Bowen v. Georgetown University Hospital

RESPONDENT: Georgetown University Hospital
LOCATION: Checker Gasoline Station

DOCKET NO.: 87-1097
DECIDED BY: Rehnquist Court (1988-1990)
LOWER COURT: United States Court of Appeals for the District of Columbia Circuit

CITATION: 488 US 204 (1988)
ARGUED: Oct 11, 1988
DECIDED: Dec 12, 1988

Richard J. Lazarus - on behalf of the Petitioner
Ronald N. Sutter - on behalf of the Respondents

Facts of the case


Media for Bowen v. Georgetown University Hospital

Audio Transcription for Oral Argument - October 11, 1988 in Bowen v. Georgetown University Hospital

William H. Rehnquist:

We will hear argument first this morning in No. 87-1097, Otis R. Bowen v. Georgetown University Hospital.

Mr. Lazarus, you may proceed whenever you are ready.

Richard J. Lazarus:

Thank you, Mr. Chief Justice, and may it please the Court:

This case concerns the authority of a Federal agency to promulgate a retroactive rule.

Our position can be simply stated.

A retroactive rule is generally valid unless the agency's decision to impose the rule retroactively is arbitrary and capricious.

Unlike the D.C. Circuit, we do not believe that the Administrative Procedure Act bars virtually all retroactive rules regardless of their reasonableness, nor do we believe that the Medicare Act prohibits all retroactive cost limit rules in every circumstance.

Instead, in our view, retroactive cost limit rules are valid in two different ways under the Medicare Act, each sufficient by itself to support the rule struck down by the lower court.

Sandra Day O'Connor:

Mr. Lazarus, I guess if we were to find that the Medicare Act itself prohibits retroactive rulemaking in this instance we wouldn't have to go on and reach the APA question, would we?

Richard J. Lazarus:

Technically the Court would not have to.

We would urge the Court to address both questions.

The Administrative Procedure Act issue is by far the more important issue decided by the lower court.

The D.C. Circuit is the most important circuit for administrative law questions, and it was decided by that court, and there's no reason why the Court logically has to address one rather than the other.

So the Court technically does not have to, but we would urge the Court to, and for the reasons in our brief, present, we don't absolutely think the Medicare Act itself does prohibit such rules.

The retroactive rule challenged in this case--

Harry A. Blackmun:

But still, the answer to Justice O'Connor's question is in the affirmative.

Richard J. Lazarus:


The Court does not have to, we would urge the Court.

The retroactive rule challenged in this case finds its genesis in the 1981 determination of the Secretary to make a wholly prospective change in the Medicare Act cost limit rules.

At the time relevant to this litigation, the Medicare Act allowed for reimbursement of providers of health services for the reasonable costs of their services to Medicare beneficiaries.

To that end, the Act authorized the Secretary to promulgate cost limit rules based on the estimates of the costs necessary for the efficient delivery of health services.

In 1981, the Secretary determined that his then-existing rule regarding wage costs promulgated in 1979 required adjustment.

The database upon which that rule was based did not accurately reflect differences in wage costs in different parts of the country.

As a result the rule unfairly disadvantaged certain providers in certain geographic areas.

Those providers were receiving inadequate reimbursement under the Medicare Act while other providers were receiving excessive reimbursement.

Because the Secretary considered the modifications necessary in the database to be of a minor technical nature, he published the final revised rule without first providing for public notice and comment.

Respondents filed suit, and in 1983 a Federal district court invalidated the 1981 rule on procedural grounds.

Antonin Scalia:

Mr. Lazarus, before you go further with the facts, I presume that the Secretary could have amended the rule in such a fashion as to eliminate the unfair disadvantage without eliminating what he regarded as the unfair advantage, in which case there would have been nobody to challenge the retroactive rule.

Richard J. Lazarus:

The Secretary could have approached it all kinds of different ways.

The question is--