MARGARET M. HECKLER, SECRETARY OF HEALTH AND HUMAN SERVICES, PETITIONER V. HUMANA OF AURORA, INC. D/B/A AURORA COMMUNITY HOSPITAL No. 85-53 In the Supreme Court of the United States October Term, 1985 The Acting Solicitor General, on behalf of the Secretary of Health and Human Services, petitions for a writ of certiorari to review the judgment of the United States Court of Appeals for the Tenth Circuit in this case. Petition for a Writ of Certiorari to the United States Court of Appeals for the Tenth Circuit TABLE OF CONTENTS Opinions below Jurisdiction Statute involved Statement Reasons for granting the petition Conclusion Appendix A Appendix B Appendix C Appendix D OPINIONS BELOW The opinion of the court of appeals (App., infra, 1a-9a) is reported at 753 F.2d 1579. The opinion of the district court (App., infra, 12a-18a) is unreported. JURISDICTION The judgment of the court of appeals (App., infra, 10a-11a) was entered on February 11, 1984. On May 5, 1985, Justice White extended the time for filing a petition for a writ of certiorari to June 14, 1985. On June 4, 1985, Justice White further extended the time for filing a petition for a writ of certiorari to July 11, 1985. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). STATUTE INVOLVED Title XVIII of the Social Security Act requires the Federal Hospital Insurance Trust Fund to reimburse hospitals for the "reasonable cost" of services provided to Medicare patients. 42 U.S.C. 1395(b)(1); 42 U.S.C. 1395g(a). The Act defines "reasonable cost" as follows (42 U.S.C. 1395x(v)(1)(A)): The reasonable cost of any services shall be the cost actually incurred, * * * and shall be determined in accordance with regulations establishing the method or methods to be used, and the items to be included, in determining such costs * * * . In prescribing the regulations referred to in the preceding sentence, the Secretary shall consider, among other things, the principles generally applied by national organizations or established prepayment organizations (which have developed such principles) in computing the amount of payment, to be made by persons other than the recipients of services, to providers of services on account of services furnished to such recipients by such providers. Such regulations may provide for determination of the costs of services on a per diem, per unit, per capita, or other basis, may provide for using different methods in different circumstances, may provide for the use of estimates of costs of particular items or services * * * , and may provide for the use of charges or a percentage of charges where this method reasonably reflects the costs. Such regulations shall (i) take into account both direct and indirect costs of providers of services * * * in order that, under the methods of determining costs, the necessary costs of efficiently delivering covered services to individuals covered by the insurance programs established by this subchapter will not be borne by individuals not so covered, and the costs with respect to individuals not so covered will not be borne by such insurance programs, and (ii) provide for the making of suitable retroactive corrective adjustments where, for a provider of services for any fiscal period, the aggregate reimbursement produced by the methods of determining costs proves to be either inadequate or excessive. QUESTION PRESENTED Whether the court of appeals erred in invalidating the regulation of the Secretary of Health and Human Services that established a formula for reimbursing hospitals for the portion of malpractice insurance costs attributable to Medicare patients. STATEMENT This case concerns the validity of a regulation (App., infra, 19a-27a), of the Secretary of Health and Human Services governing reimbursement of hospitals for the "reasonable cost" of treating Medicare patients. The specific issue is reimbursement of malpractice insurance premiums. The regulation and its statutory background are described in our petition for a writ of certiorari in Heckler v. Abington Memorial Hospital, which is being filed today. /1/ The present case involves the claim of a single hospital that sought reimbursement of its malpractice premium under the so-called "patient utilization" formula on the ground that the Secretary's action in replacing that formula with a "paid claims" formula was invalid. The district court upheld the validity of the rule and entered summary judgment in favor of the Secretary. The court of appeals reversed. It held that the record failed to demonstrate that "the utilization method no longer worked," that any imbalance in malpractice reimbursement was not offset by countervailing imbalances in reimbursement of other overhead costs, or that there is any link betweeen insurance premiums and paid claims (App., infra, 7a). In addition, the court held that there were fatal statistical flaws in the study on which the Secretary relied to show that the utilization formula resulted in reimbursement that was disproportionate to the actual claims that hospitals have paid to Medicare patients (id. at 6a, 8a-9a). The court of appeals remanded the case to the district court "for further proceedings or for remand to the agency" (App., infra, 9a). Pursuant to the remand, the district court has entered a judgment against the Secretary in the amount of approximately $18,000. REASONS FOR GRANTING THE PETITION This case involves the same Medicare regulation that is involved in Abington, and that is the subject of the pending rulemaking proceeding described in our petition for a writ of certiorari in that case. As in Abington, the decision of the court of appeals in this case addresses several issues that may be resolved, or at least brought into sharper focus, by the pending rulemaking proceeding. Therefore, as in Abington, we believe that it would be appropriate for the judgment of the court of appeals to be vacated and the case remanded for reconsideration in light of the current rulemaking proceeding. CONCLUSION The case should be disposed of in light of this Court's disposition in Heckler v. Abington Memorial Hospital. Respectfully submitted. LAWRENCE G. WALLACE Acting Solicitor General /*/ JULY 1985 /1/ A copy of the petition for a writ of certiorari in Abington is being served on counsel for respondent. /*/ Acting Solicitor General Fried is disqualified in this case. APPENDIX