Catholic Healthcare West v. Sebelius

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

__________________________________

CATHOLIC HEALTHCARE WEST, :
:
Plaintiff, :
:
v. : Civil Action 11-459 (GK)
:
KATHLEEN SEBELIUS, in her :
official capacity as Secretary :
of Health and Human Services, :
:
Defendant. :
__________________________________

MEMORANDUM OPINION

Plaintiff, Catholic Healthcare West (“CHW”), brings this

action against Defendant Kathleen Sebelius, Secretary of the

U.S. Department of Health and Human Services (respectively, the

“Secretary” and “HHS”), pursuant to Title XVII of the Social

Security Act, 42 U.S.C. §§ 1395 et seq. (“the Medicare Act”).

CHW seeks judicial review of a final agency decision denying

Marian Medical Center’s (“Marian”) reimbursement claim arising

from the merger of Marian, Mercy Healthcare Ventura County

(“Mercy”), and CHW. 1

This matter is before the Court on Plaintiff’s Motion for

Summary Judgment [Dkt. No. 14] and Defendant’s Motion for

Summary Judgment [Dkt. No. 15]. Upon consideration of the

parties’ cross-motions, the administrative record, and the

1
CHW is the successor in interest to Marian.
entire record herein, and for the reasons stated below,

Plaintiff’s Motion for Summary Judgment is denied and

Defendant’s Motion for Summary Judgment is granted.

I. BACKGROUND

On March 15 1997, Marian entered into an Agreement of

Merger with Mercy, a two-hospital system whose sole corporate

member was CHW. Administrative Record (“A.R.”) 20, 409. CHW is a

Catholic healthcare system co-sponsored by several Catholic

women’s religious orders. Id. at 20. CHW oversees and

coordinates the activities of a healthcare system consisting of

over 30 acute care hospitals in California, Arizona, and Nevada.

Id. Marian was a general acute care hospital located in Santa

Maria, California. Id. Marian was owned and operated by the

Sisters of St. Francis of Penance and Christian Charity, St.

Francis Province (“Sisters of St. Francis”). Id. The merger

between Marian, Mercy and CHW became effective April 24, 1997.

Id. at 20, 411, 413-14, 493-95. Mercy, renamed CHW-CC, remained

as the surviving corporation. Id. at 20, 411, 413-14.

A. Statutory and Regulatory Framework

Congress created the Medicare program in 1965 to pay for

certain specified, or “covered,” medical services provided to

eligible elderly and disabled persons. See 42 U.S.C. §§ 1395 et

seq. Under the program, health care providers are reimbursed for

a portion of the costs that they incur treating Medicare

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beneficiaries pursuant to an extremely “complex statutory and

regulatory regime.” Good Samaritan Hosp. v. Shalala, 508 U.S.

402, 404 (1993). That regime is administered by the Centers for

Medicare & Medicaid Services (“CMS”), under the supervision of

the Secretary. CMS contracts with a network of fiscal

intermediaries to review and process Medicare claims in the

first instance.

The Medicare Act provides for reimbursement of the

“reasonable cost of [Medicare] services.” 42 U.S.C. §

1395f(b)(1). “Reasonable” costs are those “actually incurred . .

. [as] determined in accordance with regulations.” 42 U.S.C. §

1395x(v)(1)(A). Under the Secretary's regulations in effect at

the time of the transaction at issue, “[a]n appropriate

allowance for depreciation on buildings and equipment used in

the provision of patient care [was] an allowable cost.” 42

C.F.R. § 413.134(a)(1997). 2 The costs are calculated by dividing

the asset's purchase price by its “estimated useful life” and

then prorating this amount by the percentage of the asset's use

dedicated to Medicare services. 42 C.F.R. §§ 413.134(a)(3),

(b)(1). Medicare reimburses providers for these depreciation

costs on an annual basis.

2
Since the merger at issue took effect on April 24, 1997, the
Court, like the parties, will refer to the regulations as
designated in the 1997 C.F.R., unless otherwise stated.

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 The Secretary determined that certain disposals of

depreciable assets may give rise to recognition of a “gain” or

“loss.” That figure effectively adjusts the annual Medicare

depreciation payments to more accurately reflect the actual cost

of providing covered services to Medicare beneficiaries.

Entities that were Medicare providers prior to statutorily

merging with an unrelated party are able to recoup gains and

losses from the merger subject to 42 C.F.R. § 413.134(f).

