Shalala v. Guernsey Memorial Hospital

RESPONDENT:Guernsey Memorial Hospital
LOCATION:Phoenix Police Department

DOCKET NO.: 93-1251
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Sixth Circuit

CITATION: 514 US 87 (1995)
ARGUED: Oct 31, 1994
DECIDED: Mar 06, 1995

Kent L. Jones – on behalf of the Petitioner
Scott W. Taebel – on behalf of the Respondent

Facts of the case


Media for Shalala v. Guernsey Memorial Hospital

Audio Transcription for Oral Argument – October 31, 1994 in Shalala v. Guernsey Memorial Hospital

Audio Transcription for Opinion Announcement – March 06, 1995 in Shalala v. Guernsey Memorial Hospital

William H. Rehnquist:

The opinion of the court order number 93-1251, Shalala against Guernsey Memorial Hospital will be announced by Justice Kennedy.

Anthony M. Kennedy:

This case begins with a rather splendid accounting problem.

It arises from a dispute between a hospital which is Medicare provider and the Secretary of Health and Human Services.

The hospital is the Guernsey Memorial Hospital in Cambridge, Ohio.

Like many borrowers, when interest rates change, the Guernsey Memorial Hospital decided that it would refinance bonds that it had issued and so they retired the old bonds and purchased new ones.

Now, this gave it an accounting loss for the first year, or a group of years and that’s the question before us.

The accounting loss was for the refinancing cost of the bonds.

Everyone agrees that the loss is reimbursable as the Medicare covered loss to the extent that the hospital participates in the Medicare.

The argument is about whether the entire loss must be reimbursed upfront, which is what the hospital wants or whether it must be threaded with the life of the old bonds which is what the Secretary contends for.

Now, the accounting dispute intern involves a more significant legal question.

It is whether the Secretary’s regulations resolved the issue by requiring reimbursement and in accordance with generally accept with accounting principles or whether the Secretary is free to promulgate policy guidelines that depart from those principles.

Now, we agree with the Secretary, that the regulations do not require reimbursement according to the generally accepted accounting principles, nor must the regulations resolved every accounting issue in precise detail.

The guideline announced by the Secretary is valid and controls the adjudication of procedures followed to resolve these cost disputes.

The policy of the Secretary requiring that the cost be spread on over a period of years is a reasonable implementation of the Secretary’s duty to avoid distortions in the reimbursement process.

The Court Of Appeals for the Sixth Circuit reach the opposite conclusion.

So, its judgment must be reversed.

Justice O’Connor has filed a dissenting opinion, joined by Justices Scalia, Souter and Thomas.