UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


N BROWARD HOSP DIST

v.

SHALALA, DONNA E.


98-5164a

D.C. Cir. 1999


*	*	*


Sentelle, Circuit Judge: Congress has authorized Medi- care
reimbursement at a higher than usual rate to certain  large urban
hospitals that receive significant state and local  funding apart from
Medicaid and Medicare revenues. The  Secretary of Health and Human
Services ("HHS") appeals a  decision of the district court rejecting
her interpretation of  the qualifications for eligibility under this
provision. See  North Broward Hosp. Dist. v. Shalala, 997 F. Supp. 41 
(D.D.C. 1998). Finding the statute ambiguous and the Secre- tary's
interpretation reasonable, we reverse.


I.


In 1983, Congress began to phase out the existing cost- based Medicare
reimbursement system, see 42 U.S.C.  s 1395f(b)(1); Methodist Hosp. of
Sacramento v. Shalala, 38  F.3d 1225, 1227 (D.C. Cir. 1994), and to
phase in a "prospec- tive payment" system providing reimbursement
according to  pre-determined rates based on diagnosis and geographic
loca- tion. See Social Security Amendments of 1983, Pub. L. No. 
98-21, s 601, 97 Stat. 65, 149 (1983) (codified as amended at  42
U.S.C. s 1395ww). In 1986, recognizing that special ad- justments
might be needed for hospitals serving an unusually  large number of
low-income individuals, Congress crafted  provisions implementing
"disproportionate share" adjust- ments for such hospitals. See The
Consolidated Omnibus  Budget Reconciliation Act of 1985 (COBRA), Pub.
L. No.  99-272, s 9105, 100 Stat. 82, 158 (1986). These disproportion-
ate share adjustments provide for additional Medicare pay- ments for
hospitals that qualify on either of two grounds.  Hospitals typically
qualify for an adjustment by showing that  they serve a
disproportionate number of low-income patients  based on the
proportion of inpatient days attributable to  Medicaid patients and to


Supplemental Security Income benefits.1 See 42 U.S.C.  s
1395ww(d)(5)(F)(i)(I), (v), (vi). Alternatively, under the  provision
at issue in this case, large urban hospitals can  qualify by
demonstrating that they receive state and local  funding which exceeds
a statutory threshold. Specifically,  the statute provides for a
disproportionate share adjustment  for any hospital that


is located in an urban area, has 100 or more beds, and  can demonstrate
that its net inpatient care revenues  (excluding any of such revenues
attributable to [Medicare  or Medicaid]), during the cost reporting
period in which  the discharges occur, for indigent care from State
and  local government sources exceed 30 percent of its total of  such
net inpatient care revenues during the period.


Id. s 1395ww(d)(5)(F)(i)(II). As originally enacted in 1986,  this
provision read just as it does now, except that the phrase  "total of
such net inpatient care revenues" read "total of such  revenues." See
COBRA s 9105(a)(F)(i)(II), 100 Stat. 82, 158.  The change to the
present wording was made by a 1987  amendment. See The Omnibus Budget
Reconciliation Act of  1987 (OBRA), Pub. L. No. 100-203, s
4009(j)(3)(A), 101 Stat.  1330, 1330-59 (1987).


The controversy in this case centers on the proper inter- pretation of
the ratio specified in this provision. The single  issue is whether
the 30% set forth in the provision is a  percentage of all net
inpatient care revenues or whether it is  a percentage of net
inpatient revenues excluding revenues  from Medicare and Medicaid. In
other words, the question is  whether the antecedent of "total of such
net inpatient care  revenues" is "net inpatient care revenues" or "net
inpatient  care revenues (excluding any of such revenues attributable
to  [Medicare or Medicaid])."


North Broward Hospital District ("North Broward"), doing  business as
Broward General Medical Center, North Broward 




__________

n 1 Supplemental Security Income furnishes financial assistance  to
indigent persons who are aged, blind, or disabled. See 42 U.S.C.  s
1381 et seq.


