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NHS Human Services of PA v. Dep't of Public Welfare

December 8, 2009


The opinion of the court was delivered by: Senior Judge Friedman

Submitted: October 23, 2009



NHS Human Services of PA (NHS) petitions for review of the February 3, 2009, order of the Department of Public Welfare (Department), Bureau of Hearings and Appeals (BHA), adopting the decision of an administrative law judge (ALJ) and dismissing NHS' appeal from a July 11, 2008, email from the Department's Office of Children, Youth and Families (OCYF) on the ground that the email did not constitute a final agency action. We affirm.

The Department and OCYF supervise and provide funding to county children and youth agencies, which offer services directly or through contracts with private agencies. NHS is a private agency that provides out-of-home residential services to court-adjudicated delinquent and dependent children pursuant to such contracts. On March 6, 2008, OCYF issued Bulletin #3170-08-01, which became effective July 1, 2008, and requires county agencies to include detailed expenditure documentation in all residential service contracts. On July 11, 2008, the director of OCYF's Bureau of Program Support sent an email message to NHS concerning contract documentation that NHS had submitted to OCYF. The text of the email is as follows:

I wanted to make you aware that NHS's Contract Documentation related to [OCYF] Bulletin 3170-08-01 are [sic] incomplete and unacceptable with the information that your organization has submitted to the State and to the counties. Neither the State nor the Federal Government will participate in the reimbursement of NHS indirect costs unless will [sic] receive a breakdown of said costs including the indirect staff roster and allocation plan. A single line item for indirect cost[s] is not sufficient documentation to insure compliance with State and Federal regulations.

Please rectify these issues and resubmit immediately. If you have any questions, please call or email my office. My staff can be emailed at [ ]. (R.R. at 2.) The message also provided a telephone number.

On July 21, 2008, NHS filed an appeal with the Department Secretary pursuant to 1 Pa. Code §35.20,*fn1 arguing that the email from OCYF constituted a decision that was arbitrary, capricious and unlawful. NHS complained that the email failed to explain why the contract documentation "dutifully submitted by NHS in accordance with OCYF Bulletin #3170-08-01" was incomplete and failed to cite state and federal regulations to support its decision. (R.R. at 1.) Further, NHS asserted that OCYF Bulletin #3170-08-01 constitutes an unpublished regulation and contains terms that are unreasonable and beyond the scope of OCYF's statutory authority. NHS requested the Department to rescind the bulletin or, alternatively, determine that the information submitted by NHS is legally sufficient. On July 31, 2008, the Department filed a motion to dismiss the appeal.

In a decision dated January 26, 2009, the ALJ observed that the email message warned NHS that it would not be reimbursed unless it resubmitted documentation with a breakdown of indirect costs. The ALJ determined that the request to NHS to resubmit the documentation unambiguously indicated that the Department had not taken final action affecting NHS' rights and obligations. Relying on Guthrie v. Borough of Wilkinsburg, 505 Pa. 249, 478 A.2d 1279 (1984), Benson Lincoln Mercury, Inc. v. Department of Transportation, 602 A.2d 496 (Pa. Cmwlth. 1992), and Fiore v. Department of Environmental Resources, 510 A.2d 880 (Pa. Cmwlth. 1986), the ALJ concluded that the email message was merely a warning, rather than a final agency action from which an appeal can be taken. Accordingly, the ALJ issued a recommendation that the appeal be dismissed. (R.R. at 4-6.) By order dated February 3, 2009, the BHA adopted the decision of the ALJ in its entirety and dismissed NHS' appeal.

Before this court, NHS first argues that the Department erred in determining that the email from OCYF did not constitute an adjudication appealable under the Administrative Agency Law (Law), 2 Pa. C.S. §§ 501-508, 701-704.*fn2 We disagree.

An adjudication is defined as Any final order, decree, decision, determination or ruling by an agency affecting personal or property rights, privileges, immunities, duties, liabilities, or obligations of any or all of the parties to the proceeding in which the adjudication is made.

2 Pa. C.S. §101. A letter can constitute an adjudication, requiring notice and a hearing, if a two-prong test is met: 1) the letter must be an agency's final order, decree, decision, determination or ruling; and 2) it must impact on a party's personal or property rights, privileges, immunities, duties, liabilities or obligations. Guthrie. We conclude that the same test applies to an agency's correspondence by email.

Utilizing that test, we agree that the email at issue is properly characterized as a warning, rather than an adjudication. On its face, the July 11th email, dated ten days after the effective date of the new bulletin, expresses an intent to ensure that NHS is aware that its submissions are incomplete and of the potential consequences for failure to remedy the insufficiency. The email contains no language indicating finality, but, to the contrary, invites NHS to resubmit its documentation and to contact OCYF with any questions. Thus, the email is fairly characterized as a recommendation that NHS supplement its documentation in order to comply with state and federal regulations.

NHS argues that there is nothing remotely tentative or advisory about the email. Instead, NHS asserts that the email constitutes an application of a new mandate and, consequently, an adverse determination rejecting NHS' documentation. According to NHS, OCYF determined that payment for certain costs incurred by NHS would not be paid by county children and youth agencies "unless and until" the data was submitted and approved by OCYF pursuant to the Bulletin. (NHS' brief at 12.) It ...

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