"[I]f plaintiff's argument [that the Secretary's determination that a cost is not reimbursable under his regulations occasions an impermissible cost shift] is to prevail, no cost could ever be disallowed for reimbursement purposes because to do so would tend to shift the cost to non-Medicare patients."
How later courts described this case
- "[I]f plaintiff's argument [that the Secretary's determination that a cost is not reimbursable under his regulations occasions an impermissible cost shift] is to prevail, no cost could ever be disallowed for reimbursement purposes because to do so would tend to shift the cost to non-Medicare patients."
- refusing to modify Merrill to bind the government to a promise made by a subordinate without actual authority
- precluding a defense of reasonableness as to the price provisions of a contract between related organizations
- § 405.427 defines "cost” — for situations in which the parties are related — as cost to the seller, not cost to the buyer
Written by the judges who cited it.
The opinion
Kunzig, Judge,
concurring:
I concur with the opinion for defendant in this case and wish to emphasize its consistency with the court’s decision issued today in Trustees of Indiana University v. United States, post at 88, wherein I join the decision for plaintiff.
First, the instant case involves a different regulation than the one in Indiana University. The thrust of the regulation we confront in Pasadena, 42 C.F.R. § 405.427 "Cost to related organization,” defines includable costs for the purposes of reimbursement. In contrast, the regulation in Indiana University, 42 C.F.R. § 405.419 (c) was designed to assure that reimbursable interest expenses are reasonable. "The intent of this provision is to assure that loans are legitimate and needed, and that the interest rate is reasonable.” 42 C.F.R. § 405.419 (c)(1). The refusal of defendant in Indiana University to reimburse plaintiff its interest expenses is directly contrary to this explicit purpose. The refusal in this case to reimburse sums which are excluded from the cost standard, see 42 C.F.R. § 405.527 (c)(2), is quite different.
*88 Second, the decision in Indiana University is concerned with avoiding questions of the regulation’s validity on constitutional grounds. The regulation in Indiana University draws an exception for interest payments by a provider operated by members of a religious order made to that order. Denying reimbursement to nonprofit Indiana University Hospitals yet permitting interest payment reimbursement to an affiliated religious order could well raise a first amendment question. The decision in Indiana University avoids that problem. This factor is entirely absent from the court’s consideration of Pasadena.
These two aspects of Indiana University, the. different nature of the regulation involved, the presence of the constitutional question, plus the unique factual circumstances enumerated therein, serve clearly to distinguish it from the approach we outline in Pasadena.