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NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports.  Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash-
ington, D.C. 20543, of any typographical or other formal errors, in order that
corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
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No. 93-120
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THOMAS JEFFERSON UNIVERSITY, dba THOMAS
JEFFERSON UNIVERSITY HOSPITAL, PETI-
TIONER v. DONNA E. SHALALA, SECRE-
TARY OF HEALTH AND HUMAN SERVICES
on writ of certiorari to the united states court
of appeals for the third circuit
[June 24, 1994]

  Justice Kennedy delivered the opinion of the Court.
  Although Medicare reimburses provider hospitals for
the costs of certain educational activities, the program
is forbidden by regulation from -participat[ing] in
increased costs resulting from redistribution of costs from
educational institutions . . . to patient care institutions.-
42 CFR 413.85(c) (1993) (emphasis added).  In denying
reimbursement for the disputed costs in this case, the
Secretary of Health and Human Services interpreted this
provision to bar reimbursement of educational costs that
were borne in prior years not by the requesting hospital,
but by the hospital's affiliated medical school.  The
dispositive question is whether the Secretary's interpre-
tation is a reasonable construction of the regulatory
language.  We conclude that it is.

                            I
                            A
  Established in 1965 under Title XVIII of the Social
Security Act, 79 Stat. 291, as amended, 42 U. S. C.
1395 et seq. (1988 ed. and Supp. IV), Medicare is a
federally funded health insurance program for the
elderly and disabled.  Subject to a few exceptions, Con-
gress authorized the Secretary of Health and Human
Services (Secretary) to issue regulations defining reim-
bursable costs and otherwise giving content to the broad
outlines of the Medicare statute.  1395x(v)(1)(A).  That
authority encompasses the discretion to determine both
the -reasonable cost- of services and the -items to be
included- in the category of reimbursable services.  Ibid.
Acting under the statute, the Secretary, by regulation,
permits reimbursement for the costs of -approved edu-
cational activities- conducted by hospitals.  42 CFR
413.85(a)(1).  The regulations define -approved educa-
tional activities- as -formally organized or planned pro-
grams of study usually engaged in by providers in order
to enhance the quality of patient care.-  413.85(b).
  Graduate medical education (GME) programs are one
category of approved educational activities.  GME
programs give interns and residents clinical training in
various medical specialties.  Because participants learn
both by treating patients and by observing other physi-
cians do so, GME programs take place in a patient care
unit (most often in a teaching hospital), rather than in
a classroom.  Hospitals are entitled to recover the -net
cost- of GME and other approved educational activities,
a figure -determined by deducting, from a provider's
total costs of these activities, revenues it receives from
tuition.-  413.85(g).  A hospital may include as a
reimbursable GME cost not only the costs of services it
furnishes, but also the costs of services furnished by the
hospital's affiliated medical school.  413.17(a).
  That brings us to the regulation here in question.
Section 413.85(c) sets forth conditions governing the
reimbursement of educational activities.  In a sentence
referred to by the parties as the -anti-redistribution-
principle, the regulation provides that -[a]lthough the
intent of the [Medicare] program is to share in the
support of educational activities customarily or tradition-
ally carried on by providers in conjunction with their
operations, it is not intended that this program should
participate in increased costs resulting from redistribu-
tion of costs from educational institutions or units to
patient care institutions or units.-  Ibid.  In a portion of
the regulation known as the -community support-
principle, 413.85(c) also states that the costs of educa-
tional activities -should be borne by the community,- but
that -[u]ntil communities undertake to bear these costs,
the [Medicare] program will participate appropriately in
the support of these activities.-  Ibid.

                            B
  Thomas Jefferson University Hospital (Hospital) is a
700-bed teaching hospital in Philadelphia, Pennsylvania.
