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COMMONWEALTH PENNSYLVANIA v. FORBES HEALTH SYSTEM AND GEOFFREY M. HOSTA AND ASSOCIATES. COMMONWEALTH PENNSYLVANIA (10/31/80)

decided: October 31, 1980.

COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF PUBLIC WELFARE, APPELLANT,
v.
FORBES HEALTH SYSTEM AND GEOFFREY M. HOSTA AND ASSOCIATES. COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF PUBLIC WELFARE, APPELLANT, V. EMERGENCY ASSOCIATION OF SOUTHWESTERN PENNSYLVANIA



Docket No. 80-1-24, Appeal from the Order of the Commonwealth Court, No. 2407 C.D. 1977, dated June 28, 1979. Docket No. 80-1-39, Appeal from the Order of the Commonwealth Court, No. 2088 C.D. 1978, dated October 25, 1979.

COUNSEL

John A. Kane, Asst. Atty. Gen., Dept. of Public Welfare, Harrisburg, for appellant.

William J. McCormick, Thomas E. Boyle, Moorhead & Knox, Pittsburgh, for Forbes.

Lee P. Symons, Washington, for Emergency Ass'n of Southwestern Pennsylvania.

James H. Stewart, Nauman, Smith, Shissler & Hall, Harrisburg, for Hospital Ass'n of Pennsylvania Amicus Curiae.

O'Brien, C. J., and Roberts, Nix, Larsen, Flaherty and Kauffman, JJ.

Author: Roberts

[ 492 Pa. Page 79]

OPINION OF THE COURT

Appellant, Department of Public Welfare of the Commonwealth of Pennsylvania (DPW), appeals from two separate orders of the Commonwealth Court reversing appellant's denial of Medicaid payments to appellee Geoffrey M. Hosta and Associates and appellee Emergency Association of Southwestern Pennsylvania. Forbes Health System and Geoffrey M. Hosta and Associates v. Commonwealth, DPW, 43 Pa. Commw. 609, 403 A.2d 625 (1979); Emergency Association of Southwestern Penn. v. Commonwealth, DPW, 46 Pa. Commw. 599, 407 A.2d 91 (1979). At issue is whether, under Medical Assistance regulations and the accompanying statutes, private independent physician groups which contract with hospitals to provide emergency room physician coverage are entitled to Medicaid reimbursement for services rendered to Medical Assistance patients while on emergency room duty, even though these hospitals receive Medicaid reimbursement for all emergency room services, including physician coverage. Because these cases present similar facts and an identical issue of law, they have been consolidated for purposes of appeal. We conclude that the Commonwealth Court exceeded the scope of judicial review of the determination of DPW and that the regulations as interpreted by DPW are valid under state and federal law. Thus, we reverse the orders of the Commonwealth Court.

Appellee Geoffrey M. Hosta and Associates, a California -- based association, and appellee Emergency Association of Southwestern Pennsylvania, a professional corporation, are independent physician groups which have contracted to provide emergency room physician services at certain Pittsburgh area hospitals. Appellee Hosta contracted with appellee Forbes Health System, a non-profit Pennsylvania corporation, to provide the physician component of emergency room services at two hospitals operated by Forbes.*fn1 Similarly, appellee Emergency Association contracted with three

[ 492 Pa. Page 80]

    hospitals*fn2 to provide physician services in their emergency rooms.

For almost two years DPW paid claims submitted on behalf of appellees Hosta and Emergency Association for emergency room physician services rendered to Medical Assistance patients, and also paid claims for these same services submitted by the hospitals with which they contracted. In March 1977, by letter to appellee Forbes Health System, the Bureau of Medical Assistance (BMA) of DPW terminated payments to appellee Hosta and, similarly, by letter to Monongahela Valley Hospital, Inc., BMA terminated payments to appellee Emergency Association. It stated that the department's authorization of double payments for a single service had been made in error.*fn3 In subsequent letters BMA explained that Medical Assistance payments to hospitals for emergency room visits constituted full payment for all emergency services, including those of emergency room physicians, and that payment to physicians for these services was therefore a contractual matter between the hospitals and physicians. In a letter to Monongahela Valley Hospital, Inc., BMA stated, "the emergency room fee per visit is available either to the hospital or to a physician group practice that has assumed the complete operation of the emergency room, but not to both." However, because appellant had been in error in authorizing payment to appellees Hosta and Emergency Association, appellant did not seek restitution of payments made.

Appellees Hosta and Emergency Association separately appealed the determination of BMA to the Hearing and Appeals Unit of DPW. Appellee Forbes joined appellee Hosta in its appeal, alleging that the agency's determination would require renegotiation of its contract with Hosta to provide payment to Hosta for emergency room physician

[ 492 Pa. Page 81]

    services rendered to Medical Assistance patients. The appeal of appellees Hosta and Forbes was heard on July 14, 1977 and the appeal of appellee Emergency Association was heard on February 17, 1978, each before a different hearing examiner. Both hearing examiners affirmed the decision of BMA denying separate or additional payment for emergency room physician services to appellees Hosta and Emergency Association. The Commonwealth Court reversed, holding that the interpretation by DPW of its own regulations was erroneous as a matter of law.

In reviewing an administrative agency's interpretation of its own regulations, courts are governed by a two step analysis. First, "[i]n construing administrative regulations, 'the ultimate criterion is the administrative interpretation, which becomes of controlling weight unless it is plainly erroneous or inconsistent with the regulation.'" United States v. Larionoff, 431 U.S. 864, 872, 97 S.Ct. 2150, 2155, 53 L.Ed.2d 48 (1977) quoting Bowles v. Seminole Rock Co., 325 U.S. 410, 414, 65 S.Ct. 1215, 1217, 89 L.Ed. 1700 (1945). Second, the regulations "must be consistent with the statute under which they are promulgated." Id. at 873, 97 S.Ct. at 2156. See also Commonwealth v. Beck Electric Construction, Inc., 485 Pa. 604, 403 A.2d 553 (1979). The Commonwealth Court failed to follow this analysis and instead erroneously substituted its own independent reading of the regulations. The court therefore never reached the only question validly at issue: whether the regulations as interpreted by DPW are consistent with the statutes they implement.

I

The hearing examiners found that, pursuant to Medical Assistance Manual Section 9412.11 and Section 9412.76, hospitals with which appellees Hosta and Emergency Association contracted were entitled to Medicaid reimbursement for emergency room services. This finding was ...


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