Subsection (f) allows providers to request reimbursement for the

difference between the “net book value” 3 and the compensation

actually received in exchange for assets disposed of prior to

December 1, 1997. 4 42 C.F.R. § 413.134(f)(1). Subsection (f)(2)

permits the inclusion of “gains and losses realized from the

bona fide sale ... of depreciable assets” in the determination

of allowable cost. 42 C.F.R. § 413.134(f)(2). 5

3
“Net book value” is the remaining value of an asset after
depreciation costs are deducted. 42 C.F.R. § 413.134(b)(9).
4
In 1997, Congress amended the Medicare Act to eliminate
depreciation adjustments for assets after December 1, 1997.
Balanced Budget Act of 1997, Pub. L. No. 105-33, § 4404, 111
Stat. 251, 400 (1997).
5
In addition to the gain or loss regulation at 42 C.F.R. §
413.134(f), the Secretary’s regulations address “[t]ransactions
involving a provider’s capital stock. See 42 C.F.R. §
413.134(l)(1997)(now substantively modified and recodified at 42
C.F.R. § 413.134(k)). The capital stock regulation, also
referred to as the statutory merger regulation, specifies that
providers that transfer assets pursuant to a statutory merger
are “subject to the provision of paragraph[] . . . (f) of [42

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 The Secretary issued Program Memorandum (“PM” or

“Memorandum”) A-00-76 in order to clarify the application of 42

C.F.R. § 413.134(l), the statutory merger regulation, to non-

profit providers. PM A-00-76 (Oct. 19, 2000) (A.R. 1676-79). The

Memorandum describes the “related organizations” and “bona fide

sale” standards under which mergers between non-profit

organizations should be analyzed. Id.

As to “related organizations,” PM A-00-76 notes that

consideration should be given to continuity of control, or the

degree to which the pre-merged entities continue to exercise

control over the post-merger entity. Id. As to “bona fide sale,”

the Memorandum defines that term as an arm’s length transaction

for reasonable consideration. Id. PM A-00-76 explains that “a

large disparity between the sales price (consideration) and the

fair market value of the assets sold indicates the lack of a

bona fide sale.” Id. The Memorandum recommends reviewing “the

allocation of the sales price among the assets sold” to help

determine whether a bona fide sale took place. Id.

PM A-00-76 explains that its effective date is not of

consequence because it clarified, rather than changed, existing

policy. Accordingly, the Memorandum concludes by stating that it

should be applied to “all cost reports for which a final notice

C.F.R. § 413.134] concerning . . . the realization of gains and
losses.” 42 C.F.R. § 413.134(l)(2)(i).

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of program reimbursement has not been issued and to all settled

cost reports that are subject to reopening . . . .” Id.

B. Procedural Background

Marian claimed a loss on the disposal of assets on its

final Medicare cost report for the hospital’s fiscal year ending

April 24, 1997. A.R. 65. On August 12, 1999, the fiscal

intermediary engaged by the Secretary to administer the Medicare

program denied Marian’s claim for reimbursement. Id. at 1723-27,

1861-64.

Marian appealed the fiscal intermediary’s determination to

HHS’ Provider Reimbursement Review Board (“PRRB”). On November

3, 2010, the PRRB affirmed the intermediary’s denial of Marian’s

claim. Id. at 33-46. The PRRB concluded that the large disparity

between the consideration received and the fair market value of

the assets acquired indicated a lack of reasonable consideration

and, therefore, the lack of a bona fide sale. Id. at 46. Having

determined that there was no bona fide sale, the PRRB held that

payment for the claimed loss on disposal of assets was not

allowable. Id. The PRRB also concluded that the parties were not

related. Id. 39, 43.

The CMS Administrator, who has the discretion to review any

final decision of the PRRB, chose to review the PRRB’s denial of

Marian’s claim. Id. at 2-25. On January 4, 2011, the CMS

Administrator issued her decision and determined that, based on

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the cost appraisal approach, Marian transferred cash, cash

equivalent assets, plant, and equipment worth approximately $67

million (comprised of cash and cash equivalent assets worth

approximately $15.9 million and plant and equipment worth

approximately $51.1 million) in exchange for the assumption of

liabilities worth approximately $32.7 million. Id. at 22. Based

on these figures, the CMS Administrator concluded that the

merger did not qualify as a bona fide sale because Marian never

sought and did not receive reasonable consideration for the

transfer of its depreciable assets. Id. at 21-22. Like the PRRB,

the CMS Administrator held that Marian was “not entitled to

reimbursement for a loss on disposal of assets . . . .” Id. at

22.

