American Medicorp, Inc., Appellees/cross-Appellants v. Richard S. Schweiker, Appellant/cross-Appellee

This is an appeal of consolidated cases. In the interest of clarity, we will discuss the facts and issues of each in turn.

The Doctors’ Hospital Transaction

The district court granted summary judgment to the plaintiff, American Medicorp, Inc. (AMI), in its claim for Medicare reimbursement. The Secretary of Health and Human Services appeals, contending that certain of AMI’s claims should be disallowed. We affirm.

The issue here arises from AMI’s acquisition of Doctors’ Hospital and its claims for reimbursement based on the cost of acquisition. The facts show that prior to December 28,1969, Doctors’ Hospital of San Leandro was owned and operated by Doctors’ Hospital of San Leandro, Inc. (Doctors’ Inc.) and Estadillo Properties, Inc. (Estadillo). Doctors’ Inc. and Estadillo were owned by the same individuals.

Pursuant to an agreement between AMI and Estadillo, AMI sought to acquire Doctors’ Hospital from Estadillo. Doctors’ Inc. and Estadillo merged, with Estadillo the survivor. Then AMI, through its wholly owned subsidiary, acquired 100% of the stock of Estadillo in exchange for stock in AMI. The following day, December 29, 1969, AMI merged its subsidiary into Estadillo, with…