Unity HealthCare v. Azar, No. 18-1316 (8th Cir. 2019)Annotate this Case
Hospitals challenged the method the Secretary used to calculate the volume-decrease adjustment (VDA) for certain fiscal years during the mid-2000s, as well as the Administrator's classification of certain costs as variable costs when calculating the adjustment.
The Eighth Circuit affirmed the district court's decision to uphold the Secretary's actions and held that the Secretary's interpretation of the relevant regulations was a reasonable interpretation of the plain language of the Medicare statute. Given the lack of guidance in the statute and the substantial deference the court affords to the agency, the Secretary's decision reasonably complied with the mandate to provide full compensation. That the Secretary has prospectively adopted a new interpretation was not a sufficient reason to find the Secretary's prior interpretation arbitrary or capricious. The court also held that the Secretary's interpretation of the relevant regulations in these cases was clearly consistent with their text, and the costs at issue were reasonably classified as variable costs.