The CMS Administrator also disallowed the loss-on-sale

claim for a second, independent reason, i.e., that the merger

was a related-party transaction. Id. at 22-24. The CMS

Administrator explained that the PRRB “incorrectly concluded

that the related party concept only applied to the entities[’]

relationship that existed prior to the merger” and that the

principle in fact “applied to the parties’ relationship pre and

post merger.” Id. at 22. Although the CMS Administrator noted

that “the record is lightly developed with respect to whether

[Marian] was related to the merged entity through a continuity

of control and ownership,” the Administrator nonetheless

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concluded that there was sufficient evidence demonstrating that

the parties were related. Id. 23-24. The CMS Administrator’s

decision constitutes the final decision of the Secretary and is

now before this Court for review.

II. STANDARD OF REVIEW

The Medicare Act provides for judicial review of a final

decision made by the Secretary. 42 U.S.C. § 1395 oo(f)(1). The

Medicare Act instructs the reviewing court to apply the

provisions of the Administrative Procedures Act (“APA”). Id.

Under the APA, the agency decision can be set aside only if it

is “arbitrary, capricious, an abuse of discretion, or otherwise

not in accordance with law” or “unsupported by substantial

evidence.” 5 U.S.C. §§ 702(2)(A), (2)(E).

“The arbitrary and capricious standard [of the APA] is a

narrow standard of review.” Citizens to Preserve Overton Park,

Inc. v. Volpe, 401 U.S. 402, 416 (1971). It is well established

in our Circuit that “[t]his court's review is . . . highly

deferential” and that “we are ‘not to substitute [our] judgment

for that of the agency’ but must ‘consider whether the decision

was based on a consideration of the relevant factors and whether

there has been a clear error of judgment.’” Bloch v. Powell, 348

F.3d 1060, 1070 (D.C. Cir. 2003) (citations omitted). Thus, even

if this Court were to find “that other policies might better

further the Secretary’s stated objectives, [the Court is]

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compelled to accept the policies and rules adopted by the

Secretary so long as they have a rational basis, are reasonably

interpreted, and are consistent with the underlying statute.”

Sentara Hampton Gen. Hosp. v. Sullivan, 980 F.2d 749, 755 (D.C.

Cir. 1992).

The substantial evidence standard is satisfied if the final

agency decision is supported by “such relevant evidence as a

reasonable mind might accept as adequate to support a

conclusion.” Consolo v. Fed. Maritime Comm’n, 383 U.S. 607, 619-

20 (1966) (citation and internal quotation marks omitted); City

of S. Bend, Ind. v. Surface Transp. Bd., 566 F.3d 1166, 1170

(D.C. Cir. 2009). Substantial evidence is “something less than

the weight of the evidence, and the possibility of drawing two

inconsistent conclusions from the evidence does not prevent an

administrative agency’s findings from being supported by

substantial evidence.” Consolo, 383 U.S. at 620 (citation

omitted); S.E.C. v. Fed. Labor Relations Auth., 568 F.3d 990,

995 (D.C. Cir. 2009). Under this standard, a court may reverse

the agency’s findings “only when the record is so compelling

that no reasonable factfinder could fail to find to the

contrary.” Orion Reserves Ltd. P’ship v. Salazar, 553 F.3d 697,

704 (D.C. Cir. 2009).

When an agency interprets its own rule or regulation, the

interpretation “is entitled to the utmost deference.” St. Luke’s

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Hosp. v. Sebelius, 662 F. Supp. 2d 99, 102 (D.D.C. 2009); see

Ballard v. C.I.R., 544 U.S. 40, 70 (2005) (“An agency’s

interpretation of its own rule or regulation is entitled to

controlling weight unless it is plainly erroneous or

inconsistent with the regulation”) (internal quotation marks

omitted). In the case of Medicare regulations, “[t]his broad

deference is all the more warranted” because “the regulation[s]

concern[] a ‘a complex and highly technical regulatory program,’

in which the identification and classification of relevant

‘criteria necessarily require significant expertise and entail

the exercise of judgment grounded in policy concerns.’” Thomas

Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994) (quoting

Pauley v. BethEnergy Mines, Inc., 501 U.S. 680, 697 (1991)).

