payment is dispute involving a loss that same francis medical center incurred when a consolidated with an unrelated entity to create the a christie the secretary disallowed the last claim on two  grounds first that the transaction was between related parties and second that the koreans action was not a bona fide sale according to the agency the transaction was not a bona fide sale because st francis did not receive reasonable compensation the consideration in this case or whether they took maximum steps to maximize consideration the record shows that they didn't receive reasonable consideration for their assets over your two percent difference between the consideration that they receive or we do not agree with that for a couple of different reasons first of all the medicare loss to the agency interpretation is you take all the consideration and allocate it proportionately among all of the assets what the government did was take all of the consideration and allocated everything besides the hard assets and then say look there's nothing left for depression wesson's that's not provided for in agency interpretations it's not even provided for in the program memorandum on which the government's case is based they say you take the consideration and you allocate it only to the cash and against it which is one hundred sixteen million dollars which really leaves around ninety nine million dollars for other assets including the property plant and equipment and the to push west that's even if you allocate the the designated about eighty four thousand dollars you've got thirty million dollars attributable to depreciable assets and in fact the party stipulated that based on the medicare regulations this is how the calculation would go you would have twenty three million dollars which was attributable to the depreciable assets so in coming up with zero for the depreciable assets the government just takes all the money and shifted to everything else including things that no one would ever pay six two hundred fifteen us one hundred sixteen about ninety nine million dollars the government allocated the consideration to everything other than the property playing equipment and then showed why law there's nothing left equivalents and other current assets you take that weight off the top and then you compare it with you know and then you see if there's anything left for the push blast and other assets but that's not just what they did but that's that's a high number so that's a whole number of what compensation when we see you don't end up with a big difference to compensation for pushable assets which is the issue that we're focusing on  together were worth two hundred and ninety million dollars that's what valuation counts richard herman the consideration the total consideration was two hundred fifty million dollars so we've only got a four million dollar difference between the light of the what is assumed which is to cut the consideration received from the assets and what valuation counselors determined to be the value of the assets you know two percent ninety eight a loss indicate that it's not a bona fide it certainly doesn't mean that that's not reasonable consideration when you're getting ninety eight cents on the dollar particularly when you have a consolidation as opposed to a straight asset where in fact the liabilities consideration and the value of the assets are just so close and the only real way that they're not close is if the government relies on reproduction costs instead of the  universally used for gauging the fair market value of these types of hospital assets and the whole of the whole package but not have to push it all assets as a separate category i mean there's a lot there's a lot of difficulty with that question about the overall background of this you argue that the v a christian itself does not the its costs for ask for compensation for depreciation on these buildings is that correct what you haven't made that statement but that is essentially true because of the prospect of payment system that went into effect that generally depreciation is argument including all of the related procedural arguments why you should not be a part of why sales were not reasonable consideration this court has not addressed the requirements that are exclusively in the program membrane them that sheen on behalf of the secretary of health and human services as a court is has clearly been asking questions of mr maser i do not want to take too much of your time going over the long history that this court has a stablished as to the reasonableness of the secretary's interpretation of her regulations i believe that the court has accurately zoned in on the of the evidence that the secretary based her determination that there was no reasonable consideration in this case going off of judge coloreds questioning i think it is evident from the last compensate last calculations that submitted in the underlying administrative case that in fact all of the assets other than the plant property and equipment of st francis were transferred consolidated with st joseph to create fear christie and those assets were valued at two hundred twenty almost two hundred twenty two million dollars and again these are the figures that saint francis and be a christie put forth themselves and these were the fair market values of their assets and they said twenty three non as i want you would look at that it may be there your honor the iteration i'm looking at is j a one consideration of two hundred fifteen million dollars so therefore you know can evaluate in those two amounts it's clear that all assets other than the decrease of all assets of land were consolidated for less than value than the assets value as the administrator found in the lower court considered and and considered was that the this means that the assets were trant those assets were transferred for less than their full value and that there was no depreciate no no compensation left attributable to the depreciating assets or that the  income approach using going concern of the entire hospital the entire hospital was eighty nine million dollars but to that was added limited use in investment assets and other non operating assets which total the two hundred one thousand million dollars that mr maser was referencing so using the income pro choice the total amount that the hospitals valued at is two hundred in one thousand million of which eighty nine million of