Cite as: 508 U. S. 402 (1993)
Opinion of the Court
ground to this case. To begin, Congress has required the Secretary to repay the lesser of the "reasonable cost" or "customary charg[e]." See 42 U. S. C. § 1395f(b)(1). Rather than attempt to define "reasonable cost" with precision, Congress empowered the Secretary to issue appropriate regulations setting forth the methods to be used in computing such costs. See § 1395x(v)(1)(A).1
Prior to 1972, the Secretary's regulations contemplated reimbursement of the entirety of a provider's services to Medicare patients unless its costs were found to be "substantially out of line" with those of similar institutions. See, e. g., 20 CFR § 405.451(c) (1967).2 In 1972, apparently fueled by concern that providers were passing on inefficient and excessive expenses, see H. R. Rep. No. 92-231, pp. 82-85 (1971); S. Rep. No. 92-1230, pp. 188-189 (1972), Congress amended the statute to specify that "reasonable costs" meant only those "actually incurred, excluding therefrom any part of incurred cost[s] found to be unnecessary in the efficient delivery of needed health services," 42 U. S. C. § 1395x(v)(1)(A), and to authorize the Secretary—as part of the "methods" of determining costs—to establish appropriate cost limits, see ibid.
Accordingly, the Secretary promulgated regulations, updated yearly and establishing routine cost limits based on factors such as the type of health care provider (hospital, skilled nursing facility, etc.), type of services it rendered, its geographical location, size, and mix of patients treated. See
1 Section 1395x(v)(1)(A) provides in pertinent part that the Secretary "shall" determine reasonable costs "in accordance with regulations establishing the method or methods to be used, and the items to be included, in determining such costs for various types or classes of institutions, agencies, and services."
2 Regulations regarding the determination of reimbursable costs were originally codified at 20 CFR §§ 405.401-405.454 (1967). They have twice been redesignated, first in 1977, at 42 CFR pt. 405, see 42 Fed. Reg. 52826 (1977), and then in 1986, at 42 CFR pt. 413, see 51 Fed. Reg. 34790 (1986). Unless reference to a particular date is appropriate, the 1986 designation will be used in this opinion.
405
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