Medical Center, and Imperial Point Medical Center, believed  that the
latter interpretation was correct, and that its facili- ties therefore
qualified for the disproportionate share adjust- ment for fiscal years
1989-1991. However, the Medicare  fiscal intermediary adhered to the
former interpretation, and  accordingly refused to make the more
generous reimburse- ments to North Broward. North Broward appealed to
the  Provider Reimbursement Review Board ("PRRB") as speci- fied in 42
U.S.C. s 1395oo(a), (h). The PRRB adopted the  latter interpretation
of the ratio, reversed the intermediary's  decision, and held that the
North Broward facilities qualified  for the disproportionate share
adjustment. Next, at the  urging of the intermediary and HHS's Bureau
of Policy  Development ("BPD"), the Administrator of the Health Care 
Financing Administration ("HCFA"), acting as the Secre- tary's
delegate, reversed the Board's decision, as permitted  by 42 U.S.C. s
1395oo(f)(1) and 42 C.F.R. s 405.1875. The  Administrator held that
the provision contained "incontro- vertible referential ambiguity" and
that the former interpre- tation, adopted by the BPD and the
intermediary, was rea- sonable. Pursuant to 42 U.S.C. s 1395oo(f)(1),
the hospitals  sought review in the district court, which in turn
reversed the  Administrator's decision and granted summary judgment
for  North Broward. The district court held that the language of  the
provision is clear and unambiguous and that it requires  the latter
interpretation, urged by North Broward. 997  F. Supp. at 45, 48. The
Secretary appeals from this ruling of  the district court.


II.


The practical differences between the Secretary's interpre- tation and
that advanced by North Broward and accepted by  the district court are
significant. As an illustration of the  implications of the two
interpretations, consider an example  of a hospital whose total net
inpatient care revenues are  $100,000,000, of which $40,000,000 are
Medicare and Medicaid  revenues. Under North Broward's interpretation,
which ex- cludes Medicare and Medicaid revenues from the denomina- tor
of the ratio, the hospital would qualify for a disproportion-


ate share adjustment under the provision at issue as long as it 
received more than $18,000,000 in state and local funding not 
attributable to Medicaid or Medicare, as illustrated by the  following
calculations: North Broward's interpretation Numerator = (State and
local funding other than  Medicare & Medicaid)  = $18,000,000
Denominator = (Net inpatient revenues, excluding  Medicare & Medicaid)
 = $100,000,000 - $40,000,000  = $60,000,000  The ratio is thus 18/60,


Under the Secretary's interpretation, which does not exclude  Medicare
and Medicaid revenues from the denominator, the  hospital would need
to receive more than $30,000,000 of state  and local funding not
attributable to Medicaid or Medicare to  qualify: Secretary's
interpretation Numerator = (State and local funding other than 
Medicare & Medicaid) = $30,000,000 Denominator = (Total net inpatient
revenues)  = $100,000,000 The ratio is thus 30/100, or 30%.


Given the sizable difference in the amount of state and local  funding
required to qualify under the two interpretations,  adopting North
Broward's interpretation would likely in- crease the number of
providers qualifying for the dispropor- tionate share adjustment under
the provision.2


Whether such an increase in the provision's applicability  would be
appropriate or desirable is a matter of policy, not of  statutory
construction, and within the bounds of congressional  directive, it is
primarily a question for HHS, not the courts.  Because an agency's
policy choices are necessarily con- strained by the statute pursuant
to which it acts, when an  agency has interpreted a statute it
administers, we first  consider whether Congress has "directly


__________

n 2 According to HHS, fewer than a dozen facilities or hospital 
districts in the nation qualified under this provision in 1995. Secre-
tary's Brief at 42; J.A. at 65. cise question at issue." Chevron
U.S.A. Inc. v. Natural  Resources Defense Council, Inc., 467 U.S. 837,
843 (1984). If  the intent of Congress is clear, it must be given
effect. Id.  However, if the intent of Congress is not clear, we do
not  impose our own construction of the statute, but instead  examine
only whether "the agency's answer is based on a  permissible
construction of the statute." Id. Thus, absent  clear congressional
intent to the contrary, we will defer to the  Secretary's
interpretation " 'if it is reasonable and consistent  with the
statute's purpose.' " National Med. Enters., Inc. v.  Shalala, 43 F.3d
691, 695 (D.C. Cir. 1995) (quoting Chemical  Mfrs. Ass'n v. EPA, 919
F.2d 158, 162-63 (D.C. Cir. 1990)).  See also HCA Health Servs. of
Oklahoma, Inc. v. Shalala, 27  F.3d 614, 616-17 (D.C. Cir. 1994);
Marymount Hosp., Inc. v.  Shalala, 19 F.3d 658, 661 (D.C. Cir.


