PETITION FOR REVIEW (DEPARTMENT OF PUBLIC WELFARE)
Jonathan Vipond, III, Esq., BASKIN, FLAHERTY, ELLIOTT, MANNINO & BEREN, P. C., Harrisburg, Pennsylvania, FOR PETITIONER.
John Kane, CHIEF COUNSEL, Howard Ulan, ASST. COUNSEL, Harrisburg, Pennsylvania, FOR RESPONDENT.
Before: Honorable David W. Craig, Judge, Honorable Francis A. Barry, Judge, Honorable Jacob Kalish, Senior Judge. Senior Judge Jacob Kalish concurs in the result only.
Opinion BY JUDGE DAVID W. CRAIG
The Lackawanna-Susquehanna-Wayne Mental Health and Mental Retardation Program (Program) appeals an order of the Director of the Office of Hearings and Appeals of the Department of Public Welfare (DPW) holding that (1) the requirement that a minimum occupancy rate of 85 percent be used to calculate reimbursement units for fee-for-service (per diem) funding of community Residential Rehabilitation (CRR) programs applies to the program; (2) money donated to the county in response to the program administrator's letter of solicitation, and given to the Program by the county, is income to the Program; and (3) reimbursement for expenditures related to the administrator's enrollment in a doctoral program is not authorized.
The Program is a provider of mental health and mental retardation services in the three-county area. In 1984, DPW's Office of Operations Review conducted an audit of the Program for a four-year period ending on June 30, 1984.
Three of the findings contained in the Operational Audit Report are the subject of the Program's appeal. Those findings are: (1) $18,726 (reduced by stipulation to $10,499) in CRR expenditures for the 1981-82 fiscal year are not eligible for DPW financial participation; (2) the Program failed to report donations and gifts totaling $30,152 as income; and (3) a $19,327 reimbursement, received by the Program from DPW and the participating counties for the administrator's post-graduate education, is not authorized by DPW regulations or Program policies. The effect of implementing these findings is that a greater amount of local county funds will be required by the Program to provide services.
On November 20, 1986, an Attorney Examiner conducted a formal hearing on the Program's appeal, and recommends a decision holding that DPW properly disallowed $10,499 of reimbursement based on a published 85 percent occupancy rate factor, but that DPW erred in disallowing both the $30,152 in donations, which DPW characterized as contributions to the Program, and the $19,327 in expenditures related to the administrator's enrollment in a doctoral program.
The Program's appeal to DPW's Office of Hearings and Appeals followed. On July 14, 1988, the director of the Office issued an order adopting the examiner's recommendation as to the reimbursement, but rejecting the donation and education recommendations, thereby affirming all three disallowances in the audit findings. The Program now appeals the same three findings to this court.
The first issue is whether DPW properly disallowed $10,499 in reimbursements as a result of adhering to an 85 percent minimum occupancy rate, published in a Mental Health Bulletin, to calculate reimbursement unit amounts for CRR programs. If reimbursement unit amounts are calculated by assuming that at least 85 percent of service units are occupied, the unit amounts are necessarily lower than they would be if a lower occupancy rate were used as the cost devisor. The Program had used an actual occupancy rate (81% in this case) to calculate per diem reimbursement unit amounts at its CRR facility, thus reaching a unit amount higher than the amount which would be produced by an 85% rate.
Section 201(2) of the Mental Health and Retardation Act of 1966*fn1 authorizes DPW "[t]o make . . . and enforce all regulations necessary and appropriate to the proper accomplishment of the mental health and mental retardation duties and functions imposed by this act." Under the legal authority of section 201(2), the County Mental Health and Mental Retardation (MH/MR) Fiscal Manual provides that "[r]ates or fees per unit of service ...