Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-22-05249/USCOURTS-caDC-22-05249-0/pdf.json

Nature of Suit Code: 151
Nature of Suit: Overpayments under the Medicare Act
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 27, 2023 Decided July 23, 2024

No. 22-5249

BRIDGEPORT HOSPITAL, DOING BUSINESS AS YALE NEW 

HAVEN HEALTH, ET AL.,

APPELLEES

v.

XAVIER BECERRA, SECRETARY, UNITED STATES DEPARTMENT 

OF HEALTH AND HUMAN SERVICES,

APPELLANT

Consolidated with 22-5269

Appeals from the United States District Court

for the District of Columbia

(No. 1:20-cv-01574)

David L. Peters, Attorney, U.S. Department of Justice, 

argued the cause for appellant/cross-appellee. With him on the 

briefs were Brian M. Boynton, Principal Deputy Assistant 

Attorney General, Abby C. Wright, Attorney, Samuel R. 

Bagenstos, General Counsel, U.S. Department of Health and 

Human Services, Janice L. Hoffman, Associate General 

USCA Case #22-5249 Document #2065938 Filed: 07/23/2024 Page 1 of 18
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Counsel, and Susan Maxson Lyons, Deputy Associate General 

Counsel. 

Katrina A. Pagonis argued the cause for appellees/crossappellants. With her on the briefs was Kelly A. Carroll. 

Before: RAO and WALKER, Circuit Judges, and 

RANDOLPH, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge WALKER.

WALKER, Circuit Judge: Parts of the United States Code 

are notoriously short on details. When should the FCC license 

a radio station? When “public interest, convenience, and

necessity” require it. 47 U.S.C. § 309(a). What can FERC 

allow companies to charge for electricity transmission? Rates 

that are “just and reasonable.” 16 U.S.C. § 824d(a). What 

primary standards for particle pollution should the EPA set? 

Standards that are “requisite to protect the public health,” while 

allowing for “an adequate margin of safety.” 42 U.S.C. 

§ 7409(b)(1). 

But sometimes Congress speaks precisely. And it did so 

in the section of the Medicare Act at issue in today’s case. See 

id. § 1395ww. With remarkable specificity, this statutory 

section prescribes intricate formulas to reimburse hospitals for 

inpatient care. 

The Department of Health and Human Services does not 

like the result of those formulas. So it categorically inflated 

reimbursements for 25 percent of hospitals — at a cost of $245 

million more than Congress prescribed. Then, to balance the 

budget, HHS reduced reimbursements for all other hospitals. 

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The district court held that HHS cannot deviate in that way 

from Congress’s directive. Without vacating HHS’s action, the 

district court remanded the rule with instructions to recalculate 

the reimbursements. 

Like the district court, we hold that HHS exceeded its 

authority. Unlike the district court, we conclude that HHS’s 

unlawful action must be vacated.

I. Background

A. Medicare’s Reimbursement System

Medicare covers the health care of elderly and disabled 

Americans. Its coverage includes inpatient care. When 

hospitals provide that care, they receive Medicare 

reimbursements. See 42 U.S.C. § 1395d(a); see also Becerra 

v. Empire Health Foundation, 597 U.S. 424, 428-29 (2022). 

The Department of Health and Human Services calculates 

inpatient reimbursements according to formulas chosen by 

Congress. See Empire Health Foundation, 597 U.S. at 428-29. 

The formulas include predetermined fixed rates. The rates

approximate the amount of money “an efficiently run hospital, 

in the same region, would expend to treat a patient with the 

same diagnosis.” See id. at 429; see also 42 U.S.C. 

§ 1395ww(d).

To fully understand how all the Medicare formulas work, 

you would have to read the tens of thousands of words in 42 

U.S.C. § 1395ww. But the basics of the inpatient 

reimbursement system go something like this. Begin with a 

fixed rate for wages — the first component. See Cape Cod 

Hospital v. Sebelius, 630 F.3d 203, 206 (D.C. Cir. 2011). Then,

add a fixed rate for nonlabor costs — the second component. 

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See id. Finally, multiply that sum by a fixed rate assigned to 

each patient’s diagnosis — the third component. See id.; see 

also 42 U.S.C. § 1395ww(d)(2), (4).

