Department of Public Welfare v. Presbyterian Medical Center

only requested during 60-day could only

window. Not did we hold that lan-

guage unambiguous, was clear and but to

interpret language majority as the

does would make the statute “the read

employee shall be requested insurer at

any time upon expiration of one hun-

dred and eleven and weeks.” Because provide any exception

the statute does not

for a mistake the date the claimant benefits,

began I receiving dissent from majority’s decision and would reverse

the Board.

DEPARTMENT OF PUBLIC

WELFARE, Petitioner,

PRESBYTERIAN MEDICAL CENTER Presbyterian

OF OAKMONT and Oakmont, Pennsyl-

Medical Center of

vania, Inc., Respondents. Pennsylvania.

Commonwealth Court of Manne, Pittsburgh, peti- Jason W. Argued Feb. tioner. May Decided Jr., Capozzi, Harrisburg, Louis J. Reargument July Denied respondents. COLINS, Judge, President BEFORE: McGINLEY, PELLEGRINI, Judge, LEADBETTER, COHN, Judge, Judge, SIMPSON, LEAVITT, Judge, Judge, Judge. Judge

OPINION BY McGINLEY. of Public Welfare (DPW) petitions for review of Board of Presbyterian to award Claims’ decision Presbyte- Medical Center of Oakmont and during that costs incurred Oakmont, the Pennsyl- identified Medical Center of rían (Oakmont) $811,324.00 cost and vania, plus pre- report audited the year. DPW Inc. post-judgment regulations interest as deter- judgment and with DPW accordance reim- audits of Oakmont’s nursing facility’s result DPW allowable mined the under assistance. medical costs, rates and reimbursement. payment a final report audit and issued an DPW reports a series of audit DPW issued settlement, nursing fa- reconciling the cost un- reimbursement establishing Oakmont’s its audited cility’s interim-payments with program. Oak- der the medical assistance rates. appeals mont filed administrative contest- with ing certain reimbursements controversy, disagreed Oakmont In this Hearings Appeals Bureau of and DPW’s contend- the audit results. Oakmont with (BHA). filed three claims1 Then Oakmont applied the erred when ed DPW 1996, In the Board of Claims. Oak- before equipment movable “moratorium” to its mont withdrew two of its administrative 1984, had undertaken costs. Oakmont proceeded the BHA and with claims with project sixty- and added a construction its claims before the Board Claims. (68) facility. new beds to the Oak- eight Hearings July held in 1999. were existing equipment movable and mont used nursing facility, Oakmont is licensed $460,000 than in new mov- purchased more participated in the medical assis- which determined the 68 equipment. able DPW 1996,3 program.2 tance Prior to DPW re- to the “moratori- new beds were nursing facilities on a imbursed based depre- the related um.” disallowed DPW retrospective cost-based reimbursement including capital interest costs ciation and system. Payment rates were limited the mova- depreciation and interest on the certain at issue here DPW fig- calculated this equipment. ble DPW “$22,000/bed cap”4 known as the and the unallowable beds to using ure a ratio of 68 “moratorium.”5 202 total beds. retrospective sys- cost-based Under also contested DPW’s refusal tem, Oakmont made interim to the payments $7,466 expense in interest for classify At nursing facility during year. fiscal prior years 1996. In DPW reclassified year the close of the fiscal However, in working capital. facility report filed a cost and interest with DPW January reimbursement DPW’s 1. Oakmont filed three claims before the After system. The 9, 1995, system changed to the case-mix (1) disput- Board of Claims: March system apply in case. does not this case-mix ing DPW's reimbursement 1992; 23, 1996, (2) May disputing DPW’s and "$22,000/bed cap” allowable limited 4. The 1994; reimbursement for November capital interest costs to depreciation and 13, 1997, disputing DPW’s per bed of cost maximum construction 1181.65(c)(4); $22,000. §§ 55 Pa.Code 1181.260(k). 1181.259(s); signed provider participant, 2. As a generally precluded rec- 5. The "moratorium” provider agreement agreement. capital any depreciation inter- ognition pay with its directed that DPW in accordance or additional beds” to "new est costs related 1990’s, early regulations. In the DPW re- a certificate of need constructed agreement. all other placed provider For this nonreviewability Au- dated after letter or or issue, agree- periods at Oakmont’s were considered gust unless the beds one-page of a enrollment with ment consisted Pa.Code beds.” "replacement payment terms. no 1181.259(r); 1181.260(a). 1181.65(c)(1); §§ Post-judgment hereby Oakmont refinanced its interest bonds all pending awarded on matters before pro- auditor decided to validate to this is- Claims relative priety of the reclassification. Oakmont sue. why could not demonstrate the interest reclassified, recoupment, 14. The defenses of mis-

