Appeals from the Orders of the Department of Public Welfare, in cases of In Re: Appeal of Ohesson Manor, File No. 23-83-131; In Re: Appeal of Susquehanna Lutheran Village, File No. 23-83-136; In Re: Appeal of Locust Grove Retirement Village, File No. 23-83-125; In Re: Appeal of Buffalo Valley Lutheran Village, File No. 23-83-124 and In Re: Appeal of Frey Village, File No. 23-83-116.
J. Jay Cooper, Goldberg, Evans & Katzman, P.C., for petitioners.
William D. Lenahan, Assistant Counsel, with him, Bruce Baron and Jeffrey Gonick, for respondent.
Judges MacPhail and Colins, and Senior Judge Barbieri, sitting as a panel of three. Opinion by Judge MacPhail.
[ 100 Pa. Commw. Page 281]
Tressler Lutheran Service Associates, Inc. (Petitioner) has appealed from orders of the Department of Public Welfare (DPW) which denied in part Petitioner's appeal from DPW's audit adjustments disallowing reimbursement regarding its Office of Public Information and DPW's offset of investment income earned in its Cash Management Office against interest on capital indebtedness borne by its various nursing facilities. We will affirm.
Petitioner appealed from DPW's Statement of Allowable Cost for each of its facilities for the fiscal year ending December 31, 1981.*fn1 Petitioner alleged, inter alia :
The home office expenses of the President's Office and Public Information can be shown to be allowable expenses to the facility.
The interest income received by the home office relates to the effectiveness and prudence of their business decisions on the entire Agency's operations. This interest income should be used to reduce the home office expense, which will benefit all areas of the Agency, rather than only those portions of operation that have capital indebtedness.
Hearings concerning Petitioner's Buffalo Valley Lutheran Village and Locust Grove Retirement Village were held on August 29, 1983 and September 22, 1983 respectively. The parties agreed that the records
[ 100 Pa. Commw. Page 282]
developed in these two appeals would be representative of the issues involved for all five appeals.
The hearing examiner resolved the aforementioned issues against Petitioner.*fn2 The Office of Hearings and Appeals adopted the hearing examiner's decisions in their entirety, and the instant appeals followed.*fn3
DPW's Medical Assistance Program Manual for Allowable Cost Reimbursement for Skilled Nursing and Intermediate Care Facilities (Manual), 8 Pa. B. 2833 (1978) provided, at that time, that "[a]llowable costs are those costs necessary and reasonable for the proper care of Medical Assistance patients."
The hearing examiner found the following facts relative to the Office of Public Information:
The Department disallowed costs associated with the Office of Public Information.
The Office of Public Information distributes three newsletters:
(a) TLSA Now -- published four times a year and deals with TLSA [Petitioner] as a whole and provides information about what TLSA is doing;
(b) TLSA Notes -- published two times a year and is geared toward pastors; and
(c) Newsletters -- published monthly for each of TLSA's nine facilities and deals with events within the individual facilities.
In the "Discussion" portion of her decision, the hearing examiner stated:
The provider explained that the primary function of the Office of Public Information is
[ 100 Pa. Commw. Page 283]
the publication of various newsletters. . . . The provider maintains that these newsletters provide information to residents and their families regarding what is happening at the facility and provide a psychological boost to the residents.
Although the patients in TLSA facilities may occasionally derive some psychological benefit from the monthly newsletter for the individual facilities, the provider has failed to convince the Hearing Officer that the newsletters are in any way related to patient care.
Petitioner submits that the newsletters are patient related, pointing out that on cross-examination, DPW's witness admitted that the newsletters were in fact related to patient care.
Our review of the record reveals that although DPW's witness conceded that the publications which dealt with the specific facilities and were made available to the patients and their families were related to patient care, that same witness was of the opinion that the costs associated with the Office of Public Information were not reimbursable because they constituted advertising:
Q: What do you mean by 'advertising'? Disallowed cost related to Public Information. Doesn't all Public Information in a sense sort of result in advertising? Isn't advertising the dissemination of information?
A: Yes, in a broad sense, advertising is a dissemination of information, but also it has connotations of publicizing the services in order to get patients or to let people come and ...