CMS: Memorial Hermann merger not a 'bona fide sale'

The Centers for Medicare & Medicaid Services is urging a federal appeals court to deny a Texas hospital operator a $21 million depreciation loss adjustment from the Medicare program, reported Law360.

CMS said Memorial Hermann Healthcare System could not claim a loss adjustment on the assets of its predecessor, Hermann Hospital, because the transfer of assets into the merged system did not qualify as a legitimate sale.

Medicare will pay for the reasonable cost of treating Medicare patients, including equipment depreciation and loss adjustments, according to Law360. But the latter must be part of a bonafide sale at arms-length and for a reasonable payment.

The $469 million merger between Hermann and Memorial Healthcare System did not include any arms-length negotiations for the former's assets or any attempt to seek fair-market value, according to CMS.

The tug-of-war comes as Memorial Hermann's business model is transitioning away from volume to value.

And just last week, the health system was cited by the Joint Commission as a national leader in patient safety. Memorial Hermann received the award for applying evidence-based care across all of its hospitals, ambulatory surgery centers and clinics, as well as reporting regularly on the results, FierceHealthcare previously reported.

To learn more:
- read the Law360 article