The Hospital has been a qualified Medicare provider
since the program took effect in 1966.  Petitioner
Thomas Jefferson University (University) is a private,
not-for-profit educational institution that operates the
Hospital and other entities, including the Jefferson
Medical College (Medical College).  As a teaching
facility, the Hospital provides Medicare-approved GME
programs for postgraduate interns and residents in
numerous medical specialties.  The programs are
conducted at the Hospital by Medical College faculty.
Because of their common ownership by the University,
the Hospital and the Medical College are considered
affiliated or -related- organizations under Medicare
regulations.  42 CFR 413.17(a) (1993).  As a result, the
Hospital is entitled to reimbursement for all eligible
patient-care, educational, and administrative costs
carried on the books of the Medical College.  Ibid.
  Nevertheless, for reasons not clear from the record,
the Hospital did not seek reimbursement for any GME
costs during the first eight years of the Medicare
program's existence.  During the next 10 years, however,
from 1974 through 1983, the Hospital sought and
received reimbursement for three categories of salary-
related GME costs: (1) salaries paid by the Hospital to
Medical College faculty for services rendered to the
Hospital's Medicare patients; (2) salaries paid by the
Hospital to residents and interns; and (3) funds trans-
ferred internally from the Hospital to the Medical
College as payment for faculty time devoted to the
Hospital's GME program.  The Hospital did not seek
reimbursement during that period for its other,
nonsalary-related GME costs (namely, the costs of
administering the Hospital's GME programs), and those
costs were borne by the Medical College.
  In 1983, Congress adopted a more restrictive method
of reimbursing hospitals for inpatient medical services,
see 42 U. S. C. 1395ww(d) (1988 ed. and Supp. IV), but
it retained the more lenient method of reimbursement
for medical education costs.  1395ww(a)(4) (1988 ed.,
Supp. IV).  In 1984, when the new cost reimbursement
regime was implemented, the Hospital reviewed its claim
for costs associated with its GME programs to determine
whether it was identifying all costs eligible for reim-
bursement. This review resulted in an increased claim
reflecting clerical costs incurred by the Medical College
for activities associated with its GME programs.
  The following year, in an effort to further refine its
cost allocation techniques, the Hospital retained an
accounting firm to compute the Hospital's total GME
costs for fiscal year 1985, the year here in question.
Fiscal year 1985 later became especially significant
because, under a new reimbursement scheme enacted in
1986, it is considered the Hospital's base period, to
which all later claims for GME cost reimbursement will
be tied.  See 42 U. S. C. 1395ww(h).  After completing
the cost study, the accounting firm reported that the
Hospital had incurred GME program costs totaling $8.8
million, a figure that included direct and indirect
administrative costs not previously claimed by the
Hospital.  The report was submitted to petitioner's
assigned fiscal intermediary, whose function is to review
petitioner's annual cost reports and to calculate the
appropriate level of reimbursement under applicable
statutes and regulations.  See 42 CFR 405.1803 (1993).
Although petitioner sought reimbursement for the full
$8.8 million, the fiscal intermediary allowed only those
salary-related costs that had been reimbursed earlier
(after adjustment for inflation).  The fiscal intermediary
disallowed reimbursement for all nonsalary-related GME
costs that the report identified (amounting to approxi-
mately $2.9 million).  App. to Pet. for Cert. 10a.
Petitioner then appealed to the Provider Reimbursement
Review Board, an intermediate appellate tribunal within
the Department, which reversed the decision of the fiscal
intermediary in part and allowed reimbursement for all
of the GME costs documented in the cost study.
  The Secretary, acting through the Administrator of the
Health Care Financing Administration, modified the
Board's decision and reinstated the fiscal intermediary's
ruling.  The Secretary concluded that the anti-redistribu-
tion clause of 413.85(c) prohibits the shift of approved
educational costs from an educational unit to a patient
care unit, even if the educational activities for which
reimbursement is sought are the kind of activities
traditionally engaged in by Medicare providers.  Id., at
35a.  Since the nonsalary GME costs here in issue were
borne in prior years by the Medical College, the Secre-
tary ruled that reimbursement of these costs would
constitute an impermissible -redistribution of costs-
under 413.85(c).  Ibid.
