Document: 514 U.S. 87115 S.Ct. 1232131 L.Ed.2d 106 Donna E. SHALALA, Secretary of Health and Human Services, Petitionerv.GUERNSEY MEMORIAL HOSPITAL. No. 93-1251. Supreme Court the United States Argued Oct. 31, 1994. Decided March 6, 1995. Syllabus * After refinancing its bonded debt resulted in a "defeasance" loss for accounting purposes, respondent health care provider (hereinafter Hospital) determined that it was entitled to Medicare reimbursement part loss. Although Hospital contended should receive full year refinancing, fiscal intermediary agreed with petitioner Services had be amortized over life Hospital's old bonds accord an informal guideline, PRM § 233. The District ultimately sustained Secretary's position, but Appeals reversed. Interpreting regulations, 42 CFR pt. 413, require according generally accepted principles (GAAP), latter court concluded that, because 233 departed from GAAP, effected substantive change regulations void by reason failure issue accordance notice-and-comment provisions Administrative Procedure Act (APA). Held: 1. is not required adhere GAAP making determinations. Pp. __. (a) do GAAP. position 413.20(a)—which specifies, inter alia, "[t]he cost providers maintain sufficient financial records . proper determination costs," "[s]tandardized definitions, accounting, statistics, reporting practices are widely hospital related fields followed"—ensures existence adequate does dictate own determinations supported regulation's text overall structure therefore deference as reasonable regulatory interpretation. Moreover, 413.24—which requires provider's data based on accrual basis accounting—does mandate since only form accounting. In fact, reflects different method. (b) reading her consistent statute, which adherence merely instructs establishing methods determining reimbursable costs, she "consider, among other things, applied national organizations or established prepayment (which have developed such principles) .," U.S.C. 1395x(v)(1)(A). Nor there any suggesting has statutory duty promulgate address every conceivable question process equitable reimbursement. To extent 1395x(v)(1)(A)'s broad delegation authority imposes rule-making obligation, one without doubt discharged issuing comprehensive intricate wide range questions relying upon elaborate adjudicative resolve particular details specifically addressed regulation. APA all specific applications rule evolve further, more precise rules rather than adjudication, mode benefits both rulemaking adjudication exercise mandate. P. 7-8. 2. follow invalidate guideline. It guideline interpretive defeasance losses amortized. means implementing statute's program bear neither nor less fair share 1395x(v)(1)(A)(i), requirement actual services rendered beneficiaries during given reimbursed, 413.9. As such, prototypical example issued agency advise public construction statutes administers. Interpretive notice-and-comment, although they also force effect law accorded weight adjudicatory process. would if adopted new inconsistent existing regulations. However, bind make reimbursements depart requiring bond amount An examination nature objectives GAAP—which necessarily parallel economic reality, encompasses changing conventions, rules, procedures define practice at point time, consists multiple sources, number might present conflicting treatments question—illustrates unlikelihood choose impose herself go through time-consuming whenever disagreed announcements changes wished them. 996 F.2d 830, (CA 6 1993), KENNEDY, J., delivered opinion Court, REHNQUIST, C.J., STEVENS, GINSBURG, BREYER, JJ., joined. O'CONNOR, filed dissenting opinion, SCALIA, SOUTER, THOMAS, Kent L. Jones, Washington, DC, petitioner. Scott W. Taebel, Columbus, OH, respondent. Justice KENNEDY Court. 1 this case challenges Services. What begins conventional problem raises significant respecting interpretation certain issues detail. 2 dispute concerns whether relied invalid did it. We hold valid rule. 3 Respondent Guernsey Memorial 1972 1982 fund capital improvements. 1985, refinanced bonds. will result estimated $12 million saving service transaction loss, sometimes referred advance refunding $672,581. about $314,000 total allowable issue, timing is. contends year, refinancing; must 4 See U.S.Dept. Provider Reimbursement Manual (Mar. 1993) (PRM). purport regulation been pursuant Act. Review Board disagreed, see App. Pet. Cert. 54a, Administrator Care Financing Administration reversed Board's decision, id., 40a. sustained, v. Sullivan, 796 F.Supp. 283 (SD Ohio 1992), reversed, HHS, 830 (CA6 1993). agreement Hospital, interpreted contain "flat statement 'are followed' " reimbursements. Id., 833 (quoting 413.20(a)). willing accept argument 233's treatment "squares reality," F.2d, 834, "effects [and is] agency's comply adopting it." 832. Once ruled controlled accrual, followed Secretary, correct entire recognized refinancing. 