HINSDALE HOSPITAL CORPORATION, Plaintiff-Appellant, v. Donna E. SHALALA, Secretary of Health and Human Services, Defendant-Appellee

1052; Villagrana, 5 F.3d at United States v. (7th

McKenzie, 1323, Cir.), 922 F.2d CORPORATION, HINSDALE HOSPITAL denied, 854, 163, cert. 502 U.S. 112 S.Ct. Plaintiff-Appellant, (1991). L.Ed.2d 127 The instruction must v. jury government also advise the SHALALA, Secretary Donna E. proving bears the burden of all elements of Services, Health and Human beyond the doctrine a reasonable doubt. Vil Defendant-Appellee. McKenzie, 1052; lagrana, 5 F.3d at 922 F.2d at 1330. The district court’s instruction in No. 94-3020. requirements. this case met the above It United Appeals, States Court of effectively jury advised the members of the Seventh Circuit. they responsi could hold Mr. Sandoval 12, Argued Jan. 1995. coconspirator ble for the acts of his Loera if they guilty conspiracy found Mr. Sandoval 24, Decided March 1995. they beyond if found a reasonable doubt Rehearing Suggestion Rehearing (1) offense, that Loera committed the firearm 30, En May Banc Denied 1995. (2) that the offense was in fur committed consequence therance of or as a natural (3) conspiracy, that Mr. Sandoval

was a conspiracy member of the when Loera

committed the phrase firearm offense. The

“beyond a reasonable doubt” was not re peated before each of the three elements. held, however, We have that this omission is not error when the district court used that

language prefatory phrase applying in a

all Villagrana, three elements. 5 F.3d at 1053; Diaz, (holding 864 F.2d at 549 cf. adequate Pinkerton instruction where the “beyond phrase reasonable doubt” followed doctrine). the three elements of the This upheld nearly court has identical or substan tially similar Pinkerton instructions.6 There plain

is no error.

Conclusion Accordingly, we affirm Mr. con- Sandoval’s 924(c). viction under 18 U.S.C. AFFIRMED. See, Edwards, 1; e.g., (holding inadequate 36 F.3d at 646 n. United similar Pinkerton instruction 1393, (7th Troop, support States v. 890 F.2d 1399-40 conviction on four of five counts of Cir.1989); Gironda, attempted aspects United States v. 758 F.2d extortion where various 1201, denied, (7th Cir.), 1004, liability complex, cert. 474 U.S. were unusual and the instruc- 523, (1985); attempted 106 S.Ct. 88 L.Ed.2d 456 see also tion was not linked to the crime of Goines, (7th United States v. 988 F.2d extortion complex; acknowledging its elements and the indictment was Cir.), denied, -, application cert. - U.S. 114 S.Ct. that when (1993); coconspirator liability straightforward, 126 L.Ed.2d 195 United States v. cf. McClain, (7th 1991) suffice). simple may 825-29 Cir. Pinkerton instruction

judgment upheld the denial of reim- bursement. We affirm.

