The opinion
BENNETT, Judge,
dissenting:
I must respectfully dissent and make two principal points. First, there has been some confusion in this case which is perpetuated by the majority opinion, as to what the Government has conceded. The majority opinion describes the "donation” involved in this case as consisting of the difference between the amount plaintiff billed to non-Medicare patients and the amount plaintiff remitted to Medical Professional Services Corporation (MPS) from such billings. There was a second donation involved in this case. This second donation was given voluntarily by the doctors out of Medicare receipts paid to them by MPS after the deduction of costs incurred by MPS. It was the amount of the second donation, $113,240, which was originally contested and decided adversely to the Government by the Blue Cross Association’s Provider Appeals Committee. Defendant does not contest this second donation, as noted in the majority opinion in footnote 15, supra.
Defendant does, however, contest the first "donation,” and to the extent footnote 15 suggests otherwise, it is misleading. Defendant contends that the first "donation” was a sham and allows plaintiff to make an impermissible profit off Medicare. It was this "donation” that was the basis of the dissent of the Provider Appeals Committee and the final administrative decision by HEW. The amount at issue is approximately $780,000, which equals the revenue in excess of costs received by plaintiff from its charges to non-Medicare patients for services rendered in the ancillary departments. 1 The costs deducted by plaintiff were all overhead costs incurred in the support of the ancillary *155 departments, i.e., costs attributable to both Medicare and non-Medicare patients. It appears from estimates made by plaintiffs own counsel before the administrative hearing that as much as 75 percent of the amounts billed were retained by plaintiff either as costs or as a "donation.” Plaintiff alleges that the revenue in excess of costs received on the non-Medicare billings was used to reduce the costs of Medicare patients. However, plaintiff was still reimbursed in full for its Medicare costs without any reduction for the amount of these "donations.” At most then, the only benefit that may have accrued to Medicare would be that Part A reimbursed less interest expense if plaintiff used the excess revenue to reduce the size of its debt.
In summary, plaintiff still retains "donations,” which are actually profits, out of billings, just as it did in Faith Hospital Ass’n v. United States, 218 Ct. Cl. 255 , 585 F.2d 474 (1978) (Faith I), and plaintiff uses the profits to "reduce” hospital costs no more here than it did in Faith I. The only difference is that the profits in one sense are deducted out of non-Medicare funds rather than Medicare reimbursements, but since plaintiff has commingled Medicare and non-Medicare funds by (1) paying all overhead costs out of non-Medicare funds and (2) arranging to take all of its profits out of non-Medicare funds while MPS takes a disproportionate share of its profits out of Medicare funds, the difference is merely formal. It does not matter out of which "pocket” plaintiff claims it is taking the cash. Under the rule of Faith I, the substance of the arrangement is controlling, not the form, and the court should hold that plaintiff is receiving an impermissible profit out of Medicare funds. 218 Ct. Cl. at 255, 268-69 , 585 F.2d at 474, 481-82 .
Second, the major basis for my dissent is that the court has misapprehended the nature of this case and has thereby been led into confusion. The court characterizes this case as involving an attempt to recoup Part B overcharges through Part A. Under this view, the agency appears to be impermissibly transferring Part B funds to Part A and this is part of the basis for striking the regulation. However, such "transferring” of funds is entire *156 ly theoretical and does not exist if the case is approached in different ways.
This case may with equal justification be approached as a Part A overcharge case, rather than a Part B overcharge case. MPS’s charges were allowed by Part B and presumably were reasonable. If MPS had no relationship with the hospital, these very same charges would be perfectly legitimate and would not be considered Part B overcharges in any sense. However, MPS made payments to plaintiff which represented profit to the hospital. From the view of Part A, plaintiff did not actually bear its costs to the extent the costs were covered by MPS profit payments. Faith Hospital Ass’n v, United States, supra, 218 Ct. Cl. at 264, 268-69 , 585 F.2d at 479-80, 482 . Therefore, to the extent plaintiff failed to deduct the amount of the profit payments from its claims for Part A reimbursement, plaintiff made Part A overcharges. This "Part A” approach is the one utilized by the regulation which speaks in terms of reducing allowable Part A costs rather than recouping Part B overcharges. 20 C.F.R. § 405.486 (b)(1) (1973). Under this Part A approach, the regulation does not intermingle the trust funds, plaintiff and MPS do. The actions of plaintiff and MPS provide no basis for striking the regulation. It must be observed that in the situation of the hospital-based physician, there are costs which are not per se Part A costs or Part B costs, but may with equal propriety be considered either. Therefore, there is no "intermingling” of funds by the regulation because reimbursement out of either trust fund would be valid.
This last observation leads to a second alternative approach to this case, the Faith I approach. Faith I did not treat this as an overcharge of either Part A or Part B in particular. Instead, it characterized this situation as an attempt by a provider to increase the amount of its total Medicare reimbursements, Part A and Part B, by engaging in an empty ritual, changing its form but not its substance. 218 Ct. Cl. at 264, 269 , 585 F.2d at 479, 481-82 . The regulation was held not to attempt to recoup Part B, overcharges through Part A, but rather to secure both Medicare trust funds “against the use of trifling changes in form to justify large changes'in result.” 218 Ct. Cl. at 264 , *157 585 F.2d at 479 . Under this approach there is again no transfer of trust funds from one Part to the other. The Secretary has discretion to deduct the excess in the claims for reimbursement resulting from the mere change in form under either Part.
If either of these alternative approaches is adopted, the entire basis and structure of the court’s reasoning collapses. Since the various approaches are at least equally reasonable, and the regulation may be sustained under the two alternative views, those views should be adopted and the regulation upheld. However, as Judge Davis ably indicates in his dissent, even under the court’s approach, the regulation should be upheld. The Secretary’s method for preventing the unnecessary and improper depletion of the Part B fund is a reasonable one. Under the court’s approach, however, in order to protect Part B from what is perceived to be the improper transfer of funds to Part A, the court allows the improper transfer of Part B funds to plaintiff. Even using the court’s view of the case, the Secretary’s action makes more sense than the court’s.
On the above analysis, I would uphold the regulation and affirm the administrative decision. While I can sympathize with the view towards ridding the system of this ill-drafted and trouble-making regulation, there are other considerations. I would leave to the Secretary the decision of whether the benefits from this regulation warrant retaining it in its present form when weighed against its various disorienting effects with their consequent inefficiencies, expenses, and possibilities for undermining the system.
Since this amount is based on net receipts and not the gross difference between the amount billed by plaintiff and the amount remitted to MPS, the amount retained is profit and cannot be justified as necessary to cover services to MPS in billing and absorbing the bad debts of non-Medicare patients.