should so the auditor did take and off-set are affirmative defenses reclassify not the interest for 1995. DPW clearly that must be stated in Mat- New post-audit discovered in a review Oak- they ter or are waived. Household Con- mont overbilled the medical assistance sumer Vespaziani, Discount Co. respect laundry with to certain services. Pa. 415 A.2d 689 Pa.R.C.P. parties agreed The that the issues related (a). laundry to costs were not before the Board recoupment, 15. The defenses of mis- of Claims. Oakmont then filed a motion waived; hereby take and off-set are seeking with the Board of a protec- Claims moreover, permit to them would be against any recoupment tive order Claimant, highly prejudicial to the Oak- funds. mont. following The Board of made the relevant conclusions of law: adequately 17. failed to plead DPW 1. of Claims has generated that the interest income from subject over the matter of this action the Debt Service Reserve Fund should

be used to off-set in- capital Oakmont’s 2. DPW consented to the formation of is, therefore, terest reimbursement and relationship a contractual between itself raising barred from that as an issue. and Oakmont. Opinion, April 1-2, 11, 13-15, 5, 7,

Conclusions of Law page at 13-14. Depreciation capital 5. and interest re- initially On equipment appeal,6 imbursement on movable DPW raises question of whether the Board of subject not to moratorium to Claims has when the issues is, and Pa.Code Section 1181.65 interpretation application involve the and therefore, owing. due and regulations. of DPW argues DPW wrongfully 7. DPW reclassified work- subject lacks matter DPW ing capital to in capital interest interest setting dispute is a and contends this rate outside of the Board of Claims’ because it does not arise from contract. 11. Pre-judgment interest shall be provision no of its Oakmont cites presently pend- awarded on all matters Rath- support in of its claims. ing before the Board Claims relative er, its Oakmont asserts has breached to this case. obligation pay by following regulations.7 Storage is limited dence. Inc. v. Our standard of review to deter- Shovel and Transfer Board, Liquor Pennsylvania Pa. Control mining rights whether constitutional have violated, 739 A.2d 133 been whether an error of law has commit) necessary been ed or whether find- Pennsylvania State In November by ings supported of fact are substantial evi- 142-2002(Act) Legislature enacted Act adjust- determining arguing the Board of it made erroneous audit jurisdiction, matter we Claims has certain ments and therefore failed make Penn- in guided by are our recent decision payments to Oakmont.8 sylvania Department claim does not sound Oakmont’s Associates, Riverstreet jurisdictional predicate in contract. “[T]he Riverstreet, home only when the claimant relies is satisfied facility challenged group prices peer of that contract upon provisions rates issued DPW for asserting against Riverstreet. Riverstreet al- the claim the Common leged that DPW breached its wealth.” Keenheel v. Secu peer group prices pay- when it set its Commission, 227-228, rities 523 Pa. rates. This found that ment Court 1147, 565 A.2d 1149 To determine subject did not mat- have jurisdic whether the Board of Claims has jurisdiction. dispute ter The centered on tion the focus must be on the nature of the meaning interpretation of DPW underlying claims and not the mere exis not regulations, whether DPW breached relationship tence of a contractual between provider agreement by following v. Administrative parties. Yurgosky “At regulations. complicated its issue is a Courts, 554 Pa. Office of establishing payment method of rates and Here, 722 A.2d 631 as setting payment rates. This is within the Riverstreet, claims from Oakmont’s derive specific expertise and delegated legislative not from regulations and issues of Riverstreet, authority of DPW.” 798 A.2d Consequently, juris we find no contract. at This Court finds the current con- diction with the Board of Claims. similar to the Riverstreet troversy dispute. Riverstreet, Here, Accordingly, we vacate and dismiss this as in Oakmont chal- lenges application regulations of its action.9 provided provider only question that all medical assistance whether DPW had re- was invoices, disputes shall be heard ceived this Court found the matter Hearings Appeals DPW's Bureau of jurisdiction. was within the Board’s See (BHA) and the Board of Claims shall not have Com., Smock v. 496 Pa. 436 A.2d 615 matter Under the terms (1981)(nursing home owner’s Medicaid li- of the Act the Board of Claims shall continue revoked, faced financial setbacks and cense jurisdiction publishes to have until DPW a sought recovery theory); Depart- on contract standing practice proceedings, order for this Maplewood Manor ment Public Welfare standing by July order must be issued Center, 168 Pa.Cmwlth. Convalescent issued, standing Once that order is the Board (1994)(Board jurisdiction A.2d 1117 repealed replaced Claims Act is with a payment but did not have the a claim for Chapter new 17 of the Code Procurement agreement power private to alter a settlement governing the Board of Claims. Board of home.). nursing between DPW and Claim’s over claims for damages or of medical assistance 9. Because we find that the Board of Claims services is abolished. have over the claims does not we not examine raised need Department In Public v. Divine Welfare pro- stayed the Board of Claims should have (Pa.Cmwlth. Hospital, Providence ceedings pending appeals; administrative 1986), this Court noted that in certain in- whether DPW breached its contract disallow- stances DPW would have because ing capital in connection with moveable costs expertise action for of its but cause of nursing facility equipment with beds con- might properly of contract be before breach 31, 1982; Providence, August whether DPW structed after the Board. Divine 516 A.2d at 84. refusing classify inter- Department Shapiro, 91 breached (1985), working capital; expense as whether the where est Pa.Cmwlth. DictionaRy, 318- terms. Black’s