I. Hospital is a 465-bed acute terti- care,

ary non-profit hospital located in Hins- dale, Although separately Illinois. incorpo- Illinois, in rated it is a member of a nation- (“Adven- system wide Adventist health care tist”) sponsored by Seventh-Day Adven- tist Church. Adventist controls its health system through care corporate parent and regional corporations. four Hinsdale is a of medical services in the program, § Medicare 42 U.S.C. 1395- 1395ccc, provides which health insurance for aged and years disabled. For the question, the program Medicare reimbursed providers for the “reasonable cost” of medi- cal provided eligible services to beneficiaries. 1395f(b)(l).1 § 42 U.S.C. “Reasonable cost” incurred, is defined as actually “the cost ex- cluding any part therefrom of incurred cost Ward, (ar- Dorothy Lawrence A. Manson unnecessary found to be in the efficient deliv- IL, gued), Chicago, plaintiff-appellant for ery services,” of needed health as determined Hosp. Hinsdale regulations accordance with promulgated (argued), Alvin Dept, N. Jaffe of Health by Secretary. U.S.C. Services, Y, Region and Human Office of the 1395x(v)(l)(A). § pro- statute further Counsel, Hill, Gen. Deborah A. Office regulations vides that “[s]uch shall take into Div., Atty., Section, Appellate U.S. Civil Chi- account pro- both direct and indirect costs of IL, cago, defendant-appellee Donna E. viders of services” so that costs for Medicare Shalala, Secretary, Department of Health eligible patients will not pa- be shifted to and Human Services. by private tients covered insurance and vice regulations versa. Id. adopted Under the CUDAHY, ESCHBACH, Before and by Secretary, providers may be reim- RIPPLE, Judges. Circuit expense bursed for interest on “both current capital expense and if indebtedness” ESCHBACH, Judge. Circuit “necessary proper.” 42 C.F.R. (“Hins- 413.153(a)(1).2 Hospital Corporation § Hinsdale expense For an interest dale”) “[ijncurred brought pursuant “necessary,” this action to 42 be it must be on a 1395oo(f) § to contest the decision of loan made to a financial need of the 413.153(b)(2)(i), provider, § of Health and Human Services C.F.R. (“Secretary”) deny “reasonably certain amounts of related to care.” 42 413.153(b)(2)(ii). § Medicare reimbursement claimed Hins- C.F.R. To avoid reim- expenses. bursing dale for interest The district court interest on loans which result granted Secretary’s summary investments, any motion for excess funds or interest Security redesignation regulation 1. The Social Amendments of 1983 insti- 2. Until this prospective payment system (1982). tuted a for cost § 42 C.F.R. 405.419 AH references in years beginning on or after October opinion are to the newer codification. 98-21, VI, (1983), Pub.L. No. Title 97 Stat. 149 codified at 42 U.S.C. 1395ww. The events giving challenge rise to the in this case occurred prior system. to the institution of this entity under GHCH within independent will to be reimbursable that is found system. on investments. earned be offset 413.153(b)(2)(iii). year, Each 42 C.F.R. finally arranged financing was Permanent report with required to file cost tax-exempt municipal through separate two intermediary who is contracted a fiscal 20, 1983, First, May on bond issues. amount of Secretary to ascertain the Heights issued village $35 of Glendale accurately reflects which reimbursement (“GH Bonds”) were 5-year which bonds of the Medicare services cost” “reasonable financing and as the interim used retire provided. acquisition costs. for other reimbursement 12, 1983, Second, village of Bol- July on corporate In November refunding million in ingbrook issued $44.8 acquire a 149- decided parent, bonds”). (“BLB Ap- improvement bonds hospital located Glendale bed acute total was million of the proximately $38.9 facility, then known as Heights, Illinois. The outstanding to refinance used Community Hospital, construct- was Midwest remaining and 1981 bonds and the $5.9 1978 1980, developed into a had not but ed for certain was used Hinsdale million 18, On November profitable institution. Thus, expenditures. with the restric- capital non-profit 1982, an Illinois Adventist created and 1981 covenants in Hinsdale’s 1978 tive Community Heights corporation, Glendale removed, to GH was transferred bonds (“GHCH”), Inc., purchase and to Hospital, result, 12,1983. July As a GHCH on GHCH name of Glen- hospital under the operate the obligation million for $35 assumed (“GH”). Hinsdale, Like Hospital dale and, 1984, confirmed in December bond issue regional control would be under GHCH million, including that it owed Hinsdale $7.5 could not Adventist of Adventist. million initial transfer and other the $5.9 transaction itself and GHCH finance the related amounts. independently financing of to secure unable years, subsequent Hinsdale included approximately In purchase price of $33.8 among eligible for reim- its Medicare costs collateral it could