Unpublished Disposition, 935 F.2d 273 (9th Cir. 1991)

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U.S. Court of Appeals for the Ninth Circuit - 935 F.2d 273 (9th Cir. 1991)

AMERICAN RIVER HOSPITAL, Carmichael, California, aCalifornia not for profit corporation, formerlyknown as Eskaton American RiverHospital, Plaintiff-Appellant,v.Louis W. SULLIVAN, Secretary, HHS, Defendant-Appellee.

No. 90-15640.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 15, 1991.Decided June 13, 1991.

Before ALARCON, KOZINSKI and RYMER, Circuit Judges.


Appellant American River ("the Provider") claims that it was entitled to be reimbursed by Medicare for interest paid toward the purchase of certain necessary equipment. To be reimbursable, interest must be " [i]ncurred on a loan made to satisfy a financial need of the provider." 42 C.F.R. Sec. 405.419(b) (2) (i).

A. The Provider argues that AB 1186, A.R. 1507, an administrative bulletin on Blue Cross letterhead, establishes a one-determination-of-necessity-of-borrowing principle for the Medicare program. Even if the Provider were able to show that AB 1186 is binding on the Secretary, the bulletin does not apply here. Whereas AB 1186 might preclude an intermediary from reopening a reimbursement determination based on subsequent earnings, the intermediary here reopened the determination because it felt the initial determination was erroneous.

B. In evaluating the interest reimbursement, the P.R.R.B. properly considered the corporate structure of which the Provider was a part. In effect, Eskaton's cash management system allowed the other hospitals under Eskaton's umbrella to obtain interest-free loans from the Provider at Medicare's expense. Had the Provider produced evidence that these de facto loans would have been independently reimbursable by Medicare, we would be more sympathetic. But no such evidence was presented.

C. In support of its position, the Provider presented various figures, including year-to-date cash flow and cash balance values, for the dates of the disputed purchases. The Secretary correctly points out that the cash flow figures tell us nothing about whether appellee had sufficient cash on hand to finance the purchases itself on those dates. However, the Secretary does not discuss the cash balance figures, which indicate that the Provider had insufficient cash to self-finance the HBO System, the X-Ray Tube and the CT Scanner. See Appellant's Opening Brief at 36.

A review of the record indicates that the P.R.R.B. requested the cash balance figures at hearing (A.R. 1099-1100); the Provider submitted the figures in a post-hearing brief (A.R. 337-38); the intermediary ignored the figures in a post-hearing letter answering the Provider's brief (A.R. 554); The P.R.R.B. did not discuss the figures in concluding that the provider had insufficiently documented its need for borrowing (ER Exhibit 1); the Secretary ignored the figures in two briefs before the district court (C.R. 16; CR 14);1  and the district court did not discuss the figures in affirming the P.R.R.B's decision (ER Exhibit 5). When questioned at oral argument, counsel for the Secretary presented the same litany about Exhibit 4 that appears in his brief, but again did not address the cash balance figures.

We affirm the district court and the P.R.R.B. as to the disallowance of interest on the purchases of the Nuclear Camera, ADAC Equipment, I.V. Supplies, P.T. Equipment and Energy Savings. We treat the Secretary's failure to comment on the relevance of Provider's cash balance information to the remaining three purchases as a concession, and therefore reverse as to the HBO System, the X-Ray Tube and the C.T. Scanner.



This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3


The Secretary acknowledges the cash balance figures only to note that the cash balance support reimbursement for only three items, as opposed to the four items supported by the cash flow figures. Curiously, although he criticizes the cash flow figures for not being cash balance figures, Brief of Appellee at 29, he ignores the cash balance figures that Provider supplies him

We note that the Secretary's brief on appeal on this issue is a verbatim copy of its brief before the district court. Compare Appellee's Brief at 27-32 with CR 14 at 17-22.