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FORBES HEALTH SYS. v. HARRIS

December 15, 1980

FORBES HEALTH SYSTEMS, a corporation, Plaintiff,
v.
Patricia HARRIS, as Secretary of the U. S. Department of Health Education & Welfare, Helen O'Bannon, Individually and as Secretary of Pennsylvania Department of Public Welfare, Glenn Johnson, Individually and as Director of the Bureau of Medical Assistance of the Pennsylvania Department of Public Welfare, Defendants; WASHINGTON HOSPITAL, South Hills Health System, All Saints Hospital, Lock Haven Hospital and Andrew Kaul Memorial Hospital, Plaintiffs, v. Helen B. O'BANNON, Individually and as Secretary of the Department of Public Welfare of the Commonwealth of Pennsylvania, and Gerald F. Radke, Individually, and as Deputy Secretary for Medical Assistance of the Department of Public Welfare of the Commonwealth of Pennsylvania, Defendants



The opinion of the court was delivered by: TEITELBAUM

MEMORANDUM OPINION AND ORDER

 The Forbes Health System (hereinafter Forbes) initially challenged the interpretation and enforcement of Pennsylvania regulations as being discriminatorily applied against Forbes and also challenged the regulations to the extent that a hospital-based skilled nursing facility is required to be located at the same site as the acute care facility with which the skilled nursing facility is affiliated. After Forbes obtained preliminary relief against discriminatory application of the regulations, *fn2" the related action was brought be several other similar institutions. As part of the comprehensive challenge made in the related action to Pennsylvania Medicaid regulations, two of the plaintiffs, Washington Hospital and the South Hills Health System (hereinafter South Hills) raised the same site or collocation issue that was the subject of the action brought by Forbes. To avoid unnecessary delay and with consent of all the parties, these two actions were consolidated for a hearing on permanent relief with respect to the challenge to the site requirement. A hearing on this issue was held on September 15-16, 1980. The opinion is intended to address the site issue, only.

 The evidence established that in 1973, the Pennsylvania Department of Public Welfare (hereinafter DPW) *fn3" issued the first and, at that time, the only regulation which separated skilled nursing facilities into the two categories; hospital-based and non-hospital-based. That regulation read, in pertinent part:

 
Nursing facilities desiring to participate ... under Medical Assistance (Medicaid) ... must meet the following requirements:
 
(c) A hospital-based skilled nursing home must be licensed or approved by the Office of Medical Programs and/or certified for Title XVIII (Medicare) participation.

 Medical Assistance Manual ยง 9424.6 (hereinafter 73 Reg.)

 This distinction was used to provide a higher reimbursement rate to hospital-based skilled nursing facilities than for non-hospital-based skilled nursing facilities. This difference in reimbursement rates continues to the present, although the actual rates have been modified at various times.

 That regulation remained the sole relevant effective regulation until October of 1978 when a new section was added to the existing body of regulations. That section stated, in pertinent part:

 
Payments to hospital-based distinct part SNF (Skilled Nursing Facility) units.
 
Reimbursement under a separate statewide ceiling is available only to those hospital-based facilities meeting the participation requirements under ยง 9424.6 (73 Reg.) and the following additional requirements and conditions.
 
(2) The hospital must substantiate to the Department that it is economically feasible to operate a ...

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