offer million since the payments it on the interest made financially bursement distressed GH. Conse- was the it million from the BLB bond issue to enter directed Hinsdale quently, $5.9 capital expenses. The for Hinsdale’s agreement purchase to GH. order used into an intermediary contracted the Secre- necessary financing to fiscal interim to obtain the 24, tary process Hinsdale’s reimbursement acquisition to complete this on November claim, Associa- place Blue Cross and Blue Shield required Hinsdale to the lenders and Blue of Illinois operating corporation for Cross Shield within its own GH tion/Blue (“the ques- intermediary”), initially did not permanent financing could until 7-9 months expense necessity of this interest covenants in tion the arranged. Since restrictive be ac- merely offset the interest income municipal and 1981 bond is- Hinsdale’s 1978 loan million to transferring to crued from Hinsdale’s precluded $5.9 it from GH sues expense for GHCH, permanent against fi- Hinsdale’s interest Adventist knew that GH However, in years 1983 and 1984. to refinance Hins- fiscal nancing would be needed accomplish goal Hinsdale determined the $5.9 dale’s own debt off, uncollectible and wrote it which During this in- loan was placing GH within GHCH. intermediary appeared prompted the to reexamine period when liabilities terim GH’s books, intermediary transaction.3 The deter- transferred entire on Hinsdale’s Hinsdale working the additional million bor- provide for its mined $5.9 million to GH continued, however, July in BLB bonds in 1983was unnec- rowed capital needs. GH have used the gov- essary because Hinsdale could separate medical staff and maintain capi- money it transferred to GH for its own body permanent it erning while awaited Thus, intermediary expenditures. an tal financing would allow it to become which 405.1885, years. § three 42 C.F.R. a determination 3. Under intermediary may "reopened” be within an por- disallowed the for contrary to constitutional right, power, privi tion years of Hinsdale’s debt for the fiscal in lege, immunity; or exceeding statutory juris 1988,4 dispute, through diction, in a resulting or falling short statutory right; $1,070,- approximately total disallowance of reached violation procedure; of established unsupported by substantial evidence.” 5 706(2)(A); § Univ., U.S.C. Thomas 1395oo(a), Pursuant Hins- Jefferson — at -, 2386; U.S. 114 S.Ct. Loyola at appealed dale reduction its Medicare Univ., 905 F.2d at 1066-67. Substantial evi reimbursement to the Provider Reimburse- dence is “such relevant evidence as a reason (“the Board”). ment Review Board After an might able mind accept adequate as sup evidentiary hearing post-hearing briefs, port Univ., Loyola conclusion.” upheld intermediary’s the Board determi- 1067, (quoting Perales, at Richardson v. nation on December 1992. The Adminis- 389, 401, 1420, 1427, U.S. 91 S.Ct. 28 L.Ed.2d Financing trator of the Care Health Admin- (1971)). istration elected not to review the Board’s Thus, decision. under 42 U.S.C. In our review give “[w]e must substantial 1395oo(f)(l), the final became decision agency’s deference to the interpretation of its Secretary. regulations.” own Univ., Thomas Jefferson 25, 1993, February On a — filed at -, U.S. 114 S.Ct. at 2386. “Our complaint judicial review in the district task is not to among decide which several court. The matter was magis- referred to a competing interpretations best serves the trate, Secretary’s who recommended the regulatory purpose. Rather, agency’s the 22, 1994, decision be reversed. On June the interpretation given must be controlling rejected magistrate’s district court rec- weight it plainly unless is erroneous or incon ommendation and affirmed Secretary’s (citations sistent regulation.” with the Id. decision. timely Hinsdale filed a notice of omitted). This particularly deference is war appeal pursuant § to 28 U.S.C. when, here, ranted as is inter preting regulations pursuant “issued to the II. complex Act,” and reticulated Medicare Ad challenges Secretary’s Centers, Living Inc., ventist 881 F.2d at determination, through its Provider Reim 1420-21, “in which the identification and clas Board, bursement Review million of $5.9 sification of relevant necessarily ‘criteria re Hinsdale’s 1983 BLB bond borrowing was quire significant expertise entail and the ex unnecessary, and expenses thus interest judgment grounded ercise of policy con ” service that debt not — are reimbursable. Our Univ., cerns.’ Thomas U.S. Jefferson Secretary’s review of the decision is limited. at -, 114 (quoting Pauley S.Ct. at v. While we examine the district court’s deci Mines, Inc., BethEnergy 680, 697, 501 U.S. novo, Centers, sion de Living Inc. 2524, 2534, 115 (1991)). 