Opinion ID: 1469075
Heading Depth: 2
Heading Rank: 3

Heading: The Statutory Merger Provision

Text: The Statutory Merger Provision of the regulation governing depreciable assets provides for a possible adjustment where assets are disposed of through a statutory merger, which is defined as: [A] combination of two or more corporations under the corporation laws of the State, with one of the corporations surviving. The surviving corporation acquires the assets and liabilities of the merged corporation(s) by operation of State law. 42 C.F.R. § 413.134(k)(2). [5] However, a statutory merger results in a Medicare gain or loss adjustment only if the merger was between unrelated parties, as defined by 42 C.F.R. § 413.17. 42 C.F.R. § 413.134(k)(2)(i). [6] In addition, the Statutory Merger Provision states that if the merged corporation was a [healthcare] provider before the merger, then it is subject to the provisions of paragraph[ ]. . . (f) of this section concerning recovery of accelerated depreciation and the realization of gains and losses. 42 C.F.R. § 413.134(k)(2)(i). It is the referenced provision of 42 C.F.R. § 413.134(f) that is at issue here. Section (f), the Bona Fide Sale Provision, covers gains and losses resulting from the disposition of depreciable assets through sale, scrapping, trade-in, exchange, demolition, abandonment, condemnation, fire, theft, or other casualty. 42 C.F.R. § 413.134(f). At the time of the transaction in this case, a sale of assets that resulted in a gain or loss would trigger a Medicare adjustment only if it was a bona fide sale. 42 C.F.R. § 413.134(f). [7] The purpose behind both the Related Parties Regulation and the Bona Fide Sale Provision is to eliminate the potential for self-dealing and ensure that Medicare only reimburses providers for their actual costs. See, e.g., Monsour Med. Ctr., 806 F.2d at 1191 n. 15 (discussing related parties); Via Christi Reg'l Med. Ctr., Inc. v. Leavitt, 509 F.3d 1259, 1262-63 (10th Cir.2007) (discussing bona fide sale).