Document ID: ./input/supremecourt_opinions/opinions/boundvolumes/529bv.pdf
Page Number: 748

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Unit: $U55

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Cite as: 529 U. S. 667 (2000)

673

Opinion of the Court

compliance include dismissal from the program. 42 U. S. C.
§ 1320c–5(b)(1).

Medicare attains its objectives through an elaborate fund-
ing structure. Participating health care organizations, in
exchange for rendering services, receive federal funds on
a periodic basis. §§ 1395g, 1395l. The amounts received
reﬂect the “reasonable cost” of services rendered, deﬁned
as “the costs necessary in the efﬁcient delivery of needed
health services to individuals covered [by the program].”
§ 1395x(v)(1)(A). Necessary costs are not limited to the im-
mediate costs of an individual treatment procedure.
Instead
they are deﬁned in broader terms: “Necessary and proper
costs are costs that are appropriate and helpful in developing
and maintaining the operation of patient care facilities and
activities.”
42 CFR § 413.9(b)(2) (1999). Allowable costs
include amounts which enhance the organization’s capacity
to provide ongoing, quality services not only to eligible pa-
tients but also to the community at large. By way of exam-
ple, amounts incurred for “certain educational programs for
interns and residents, known as [graduate medical education]
programs, are ‘allowable cost[s]’ for which a hospital (a pro-
vider) may receive reimbursement.” Regions Hospital v.
Shalala, 522 U. S. 448, 452 (1998) (citing 42 CFR § 413.85(a)
(1996)); see also § 413.85(b) (1999); Thomas Jefferson Univ.
v. Shalala, 512 U. S. 504, 507–508 (1994) (describing regula-
tion of education programs).
“These programs,” the Medi-
care regulations explain, “contribute to the quality of patient
care within an institution and are necessary to meet the com-
munity’s needs for medical and paramedical personnel. . . .
[M]any communities have not assumed responsibility for ﬁ-
nancing these programs and it is necessary that support be
provided by those purchasing healthcare. Until communi-
ties undertake to bear these costs, the program will partici-
pate appropriately in the support of these activities.” 42
CFR § 413.85(c) (1999). Medicare also permits, indeed en-
courages, these providers to deposit the amounts of reim-