Ex. NC-032; Ex. SEC-02-019; Ex. SEC-02-045).
Travel, tourism and gatherings
The entry proclamations, the pre-departure testing order and the conveyance order governed the practice's international and travelling patients and its foreign-trained recruits; Hawaii's traveler quarantine, Alaska's mandates and the Navajo Nation's curfews governed whole patient populations; the gathering limits terminated outreach and the health fairs, screenings and employer events at which a practice acquires patients (Ex. FED-207; Ex. FED-042; Ex. FED-020; Ex. HI-003; Ex. AZ-066; Ex. HI-025). The Library's meetings collection records the specialty-society meetings, conventions and recurring gatherings of this industry that those limits reached, with the venue orders in force on their dates.
Courts and public offices
The judicial emergency orders of the State supreme courts and the federal district courts closed or converted to remote the hearings, depositions and collection actions in which a practice's physicians and billing staff appear, and the closure of licensing and examination offices under the stay-at-home orders interrupted credentialing (Ex. TX-040; Ex. KY-058; Ex. VA-041; Ex. TN-050; Ex. IA-056; Ex. MI-080; Ex. MN-053; Ex. SC-054; Ex. WA-090; Ex. FED-302; Ex. FED-298; Ex. FED-337; Ex. ECO-C-136).
Transit
The conveyance order and the TSA security directives governed every bus, train and rideshare on which staff commuted and patients travelled from February 1, 2021 through the whole of the third quarter of 2021, and the metropolitan transit authorities' service reductions of 2020 governed them before (Ex. FED-020; Ex. FED-051; Ex. FED-052).
Health care as counterparty
The hospital procedure orders cancelled the schedules of the practice's proceduralists; the CMS facility rules and the State facility orders governed the rounds of its geriatricians, psychiatrists, podiatrists and therapists; the crisis standards of care of Idaho and Alaska and the surge rules of Louisiana rationed the care to which the practice referred; and the hospital vaccination orders of New York, California, New Jersey, Washington and Oregon determined which of the practice's physicians could hold privileges (Ex. SEC-02-037; Ex. FED-094; Ex. OH-049; Ex. ID-064; Ex. AK-031; Ex. SEC-02-038; Ex. SEC-02-045; Ex. SEC-02-019; Ex. SEC-02-030; Ex. OR-051).
Counterparty orders are orders
The Service's position is that an order addressed to a third party is not an order due to which the employer's operation is suspended. Four answers, each sufficient. First, the text: the clause requires orders "limiting commerce, travel, or group meetings" and a suspension "due to" them; it says nothing of the addressee, and the statute says nothing of the source of the order beyond the requirement that the authority be appropriate.215 Second, the Notice: Q&A-10 lists "a State's emergency proclamation that residents must shelter in place" and a curfew "on residents" as governmental orders, and Q&A-12 provides that an employer "may be considered to have a full or partial suspension of operations due to a governmental order if... the business's suppliers are unable to make deliveries of critical goods or materials due to a governmental order that causes the supplier to suspend its operations."216 Third, the United States told the Ninth Circuit so in terms, and told the District Court that the qualifying instruments are "orders, proclamations, or decrees from the Federal government or any State or local government" that limited "commerce, travel, or group meetings."217
a business may be suspended 'due to' a government order addressing a third party (such as an order that suspends the operations of a supplier of the business)Br. for Appellees at 41 & n.5
Fourth, Tri-State: "due to" requires but-for causation, and a formulation that would confine the clause to orders addressed to the employer "improperly adds words into the statute."218 The Service's contrary position rests on AM 2023-005, a memorandum that "may not be used or cited as precedent," that adds to Q&A-12 an "alternate supplier" element and a requirement that the employer produce the supplier's order, neither of which is in the Notice or the statute, and whose "narrow, limited exception" language appears nowhere in the United States' briefs.219 A stay-at-home order on the practice's patients, a closure order on its landlord's other tenants, a procedure order on its hospital, a closure order on its staff's children's school and a face-covering order, an airborne-transmission control, on its transit system are each an order limiting commerce, travel or group meetings, and each is treated as an order in this analysis.
The broken leg
The grammar
The clause asks whether "the operation of the trade or business... is fully or partially suspended during the calendar quarter due to orders." The adverbial phrase "during the calendar quarter" modifies "suspended." Congress did not write "due to orders in effect during the calendar quarter," and the Service cannot rewrite the clause to say so. The question in each quarter is whether the operation was suspended during that quarter, and whether the suspension was due to orders; an order that ended before the quarter and a suspension that continued into it because of the order satisfy the clause as written.220
The definition and the causation standard
Tri-State fixes the meaning of the clause on the United States' own agreed definitions: a suspension is "[t]he act of temporarily delaying, interrupting, or terminating something," and "a 'partial suspension' is a temporary delay, interruption, or termination of a portion an employer's business."221 A delay is a suspension. The court held that "due to" requires but-for causation, and that the United States' proposal of a "proximate, independent and sufficient cause" formulation "improperly adds words into the statute."222 But for the order that closed the procedure suite in March 2020 and the orders that permitted it to reopen only on conditions of PPE, testing and capacity, the practice's surgical schedule would have been full in July 2021; the delay in its restoration was due to those orders.