Unlike the other components, the wages component 

depends on the hospital’s location. That’s because hospitals in 

different regions pay different wages. See Southeast Alabama 

Medical Center v. Sebelius, 572 F.3d 912, 915 (D.C. Cir. 

2009); Bridgeport Hospital v. Becerra, 589 F. Supp. 3d 1, 4 

(D.D.C. 2022); see also 42 U.S.C. § 1395ww(d)(3)(E)(i).

To account for those differences, Congress added the 

wage-index provision. See 42 U.S.C. § 1395ww(d)(3)(E)(i). It 

instructs HHS to adjust reimbursement rates according to a set

wage index. That index compares a region’s average wages to 

the nation’s average wages and assigns each hospital a set value 

reflecting the wage-related expenses of hospitals in its area as 

compared against the national average. Id.; see also Robert 

Wood Johnson University Hospital v. Thompson, 297 F.3d 273, 

276 (3d Cir. 2002). 

The wage index tags the national “wage index value” at 

1.0. See Bridgeport Hospital, 589 F. Supp. 3d at 6; id. at 5 n.3. 

A region with higher-than-average wages is assigned a value 

greater than 1.0 — and a hospital there gets a higher-thanaverage rate. See id. at 5 n.3. Likewise, a low-wage region is 

assigned a value less than 1.0 — and a hospital there gets a 

lower-than-average rate. See id.

In addition to prescribing all that, Congress passed two 

other provisions relevant to this case. First, it provided that 

annual fluctuations in the wage index must be budget neutral. 

42 U.S.C. § 1395ww(d)(3)(E)(i); see also Baystate Franklin 

Medical Center v. Azar, 950 F.3d 84, 87 (D.C. Cir. 2020). So 

anytime HHS increases reimbursements in one region, it must 

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decrease reimbursements in other regions. Baystate Franklin 

Medical Center, 950 F.3d at 90. Second, in an adjustments 

provision, Congress said HHS can make “adjustments” to 

inpatient reimbursements. 42 U.S.C. § 1395ww(d)(5)(I)(i).

B. The Wage-Index Redistribution Policy

In 2018, HHS decided that wage disparities among 

hospitals were too great. 84 Fed. Reg. 19,158, 19,394 (May 3, 

2019). It reasoned that high reimbursements for high-wage 

hospitals make it easy for them to maintain high wages. See id. 

Meanwhile, low reimbursements for low-wage hospitals 

prevent them from paying higher wages, which keeps them at 

the low end of the wage index. See id.; see also Bridgeport 

Hospital, 589 F. Supp. 3d at 6. HHS calls that a “downward 

spiral.” 84 Fed. Reg. at 19,394.

In response, HHS in 2019 “proposed inflating the wage 

index value of the hospitals in the lowest quartile.” Bridgeport 

Hospital, 589 F. Supp. 3d at 6; see also 84 Fed. Reg. at 19,394-

96. To be precise, HHS decided to raise each of these lowwage hospitals’ “wage index value” by half the difference 

between (1) their congressionally prescribed value and (2) the 

value of a hospital at the 25th percentile line for wages. 

Bridgeport Hospital, 589 F. Supp. 3d at 6. So if a hospital had

a congressionally prescribed value of 0.5, and if the 25th 

percentile of all hospitals had a value of 0.8, then HHS would

now give that hospital a value of 0.65 instead of 0.5. See id. 

To balance the budget, HHS also proposed “applying a 

budget neutrality factor” for all other hospitals. 84 Fed. Reg. 

at 19,672. So while the lowest quartile of hospitals would be 

over-paid by $245 million, all other hospitals will be underpaid by $245 million. 

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Later that year, HHS promulgated a final rule adopting its 

wage-index adjustment for fiscal years 2020 to at least 2023. 

See Final Rule, 84 Fed. Reg. 42,044, 42,048 (Aug. 16, 2019). 

A coalition of hospitals administratively challenged the rule. 

