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TEMPLE UNIVERSITY COMMONWEALTH SYSTEM HIGHER EDUCATION AND HOSPITAL ASSOCIATION PENNSYLVANIA v. PENNSYLVANIA DEPARTMENT PUBLIC WELFARE AND FRANK S. BEAL (06/17/77)

decided: June 17, 1977.

TEMPLE UNIVERSITY OF THE COMMONWEALTH SYSTEM OF HIGHER EDUCATION AND THE HOSPITAL ASSOCIATION OF PENNSYLVANIA, ON BEHALF OF ITSELF AND THEMSELVES AND ALL OTHER SIMILARLY SITUATED, PLAINTIFFS
v.
PENNSYLVANIA DEPARTMENT OF PUBLIC WELFARE AND FRANK S. BEAL, SECRETARY, PENNSYLVANIA DEPARTMENT OF PUBLIC WELFARE, DEFENDANTS



Original jurisdiction in case of Temple University and the Hospital Association of Pennsylvania, on behalf of itself and themselves and all others similarly situated, v. Pennsylvania Department of Public Welfare and Frank S. Beal, Secretary, Pennsylvania Department of Public Welfare.

COUNSEL

Spencer G. Hall, Jr., with him James H. Stewart, Jr.; Nauman, Smith, Shissler & Hall; Matthew M. Strickler ; and Ballard, Spahr, Andrews & Ingersoll, for plaintiffs.

Robert E. Rains, Deputy Attorney General, with him Jeffrey G. Cooper, Deputy Attorney General, Jack G. Handler, Deputy Attorney General, and Robert P. Kane, Attorney General, for defendants.

President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Opinion by President Judge Bowman.

Author: Bowman

[ 30 Pa. Commw. Page 597]

In Department of Public Welfare v. Temple University, 21 Pa. Commonwealth Ct. 162, 343 A.2d 701 (1975) (Temple I), this Court held, inter alia, that the then existing regulations of the Department of Public Welfare (Department) contained in the Medical Assistance Manual (Manual) did not empower the Department to deny reimbursement to hospitals participating in the Medical Assistance Program for inpatient hospital care provided to eligible individuals during extended stays caused by a hospital's inability to transfer a patient to a medically suitable lesser care

[ 30 Pa. Commw. Page 598]

    facility regardless of the availability of such lesser care facility. We said:

[I]t would be an abuse of administrative discretion to deny reimbursement to hospitals which have diligently put forth every effort to locate, without success, an appropriate lesser care facility. . . . In such circumstances there is still a medical necessity for the hospital services. To hold otherwise would be to read penalty provisions into the regulations where the culpability of the hospital for the particular misutilization involved cannot be established. Clearly this type of penalty would not further the purposes of the utilization review procedure. (Emphasis added.)

Temple I, supra, 21 Pa. Commonwealth Ct. at 166, 343 A.2d at 704.*fn1

After our decision in Temple I, the Department, by a memorandum dated January 1, 1976, notified hospitals with which it had contracted to provide care under the Medical Assistance Program that Section 9421.45(b) of the Manual -- "Noncompensible Hospital Care" -- was being "revised" so as to expressly prohibit reimbursement in all cases of failure to transfer a patient to a medically suitable lesser care facility regardless of the availability of such a facility.*fn2

[ 30 Pa. Commw. Page 599]

Temple University, operating Temple Hospital, and The Hospital Association of Pennsylvania (Plaintiffs) have brought these unconsolidated class actions invoking our original jurisdiction under Section 401(a)(1) of The Appellate Court Jurisdiction Act of 1970, Act of July 21, 1970, P.L. 673, as amended, 17 P.S. § 211.401(a)(1): One in equity, docketed to No. 1171 C.D. 1976, and one seeking a declaratory judgment under the Uniform Declaratory Judgments Act, Act of June 18, 1923, P.L. 840, 12 P.S. § 831 et seq., docketed to No. 1172 C.D. 1976. Plaintiffs demand that we declare illegal and otherwise enjoin or prohibit implementation of this "revision" of Section 9421.45(b) of the Manual. They allege violations of the Commonwealth Documents Law, Act of July 31, 1968, P.L. 769, as amended, 45 P.S. § 1101 et seq., and the equal protection and due process clauses of the United States and Pennsylvania Constitutions, and challenge the statutory authority of the Department to enact this "regulation."

The Department has filed preliminary objections raising the defense of failure to exhaust administrative remedies, a demurrer to counts II through IV of the complaints, (due process, equal protection and lack of statutory authority respectively), and challenging the class action nature of these proceedings.

Four days prior to argument on these preliminary objections, the Department submitted to this Court a "suggestion of mootness" in the nature of a motion to dismiss. The department avers that by a memorandum dated February 4, 1977, the January 1, 1976 revision to Section 9421.45(b) was "deleted" and that by a second memorandum dated March 4, 1977, (a mere four days prior to argument), the Utilization Review Division of the Department was directed to review and process all claims for reimbursement which a hospital submits or has submitted without regard

[ 30 Pa. Commw. Page 600]

    to the deleted revisions to Section 9421.45(b). This latter memorandum additionally provided: "Should the hospital document that good faith efforts to relocate the patient were done (sic) and that the failure to relocate was not due to the hospital's actions or failure ...


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