The Manor at St. Luke Village, Carbondale Nursing Home, Inc., and Taylor Nursing and Rehab Center, Petitioners
Department of Public Welfare, Respondent
Argued: June 17, 2013.
BEFORE: HONORABLE ROBERT SIMPSON, Judge HONORABLE P. KEVIN BROBSON, Judge HONORABLE PATRICIA A. McCULLOUGH, Judge.
P. KEVIN BROBSON, Judge.
By Order dated November 27, 2012, we granted the petition for permission to appeal of Petitioners The Manor at St. Luke Village, Carbondale Nursing Home, Inc., and Taylor Nursing and Rehab Center (collectively referred to as Providers). Providers asked us to review an interlocutory decision of the Department of Public Welfare (DPW), Bureau of Hearings and Appeals (Bureau). In granting that request, we agreed to consider the following question:
Whether a provider that participates in the Pennsylvania Medical Assistance Program can dispute audit adjustments used to calculate its payment rates which were not previously appealed through an appeal of the subsequently issued rate notice?
(11/27/2012 Order.) The Bureau ruled that a Medical Assistance (MA) provider that fails to avail itself of the opportunity to appeal audit results pursuant to 55 Pa. Code § 1187.141 waives any right to challenge those audit results at a later time. For the reasons set forth below, we affirm.
The Providers are nursing facilities that provide care and services to Medicaid beneficiaries under the Commonwealth's MA Program. MA providers are paid for the MA services that they provide on the basis of an annual prospective payment rate, which is set by DPW and referred to as a "Case-Mix Rate." DPW has promulgated regulations setting forth the process by which it determines Case-Mix Rates. See 55 Pa. Code Ch. 1187, subchapter G. Under the applicable regulations, the development of Case-Mix Rates generally involves a three-step process.
The first step of the process requires MA nursing facility providers to submit "cost reports" on an annual basis, which the regulations refer to as "MA-11 cost reports." Id. §§ 1187.22(12) (requirement to file cost report), 1187.71 (identifying specific costs to be included in cost report by category), 1187.73 (identifying term of fiscal year and time within which provider must submit its cost report). A provider's cost report essentially sets forth fiscal-year costs separated into three categories: (1) resident care costs, (2) other resident related costs, and (3) administrative costs. When DPW receives a provider's cost report, it conducts an audit of the cost report, and DPW may adjust the items in a cost report by increasing or decreasing the amount identified with an item and may also shift a particular cost from one cost category to another category. Id. § 1187.77. DPW inputs cost data from the audited cost report into its Nursing Information System (NIS), which is the "comprehensive automated database of nursing facility, resident and fiscal information needed to operate the Pennsylvania Case-Mix System." Id. § 1187.2. Following this step, providers have the opportunity to challenge the audit results through a hearing by filing an appeal. Id. § 1187.141(a)(2).
In the second step of the rate-setting process, DPW considers the allowable costs from the three most recent audit reports to establish peer group prices for the three cost categories. DPW develops peer group pricing (PGP) based upon the data collected from the audits of individual providers in a particular peer group. DPW publishes the PGPs in the Pennsylvania Bulletin, (id. § 1187.95(4)), and providers have a limited right to challenge the PGPs: "[Providers] may appeal the peer group prices only as to the issue of whether the peer group prices were calculated in accordance with § 1187.96 (relating to price and rate setting computations)." Id. § 1187.141(a)(1).
Once DPW has completed the audit and PGP steps, it establishes an individual provider's ultimate reimbursement rate for the future year. As the administrative law judge (ALJ) explained in the decision now on appeal:
Using the data in the NIS database[, which incorporates audit information, ] the MA Program compares the average of the facility's allowable costs in the three most recent audited reports against the peer group prices for the three cost categories, limits the sub-rate for those cost categories in accordance with the regulations, and determines an amount for reimbursement of capital costs. Id. Quarterly adjustments for the acuity level of the facility's residents are also made and a budget adjustment factor applied. The calculation is issued to the nursing facilities in a rate notice. The facilities have the right to appeal the rate notice. 55 Pa. Code § 1187.141.
(ALJ decision at 8 (emphasis added).)
Providers appealed their final rate notices for particular fiscal years.In those appeals, Providers attempted to challenge, for the first time, their audit results, which DPW used pursuant to its regulations to establish the Case-Mix Rates. The ALJ determined, however, that Providers were precluded from challenging DPW's audit adjustments because Providers had failed to file appeals when they were notified of the audit results, as provided in Section 1187.141 of the regulations. In so doing, the ALJ considered but rejected Providers' arguments.
Providers' position was grounded in the Act of December 3, 2002, P.L. 1147 (Act 142), codified in part at 67 Pa. C.S. §§ 101, 1101-06. Section 1102(a) of Act 142, 67 Pa. C.S. ...