Appeals from the Order of the Department of Public Welfare in the cases of Appeal of: Audit Appeal of Carbon County Home for the Aged (FYE 12/31/79), File No. 23-82-97, dated March 20, 1984.
Steven E. Bernstein, with him; Jeffrey B. Schwartz, Berriman & Schwartz, for petitioners, Westmoreland Manor and Carbon County Home for the Aged.
Susan M. Grant, with here, Lawrence J. Brenner, Solicitor, and Dennis G. Charles, for petitioner, County of Lehigh (Cedarbrook).
Bruce Baron, with him, Jason W. Manne, Assistant Counsel, for respondent.
Judges MacPhail, Barry and Palladino, sitting as a panel of three. Opinion by Judge MacPhail.
[ 91 Pa. Commw. Page 157]
In these consolidated appeals, Petitioners*fn1 challenge an order of the Secretary of the Department of Public Welfare (Secretary) which upheld the determination of the Office of the Auditor General (Auditor General) of the final audited rates of reimbursement to which Petitioners were entitled for fiscal years ending 1978 and 1979. We affirm.
Petitioners are county nursing homes which provide skilled nursing and intermediate care services to Medicaid patients pursuant to the Pennsylvania Medical Assistance Program (Program). During a fiscal year, county homes receive interim payments to provide for required Program services. These interim payments provide the facilities with a steady cash flow for the fiscal year. At the end of the fiscal year, the accounts are audited by the Auditor General and an appropriate adjustment is then made for over or under payments based upon reimbursement rates determined by the Department of Public Welfare (DPW), the agency authorized to administer the Program. For the fiscal years in question, DPW applied a statewide per diem ceiling of $42,000 to Petitioners' operating costs in determining the amount of reimbursement to which they were entitled. This resulted in a determination that Petitioners had been overpaid. Petitioners contend that their reimbursement should have been determined on the basis of the interim rates that had been established for each facility prior to July 1, 1978.
DPW adopted a "Manual for Allowable Cost Reimbursement for Skilled Nursing and Intermediate Care Facilities" (Manual), published at 5 Pa. B. 2928-34 (1975). The Manual was revised to conform with
[ 91 Pa. Commw. Page 158]
DPW's plan to implement cost-related reimbursement for private and public skilled nursing and intermediate care facilities on July 1, 1976, published at 6 Pa. B. 1497-1503 (1976).*fn2 Relevant portions of the revised Manual read:
§ 9424.712 Payment to Private Nursing Facilities
The cost-related reimbursement system is based on the following factors: (1) recognized allowable audited direct or indirect patient care costs based on certain cost principles and standards (2) interim facility per diem rate ceilings within a maximum per diem rate ceiling (3) a statewide average participation allowance for proprietary and non-profit facilities within established ceilings (4) an annual Financial and Statistical Report based on a facility's fiscal year subject to audit to determine allowable costs in accordance with the [Manual] . . .
An interim per diem private facility rate, based on allowable costs will be established . . . within group per diem ceilings.
§ 9424.713 Payment to Public Nursing Facilities
[ 91 Pa. Commw. Page 159]
A county home will be reimbursed the applicable Federal share of the Medical Assistance per diem rate . . . and any State share . . . of allowable costs defined and allocated in accordance with the provisions of the [Manual]. The ceilings in the Manual are not applicable to county Page 159} facilities until full costs are reimbursed through Federal and State funds. (Emphasis added.)
The provisions for paying full costs to state and county public operated facilities and imposing ceilings upon rates paid to most private facilities were found to be in violation of federal regulations requiring one cost finding method to be used by all providers. Federal regulations allowed variances only by the type of facility i.e., intermediate or skilled care, and not by type of ownership. Because of the distinction between private facilities and county facilities, the federal government would not approve the Program. DPW subsequently revised the Manual, effective October 1, 1978, in order to bring the Program into compliance with federal regulations. 8 Pa. B. 2826-2838 (1978).*fn3 These revisions provided in part that county facilities would now be subject to a ceiling based on the statewide weighted average per diem cost of such facilities. The new regulations also specified the following:
[ 91 Pa. Commw. Page 160]
Interim payments to County Homes will be established by the Department based on the reported net operating costs subject to the statewide weighted average per diem net operating cost ceiling plus depreciation and interest and special supportive services allowances. The interim payments will be subject to annual payment adjustment based on audited certified costs, and within the net operating ceiling plus special allowances. In the application of the ceilings to individual facilities, in no case will the per diem payment to a ...