Thomas Jefferson Univ. v. Shalala, 512 U.S. 504 (1994)

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504

OCTOBER TERM, 1993

Syllabus

THOMAS JEFFERSON UNIVERSITY, dba THOMAS JEFFERSON UNIVERSITY HOSPITAL v. SHALALA, SECRETARY OF HEALTH AND HUMAN SERVICES

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

No. 93-120. Argued April 18, 1994—Decided June 24, 1994

Medicare reimburses provider hospitals for the costs of certain educational activities, including the cost of graduate medical education (GME) services furnished by the hospital or its affiliated medical school, 42 CFR 413.85, 413.17(a). However, reimbursement of educational activities is limited by (1) an "anti-redistribution" principle, providing that the Medicare program's intent is to support activities that are "customarily or traditionally carried on by providers in conjunction with their operations," but that the program should not "participate in increased costs resulting from redistribution of costs from educational institutions . . . to patient care institutions," 413.85(c) (emphasis added); and (2) a "community support" principle, providing that Medicare will not assume the cost for educational activities previously borne by the community, ibid. Petitioner teaching hospital, a qualified Medicare provider, sought no reimbursement for its nonsalary-related (administrative) GME costs before 1984, and those costs were borne by its affiliated medical college. In fiscal year 1985, the fiscal intermediary disallowed the hospital's claim for reimbursement for such costs, but the Provider Reimbursement Review Board reversed in part, allowing reimbursement. Respondent Secretary reinstated the fiscal intermediary's ruling, concluding that reimbursement for the nonsalary GME costs borne in prior years by the medical college would constitute an impermissible redistribution under 413.85(c). As an independent ground, she concluded that the community support principle also barred reimbursement. The District Court and the Court of Appeals affirmed.

Held: The Secretary's interpretation of the anti-redistribution principle is reasonable. Because its application suffices to deny reimbursement of the disputed costs in this case, there is no need to decide the validity of the Secretary's interpretation of the community support language. Pp. 512-518. (a) As petitioner's challenge is to the Secretary's interpretation of her own regulation, the Secretary's interpretation must be given controlling effect unless it is plainly erroneous or inconsistent with the regulation. Broad deference is all the more warranted here because the

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