See Bridgeport Hospital, 589 F. Supp. 3d at 7. HHS certified 

the Hospitals to bring their challenge in federal court, which 

they did. See 42 C.F.R. § 405.1842(f); cf. Allina Health 

Services v. Price, 863 F.3d 937, 940 (D.C. Cir. 2017). 

The district court held that HHS lacks authority to create 

its redistribution policy and so granted summary judgment to 

the Hospitals. See Bridgeport Hospital, 589 F. Supp. 3d at 10-

15. But rather than vacating HHS’s rule, the district court 

remanded it to HHS with instructions to recalculate the 

challenged reimbursements. See Bridgeport Hospital v. 

Becerra, 2022 WL 4487114, at *3-4 (D.D.C. July 27, 2022). 

HHS appealed the merits. The Hospitals cross-appealed 

the remedy.1

 

II. The Statute Does Not Authorize HHS’s Wage-Index 

Redistribution Policy

The Department of Health and Human Services lacks the 

power to inflate reimbursement rates beyond the

1 Because HHS’s appeal of the district court’s remand order puts the 

order properly before us, see North Carolina Fisheries Association, 

Inc. v. Gutierrez, 550 F.3d 16, 19 (D.C. Cir. 2008) (“a limited 

exception” allows federal agencies to appeal remand orders), “we 

may also consider the Hospitals’ cross-appeal,” County of Los 

Angeles v. Shalala, 192 F.3d 1005, 1012 (D.C. Cir. 1999); see also

NAACP v. U.S. Sugar Corp., 84 F.3d 1432, 1436 (D.C. Cir. 1996) 

(“what matters for the purposes of our appellate jurisdiction is 

whether the district court’s decision — and not any particular party 

challenging it — is properly before us”).

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congressionally prescribed wage-index values for an entire 

quartile of hospitals. The wage-index provision does not 

authorize it. See 42 U.S.C. § 1395ww(d)(3)(E)(i). Neither 

does the adjustments provision. See id. § 1395ww(d)(5)(I)(i).

A. The Wage-Index Provision

The wage-index provision does not authorize HHS to 

depart from Congress’s established formula for a favored 

quartile of hospitals simply because HHS wants those favored 

hospitals to be able to pay their employees higher wages in the 

future. 

We begin by examining the text of the wage-index 

provision:

[T]he Secretary shall adjust the proportion, (as 

estimated by the Secretary from time to time) of 

hospitals’ costs which are attributable to wages and 

wage-related costs, of the [diagnosis-related group]

prospective payment rates computed under 

subparagraph (D) for area differences in hospital wage 

levels by a factor (established by the Secretary) 

reflecting the relative hospital wage level in the 

geographic area of the hospital compared to the

national average hospital wage level. Not later than 

October 1, 1990, and October 1, 1993 (and at least 

every 12 months thereafter), the Secretary shall update 

the factor under the preceding sentence on the basis 

of a survey conducted by the Secretary (and updated 

as appropriate) of the wages and wage-related costs of 

subsection (d) hospitals in the United States.

42 U.S.C. § 1395ww(d)(3)(E)(i) (emphases added). 

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As we have said before, the wage-index provision “is 

hardly a paragon of clarity.” Southeast Alabama Medical 

Center v. Sebelius, 572 F.3d 912, 915 (D.C. Cir. 2009). 

Nevertheless, the provision includes four textual clues relevant 

to our inquiry. Together, they persuade us that the wage-index 

provision does not authorize HHS’s wage-index redistribution 

policy.

1. “shall”

We begin with the unremarkable observation that 

Congress gave HHS a mandatory duty. It said HHS “shall 

adjust” wage-based reimbursements. 42 U.S.C. 

§ 1395ww(d)(3)(E)(i). While the word “may” is permissive 

and signals discretion, the word “shall” generally signals a 

mandatory duty. Kingdomware Technologies, Inc. v. United 

States, 579 U.S. 162, 171-72 (2016); see also Antonin Scalia 

& Bryan A. Garner, Reading Law: The Interpretation of Legal 

Texts, 112-13 (2012). And where a statute uses “shall” in some 

provisions and “may” in others, as § 1395ww does here, 

Congress likely used “shall” to “impose[ ] a mandatory duty” 

that is “impervious to discretion.” Maine Community Health 

Options v. United States, 590 U.S. 296, 310-11 (2020) (cleaned 

up). In other words, HHS does not possess unlimited and 

directionless discretion.

