The Bethesda Hospital Association v. Otis R. Bowen case in 1987 revolved around the dispute over Medicare reimbursements to hospitals for their capital-related costs, such as interest on debt and depreciation of buildings and equipment. The Secretary of Health and Human Services had issued a regulation that limited these reimbursements to an amount calculated based on what they would have been under the old system prior to 1983 when Congress changed how Medicare payments were made from cost-based reimbursement to prospective payment system (PPS). Several hospitals sued, arguing that this limit was not authorized by the statute which required "reasonable" costs be reimbursed. However, the Supreme Court ruled in favor of the Secretary stating that his interpretation was reasonable given Congressional intent behind PPS - controlling escalating hospital costs - even though it might result in some hospitals being paid less than their actual capital-related expenses.

In the dissenting opinion for Bethesda Hospital Association v. Bowen, it was argued that the majority's interpretation of Medicare reimbursement regulations was incorrect and overly restrictive. The dissenters believed that hospitals should be able to include costs associated with training physicians in their reimbursable expenses under Medicare, even if those physicians were not directly employed by the hospital but instead worked as residents or interns. They contended that this broader interpretation would better align with Congress' intent when creating the Medicare program - to ensure adequate funding for medical education and training programs at hospitals serving large numbers of elderly patients. Furthermore, they expressed concern about potential negative impacts on these programs due to reduced funding resulting from the majority's decision.