Argued: June 17, 2013
BEFORE: HONORABLE ROBERT SIMPSON, Judge, P. KEVIN BROBSON, Judge, PATRICIA A. McCULLOUGH, Judge
P. KEVIN BROBSON, Judge
Petitioner Foundations Behavioral Health (Foundations) petitions for review of an order of the Department of Public Welfare (DPW), Bureau of Hearings and Appeals (BHA), dated April 13, 2012. BHA's order adopted an Administrative Law Judge's (ALJ) recommendation to deny Foundations' appeal from a determination by DPW's Bureau of Program Integrity (BPI). In its determination, BPI retrospectively denied reimbursement to Foundations for services Foundations rendered to S.D., a 13-year-old male patient, from June 11, 2010, through August 27, 2010,  in part, because Foundations failed to provide sufficient documentation demonstrating that S.D.'s continued stay in acute short-term hospital inpatient care at Foundations' inpatient psychiatric facility was medically necessary. For the reasons set forth below, we now affirm.
Prior to his admission into Foundations' inpatient psychiatric facility, S.D. had run away from his father's residence in New Jersey to reunite with his mother in Philadelphia. (R.R. at 5.) Subsequently, police captured S.D., and Foundations admitted him into its inpatient psychiatric facility on April 30, 2010, based on suicidal and homicidal concerns. (Id.) S.D. remained at Foundations' inpatient psychiatric facility until August 27, 2010. (Id.) Private insurance covered the costs of S.D.'s hospitalization from April 30, 2010, through May 17, 2010. (Id.) From May 18, 2010, through August 27, 2010, DPW paid for S.D.'s hospitalization. (Id.)
On December 22, 2011, BPI issued a letter to Foundations, notifying Foundations that, inter alia, it was denying reimbursement retrospectively to Foundations at the level requested for the admission of S.D. from June 11, 2010, until August 27, 2010. (Id. at 5, 68, 70.) BPI based its decision to deny reimbursement to Foundations for this time period on BPI's determination that the medical record for S.D. lacked documentation to justify the medical necessity for continued acute short-term inpatient hospitalization, and that by June 11, 2010, an alternate, lesser level of care was appropriate for S.D. (Id. at 5, 68.) BPI also determined that the medical record lacked documentation that discharge planning for placement was adequate or performed in a timely manner. (Id. at 68.) Consequently, BPI concluded that Foundations had violated numerous MA regulations and, thus, was not entitled to reimbursement. (Id. at 5, 68, 70.)
Foundations appealed BPI's determination on January 20, 2012. Foundations indicated that it was appealing because S.D.'s medical record established that it was medically necessary to provide S.D. with acute inpatient mental health care until July 23, 2010. (Id. at 73.) The ALJ held an evidentiary hearing on March 7, 2012, at which representatives of both Foundations and DPW testified. Lina Atkinson, M.S.N., testified on behalf of Foundations in her capacity as nurse executive. Ms. Atkinson admitted that although S.D. was voluntarily admitted to Foundations' inpatient psychiatric facility on April 30, 2010, and was discharged on August 27, 2010, Foundations was concerned only about obtaining reimbursement for June 11, 2010, to July 23, 2010. (Id. at 17, 23, 28-31, 37.) Ms. Atkinson further explained that, as of July 23, 2010, Foundations no longer believed that acute inpatient hospital care was medically necessary for S.D. At that point, he was waiting for a bed at a residential facility. Until that point, however, the inpatient psychiatric treatment Foundations rendered to S.D. was medically necessary. (Id. at 17, 29-31.) Ms. Atkinson also testified that though it was rare for any child to be on elopement precautions for a long period of time, the attending doctor in S.D.'s case had S.D. on elopement precautions because S.D. was a homicidal threat in the community. (Id. at 30-31.) Ms. Atkinson further explained that Foundations believed that up until July 23, 2010, S.D. was a risk and a danger to himself, such that S.D. could not be discharged to a lower level of care. (Id. at 31.)
