Shalala

Queen of Angels/Hollywood Presbyterian Medical Center brought this class action on behalf of all hospitals (“the Hospitals”) that have participated in the Medicare program (a health insurance program for the aged and disabled) since July 1, 1991, against the Secretary of Health and Human Services (“the Secretary”). The Hospitals challenge the Secretary’s interpretation of 42 U.S.C. § 1395cc(a)(l)(F)(i) relating to costs incurred during reviews by peer review organizations (“PROs”). The Hospitals claim that the Secretary refuses to comply with the statute and that her rule regarding payments to hospitals for costs incurred in duplicating medical records (“the Photocopy Rule”) is inconsistent with the statute and therefore invalid. The district court granted summary judgment in favor of the Secretary, concluding her interpretation of the statute and the regulation is reasonable. The Hospitals now appeal.

BACKGROUND

In 1982, Congress enacted the Peer Review Improvement Act (with additional amendments in 1983); the Peer Review Organization (“PRO”) system became operational in 1984. PROs are private medical review entities under contract with the Secretary that determine whether…