  The Secretary also relied on the community support
language in 413.85(c) as an independent ground for
denying the requested reimbursement.  According to the
Secretary, this language prohibits Medicare reimburse-
ment for educational activities that -have been histori-
cally borne by the community.-  Ibid.  That the Hospital
had failed to seek reimbursement for the disputed costs
in previous years was, in the Secretary's view, -evidence
of the communit[y's] support for these activities.-  Ibid.
-To allow the community to withdraw that support and
pass these costs to the Medicare program- would violate
the community support principle and would -encourage
the community to abdicate its commitment to education
to an insurance program intended to provide care for the
elderly.-  Ibid.
  Petitioner filed a petition for review in the District
Court seeking reimbursement for the $2,861,247 in GME
costs that the Secretary had disallowed.  Id., at 10a.
On cross-motions for summary judgment, the court ruled
in the Secretary's favor, accepting her interpretation of
the anti-redistribution and community support clauses as
a reasonable construction of 413.85(c).  Thomas Jeffer-
son Univ. Hosp. v. Aetna Life Ins. Co., CCH Medicare &
Medicaid Guide - 38,276, p. 21,536 (ED Pa. 1989).  The
Third Circuit affirmed without opinion, judgment order
reported at 993 F. 2d 879 (1993), thereby creating a
conflict with the decision of the Sixth Circuit in Ohio
State Univ. v. Secretary, Dept. of Health and Human
Services, 996 F. 2d 122 (1993), cert. pending, No.
93-696, concerning the validity of the Secretary's
interpretation of the anti-redistribution clause.  We
granted certiorari, 510 U. S. ___ (1994), and now affirm.

                           II
  Petitioner challenges the Secretary's construction of
413.85(c) under the Administrative Procedure Act
(APA), 5 U. S. C. 551 et seq.  The APA, which is
incorporated by the Social Security Act, see 42 U. S. C.
1395oo(f)(1), commands reviewing courts to -hold
unlawful and set aside- agency action that is -arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with law.-  5 U. S. C. 706(2)(A).  We must
give substantial deference to an agency's interpretation
of its own regulations.  Martin v. Occupational Safety
and Health Review Comm'n, 499 U. S. 144, 150-151
(1991); Lyng v. Payne, 476 U. S. 926, 939 (1986); Udall
v. Tallman, 380 U. S. 1, 16 (1965).  Our task is not to
decide which among several competing interpretations
best serves the regulatory purpose.  Rather, the agency's
interpretation must be given -`controlling weight unless
it is plainly erroneous or inconsistent with the regula-
tion.'-  Ibid. (quoting Bowles v. Seminole Rock & Sand
Co., 325 U. S. 410, 414 (1945)).  In other words, we
must defer to the Secretary's interpretation unless an
-alternative reading is compelled by the regulation's
plain language or by other indications of the Secretary's
intent at the time of the regulation's promulgation.-
Gardebring v. Jenkins, 485 U. S. 415, 430 (1988).  This
broad deference is all the more warranted when, as
here, the regulation concerns -a complex and highly
technical regulatory program,- in which the identification
and classification of relevant -criteria necessarily require
significant expertise and entail the exercise of judgment
grounded in policy concerns.-  Pauley v. BethEnergy
Mines, Inc., 501 U. S. 680, 697 (1991).
  Petitioner challenges the Secretary's construction of
both the anti-redistribution language and the community
support language of 413.85(c).  Because we conclude
that the Secretary's interpretation of the anti-redistribu-
tion clause is neither -`plainly erroneous [n]or inconsis-
tent with the regulation,'- Tallman, supra, at 16-17,
and because its application suffices to deny reimburse-
ment of the disputed costs in this case, we need not
pass upon the Secretary's interpretation of the commu-
nity support language.
