Supreme Court Justice William H. Rehnquist has blocked an order by a California federal court that required the Health and Human Services Department to implement new rules that would allow hospitals with a large proportion of low-income patients to receive higher Medicare payments.

The case arose from part of a 1983 law that called for higher Medicare payments, to the extent deemed appropriate by the HHS secretary, for hospitals that serve large numbers of low-income patients. When HHS did not issue the rules, Redbud Hospital in Cleardale, Calif., sued with the backing of the National Association of Public Hospitals, the American Hospital Association, the Catholic Hospital Association and other groups.

The suit argued that when HHS set up its new system for setting Medicare reimbursement rates in advance, based on the disease, it failed to take into account the needs of hospitals that serve large number of Medicare beneficiaries.

A federal district court in California issued an injunction that ordered HHS to publish final regulations by this Aug. 1 to implement the 1983 law. The U.S. Court of Appeals for the 9th Circuit is now reviewing legal issues in the case, but it had refused to delay the requirement that HHS issue the rules by the end of next week.

Under protest, HHS published a proposed version of the rules on July 1. On Wednesday, Rehnquist lifted the order for HHS to publish the rules. But he accepted the part of the district court's decision that granted special financial benefits to Redbud Hospital.

Rehnquist said he believed that the district court's use of a preliminary injunction to force HHS to issue nationwide regulations went beyond what was necessary to protect Redbud's financial position.

Although Rehnquist granted a stay on the national regulations, the National Association of Public Hospitals won a victory on the same issue on Capitol Hill the same day. The House Ways and Means Committee inserted a specific, detailed provision into a Medicare bill requiring the department to pay hospitals with a high proportion of low-income patients up to 16 percent more on each Medicare bill.