The Toledo Hospital v. Donna E. Shalala, Secretary, Department of Health and Human Services

ALAN E. NORRIS, Circuit Judge.

At issue in this case is the validity of the Medicare reaudit regulation, 42 ' C.F.R. §§ 413.86(e)(1)(ii)-(iii). For the following reasons, we conclude that the reaudit regulation is invalid under the guidelines set out by the Supreme Court in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984).

I. Regulatory Framework

From 1965 to 1986, the Medicare program reimbursed participating hospitals, known as providers, for the reasonable costs incurred in furnishing graduate medical education (“GME”). The…