## Facts

- Medicare reimburses hospitals for treating beneficiaries under regulations issued by the Secretary of Health and Human Services (HHS), including annual “cost-limit schedules.”
- A geographic “wage index” affected reimbursements by reflecting local salary levels.
- Before 1981, the wage index calculation included wages paid by federal government hospitals.
- In 1981, HHS issued a schedule changing the wage index method by excluding wages paid by federal hospitals.
- Hospitals challenged the 1981 rule; a federal district court invalidated it, and reimbursements were settled using the pre-1981 method.
- In 1984, HHS reissued the 1981 wage-index rule and sought to apply it retroactively to prior years, requiring participating hospitals to repay substantial sums.
- Hospitals sued after exhausting administrative remedies, alleging the retroactive schedule was unauthorized under the Medicare Act.

## Issues

1. Whether 42 U.S.C. § 1395x(v)(1)(A) authorized HHS to promulgate retroactive Medicare cost-limit regulations, including a retroactive wage-index rule to recoup past reimbursements.
2. Whether a general statutory grant of rulemaking authority includes power to adopt retroactive regulations absent express authorization.

## Decision

- The Supreme Court affirmed the judgment for the hospitals and held the 1984 retroactive reinstatement invalid.
- The Court applied a presumption against retroactive rulemaking: agencies may not issue retroactive regulations unless Congress clearly grants that power.
- The Court concluded § 1395x(v)(1)(A)’s reference to “retroactive corrective adjustments” authorized case-specific payment adjustments, not retroactive legislative rules changing reimbursement methods.
- Justice Scalia concurred, reasoning that the APA’s definition of a “rule” as having future effect supports a general bar on retroactive rulemaking.

## Legal Principles

- An agency’s regulation-making authority is limited to the powers Congress delegates.
- Courts generally will not read statutory rulemaking grants to permit retroactive regulations absent express authorization.
- Statutory authorization for “retroactive corrective adjustments” to reimbursements can permit individualized corrections without authorizing retroactive issuance of substantive, generally applicable reimbursement rules.
- Prior procedural invalidation of an agency rule does not, by itself, supply authority to reissue that rule with retroactive effect.

## Conclusion

The Court held that HHS lacked statutory authority to impose a retroactive Medicare cost-limit rule; retroactive rulemaking requires express congressional authorization, and § 1395x(v)(1)(A) permitted only case-by-case payment corrections rather than retroactive substantive regulations.


Bowen v. Georgetown Univ. Hosp., 488 U.S. 204 (1988)