North Broward advances two arguments that the usual  Chevron analysis
is inapplicable, neither of which we find  convincing. First, North
Broward argues that the Secre- tary's interpretation of the statute
creating the ratio is not  entitled to deference because it is not
longstanding, noting  that even the Administrator's decision
characterized the regu- lations as silent with respect to the issue.
We are somewhat  puzzled by North Broward's argument, since the
statutory  interpretations of the agency's adjudicatory decision in
this  case would be entitled to deference even if the matter had 
never been addressed in regulations at all. See Appalachian  Regional
Healthcare, Inc. v. Shalala, 131 F.3d 1050, 1054  (D.C. Cir. 1997).
There is certainly no argument that the  Administrator's decision in
this case is actually incompatible  with the regulations. While
perhaps not entirely unambigu- ous, the regulations describe the
required ratio as 30 percent  of "net inpatient care revenues" and are
thus more consistent  with the Secretary's interpretation of the
statute than with  the contrary position urged by North Broward. See
42  C.F.R. s 412.106(c)(2) (providing that the adjustment is avail-
able if a hospital "can demonstrate that, during its cost  reporting
period, more than 30 percent of its net inpatient  care revenues are
derived from State and local government  payments for care furnished


51 Fed. Reg. 16,772, 16,776 (1986) (explaining that a qualify- ing
hospital must show "that more than 30 percent of its total  inpatient
care revenues are from State and local government  sources and that
these revenues are specifically earmarked  for the care of


Second, and even less convincingly, North Broward argues  that the
Secretary is not entitled to deference because of her  "unremitting
hostility" to disproportionate share adjustments  in general. As
evidence of this hostility, North Broward  notes that Congress's 1986
enactment of statutory dispropor- tionate share adjustments arose in
response to HHS's failure  to implement acceptable adjustments by
regulation, and that  the House and Senate reports expressed
dissatisfaction with  the Secretary's nonresponsiveness. See H.R. Rep.
No.  99-241, pt. 1, at 15-16 (1985); S. Rep. No. 99-146, at 291 
(1985). As further evidence of the Secretary's alleged hostili- ty to
disproportionate share adjustments, North Broward  points to cases
rejecting the Secretary's interpretation of the  statutory provisions
governing disproportionate share adjust- ments based on a high
proportion of low-income "patient  days." See, e.g., Cabell Huntington
Hosp., Inc. v. Shalala,  101 F.3d 984 (4th Cir. 1996); Jewish Hosp.,
Inc. v. Secretary  of HHS, 19 F.3d 270 (6th Cir. 1994). Not
surprisingly, North  Broward cites no support for its suggestion that
we should  deny an agency Chevron deference because of our judicial 
assessment that it has been "hostile" to certain ideas. If an 
agency's "hostility" leads it to adopt an unreasonable inter-
pretation of a statute, the interpretation will, if challenged, be 
rejected by the courts, as is perhaps illustrated by the cases  cited
by North Broward in which courts have rejected the  Secretary's
interpretation of the "patient-day" based dispro- portionate share
mechanism. It is a far different thing to  suggest that a court
withhold deference to an agency's inter- pretation of a statute it
administers on the basis of some sort  of judicial "vote of no
confidence" regarding the agency's  actions on related matters. If
Congress views HHS as  "unremittingly hostile" to disproportionate
share adjust- ments, it is free to decrease the agency's discretion in


entirely. Absent such congressional intervention, administra- tion of
the provision at issue is entrusted to HHS, and our  review is that
prescribed by Chevron.