111 S.Ct. 604 L.Ed.2d Bowen, 1417, 1420 (7th v. Cir.1989), 881 F.2d judicial Secretary’s review of the is decision Board The determined that the 1983 governed by 1395oo(f), 42 borrowing which unnecessary. bond was It found incorporates the standard of review purchase Hinsdale’s decision to GH was (“APA”). Administrative Procedure Act by corporate parent, made its and — Shalala, Thomas v. part Univ. U.S. was not plan by deliberate Hins Jefferson -, -, 2381, 2386, 114 S.Ct. 129 L.Ed.2d dale to an purpose make investment for (1994); Loyola 405 Chicago Univ. v. expanding patient Bow care activities. While en, (7th Cir.1990). 905 F.2d 1066 Un the Board acknowledged that Hinsdale’s tem APA, der the we will “hold unlawful porary and set acquisition required of GH it to re agency only aside” an determination it operating if flect an GH as division Hinsdale “arbitrary, capricious, discretion, an abuse of reporting purposes, financial this was or law; otherwise not in accordance merely with found to a be short-term accommoda- intermediary change 4. The did not adjust- and loan 1983 it was written off before made an figures 1984 since unnecessary. the interest offset from the GH ment Auth., Cir.1991); Forsyth County Hosp. Inc. to facilítate Adventist’s tion. It was done Cir.1988). (4th Bowen, independent mem- v. 856 F.2d having GH as an goal of cases, provider’s with this in- system. Consistent In a both ber tent, a found that GH continued investment income of the Board offset was during independent even its status trans- party maintain after the had appeared on Hinsdale’s period party. short The inter- funds to the related ferred public to the was never held out unnecessary GH books. because expense was thus est subsidiary of Hinsdale. GH as a branch pro- available to the parent’s income was and li- separately times certified was at all Forsyth County Hosp. Authority, vider. See a hospital and it maintained censed as Inc., to the F.2d at 670. This similar body. governing separate medical staff Hinsdale made funds case which instant Moreover, the Board found that $5.9 corporate plans. available for Adventist’s transferred, not as an intra-cor- million was is that Hinsdale’s trans- difference transfer, but as a loan evidenced porate to borrow fer created need interest-bearing promissory the issuance of and, por- place, consequently, that the first findings supported These factual notes. unnecessary. borrowing It tion of the was Thus, the interest evidence. substantial or inconsis- “plainly thus not erroneous on a loan made to expense was not incurred regulation” for the Board to tent with the Hinsdale, satisfy financial need of but was that, light of the relatedness of determine a need of Hinsdale’s instead made money parties, transfer of 413.153(a)(1). 42 C.F.R. parent, Adventist. nothing than an artificial created more GH decision, for Hinsdale. need making its the Board analysis by relying upon the strengthened its in Northwest Hinsdale cites our decision organizations” principle in C.F.R. “related Hosp., Hospital Corp., Inc. v. Serv. 413.153(c) 413.17(a). §§ Since Hinsdale (7th Cir.1982), proposition that for the corporations under the are affiliated GH organizations principle should not the related and direction of common control deny the be used to reimbursement where they purposes related for the were underlying expense transaction for which the 413.17(b)(1). 413.153(c), § § Under C.F.R. objectively prudent in its was incurred is expense between interest on indebtedness Hospi- In Northwest terms and structure. except in parties related is not allowable tal, for-profit hospital with three stockhold- narrowly proscribed situations. Un several non-profit hospital. ers wished to convert to a 413.17(a), § cost of der the reimbursable corporation A new was formed and issued by organization goods provided a related interest-bearing promissory below-market goods limited to the cost of the to the related notes to the three stockholders. The Secre- organization organization unless the related tary hospital’s attempt disallowed the price charged was in can establish expenses prohibition due to the claim interest open line with the market. The Board deter expenses parties. between related on interest by mined that the diversion of funds one at 987-88. This court held that such a Id. entity entity can to another related inappropriate disallowance is where blanket not create a bona fide need to borrow on objectively the loan was reasonable because entity providing the diverted behalf of the statutory with mandate to it conflicts principle technically ap funds. The was not 992; reimburse all “reasonable costs.” Id. at plicable here since Hinsdale did not borrow Trustees Indiana Univ. v. United see organization, is not claim from a related GH States, 736, 739, 618 F.2d 223 Ct.Cl. 88 ing any payments reimbursement interest (1980). Hinsdale, goods and no were sold between the Board did not need to refer to However, While organizations. Board cited justify organizations principle to the related in several instances which courts have used case, nothing in this in