On January 11, 2008, the federal district court for the Northern District of Florida held that days during which a bed is used to house observation patients must be included in the provider's bed count for purposes of determining whether a provider qualifies for a disproportionate share hospital ("DSH") payment adjustment. The Provider, North Okaloosa Medical Center, appealed the Intermediary's removal of "observation bed days" from its bed count—a removal which resulted in the hospital's failure to reach the 100-bed threshold for DSH reimbursement for urban hospitals. The Provider argued that, under the plain language of the DSH regulation and Medicare manual provisions in place during the relevant time period, observation bed days must be included in a provider's DSH bed count. The court agreed with the Provider, citing the fact that the plain language of the bed-counting regulation in place at that time did not list observation beds among the enumerated categories of beds that must be excluded from a provider's bed count. The court rejected the Intermediary's argument that only bed days involving services reimbursable under the inpatient prospective payment system may be counted for DSH bed-counting purposes. As a result of the court's decision, the Provider was deemed to have at least 100 available beds and therefore qualified for DSH reimbursement. This decision is the latest in a line of provider-friendly decisions on the DSH bed-counting issue, which include Clark Regional Med. Ctr. v. U.S. DHHS (6th Circuit 2002), Odessa Regional Hosp. v. Leavitt (W.D. Texas 2005), and Highland Med. Ctr. v. Leavitt (N.D. Texas 2007). The Providers in the present North Okaloosa case and the recent Highland case were represented by Greg Etzel and Krista Barnes. The decision in North Okaloosa Med. Ctr. v. Leavitt is available on Westlaw at 2008 WL 141478.