Finally, North Broward urges that even if Chevron applies,  we need not
conduct a Chevron analysis, because regardless  of our view of the
statute, the final decision by the HCFA  Administrator was arbitrary
and capricious and therefore  violated the Administrative Procedure
Act ("APA"). 5 U.S.C.  s 706(2)(A); see also 42 U.S.C. s 1395oo(d) &
(f)(1). In  particular, North Broward relies on the fact that the
Adminis- trator's decision made reference to the fact that the phrase 
"such revenues" appears twice in the relevant sentence of the 
statute. North Broward accurately points out that while  "such
revenues" appeared twice in the statute before the 1987  amendment, it
no longer does so--"such revenues" appears  once, and "such net
inpatient care revenues" appears once.  Thus, appellees argue, the
Administrator "did not even get  the words of the statute right."
North Broward Brief at 33.  We find this argument hypertechnical. The
Administrator's  decision quoted the entire relevant statutory passage
in two  places, one immediately above the complained-of references  to
"such revenues." The statute was set forth correctly, with  "such
revenues" in one place and "such net inpatient care  revenues" in the
other. In light of this, it seems clear that  the Administrator's
reference to the two occurrences of "such  revenues" was simply a
shortening of the latter phrase by  omitting the modifiers for ease of
reference. Such shorthand  may offend certain attorneys and
copyeditors, but does not  offend the APA. We therefore proceed to a


III.


Under the first step of Chevron, our task is to consider  whether "the
intent of Congress is clear" with respect to the  interpretation of
the state and local funding provision. Chev- ron, 467 U.S. at 842. As
we noted above, the statute provides  for enhanced reimbursement if a
hospital


is located in an urban area, has 100 or more beds, and  can
demonstrate that its net inpatient care revenues  (excluding any of
such revenues attributable to [Medicare  or Medicaid]), during the
cost reporting period in which  the discharges occur, for indigent
care from State and  local government sources exceed 30 percent of its
total of  such net inpatient care revenues during the period.


42 U.S.C. s 1395ww(d)(5)(F)(i)(II). The Secretary argues  that the
statute is inherently ambiguous, in that "total of such  net inpatient
care revenues" might refer back to simply the  entire category of "net
inpatient care revenues" or might  instead include the modifying
parenthetical "(excluding any of  such revenues attributable to
[Medicare or Medicaid])." In  contrast, North Broward argues that the
statute is unambigu- ous, and that the Secretary's interpretation
conflicts with the  text of the statute. According to North Broward,
by inter- preting "total of such net inpatient care revenues" as
identical  with "net inpatient care revenues," the Secretary's
interpreta- tion fails to give effect to the words "of such."


North Broward's argument implicitly assumes that "such"  is surplusage
if it is not serving some limiting or particulariz- ing role. The
district court adopted a similar view. Relying  on a portion of the
definition of "such" from Black's Law  Dictionary, which notes that
"such" "represents the object as  already particularized in terms
which are not mentioned, and  is a descriptive and relative word,
referring to the last  antecedent," Black's Law Dictionary 1432 (6th
ed. 1990), the  court concluded that "net inpatient care revenues
(excluding  any of such revenues attributable to [Medicare] or [Medic-
aid])" was the last antecedent, since the parenthetical phrase 
"particularizes" the object. North Broward, 997 F. Supp. at  45. In
our view, this analysis takes too narrow a view of the  uses of the
word "such." While it often serves the particular- izing role
envisioned by North Broward and the district court,  the word "such"
can also be used simply to refer back to  something previously
mentioned but not "particularized." As  the Secretary notes, this use
of "such" does not render the  word surplusage--it still serves a role
in "helping the reader  to identify concepts that have already been


long or complicated piece of writing." Secretary's Reply  Brief at
18.


Where both a "particularizing" and a "non-particularizing" 
interpretation of "such" are possible, it need not be the case  that
the particularizing interpretation prevails. For example,  in Hogar
Agua y Vida en el Desierto, Inc. v. Suarez-Medina,  36 F.3d 177 (1st
Cir. 1994), the court encountered a provision  whose prefatory clause
made the provision applicable to any  "single-family house sold or
rented by an owner," and whose  following provisos referred to "such
single-family houses."  Although it was argued that the phrase in the
provisos  unambiguously related back to the complete phrase--"single-
family house sold or rented by an owner," rather than to 
single-family houses generally, the court found the language 
ambiguous. Id. at 185-86. Accordingly, the court construed  the
statute in accordance with its remedial goals, and held  that the
references to "such single-family houses" did not  incorporate the
phrase "sold or rented by an owner," but  rather simply referred to


