Legal Document

512 U.S. 504114 S.Ct. 2381129 L.Ed.2d 405 THOMAS JEFFERSON UNIVERSITY, dba Thomas Jefferson University Hospital, Petitionerv.Donna E. SHALALA, Secretary of Health and Human Services. No. 93-120. Supreme Court the United States Argued April 18, 1994. Decided June 24, Syllabus * Medicare reimburses provider hospitals for costs certain educational activities, including cost graduate medical education (GME) services furnished by hospital or its affiliated school, 42 CFR §§ 413.85, 413.17(a). However, reimbursement activities is limited (1) an "anti-redistribution" principle, providing that program's intent to support are "customarily traditionally carried on providers in conjunction with their operations," but program should not "participate increased resulting from redistribution institutions . patient care institutions," § 413.85(c) (emphasis added); (2) a "community support" will assume previously borne community, ibid. Petitioner teaching hospital, qualified provider, sought no nonsalary-related (administrative) GME before 1984, those were college. In fiscal year 1985, intermediary disallowed hospital's claim such costs, Provider Reimbursement Review Board reversed part, allowing reimbursement. Respondent reinstated intermediary's ruling, concluding nonsalary prior years college would constitute impermissible under 413.85(c). As independent ground, she concluded community-support principle also barred The District Appeals affirmed. Held: Secretary's interpretation anti-redistribution reasonable. Because application suffices deny disputed this case, there need decide validity community language. Pp. ____. (a) petitioner's challenge her own regulation, must be given controlling effect unless it plainly erroneous inconsistent regulation. Broad deference all more warranted here because regulation concerns complex highly technical which identification classification relevant criteria require significant expertise entail exercise judgment grounded policy concerns. (b) meaning 413.85(c)'s sentence straightforward: Its first clause defines scope may sought, second provides reimbursed if they result shift educational, care, facility. gives full both clauses, programs engaged while denying incurred paid school. It only plausible interpretation, most sensible language bear. reliance school's historical allocations simple effective way determining whether prohibited has occurred. (c) Petitioner's argument prohibits ignores critical sentence, refers face "redistribution costs." Moreover, term "costs" used without condition. Even far consistent regulation's unqualified language, construction reasonable one afforded weight. presented persuasive evidence argument, been applying principle. "precatory" "aspirational" nature, thus lacking operative force, unpersuasive, since lays down bright line distinguishing permissible 993 F.2d 879 (CA 3), KENNEDY, J., delivered opinion Court, REHNQUIST, C.J., BLACKMUN, SCALIA, SOUTER, JJ., joined. THOMAS, filed dissenting opinion, STEVENS, O'CONNOR, GINSBURG, Ronald N. Sutter, Washington, DC, petitioner. Amy L. Wax, respondent. Justice KENNEDY Court. 1 Although forbidden "participat[ing] institutions." (1993) added). Services interpreted provision bar requesting dispositive question regulatory We conclude is. 2 A. 3 Established 1965 Title XVIII Social Security Act, 79 Stat. 291, as amended, U.S.C. 1395 et seq. (1988 ed. Supp. IV), federally funded health insurance elderly disabled. Subject few exceptions, Congress authorized (Secretary) issue regulations defining reimbursable otherwise giving content broad outlines statute. 1395x(v)(1)(A). That authority encompasses discretion determine "reasonable cost" "items included" category services. Ibid. Acting statute, Secretary, permits "approved activities" conducted hospitals. 413.85(a)(1). define "formally organized planned study usually order enhance quality care." 413.85(b). 4 Graduate approved activities. give interns residents clinical training various specialties. participants learn treating patients observing other physicians do so, take place unit (most often hospital), rather than classroom. Hospitals entitled recover "net figure "determined deducting, provider's total these revenues receives tuition." 413.85(g). A include furnishes, 5 brings us question. Section sets forth conditions governing activities.1 referred parties "[a]lthough [Medicare] share customarily operations, intended participate units units." portion known states "should community," "[u]ntil communities undertake bear appropriately activities." B 6 Hospital (Hospital) 700-bed Philadelphia, Pennsylvania. took 1966. (University) private, not-for-profit institution operates entities, Medical College (Medical College). facility, Medicare-approved postgraduate numerous at faculty. common ownership University, considered "related" organizations regulations. 