Md. Gen. Hosp., Inc. v. Thompson,
No. 01-2012 (4th Cir. Oct. 9, 2002).

A hospital established a hospital-based skilled nursing facility by purchasing the bed rights from three other skilled nursing facilities. The hospital applied for, and was denied, a "new provider exemption" by HHS which allows higher Medicare reimbursement rates during the first years of operation. The District Court upheld the decision of HHS, the hospital appealed, and the United States Court of Appeals for the Fourth Circuit reversed. The Fourth Circuit concluded that the hospital was entitled to the exemption because it had not operated a skilled nursing facility in the past, even though it had purchased the bed rights from skilled nursing facilities that had been in operation in the past. Also, the Fourth Circuit found that the HHS interpretation of the regulation at issue was entitled to no deference because it was plainly erroneous and inconsistent with the plain meaning of the statute.