5 granted certiorari, 511 ----, 114 1395, 128 69 (1994), now reverse. II Under scheme here, participating hospitals furnish reimbursed intermediaries. §§ 1395g 1395h (1988 Supp. V). Hospitals "reasonable defined statute "the actually incurred, excluding therefrom incurred found unnecessary efficient delivery needed services." authorizes "establishing method used" directing computing" amounts. Ibid. 7 promulgated, updated annual basis, Good Samaritan Shalala, 508 113 2151, 2155, 124 368 (1993). relevant can within 413 two these 413.20(a) 413.24, counters does. A. Section provides follows: 8 "The statistical costs payable under program. Standardized followed. Changes systems order determine Essentially involve use available institution's accounts, usually maintained, arrive payment beneficiaries." 9 Assuming, arguendo, practices" refer nevertheless just beginning, end, inquiry. decisive still remains: Who "follow[s]" what purposes? view ensures persuaded correct. 10 sets forth directives ordered progression. first sentence directs costs. say conclusive second makes clear standardized third reassures their recordkeeping recover when raw data. That distinction between hand other. last confirms distinction, contemplates basic information organized beginning "arrive[s] This far saying definition measure 11 essential requirements confirmed organization Subpart A introductory principles. B, containing here question, "Accounting Records Reports." logical conclusion B concern reimbursement, closer inspection reveals case. 413.20 section "Financial reports." addition 413.20(a), paragraphs govern "[f]requency reports," "[r]ecordkeeping providers," "[c]ontinuing requirements," "[s]uspension payments [who] records." Not until following Subparts matters considered. C "Limits Cost Reimbursement," D "Apportionment [of costs]," E "Payment Providers," F H categories. sequence Part interpreting meaning. 12 true, said, "does exist vacuum" scheme. 835. But fact step toward step. hardly surprising requirements. 13 regulations' description intermediary's role underscores direct consult assist applying generate claims 413.20(b), involves handing reports. permit initial acceptance claims, unless obvious errors inconsistencies, expedite payment. 413.64(f)(2). When subsequent, thorough audit follows, may establish adjustments necessary. Ibid.; 421.100(a), (c). well ultimate 14 reimburse interpretation, we defer Thomas Jefferson Univ. 512 2381, 2386, 129 405 (1994); Martin Occupational Safety Comm'n, 499 144, 151, 111 1171, 1176, 117 (1991) ("Because complex circumstances calls unique expertise policymaking prerogatives, presume power authoritatively interpret component delegated lawmaking powers"); Lyng Payne, 476 926, 939, 2333, 2341, 90 921 (1986) ("agency's substantial deference"). 15 argues even 413.24 contention need detain us long. "revenue reported period earned, regardless collected, expenses paid." 413.24(b)(2). accounting; approach reflect Accounting Principles (APB) Opinion 26, &Par; 5-8, reprinted 64-66 (describing alternative recognizing losses, including 233). not, simply requirement, 16 statute. Rather computing 17 either default specification, 1395x(v)(1)(A), discharged. U.S., ---- n. 13, S.Ct., 2161 2162. questions. detail, addressing limits apportioning services, numerous 1993, consumed some 620 pages Code Federal Regulations. 18 relies includes right review Board, and, instances, judicial federal district final action. 1395oo(f)(1); Bethesda Assn. Bowen, 485 399, 400-401, 108 1255, 1256-1257, 99 460 (1988). before way, "could exact calculating," course, render them invalid, "methods estimation costs" "generalizations [that] fail yield numbers." Samaritan, supra, 2161. adjudication. NLRB Bell Aerospace Co., 416 267, 94 1757, 40 134 (1974); SEC Chenery Corp., 332 194, 67 1575, 91 L.Ed. 1995 (1947). is, our view, III 19 believe ensure capital-related manner 1395x(v)(1)(A)(i) ("[T]he necessary efficiently delivering covered individuals [Medicare] borne so covered, respect [Medicare]"). promulgated authorizing respondent's "appropriate helpful maintaining operation patient facilities," 413.9(b)(2) (1993); 413.130-413.157, "[n]ecessary interest" associated indebtedness, 413.153(a)(1); 413.130(a)(7) (g). unaddressed otherwise subject once spread years. amortization. 