In the case of Thomas Jefferson University v. Donna E. Shalala, Secretary of Health and Human Services (1993), the Supreme Court ruled in favor of Shalala, upholding a Medicare reimbursement policy that had been challenged by Thomas Jefferson University Hospital. The hospital argued that it should be reimbursed for certain educational costs related to its teaching program under Medicare's provisions for "reasonable costs" associated with patient care. However, the Department of Health and Human Services had issued regulations limiting such reimbursements only to those educational activities directly related to patient care services. The court held that these regulations were within the agency's authority and reasonably interpreted Congressional intent behind Medicare legislation.

In the dissenting opinion for Thomas Jefferson University v. Shalala, Justice Scalia argued that the majority's decision to defer to an agency's interpretation of its own regulations was a departure from traditional principles of administrative law and threatened judicial independence. He contended that such deference allows agencies to both write and interpret their own rules, effectively consolidating legislative and judicial powers in one body contrary to constitutional separation-of-powers principles. Furthermore, he criticized the court’s reliance on Auer v Robbins (1997), which established this precedent of deferring to an agency’s interpretation of its own ambiguous regulation unless it is plainly erroneous or inconsistent with regulation itself. In his view, this approach undermines courts' role as independent arbiters by giving too much power over legal interpretations to executive agencies.