[1] Justice Anthony Kennedy wrote for a unanimous court that the Secretary of Health and Human Services had exceeded his rulemaking authority under the Medicare Act in promulgating a wage index rule in 1984 under which he would recoup Medicare reimbursements paid to hospitals, including Georgetown University Hospital, that had been disbursed since 1981 according to the pre-1984 rule.

[5] Several Washington hospitals challenged the new rule in the United States District Court for the District of Columbia on the grounds that the Secretary had violated the Administrative Procedure Act (APA) in promulgating the rule by not first providing notice of proposed rulemaking and allowing an opportunity for public comment.

[7] In February 1984, the Secretary issued a notice seeking public comment on a proposal to re-institute the 1981 rule, which would apply retroactively to July 1, 1981.

The District Court granted summary judgment for the plaintiffs, finding that the circumstances did not justify a retroactively effective rule.

[8] The Secretary appealed, and the United States Court of Appeals for the District of Columbia Circuit affirmed the lower court,[9] but instead reasoned that the APA generally prohibits retroactive rulemaking and that the Medicare Act specifically prohibits retroactive cost-limit rules.

[14] The court reached this determination by finding that past agency practice, the Medicare statute, and its legislative history do not indicate that Congress intended to grant the Secretary of Health and Human Services retroactive rulemaking power.

Agreeing with the circuit court, he wrote that "general principles of administrative law" prohibit the retroactivity, as well as both specific statutes.