The Notice's own recognition
Q&A-22 provides that "[a]n employer with business operations that are fully or partially suspended due to a governmental order during a portion of a calendar quarter is an eligible employer for the entire calendar quarter."223 Q&A-16's fourth factor recognizes that a suspension an order caused persists after the order operates: "some adjustment period is expected," and a "significant delay (for example, beyond 2 weeks) in moving operations" is itself a partial suspension "during that transition period."224 The Service's own guidance thus treats the suspension as measured by the operation's condition, not by the order's calendar, and the Service is bound by that guidance to the same extent as a revenue ruling.225
What the orders compelled this industry to dismantle, and how long the orders' own steps took to restore it
The March 2020 orders compelled the cancellation of every elective procedure and non-urgent visit on the schedule, with no date for rebooking, and the exhaustion of PPE inventories under allocation with no lawful way to rebuild them while the allocation orders ran; from those commands followed the furlough or discharge of clinical and front-desk staff whose work the orders had prohibited, the conversion of examination rooms to telehealth stations and back, the renegotiation of hospital privileges, payer contracts, leases and equipment financing, and the loss of referral relationships that ran through hospitals whose schedules were themselves cancelled. The orders' own reopening steps fix how long the restoration took. Texas prohibited procedures on March 22, 2020, permitted them on April 22 only where the facility certified capacity and PPE, permitted them from May 1 on a 15 percent capacity reservation, re-prohibited them in four counties on June 26, prohibited them by trauma-service-area trigger from September 17, 2020, with eighteen of twenty-two trauma service areas over the threshold by January 15, 2021, and released them on March 10, 2021 (Ex. SEC-02-011; Ex. SEC-02-012; Ex. SEC-02-013; Ex. SEC-02-014; Ex. SEC-02-015; Ex. SEC-02-016; Ex. TX-026). Kentucky ceased procedures on March 18, 2020, began Phase I on April 27, and modified it on May 1, May 6, May 8 and May 13 and thereafter (Ex. SEC-02-033; Ex. KY-015). New Jersey suspended procedures on March 27, 2020, rescinded the suspension on May 26 on conditions, made the conditions Executive Directives on June 24, 2020, continued them past the end of the general orders on June 4, 2021 and to January 11, 2022, and added the vaccination-or-testing condition on September 7, 2021 (Ex. SEC-02-017; Ex. SEC-02-018; Ex. NJ-084; Ex. NJ-085; Ex. SEC-02-019). Minnesota postponed procedures on March 23, 2020, replaced the postponement with a written-plan requirement on May 10, 2020, and rescinded the requirement on May 27, 2021 (Ex. SEC-02-022; Ex. SEC-02-023). Oregon cancelled procedures by March 23, 2020, permitted them from May 1 on PPE, testing and capacity conditions, and rescinded the conditions on June 30, 2021 (Ex. SEC-02-031; Ex. SEC-02-032; Ex. OR-043). Pennsylvania closed non-life-sustaining operations on March 19, 2020, reopened them county by county from May 8 and May 29, re-imposed mitigation on November 27 and a 50 percent elective reduction in low-capacity regions on November 23, 2020, and terminated the reduction on August 23, 2021 (Ex. PA-002; Ex. PA-010; Ex. PA-011; Ex. PA-022; Ex. PA-025; Ex. PA-101). Massachusetts postponed procedures on March 18, 2020, permitted urgent procedures on May 18, non-essential procedures on June 24, curtailed them again from December 11, 2020 to March 1, 2021, preserved the health care face-covering requirement, an infection-prevention control on every clinical setting, from May 29, 2021 and required vaccination of long-term care staff from August 4, 2021 (Ex. MA-060; Ex. MA-061; Ex. MA-066; Ex. MA-050; Ex. MA-067). New York cancelled elective procedures on March 23, 2020, permitted them county by county from April 29, began New York Forward on May 14, 2020, readopted the health care face-covering rule on June 23, 2021 and required vaccination of every covered entity's personnel from August 26, 2021 (Ex. SEC-02-048; Ex. SEC-02-049; Ex. SEC-02-038). California confined its residents from March 19, 2020 to June 15, 2021, confined them again regionally from December 5, 2020 to January 25, 2021, curtailed surgeries in surge regions to February 5, 2021, preserved the health care face-covering requirement from June 15, 2021 and required vaccination or testing of health care workers from August 23 and vaccination from September 30, 2021 (Ex. CA-021; Ex. CA-026; Ex. SEC-02-073; Ex. SEC-02-046; Ex. SEC-02-045). A practice whose procedure suite was ordered closed in March 2020, reopened on a 15 percent capacity reservation in May, re-closed in June and again in the winter, and released in March 2021 had not restored its schedule, its staff or its referral base by July 1, 2021; the orders' own dates say so. An employer whose operation was ordered suspended through June 30 was not walking normally on July 1.
What was still in force
The continuing suspension does not rest on expired orders alone, and this analysis never says that an expired order suspended anyone by its own force. In each quarter after the second quarter of 2020 the federal general layer remained in force (the national and public health emergencies, the section 1135 waivers, the allocation and export rules to June 30, 2021, the leave mandates to December 31, 2020, the entry proclamations and border closures, the conveyance order from February 1, 2021, the OSHA standard from June 21, 2021); the State emergencies remained in force in thirty-five States on July 2, 2021 and twenty-five on September 21, 2021; the health care face-covering, facility and reporting orders survived the general orders in every State that had issued them; the metropolitan reinstatements of July through September 2021 followed; and the school, child-care and quarantine orders of the 2021-22 school year began in August 2021.226 The suspension that the March 2020 orders caused continued because of them for the period their compelled dismantling took to reverse, and on every day of that period other orders were in force that themselves limited commerce, travel and group meetings and reached the practice's functions. Both routes satisfy the clause; either would.