Shalala

The Supreme Court, — U.S. -, 113 S.Ct. 2955 , 125 L.Ed.2d 657 , vacated our previous judgment and remanded this case to us for further consideration in light of Good Samaritan Hospital v. Shalala, — U.S. -, 113 S.Ct. 2151 , 124 L.Ed.2d 368 (1993). We hereby withdraw our previous opinion in this case, Mt. Diablo Hospital v. Sullivan, 963 F.2d 1175 (9th Cir.1992), and substitute this Opinion.

Mt. Diablo and Memorial Hospitals appeal from the district courts’ grants of the Secretary of Health and Human Services’ (“Secretary”) motions for summary judgment. We consider whether the district courts erred in concluding (1) that the providers were not entitled to retroactive corrective adjustments to compensate them for the effects of those cost limits, and (2) that the Secretary’s methods for determining routine cost limits for Medicare reimbursement are not arbitrary and capricious. We affirm.

I

BACKGROUND

Appellants provide health care services to eligible aged and disabled persons under the Medicare program, 42 U.S.C. § 1395 et seq. For the cost years at issue in this case, 1 providers were reimbursed for daily routine service costs at a rate equivalent to the lesser of the…