413.17(a) (1993). result, eligible patient-care, administrative books College. 7 Nevertheless, reasons clear record, did seek any during eight existence. During next 10 years, however, 1974 through 1983, received three categories salary-related costs: salaries faculty rendered Hospital's patients; interns; (3) funds transferred internally payment time devoted program. period other, (namely, administering programs), 8 adopted restrictive method reimbursing inpatient services, see 1395ww(d) retained lenient costs. 1395ww(a)(4) ed., IV). when new regime was implemented, reviewed associated identifying This review resulted reflecting clerical programs.2 9 following year, effort further refine allocation techniques, accounting firm compute Fiscal 1985 later became especially because, scheme enacted 1986, base period, claims tied. See 1395ww(h). After completing study, reported had totaling $8.8 million, included direct indirect claimed Hospital. report submitted assigned intermediary, whose function annual reports calculate appropriate level applicable statutes 405.1803 petitioner allowed earlier (after adjustment inflation). identified (amounting approximately $2.9 million). App. Pet. Cert. 10a. then appealed Board, intermediate appellate tribunal within Department, decision part documented study. acting Administrator Care Financing Administration, modified Board's ruling. unit, even kind providers. Id., 35a. Since College, ruled costs" 11 relied ground requested According "have historically community." failed previous was, view, "evidence communit[y's] "To allow withdraw pass program" violate "encourage abdicate commitment provide elderly." 12 petition seeking $2,861,247 disallowed. On cross-motions summary judgment, court favor, accepting clauses Univ. v. Sullivan, CCH & Medicaid Guide ¶ 40,294, p. 30,959 (ED Pa.1992). Third Circuit affirmed (1993), thereby creating conflict Sixth Ohio State Dept. Services, 996 122 cert. pending, 93-696, concerning clause. granted certiorari, 510 ----, 114 2731, --- ---- (1994), now affirm. II 13 challenges Administrative Procedure Act (APA), 551 APA, incorporated oo(f)(1), commands reviewing courts "hold unlawful set aside" agency action "arbitrary, capricious, abuse discretion, accordance law." 706(2)(A). substantial agency's Martin Occupational Safety Comm'n, 499 144, 150-151, 111 1171, 1175-1176, 113 117 (1991); Lyng Payne, 476 926, 939, 106 2333, 2341, 90 921 (1986); Udall Tallman, 380 1, 16, 85 792, 801, 616 (1965). Our task among several competing interpretations best serves purpose. Rather, " 'controlling weight regulation.' (quoting Bowles Seminole Rock Sand Co., 325 410, 414, 65 1215, 1217, 89 L.Ed. 1700 (1945)). words, we defer "alternative reading compelled plain indications promulgation." Gardebring Jenkins, 485 415, 430, 108 1306, 1314, 99 515 (1988). when, here, "a program," "criteria necessarily concerns." Pauley BethEnergy Mines, Inc., 501 680, 697, 2524, 2534, 115 604 (1991). 14 neither 'plainly [n]or regulation,' supra, U.S., 16-17, S.Ct., upon 15 contained final 413.85(c), states: 16 "Although 17 straightforward. introductory sought: To reimbursement, activity operations." follows, imposes restriction redistribution. that, notwithstanding 18 sentence. interprets hospitals, but, same time, "cost[s] school." Brief 26 deleted); 413.85(b) (defining "programs care"). regulation; 19 circumstance addressed submission "increased arising provides, unambiguous terms, "redistribution," shift, "educational" facility "patient care" generated sort allocations, along Indeed, hard-pressed come up alternative identify shifting entity another. 20 advances separate arguments deferring None persuasive. 21 First, asserts "clear meaning" (e.g., interns), classroom training). 14. according petitioner, 20. 22 mistaken, refers, face, costs," "costs," moreover, Nothing suggests prohibition (such instruction) unit. inference "educational institutio[n] uni[t]" prohibited. advanced But is, very least, one, required afford "controlling weight." 1217. 23 Second, argues provision. While true statute conflicts 'entitled considerably less deference' consistently held view," INS Cardoza-Fonseca, 480 421, 446 n. 30, 107 1207, 1221, 94 434 (1987) Watt Alaska, 451 259, 273, 101 1673, 1681, 68 80 (1981)), maxim does apply fails present manner.3 24 attempt find inconsistency, points 1978 internal operating memorandum issued Administration (HCFA) schools Intermediary Letter 78-7 (Feb. 1978), 64a-66a. letter detailed amounts expenses might allowable providers, mention limitation. Petitioners' infer silence existence contrary purport comprehensive placed By attempted "number situations" relating namely "situations rais[ing] questions about reasonableness [medical school faculty] appropriateness bases allocating them hospital." 