Appeals and 198 C.D. 1982, from the Order of the Secretary of the Department of Public Welfare in the cases of Appeal of: Leader Nursing Centers, Inc. and Wilmac Corporation, Docket Numbers 23-80-76 to 23-80-87.
Joel M. Hamme, Pierson, Ball & Dowd, for petitioner, Leader Nursing Centers, Inc., etc.
Charles O. Barto, Jr., Killian & Gephart, for petitioner, Wilmac Corporation, etc.
John A. Kane, Deputy Chief Counsel, for respondent.
Judges Williams, Jr., Craig and Doyle, sitting as a panel of three. Opinion by Judge Williams, Jr.
Leader Nursing Centers, Inc. (Leader) and Wilmac Corporation (Wilmac) have filed separate appeals from the order of the Secretary of Public Welfare disallowing reimbursement of employee meals under the Pennsylvania Medical Assistance (Medicaid) Program,*fn1 Sections 441.1-453 of the Public Welfare Code, Act of June 13, 1967, P.L. 31, as amended, added by Section 5 of the Act of July 31, 1968, P.L. 904, as amended, 62 P.S. §§ 441.1-453. The appeals have been consolidated due to the similarity in factual and legal issues involved.
Both Leader and Wilmac are engaged in the ownership and operation of nursing facilities throughout the Commonwealth of Pennsylvania. Both corporations provide long-term skilled nursing and intermediate care services to Medicaid patients pursuant to the Pennsylvania Medicaid Program. The Pennsylvania Department of Public Welfare (DPW), the agency authorized to administer Pennsylvania's Medicaid Program, conducts audits of the appellants' nursing facilities at the end of each fiscal year, and
based on those audits, reimburses Leader and Wilmac for certain allowable costs associated with their provision of services to Medicaid patients. For the period January 1, 1978 through December 31, 1978, Leader sought reimbursement from DPW for costs it incurred in providing free meals to its employees in twelve of its nursing facilities. Wilmac sought similar reimbursement for costs incurred at four of its facilities during the period July 1, 1976 through October 1, 1978.*fn2 DPW disallowed reimbursement for these costs, and Leader and Wilmac submitted timely requests for hearings on the disallowance. By agreement of all parties, the cases were consolidated for hearing, which was held on May 6, 1981 before a hearing officer of DPW's Office of Hearings and Appeals. On November 25, 1981, on the basis of the recommendation and findings of the hearing officer, the Office of Hearings and Appeals sustained the claims for reimbursement of costs of employee meals incurred prior to October 1, 1978, but disallowed reimbursement for costs incurred after that date. October 1, 1978 is the effective date of a new section of the state regulatory manual which governs Medicaid reimbursements for skilled nursing and intermediate care facilities.
All parties sought reconsideration of the decision of the Office of Hearings and Appeals by the Secretary of Public Welfare. Leader and Wilmac sought reconsideration of so much of the order as disallowed
reimbursement for costs incurred after October 1, 1978, while DPW sought reconsideration of the allowance of costs incurred before October 1, 1978. By final order dated December 30, 1981, the Secretary reversed the order entered by the Office of Hearing and Appeals to the extent that it allowed reimbursement of the cost of employee meals incurred prior to October 1, 1978. The Secretary disallowed reimbursement to Leader on the grounds that costs for employee meals are not "costs . . . necessary for patient care, and because Leader was aware of DPW's policy not to reimburse general nursing facilities for the cost of employees meals." Reimbursement to Wilmac was disallowed on the grounds that its costs of employee meals were not treated as a fringe benefit to employees, and were not related to patient care. These appeals followed.
We begin our analysis of these appeals with a discussion of what we perceive to be the governing standards for determining when, if ever, employee meals are reimbursable to nursing home providers under the Medicaid Program. Pursuant to its authority to administer the state Medicaid Program, DPW, by memorandum dated October 24, 1975, adopted a "Manual for Allowable Cost Reimbursement for Skilled Nursing and Intermediate Care Facilities (Manual). The Manual was to be used for determining Medicaid reimbursements to general nursing facilities, including those subject to these appeals, for periods beginning on and after July 1, 1976. As originally published,*fn3 relevant portions of the Manual read:
III Costs reimbursement principles and methods.
Facilities will be reimbursed their allowable costs . . . if applicable for the facility within statewide group ceilings on net operating costs plus allowable depreciation and interest. Allowable costs are those costs necessary and reasonable for the proper care of Medical Assistance patients.
IV Standards for general and selected costs.
The standards listed below are established to provide guidance in determining whether certain selected cost items will be recognized as allowable costs. In the absence of specific instructions or guidelines in the manual, facilities will follow the guidelines and policies in the Medicare Provider Reimbursement Manual contained in HIM [Health Insurance Manual] 15.
[Subsections A through E set forth guidelines for determining allowable cost for such specific expenses as administrative expenses, dietary and housekeeping services, social service professionals, pastoral, rehabilitative and recreational services, support of volunteer services, and management consultants.]
F. Expenses and revenue items excluded from net operating costs.
Certain expenses and revenues are excluded because they are not normally incurred in ...