The government's best offense is deference: the decision of the Supreme Court in Shalala v. Guernsey Memorial Hospital

The United States Supreme Court agreed with the Secretary of Health and Human Services that Guernsey Memorial Hospital's advance refunding transaction costs would be subject to a medicare reimbursement policy that is not based upon generally accepted accounting principles. According to the sharp dissent in this case, this policy, set forth in a manual provision, contradicts federal regulations.     

Physician recruitment after Hermann Hospital

The state of physician recruitment changed after the Internal Revenue Service required Hermann Hospital to publish its closing agreement with the IRS. The closing agreement released the long-awaited IRS "Hospital Physician Recruitment Guidelines." The IRS' recently proposed revenue ruling provides additional insight on acceptable physician recruitment practices as well.     

State Medicaid reform under Section 1115 demonstration authority

Given the complexity of federal Medicaid law and the limitations it imposes on state flexibility, it is likely that states will continue to ask the Secretary to grant waivers under Section 1115 to allow them to pursue new approaches to health care reform. The results of currently operational Section 1115 projects involving statewide managed care systems will be useful in evaluating the Medicaid reform measures currently under discussion in other states and at the federal level. In particular, the ability of the states to control Medicaid and indigent care costs and to utilize federal dollars more efficiently should prove important in evaluating a block grant approach to federal Medicaid funding. Moreover, Section 1115 project results that bear on the sufficiency of various Medicaid capitation rate methodologies will also be of value as more states expand the use of managed care arrangements for their Medicaid populations.