Shalala

Sisters of Providence hospitals (providers) appeal from the district court’s summary judgment order affirming the determination of the Secretary of Health and Human Services (Secretary) disallowing the use of a “blended” interest rate for purposes of Medicare reimbursement.

Under the Medicare Act, 42 U.S.C. § 1395 et seq., hospitals are reimbursed for interest costs that are “actual” and “necessary.” See 42 U.S.C. § 1395x(v)(l)(A); 42 C.F.R. 413.153(a)(1) (1994). In addition, the Medicare program must seek to prevent cross-subsidization. 1 See 42 U.S.C. § 1395x(v)(l)(A). In denying reimbursement of interest costs according to a “blended” interest rate, the Secretary interpreted the provisions of the Medicare Act to bar reimbursement of interest costs that were not incurred directly by each hospital. On appeal, the providers contend that the Secretary applied the Medicare regulations arbitrarily, denying the providers the benefit of a lower interest rate obtained as a result of group financing. We have jurisdiction pursuant to 28 U.S.C. § 1291 and we affirm.

BACKGROUND

The material facts are not in dispute. This action involves a dispute between Providence Hospital of Toppenish,…