2. “by a factor”

Congress further restrained HHS by specifying that it must 

make the annual wage-based adjustment “by a factor.” 42 

U.S.C. § 1395ww(d)(3)(E)(i). Consider that Congress could 

have told HHS to adjust reimbursements without specifying 

how to calculate the adjustment. Or Congress could have 

allowed HHS to calculate the adjustment however HHS 

thought “reasonable and necessary” — a phrase used 

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elsewhere in this statute. See id. § 1395ww(b)(4)(A)(i). Either 

of those options might well have conferred the broad discretion 

HHS claims. But instead, Congress authorized HHS to adjust 

the reimbursement rate only according to a specific, calculated 

“factor.” 

3. “the”

That factor must “reflect[ ] the relative hospital wage level 

in the geographic area of the hospital compared to the national 

average hospital wage level.” Id. § 1395ww(d)(3)(E)(i)

(emphases added). By using the definite article “the” before 

“relative hospital wage level” and “national average hospital 

wage level,” Congress specified that each of these metrics has 

a single, definite, discernable value. Id.; see Nielsen v. Preap, 

586 U.S. 392, 407-08 (2019); United States v. Little, 78 F.4th 

453, 457 (D.C. Cir. 2023). So the wage-index factor must 

“reflect” the calculated difference in two objective, discernable

numbers.

4. “on the basis of”

In addition, the factor must be updated “on the basis of a 

survey” of each hospital’s “wages and wage-related costs.” 42 

U.S.C. § 1395ww(d)(3)(E)(i). While terms such as “‘based on’

do not necessarily mean ‘rest solely on,’” they do prohibit a 

governmental actor from taking actions that “abandon” or 

“supplant” the authorized scheme or decisional criteria. 

Nuclear Energy Institute, Inc. v. EPA, 373 F.3d 1251, 1269 

(D.C. Cir. 2004) (cleaned up). So the annual adjustment to the 

wage-index factor must be anchored to the survey of wages, 

and not to other policy factors that would abandon or supplant 

the data-driven metric prescribed by Congress. 

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5. Putting the Four Textual Clues Together

Based on those four textual clues, we conclude that the 

wage-index provision imposes (1) a mandatory duty on HHS 

to make the annual wage adjustment, (2) based on a uniform 

factor (3) comprised of definite, objective data, (4) drawn from 

a survey of each hospital’s wages and reflecting the disparities 

between regional and national wages. And that simply is not 

what HHS has done here. Its proposed policy distorts the 

uniform factor, jettisons the definite, objective data, and 

departs from the actual disparities between regional and 

national wages. And it does so in spite of a mandatory duty to 

follow the formula Congress chose. 

Of course, HHS has some discretion in how it conducts the 

survey or compiles the data for calculation. See Anna Jacques 

Hospital v. Burwell, 797 F.3d 1155, 1164-65 (D.C. Cir. 2015). 

But the wage-index provision requires “that the wage index 

must be uniformly determined and applied.” Atrium Medical 

Center v. HHS, 766 F.3d 560, 569 (6th Cir. 2014). It also must 

“encompass only wages and wage-related costs and must 

reasonably reflect the relative hospital wage level in a given 

area.” Id. (cleaned up); see also Anna Jacques Hospital, 797 

F.3d at 1158; Methodist Hospital of Sacramento v. Shalala, 38 

F.3d 1225, 1230 (D.C. Cir. 1994). Once that uniform 

calculation of the comparative wage rates has been calculated, 

nothing in the wage-index provision permits HHS to change 

those rates simply because it would rather give preferred

hospitals more money and disfavored hospitals less.

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B. The Adjustments Provision

HHS offers a back-up argument. It points to an 

adjustments provision that applies to inpatient reimbursements: 

HHS “shall provide by regulation for such other 

exceptions and adjustments to such payment 

amounts under this subsection as the Secretary deems 

appropriate.” 

