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and amount of chemotherapy drugs used on its patients but did not
itemize the less expensive supplies. While we agree with
respondent that the itemization of the drugs on the bills is a
fact properly considered, see, e.g., Thompson Elec., Inc. v.
Commissioner, supra, we disagree with respondent that it is
dispositive of the issue. The substance of the transactions at
issue is that a service is provided by and purchased from
petitioner. Petitioner and other health care providers today
must operate under a myriad of statutory, regulatory, and
contractual mandates the purpose of which is aimed at management
of care and cost containment in the health care industry. See,
e.g., 42 U.S.C. secs. 1395 through 1395ccc (1994); 42 C.F.R.
secs. 405.201 through 405.2470 (1998); Health Care Finance
Administration, Medicare Provider Reimbursement Manual (Pubs. 15-
1 and 15-2) (Rev. 3-93). Undoubtedly, as the costs of medical
supplies increase, so do the regulatory and contractual
directives for itemization and justification. There is no
evidence petitioner provided those itemizations for merchantable
purposes or because it was selling merchandise. Rather, the
manner and form in which petitioner prepares its bills are
dictated by applicable laws, contracts with private insurers, and
the environment of the industry in which it operates. We decline
to attach further accounting or other significance thereto.
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