Appeals from the Orders of the Department of Public Welfare, Office of Hearings and Appeals, in the case of Appeal Of: Denver Nursing Home, Docket Nos. 23-80-173 and 23-80-174.
Gilbert B. Abramson, with him, Michael B. Tolcott, Abramson, Cogan, Kogan, Freedman & Thall, P.C., for petitioner.
Bruce G. Baron, Assistant Counsel, for respondent.
Judges Colins and Smith, and Senior Judge Kalish, sitting as a panel of three. Opinion by Judge Smith. Judge MacPhail did not participate in the decision in this case. Dissenting Opinion by Judge Colins.
[ 123 Pa. Commw. Page 132]
Petitioner Denver Nursing Home appeals from a July 24, 1987 order of the Director of the Office of Hearings and Appeals, Department of Public Welfare (DPW), which denied Petitioner's appeal of DPW's audit findings for fiscal years ending September 30, 1977 and September 30, 1978. Petitioner also appeals from the September 29, 1987 order of the Secretary of DPW which denied reconsideration of the July 24, 1987 order. Both appeals have been consolidated for disposition by this Court.
Questions involved for review are whether DPW abused its discretion or committed an error of law in disregarding evidence of Petitioner's reimbursable expenses, destruction of invoices and efforts to reconstruct documentation for the years audited, as well as expert testimony that evidence presented was sufficient to support reimbursement.
After hearings*fn1 held on Petitioner's appeal from DPW audits conducted for the fiscal years ending September
[ 123 Pa. Commw. Page 13330]
, 1977 and September 30, 1978, the hearing officer concluded that Petitioner failed to demonstrate entitlement to its claim for reimbursement of costs in the amounts of $86,823.74 for 1977 and $38,430.79 for 1978.*fn2 By order dated July 24, 1987, the Director of the Office of Hearings and Appeals adopted the recommendation of the hearing officer who found that at the September 28, 1982 hearing, Petitioner failed to have admitted into the evidence exhibits which were marked as A-8 through A-39 and that the exhibits marked during testimony of Petitioner's expert witness on December 16, 1982 were likewise never admitted into the evidence. The exhibits formed the basis of Petitioner's case. The hearing officer limited the issues at hearing to a disallowance of depreciation and disallowances of certain costs due to lack of documentation. Petitioner only challenges in this appeal the disallowances of certain costs due to lack of documentation.
Petitioner presented evidence to establish that its invoices for the years 1977 and 1978 were destroyed by water from a sewer backup in early 1979, and when employees discovered the soaked boxes in which invoices were contained, the boxes were thrown out without
[ 123 Pa. Commw. Page 134]
checking the contents. N.T., pp. 20-23, Hearing of July 9, 1982. Cancelled checks were maintained separately and were preserved. Petitioner contends that it either provided cancelled checks or copies of vendor invoices which were presented as evidence at hearing to substantiate its claims for reimbursement of various items of expenditure including food products, utility service, nursing supplies and many others. Petitioner also presented other available evidence of expenditures including letters from vendors substantiating that payments were made by them for services during the subject years. Petitioner's expert witness, a certified public accountant previously employed as Director of the Bureau of Audits for DPW, testified that it was a practice of his bureau to accept cancelled checks as documentation of an expenditure to support reimbursement, that invoices were not always required, and that due to the destruction of Petitioner's invoices, the evidence ...