Therefore, courts must defer to the Secretary’s interpretation

unless an alternative reading is “compelled by the regulation’s

plain language” or if the language is ambiguous, by “other

indications of the Secretary’s intent at the time of the

regulation’s promulgation.” Thomas Jefferson, 512 U.S. at 512.

The task of the reviewing court is to set aside only those

agency interpretations that are affirmatively and plainly

“inconsistent” with the regulation itself. Id.

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III. ANALYSIS

A. The Secretary’s Interpretation of “Bona Fide Sale” in
PMA-00-76 Is Reasonable and Not Inconsistent with 42
C.F.R. § 413.134

Plaintiff argues that the Secretary incorrectly relied on

PM A-00-76’s definitions of “related organizations” and “bona

fide sale,” because those definitions are contrary to the

regulations.

As noted, supra, PM A-00-76 defines a “bona fide sale,” as

an arm’s length transaction for reasonable consideration. A.R.

1676-79. The Memorandum explains that the absence of reasonable

consideration indicates the lack of a bona fide sale. Id. PM A-

00-76 elaborates on what constitutes reasonable consideration,

stating that “[n]on-monetary consideration, such as a seller’s

concession from a buyer that the buyer must continue to provide

care to the indigent, may not be taken into account in

evaluating the reasonableness of the overall consideration (even

where such elements may be quantified in dollar terms). These

factors are more akin to goodwill than to consideration.” Id.

PM A-00-76 further clarifies that when valuing assets, “the

cost approach is the only methodology that produces a discrete

indication of the value for individual assets . . . .” Id. By

contrast, “[b]oth the market approach and the income approach

produce a valuation of the business enterprise as a whole,

without regard to the individual fair market values of the

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constituent assets. As a result, both the market approach and

the income approach could produce an entity evaluation that is

less than the market value of the current assets.” 6 Id. The

Memorandum concludes that “the cost approach is the most

appropriate methodology” for the bona fide sale analysis in the

non-profit context. Id.

Plaintiff argues that PM A-00-76’s prohibition against

considering non-monetary factors in evaluating the

reasonableness of consideration is inconsistent with Medicare

regulations. 7 Plaintiff further argues that PM A-00-76’s focus on

6
The Secretary recognizes that, in other circumstances,
including some cases interpreting the Internal Revenue Code and
other types of commercial cases, the market and income
approaches may be appropriate appraisal methodologies. See A.R.
17; Pl.’s Rep. at 8, 14-15 (citing cases and tax regulations).
However, the Secretary is correct that “Medicare rules may
diverge from IRS rule and Medicare policy is not bound by IRS
policy[.]” A.R. 17.
7
Plaintiff contends that, relying on PM A-00-76, the Secretary
“erred in holding that the desire to maintain the religious
mission of the hospital cannot be considered in determining
whether the merger was for fair market value.” Pl.’s Mot. for
Summ. J. at 10. Plaintiff argues that under the Secretary’s
interpretation, “Marian could never have been sold for fair
market value, because Marian’s trustees were required by law to
select a merger partner on the basis of adherence to the
Catholic principles under which Marian was organized.” Id. at
13.

However, as Defendant correctly points out “Plaintiff is
mistaken that the Secretary’s final decision held that Marian
was incapable of entering into an arm’s length transaction
because of its religious affiliation” and that “non-profit
providers, like for-profit providers, may engage in arm’s length
transactions even while prioritizing non-economic

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the cost approach as the most appropriate methodology to be used

in establishing the fair market value of assets is at odds with

42 C.F.R. § 413.134’s definition of fair market value. 8 Pl.’s

Mot. for Summ. J. at 13.

Plaintiff’s arguments are not persuasive. The D.C. Circuit

has unambiguously upheld the Secretary’s interpretation of “bona

fide sale” as memorialized in PM A-00-76. See St. Luke’s Hosp.

v. Sebelius, 611 F.3d 900, 906 (D.C. Cir. 2010) (“[W]e uphold

the Secretary’s interpretation of 42 C.F.R. § 413.134(f) and

(l), memorialized in PM A-00-76, because it is not ‘plainly

erroneous or inconsistent with the regulation’”); see Forsyth

Mem. Hosp. v. Sebelius, 639 F.3d 534, 537 (D.C. Cir. 2011)

(summarily rejecting “a host of arguments that the [Secretary]

should not have applied PM A-00-76[]” because the D.C. Circuit

had “previously upheld PM A-00-76 insofar as [was] relevant”).