20 one-time recognition better where how best portray investors appreciate company's APB 4-5, 64, amortization appropriate share. calculate much attributable 413.5(a), 413.9(a) (c)(3) (1993), entails calculating proportion were patients, 413.50 413.53. ratio "Medicare utilization." 49a. allocating Medicare, guard against various contingencies. percentage hospital's patients year; drop altogether. Either cause utilization fluctuate. Given undoubted constant, strive assure provided time spread, avoid distortions yearly becomes ascertainable, able allocate accuracy proportionate Proper timing. Should span years, later leads distortion. If rate drops altogether up front services. cross-subsidization, 50a, forbids. 1395x(v)(1)(A)(i). 21 implements ban cross-subsidization way illustrated Administrator's application facts "did relate exclusively [but were] closely [patient in] years original term extended." Because cross-subsidization: 22 prohibition [citing provision codified 1395x(v)(1)(A) ], those 50a (footnote omitted). 23 "By amortizing match relates, protected utilization, likewise assured adequately increases. Further, future then having out Program years." 49a 24 1395x(v)(1)(A)(i); 413.9 'issued administers.' Chrysler Corp. Brown, 441 281, 302, 1705, 1717, 60 208 (1979) Attorney General's 30, (1947)). although, recognizes, Foreword PRM, process, ibid. 25 agree set II, however, does, "effect[ ] regulations." IV 26 There irony suggestion, made support bound delegate matter conventions comprise imposing disagrees wishes Examining illustrates course. 27 Contrary certainty whose account "do[es] reality." R. Kay & D. Searfoss, Handbook Auditing, ch. 5, p. (2d ed. 1989). Financial science. addresses many answers uncertain, "process continuous judgments estimates." pp. guiding estimates, "financial foundation principle conservatism, corollary 'possible measurement [should] direction understatement overstatement net income assets.' Thor Power Tool Co. Commissioner, 439 522, 542, 773, 786, 58 785 (citation orientation objective informing investors, ill-serves needs cross-subsidization. Cf. 543, 787 accountant's conservatism cannot Commissioner IRS] his efforts collect taxes"). 28 lucid encyclopedic pre-existing dissent perceive be. Far single-source rulebook, "encompasses time." (1994 Update). point, often indeterminate. "[T]he difficult no single source exists principles." question. 6-7. conflicts arise, accountant directed hierarchy sources follow. think extraordinary proposition consigned 29 framework sensible setting apply adjudicating claims. rule, policy deny claim 1985. 30 judgment 31 ordered. 32 whom THOMAS join, dissenting. 33 Unlike I general treated "generally result, contrary guidelines manual notice comment Act, 553. holds contrary, respectfully dissent. 34 undisputed, notes, ante, __, respondent, (Hospital), improvement timing: lump sum (known world GAAP), series remaining bonds, after challenged decision 1395oo(f), incorporates 551 et seq. V), reference. governing standard, reviewing courts "hold unlawful aside" action "arbitrary, capricious, abuse discretion, law." 706(2)(A). give (1986), 'plainly erroneous regulation.' Stinson States, 1913, 1919, 123 598 (1993) Bowles Seminole Rock Sand 325 410, 414, 65 1215, 1217, 89 1700 (1945)). my here. 35 "shall used costs." similarly provide "[r]easonable used, items included." 413.9(b)(1) adopt purposes; indeed, promulgating shall consider, ." Neither disputes flexible prescribe standards 2161, 36 Nevertheless, clearly state applicable regulations—including cover situations supplant type cost. Indeed, despite Court's suggestion employing operate sensible, Congress envisioned. Otherwise, background guidelines, benefit decisions based, administrators free select, procedures, whatever appear context (so long meets minimum rationality). 37 Like "must accounting," itself explains, "[u]nder revenue "accrual basis" dictionary understanding term, thereby distinguishing "cash (under received paid). employs possible form. Early Extinguishment Debt, (1972), 62, opposed cash 38 opens door employ has, incorporated into followed." 413.20(a). noted, "[i]t bar, keeps books 834 Similarly, entities field practices. American Institute Certified Public Accountants, Audits Providers 3.01, ("Financial statements prepared conformity principles"); Brief al. Amici Curiae 7-8 ("Generally always standard definitions non-government records"). Accordingly, concedes 413.20, very least submit request 283, 288-289 1992); Tr. Oral Arg. 8. 