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ODD FELLOWS HOME PENNSYLVANIA v. COMMONWEALTH PENNSYLVANIA (01/16/81)

decided: January 16, 1981.

THE ODD FELLOWS HOME OF PENNSYLVANIA, PETITIONER
v.
COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF PUBLIC WELFARE, RESPONDENT



Appeal from the Order of the Secretary of the Department of Public Welfare in the case of In Re: Appeal of the Odd Fellows Home of Pennsylvania from Audit Determination in Annual Adjustment, Report No. 77-85, dated June 7, 1979.

COUNSEL

Robert E. Yetter, Metzger, Wickersham, Knauss & Erb, for petitioner.

John A. Kane, Assistant Attorney General, for appellee.

Judges Wilkinson, Jr., Blatt and Williams, Jr., sitting as a panel of three. Opinion by Judge Williams, Jr.

Author: Williams

[ 56 Pa. Commw. Page 116]

The Odd Fellows Home of Pennsylvania (Home) has appealed to this Court from an order of the Department of Public Welfare (DPW) reducing the amount of allowable costs for which the Home would be given reimbursement under the state Medical Assistance Program. Specifically contested is DPW's reduction of the Home's reimbursable interest expense by $62,537.00, following DPW's audit for the last six months of 1976.

The Home is a Pennsylvania non-profit corporation. Its stated purpose is to operate a residence for the care and support of aged members of the Odd Fellows Order, their wives, aged widows of deceased members, and other persons desiring to become residents by the payment of maintenance charges. It is

[ 56 Pa. Commw. Page 117]

    also declared in the statement of corporate purpose that the Home shall be operated as a long-term care facility according to the standards and regulations for skilled nursing and intermediate care facilities.

To comply with federal and state laws and regulations, the Home constructed a new patient care facility in 1976, using about $2,720,000.00 in borrowed capital. As a participant in the Medical Assistance Program, the Home became eligible for the reimbursement for certain costs after appropriate adjustments were certified by state auditors. In making its audit determination and annual adjustment for the period from July 1, 1976 to December 31, 1976, DPW reduced the Home's allowable or reimbursable interest expense by the amount of the investment income which the Home realized from several funds under its control.

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).*fn1 The Manual clearly specifies interest as an allowable cost item. However Section IV(D)(10)(e) provides that:*fn2

Interest expense reduced by investment income, except when the investment income is derived from gifts or grants which are restricted by the donor and which are accounted for separately from ...


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