United States v. Bowen, 100 U.S. 508 (1879), upon which  North Broward
relies, is not to the contrary. In that case,  the Supreme Court read
the statutory phrase "all such pen- sioners" not to refer to all
pensioners, but to a subset of  pensioners previously described,
noting that the alternate  interpretation would render "such" useless.
Id. at 512.  However, Bowen differs from the present situation in
impor- tant respects. First, the provision considered in Bowen had 
not previously referred to the class of pensioners generally,  but had
only referred to a certain subset. Thus, the Court  noted that
"[t]here is no antecedent use of the word 'pension- ers' in the
[relevant] chapter ... to which the word such can  refer, but the
immediately preceding sentence in the same  section." Id. Accordingly,
"such" either had to refer back to  the subset, or to nothing. That is
not the case here. Second,  the Bowen Court's task was not the same as
ours. The  Bowen Court had simply to choose between two interpreta-
tions of the statute. We must decide whether there is a clear 
congressional intent which precludes the Secretary's view. 


Bowen did not involve the rejection of the interpretation of  those
charged with administering the statute. Not only did  Bowen long
predate Chevron, but, as the pensioners there  pointed out, the
interpretation of the provision ultimately  chosen by the Court had
apparently been "uniformly given to  it by the Commissioner of
Pensions," who was charged with  the duty of executing the statute.


Given a choice between attributing to "such" the simple  referential
function described by the Secretary or a particu- larizing function,
we might ordinarily be inclined to choose  the latter, which arguably
gives "such" a more meaningful  role. However, the provision at issue
does not unambiguously  require such an interpretation, and indeed,
other features of  the provision make the Secretary's interpretation
of "such"  seem more than reasonable. First, the denominator refers 
not simply to "such net inpatient care revenues" but to the  "total of
such net inpatient care revenues." North Broward  correctly observes
that if "such net inpatient care revenues"  incorporated the exclusion
of Medicare and Medicaid reve- nues, then "total of such net inpatient
care revenues" would  as well. Nonetheless, we find the presence of
the phrase  "total of" at least suggestive that the phrase following
is to be  all-encompassing, without exclusions. Indeed, this seems the
 only way to give any real function to the phrase "total of."


In addition, the syntactical structure of the phrase describ- ing the
numerator makes it unusually difficult to isolate the  antecedent of
"such net inpatient care revenues" in the  denominator. Even if we
were intent on interpreting this  phrase as referring to "net
inpatient care revenues" as previ- ously particularized, it would not
be a simple task. This is so  because the reference to "net inpatient
care revenues" in the  numerator is particularized not only by the
parenthetical  excluding Medicare and Medicaid revenues, but by two
addi- tional phrases as well. The numerator consists of "net inpa-
tient care revenues (excluding any of such revenues attribut- able to
[Medicare or Medicaid]), during the cost reporting  period in which
the discharges occur, for indigent care from  State and local
government sources." 42 U.S.C.  s 1395ww(d)(5)(F)(i)(II). North


guments explaining why the last two phrases cannot reason- ably be
read as being within the particularization incorporat- ed by the
"such" in the denominator, and we do not suggest  that they are. But
this reasoning necessarily departs from a  simple rule that "such"
always incorporates previous particu- larizations, and illustrates
that the unwieldy formulation of  the numerator makes blanket
application of such a rule  unworkable here. Given this, it is
impossible to conclude that  Congress clearly intended that "such"
serve the specific  particularizing role advanced by North Broward.


The Secretary argues that her interpretation is also bol- stered by
consideration of the provision's original wording  and the change made
by the 1987 amendment. The sole  modification to the provision made by
the 1987 Act was to  replace the requirement that the numerator
"exceed 30 per- cent of [the hospital's] total of such revenues" with
a require- ment that the numerator "exceed 30 percent of [the hospi-
tal's] total of such net inpatient care revenues." See OBRA  s
4009(j)(3)(A), 101 Stat. 1330, 1330-59. According to the  Secretary,
the 1987 change was merely intended to clarify  that the phrase "total
of such revenues" was not meant to  indicate gross revenues rather
than net. In the Secretary's  view, this is supported by a string of
words from the Confer- ence Report accompanying the 1987 amendment
(calling it a  sentence would be too kind):


[T]here has been controversy over the interpretation of  current
statutory language which refers to inpatient care  revenues as "net
inpatient care revenues" in one location,  but refers to "such
revenues" has been interpreted to  mean either gross inpatient
revenues (revenues the hos- pital would receive if all patients paid
the hospital's full  charges) or net inpatient revenues (gross
revenues minus  bad debts, contractual allowances, and charity


H.R. Conf. Rep. No. 100-495, at 543 (1987). While impossi- ble to parse
grammatically, this is the only passage in the  legislative history to
which we have been referred which  meaningfully attempts to explain
the motivation for the 1987 


amendment. It provides at least minimal support for the  Secretary's
view of the purpose of that amendment.


