Henry Ford Health Sys. v. Dept. of Health & Human Servs., No. 10-1209 (6th Cir. 2011)
Annotate this CaseThe Medicare program pays teaching hospitals to cover "direct" and "indirect costs of medical education," 42 U.S.C. 1395ww(d)(5)(B), (h). Direct costs include expenses such as residents' salaries. Indirect costs are incurred due to "general inefficiencies" and "extra demands placed on other staff." Congress created a formula for calculating indirect expenses based on full-time equivalency interns; an HHS regulation referred to time residents spend in the "portion of the hospital subject to the prospective payment system or in the outpatient department of the hospital." In reimbursing plaintiff, HHS excluded from the FTE count time residents spent on pure research, unrelated to treatment of a patient. While appeal of a decision favoring the hospital was pending, Congress enacted the Patient Protection and Affordable Care Act, 124 Stat. 119, 660–61. For the years at issue, HHS must include in FTE: "all the time spent by an intern or resident in an approved medical residency training program in non-patient care activities, such as didactic conferences and seminars, as such time and activities are defined by the Secretary." HHS promulgated a regulation specifying that eligible non-patient care activities do not include time residents spend conducting pure research. The Sixth Circuit upheld the regulation as within the Secretary's authority and applicable to the years at issue.
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