Appeal from the Order of the Department of Public Welfare in the case of Appeal Of: Citizen Care, Inc., d/b/a Robinson Developmental Center, Docket No. 23-85-133, dated February 20, 1987.
Susan M. Mussman, with her, Robert B. Sommer, Kirkpatrick & Lockhart, for petitioner.
No appearance for respondent.
President Judge Crumlish, Jr., Judge Colins, and Senior Judge Blatt, sitting as a panel of three. Opinion by President Judge Crumlish, Jr.
[ 118 Pa. Commw. Page 398]
A Department of Welfare (DPW) attorney examiner issued a recommended opinion which affirmed DPW's withholding of $340,000.00 from a monthly payment due Citizen Care, Inc., d/b/a Robinson Developmental Center (RDC). The Office of Hearings and Appeals (OHA) adopted the recommendation in its entirety. RDC appeals; we vacate and remand.
RDC is a duly licensed intermediate care facility for the mentally retarded which is dependent upon state and federal revenues to meet operating costs. Prior to July 1, 1980, RDC operated pursuant to a DPW "blueback" contract which permitted it to receive advance reimbursement for operating expenses (utilities, rent, payroll, etc.) and acquire needed physical assets (vehicles, beds, etc.). This arrangement enabled RDC to have cash on hand to meet obligations as they arose.
In an effort to maximize federal subsidization, DPW began negotiations with RDC in 1978 to convert it from a contractual provider to an independent provider pursuant to the federal Medical Assistance (MA) Program.
[ 118 Pa. Commw. Page 399]
RDC resisted this conversion because it would necessitate changing to a system of retroactive reimbursement creating serious cash flow problems.
RDC attempted to obtain a revolving credit account from private commercial banks but was unsuccessful due to its lack of collateral, despite the intercession of former DPW Secretary Helen O'Bannon. Negotiations remained unresolved as of March 1980, when DPW formally advised RDC that the existing "blueback" contract would not be renewed. RDC responded that it would have to close its doors if no alternative could be found.
To avoid this result, DPW proposed Amendment No. 1 to the "blueback" contract under which it agreed to raise the ceiling on payments by granting a one-time increase of $340,000.00 to allow for the establishment of a funded depreciation account. By borrowing against this account, RDC would be able to meet recurring operating expenses and assure the availability of funds for the acquisition of capital assets. In return, RDC agreed to continue to provide service, now as a participant in the MA program, and to make semiannual payments to DPW based on depreciation expenses.
Amendment No. 1 became effective July 1, 1980, when the funded depreciation account was created. Although RDC produced some evidence of its attempts to make the payments required under the Amendment,*fn1 in 1985 DPW unilaterally terminated the account and thus withheld $340,000.00 from funds otherwise payable to RDC.
The attorney examiner found that RDC had not complied with the repayment provisions and that DPW lacked the authority to make a grant or perpetual endowment of ...