Whether or not the 1987 amendment was made only to  clarify the net
versus gross issue, it was styled a "technical  correction," see OBRA
s 4009(j)(3)(A), 101 Stat. 1330, 1330- 59, suggesting that only
clarification and not substantive  change was intended. Thus our
concern is the meaning of  the phrase "such revenues" as used in
describing the denomi- nator of the ratio in the original 1986
enactment, and as  "clarified" in 1987 to read "such net inpatient


As originally enacted, the provision provided an adjustment  for any
hospital that could


demonstrate that its net inpatient care revenues (exclud- ing any of
such revenues attributable to [Medicare or  Medicaid]), during the
cost reporting period in which the  discharges occur, for indigent
care from State and local  government sources exceed 30 percent of its
total of such  revenues during the period.


COBRA s 9105(a)(F)(i)(II), 100 Stat. 82, 158 (emphasis add- ed). The
first occurrence of "such revenues" in this passage  unambiguously
referred back to "net inpatient care reve- nues." In the Secretary's
view, the second occurrence of  "such revenues" had the same meaning
as the first, referring  back simply to "net inpatient care revenues,"
and since the  1987 amendment did not implement any substantive
change,  the current "such net inpatient care revenues" language in 
the denominator has the same meaning. While we cannot  assume that the
antecedent of the second occurrence of "such  revenues" would
necessarily have to be the same as that of  the first, we agree that
the previous occurrence of "such  revenues" with a clear antecedent
does seem to provide at  least some support for construing the latter
occurrence of  "such revenues" (and thus the amended "such net
inpatient  care revenues") as referring to the same antecedent.


The Secretary also asserts that her interpretation of the  statute is
the only one compatible with the legislative history  of the original
act, which indicated that the adjustment ap-


plied to a hospital if "at least 30% of its net inpatient care 
revenue is provided by local or state governments for inpa- tient care
for low-income patients not otherwise reimbursed  by medicaid." H.R.
Rep. No. 99-241, pt. 1, at 16. The House  Report also states that
"[t]he Committee further intends that  the denominator of this
equation, net inpatient care revenue,  be defined according to the
generally accepted accounting  principles in the hospital industry;
i.e., this factor should  represent gross patient care revenues less
deductions from  revenue (other than contractual allowances), as those
terms  are generally used." Id. at 18-19 (emphasis added). We  agree
that these passages are consistent with the Secretary's  view that the
relevant state and local funding was required to  be 30% or more of
total net inpatient care revenues. The  Conference Report further
supports the Secretary's view,  describing hospitals qualifying under
this provision as "those  which can demonstrate that more than 30
percent of their  revenues are derived from State and local government
pay- ments for indigent care provided to patients not covered by 
medicare or medicaid." H.R. Conf. Rep. No. 99-453, at 461- 62


However, North Broward argues that since the present  wording of the
provision dates only from the 1987 amend- ment, the legislative
history of that amendment, and not that  of the original enactment, is
the better source for determining  Congress's intent. North Broward
notes that in discussing  "present law," the 1987 Conference Report
noted that a  hospital qualified under the provision at issue if "it
can  demonstrate that more than 30 percent of its inpatient care 
revenues (excluding any Medicare or Medicaid revenues) are  provided
by State and local government payments for indi- gent care." H.R.
Conf. Rep. No. 100-495, at 543. The  Conference Report further noted
that the amendment "[c]lar- ifies that a hospital would qualify if
more than 30 percent of  its net inpatient care revenues (excluding
any Medicare or  medicaid revenues) are provided by State and local
govern- ment payments for indigent care." Id. at 545. The Secre- tary
argues, and we agree, that the 1987 Conference Report's 
characterization of existing law is entitled to little weight. As 