  The anti-redistribution clause is contained in the final
sentence of 413.85(c), which states:
-Although the intent of the [Medicare] program is to
share in the support of educational activities custom-
arily or traditionally carried on by providers in
conjunction with their operations, it is not intended
that this program should participate in increased
costs resulting from redistribution of costs from
educational institutions or units to patient care
institutions or units.-  (emphasis added).
The meaning of this sentence is straightforward.  Its
introductory clause defines the scope of educational
activities for which reimbursement may be sought: To be
eligible for reimbursement, the activity must be one that
is -customarily or traditionally carried on by providers
in conjunction with their operations.-  It is the language
that follows, however, that imposes the relevant restric-
tion on cost redistribution.  The second clause provides
that, notwithstanding the activity for which reimburse-
ment is sought, the Medicare program will not partici-
pate in the -redistribution of costs from educational in-
stitutions or units to patient care institutions or units.-
  The Secretary's interpretation gives full effect to both
clauses of the relevant sentence.  The Secretary inter-
prets the regulation to allow reimbursement for costs of
educational programs traditionally engaged in by hospi-
tals, but, at the same time, to deny reimbursement for
-cost[s] previously incurred and paid by a medical
school.-  Brief for Respondent 26 (emphasis deleted); see
also 413.85(b) (defining -approved educational activities-
which are eligible for reimbursement as -programs of
study usually engaged in by providers in order to en-
hance the quality of patient care-).  The Secretary's
reading is not only a plausible interpretation of the reg-
ulation; it is the most sensible interpretation the lan-
guage will bear.
  The circumstance addressed by the anti-redistribution
clause is a hospital's submission of -increased costs-
arising from approved educational activities.  The
regulation provides, in unambiguous terms, that the
-costs- of these educational activities will not be reim-
bursed when they are the result of a -redistribution,- or
shift, of costs from an -educational- facility to a -patient
care- facility, even if the activities that generated the
costs are the sort -customarily or traditionally carried on
by providers in conjunction with their operations.-
413.85(c).  The Secretary's reliance on a hospital's own
historical cost allocations, along with those of an af-
filiated medical school, is a simple and effective way of
determining whether a prohibited -redistribution of
costs- has occurred.  Indeed, one would be hard-pressed
to come up with an alternative method to identify the
shifting of costs from one entity to another.
  Petitioner advances three separate arguments for not
deferring to the Secretary's interpretation of the anti-
redistribution clause.  None is persuasive.
  First, petitioner asserts that the -clear meaning- of
the anti-redistribution clause is to allow reimbursement
for the costs of activities traditionally carried on by
hospitals (e.g., clinical training of residents and interns),
but to deny reimbursement for costs incurred in activi-
ties traditionally carried on by educational institutions
(e.g., classroom training).  Pet. for Cert. 14.  In other
words, according to petitioner, the redistribution that is
prohibited is the redistribution of activities, not the
redistribution of costs.  Brief for Petitioner 20.
  This argument is mistaken, for it ignores the second
clause of the critical sentence, which refers, on its face,
to the -redistribution of costs,- not the -redistribution of
activities.-  The term -costs,- moreover, is used without
condition.  Nothing in the plain language suggests that
the prohibition on -redistribution of costs- is limited to
the costs of certain activities (such as classroom instruc-
tion) carried on by an educational unit.  The clear
inference from the language is that the shift of any
reimbursable costs from a -educational institutio[n] or
uni[t]- to a -patient care institutio[n] or uni[t]- is
prohibited.  The Secretary's interpretation of the anti-
redistribution principle is thus far more consistent with
the regulation's unqualified language than the interpre-
tation advanced by petitioner.  But even if this were not
so, the Secretary's construction is, at the very least, a
reasonable one, and we are required to afford it -control-
ling weight.-  Bowles v. Seminole Rock & Sand Co., 325
U. S., at 414.
  Second, petitioner argues that the Secretary has been
inconsistent in her interpretation of the anti-redistribu-
tion provision.  While it is true that an agency's inter-
pretation of a statute or regulation that conflicts with a
prior interpretation is -`entitled to considerably less
deference' than a consistently held agency view,- INS v.
