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RFK Medical Center v. Leavitt (9th Cir. - May 19, 2008)

By Shaun Martin

My initial reaction to this case was: "Disputed corporate Medicare reimbursement as applied to depreciation losses resulting from the disposal of assets through a statutory merger: Thrilling!" Of course, I was being facetious.

But, to my horror, I did actually find the case to be marginally interesting. It seemed to me a close question as to whether the merger of the two non-profit hospitals at issue here -- RFK Medical Center (formerly in Hawthorne, now closed) and Catholic Heathcare West -- was really a "bona fide sale" and hence entitled to reimbursement. On the one hand, the two entities were unrelated, so it seems like a decently arms length transaction. On the other hand, the economics of the deal do indeed seem fishy: Catholic Heathcare West paid $30.5 million for $50.5 million of RFK assets, which facially doesn't make sense, and gives rise to an inference that the deal was done for non-arms length reasons.

Ultimately, I think that the panel gets it right when it holds that the deference to agency interpretations that's required by both the APA and Chevron -- which is especially applicable in the complex Medicare arena -- requires the court to uphold the Secretary's determination that the transaction wasn't arms length. It's a case where the relevant deference is, I think, in fact dispositive.

Full post as published by California Appellate Report on May 19, 2008 (boomark / email).