Appeal from the Order of the Department of Public Welfare in case of Appeal Of: Michael Manor, Inc., Guilford Convalessarium, File Nos. 23-83-9, 23-83-10, 23-83-11, and 23-83-12, dated November 18, 1983.
Gordon A. Roe, Kain, Brown & Roberts, for petitioner.
Bruce G. Baron, Assistant Counsel, for respondent.
Judges Rogers and Craig, and Senior Judge Barbieri, sitting as a panel of three. Opinion by Judge Craig. Judge Williams, Jr., did not participate in the decision in this case.
[ 88 Pa. Commw. Page 584]
Claimants Michael Manor, Inc. and Guilford Convalessarium, Inc., private facilities providing skilled nursing and intermediate care, appeal from a decision of the Pennsylvania Department of Public Welfare which denied part of the reimbursement they claimed for patient services performed in their fiscal year 1981. The department interpreted 55 Pa. Code § 1181.73(b)*fn1 as requiring, when a facility has filed a
[ 88 Pa. Commw. Page 585]
late final cost report, that reimbursement determinations be based on costs for the last previous year audited. The question of law is whether that regulation applies only when a facility has filed no final cost report, and not when its filing is tardy.
A group of private investors had acquired Michael Manor and Guilford on December 31, 1981. Afterward, George Miller, comptroller for both facilities, realized that the facilities were required to file final cost reports with the department. On February 2, 1982 (after the thirty-day limitation for filing required by 55 Pa. Code § 1181.73(a) had expired), and on two later occasions, Mr. Miller asked the department to send the proper final cost report forms. The forms did not arrive until mid-April; the facilities filed their reports on April 30 (Guilford) and May 13, 1982 (Michael Manor). As a result of final audits of both facilities, the department claimed that the facilities had been overpaid.*fn2 The department's Office of Hearings and Appeals affirmed the overpayment findings. This appeal followed.
Department of Public Welfare v. Forbes Health System, 492 Pa. 77, 422 A.2d 480 (1980), supplies two principles with respect to an administrative agency's interpretation of its own regulation. First, the interpretation is entitled to judicial deference unless it is clearly erroneous or inconsistent with the regulation interpreted. Second, the interpretation must be consistent with the underlying policy and objectives of
[ 88 Pa. Commw. Page 586]
the statute which authorized the regulation. Id. at 81, 422 A.2d at 482.
The regulation in question, 55 Pa. Code § 1181.73(b), provides that, "[w]hen a final cost report is not submitted" (emphasis added) the department must use the previous year's rates in its final audit. The word "not" could mean "never" or "not timely"; the regulation gives no guidance. The department's interpretation is not clearly erroneous ...