42 U.S.C. § 1395ww(d)(5)(I)(i) (emphasis added). 

To be sure, this adjustments provision does some real 

work. It allows HHS to “fill[ ] ” the “space that the specific 

provisions do not occupy.” Adirondack Medical Center v. 

Sebelius, 740 F.3d 692, 699 (D.C. Cir. 2014) (interpreting 

“adjustment” in § 1395ww(d)(5)(I)(i)). So, whereas “all else 

equal, silence indicates a lack of authority,” Loper Bright

Enterprises v. Raimondo, 45 F.4th 359, 374 (D.C. Cir. 2022) 

(Walker, J., dissenting), majority op. rev’d, 144 S. Ct. 2244, 

2273 (2024), the adjustments provision here specifically 

authorizes regulatory “adjustments.”2

But the adjustments provision has limits, beginning with 

the limits of the word “adjustments.” We have said that 

“similar limits inhere in the term ‘adjustments’ to those the 

Supreme Court found in the word ‘modify.’” Amgen, Inc. v. 

2 Section 1395ww(d)(5)(I)(i) contemplates both an “exceptions”

authority and an “adjustments” authority. An exception is a special 

case that departs from a generally applicable rule. That, according 

to HHS, is not this case. Here, HHS called its redistribution plan an 

“adjustment” and invoked only its “adjustments” authority. See HHS

Br. 14-24; see also 84 Fed. Reg. 42,044, 42,048, 42,328 (Aug. 16, 

2019). We therefore analyze the redistribution policy only as an 

“adjustment.” 

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Smith, 357 F.3d 103, 117 (D.C. Cir. 2004) (emphases added); 

see also Biden v. Nebraska, 143 S. Ct. 2355, 2368-69 (2023) 

(“modify”); MCI Telecommunications Corp. v. AT&T, 512 

U.S. 218, 225 (1994) (“modify”). 

Those cases teach that the terms “modify” and “adjust” 

mean “to change moderately or in minor fashion.” MCI, 512 

U.S. at 225. Each term connotes “increment or limitation.” Id. 

So the adjustments provision in § 1395ww(d)(5)(I)(i) is a 

“subtle device” with “limits,” Nebraska, 143 S. Ct. at 2368, 

2370-71 (cleaned up), that can’t be used for a “severe 

restructuring of the statutory scheme” or a “substantial 

departure from the default amounts,” Amgen, 357 F.3d at 117. 

HHS’s wage-index adjustment exceeds those limits. 

To begin with, the wage-index adjustment does not fill a 

gap left by statutory silence. Far from it. The statute already

instructs how to account for geographic differences in wages. 

See 42 U.S.C. § 1395ww(d)(3)(E)(i). 

Indeed, the Medicare Act prescribes formulas for inpatient 

reimbursements in excruciating detail. For a flavor of that 

detail, read the 1,300-word formula for extra inpatient 

reimbursements to hospitals with “indirect costs of medical 

education.” Id. at § 1395ww(d)(5)(B). Or the 500-word 

formula for extra inpatient reimbursements to “small rural 

hospital[s].” Id. at § 1395ww(d)(5)(G). Or the 1,900-word 

formula for extra inpatient reimbursements to hospitals with a 

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“disproportionate number of low-income patients.” Id. at 

§ 1395ww(d)(5)(F). 

We could go on and on, because § 1395ww(d) itself goes 

on and on.

3

 Our point, however, is not nearly as complicated 

as the statute. It is simply this — in § 1395ww(d), Congress 

did not paint with broad strokes while delegating all the hard 

decisions to an agency. Section 1395ww(d) is instead a regime 

of highly specific formulas. And HHS does not “complement” 

§ 1395ww(d) when it jettisons one of those formulas. 

Adirondack, 740 F.3d at 699. Rather, HHS “supplant[s]” it 

“with a new regime entirely.” Nebraska, 143 S. Ct. at 2369. 

Furthermore, HHS’s use of the adjustments provision 

“does not remotely resemble” any use of that provision held 

valid by this or any other court in a case identified by HHS. Id.

at 2370. To the contrary, HHS has identified no time when it 

has relied on the adjustments provision to override a statutory 

command as specific as the congressionally required formula 

in the wage-index provision. Cf. Shands Jacksonville Medical 

Center v. Burwell, 139 F. Supp. 3d 240, 260 (D.D.C. 2015) (the 

adjustments “provision does not give the Secretary carte 

blanche to override the rest of the Act”). 

