Appeal from the Order of the Department of Public Welfare in case of Appeal of: Mountain Rest Nursing Home, Inc., Nos. 23-80-136, 24-80-23 and 23-80-48.
Jerry J. Weinberger, Tellie, Durkin, Weinberger, Murphy & Piazza, P.C., for petitioner.
Jeffrey Gonick, Assistant Counsel, for respondent.
Judges Blatt, MacPhail and Doyle, sitting as a panel of three. Opinion by Judge MacPhail.
Mountain Rest Nursing Home, Inc. (Petitioner) has appealed from an order of the Department of Public Welfare (DPW)*fn1 which dismissed Petitioner's appeal from the disallowance of reimbursement by DPW for depreciation of Petitioner's facility.
The fact findings of the hearing examiner in this case, which are supported by substantial record evidence, establish that the subject facility was purchased by Petitioner on January 28, 1974. DPW subsequently adopted regulations, which were applied effective July 1, 1976, to implement the federally mandated*fn2 "cost reimbursement" method of payment
for services provided by skilled nursing and intermediate care facilities.*fn3 The regulations include a depreciation allowance as one of the allowable costs in determining reimbursement levels. Prior to July 1, 1976, the facilities were to continue to be paid on the basis of maximum flat per diem rates previously established by DPW. See 5 Pa. B. 2928 (1975).
The issues in the instant case concern, in particular, Section IV(D)(9)(f) of the regulations which provides, in pertinent part, that:
The cost basis for depreciable assets of a facility purchased as an ongoing operation shall be the lesser of the purchase price or the fair market value based on the lesser of at least two bona fide appraisals at the time of the sale and less any straight line depreciation by the prior owner. (Emphasis added.)
Applying this regulation, DPW disallowed Petitioner's claimed depreciation for the fiscal years ending December 31, 1977 and December 31, 1978 due to Petitioner's inability to adequately document the prior owner's depreciation. No attempt was made by DPW to estimate the prior owner's depreciation based on those records which were available. The facts surrounding Petitioner's failure to ...