ORDER Law (7th ed.1999). evidences, neverthe- It NOW, May, day this 15th AND less, relationship. a contractual in the the order of of the relation The contractual nature case is vacated and the above-captioned dem and DPW is ship between case is dismissed. authority. by more than one onstrated require Federal Judge BY DISSENTING OPINION in order to a contract with DPW have LEAVITT. ser providing to receive able I dissent. this deci- Respectfully, With clients. to Medical Assistance vices sion, for the first time that reim- we hold 1396a(a)(27); § C.F.R. U.S.C. arising provid- from a 431.107; § 442.12. Recent 42 C.F.R. medical or to deliver er’s this federal is consistent with case law Assistance to Medical services regulatory authority. See statutory and exclusively by heard client must be Inc., No. CIV.A Group, Healthcare Sun (DPW). of Public Welfare (D.Del. 00-986-GMS, 2002 WL 2018868 so, we the Board doing divest Gorman, 2002); 536 U.S. Barnes v. Sept.4, provider reim- 2097, 153 181, 122 230 L.Ed.2d S.Ct. claims, though juris- even (wherein that Supreme the Court noted has been ex- such claims diction over for their private made to entities payments recognized by DPW since at least pressly leg Clause Spending to services 1981.1 Act, islation, Medicaid estab such as the contract). insti- a DPW’s own of Claims is a venerable lish The Board agreements provider that expressly in to stated created “arbi- tution that was relationship. a contractual establish the against claims Commonwealth trate (1983). Pa. B. 3655 by into the contracts entered arising from ” 1 of the Act Section Commonwealth.... River Department of amended, May P.L. as (Pa. Associates, 798 A.2d Street recently § has revised P.S. 4651-1. DPW Cmwlth.2002), majority re- upon which the agreement from a provider its standard lies, River Street was distinguishable. is a shorter one many pages to document change pay- the sought that to class action form.” Howev- it calls an “enrollment ser- that deliver rates for ment document is er, shape or of a length the of DPW clients to Medical Assistance vices of the kind of regula- a determination in irrelevant to that were established establishes between to the relationship challenge that a legal held tions. We pre- must be provider of those rate levels parties.2 adequacy two to and not prepared by disposition for contract that was sented to DPW an adhesion contrast, Here, ie., by Board of Claims. the imposed upon provider, DPW and challenge presented with we are has no choice about party who the weaker Notably, Procurement awarding the Commonwealth prejudg- erred in interest; as follows: whether Code defines “contract” ment reauditing a cost may prohibit DPW from regardless agreement, typeA of written costs; including laundry Oak- report called, procurement may he for the what it have been able expert witness should mont’s supplies, or construction. services refused to of Claims testify when the Board added). (emphasis 62 Pa.C.S. 103 recoupment defense. DPW's hear Pa. B. 2630 1. 11 levels, but, rather, companies a forum in which appli- provides

