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COMMONWEALTH PENNSYLVANIA v. OVERLOOK MEDICAL CLINIC (07/27/88)

decided: July 27, 1988.

COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF PUBLIC WELFARE, APPELLANT,
v.
OVERLOOK MEDICAL CLINIC, INC., APPELLEE



Appeal from the Orders of the Commonwealth Court Dated March 10, 1986 and May 23, 1986 at No. 3228 C.D. 1984 Reversing the Order of the Department of Public Welfare Dated October 15, 1984, in File Nos. 23-83-381, 382 and 240; 23-84-32. 95 Pa. Commonwealth Ct. 536, Nix, C.j., and Larsen, Flaherty, McDermott, Zappala, Papadakos and Stout, JJ.

Author: Papadakos

[ 518 Pa. Page 509]

OPINION OF THE COURT

The issue which we must address in this case is whether the Commonwealth Court acted within the proper bounds of their authority to review decisions of administrative agencies when they ordered Appellant herein, the Department of Public Welfare (DPW), to grant an extension of time where that agency had concluded that its own rules and regulations prohibited an extension. For the reasons set forth below, we have determined that the decision of the Commonwealth Court, 95 Pa. Commw. 536, 505 A.2d 1368 (1986), must be affirmed.

The facts are as follows. Appellee, Overlook Medical Clinic, Inc., was a nursing home facility that participated as a provider in the Pennsylvania Medical Assistance Program. The nursing home was sold, effective April 11, 1983 (R. 2a, 29a). On May 3, 1983, Overlook requested an extension of time to file its final cost report, which, pursuant to 55 Pa. Code § 1181.73(a),*fn1 was then due on May 11, 1983 (R. 2a, 32a). When it requested an extension, Overlook was cognizant of the fact that previously extensions had been granted to two other facilities (R. 32a-33a). Overlook's request for an extension of time did not specify the amount of time it would need, but suggested that more than 45 days was necessary.

By letter dated May 11, 1983, Overlook's request for an extension of time to file its final cost report was denied by the Director of Reimbursement Methods, DPW (R. 4a). Overlook sent in a final cost report on June 9, 1983; i.e., 29 days late and 59 days after the date of sale (R. 42a). DPW deemed this final report late and "settled" Overlook's costs without regard to the final cost report under authority of 55

[ 518 Pa. Page 510]

Pa. Code § 1181.73(b)*fn2 (R. 16a, 23a, 29a). The settlement was issued on January 5, 1984, and indicated that Overlook had been overpaid some $10,146.60, which it was obligated to reimburse to DPW. Based on Overlook's letter of appeal to DPW dated February 1, 1984 (R. 5a-8a), Overlook apparently argued that if the data in its final report had been taken into account, it would have been entitled to a substantial final reimbursement, although no firm figure is set forth.

Overlook did not file a direct administrative appeal from the initial letter of denial of the extension (R. 43a).*fn3 However, Overlook did file a timely administrative appeal with respect to the settlement (R. 5a-8a), in which it naturally sought to challenge the detrimental effect of the denial of the extension.

A hearing was held on Overlook's appeal on June 21, 1984, before a DPW hearing officer (R. 18a-52a). Upon the recommendations of the hearing officer, DPW's Office of Hearings and Appeals determined that Overlook's final cost report was untimely and that the settlement correctly applied 55 Pa. Code § 1181.73. The hearing officer's recommendation adopted by the Office of Hearings and Appeals specifically stated that DPW regulations do not make any provision for extensions for filing final cost reports (R. 12a, Finding of Fact No. 3), even though two such extensions had been granted to others in the past. It was concluded that such past errors did not estop DPW from literally applying 55 Pa. Code § 1181.73 in this case. DPW's Office

[ 518 Pa. Page 511]

    of Hearings and Appeals denied Overlook's appeal on October 15, 1984. On May 9, 1985, Overlook's request for reconsideration was denied by DPW.

On appeal, the Commonwealth Court reversed DPW's order. That Court reasoned, that DPW had "the inherent authority" to grant extensions where good cause is shown; that because DPW has regulations allowing the grant of extensions for filing annual cost reports,*fn4 it possessed the ability and authority to do so for final cost reports; that this conclusion was supported by the fact that DPW had granted such extensions in the past; and that the DPW order denying the extension was, therefore, arbitrary and capricious, particularly because Overlook had shown ample reason for its need for the extension.

We granted DPW's petition for allowance of appeal because we were concerned over the contention that the Commonwealth Court improperly attempted to exercise here a power (which they do not possess) to create a rule or regulation for an administrative agency. Indeed, there is language in the Commonwealth Court's opinion from which some might draw the unfortunate and erroneous conclusion that the Commonwealth Court has such power. DPW also argues that the consequence of the Commonwealth Court opinion in this case is that an administrative agency may be compelled to grant relief merely because it has the inherent power to do so; and that the Commonwealth Court, in any event, does not have the power to usurp ...


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