considerations, so long as they bargain to receive reasonable
economic consideration for the transfer of their assets and meet
the other statutory and regulatory criteria.” Def.’s Rep. at 11
[Dkt. No. 19].
8
Plaintiff contends that fair market value, as defined by 42
C.F.R. § 413.134(b)(2)(1997), “is established if the following
factors are present: (a) bona fide bargaining; and (b) well
informed buyers and sellers.” Pl.’s Mot. for Summ. J. at 13.
Plaintiff further contends that “[p]rior cases interpreting the
‘bona fide sale’ provision at 42 C.F.R. § 413.134 have
emphasized the centrality of arm’s length bargaining in
determining whether a bona fide sale occurred.” Id. at 17.
However, Plaintiff has failed to cite any Medicare cases where
the Secretary applied a valuation methodology other than the
cost approach.

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 Accordingly, the Secretary’s interpretation of “bona fide

sale,” as memorialized in PM A-00-76, is reasonable, not plainly

erroneous, and not inconsistent with prior agency statements.

B. The Secretary Appropriately Applied PM A-00-76 to the
Merger at Issue

Plaintiff argues that the Secretary “erred in implementing

PM A-00-76 because it failed to publish timely notice of the

same in the federal register as required by 42 U.S.C. §

1395hh(C)(1).” Pl.’s Mot. for Summ. J. at 30. Under the APA,

however, notice and comment is not required for “interpretive

rules” or “general statements of policy.” 5 U.S.C. §

553(b)(3)(A). As PM A-00-76 is “an interpretation of an existing

regulation [] [it] does not require notice and comment.” Forsyth

Mem. Hosp. v. Sebelius, 667 F. Supp. 2d 143, 150 (D.D.C. 2009);

see also St. Luke’s, 662 F. Supp. 2d at 104 (rejecting the

argument that PM A-00-76 was subject to notice and comment and

holding that “[n]or can there be any doubt that [PM A-00-76] is

properly an informal interpretation”).

Plaintiff additionally argues that PM A-00-76 was

impermissibly retroactive. Pl.’s Rep. at 39 [Dkt. No. 18].

Plaintiff’s retroactivity argument has been soundly rejected by

the D.C. Circuit. See St. Luke’s, 611 F.3d at 906-907 (finding

“no impermissible retroactivity” with respect to the Secretary’s

application of PM A-00-76 to a merger effective as of January 1,

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1997 and holding that “any potential retroactive effect was

completely subsumed in the permissible retroactivity of the

agency adjudication”) (internal quotation marks omitted).

Accordingly, the Court concludes that the Secretary’s

application of PM A-00-76 to the merger at issue was

appropriate. 9

C. The Secretary’s Finding that the Merger Was Not a Bona
Fide Sale Was Supported by Substantial Evidence

Given the validity of the interpretation relied upon by the

Secretary, the only question remaining is whether the

Secretary’s finding that the merger between Marian, Mercy and

CHW was not a bona fide sale was supported by substantial

evidence.

The Secretary based her decision, in part, on the large

discrepancy between the consideration received for Marian’s

assets and the value of those assets. Plaintiff takes issue with

the Secretary’s use of Plaintiff’s own cost approach appraisal 10

9
In any event, even in the absence of PM A-00-76, the Secretary
would have had the authority to interpret her own regulations in
the context of a case-specific adjudication such as that which
preceded this action. See St. Luke’s Hosp. v. Sebelius, 611 F.3d
900, 907 (D.C. Cir. 2010) (“[The] Secretary generally may
lawfully interpret a regulation . . . [w]ithin the context of an
agency adjudication”).
10
The appraisal relied upon by the Secretary was commissioned by
Marian itself and conducted by Valuation Counselors Group, Inc.
(“VCG”). See A.R. 729. The appraisal estimated the market value
of Marian’s assets using three approaches: cost, market and
income. The cost approach valued Marian’s assets at $51.1

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to determine that reasonable consideration was not exchanged.

Pl.’s Mot. for Summ. J. at 16-21; see A.R. 20-22.

