PETITION FOR REVIEW, (DEPARTMENT OF PUBLIC WELFARE).
Mark Stadler, Mansmann, Cindrich & Titus, Pittsburgh, for petitioner.
John Kane, Chief Counsel, Bruce G. Baron, Asst. Counsel, Harrisburg, for respondent.
Barry, McGinley and Smith, JJ.
[ 127 Pa. Commw. Page 128]
This is an appeal by the Mercy Hospital of Johnstown (Mercy) from the decision of the Office of Hearings and Appeals (OHA) denying Mercy's appeal and determining that Mercy's allowable cost basis in the building must be limited to Central Transportation, Inc.'s (CT) basis therein at the time of sale.
CT was the owner of a building (Building) in Johnstown, Pennsylvania, which it leased to the Cambria County Nursing Care Center (County Nursing) from March 6, 1975, until the end of 1984. Mercy acquired the Building to operate its own nursing facility on or about November 28, 1984. Mercy operates a seventy-five bed nursing home and is a provider of services to eligible recipients under the Pennsylvania Medical Assistance Program (MA Program) administered by the DPW. County Nursing never claimed or received reimbursement under the MA Program for interest and depreciation expenses associated with CT's building although it did claim reimbursement with respect to lease payments made to CT.*fn1
[ 127 Pa. Commw. Page 129]
Pursuant to Mercy's purchase Cambria County ceased operations on December 31, 1984, and Mercy commenced operating the facility.*fn2
By notice dated July 18, 1986, DPW advised Mercy of its new interim per diem reimbursement rates established for the nursing home. The rates contained no allowance for interest and depreciation expenses associated with the Building. DPW took the position that Mercy's interim interest and depreciation reimbursement could not be determined until documentation was provided concerning CT's basis in the Building on the date Mercy purchased it. The Department's authority for this position is 55 Pa.Code Section 1181.65(h).*fn3 Mercy appealed and alleges that DPW erroneously determined the cost basis of CT in the Building
[ 127 Pa. Commw. Page 130]
as the limit of Mercy's allowable depreciation. Mercy argues that: 1) DPW's interpretation of 55 Pa.Code Sections 1181.65(h), 1181.259(m) and 1181.260 is erroneous and inconsistent; and 2) DPW's interpretation of the regulations is inconsistent with the legislative and regulatory history underlying the same.
Section 2314 of the Deficit Reduction Act,*fn4 amended a number of sections of the Social Security Act,*fn5 and required DPW to adopt a method of reimbursement that satisfied the U.S. Department of Health and Human Services' reasonable concern that DPW would not pay more as a result of a sale than would be paid under the method used by the MA Program. The ...