Elaine Douglas, M.D., testified on behalf of DPW at the hearing. Dr. Douglas, a board certified psychiatrist employed as a consultant for DPW, testified that the insurance company which paid for the first part of S.D.'s stay at Foundations' inpatient psychiatric facility stopped paying after May 17, 2010, because it believed that S.D. was ready for discharge and appropriate for outpatient care as of that date. (Id. at 44-45.) Dr. Douglas explained that DPW then picked up the case. (Id. at 45.) Dr. Douglas testified that in evaluating the case for medical necessity, it was pretty clear that S.D. was improving in late May or early June. (Id. at 48.) Dr. Douglas indicated that upon evaluation of S.D. On May 12, 2010, it was determined that he needed to go to a residential treatment facility (RTF). (Id.) Dr. Douglas further explained that Foundations was trying to find an RTF at which to place S.D., but that such placement had to be in New Jersey. (Id.) Dr. Douglas testified that on June 7, 2010, the therapist was told that S.D. was being denied a facility placement due to the inability to do a face-to-face assessment. (Id.) Dr. Douglas also testified that Foundations was notified that transferring S.D. to a New Jersey acute hospital would expedite placement in a New Jersey RTF, but that there was no indication that Foundations pursued this option. (Id. at 49-50.) Dr. Douglas indicated that a contact interview was eventually performed on June 10, 2010, and that S.D.'s name was put on a waiting list, where it remained for months. (Id. at 49.) Dr. Douglas testified that, as a result of being placed on the waiting list and his desire to leave Foundations' inpatient psychiatric facility, S.D. became irritable and began to act out. (Id. at 49-51.) Dr. Douglas further testified that S.D. was eventually told that he was nearing the end of the waiting list, but that on August 11, 2010, the therapist learned that because S.D.'s father had left New Jersey and returned to Pennsylvania, S.D. could no longer be placed in New Jersey. (Id. at 50-51.) As a result, Foundations was able to discharge S.D. to its own RTF facility in Pennsylvania. (Id. at 51.)
According to Dr. Douglas, it was BPI's position that when Foundations was told to transfer S.D. to a New Jersey hospital and Foundations made no attempt to do so, DPW no longer had to pay for S.D.'s stay at Foundations' inpatient psychiatric facility. (Id. at 52.) In her closing statement, Dr. Douglas reiterated that S.D.'s behavioral issues were due to his frustration about his lengthy stay at Foundations' inpatient psychiatric facility. (Id. at 62.) Dr. Douglas further indicated that it was not medically necessary to keep S.D. in an inpatient psychiatric unit, which is the highest level of psychiatric care, during the time period at issue. (Id.) Dr. Douglas stated that from BPI's perspective, Foundations was actively searching for a bed for S.D. as of June 11, 2010, and that S.D. would have been discharged at that time had a bed been available. (Id.)
Following the hearing, the ALJ issued an adjudication and accompanying recommendation to deny Foundations' appeal. In so doing, the ALJ determined, most relevantly, that (1) Foundations indicated that it was only appealing the admission period of June 11, 2010, through July 23, 2010; (2) a graph that Foundations introduced at the hearing documenting S.D.'s care at Foundations' inpatient psychiatric facility reflected dates that were after S.D.'s discharge date of August 27, 2010; and (3) Foundations failed to provide sufficient documentation that S.D.'s admission for the period of June 11, 2010, through August 27, 2010, was medically necessary. (Id. at 5.)
