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MILLVILLE HEALTH CENTER v. COMMONWEALTH PENNSYLVANIA (03/01/88)

decided: March 1, 1988.

MILLVILLE HEALTH CENTER, INC., PETITIONER
v.
COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF PUBLIC WELFARE, RESPONDENT



Appeal from the Order of the Department of Public Welfare, in case of Appeal of: Millville Health Center, Inc., File Nos. 23-83-262B and 23-84-211.

COUNSEL

Charles O. Barto, Jr., Charles O. Barto, Jr. and Associates, for petitioner.

Diane J. Bartels, Assistant Counsel, for respondent.

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

Author: Macphail

[ 114 Pa. Commw. Page 170]

Millville Health Center, Inc. (Petitioner) appeals a final order of the Department of Public Welfare (DPW) entered following reconsideration of an order of the Office of Hearings and Appeals (Office) adopting an attorney examiner's recommendation to deny in part Petitioner's appeal of a DPW determination.

Petitioner, as a provider of skilled nursing and intermediate care services under the Pennsylvania Medical Assistance Program, is entitled to a 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. Depreciation on capital assets, which is the subject of this appeal, is an allowable cost for reimbursement. 55 Pa. Code § 1181.412.

Petitioner changed ownership in October of 1981 when its assets were purchased by a new group of owners. Subsequently, for fiscal years ending June 30, 1982 and June 30, 1983, the new owners filed cost reports containing newly-assigned useful lives for depreciable assets allegedly based on American Hospital Association (AHA) guidelines. After audit by DPW, the useful lives of the assets were changed back to those used by the prior owner. This adjustment resulted in longer lives than the AHA guidelines would have permitted,

[ 114 Pa. Commw. Page 171]

    and accordingly, a lower depreciation allowance per year.

After a formal hearing, a DPW attorney examiner recommended that Petitioner's appeal of its depreciation allowance be denied.*fn1 The examiner concluded that even though DPW based its decision to hold Petitioner to the prior owner's choice of useful lives on an unwritten departmental policy, Petitioner "failed in its burden of proof by failing to support its assertion that the useful lives claimed were in accordance with the AHA guidelines." Adjudication at 4, Reproduced Record (R.R.) at 102a. The Office of Hearings and Appeals adopted the examiner's recommendation on January 27, 1986, and by preliminary order entered February 26, 1986, Petitioner's request for reconsideration of this determination was granted. On March 20, 1986, a final order was entered which, in effect, reaffirmed the decision of the Office of Hearings and Appeals.*fn2 Petitioner's appeal of this order is now before us.

Petitioner argues on appeal that the examiner erred in concluding that it had failed in its burden of proving compliance with the AHA guidelines, when the examiner ...


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