39 remainder demonstrates, moreover, commonly reported. explains require" (emphasis added). And emphasizing "are followed" accompanied promise "[c]hanges [that reimbursable] reimbursement." language regulation, taken whole, indicates system maintained ordinarily forms reimbursed. find HCFA Administrator, changed previously benefit. Dr. David M. Brotman Blue Cross Assn./Blue Southern California, Admin. Decision, CCH Medicaid Guide ¶ 30,922, 9839 (1980) (holding 405.406 [now 413.20], rule—that credit card incurred—and PRM's considered reductions revenue). Following current concludes, intended reassure fundamentally alter purposes. maintains, records, practices, enable using system-wide For several reasons, untenable. 41 Initially, belied says vacuum." explained purpose known calculated. reason, consistency fundamental Fort Worth Osteopathic Medical Center Shield Ass'n/Blue Texas, 40,413, 31,848 (1991). establishes link explaining modify reimburse. By linking reimbursable. little sense tie while simultaneously mandating each. addition, aptly puts it, meaning." Ante, Consideration processed undermines suggests intermediaries who take report separate situations, namely departures undoubtedly reliance GAAP-based considering ordinary claim. See, e.g., 413.60(b) (providing "[a]t end [reporting] period, apportionment, finding apportionment selected provider, determines period" added)); 413.64(f)(2) ("In quickly possible, retroactive adjustment soon received. purpose, reported, audit. liability determined, made" added)). intermediary, then, essentially instructed check accuracy, reasonableness, presumably compliance task seems normal procedure—i.e., —and alternative, uncodified employed Secretary. 421.1-421.128 43 seriously obligation particularly "when, 'a highly technical program,' identification classification 'criteria entail grounded concerns.' 2387, (1994) Pauley BethEnergy Mines, Inc., 501 680, 697, 2524, 2534, 115 604 (1991)). case, advances conclude fulfilled incorporate absence specifies methodology could method, "in used," unreasonable unworthy deference. 44 therefore, providing otherwise. flows conclusion. 233, departs concerning And, argument, "interpretation" odds meaning itself. Thus, refusal, premised defeasement invalid. 45 arguments advanced insurmountable burden administration disagree. obviously thought manage act nothing detailed minute arise. certainly foresee factual scenario presented administering programs; fill gaps, rely cases action, promulgation statements, embodied being foreclosed case-by-case obligated, decisions, abide ground issue—and indeed done stated outside decisions. Act's command requests evaluated precludes result. 46 situation foreseen. opportunity include giving valuable wisdom adversely affected chance challenge court. promulgates attempt circumvent amendment recorded unsupported Here, expressed Secretary—whatever —must procedural protections 47 remains important detail lay prepare contexts. One Manual, daunting overseeing thousands each year. devised accommodate administrative uniformly nationally regard furnished." large portions devoted examples, step-by-step calculations, facts. forum policy, types describe believes obligations created thereby. Such exempt 553(b)(A), explain contradict require. 48 considerations focuses, largely beside point. Appeals, likely upheld rational properly promulgated. advantages true prohibits bearing immediate violate principle. While like assumes attributed evidence record substantiating proposition. testimony supports recognize longer carries refunded thereafter; represent difference carrying price reacquire 14-15, 22. people debate merits options, economically permissible when. commanded 413.20. 49 Finally, "broad mandate" "it exceedingly unlikely intended, implementation abdicate profession (or anyone else) responsibility determinations." Petitioner 19. She points beneficiaries, identical "to useful management, shareholders, creditors, others interested" "has [financial] conservatism." (rejecting taxpayer's assertion conforms presumed tax purposes). well. 50 Reading though evolves, imply abdication invocation body situations. Compare, 413.134(f)(2) (limited gain involuntary conversion depreciable asset) 15, 1989 1994 Update) (gains disposal asset, reinvested similar asset). devise believes, argues, binds allocation ill-suited Our adopted, 51 conclusion, defended sought published departure instance, request; contradicted "not law" below 'nexus' too strong broken Act." 836. otherwise, syllabus constitutes Reporter Decisions convenience reader. Detroit Lumber 200 321, 337, 282, 287, 499.

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