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.