The Medicare Act (Act), 42 U.S.C. § 1395x(v)(1)(A), authorized Secretary of Health and Human Services Bowen (Secretary) (defendant) to set limits on Medicare reimbursements for expenses that healthcare providers incurred while treating patients in the Medicare program. In 1981, the Secretary introduced a cost-limit schedule that changed the rule for calculating the wage index for hospital employees. The wage index was later found to be invalid, because the Secretary had failed to provide for notice and comment before issuing the schedule. In 1984, the Secretary proposed the same wage-index rule again, which would apply retroactively beginning from 1981. The wage index went into effect in 1984, enabling the Secretary to collect over $2 million in reimbursements that had been paid when the 1981 wage index was found invalid. Georgetown University Hospital and six other hospitals (plaintiffs) challenged the rule as invalid under the Act and the Administrative Procedure Act (APA), 5 U.S.C. § 551 et seq. The district court granted summary judgment for the plaintiffs. The Secretary appealed, and the court of appeals affirmed. The United States Supreme Court granted certiorari.