Regions Hospital v. Shalala

PETITIONER: Regions Hospital
LOCATION: The White House

DOCKET NO.: 96-1375
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Eighth Circuit

CITATION: 522 US 448 (1998)
ARGUED: Dec 01, 1997
DECIDED: Feb 24, 1998

Lisa Schiavo Blatt -
Lisa S. Blatt - Department of Justice, argued the cause for the respondent
Ronald N. Sutter - Argued the cause for the petitioner

Facts of the case

Under the Medicare Act a hospital may obtain a reimbursement for certain graduate medical education (GME) programs for interns and residents by preparing certain reports. The GME Amendment, section 9202(a), of the Medicare and Medicaid Budget Reconciliation Amendments of 1985 directs the Secretary of Health and Human Services to determine, for a hospital's cost reporting period starting during fiscal year 1984, the amount "recognized as reasonable" for GME costs. The Amendment then directs the Secretary to use the 1984 amount, adjusted for inflation, to calculate a hospital's GME reimbursement for subsequent years. The Secretary's "reaudit" regulation permits a second audit of the 1984 GME costs to ensure accurate reimbursements in future years. A reaudit of Regions Hospital significantly lowered the Hospital's allowable 1984 GME costs. Subsequently, the Hospital challenged the validity of the reaudit rule. Ultimately, the District Court granted the Secretary summary judgment, concluding that the rule reasonably interpreted Congress' prescription and that the reauditing did not impose an impermissible "retroactive rule." The Court of Appeals affirmed.


Is the Secretary of Health and Human Services' "reaudit" rule a reasonable interpretation of the GME Amendment of the Medicare and Medicaid Budget Reconciliation Amendments of 1985?

Media for Regions Hospital v. Shalala

Audio Transcription for Oral Argument - December 01, 1997 in Regions Hospital v. Shalala

William H. Rehnquist:

We'll hear argument first this morning in Number 96-1375, Regions Hospital v. Donna Shalala.

Mr. Sutter.

Ronald N. Sutter:

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

This case presents a straightforward question of statutory construction.

At issue is the meaning of 42 U.S.C. 1395ww(h)(2)(A), which is quoted on page 19 of petitioner's opening brief.

As the Sixth Circuit correctly concluded in the Toledo case, this is a simple statute.

It directs the Secretary to do one thing.

It directs the Secretary to determine an average, nothing more.

The numerator in this case is the amount recognized as reasonable under this subchapter for GME costs for 1984.

The statute itself does not direct the Secretary to determine the numerator, and the reason why is clear from the words, under this subchapter.

The statute does not say, under this section, or under this paragraph, but it says, under this subchapter, and there was already a longstanding process in place for determining the amount recognized as reasonable for each year, including 1984.

William H. Rehnquist:

Well, determine I think could quite reasonably be read to mean, use some discretion, or judgment.

I mean, it seems to me if they just meant calculate they would have said calculate.

Ronald N. Sutter:

Well, I think when you're referring to an average, determine and calculate are essentially equivalent, and there are, Mr. Chief Justice, within 1395ww(h) other provisions where it's clear that Congress did intend to confer significant authority on the Secretary.

One such provision is 1395ww(h)(2)(E), which is on page 3 of petitioner's appendix.

I will use ellipses here, but there it says, in the case of a hospital that did not have an approved medical residency training program, ellipses, during fiscal year 1984, the Secretary shall, ellipses, provide for such approved FTE resident amount as the Secretary determines to be appropriate.

Now, this is language that does clearly grant the secretary discretion.

Here we have activist language.

In (a), the provision we're dealing at... with, the Congress was telling the Secretary, divide A by B, divide one number by another.

There is also, if--

Antonin Scalia:

Mr. Sutter--

--The problem I have with this provision is what it is that the word recognized modifies.

You win, it seems to me, if it is to be read, that the average amount recognized as... recognized as reasonable under this subchapter.

Does under this subchapter go with recognized?

If it does, I think your case is strengthened.

But it could also be read, the average amount recognized as reasonable under this subchapter.

You understand what I'm saying?

If it has to have been recognized under this subchapter, you're... the text obviously refers to a 19... to a prior determination.

Ronald N. Sutter:


Antonin Scalia:

It has already been recognized.