The U.S. Supreme Court case Donna E. Shalala, Secretary of Health and Human Services v. Guernsey Memorial Hospital dealt with the interpretation of Medicare reimbursement regulations for hospitals serving a disproportionate share of low-income patients. The hospital argued that it should be reimbursed based on its proportion of total patient days attributable to low-income patients (including both Medicare and non-Medicare), while the Department of Health and Human Services (HHS) contended that only those patient days associated with Medicare beneficiaries should be considered in calculating reimbursements. The court ruled in favor of HHS, stating that their interpretation was consistent with the language, structure, purpose, and history of the statute as well as past administrative practice.

In the dissenting opinion for Shalala v. Guernsey Memorial Hospital, Justice Scalia disagreed with the majority's interpretation of Medicare reimbursement regulations. He argued that the Secretary of Health and Human Services' decision to change how hospitals were reimbursed for their capital costs was not a reasonable interpretation of existing law. According to Scalia, this change violated both statutory language and congressional intent by retroactively applying new rules without providing adequate notice or opportunity for comment from affected parties. Furthermore, he contended that such an abrupt policy shift could cause financial harm to hospitals who had made investment decisions based on previous interpretations of these regulations. Therefore, in his view, it was inappropriate for courts to defer to agency discretion under these circumstances.