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Supreme Court ruling reduces GAAP's authority in Medicare cases.

Before March 6, 1995, the Federal courts routinely required that generally accepted accounting principles (GAAP) be applied when Medicare cost reimbursement decisions were made, even if the Health Care Financing Administration (HCFA) had contrary reimbursement policies in place. On March 6, however, the U.S. Supreme Court handed down a ruling in Shalala v. Guernsey Memorial Hospital that rejected prior court decisions and thus dismantled the body of case law that deferred to GAAP. As a result, hospitals, nursing homes, and other Medicare providers no longer can expect reimbursement decisions to be made in accordance with GAAP. The ruling also bestows greater discretionary power on HCFA and lessens its public accountability, which means that providers will face new reimbursement challenges in pending disputes with HCFA and its representatives.