CMS Pub. 100-16, ch. mc86c17a, § 70

Allowable costs are those direct and indirect costs, including normal standby costs, which

the HMO/CMP incurs and are proper and necessary to efficiently deliver needed health

care. These costs include costs related to the care of beneficiaries that are normally paid

by Medicare and other costs such as enrollment, membership, and similar costs unique to

Medicare HMO/CMPs and necessary to the HMO/CMP's operations.

The types of items and costs generally incurred by a provider of service, in accordance

with the principles of reimbursement for provider costs, are allowable to an HMO/CMP.

These costs are allowable and reimbursable if incurred by the HMO/CMP, by providers

of services, or other facilities owned or operated by the HMO/CMP through which

covered care is furnished to its Medicare enrollees.

The allowable costs of an HMO/CMP are first determined in accordance with the

principles set forth in 42 CFR Part 417, Subpart O and this manual. After those

requirements are met, the Medicare principles of reimbursement as described in the

“Provider Reimbursement Manual” (Pub. 15) are applicable if they are not in

contradiction with the regulation and this manual. In addition, Generally Accepted

Accounting Principles (GAAP) should be followed if instructions in the regulation or

manuals do not instruct the HMO/CMP otherwise.