the Supreme Court has observed, subsequent legislative his- tory is
"an unreliable guide to legislative intent." Chapman  v. United
States, 500 U.S. 453, 464 n.4 (1991). See also  Wright v. West, 505
U.S. 277, 295 n.9 (1992); Pierce v.  Underwood, 487 U.S. 552, 566-67
(1988). However, North  Broward argues that because the 1987
legislative history  accompanied an amendment to the provision at
issue, its view  of existing law deserves credit. While a discussion
of existing  law in subsequent legislative history may be more
valuable  where it accompanies a related amendment to the provision, 
see Mackey v. Lanier Collection Agency & Serv., Inc., 486  U.S. 825,
840 (1988); United States v. General Motors Corp.,  518 F.2d 420,
436-37 (D.C. Cir. 1975), here there is no  evidence that the exclusion
of Medicare and Medicaid funds  from the denominator of the ratio was
the focus of attention  of Congress, the Conference Committee, or even
the author  of the report. Hence the passages in the Conference Report
 on which North Broward relies as evidencing whether Medi- care and
Medicaid were intended to be excluded from the  denominator are mere
"legislative dicta," Dunn v. Commodi- ty Futures Trading Comm'n, 519
U.S. 465, 478 (1997), and we  do not view these remarks as speaking


Furthermore, even if we were inclined to give weight to the  1987
Conference Report, which we are not, it is not at all  clear that the
report, taken as a whole, supports North  Broward's position. To be
sure, in the passage cited by  North Broward, the Conference Report
characterizes existing  law as providing an adjustment if a hospital
can demonstrate  "that more than 30 percent of its inpatient care
revenues  (excluding any Medicare or Medicaid revenues) are provided 
by State and local government payments for indigent care."  Because of
the placement of the parenthetical after "reve- nues" rather than at
the end of the sentence, this portion of  the history is consistent
with North Broward's interpretation.  However, elsewhere in the same
Conference Report, there is  language encouraging the Secretary
"expeditiously to imple- ment the disproportionate share adjustment
for hospitals  which receive more than thirty percent of net patient


nues from State and local governmental sources," H.R. Conf.  Rep. No.
100-495, at 525 (1987), and setting the amount of the  adjustment at
15% for hospitals "which receive at least 30  percent of their net
inpatient care revenues from State and  local payments for indigent
care," id. at 521. Because these  portions of the report refer to the
required ratio as 30% of  net revenues with no reference to excluding
Medicare and  Medicaid, they do not support North Broward's
interpreta- tion. Thus, in our view, the only lesson to be drawn from
the  1987 legislative history is that the individuals who wrote it 
had not carefully considered, or at least didn't quite agree on,  what
the original provision meant.


In sum, the provision's textual unwieldiness is not illumi- nated by
this jumbled legislative history, and we cannot  discern any clear
congressional intent regarding the meaning  of the provision.
Accordingly, we agree with the Secretary  that the provision is
ambiguous, and proceed to the second  step of the Chevron analysis.


IV.


We have little difficulty concluding that the Secretary's 
interpretation is a permissible construction of the provision. 
Indeed, the ambiguity of the provision described above arises  largely
because the provision is reasonably amenable to both  the Secretary's
and North Broward's readings. Nonetheless,  North Broward argues that
even if the Secretary's interpre- tation is a possible parsing of the
provision's text, it is  unreasonable in that it effectively penalizes
hospitals for  treating Medicare and Medicaid patients. This is so,
the  argument goes, because under the Secretary's interpretation,  the
more services a hospital furnishes to Medicare and Medic- aid
patients, the lower its ratio will be, since revenues for  those
services will be included in the denominator, but not the  numerator.
In contrast, North Broward suggests that under  its interpretation,
services to Medicare and Medicaid patients  "do not help a hospital
qualify for a disproportionate share  adjustment ... but neither do
they hurt the hospital." North  Broward Brief at 39.