The ALJ reasoned that the graph, which was purported to be a transcription of S.D.'s physician notes in order to justify S.D.'s stay at Foundations' inpatient psychiatric facility from June 11, 2010, to July 23, 2010, was a flawed and unacceptable verification of medical necessity in several respects. (Id. at 9.) The ALJ noted that a transcript of the physician's notes is not the best evidence under the applicable regulations. (Id.) The ALJ also reasoned that the transcription was incompetent on its face, because it was dated June 11, 2011, through July 25, 2011, dates that were after S.D.'s date of discharge. The ALJ further noted that even if the transcribed document was reviewed under the premise that the dates should have read 2010 instead of 2011, it contained contradictory evaluations. (Id.) The ALJ indicated that one entry under the heading of "Physician Documentation" provided: "Rated high risk suicide, homicide, elopement, & assault." (Id. at 9, 77.) The ALJ noted that another entry under the heading of "Nurse/Therapist" made on the same date provided: "[P]hone interview Children's Home in New Jersey. Waiting list. Maybe two weeks for opening." (Id.) The ALJ reasoned that based on those remarks, it appeared that S.D. was considered dangerous and not ready for discharge while simultaneously on a waiting list for a vacancy as indicated by Dr. Douglas. (Id. at 9.) The ALJ indicated that under DPW's regulations, Foundations failed to provide adequate documentation to justify S.D.'s continued care at Foundations' inpatient psychiatric facility after June 10, 2010. (Id.) Thus, the ALJ concluded that based on the facts, testimony, and evidence submitted, DPW was correct to deny payment retrospectively to Foundations for the period of June 11, 2010, through August 27, 2010. (Id.) By order dated April 13, 2012, BHA adopted the ALJ's recommendation. (Id. at 1.) Foundations then petitioned this Court for review.
On appeal,  Foundations essentially argues that BHA erred in concluding that Foundations is not entitled to reimbursement for the care it rendered to S.D. from June 11, 2010, to August 27, 2010, because BHA's determination that Foundations failed to provide sufficient documentation that S.D.'s admission during that time was medically necessary is not supported by substantial evidence. Although Foundations argues that it provided medically necessary care to S.D. during S.D.'s entire stay at Foundations' inpatient psychiatric facility, it divides S.D.'s stay into two time periods and makes separate arguments as to why it is entitled to reimbursement and the proper reimbursement rate to be applied for each time period. Thus, we address these time periods and corresponding arguments in turn.
Foundations first argues that it is entitled to reimbursement for the care it provided to S.D. from June 11, 2010, to July 23, 2010. Foundations contends that it was medically necessary to provide S.D. with inpatient care for this time period, and that S.D.'s medical record is replete with documentation evidencing this need and S.D.'s receipt of such care. Foundations also notes that the record documents Foundations' good faith efforts to place S.D. at an appropriate lower care facility and the unavailability of such a facility as of June 11, 2010. Foundations alleges that BHA ignored S.D.'s medical record and the hearing testimony evidencing S.D.'s continuing need for and receipt of care and the lack of an alternative treatment placement, as well as the applicable regulations and case law entitling Foundations to reimbursement. Foundations contends that BHA instead relied on a single notation found in the graph Foundations submitted during the hearing as proof that as of June 11, 2010, S.D. was ready to be discharged and an alternative treatment placement was actually available for him. Foundations argues that the mere planning for the transfer of a patient to a lesser care facility is not indicative of the care the patient actually needs or is receiving at the time of such planning. Foundations also contends that DPW produced no evidence contradicting Foundations' showing of S.D.'s actual need for and receipt of medically necessary inpatient care for this time period or the lack of an available RTF placement prior to S.D.'s discharge in August. Thus, Foundations requests payment at the applicable inpatient hospital rate for the care it provided to S.D. from June 11, 2010, through July 22, 2010.
The regulations governing DPW's payment for inpatient psychiatric services rendered by a provider to MA recipients are found in Title 55, Chapter 1151 of the Pennsylvania Code. 55 Pa. Code §§ 1151.1-.101. "The MA [p]rogram provides payment for medically necessary inpatient services rendered to eligible recipients by enrolled inpatient psychiatric facilities. Payment is made subject to [Chapter 1151] and Chapter 1101 (relating to general provisions)." Id. § 1151.1. Pursuant to Section 1101.61 of the regulations, DPW "will only pay for medically necessary compensable services." Id. § 1101.61; see alsoid. § 1101.66(a)(2) ("DPW pays for compensable services or items rendered, prescribed or ordered ...