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SPANG CREST HOME v. COMMONWEALTH PENNSYLVANIA (02/22/88)

decided: February 22, 1988.

SPANG CREST HOME, PETITIONER
v.
COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF PUBLIC WELFARE, RESPONDENT



Appeal from the Order of the Department of Public Welfare in the case of Appeal of: Spang Crest, File Nos. 23-85-074 and 23-85-095, dated June 4, 1986.

COUNSEL

James R. Adams, Barley, Snyder, Cooper & Barber, for petitioner.

William D. Lenahan, Assistant Counsel, for respondent.

Judges MacPhail and Palladino, and Senior Judge Kalish, sitting as a panel of three. Opinion by Judge MacPhail.

Author: Macphail

[ 113 Pa. Commw. Page 564]

Spang Crest Home (Petitioner) appeals a final order of the Department of Public Welfare (DPW) which reversed an order of the Office of Hearings and Appeals (OHA) adopting a hearing examiner's recommendation to sustain Petitioner's appeal of a decision of DPW's Bureau of Reimbursement Methods.

Petitioner, a private long-term care facility owned and operated by Lutheran Social Services -- Eastern Region (LSS), is a participant in the Pennsylvania Medical Assistance Program. As such, Petitioner is entitled to cost-related reimbursement for care provided to qualified medical assistance patients. See Section 443.1 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, 62 P.S. § 443.1. DPW, which administers the Program in accordance with federal law,*fn1 has promulgated regulations governing reimbursements in the Manual for Allowable Cost Reimbursement for Skilled Nursing and Intermediate Care

[ 113 Pa. Commw. Page 565]

Facilities (Manual). The regulation at issue in the case sub judice, Section IV-D-10-e of the Manual, first published at 5 Pa. B. 2933 (1975), provides: "Interest expense reduced by investment income, except when the investment income is derived from gifts or grants which are restricted by the donor and which are accounted for separately from other funds, will be recognized."*fn2

In the case before us, Petitioner challenges DPW's adjustment of its allowable cost for interest on capital indebtedness for the fiscal year ending December 31, 1982, and the fiscal periods January 1, 1983 to June 30, 1983 and July 1, 1983 to December 31, 1983. Following an audit of Petitioner's cost reports for these periods, DPW offset Petitioner's claimed interest expense by certain trust income payable to Petitioner, concluding that this was "investment income."

The trust income at issue arises from a trust created by Amelia Spang Strickler (Strickler Trust) by which Ms. Strickler donated her home to what is now the Southeast Pennsylvania Synod of the Lutheran Church of America*fn3 to establish Petitioner as a nursing home. It provided that Petitioner "is to be maintained, in so far as may be, from the income from the fund of Fifty Thousand ($50,000.00) Dollars, which I am giving to The Evangelical Lutheran Ministerium of Pennsylvania and the Adjacent States, in trust, toward the maintenance of said home." Reproduced Record (R.R.) at 84a; Notes of Testimony (N.T.) from June 17, 1985 at 16-18, R.R. at 53-55a.

LSS's controller testified that the home office receives a check from interest generated by the Strickler Trust from "the Fidelity Bank." That money is then

[ 113 Pa. Commw. Page 566]

    commingled with other funds LSS receives from a variety of sources and is used to operate and maintain the various facilities under the ownership and control of LSS. The witness further stated that the interest check LSS receives from the bank ...


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