DPW’s rate their by cation calculate amount DPW to which do business with the Common- particular provider par- to a owed under pres- can agencies wealth and its various ticular contract. contractual and seek reme- ent alleged dies for the Commonwealth’s perhaps explained

It is a distinction best breaches. by reference to tariff the “filed doctrine.” Utility by rates are established review and Pennsylvania Keenheel v. Securities Com Commission, approval Utility of the Public mission, 523 Pa. set, and once are they binding on both the Oakmont is a customer and utility. Philadelphia agen does business with Commonwealth Suburban Water Co. v. Pub DPW, cy, and it seeks redress for DPW’s (Pa. Commission, Utility lic alleged obligation pay breach of its Cmwlth.2002). They may challenged services Oakmont rendered to DPW’s only in statutory pro accordance with the Medical Assistance clients. governing cedures establishment majority Other cases cited are rates,3 they may said not be set aside distinguishable. They pay- do not involve in a breach of contract action in a brought ment for services rendered to the Com- However, court of if law. the rate has monwealth, they sought relief that been improperly applied an individual case, granted by could not be the Board of may the individual rate payer sue the utility in contract for return of Claims. an excess Likewise, charge. utility has a contract of a Keenheel concerned the settlement against any action under customer charge against of racial discrimination filed 2d, charge. 64 Am JuR Public Utilities Pennsylvania the Commission Securities e.g., 62 American Telephone See by of former employees. one its The Telegraph & Co. v. Central Tele Office to settle a violation of the Inc.,

