HHS Agrees To Temporarily Suspend Exclusion Notices in Gender-Affirming Care Litigation

As we enter 2026, federal regulation of gender-affirming care for minors continues to evolve at a rapid pace, building on the 2025 developments we covered in our previous blog posts (here, here, and here).

This article focuses on litigation surrounding a declaration issued by the Secretary of the Department of Health and Human Services (“HHS”) (the “Kennedy Declaration”) on December 18, 2025.^[1] The Kennedy Declaration concludes that gender-affirming care for children and adolescents does not satisfy professionally recognized standards of health care, purporting to supersede contrary national or statewide standards of care. The Kennedy Declaration could be invoked by the HHS Office of Inspector General (“OIG”) to immediately exclude persons and providers from participation in federal health care programs (“FHCPs”). Indeed, within days of issuing the Kennedy Declaration, multiple children’s hospitals were referred to OIG for failure to meet professionally recognized standards of health care for providing gender-affirming care contrary to the Declaration.

HHS temporarily agrees not to issue notices of exclusion while litigation proceeds

Even before the first referral of a children’s hospital, about 5 days after the Kennedy Declaration was issued, 19 states^[2] and the District of Columbia filed a federal lawsuit, Oregon et al. v. Kennedy et al., No. 6:25-cv-2409, (D. Or.)^[3], seeking to vacate the Kennedy Declaration. The primary argument levied by the states is that the Kennedy Declaration violated the Administrative Procedure Act (“APA”). 

On January 6, 2026, only two weeks after filing their Complaint, the Plaintiff states filed a motion for summary judgment discussed in more detail below. The Court granted the parties’ joint request to modify the briefing schedule, setting oral argument for March 19, 2026. ECF 65. 

Importantly, in order to extend the briefing deadline, HHS agreed not to issue any notices of intent to exclude or notices of exclusion from participation in FHCPs until the earlier of (1) the Court’s decision on the parties’ cross-motions for summary judgment, or (2) 30 days after oral argument on the summary judgment motions. HHS’s concession provides a critical, albeit temporary, window of stability for health care providers. Importantly, though, unless the Plaintiff states prevail and the declaration is struck down, the continued provision of gender-affirming care to minors and adolescents may subject providers to potential exclusion once these deadlines pass.

Plaintiff States Challenge the Kennedy Declaration Under the APA, Notice-and-Comment Rulemaking, and Other Grounds

In their motion for summary judgment, the Plaintiff States and the District of Columbia assert four primary arguments.

First, Plaintiffs argue that the Kennedy Declaration constitutes final agency action subject to APA review. Plaintiffs explain that the Kennedy Declaration satisfies the requirements to constitute final agency action because it (1) declares that gender-affirming care for minors is neither safe nor effective and fails to meet professional standards of care, and (2) once exclusion proceedings have been initiated, the Kennedy Declaration essentially forces HHS to exclude an individual or entity from FHCPs if they have provided gender-affirming care to children or adolescents, with no guarantee of reinstatement –– even in states where such care is legal and despite evidence-based practice guidelines endorsed by relevant professional associations. See Oregon v. Kennedy, No. 6:25-cv-2409, Plaintiffs’ Motion for Summary Judgment, ECF No. 32 (“Plaintiffs’ MSJ”), at 19-23.

Second, Plaintiffs argue that the Kennedy Declaration exceeds the Secretary’s statutory authority, arguing that “[n]o statute grants the Secretary of HHS authority to unilaterally declare that a treatment modality is not safe and effective or that providing that treatment is legally sufficient grounds for exclusion from the program.” Id. at 23. 

Plaintiffs first argue that the Kennedy Declaration exceeds HHS authority under 42 U.S.C. § 1395 as it fails to identify any statutory authority for its action, only a definitional regulation, 42 C.F.R. § 1001.2. See id. at 24. Plaintiffs further argue that the Secretary improperly interpreted federal health care statutes, which do not give the Secretary authority to make unilateral medical determinations or dictate a national standard of health care. See id. at 25. According to Plaintiffs, the Kennedy Declaration directly interferes with and usurps Plaintiff States’ regulation of the practice of medicine. See id at 24-25.

Plaintiffs further argue that the Kennedy Declaration exceeds HHS authority under 42 U.S.C. §  1320a-7 (which permits exclusion from FHCPs for services that fail to meet professionally recognized standards of health care) and § 1320c-5 (which requires providers to attest that the services they provide meet the professionally recognized standards of health care). Plaintiffs note that these statutes do not provide the Secretary authority to determine “professionally recognized standards,” as the Kennedy Declaration purports to do. They further argue that “professionally recognized standards of health care” has to do with the quality of delivery of a health care service, not its medical necessity for a given patient, meaning the statute could not possibly confer upon the Secretary authority to determine that all gender-affirming care for all children and adolescents categorically falls below the standard of care. See id. at 29-30.

Plaintiffs contend that the court need not reach the major questions doctrine, but if it did, the Kennedy Declaration would run afoul of the doctrine for two independent reasons: (1) it seeks to regulate the practice of medicine, which is the states’ purview, and (2) the major questions doctrine “counsels against reading these statutes to delegate the sweeping regulatory authority the Secretary seeks to exert,” particularly given that HHS has only excluded six hospitals from participation in FHCPs ever. See id. at 30-31.

Third, and importantly, Plaintiffs argue that the Kennedy Declaration seeks to establish a new rule that dramatically changes the agency’s policy regarding gender-affirming care, which was promulgated in violation of the notice-and-comment procedures set forth in the statutes that govern the Medicare and Medicaid programs. Plaintiffs contend that the Kennedy Declaration is rule or requirement that fails to adhere to APA rulemaking requirements and must be set aside. See id. at 32-40.

Fourth, Plaintiffs argue that The Kennedy Declaration is contrary to numerous provisions of the Medicaid Act by violating the terms of federally approved Medicaid state plans and violates the statutory requirement of a free choice of provider. See id. at 40-43.

Key Takeaways

While the “stay” on exclusion notices may offer a temporary delay, providers should be prepared for the possibility that HHS could resume taking action pursuant to the Kennedy Declaration as soon as late March, unless the States prevail and enforcement of the Kennedy Declaration is enjoined. Even then, close attention should be paid to the status of the Kennedy Declaration pending the inevitable appeal.

Reed Smith will continue to track this litigation and other developments impacting the provision of gender-affirming care to minors throughout the country. If you have any questions about the impact of these actions by HHS on your organization, please reach out to the authors of this client alert or to your health care attorneys at Reed Smith.