the Board’s organizations guiding the result the related rule as a principles decision conflicts with the enunci- principle determining provider’s “reason only In Hospital. ated in Northwest loan Monongahela Valley Hosp., able cost.” See (3d Sullivan, case, parties in Inc. v. 591-92 between related this the loan GH, applied GH has neither from Hinsdale Portland Adventist Medical Ctr. v. Heck Cf. ler, (D.D.C.1983) F.Supp. for nor been denied reimbursement for 1096-97 expense. principle’s application (borrowing necessary not The where need created by guide ease has been as a in determin- diversion of funds to a non-reimbursable project). necessary. statutory This is antithetical to ing what costs are This use of against cost-shifting. directive organizations principle within a the related 1395x(v)(1)(A). necessary determination as to costs are what exactly adopted what was is Northwest protests the Board Moreover, Hospital. Id. at 995. the circum- arrived at this examining conclusion justify stances the instant case the Board’s parties intent of the authority when it had no principle. reference to this In Northwest regulations in the statutes or to make such Hospital, the financial need was created Hinsdale, an According examination. provider’s change corpo- own desire to its they facts as existed when the only question rate structure. was transferred were GH and Hinsdale whether the terms of the loan were reason- corporation were within the same and the light parties, able in of the relatedness of the transfer of necessary by funds was made provider’s change not whether the desire to corporate their responsibilities. corporate By its structure was reasonable. evaluating truly necessary whether a loan is contrast, the Board found that Hinsdale’s requires an examination of the events and solely actions were motivated needs creating transactions underlying need. corporate parent, its Adventist. The related- Since interest allowable parties question ness of the called into Hins- where it “[i]ncurred on a loan made to need, necessity dale’s and therefore the provider,” a financial need of the money the loan. The transfer was not 413.153(b)(2)(i), C.F.R. the Board reason poor akin to a investment where a ably explored in making Hinsdale’s intent attempts money, to make but instead finds loan which occasioned In the need. North itself left with a true financial In- need.5 Hospital, west we discussed the circum stead, engineered by this transaction was surrounding stances the denial of reimburse way such a that Hinsdale nei- expenses Caylor-Nickel ment for interest money attempted ther to make nor to serve Hospital, Califano, Inc. v. CCH Medicare & ¶ effect, (N.D.Ind. its own 29,619 needs. it was an Medicaid Guide March 1979). attempt completing to shift the costs of Hosp., Northwest 687 F.2d at 995. provider, transaction from a non-Medicare portions This court Cay cited several provider, opinion, including to a Medicare Hinsdale.6 lor one which the court Thus, economically paid it is not irrational for Medi- claim a reimbursement on interest to care to reimburse for financial needs which arise replacement money secure a for the it loaned to investments, from bad but not for needs which GH or to service a loan which allowed it to orga- arise from the diversion of funds to related suggests transfer funds to GH. The dissent provider’s corpo- nizations at the direction aof replacement where a loan is uncollectible so that situation, parent. rate In the former the Secre- necessary, funds Adventist should not be re- tary policy has made the decision that Medicare quired thereby to suffer the loss and relieve unequipped attempt will not or is to to second Yet, duty expenses. its to Medicare of share guess the economic reasonableness of an invest- duty Medicare no to a has reimburse lender money ment. where a transfer of loan, unless, provider per- a a when defaults on patient made without an economic or motive, services haps, happens the lender also to be a Medicare merely carry goal but to out the aof provider. pro- Since a Adventist is not Medicare provider's corporate parent acquisition, in an benefit, acquisition vider and the was for its it is qualified uniquely investigate to appropriate prudent that Adventist bear the transaction. risk that GH will default on its loan. When Adventist directed Hinsdale to advance the funds course, arranged 6. Of if Adventist had to finance GH, sought to shift its risk to a operating costs of GH itself or with its own Secretaty collateral, Medicare so that the became operations as GH would have been guarantor the ner, of the loan to GH. In this man- any expense reimbursed on interest incurred on pay acqui- asks Medicare to for an “religious a loan from Adventist under the or- 413.153(c)(2). exception would not otherwise be reimbursa- der” sition which C.F.R. However, Adventist would not then be able to ble. III. appeared “to be there

