Cite as: 514 U. S. 87 (1995)
Opinion of the Court
Financing Administration reversed the Board's decision, see id., at 40a. In the District Court the Secretary's position was sustained, see Guernsey Memorial Hospital v. Sullivan, 796 F. Supp. 283 (SD Ohio 1992), but the Court of Appeals reversed, see Guernsey Memorial Hospital v. Secretary of Health and Human Services, 996 F. 2d 830 (CA6 1993). In agreement with the Hospital, the court interpreted the Secretary's own regulations to contain a "flat statement that generally accepted accounting principles 'are followed' " in determining Medicare reimbursements. Id., at 833 (quoting 42 CFR § 413.20(a)). Although it was willing to accept the argument that PRM § 233's treatment of advance refunding losses "squares with economic reality," 996 F. 2d, at 834, the Court of Appeals concluded that, because PRM § 233 departed from GAAP, it "effects a substantive change in the regulations [and is] void by reason of the agency's failure to comply with the Administrative Procedure Act in adopting it." Id., at 832. Once the court ruled that GAAP controlled the timing of the accrual, it followed that the Hospital, not the Secretary, was correct and that the entire loss should be recognized in the year of refinancing.
We granted certiorari, 511 U. S. 1016 (1994), and now reverse.
II
Under the Medicare reimbursement scheme at issue here, participating hospitals furnish services to program beneficiaries and are reimbursed by the Secretary through fiscal intermediaries. See 42 U. S. C. §§ 1395g and 1395h (1988 and Supp. V). Hospitals are reimbursed for "reasonable costs," defined by the statute as "the cost actually incurred, excluding therefrom any part of incurred cost found to be unnecessary in the efficient delivery of needed health services." § 1395x(v)(1)(A). The Medicare Act, 79 Stat. 290, as amended, 42 U. S. C. § 1395 et seq., authorizes the Secretary to promulgate regulations "establishing the method or methods to be used" for determining reasonable costs, directing
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