64a. surprising, then, address mere failure hardly establishes Secretary.4 25 Likewise, dissent's suggestion, post, ____, fact have appear violated render invalid. For could show allowance — brought attention designate "[t]he estopped changing view believes mistaken legal interpretation." Good Samaritan Hosp. Shalala, 508 2151, 2161, 124 368 And circumstances "where [its regulation] least ones, little, any, reason construction." 2161. Finally, contends ignore force. 31-32. lightly setting specific limitations federal devoid substantive effect. so speaks vague generalities precise terms not, available. Whatever vagueness found precedes it, reimbursement: well interpret imposing limitation 27 sum, faithful case. reasons, affirm Appeals. 28 ordered. 29 whom GINSBURG join, dissenting. 30 Court's reads case model action. views matters, "unambiguous," ante, respondent always "faithful language." Ante, disallow sought. account accurate portrayal When properly viewed, I cannot avoid conclusion runs afoul therefore law, violation respectfully dissent. 31 holds content, reasoning "the available." my cast aspirational strains credulity read reimbursability expenses. contrary, subsection appears nothing precatory statement purpose restrictions. 32 Subsection (c), stark contrast remainder like preamble law. 413.85(c)).1 praises benefits expresses belief "should" pay programs. announces intention "appropriately," suggestion some point future restructuring priorities "community" obviate support. two "intent[ions]": first, "customar[y] traditiona[l]" and, second, permit transform "interpretation" what self-evidently generalized expressions into rules reimbursability. Cf. Stinson States, - 1913, 1919, 123 598 (an sustained regulation' ") 33 rejected similar transformation Pennhurst School Halderman, 1531, 67 694 (1981). There, "bill rights" Developmentally Disabled Assistance Bill Rights 1975, 6010 (1976 III), created rights favor mentally retarded. bill provided, persons right treatment, habilitation" governments obligation assure public provided [noncomplying] institutio[n]." 6010(1), (3). effect: "§ 6010, context provisions express congressional preference kinds treatment. simply general 'findings' such, too thin reed obligations below." 19, 1541. though involve textual analysis unreasonable precatory, EEOC Arabian American Oil 244, 260, 1227, 1237, 274 (1991) (SCALIA, concurring judgment) (explaining "deference abdication, requires accept light principles normally employ"). 34 Interestingly enough, decades operation, intermediaries, acquiescence (if approval), gave precisely none. entire never invoked unreimbursed actually despite baffling assertion "petitioner manner," look brief, 21-24, interpretive inconsistency principles. 35 1966 1973. awarded 1974, below finds, matter fact, borne, large extent, period. Cf.App. 32a (identifying grants tuition sources funding pre-1974 activities). Also, came fees charges non-Medicare beneficiaries, ibid.) constituted support." 18a (the "views source program"). 36 Yet obtained beginning extent School, presently construed. ("The school") (editorial revisions omitted). (PRRB) explicitly recognized finding "redistribution" (adopted below), "[i]n [Hospital] commenced "[a]dditional occurred 1984 [Hospital's] report." 50a.2 Similarly, available sources. (where received, "prohibits reimbursement"). Thus, wishful thinking: routinely denied current correct. 37 think inception program, acted basis attached significance for, carry books, roughly contemporaneous pronouncements. ,S.Ct. M. Kraus Bros., Inc. 327 614, 622, 66 705, 708, 894 (1946) (opinion Murphy, J.). 1978, example, advised intermediaries related "allowable mentioning either potential construction. letter's explicit therein "appropriateness" "allocating [educational costs] [in question]," ibid., demonstrates inaccuracy topics entirely unrelated ____; governs, all. 38 1982, answered query relationship between "allocation governed 78-7." 25. makes much 1982 4. doing, overlooks inquiry binary choice: (i.e., reimbursable) (as 78-2 advised) 413.85(c)? answering pointed 25, quite clearly (albeit implicitly) whatsoever. 39 sure, stating, elaboration, [the principle] mentioned [1982] change basic espoused [§ ]." 27. memorandum's bare reference "policy" disavowed past nor interpretation. overstates matters specifically confirmed continued vitality 4.3 40 Based undeniably practice, hold limit 708 ("Not Administrator's his can add certainty definiteness language"). Instead, seems merely explain addresses clear, unmistakably mandatory terms. Pennhurst, 14, 1541, 41 hopelessly disserves behind delegation lawmaking power agencies, "resol[ve] ambiguity statutory text." 696, generally Chevron U.S.A., Natural Resources Defense Council, 467 837, 865-866, 104 2778, 2792-2793, 81 (1984). Here, resolving statutes, replaced ambiguity. perfectly understandable, course, regulations, maximizes allows greater latitude make law adjudication cumbersome rulemaking process. Nonetheless, definite affected adequate notice understanding FTC Atlantic Richfield 567 96, 103 (CADC 1977) (Wilkey, K. Davis R. Pierce, Law 11.5, 204 (3d 1994) ("An powers meaningful standards legislative poses serious threat liberty democracy"). woefully inadequate impart notice.4 unbelabored limits discussion focuses primarily import have. finds "straightforward" subsequently Medicare. discussed, reasonably construed impose restrictions effect, agree sweeping premised distortion text enunciating text, Bowles, 1217 (holding comport words regulation"). 