phone, 1956, 524 U.S. 118 S.Ct. Pennsylvania Human Relations Act bears (1998); 141 222 L.Ed.2d Penn Power West services, no resemblance to a contract for Co., v.Co. Nationwide Mutual Insurance Further, arrangement which is the here. 209 Pa.Super. 228 A.2d 218 but, Mr. not Keenheel did seek Here, Presbyterian Medical Center of rather, nulli- sought to have the settlement (Oakmont) challenge does not equitable Board fied. The does not have by the rate level set regulation appropriate- powers. Supreme Our Court Rather, providers. all challenges it the lacked ly held that reimbursement, particular amount of its a dispute over such because which it claims has not been calculated in goods originate did not with a contract for approved accordance with DPW’s rules and services. and rates. This is a contractual matter Yurgosky v. Administrative by that can heard the of Claims. Office of Courts, Pa. 722 Pennsylvania Supreme Our Court has held that the (1998), similarly inapposite. Board of A.2d 631 is Claims agency, upon appropriate in this 3. DPW’s reliance Ciamaichelo v. Inde before the state Here, Cross, (Pa. challenge pendence case DPW. Oakmont does not Blue Cmwlth.2002) accepts It the misplaced that case the rate levels in its contract. because DPW, contract with whether the rates were excessive terms of its adhesion concerned contends, and, including thereby, generating profits. Rate the terms. It excess obligations setting, inadequate simply, has not met its to correct or ex that DPW levels, belongs activity rate under that contract. cessive is an that “[ojtherwise, has [of Claims] the Board justice who a district Yurgosky was Pro- Rules of a Medical Assistance Pennsylvania jurisdiction over that the claimed Ad- the Id. at 496 A.2d required gram appeal.” Judicial Administration Thus, Courts ministrative Office that the Board of we held legal him defense when provide with a jurisdiction over reimbursement had that occurred charged he with a crime was home to services rendered jur- no capacity. in his official There was clients. Medical Assistance Board of Claims because isdiction the regulations4 may The fact that DPW’s contract; Yurgosky was no was there contract the outcome of Oakmont’s affect vendor. a Commonwealth public official not the with does divest dispute hand, precedent the the other On In Shovel that the Board of proposition the support Simpson, Inc. v. Storage, Transfer dis- to consider Claims has (1989), the Pa. 565 A.2d to medi- putes over DPW’s its claim as “statu characterized petitioner that treat Medical Assistance cal contractual, filed a than tory,” rather and extensive. longstanding clients is both Supreme complaint with this Court. Com., Pa. jurisdiction, Smock on reversed this Court Court (1981), held that a Supreme our Court stating that: for services ren claim for reimbursement validity The mere fact patients after dered to Medical Assistance statu- may upon turn issues was ter agreement with DPW its statutory duty does not create tory by the Board of minated should be heard Rather, the focus is on right of action. Claims. In the rights claimed. origin 64, 496 A.2d 887 91 Pa.Cmwlth. Shapiro, matter, objective is to Shovel’s instant (1985), exclusive that it had DPW claimed relationship. the contractual establish reim Medical Assistance Shovel, 241, 565 A.2d at 1156 523 Pa. at because added). Thus, Supreme (emphasis program. governed the Medical Assistance forum was proper held that Court agree, holding This Court did not Board of Claims. matter Board of Claims also with this Court’s was consistent Shovel Again, Department in of Department in Public Wel- ruling prior of Manor Con Maplewood Public v. Welfare Hospital, 101 Divine Providence v. Center, 168 Pa.Cmwlth. fare valescent (1986) in Pa.Cmwlth. ques we addressed A.2d that the Board of which we held and, jurisdiction exclusive tion of DPW’s reimburse- jurisdiction had 1) limited to: found it reiterating Shapiro, though the claim was dispute ment even As eligibility for Medical a determination that allegation DPW upon based 2) benefits, a termination of a and sistance short, regulation. its own not followed authority to-treat Med contract provider’s of is not divested Board of Claims that concluded ical clients. We Assistance the Board be removed from governed by Oakmont’s claim reimbursement 4. Oakmont’s However, of Cost Reim- of Claims. "Manual for Allowable DPW's Nursing determined on this and Intermedi- is not bursement for Skilled terms of this Manu- Facilities.” The to hear cases ate Care It was established basis. Indeed, at 55 Pa.Code published factually. DPW legally al have been complex and are §§ deciding provider 1181.201-1181.274. reim- been because it has decades, exper- it has disputes for com- suggest that the majority seems to such claims. requires that tise in regulations plexify of DPW’s dis- simply because contract NEWSPAPERS, INC., Publisher may interpretation involve the and YORK pute regulations; of application statutes Sunday Dispatch/York of The York surprising this should not be when the Daily Record and and York News party purchasing goods and services is the Hetzel, Dennis Commonwealth. v. failed, previously sought, has DPW Shapiro to have this Court reverse YORK, Appellant. The CITY OF Divine Providence. Public Pennsylvania. Commonwealth Court Soffer, Pa.Cmwlth. Welfare (1988); Department A.2d 1109 31, 2003. Argued March Jerrytone, 118 Pa.Cmwlth. litigation When Decided June failed, attempted adopt regula

tions that forbid from would

bringing to the proposed regula of Claims. This rejected by

tion Independent Reg was

ulatory Review as contrary Commission

the statute establishing the

the Board Claims. 20 Pa. B. 3847-49 reasons,

For all of these the Board of jurisdiction5

Claims had over the dispute

between Oakmont and DPW on what Oak-

mont is owed for its services to certain

Medical Assistance clients. Oakmont’s

claim Although sounds contract. incorporates by reference certain DPW,

rate level the contract

is the source of Oakmont’s rights. With- contract,

out a any rights could not claim flowing under DPW’s Manual for Allow-

able Cost Reimbursement for Skilled Facilities,

Nursing and Intermediate Care §§

55 Pa.Code 1181.201-1181.274.

Accordingly, I dissent. joins

Judge SIMPSON in this dissent. Assembly 5. The General has divested the order to the Act of December cate- at 62 Pa.C.S. over the P.L. No. consolidated 102(e). gory at issue not remove the 300 claims claims here for I would standing pending future in the event DPW issues a now in the Board of Claims.

Case Details

Case Name: Department of Public Welfare v. Presbyterian Medical Center

Court Name: Commonwealth Court of Pennsylvania

Date Published: May 15, 2003

Citation: 826 A.2d 34

Court Abbreviation: Pa. Commw. Ct.