Appeal from the Order of the Department of Public Welfare in case of Appeal of: Klingerman Nursing Center, Inc., File Nos. 23-80-90 and 23-80-146/24-80-26.
Alvin Luschas, with him Charles B. Pursel, Derr, Pursel & Luschas, for petitioner.
Jeffrey Gonick, Assistant Counsel, for respondent.
Judges Rogers, Blatt and MacPhail, sitting as a panel of three. Opinion by Judge Blatt. Dissenting Opinion by Judge Rogers.
[ 73 Pa. Commw. Page 472]
Klingerman Nursing Center, Inc. (Klingerman) appeals here an adjudication of the Department of Public Welfare (DPW) which reversed the Hearing Examiner's recommendation to sustain Klingerman's appeal from the annual nursing home audit made by the DPW.
Klingerman is a skilled nursing care facility entitled to cost reimbursement from the DPW. On July 1, 1977, the DPW changed its method of computing such reimbursements. Per diem costs were previously calculated on the total allowance cost of patient care, including depreciation and interest. Subsequently, however, the per diem rate was calculated on the net cost, derived from net operating costs plus an additional reimbursement representing depreciation and interest. Klingerman's fiscal year ran from April 1, 1977 to March 31, 1978, and, because the method of calculation had changed during the fiscal year, Klingerman requested a split audit in which costs would be arrived at by the old method from April 1, 1977 to June 30, 1977 and by the new method from July 1, 1977 to March 31, 1978. The DPW performed the requested split audit as well as a unified audit in which it averaged the costs over a 12-month period. The Hearing Examiner found that, in the first three months (25% of the audit period), Klingerman incurred only 20% of its total costs. The use of averaging in the unified audit, therefore, had the effect of placing Klingerman above the ceiling rate for the three months prior to July 1, 1977 and under the ceiling rate for the remaining 9 months of its fiscal year. According to the undisputed testimony of Klingerman's accountant, the use of the unified audit, as opposed to the split audit, reduced the total amount of reimbursement by $24,500. The DPW, however,
[ 73 Pa. Commw. Page 473]
accepted and used the unified audit. Klingerman then appealed. The Hearing Examiner recommended use of the split audit, holding that the unified audit had "artifically manipulated the cost incurred by [Klingerman] in providing patient care from a reimbursable period to a non-reimbursable period." The Director chose not to follow the Examiner's recommendation and denied the appeal without stating any reasons. Klingerman next perfected his appeal to this Court. The DPW was then given an opportunity to complete the record, and it submitted a brief statement of the reasons for its previous order. This order is now under review here.
Our scope of review of orders of the DPW is limited to a determination of whether or not the adjudication was in accordance with the law, whether or not any constitutional rights were violated, and whether or not the findings of fact were supported by substantial evidence. Spicer v. Department of Public Welfare, 58 Pa. Commonwealth Ct. 558, 428 A.2d 1008 (1981). And review of the Hearing Examiner's recommendation by the Director of the Office of Hearings and Appeals is governed by 55 Pa. Code § 275.4(H)(4)(i) which states in pertinent part that no findings of facts made by the Hearing Examiner will be subject to reversal.
The DPW seeks to uphold the adjudication by reference to the DPW Manual for Allowance Cost for Skilled Nursing and Intermediate Care Facilities (Manual), particularly Section VI*fn1 which provides in pertinent part that:
An auditor may validate the costs and statistics of the annual report by an on-site visit to the facility. The ...