Catholic Healthcare West v. Sebelius, No. 13-5090 (D.C. Cir. 2014)Annotate this Case
Plaintiff, CHW, was the surviving entity after a merger between Marian and the hospitals previously constituting CHW. Plaintiff's claim related to depreciation taken by Marian in the years before the merger. Plaintiff argued that the merger transaction revealed the inadequacy of that depreciation and that, under the statute and regulations applicable to the merger, the deficiency was subject to recoupment as part of Medicare providers' general entitlement to compensation for the "reasonable cost" of services rendered, 42 U.S.C. 1395f(b)(1). The Secretary rejected the claim, reasoning that the implicit selling price showed a transfer for much less than Marian's true worth, so that the merger did not present a "bona fide sale" between "unrelated parties," a prerequisite for use of the transaction as evidence that the prior depreciation had been inadequate. The court concluded that, under the valuation methods permitted prior to the Program Memorandum at issue and in fact championed by plaintiff here and in the administrative proceedings, there was a gross disparity between Marian's value and the implicit price paid. Therefore, the court affirmed the district court's judgment affirming the Secretary.