The Secretary explained in her final decision why she

relied upon the cost approach. A.R. 22. Her explanation is

consistent with PM A-00-76, which, as discussed supra, has been

upheld by the D.C. Circuit. Using the cost approach, the

Secretary determined that $32.7 million, the approximate worth

of Marian’s liabilities, was not reasonable consideration for

$67 million in assets. 11 That determination is not unreasonable

and certainly does not reflect “a clear error of judgment.”

million, the market approach at $38.5 million, and the income
approach at $28.5 million. Id. at 729-833.
11
For the first time in its Reply, Plaintiff insists that the
Secretary should evaluate the reasonableness of the
consideration exchanged based on a valuation of Marian’s assets
at $35.28 million. The $35.28 million figure appears to be a
blending of the VCG appraisal report’s market and income
approaches, though no clear explanation is given in the report
as to how the appraiser calculated that figure. See Pl.’s Rep.
at 9-10; see also A.R. 832. As PM A-00-76 explains, “the cost
approach is the most appropriate methodology,” for the bona fide
sale analysis in the non-profit context.

Moreover, Plaintiff has failed to submit evidence that the
cost approach does not accurately reflect the fair market value
of the assets in question. Nor has Plaintiff adduced evidence as
to how the alleged impairments in Marian’s value (i.e., the
alleged constructive trust and alleged need for seismic safety
upgrades, see Pl.’s Mot. for Summ. J. at 10, 18-21) should be
reflected in a downward adjustment to the assets’ cost approach
appraised value. Instead, Plaintiff simply insists that the
Secretary should have used its preferred methodology. In any
event, “absent extraordinary circumstances (not present here)
[courts] do not entertain an argument raised for the first time
in a reply brief.” U.S. v. Whren, 111 F.3d 956, 958 (D.C. Cir.
1997).

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Bloch, 348 F.3d at 1070; see St. Luke’s, 611 F.3d at 905 (“It is

logical [] to infer . . . that a ‘large disparity’ between the

assets’ purchase price and their fair market value indicates

that the underlying transaction is not in fact bona fide”).

Additional evidence that the parties did not engage in

arm’s length, self-interested bargaining supports the

Secretary’s finding as well. For instance, Marian appeared

uninterested in maximizing the amount of consideration it would

receive from the sale of its assets. This is evidenced by the

fact Marian did not seek appraisal of its assets prior to the

merger. 12 See A.R. 729-833 (The VCG appraisal report, the only

appraisal in the Administrative Record, was not completed until

February 22, 1999, nearly two years after the merger).

Marian also declined to place its assets for sale on the

open market. See Id. at 84-85 (Marian’s then-CEO and the Sisters

of St. Francis explained, “[o]ne of the principal reasons we

have focused on CHW is our firm belief that, with this group, we

have the best assurance that the mission, presence, and

sponsorship of the Sisters of St. Francis can be most

effectively preserved and enhanced.”); id. at 214-15. Instead,

Marian was motivated by its desire to maintain the religious

12
At the time of the merger, the only available information
about Marian’s fair market value with which the parties were
working was a one-page attachment to the parties’ Purchase Price
Allocation Agreement that was based upon a February 28, 1997
unaudited financial statement “to be adjusted.” See A.R. 301.

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mission of the hospital. See Pl.’s Mot. for Summ. J. at 10-15.

Although Marian’s desire to maintain the religious mission of

the hospital may be an important and worthwhile goal, such non-

monetary considerations are “not indicative of parties engaged

in self-interested bargaining with a focus on maximizing

financial compensation.” Forsyth, 667 F. Supp. 2d at 151. Thus,

“[a party’s] non-monetary motivations may not form the basis of

a bona fide sale.” Id.

The sizable gap between the “purchase price” and the value

of Marian’s assets, as well as the other circumstances

surrounding the merger, constitute substantial evidence that

supports the Secretary’s finding that reasonable consideration

was not exchanged, and that therefore, the merger was not a bona

fide sale.

Because the Secretary’s finding that the merger between

Marian, Mercy and CHW was not a bona fide sale was an

independent and adequate basis for denying Plaintiff’s

reimbursement claim, the Court need not address the Secretary’s

determination that the merger parties were related. See Forsyth,

639 F.3d at 539 (limiting its analysis to the bona fide sale

issue “because it was an independent and sufficient ground for

refusing appellants their requested reimbursement” and therefore

declining to address the related parties issue); Robert F.

Kennedy Med. Ctr. v. Leavitt, 526 F.3d 557, 563 (9th Cir. 2008)

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(finding that because the “[‘bona fide sale’] issue is

dispositive in this case, we do not reach the ‘related parties’

issue”).

IV. CONCLUSION

For all of the reasons stated herein, Plaintiff’s Motion

for Summary Judgment is denied and Defendant’s Motion for

Summary Judgment is granted.

/s/________________________
January 29, 2013 Gladys Kessler
United States District Judge

Copies to: attorneys on record via ECF

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