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HAHNEMANN UNIVERSITY v. COMMONWEALTH PENNSYLVANIA (07/25/89)

filed: July 25, 1989.

HAHNEMANN UNIVERSITY, PETITIONER,
v.
COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF PUBLIC WELFARE, RESPONDENT. FRANKFORD HOSPITAL, PETITIONER, V. COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF PUBLIC WELFARE, RESPONDENT



PETITION FOR REVIEW.

COUNSEL

Jennifer A. Stiller (Anne E. Walters, of counsel), Montgomery, McCracken, Walker & Rhoads, for petitioners.

John A. Kane, Chief Counsel, with him, Bruce G. Baron, Senior Asst. Counsel, for respondent.

Barry and McGinley, JJ., and Kalish, Senior Judge.

Author: Kalish

[ 128 Pa. Commw. Page 607]

Hahnemann University and Frankford Hospital (petitioners) petition for review of adjudications and orders of the Department of Public Welfare (DPW). The petitioners challenge the rate of reimbursement for services provided to medical assistance beneficiaries during the year July 1, 1984, and ending June 30, 1985. We affirm.

Petitioners appealed from the decision of DPW concerning the application of prospective payment rates. Following a hearing, the hearing officer affirmed DPW's decision. Petitioners now appeal to this court, contending that DPW's prospective payment methodology is improper.

Section 1163.52 of the Medical Assistance Manual, 55 Pa.Code § 1163.52, deals with prospective payment methodology. DPW bases payment for in-patient hospital services on the classification of in-patient discharge, the Diagnosis Related Group (DRG), which is a price-fixing system based on concept scores of an efficient and economically operated hospital. The scores include factors such as teaching status, medical assistance volume, environmental characteristics, and hospital costs.

Petitioners contend that this is improper since pursuant to section 443.1 of the Public Welfare Code, Act of June 13, 1967, P.L. 31, as amended, added by Act of July 31, 1968, P.L. 904, as amended, 62 P.S. § 443.1, DPW is required to pay the reasonable cost of in-patient services, and that DPW's method of calculating reimbursement from cost-based to prospective payment is a fundamental restructuring which requires a statutory change.

While section 443.1 of the Public Welfare Code provides for the payment of reasonable costs of in-patient care, it also provides that such reasonable costs are to be as, "specified in the Department's regulation."

[ 128 Pa. Commw. Page 608]

In Citizens General Hospital v. Department of Public Welfare, 125 Pa. Commonwealth Ct. 358, 558 A.2d 125 (1989), DPW promulgated the regulations pursuant to legislative rule-making power conferred upon it by sections 201 and 403 of the Public Welfare Code, 62 P.S. §§ 201 and 403. These sections empower DPW to promulgate regulations, and establish and enforce standards for eligibility and assistance. This is a grant of legislative policy-making power to the agency.

Thus, there is nothing in the record to indicate that it was an exercise of whim rather than an exercise of judgment. In Centennial Spring Health Care Center v. Department of Public Welfare, 115 Pa. Commonwealth Ct. 450, 541 A.2d 806 (1988), this court held that duly promulgated state regulations for administering the medicaid program are presumptively valid under federal and state law, and the Commonwealth Court will not disturb DPW's exercise ...


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