Opinion ID: 727292
Heading Depth: 5
Heading Rank: 2

Heading: CMCI Interest

Text: 40 The government contends that the CMCI interest payments were nonreimbursable because they were expenses paid to a related company. See 42 C.F.R. § 413.17 and discussion supra pp. 525-26. The government argues that the interest did not represent actual costs incurred by CMCI, as required by 42 C.F.R. § 413.17. The payment of interest, the government argues, was merely movement of money from one pocket of CMC, the parent corporation, to another. Calhoon argues, however, that the government at no time attempted to show that the interest expense did not represent an actual cost and, therefore, did not bear its burden of proving the falsity of the statement. 41 Don Crosset, former head of Charter's Medicare reimbursement division from 1981 through 1987, testified that the hospitals were taking out loans for new construction. See R.A. Vol. 7 p. 58. The actual cash ultimately loaned to the hospitals was being generated by CMC, the parent corporation. Id. CMC then funded out [that cash] to the Nevada company, CMCI, and CMCI in turn, loaned [the money] to the hospitals. Id. Crosset testified that, as a result of these transactions, there was a reimbursable cost to CMC, the parent company. The company policy was for CMC to account for that cost in claims for the home office expenses. In order to avoid duplicating costs, CMC had an internal policy that individual hospitals should not claim the CMCI interest as reimbursable. 2 42 As discussed above, where a provider obtains services, facilities, or supplies from a related organization, the reimbursable cost includes only the costs for these items at the cost to the supplying organization. 42 C.F.R. § 413.17. In this case, the supplying organization obtained the money loaned to the hospital from yet another related organization, the parent company. See 42 C.F.R. § 413.17(b)(1) (Related to the provider means that the provider to a significant extent is associated or affiliated with or has control of or is controlled by the organization furnishing the services, facilities, or supplies.); 42 C.F.R. § 413.17(b)(3) (Control exists if an individual or an organization has the power, directly or indirectly, significantly to influence or direct the actions or policies of an organization or institution.). Whether the interest paid by the hospital to CMCI is reimbursable depends on whether it reflected the actual cost to CMC, the related organization that was ultimately the source of the loan. See 42 C.F.R. § 413.17. If the interest claimed was actually the amount of interest CMC was paying an outside lender for the money or the exact income stream foregone by CMC when it chose to lend the money to a subsidiary rather than to invest it outside of the enterprise, the CMCI interest may have been reimbursable. See 42 C.F.R. § 413.17; R.A.Vol. 6, p. 111 (testimony of Wheeler, the government's expert, that whether the CMCI interest was reimbursable under the regulations pertaining to related company transactions depended on where the related organization obtained the money); cf. Prov.Reimb.Man., Part 1, § 1011.5 (described supra p. 526). The government having offered no evidence about the source of the money obtained by CMC, the cost to CMC to obtain it, or the aggregate cost of CMC's loaning it to CMCI and of CMCI's loaning it to the hospital, failed to sustain its burden of proving that the interest payment was nonreimbursable. 43 Nonetheless, as with the royalty fees, the cost reports the government introduced demonstrate that Calhoon concealed that the CMCI interest was an expense paid to a related organization. As discussed above, this fact was critical to the determination of whether it could be reimbursable. Its concealment constitutes falsity for purposes of section 1001. See supra p. 524. 44