National Medical Enterprises, Inc. v. Louis W. Sullivan, M.D., Secretary of Health and Human Services

This case involves a challenge to the validity of a regulation promulgated by. the Secretary of Health and Human Services (the Secretary ) that limits the cumulative allowable return on equity capital attributable to goodwill payable to Medicare providers. The primary question presented is whether the regulation is reasonably related to the purposes of the Medicare statute and thus within the Secretary’s authority to issue. We conclude that the regulation is so related, and that its provision for the calculation of cumulative return on goodwill does not constitute unlawful retroactive rulemaking. Accordingly, we affirm the district court’s grant of summary judgment to the Secretary.

I

For the years at issue in this appeal, the Medicare statute, 42 U.S.C. §§ 1395 et seq., authorized payment to all types of proprietary (for-profit) providers of health care services of “a reasonable return on equity capital ... invested in the facility and used in the furnishing of such services.” Id. § 1395x(v)(l)(B) (1988). The statute expressly delegated the task of defining Medicare reimbursable equity capital to the Secretary. Id. § 1395x(v)(l)(A)-(B). . Pri- or to 1970, the Secretary’s…