that was the million dollars thirty and a half million dollars but interestingly the only way that that number is arrived at is by backing out of the eighty nine million dollars fifty eight million dollars in working in networking capital which itself from the appraisal in the documents that the hospital produced itself suggests is somewhat of an arbitrary number because thirty three million dollars of consideration was used immediately to offset current current assets so arriving at the eighty nine million dollars arriving at the thirty million dollars of appreciable assets under the income method is fairly arbitrary because of that eighty nine million dollars fifty million dollars of it was considered now working capital which was didn't did not include all of the current assets that were on the books of the hospital at the time it was to explore you how all this fits in with medicare's reimbursement system is or was saying but going forward this doesn't affect the way it's treated doesn't affect reimbursement for fear christie i mean there's two things that are going are a couple things that are going on obviously congress changed the last calculation as you know post one thousand nine hundred seven this this transaction happened before that the other as of two thousand and one depreciation to the extent it is a come a reimbursable cost of any hospital is factored into the capital prospect of payment system so to the extent that via christi acquired st francis is assets in this consolidation those assets were put on the a christie's books at the net book extent the netbook values of these depreciating assets that were on scene francis's books are now the same as they are present and to the extent that of those assets continue to be reimbursed by medicare for the years until won't be possible to see from that audited financial statement of via christi what the division of the assets from the two hospitals were so to the extent that there is a line item for the net value of the assets held over his credit it's produced by simply putting together the book value of the both hospitals assets correct but we're not going to see it on their christ demonstrates that breakout what's your response to mr manners argument that requiring in the nonprofit consolidation context that the transaction be arm's length just doesn't make any sense because the nonprofit by virtue of not being a maximum profit maximizing entity has less the the what it what the consideration that received is much less indicative of the fair market value of the assets where is the attempt to seek out the best value for the assets as one can which is demonstrated through arm's length negotiations putting your assets up for sale get pretty transaction appraisal doing knees taking the steps to understand what your assets are worth and going out and trying to achieve maximum value for your assets demonstrates that in fact  assets may be worth more or less than what book value is but in this circumstance that didn't happen the only indication of a value that the hospitals put forth is a post talked about ration clearly the assumption of one's liabilities have no has no rational connection to the value of the assets which is why the secretary we serve reasonably found that there was no reasonable consideration here because the consideration received was so much less than the net book value of the assets can i go back to the perspective payment system i gather would you say that it is tailored to each hospital in other words it's not the outpatient prospect of payment system and then there's capital prospect of payment system which is aimed at reimbursing hospitals and other providers for their capital investments that may not be  that seemed to be implicit in your answer when you said that the book value going over to via christi would be a basis for calculating its reimbursable it is to the extent right to the extent that  worked into that it's just kind of in a smaller standard way and what we're dealing with here is whether that should be corrected based on a transaction correct prior to one thousand nine hundred seven it was it was a hospital specific and you showed the correct based on  caring enough to get a valuation to get an appraisal of the value of those assets as you go into the transaction that would be a way even me absence of an active market for  let me refer you your honor to joint appendix six thirty five which is one of the balance sheets and it's easy to look at because it has a category specifically referred to as current as those assets that are part current assets cash and cash equivalents short term investments assets uses limited supplies prepaid expenses comes out at one hundred sixty million dollars and five hundred seventy seven thousand dollars it does not include another set of monetary assets that are held by  which is that next category of assets use is limited obviously it doesn't include property and equipment and that it doesn't include this a number of types financing costs and other not current assets so when the starting with two hundred fifty million dollars if you take away the current assets of one hundred sixteen million dollars you know you got roughly ninety nine you take care of the assets use is limited you subtract out another eighty four million dollars you still have about reasonable consideration as a term and by appraiser and the board noted that an appraisal was in third party's attempt to to write the price that arms length bargaining should produce and that's at when ninety seven one ninety eight so there's no reason to believe that even if there was a purchaser after that was willing to purchase it that they would get any more than neatly approved value of the two hundred ninety million dollars in fact there is you know there's no evidence was time there were a few things noted in the secretary's footnote there were also addressed in secretary brief and we believe that we've addressed them and you know the incoming coach i would not say is a perfect approach as not just like the reproduction cost is not perfect but this one was done by the book and there is nobody who has shown anything other than this was an income approach as that income approach is supposed to be performed in context like this nor has anybody been showing that there is a serious basis to say that the income approach is not to be used for not for profit hospitals everything in the record is to the