examined whether underlying legitimate reason business reasons, foregoing of the decision For the transaction,” purpose “the sole and discussed district court is reject- Although arrangement.” Id. AFFIRMED. upholding the blan- Caylor court’s of ing the interest, party for related ket disallowance CUDAHY, dissenting. Judge, Circuit examining process a of approved court of this through process progress the review its surrounding the totality circumstances for- matter has drawn dissent —either determining underlying transactions every mally practical effect —at level. necessary un- was whether Thus, Re- in the Provider Reimbursement Thus, regulations. Id. the nature der the Board, dissented on the Member Sloan view inquiry was not unreasonable. the Board’s that, transferred the ground when Hinsdale Heights, Glendale million to Glendale $5.9 findings Board’s as to corporate “under Hinsdale’s Heights was well-sup making the transfers are intent as if it structure” and “should be treated admits ported the evidence. Hinsdale hospital department.” “all Medi- were a And with the intent that Adventist created GHCH borrowing it is regulations allow when independent acquiring as an member GH provider department.” This to benefit system. Hinsdale also ad of the Adventist succinctly put to me to the matter seems Board position paper in its before the mitted accurately. ultimately million that was that “[t]he $5.9 Later, Magistrate Judge said Guzman by the Provider to Glendale was loaned decision, “Hinsdale is cor- his recommended operations and to accom sustain Glendale’s argues disputed [the rect when it objective spinning-off plish the desired necessary was in fact a and reason- million] (A.R. 340). The con Glendale into GHCH.” being satisfy cost because it was used to able temporary evidence confirms this intent. provider and was a financial need of the rather than an intra Hinsdale made loan reasonably care.” The GH, money to corporate transfer of the indicates, judge, majority magistrate as the jointly obligated May it was with GH on the prevail. that Hinsdale should recommended bonds, 1983 GH before Hinsdale’s debt was majority I am as sensitive as the to the covenants re refinanced and the restrictive Secretary in difficult need to defer to the Thus, separate moved. was treated as a GH interpreting Regula- task of the Medicare organization. if Hinsdale forced to Even But I do not deference should tions. believe make the transfers the restrictive cove point defeating to the the es- be carried nants, Adventist’s it was still needs statutory purpose, sential which is that Medi- rather than Hinsdale’s. When Adventist di provider hospitals for care should reimburse acquisition, rected Hinsdale to make the Ad necessary earing the reasonable and costs of requirements ventist knew about the lenders’ patients. pro- for Medicare Here the cost of for collateral and it also knew about the viding working capital patient to enable care temporari restrictive covenants which would (then or, Heights in an “extension” Glendale ly to on its force Hinsdale show GH books. words, “department,” in Member a Sloan’s essentially to Adventist directed Hinsdale Hinsdale) to to me an emi- continue seems needs, provide working capital for GH’s and nently valid and reasonable cost for Medicare obligation that Hinsdale incurred because majority to reimburse. The effect of the def Adventist’s need. Given substantial patient decision is to shift those Medicare Secretary of the erence owed to decision patients onto non-Medicare vio- care costs —a matter, say in this we cannot it was lation of the statute. See Board 1395x(v)(l)(A) (1988). unreasonable for the to conclude necessary “[T]he to a finan Hinsdale’s loan to GH was efficiently delivering covered ser- costs of Hinsdale, by than cial need of Adventist rather to individuals covered the [Medicare vices by Program] not ... will not be borne individu- and therefore was reimbursable. covered_” that, is no doubt 42 U.S.C. interest. There had funds not so als (1988). 