In addition, the redistribution policy is neither low in cost 

nor narrow in scope. Rather, it redistributes $245 million in 

Medicare funding to 25 percent of reimbursed hospitals. And 

so far as we can tell, the supposed need for a redistribution 

might continue as long as there are geographical differences in 

wages — differences that are not going away any time soon. 

Those three factors — expense, scope, and longevity — add up 

3 So does the rest of the section on inpatient reimbursement formulas. 

At nearly 60,000 words, § 1395ww is longer than many books. See, 

e.g., F. Scott Fitzgerald, The Great Gatsby (1925).

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to a “substantial departure from the default amounts” required 

by the (original) wage-index provision. Id.; see also Nebraska, 

143 S. Ct. at 2368-69.

In HHS’s defense of its (unprecedented, expensive, broad, 

and possibly never-ending) change to congressional policy, 

HHS says this case is like Adirondack Medical Center v. 

Sebelius, 740 F.3d 692 (D.C. Cir. 2014). There, Congress 

expressly authorized a specific adjustment for a group of 

hospitals that operated under what’s called the “federal rate” of 

reimbursements. Id. at 694. We held that HHS could give a 

similar bump in funding to a different group of hospitals, which 

were classified under the “hospital-specific rate” of 

reimbursements. Id. at 695. That’s because HHS could “fill[ ] ” 

the silence in the statute about whether or not to provide an 

adjustment to the “hospital-specific rate” hospitals. Id. at 699. 

So the congressionally ordered adjustment and the HHScreated adjustment complemented each other, and the latter 

filled a space that the former did not occupy. See id. 

Here, in contrast, there is no silence. Instead, Congress 

created a detailed reimbursement scheme that reflects actual 

wages in different regions. HHS then swept aside the scheme’s 

congressionally required formula because HHS determined 

that the scheme should serve a different policy goal 

altogether — namely, increasing wages at the lowest-wage 

hospitals. That is not in any sense a reimbursement 

“adjustment,” but an entirely different policy.

Adirondack did not uphold that kind of change to an 

express congressional policy, nor can we do so today.4

 We 

4 Also, Adirondack “rest[ed] on Chevron deference.” 740 F.3d at

696. But even before the Supreme Court overruled Chevron, see 

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hold instead that the adjustments provision in

§ 1395ww(d)(5)(I)(i) does not authorize HHS to set aside the 

congressionally required formula in the wage-index provision, 

§ 1395ww(d)(3)(E)(i). See Nebraska, 143 S Ct. at 2368-71; 

see also American Hospital Association v. Becerra, 596 U.S. 

724, 737 (2022) (rejecting HHS’s expansive interpretation of 

its “adjustment authority” because that “interpretation . . .

would eviscerate such significant aspects of the statutory 

text”). 

III. The Rule Should Be Vacated

When an agency’s action is unlawful, “vacatur is the 

normal remedy.” Allina Health Services v. Sebelius, 746 F.3d 

1102, 1110 (D.C. Cir. 2014). That’s because Congress directed 

us to “hold unlawful and set aside agency action” that is “not 

in accordance with law[.]” 5 U.S.C. § 706(2)(A). “[T]o ‘set 

aside’ a rule is to vacate it.” Corner Post, Inc. v. Board of 

Governors, No. 22-1008, slip op. at 6 (2024) (Kavanaugh, J. 

concurring); see also id. at 5 (“The APA prescribes the same 

‘set aside’ remedy for all categories of ‘agency action’ . . . .”). 

Nevertheless, our court has sometimes remanded without 

vacating the agency’s action. That is an “exceptional remedy.” 