We find North Broward's argument unconvincing. First,  even if
increased Medicare and Medicaid funding adversely  affected a
hospital's ratio under this provision, hospitals  treating an
unusually large number of Medicaid and low- income Medicare patients
are entitled to the disproportionate  share adjustment under the
alternate mechanism of 42 U.S.C.  s 1395ww(d)(5)(F)(i)(I), (v), (vi).
The provision at issue in  this case seeks to identify and
appropriately compensate  hospitals receiving significant state and
local funding for  indigent care apart from Medicaid and Medicare
spending.  To the extent that an increase in Medicaid and Medicare 
revenues decreases the proportion of revenues attributable to  other
state and local funding, a decrease in the hospital's ratio  could


More importantly, we are unconvinced of North Broward's  factual
premise--at least in some circumstances, it is the  Secretary's
interpretation, and not North Broward's, that is  neutral with regard
to services to Medicare and Medicaid  patients. For example, suppose
that in a given year, Hospital  A and Hospital B each had total net
inpatient care revenues  of $100,000,000, of which $20,000,000 was
state and local  funding not attributable to Medicare or Medicaid.
Suppose,  however, that Hospital A received $40,000,000 net inpatient 
care revenues from Medicare and Medicaid, and $40,000,000  from other
sources such as private insurance and individual  payments, while
Hospital B received $50,000,000 from Medi- care and Medicaid and
$30,000,000 from other sources. Thus,  the only difference in the two
hospitals' revenues is the  amount of funding from Medicare and
Medicaid versus pri- vate sources. The ratios calculated under this


Secretary's interpretation


Hospital A: Numerator = $20,000,000 state and local  funding


Denominator = $100,000,000 total


Ratio = 20/100


Hospital B: Numerator = $20,000,000 state and local  funding


Denominator = $100,000,000 total  Ratio = 20/100


North Broward's interpretation


Hospital A: Numerator = $20,000,000 state and  local funding
Denominator = $100,000,000 total  - $40,000,000 Medicare  & Medicaid 
= $60,000,000  Ratio = 20/60 


Hospital B: Numerator = $20,000,000 state and  local funding
Denominator = $100,000,000 total  - $50,000,000 Medi-  care & Medicaid
 = $50,000,000  Ratio = 20/50


Under the Secretary's method, the fact that Hospital B had  more
services funded by Medicare and Medicaid than Hospi- tal A leads to no
difference in the ratios for the two hospitals.  Under North Broward's
method, however, Hospital B's great- er Medicare and Medicaid funding
leads to a higher ratio.  We do not understand why North Broward views
this as  "neutral."


Furthermore, in some situations, this feature of North  Broward's
interpretation would lead to results which seem  less consistent with
the apparent purpose of the provision  than would be the case under
the Secretary's interpretation.  For example, consider two otherwise
qualifying hospitals, C  and D, each of which has total net inpatient
care revenues of  $100,000,000, of which $10,000,000 is from Medicaid.
Suppose  that Hospital C receives heavy state and local funding not 
attributable to Medicaid or Medicare, in the amount of  $23,000,000,
while Hospital D receives $10,000,000 in such  funds. One would expect
that if either hospital would qualify  for a disproportionate share
adjustment under the provision  targeted at hospitals with unusually
high state and local  funding, it would be Hospital C. However, under
North  Broward's interpretation, as we understand it, this would not 
necessarily be the case. In particular, suppose that Hospital  D is in
an area with a large number of retirees, and therefore  has a large
amount of Medicare revenues totaling $60,000,000,  while Hospital C
has Medicare revenues of only $10,000,000.  The calculations under
North Broward's method would pro- ceed as follows:


HospitalC: Numerator = $23,000,000


Denominator = $100,000,000 - $10,000,000  Medicaid - $10,000,000 
Medicare  = $80,000,000


The ratio is thus 23/80, which is less than 30%.


HospitalD: Numerator = $10,000,000


Denominator = $100,000,000 - $10,000,000  Medicaid - $60,000,000 
Medicare = $30,000,000


The ratio is thus  10/30 = 1/3, which is greater  than 30%.


Thus despite its far greater state and local funding, Hospi- tal C
would not qualify for the adjustment under North  Broward's
interpretation, while Hospital D would. We note  that the difference
in Medicare funding that tips the balance  in favor of Hospital D need
not be for indigent elderly at all,  but could equally as well be for
wealthy seniors with Winne- bagos and supplemental insurance. It is
hard to see why  serving a high number of such patients should affect
Hospital  D's ratio so favorably. We see little logic in this feature
of  North Broward's interpretation, and cannot condemn the 
Secretary's failure to adopt it.


For the foregoing reasons, the decision of the district court  is


Reversed.