43 Under type determines proper: "[T]he [patient care] proper therefore, puts "[a particular provider] allowed" 37a. traditionally" If, negative, award Conversely, seeks occurs reimbursed. 44 against (for nursing schools) necessary related-organization rule, "costs facilities, supplies control includable provider." 413.85(a)'s recognition distinct possibility many, most, shifted (and program) definition, engage 57 Fed.Reg. 43659, 43668 (1992) (expressing concern "Medicare provider"). fund disabled, subsidize professionals, cf. 1395c, avoided inadvertent "expan[sion] [in] range items payment" barring units. Fed.Reg., 43668. 45 errs wholly divorced appears. ____ (suggesting "relevant" phrase). , understood interpreting "is holistic endeavor." Savings Assn. Texas Timbers Inwood Forest Associates, Ltd., 484 365, 371, 626, 630, 98 740 Viewed context, simultaneously disallows conducting unworthy deference. Cf., e.g., 46 There cogently explained 777 F.Supp. 582 (S.D. 1991), aff'd, (CA6 1993), 93-696: 47 "In education, customary traditional employ specialties select supervise enrolled These staff, office space out function[s]. Their salaries, staffs, ultimately contributes F.Supp., 587. revenues. 413.85(a), (g). 48 wholeheartedly PRRB Hospital] fully prohibit correction [cost accounting] error reporting contention." 58a-59a. ruling arbitrarily subjects similarly situated identical levels disparate forgone consequence procedure's "[m]en turn square corners deal Government," Island, L.R. Co. 254 141, 143, 55, 56, 188 (1920) (Holmes, J.), manifest injustice apparent. 49 Because, unlike believe non-salary-related agree. Not policy, 413.85 leave role calculus 50 413.85(a) authorizes "include net "calculated paragraph (g) section." 413.85(a). 413.85(g), turn, "[n]et "total activities," "revenues 413.85(g) expect offset No requiring, cost, flatly 51 implication history. 941, 2342. amended subsection's predecessor eliminate requirement "grants" "specific donations" incurred. 234, 296, 313 (1984) (amending 405.421(g) (1983)). 39752, 39797, 39811 (1983) (withdrawing 405.423 (1982) offsets gifts). essentially reintroduces donations calculus. amendment superfluous, disfavored where possible. Kungys 759, 778, 1537, 1550, 839 Connecticut Nat. Bank Germain, 503 112 1146, 1149, 391 (1992). 52 Consequently, See, Stinson, 1919. III 53 foregoing 706(2)(A), construing receive reverse syllabus constitutes prepared Reporter Decisions convenience reader. Detroit Lumber 200 321, 337, 282, 287, 499. full: "Educational Activities. Many nurses, students, residents, paramedical contribute meet community's needs personnel. community. many assumed responsibility financing purchasing care. Until although formerly designated 405.421 (1977) (1967). determined error. dissent demonstrate post dispute proposition; indicated above, relies exchange memoranda HCFA regarding Oregon's 22-26. response additional clarification Director HCFA's Division Institutional responded, 78-7," discuss issue. omission likewise policy. subsequent Payment Policy stated issue] subject ]" "that university represents institution." Like refer last "anti-redistribution principle," principle." HCFA, PRRB's decision, 37a, remains force HCFA. 1305oo(f)(1). satisfactory relevance. 37. conduct "estop[s]" (internal quotation marks omitted) conduct, statements, Motor Vehicle Mfrs. Farm Mut. Auto. Ins. 463 29, 41-42, 2856, 2866, 77 443 "[a] 'settled course behavior embodies informed pursuing policies [of regulations]' Atchison, T. S. F. Wichita Bd. Trade, 412 800, 807-808, 93 2367, 2375, 350 (1973)). Two contravention certainly "settled behavior," difficult persistent costly rules. Cf.1991 Explained (CCH) 706, 178 ("When pays noncovered covered ordinarily amount overpayment"). settled persists over presumptively preferred, Assn., judges suspect sharp departures practice unexplained 42, 2866. 2375. today, who, past, suddenly faced being sued recoupment millions dollars "overpayments" noted, "permits retroactive action" 'corrective adjustments where, aggregate produced methods proves excessive.' Bowen Georgetown 488 204, 209, 109 468, 472, 102 493 (1988) 1395x(v)(1)(A)). permitted "those 1984," act grace revision whim Secretary. Heckler Community Crawford County, 51, 2218, (Secretary recouping overpayment made advice intermediary).

Classification Label: 8