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EYE & EAR HOSPITAL AND PRESBYTERIAN UNIVERSITY HOSPITAL v. COMMONWEALTH PENNSYLVANIA (09/08/86)

decided: September 8, 1986.

EYE & EAR HOSPITAL AND PRESBYTERIAN UNIVERSITY HOSPITAL, PETITIONERS
v.
COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF PUBLIC WELFARE, RESPONDENT



Appeal from the Order of the Department of Welfare, in case of Appeals of: David W. Groff, Eye & Ear Hospital, Case No. 02K0050, and Presbyterian University Hospital, Case No. 02K0068.

COUNSEL

William C. Shaffner, Mansmann, Cindrich & Huber, for petitioners.

Jeffrey P. Schmoyer, Assistant Counsel, for respondent.

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

Author: Barry

[ 100 Pa. Commw. Page 364]

This appeal results from an order of the Office of Hearings & Appeals, Department of Public Welfare (DPW), which adopted in its entirety the recommendation of a hearing officer that no error was committed by DPW in its denial of certain reimbursement payments sought by the petitioners, Eye & Ear Hospital and Presbyterian University Hospital.

The sought-after reimbursements stem from care provided by the two hospitals to thirty-four patients in their shared "Short Procedure Unit" (SPU). This was a new facility,*fn1 having commenced operation in June, 1984. In December, 1984 the hospitals, having provided medical services to certain Medicaid patients, submitted reimbursement requests for the services to DPW under the recently inaugurated Diagnosis Related

[ 100 Pa. Commw. Page 365]

Group (DRG) payment (reimbursement) system.*fn2 Reimbursement was sought for services rendered from June, 1984 through October, 1984. DPW, however, refused to review the claims submitted for services rendered from August 31 through October 16 on the grounds that the hospitals' SPU had not been approved by the Department of Health (DOH).

At a hearing convened after this refusal, the hospitals argued that DPW had led them to believe that, under the new reimbursement system, DOH approval was not necessary, and that it was thus unfair and unreasonable to deny reimbursement. The hearing officer concluded that "it [was] not perfectly clear" that the hospitals' confusion was the fault of DPW, and hence upheld the denial. That decision was, in turn, adopted by the Office of Hearings & Appeals. From that order the petitioners have prosecuted the present appeal.

We first seek to clarify the rather confusing course of events presently involved which, we note, are not seriously in dispute. In the early portion of 1984 the hospitals were in the midst of constructing their new SPU, and initiated efforts to obtain DOH approval, a recognized prerequisite for medical assistance (MA) reimbursements under the pre-DRG system.*fn3 N.T. at 19-20. While attending a speech on April 11, 1984,

[ 100 Pa. Commw. Page 366]

    however, a management employee of the hospitals allegedly heard Mr. Gerald F. Radke (Radke), Deputy Secretary of Medical Assistance, state that it was no longer necessary to have SPU's approved under the new system, and this apparently prompted the hospitals to discontinue their efforts to obtain DOH approval.

While DPW has at no time admitted that this statement was made, regulations promulgated during this same period seem to reflect the same regulatory position as that articulated in the alleged statement. These early pronouncements, the hospitals claim, also prompted them to discontinue their approval efforts. A proposed rule for the new DRG system, for example, published in the Pennsylvania Bulletin on February 18, 1984, provided as follows:

Since the Department is defining [SPU] services as inpatient hospital services under the DRG reimbursement system, payment for services in a [SPU] will be on the same basis as that of any other inpatient hospital services. Services provided to a [MA] recipient in a [SPU] will be treated as an inpatient admission for [MA] payment purposes.

[T]he Department finds that it is no longer necessary to separately identify [SPU's]. The participation requirements for [SPU's] appearing [in] the current regulations have . . ...


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