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decided: June 27, 1983.


Appeal from the Order of the Department of Public Welfare in case of In Re: Montgomery County Geriatric and Rehabilitation Center, File No. 23-80-243.


Douglas B. Briedenbach, with him Howard E. Kalis, III, Binder, Kalis, Proctor & Briedenbach, for petitioner.

Jeffrey Gonick, Assistant Counsel, for respondent.

Judges Rogers, Blatt and Craig, sitting as a panel of three. Opinion by Judge Craig.

Author: Craig

[ 75 Pa. Commw. Page 250]

The Montgomery County Geriatric and Rehabilitation Center (geriatric center), a county-operated skilled nursing (SNF) and intermediate care (ICF) facility, appeals from a Pennsylvania Department of Public Welfare (DPW) order which, for the year ending December 31, 1978, (1) disallowed, as non-reimbursable, the cost of providing patients with barber and beauty shop services and clothing and (2) disallowed an accounting method used by the center to carry forward, to two succeeding cost reporting periods, certain costs disallowed in previous years. We affirm in part and reverse in part.

Although the hearing examiner made no findings of fact to facilitate review, uncontradicted testimony of record reveals that the geriatric center houses approximately 350 residents in its SNF and 241 residents in its ICF; approximately 98% of these patients are Medicaid recipients under Pennsylvania's Medical Assistance Program (program).*fn1 Under the program, each Medicaid patient receives a $25 monthly allowance for personal needs.

In 1978, the geriatric center provided patients with barber and beauty shop care but did not deduct the cost of that service from a recipient's personal account. Rather, it sought reimbursement from the Commonwealth. According to the uncontradicted testimony of the center's assistant administrator, Mrs. Jean John, a majority of the Medicaid recipients exhaust their monthly $25 allowance without paying for hair care services.

[ 75 Pa. Commw. Page 251]

In 1978, the center also purchased shirts, trousers, sweaters, underwear, shoes and slippers for both male and female patients, stockings, slips, and simple cotton dresses for women, and hose for men, making such items available to residents on an as-needed basis. According to Mrs. John's testimony, the underwear provided is not labeled for each patient; if a patient is discharged or dies, the facility recirculates usable articles of clothing to other residents. The center labels dresses, shirts, and trousers with a resident's name so that after laundering, he receives an item previously fitted to his needs. After a patient's death or discharge, the facility removes the labels and returns usable articles to stock.

Thus, for its ambulatory patients, the geriatric center has, in effect, substituted street clothes for institutional gowns and now seeks reimbursement from the Commonwealth for the cost of providing that service.

Under its statutory authority to review expenses and adjust costs incurred by SNFs and ICFs furnishing care under the Medicaid program, the Department of the Auditor General examined the geriatric center's books and records for the year ending December 31, 1978, and informed Montgomery County by final settlement letter of November 3, 1980, that the Commonwealth would not reimburse the center for the expense of operating a barber and beauty shop or for the expense of providing residents with "additional patient personal clothing. . . ."*fn2

The Auditor General based that determination on a July 5, 1979 memorandum from the director of the Bureau of Medical Assistance, Glenn Johnson, who informed

[ 75 Pa. Commw. Page 252]

    the bureau of state-aided audits that beauty and barber shop services should not be charged to the program and that "[i]f a County facility purchases streetwear for the residents, the cost of the personal clothes should be charged to the patient." According to the uncontradicted testimony of Raymond Rall, Jr., an auditor of facility records, the Auditor General had allowed barber and beauty shop costs to be charged to the program in the past.

The Auditor General also informed the geriatric center, apparently at a conference in March of 1980, that DPW no longer recognized an accounting principle under Medicare regulations*fn3 which permits facilities to carry forward reasonable costs disallowed in previous years. The geriatric center had relied upon these federal carry-forward regulations in 1978, seeking reimbursement for excess reasonable costs disallowed by DPW for the 1976-77 reporting periods.

