Good Samaritan Hospital v. Shalala, 508 U.S. 402 (1993)

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certiorari to the united states court of appeals for the eighth circuit

No. 91-2079. Argued March 22, 1993—Decided June 7, 1993

Title 42 U. S. C. 1395f(b)(1) requires the Secretary of Health and Human

Services to reimburse the lesser of the "customary charges" or the "reasonable cost[s]" of providers of health care services to Medicare beneficiaries, while 1395x(v)(1)(A) empowers the Secretary to issue regulations setting forth the methods to be used in computing reasonable costs, which may include the establishment of appropriate cost limits. Regulations issued pursuant to that authority impose such limits based on a range of factors designed to approximate the cost of providing general routine patient service, but permit various exceptions, exemptions, and adjustments to the limits. After their costs during the relevant period exceeded the corresponding cost limits, petitioner providers filed an administrative appeal challenging the limits' validity. In ruling for petitioners on expedited review, the District Court adopted their interpretation that 1395x(v)(1)(A)(ii) (clause (ii))—which requires the regulations to "provide for the making of suitable retroactive corrective adjustments where, for a provider of services for any fiscal period, the aggregate reimbursement produced by the methods of determining costs proves to be either inadequate or excessive"—entitled them to reimbursement of all costs they could show to be reasonable, regardless of whether the costs surpassed the amount calculated under the regulations' cost limit schedule. In reversing, the Court of Appeals reasoned that petitioners' request for adjustments would amount to a retroactive change in the methods used to compute costs that would be invalid under Bowen v. Georgetown Univ. Hospital, 488 U. S. 204. Instead, the court adopted the Secretary's interpretation that clause (ii) permits only a year-end book balancing to reconcile the actual "reasonable" costs under the regulations with the interim, advance payments that the statute requires to be made during the year based on the provider's approximate, anticipatory estimates of what its reimbursable costs will be.

Held: Clause (ii) does not require the Secretary to afford petitioners an opportunity to establish that they are entitled to reimbursement for costs in excess of the limits stated in the regulations. Pp. 409-420.

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