1395x(v)(l)(A)(i) been found somewhere even at extortionate interest, representing rates of the debt those decision, majority as did the decision The incorporated funds could have into been it, Board before seems to turn of the Review Heights capital Glendale structure and the argument that Hinsdale’s primarily on quite prop- inflated interest would have been sprang of funds not from advance or transfer erly reimbursable Medicare. That inter- “intrinsic” need of its own some internal or est would have met a financial need of Glen- arising need from the but from an “artificial” Heights dale and would have been reason- acquiring Adventist in Glen- requirements of ably patient statutory to care —the my position that the Heights. dale It is not regulatory and tests. transferring the funds intent of Hinsdale majority In its footnote notes that irrelevant, part played wholly or that the might provided by the funds have been Ad- inducing the transfer is other actors Possibly they ventist itself. could have been But I believe that the facts as irrelevant. but, (although pure speculation), this is as are the they at the time of transfer existed notes, majority the interest on Adven- Hospital v. critical facts. St. Bernard’s Cf. tist’s loan would have been reimbursable to Sullivan, (E.D.Ark.1991); F.Supp. 576 Heights, and Glendale Medicare would there- Sullivan, Hospital v. 1990 WL Francis St. paid have its fair share. foot- (Dist. Lexis 1991 U.S.Dist. goes note on indicate the financial conse- Del.). surrounding circumstances are The quences if it to Adventist had had to borrow they if somehow violated the of concern money “replacement” for as its advance to spirit or of the statute or of the letter But, Heights. Glendale the issue of interest imprudence regulations, evidenced “replacement” reimbursement on the would purpose way interfered with the central unless, as on be irrelevant the facts of the key cost-sharing. my view it defeats the us, case before the “loan” were uncollectible cost-sharing ignore purpose of Hinsdale’s gift. and instead amounted to On those responsibilities for care at Glendale facts, certainly, there would have been no Heights, merely Heights’ because Glendale duty regulations under the statute or the partly patients patients Hinsdale’s as became gifts hospital systems like Adventist to make acquire a result of Adventist’s efforts to working capital hospi- to their constituent objective reality Heights. The at Glendale ways of its tals which relieve Medicare the time of transfer was duty hospital care to to share the costs of responsibili- Heights were both the Glendale patients. reality here is that Medicare board, ty of Hinsdale’s that Glendale Secretary pointed any impro- has not Heights’ patient required a cash care needs in the priety, imprudence or law violation responded appro- infusion and that Hinsdale system provided way for the priately to this need. Medicare should share financing acquisition of steps in various meeting need Medi- in the cost of since Heights. has the Glendale Nor patients were benefited. have been shown that Medicare would surrounding of the circum- The basic facts charged with more than its fair share leading up responsibili- stances to Hinsdale’s Heights if working capital costs at Glendale Heights’ patients ty for are not argument prevailed. Glendale had There- Heights financially dispute. fore, surrounding Glendale to me that the seems highly unereditworthy. essentially Ad- motivating distressed and neu- circumstances buy failing hospital tral, proposed ought properly ventist to focus on and we Presumably, system. of Hinsdale’s need to ad- bring problem it into its crucial funds, particular on time the could not be financed vance at the the transaction of advance, in party provide patient care Glendale Heights’ credit from third Glendale sources, Heights.1 not at reasonable rates of at least Heights on its will default majority the risk that Glendale

