Bowen v. Georgetown University Hospital

Supreme Court of the United States · 1988 · Administrative Law

488 U.S. 204 (1988)

Updated August 1, 2026

Administrative Lawretroactive rulemakingMedicare reimbursementretroactivityadministrative rulemakingexpress statutory authorizationMedicare Actcost-limit rules

Facts

The Secretary had authority under the Medicare Act to issue regulations setting limits on reimbursable Medicare costs, and in 1981 issued a cost-limit schedule changing the wage-index calculation by excluding wages paid by federal hospitals. A district court later invalidated that 1981 wage-index rule because the Secretary had failed to provide notice and comment, and the Secretary then settled reimbursement reports using the pre-1981 method. In 1984, after notice and comment, the Secretary reissued the 1981 wage-index rule and made it retroactive to July 1, 1981, for a 15-month period. That retroactive rule required the respondent hospitals to repay more than $2 million they had previously received.

Issue

Whether the Secretary of Health and Human Services had statutory authority under the Medicare Act to promulgate a retroactive cost-limit rule. More specifically, the question was whether either the Medicare Act's retroactive corrective-adjustment provision or its general grants of rulemaking authority authorized retroactive rulemaking.

Rule

Retroactivity is not favored in the law, and statutes and administrative rules will not be construed to have retroactive effect unless their language requires that result. Accordingly, a statutory grant of legislative rulemaking authority will not generally be understood to include power to promulgate retroactive rules unless Congress has conveyed that power in express terms. Under the Medicare Act, the provision requiring suitable retroactive corrective adjustments authorizes case-by-case reimbursement adjustments for individual providers, not retroactive rulemaking.

🔒

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.

The Federal Care Payments Bureau administers a reimbursement program for rehabilitation clinics in Ohio. Congress authorized the Bureau to issue regulations "necessary to carry out" the program, but said nothing about retroactivity. After a court in Columbus invalidated a reimbursement formula for lack of notice and comment, the Bureau reissued the same formula through proper procedures and declared it effective 18 months earlier, requiring clinics to repay prior reimbursements.

Are the retroactive repayment obligations most likely valid?

Explanation. The governing principle is that retroactivity is disfavored, and an agency's legislative rulemaking authority does not ordinarily include power to issue retroactive rules unless Congress expressly grants it. A general authorization to issue regulations necessary to administer a program is not enough. The fact that the prior rule was invalidated for procedural defects does not itself create authority to reissue it retroactively.