MARGARET M. HECKLER, SECRETARY OF HEALTH AND HUMAN SERVICES, ET
AL., PETITIONERS V. ABINGTON MEMORIAL HOSPITAL, ET AL.

   No. 85-52

   In the Supreme Court of the United States

   October Term, 1985

   On Petition For A Writ Of Certiorari To The United States Court of
Appeals For The Third Circuit

   Reply Memorandum For The Petitioners

   1. Subsequent to the filing of our petition for a writ of
certiorari, the Fifth Circuit in DeSoto General Hospital v. Heckler,
766 F.2d 182(1985), granted in part the Secretary's petition for
rehearing and remanded the claims to the Provider Reimbursement Review
Board for reconsideration in light of the Secretary's proposed new
rule (App.,infra).  The disposition in DeSoto is thus in conflict with
the decision of the Third Circuit below, as well as with decisions of
the Fourth, Eighth and Eleventh Circuits, all of which have held that
hospitals successfully challenging the Secretary's new formula for
reimbursement of malpractice premiums are presently entitled to
payment under the prior formula.  /1/

   2. Respondents' basic argument on the remedial issue is that the
Secretary's prior regulation must be held to govern their claims for
reimbursement since the Secretary's attempt to amend the prior
regulation has been ruled invalid.

   This argument overlooks the express statutory grant of authority to
the Secretary to make "suitable retroactive corrective adjustments"
where the reimbursement produced by any particular formula is
"inadequate or excessive." 42 U.S.C. 1395x(v)(1)(A)(ii).  Thus, any
present entitlement to payment under the old formula is subject to
retroactive adjustment in the event the Secretary finds that the old
formula produces "excessive" reimbursement.  Where the Secretary has
raised significant questions as to the fairness of the old formula and
has instituted a rulemaking proceeding to resolve those questions, it
is appropriate to withhold any order directing immediate payment of
the funds in dispute under the old formula.  Otherwise some hospitals
will obtain payment under court judgments purporting to insulate them
from recoupment under a later retroactive adjustment, while other
hospitals would be subject to such an adjustment for the same cost
years.  Since all hospitals have known since 1979 that the old formula
for Medicare reimbursement of malpractice premiums was in question and
accepted Medicare patients on that basis, no unfairness is involved in
waiting until the dispute is resolved before final payment is made.
Respondents have already been reimbursed for the year ended June 30,
1980 under the new formula and, as our petition points out (at 9), the
only amount remaining in dispute is the difference between
reimbursement under the two formulas.

   The situation here bears no comparison to NLRB v. Wyman-Gordon Co.,
394 U.S. 759 (1969), as is suggested by respondents in the brief in
opposition in No. 85-53.  In Wyman-Gordon, this Court refused to
remand for further proceedings, on the ground that "(t)here is not the
slightest uncertainty as to the outcome of a proceeding (on remand)
before the Board." 394 U.S. at 767 n.6.  Here, however, the outcome of
further proceedings is not certain.  While the decision below rejects
the Secretary's new formula on the basis of the present record, it
does not address how the Secretary might proceed on a new record, nor
does it prescribe other formulas the Secretary might select.  Indeed,
the district court in this case, in an opinion that the court of
appeals adopted, refused to "specify what method of apportioning
malpractice insurance costs should be adopted." Pet. App. 26a-27a.  In
contrast, orders directing payment under the old formula will have the
practical effect of specifying "what method of apportioning
malpractice insurance costs" will govern for the hospitals and costs
years involved in these cases.  That would be an inappropriate
disposition, particularly in light of the Secretary's ongoing efforts
to comply with the statute in an evenhanded manner.

   For these reasons and the reasons stated in our petition,
certiorari should be granted, the judgment of the court of appeals
should be vacated, and the case should be remanded for further
proceedings.

   Respectfully submitted,

   LAWRENCE G. WALLACE /*/

      Acting Solicitor General

   September 1985

   /1/ Bedford County Memorial Hospital v. Heckler, No. 84-1672 (4th
Cir. Aug. 14, 1985);  Menorah Medical Center v. Heckler, No. 84-2257
(8th Cir. July 24, 1985);  Lloyd Noland Hospital v. Heckler, 762 F.2d
1561 (11th Cir. 1985).  In Humana of Aurora, Inc. v. Hecker, 753 F.2d
1579 (1985), petition for cert. pending, No. 85-53, the Tenth Circuit
invalidated the rule and remanded the case to the district court "for
further proceedings or for remand to the agency." The district court
subsequently entered a judgment in favor of the hospitals for an
amount certain.

   /*/ Acting Solicitor General Fried is disqualified in this case.

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