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11/05/97 SIEMON'S LAKEVIEW MANOR ESTATE v.

November 5, 1997

SIEMON'S LAKEVIEW MANOR ESTATE, PETITIONER
v.
DEPARTMENT OF PUBLIC WELFARE, RESPONDENT



Appealed From No. 23-95-082. State Agency, Department of Public Welfare.

Before: Honorable Doris A. Smith, Judge, Honorable Dan Pellegrini, Judge, Honorable Emil E. Narick, Senior Judge. Opinion BY Senior Judge Narick.

The opinion of the court was delivered by: Narick

OPINION BY SENIOR JUDGE NARICK

FILED: November 5, 1997

The issues before us for review are the following: (1) whether the Secretary of the Department of Public Welfare (DPW) has the power to reverse factual findings of the Director of the Office of Hearings and Appeals (OHA) in a provider appeal; and (2) if so, whether the Secretary improperly disallowed horse and buggy costs, interest costs and salary costs.

Siemon's Lakeview Manor Estate (Siemon's) appeals from an order of the Secretary of DPW that denied reimbursement of certain costs associated with nursing care services under Pennsylvania's Medical Assistance (MA) Program, Section 443.1 of the Public Welfare Code. *fn1 We affirm.

Siemon's is a family owned and operated nursing facility in Somerset County that provides nursing care to MA recipients. *fn2 DPW administers the MA program, which provides reimbursement of costs for nursing care services provided to MA recipients. During the fiscal year ending June 30, 1990, DPW still used a retrospective method of cost reimbursement that required Siemon's to submit a cost report to DPW. *fn3 After Siemon's submitted its cost report, DPW audited the report and adjusted certain costs. The adjusted costs included: (1) the disallowance of $10,733 of costs related to the maintenance of a horse and buggy; (2) the disallowance of $2,962 in interest payments on a loan; and (3) the reduction of a portion of the salaries paid to the three owners/employees of Siemon's. *fn4 Siemon's appealed to OHA.

A hearing was held before an attorney examiner, but the appeal was then transferred to a different attorney examiner who recommended that Siemon's appeal be sustained. The Director of OHA (Director) adopted the recommendation of the attorney examiner in its entirety and sustained Siemon's appeal. DPW then requested reconsideration by the Secretary. The Secretary granted the request, set aside the Director's order and denied Siemon's appeal.

On appeal, Siemon's contended that the Secretary failed to adequately explain her reasoning, committed errors of law in applying the burden of proof and that her findings were not supported by substantial evidence. In response, we relinquished jurisdiction and remanded the case to the Secretary so that she could provide an opinion explaining her decision. The Secretary issued her opinion, which stated that the Secretary is the ultimate finder of fact under G.S. v. Department of Public Welfare, 104 Pa. Commw. 84, 521 A.2d 87 (Pa. Commw. 1987). The Secretary's opinion further explained that she upheld the disallowance of the horse and buggy costs because she found the infrequent use as shown in the calendar logs more credible than the testimony of Siemon family members. As to the interest costs and salary costs, the Secretary held that Siemon's failed to meet its burden of proving that these expenses were allowable. Siemon's appealed.

On appeal, Siemon's contends that the Secretary of DPW does not have the authority to reverse the Director of OHA on factual issues. Siemon's asserts that the attorney examiner is in the best position to Judge the credibility and demeanor of witnesses and to review the evidence. However, Siemon's admits that under the General Rules of Administrative Practice and Procedure, 1 Pa. Code "35.1-35.251, the attorney examiner is designated by the agency head as a presiding officer with the limited authority to issue proposals and make recommendations. As a result, Siemon's concedes that the Director is the finder of fact in MA provider appeals. Although the Director is not in a position to see the witnesses and assess credibility, Siemon's argues that the Director still has more time to review the record and the examiner's recommendations than the Secretary, who is a cabinet-level official with busy policy-making duties. Thus, Siemon's requests that we limit the Secretary's fact-finding authority. We decline the request and today answer the question we left open in Northwestern Institute of Psychiatry v. Department of Public Welfare, 99 Pa. Commw. 213, 513 A.2d 495 (Pa. Commw. 1986). *fn5

In Northwestern, an en banc panel of this court held that the Director, not the attorney examiner, is the finder of fact in a provider appeal. In support of our holding, we reviewed the General Rules of Administrative Practice and Procedure, 1 Pa. Code "35.1-35.251, which govern the practice and procedures of an administrative agency where the agency has not adopted its own regulations on the subject. Department of Public Welfare v. Overlook Medical Clinic, Inc., 518 Pa. 507, 544 A.2d 935 (1988). We presumed that the Director is a duly authorized agent of the Secretary under Section 206 of the Administrative Code of 1929, Act of April 9, 1929, P.L. 177, as amended, 71 P.S. '66. Section 206 provides in pertinent part:

Each administrative department shall have as its head an officer who shall, either personally, by deputy, or by duly authorized agent or employe of the department, and subject at all times to the provisions of this act, exercise the powers and perform the duties by law vested in and imposed upon the department.

The following officers shall be the heads of the administrative departments following ...


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