On November 25, 1980, the center's administrator, Gus Arapolu, filed a timely appeal with DPW. After a formal hearing on July 2, 1981, a hearing examiner recommended that DPW deny the center's appeal in its entirety; the Secretary of DPW adopted that recommendation on October 27, 1981.

Scope of Review

We limit our scope of review to a determination of whether DPW (1) adjudicated the issues in accordance with the law, (2) violated constitutional rights, or (3) failed to support findings of fact with substantial evidence. Spicer v. Department of Public Welfare, 58 Pa. Commonwealth Ct. 558, 560, 428 A.2d 1008, 1009 (1981). Here, the geriatric center asks our court to decide if DPW violated federal and state Medicaid legislation and regulations by disallowing reimbursement

[ 75 Pa. Commw. Page 253]

    for the services described above and by refusing to recognize the carry forward accounting method used by the facility in 1978.

Title XIX of the Social Security Act, 42 U.S.C. §§ 1396-1396p, "establishes the Medicaid program under which participating States may provide federally funded medical assistance to needy persons." Beal v. Doe, 432 U.S. 438, 440 (1977) (footnotes omitted). It is a grant-in-aid project providing federal monies to participating states. District of Columbia Podiatry Society v. District of Columbia, 407 F. Supp. 1259, 1262 (D.D.C. 1975). Participation is voluntary, but for a state to receive federal funds, its approved plan must meet all the requirements of the federal statute, 42 U.S.C. § 1396a, and implementing regulations. Swanson v. Department of Health and Social Services, 105 Wis.2d 78, 83, 312 N.W.2d 833, 836 (1981); accord, White v. Beal, 555 F.2d 1146 (3rd Cir. 1977) (Pennsylvania's provision for eye care inconsistent with federal regulation defining purpose of "eyeglasses").

Pennsylvania participates in the Medicaid program and has implemented a federally-approved plan for medical assistance, as mandated under the federal statute. See 62 P.S. §§ 441.1-453.

Congress enacted Medicaid legislation "[f]or the purpose of enabling each State, as far as practicable under the conditions in such state, to furnish (1) medical assistance on behalf of families with dependent children and of aged, blind, or disabled individuals, whose income and resources are insufficient to meet the costs of necessary medical services, and (2) rehabilitation and other services to help such families and individuals attain or retain capability for independence or self-care. . . ." 42 U.S.C. § 1396.

Although Title XIX confers broad discretion on each state to design Medicaid benefit programs tailored to meet its needs and demands, Beal v. Doe, 432 U.S. 438, 444

[ 75 Pa. Commw. Page 254]

(1977), that discretion is not unbridled. Dodson v. Parham, 427 F. Supp. 97 (N.D. Ga. 1977).

In construing the language of the federal statute and its supplementary rules and regulations, we must recognize the remedial nature of the legislation and accordingly construe its terms liberally. Brooks v. Smith, 356 A.2d 723 (Me. 1976) (state agency may not deny orthodontia to child where scheme of federal statutes, regulations, and interpretive guidelines appear to require reimbursement for such service). By the same token, we must accord an administrative agency's interpretation of its own regulations controlling weight, unless (1) that interpretation is plainly erroneous or inconsistent with the regulations or (2) unless the regulations are inconsistent with the underlying legislative scheme. Department of Public Welfare v. Forbes Health System, 492 Pa. 77, 81, 422 A.2d 480, 482 (1980) (court defers to DPW's interpretation of medical assistance regulations concerning emergency room physician coverage). Compare Luhovey v. Department of Public Welfare, 36 Pa. Commonwealth Ct. 126, 387 A.2d 978 (1978) (DPW's food stamp regulations in harmony with federal regulations governing distribution) with Forbes Health Systems v. Harris, 661 F.2d 282, 285-86 (3rd Cir. 1981) (court relies on DPW's own practices rather than its current ...

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