Denver Nursing Home v. Com., Dept. of Public Welfare

• Decision Date: 25 January 1989
• Citation: 552 A.2d 1160,123 Pa.Cmwlth. 131
• Parties: DENVER NURSING HOME, Petitioner, v. COMMONWEALTH of Pennsylvania, DEPARTMENT OF PUBLIC WELFARE, Respondent. DENVER NURSING HOME, Petitioner, v. COMMONWEALTH of Pennsylvania, DEPARTMENT OF PUBLIC WELFARE, Respondent.
• Court: Pennsylvania Commonwealth Court

Page 1160

552 A.2d 1160

123 Pa.Cmwlth. 131

DENVER NURSING HOME, Petitioner, v. COMMONWEALTH of Pennsylvania, DEPARTMENT OF PUBLIC WELFARE,

Respondent.

DENVER NURSING HOME, Petitioner, v. COMMONWEALTH of Pennsylvania, DEPARTMENT OF PUBLIC WELFARE,

Respondent.

Commonwealth Court of Pennsylvania.

Argued June 16, 1988.

Decided Jan. 25, 1989.

Gilbert B. Abramson, Michael B. Tolcott, Abramson, Cogan, Kogan, Freedman & Thall, P.C., Philadelphia, for petitioner.

Bruce G. Baron, Asst. Counsel, John Kane, Chief Counsel, Harrisburg, for respondent.

Before COLINS and SMITH, JJ., and KALISH, Senior Judge.

SMITH, Judge.

Petitioner Denver Nursing Home appeals from a July 24, 1987 order of the Director of the Office of Hearings and Appeals, Department of Public Welfare (DPW), which denied Petitioner's appeal of DPW's audit findings for fiscal years ending September 30, 1977 and September 30, 1978. Petitioner also appeals from the September 29, 1987 order of the Secretary of DPW which denied reconsideration of the July 24, 1987 order. Both appeals have been consolidated for disposition by this Court.

Questions involved for review are whether DPW abused its discretion or committed an error of law in disregarding evidence of Petitioner's reimbursable expenses, destruction of invoices and efforts to reconstruct documentation for the years audited, as well as expert testimony that evidence presented was sufficient to support reimbursement.

After hearings¹ held on Petitioner's appeal from DPW audits conducted for the fiscal years ending September 30, 1977 and September 30, 1978, the hearing officer concluded that Petitioner failed to demonstrate entitlement to its claim for reimbursement of costs in the amounts of $86,823.74 for 1977 and $38,430.79 for 1978.² By order dated July 24, 1987, the Director of the Office of Hearings and Appeals adopted the recommendation of the hearing officer who found that at the September 28, 1982 hearing, Petitioner failed to have admitted into the evidence exhibits which were marked as A-8 through A-39 and that the exhibits marked during testimony of Petitioner's expert witness on December 16, 1982 were likewise never admitted into the evidence. The exhibits formed the basis of Petitioner's case. The hearing officer limited the issues at hearing to a disallowance of depreciation and disallowances of certain costs due to lack of documentation. Petitioner only challenges in this appeal the disallowances of certain costs due to lack of documentation.

Petitioner presented evidence to establish that its invoices for the years 1977 and 1978 were destroyed by water from a sewer backup in early 1979, and when employees discovered the soaked boxes in which invoices were contained, the boxes were thrown out without checking the contents. N.T., pp. 20-23, Hearing of July 9, 1982. Cancelled checks were maintained separately and were preserved. Petitioner contends that it either provided cancelled checks or copies of vendor invoices which were presented as evidence at hearing to substantiate its claims for reimbursement of various items of expenditure including food products, utility service, nursing supplies and many others. Petitioner also presented other available evidence of expenditures including letters from vendors substantiating that payments were made by them for services during the subject years. Petitioner's expert witness, a certified public accountant previously employed as Director of the Bureau of Audits for DPW, testified that it was a practice of his bureau to accept cancelled checks as documentation of an expenditure to support reimbursement, that invoices were not always required, and that due to the destruction of Petitioner's invoices, the evidence presented was sufficient documentation of the questioned expenses. Petitioner argues that its evidence was overwhelming and that the hearing officer's disregard of this evidence amounted to an arbitrary and capricious disregard of the evidence.³

Another contention advanced by Petitioner is that since the cancelled checks, invoices and letters from vendors were previously submitted to DPW, it was error to deny reimbursement for lack of documentation on the basis that such evidence was not introduced into the record at hearing. Counsel for Petitioner does not dispute that counsel omitted the process of introducing the relied upon exhibits into the record but urges that the omission was due to the discharge of its counsel prior to the November 15, 1984 hearing and denial of Petitioner's request for continuance. See Transcript of November 15, 1984 Hearing. Petitioner argues that an abuse of discretion was committed by the hearing officer in disregard of Petitioner's rights citing Clark v. Department of Transportation, 35 Pa.Commonwealth Ct. 87, 384 A.2d 1363 (1978). In Clark, this Court held that a denial of continuance to allow new counsel to familiarize himself or herself with the case constituted an abuse of discretion where the record indicated that despite a good faith attempt to secure a continuance, the agency failed to timely respond to the request and acted in disregard of the petitioner's rights. Clark is distinguishable from the facts of this case.

Petitioner's contention that it failed to offer the exhibits into the record because of the denial of continuance is disputed by the procedural and factual history. In Petitioner's appeal of the March 15, 1985 order in Lee v. Department of Public Welfare, 105 Pa.Commonwealth Ct. 211, 523 A.2d 1188 (1987), this Court held that the denial of a continuance was not an abuse of discretion where Petitioner's request for continuance occurred simultaneously with the discharge of its counsel one day prior to the November 15, 1984 scheduled hearing. The discharged attorney appeared at the hearing and again requested a continuance which was properly denied and the record closed. Petitioner failed to appear in person or through a representative to present evidence or to request a continuance of the hearing.⁴ Consequently, the March 15, 1985 order of the Director of the Office of Hearings and Appeals was affirmed to the extent that audit appeals for 1979 through 1982 were dismissed for lack of prosecution. The appeal was dismissed as to the non-final portion of the order with regard to the 1977 and 1978 audit appeals. Nonetheless, DPW argues that the denial of a continuance issue was not raised in Petitioner's request for reconsideration and therefore not preserved for review by this Court. DeMarco v. Jones & Laughlin Steel Corp., 513 Pa. 526, 522 A.2d 26 (1987). A review of the request for reconsideration supports DPW's waiver argument. In any event, Petitioner had ample opportunity at the September 28, 1982 and December 16, 1982 hearings to formally introduce its exhibits into the record but failed to do so.

The hearing officer determined that because of Petitioner's failure to introduce any exhibits into the evidence, Petitioner's appeal must be denied for failure to...