American Great Lakes Ports Association v. Schultz, 962 F.3d 

510, 519 (D.C. Cir. 2020). And our precedents allow it only if 

an agency’s error is “curable.” U.S. Sugar Corp. v. EPA, 844 

Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244, 2273 (2024), 

Chevron would not have applied to this case. Here, HHS has neither 

sought Chevron deference nor identified any ambiguity that it used 

the adjustments provision to fill. Shands Jacksonville Medical 

Center v. Burwell — a district court precedent cited by HHS — is 

distinguishable for the same reason. See 139 F. Supp. 3d 240, 251

(D.D.C. 2015) (proceeding under “the two-step framework set forth 

in” Chevron). 

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F.3d 268, 270 (D.C. Cir. 2016); see also Allied-Signal, Inc. v. 

U.S. Nuclear Regulatory Commission, 988 F.2d 146, 151 (D.C. 

Cir. 1993) (allowing the remedy when “there is at least a 

serious possibility that the [agency] will be able to substantiate 

its decision on remand”).5

Because an agency can’t “cure” the fact that it lacks 

authority to take a certain action, remand-without-vacatur is 

unavailable here. HHS was powerless to adopt this wage-index 

adjustment, which means HHS will not be able to justify its 

decision on other grounds. Therefore, the district court should 

have vacated the rule rather than ordering remand without 

vacatur.6 

IV. The Hospitals Should Receive an Award of Interest

The Medicare statute provides that when hospitals seek 

judicial review of HHS’s decisions, “the amount in controversy 

shall be subject to annual interest,” which is then “to be 

5 The conflict between 5 U.S.C. § 706(2)(A)’s command and our 

creation of remand without vacatur has been noted in more than one 

separate opinion. See Checkosky v. SEC, 23 F.3d 452, 491 (D.C. Cir. 

1994) (Randolph, J., separate opinion) (“Setting aside means 

vacating; no other meaning is apparent.”); see also Comcast Corp. v. 

FCC, 579 F.3d 1, 10-12 (D.C. Cir. 2009) (Randolph, J., concurring); 

Milk Train, Inc. v. Veneman, 310 F.3d 747, 757-58 (D.C. Cir. 2002) 

(Sentelle, J., dissenting). 

6 The Hospitals took a confusing tack when arguing vacatur before 

the district court. They sought vacatur of the budget-neutrality 

adjustment (which reduced their respective reimbursements) without 

seeking vacatur of the wage-index adjustment. See Bridgeport 

Hospital v. Becerra, 2022 WL 4487114, at *3 (D.D.C. July 27, 

2022). But because the budget-neutrality adjustment existed only as 

a subsidiary component of the wage-index redistribution policy, the 

two adjustments are inextricably intertwined.

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awarded by the reviewing court in favor of the prevailing 

party.” 42 U.S.C. § 1395oo(f)(2). The Hospitals claim that the 

district court should have ordered an award of interest because 

they were the prevailing parties below. 

For its part, HHS does not dispute that the Hospitals were 

the “prevailing parties.” Instead, it argues that an award of 

interest is premature until the precise back-payments have been 

calculated. 

Because the Medicare statute requires a “reviewing court” 

(not the agency) to “award[]” interest, we agree with the 

Hospitals. Id. § 1395oo(f)(2); see also Tucson Medical Center 

v. Sullivan, 947 F.2d 971, 980-83 (D.C. Cir. 1991). It does not 

matter whether back-payments have been calculated. The 

statute requires a judicial order directing the future award of 

interest whenever such calculations have been finalized. So on 

remand, the district court should add an award of interest to its 

order.7

 

V. Conclusion

Because HHS cannot manipulate wage-index rates up and 

down in a way that picks winners and losers by sweeping aside 

the congressionally required formula, HHS’s wage-index 

redistribution policy is unlawful. And because the unlawful 

policy is not curable on remand, HHS’s action must be vacated. 

7 The order need not calculate the exact interest. It is enough to 

simply state that on the remand to HHS, HHS must pay the prevailing 

parties interest on increased reimbursements in accordance with 42 

U.S.C. § 1395oo(f)(2). See, e.g., Alegent Health-Immanuel Medical 

Center v. Sebelius, 917 F. Supp. 2d 1, 3-4 (D.D.C. 2012).

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We therefore affirm in part, reverse in part, and remand to 

the district court for further proceedings consistent with this 

opinion. 

So ordered.

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