Court Opinion

ID: 9439245
Source: CourtListenerOpinion
Date Created: 2023-08-03 06:27:13.949251+00
Date Added: 2024-06-11T17:26:15.259768
License: Public Domain

SENTELLE, Circuit Judge,
concurring in part and dissenting in part:
I concur in most of the well reasoned opinion of the court, but find that I am unable to join Part II. Although I think the result reached by the Secretary, the district court, and the majority is a reasonable one, I do not think it is consistent with governing HHS regulations.
The applicable HHS regulation provides:
If a provider sells more than one asset for a lump sum sales price, the gain or loss on the sale of each depreciable asset must be determined by allocating the lump sum sales price among all the assets sold, in accordance with the fair market value of each asset as it was used by the provider at the time of sale. If the buyer and seller cannot agree on an allocation of the sales price, or if they do agree but there is insufficient documentation of the current fair market value of each asset, the intermediary for the selling provider will require an appraisal by an independent appraisal expert to establish the fair market value of *572each asset and will make an allocation of the sales price in accordance with the appraisal.
42 C.F.R. § 413.134(f)(2)(iv) (emphasis added). The regulation makes no distinction between tangible and intangible assets, nor does it limit the allocation of sale prices to depreciable assets. Most importantly for the purposes of the present controversy, it does not adopt “generally accepted accounting practices.” Maj. Op. at 571.
The Secretary’s argument that medical records primarily have a “going concern” value and that assets with “going concern” value should not be allocated a portion of the sale price is certainly reasonable, and I accept that following “generally accepted accounting practices” would dictate the result reached by the court. Indeed, were the Secretary to promulgate regulations to that effect, I have little doubt that those regulations would withstand all challenge. But that is not the state of the regulations that governed the sale before us.
As appellant argued, the Secretary’s regulations explicitly require the intermediary to allocate the sales price “among all the assets sold.” There is little ambiguity in this statement. If the medical records were among “the assets sold” by Nu-Med, then they should be allocated a portion of the sales price. The records were listed as a separate asset at the time of sale even though all of the assets were sold for a lump-sum price.
Since the buyer and seller did not agree on the value, if any, to be assigned to the medical records, the intermediary was required to submit this matter for independent appraisal, which it did. Under the plain language of the regulation, this appraisal, and not “generally accepted accounting practices,” controls. The regulatory language leaves no room for the intermediary, or the Secretary, to reallocate portions of the sales price because they disapprove of the appraiser’s judgment. While the Secretary’s view is most reasonable as a policy matter, it is not the view embodied in the Secretary’s own regulations. If the medical records were “intended to be among the assets transferred in the sale” then they were among the “assets sold” and fall under the regulations. That this produces an unreasonable or unconventional result does not give the Secretary or the courts license to rewrite the regulatory language.
In all other respects I join Judge Randolph’s careful opinion for the court.