Cardoza-Fonseca, 480 U. S. 421, 446, n. 30 (1987)
(quoting Watt v. Alaska, 451 U. S. 259, 273 (1981)), that
maxim does not apply here because petitioner fails to
present persuasive evidence that the Secretary has
interpreted the anti-redistribution provision in an
inconsistent manner.
  In an attempt to find an inconsistency, the petitioner
points to a 1978 internal operating memorandum issued
by the Health Care Financing Administration (HCFA)
that addressed the reimbursement of costs incurred by
medical schools affiliated with providers.  Intermediary
Letter No. 78-7 (Feb. 1978), App. to Pet. for Cert.
64a-66a.  The intermediary letter detailed various
categories and amounts of educational expenses incurred
by affiliated medical schools that might be allowable to
providers, but did not mention the anti-redistribution
limitation.  Petitioners' attempt to infer from that
silence the existence of a contrary policy fails because
the intermediary letter did not purport to be a compre-
hensive review of all conditions that might be placed on
reimbursement of educational costs.  By its own terms,
the intermediary letter attempted to review only a
-number of situations- relating to the reimbursement of
educational costs-namely -situations rais[ing] questions
about the reasonableness of [medical school faculty] costs
as allowable hospital costs and the appropriateness of
the bases used in allocating them to the hospital.-  Id.,
at 64a.  It is not surprising, then, that the letter did not
address the anti-redistribution principle, and the mere
failure to address it here hardly establishes an inconsis-
tent policy on the part of the Secretary.
  Likewise, contrary to the dissent's suggestion, post, at
4-5, the mere fact that in 1974 a fiscal intermediary
may have allowed reimbursement to petitioner for GME
costs that appear to have violated the anti-redistribution
clause does not render the Secretary's interpretation of
that clause invalid.  For even if petitioner could show
that such allowance was approved by-or even brought
to the attention of-the Secretary or her designate at
the time, -[t]he Secretary is not estopped from changing
a view she believes to have been grounded upon a
mistaken legal interpretation.-  Good Samaritan Hosp.
v. Shalala, 508 U.S. ___, ___ (1993) (slip op., at 14).
And under the circumstances of this case, -where the
agency's interpretation of [its regulation] is at least as
plausible as competing ones, there is little, if any,
reason not to defer to its construction.-  Id., at ___ (slip
op., at 15).
  Finally, petitioner contends that we should ignore the
Secretary's interpretation of the anti-redistribution
clause because the language of the regulation is -preca-
tory- and -aspirational- in nature, and thus lacking in
operative force.  See Brief for Petitioner 31-32.  We do
not lightly assume that a regulation setting forth specific
limitations on the reimbursement of costs under a
federal program is devoid of substantive effect.  That is
especially so when, as here, the language in question
speaks not in vague generalities but in precise terms
about the conditions under which reimbursement is, and
is not, available.  Whatever vagueness may be found in
the community support language that precedes it, the
anti-redistribution clause lays down a bright line for
distinguishing permissible from impermissible reimburse-
ment: educational costs will not be reimbursed if they
are the result of a -redistribution of costs from educa-
tional institutions or units to patient care institutions or
units.-  413.85(c).  The Secretary was well within her
discretion to interpret this language as imposing a
substantive limitation on reimbursement.
  In sum, the Secretary's construction of the anti-
redistribution principle is faithful to the regulation's
plain language, and the application of this language
suffices to bar reimbursement of the costs claimed in
this case.  For these reasons, we affirm the judgment of
the Court of Appeals.
                                      It is so ordered.