1. The asserts in footnote 6 reasoning. or The loan working capital of loan.” This is tortured loan was for the “benefit” for the direct benefit of transfer of funds was that Adventist should “bear the Adventist and provide working majority orga The advance of funds to The concedes that the related Heights a capital principle “technically applica at Glendale went to meet not nizations (Hinsdale, financial need of the ble here” but cites certain cases where the Heights) which included Glendale and then organizations courts have used reasonably patient related to care. At “guiding principle” determining rule a in a as made, the time the advance or loan was provider’s “reasonable cost.” See Monon Heights shared the Hinsdale Glendale Sullivan, gahela Valley Hosp., Inc. v. structure, corporate patient same care at (3d Cir.1991); Forsyth F.2d 591-92 Heights responsibility was the Glendale Auth., Bowen, County Hosp. Inc. v. the Hinsdale Board. The funds were ad- (4th Cir.1988). majority also purposes reasonably vanced for related to Portland Adventist v. cites Medical Center Barring impro- patient care. some claim of (D.D.C. Heckler, F.Supp. 1096-97 process priety imprudence or under 1983), in connection with the assertion Heights occupy which came to a Glendale present attempt facts show an to shift place corporation, in the Hinsdale I no see costs from Adventist to Hinsdale. beyond they reason to look the facts as exist- Monongahela Valley, It is true that For ed when the funds were transferred. It syth County Marymount Hosp. v. Sha that, seems to me irrelevant as the Board lala, (D.C.Cir.1994), implicitly 19 F.3d 658 out, pointed housing Heights of Glendale support proposition in investment operating as an division of Hinsdale was “a by non-provider parent entity come earned short-term accommodation.” Nor rele- by provider on funds donated should offset arrangement vant that “facilitated Ad- provider’s otherwise allowable interest goal.” certainly ventist’s It is not relevant expense. although Secretary Heights that Glendale “was never held out to urges Marym- that Portland Adventist and public subsidiary as a branch or of Hins- (and Hospital ount v. imputed Shalala other really Nor is it dale.” material whether the cases) investment income offset should con “intra-corporate anwas transfer” here, present trol the outcome case is or a “loan.” The relevant fact is that crucially different from the others: the transfer or loan was made to meet the patients care needs of the at Glendale 1. The funds “diverted” in all the cases Heights, being which was the time a mere Secretary majority cited and the were responsibility extension of Hinsdale and a separate corporations diverted to that did the Hinsdale Board. That Board would have participate program not in the Medicare fiduciary duty been breach of its to Glen- capitalize corporations order to other that did Heights dale had it failed to advance the participate not example, Medicare. For funds. pleased Whether Adventist was Portland the funds were trans- displeased by totally this turn of events is provider corporation ferred from a to a cor- respect irrelevant with to the fundamental poration engaged that was in a non-reim- objective sharing patient equita- care costs activity establishing ambulatory bursable bly pa- between Medicare and non-Medicare Here, hand, care businesses. on the other tients. recipient hospital of the funds was a ease, majority notes, In this as the providing hospital patients. care to Medicare organizations Board relied on the related principle probability to conclude “that 2. Hinsdale in all the diversion of saved Medi- entity money by funds using internally generated one related to another cannot create a bona fide need to borrow on behalf funds Heights while Hinsdale and Glendale entity providing the diverted funds.” corporate were under the same umbrella. patients (including patients) replacement Medicare in Glen- interest cost of funds. This is not a Heights, dale who were at risk of loss of care. At understood, "guaranty,” generally as since loss transferred, the time the funds were was And, principal was not underwritten. responsible Heights' patient for Glendale event, there was no "benefit" to Adventist unless Hence, properly care. the funds were advanced obligation Adventist were under some to advance "default,” Heights' Hinsdale. After Glendale working capital place. funds in the first obligation had an to share in the exception of religious order As the 3. 413.153(c)(2) is no evil in a suggests, there strong system using a

religious health a weaker one unit to subsidize operating serving patients as Medicare where both providers. evils, neither the Secre-

If there are such them. majority has articulated tary nor the “intent” that the focus on the It to me seems work of carrying out this of Hinsdale merely the facts as correct- mercy obfuscates in his Review ly by Member Sloan discerned Board dissent. respectfully dissent.

I therefore LIQUOR, & EAST FOOD INCORPORATED,

Plaintiff-Appellee,

v. America, UNITED STATES Defendant-Appellant.

No. 94-1902. Appeals, United States Court Circuit. Seventh Argued 1994. Oct. Decided March

Case Details

Case Name: HINSDALE HOSPITAL CORPORATION, Plaintiff-Appellant, v. Donna E. SHALALA, Secretary of Health and Human Services, Defendant-Appellee

Court Name: Court of Appeals for the Seventh Circuit

Date Published: May 30, 1995

Citation: 50 F.3d 1395

Docket Number: 94-3020

Court Abbreviation: 7th Cir.