90 Pa. Commw. 426 | Pa. Commw. Ct. | 1985
Opinion by
Chateau Convalescent Center (Chateau) appeals from an order of the Department of Public Welfare, Office of Hearings and Appeals (DPW) which affirmed the decision of a hearing examiner reducing the amount of allowable costs for which Chateau would be given reimbursement under the State Medical Assistance Program (Program). Specifically contested is DPW’s reduction of Chateau’s reimbursable interest on capital indebtedness expense by $35,484.00 following DPW’s audit of Chateau’s cost report for its fiscal year ending March 31, 1980.
Chateau is a general nursing facility offering skilled nursing services under Pennsylvania’s Medical Assistance Program (Program). As a provider under the Program, Chateau is eligible for reimbursement for certain costs incurred in its furnishing of
On its cost report, Chateau initially reported the sum of $62,646.00 as total “other interest” expense for the fiscal year in question. Included in this amount was $35,484.00 in interest paid by Chateau to Bryn Mawr Joint Venture (Joint Venture), a company related to Chateau by common ownership, on money loaned for current operating expenses. Chateau then deducted the $35,484.00 in interest it had paid on this loan from its total “other interest” expense as a nonallowable cost. Upon audit DPW allowed the $35,484.00 to be included as an allowable “other interest” cost but offset this amount against Chateau’s allowable cost for “interest on capital indebtedness”. It is from DPW’s order affirming these adjustments that Chateau appeals to this Court.
DPW’s regulations governing the reimbursement of costs are set forth in the Medical Assistance Program Manual for Allowable Cost Reimbursement for Skilled Nursing and Intermediate Care Facilities (Manual), 55 Pa. Code §§1181.201-1181.274. “Interest on capital indebtedness” is defined in the Manual as funds borrowed for capital purposes, i.e., acquisition of facilities, equipment and capital improvements. 55 Pa. Code §1181.202. The Manual also defines “inter
Chateau first argues that it properly deducted from ‘ ‘ other interest ” as a nonallowable cost the $35,-484.00 in interest it had paid to Joint Venture inasmuch as this amount constituted interest paid to a related party which is prohibited under the Medicare Provider Reimbursement Manual (MPRM). We agree. The Manual provides that DPW will determine providers’ allowable costs in accordance with the MPRM. 55 Pa. Code §1181.231. And as Chateau correctly noted, the MPRM provides that to be an allowable cost, interest expense must be incurred on indebtedness established with lenders or lending organizations not related through ownership to the borrower. 42 C.P.R. §405.419.
Section 273(a) of the Manual, 55 Pa. Code §1181.273(a), provides in pertinent part that: “Any form of investment income from the use of unrestricted funds will be used to reduce the allowable interest on capital indebtedness first, then other interest.” “Investment income” is defined as “Actual income available to or accrued by a facility
Accordingly, for the reasons set forth, we reverse DPW’s adjudication and order and remand with directions to reinstate Chateau’s cost report for the fiscal year ending March 31, 1980 so as to: (1) reduce the allowable “other interest” expense by $35,484.00; and (2) increase the allowable “interest on capital indebtedness” expense by $35,484.00.
Order
And Now, July 16, 1985, the adjudication and order of the Department of Public Welfare in the above matter dated August 17, 1983, is reversed and remanded with directions to reinstate Chateau’s cost report consistent with the foregoing opinion.
Jurisdiction relinquished.
Our scope of review from orders of DPW is limited to a determination of whether an error of law was committed, constitutional rights were violated, or findings of fact were unsupported by substantial evidence. Klingerman Nursing Center, Inc. v. Department of Public Welfare, 73 Pa. Commonwealth Ct. 470, 458 A.2d 653 (1983).
The intent of this provision is to assure that the interest rate is reasonable. The presence of indebtedness established with a related organization could “be suggestive of an agreement on higher rates of interest or of unnecessary loans.” 42 C.F.R. §405.419 (b) (8)(c).
“Facility” is defined as “a county or general nursing facility that is enrolled in the Medical Assistance Program.” 55 Pa. Code §1181.202.