DPW v. Presbyterian Medical Center

• Decision Date: 22 June 2005
• Citation: 877 A.2d 419,583 Pa. 336
• Parties: DEPARTMENT OF PUBLIC WELFARE, Appellee, v. PRESBYTERIAN MEDICAL CENTER OF OAKMONT and Presbyterian Medical Center of Oakmont, Pennsylvania, Inc., Appellants.
• Court: Pennsylvania Supreme Court

877 A.2d 419

583 Pa. 336

DEPARTMENT OF PUBLIC WELFARE, Appellee, v. PRESBYTERIAN MEDICAL CENTER OF OAKMONT and Presbyterian Medical Center of Oakmont, Pennsylvania, Inc., Appellants.

Supreme Court of Pennsylvania.

Argued September 20, 2004.

Decided June 22, 2005.

Louis J. Capozzi, Esq., Harrisburg, for Presbyterian Medical Center of Oakmont, et al.

Kimber Lynn Latsha, Esq., Mechanicsburg, for Pennsylvania Association of Non-Profit Homes for the Aging.

Jason W. Manne, Esq., Pittsburgh, for Department of Public Welfare.

BEFORE: CAPPY, C.J., and CASTILLE, NIGRO, NEWMAN, SAYLOR, EAKIN and BAER, JJ.

OPINION

Justice SAYLOR.

This limited appeal concerns the question of whether jurisdiction over claims for reimbursement under the Pennsylvania Medical Assistance Program that were filed prior to 2003 properly lays in the Board of Claims.

Appellant, Presbyterian Medical Center of Oakmont ("Oakmont") is a non-profit operator of a licensed nursing facility in Allegheny County and an enrolled provider in the Pennsylvania Medical Assistance ("MA") Program,¹ a state plan for funding the provision of medical care and services to individuals in need of government aid, conducted with the assistance of federal funding and subject to extensive federal regulation. See generally DPW v. Devereux Hosp. Texas Treatment Network, 579 Pa. 313, 320-21, 855 A.2d 842, 846 (2004)

. Appellee, the Department of Public Welfare (the "Department" or "DPW") is the Commonwealth agency charged, inter alia, with administering this program. See 62 P.S. § 201.

In the early to mid-1990s, disputes arose concerning the Department's calculations of reimbursement payments due and owing to Oakmont for nursing care and services that it had previously provided pursuant to the MA Program. The primary substantive disagreement involved DPW's interpretation of moratorium regulations restricting payments relative to new or additional nursing facility beds, see 55 PA.CODE § 1181.65(c), as disallowing depreciation and interest relative to associated moveable equipment. See DPW v. Presbyterian Med. Center of Oakmont, 826 A.2d 34, 35 (Pa.Cmwlth.2003)

. Oakmont filed several statements of claim with the Board of Claims, the independent administrative board charged with arbitrating contract-based claims against the Commonwealth, pursuant to the Board's then-prevailing enabling act.² Each claim was expressly grounded on Oakmont's applicable "provider agreement," an agreement between DPW and MA providers that is mandated by federal law, see 42 U.S.C. § 1396a(a)(27); 42 C.F.R. §§ 442.12, 431.107, and was styled as a contract action in order to invoke the Board of Claims' exclusive jurisdiction "to hear and determine all claims against the Commonwealth arising from contracts hereafter entered into with the Commonwealth. . . ." See 72 P.S. § 4651-4 (repealed).³ In response, DPW challenged the Board's jurisdiction to adjudicate the claims, contending that they raised solely regulatory matters, as opposed to contractual ones and, therefore, should proceed through the administrative review process. Specifically, DPW's position was that Oakmont's claims should be litigated in its Bureau of Hearing Appeals, with judicial review confined to the appeals process prescribed in the Administrative Agency Law, 2 Pa.C.S. §§ 101-754. See 55 PA. CODE §§ 1101.84, 1181.101.⁴

The Department's position in this regard represented a change in its policy, since previously (in the mid-1970's and through the early 1980's), it had acceded to the Board of Claims' jurisdiction over MA provider reimbursement-based claims. Indeed, in connection with its promulgation of regulations governing provider agreements, DPW explained publicly that "[t]he Department views its relationship with providers as a contractual one between buyer and seller of services with each party deciding whether or not it wishes to enter into a contract." 13 Pa. Bull. 3655 (Nov. 19, 1983). Moreover, DPW's standard form for a provider agreement mirrored this position, in that such form reflected a detailed contractual undertaking, with mutual obligations expressly stated and provisions for execution by both DPW and the MA provider. See id. (setting forth Department commentary to the effect that "[t]he provider agreement, which is signed by all enrolled providers, reiterates this concept [of a contractual undertaking]"). DPW also advocated Board of Claims jurisdiction over MA provider reimbursement claims before this Court and in other judicial tribunals.⁵

By the late 1980s, however, DPW attempted to implement a substantial change, consistent with its present position, to reflect that provider payment disputes implicate regulatory concerns, and not contractual ones, and therefore, are not amenable to adjudication before the Board of Claims. The Department's initial efforts, however, were rebuffed in a series of decisions by the Commonwealth Court. Seminally, in Department of Public Welfare v. Divine Providence Hospital, 101 Pa.Cmwlth. 248, 516 A.2d 82 (1986), the Commonwealth Court rejected DPW's position that a provider claim asserting that DPW breached its provider agreement by not reimbursing it in accordance with DPW regulations represented exclusively a non-contractual, regulatory dispute.⁶ See id. at 252, 516 A.2d at 84 (holding that the Board of Claims had jurisdiction because "this case . . . concerns the question of whether DPW breached the provider agreement by not following its own regulations").⁷

In addition to advancing its policy change before the courts, DPW took other measures in attempting to effectuate it. By the early 1990s, the Department had altered its standard provider agreement to reflect only the minimum federal requirements pertaining to record-keeping, disclosure, and compliance, omitting all provisions identifying responsibilities on DPW's part, as well as the requirement of a signature by a DPW representative.⁸ DPW also began to describe the forms as enrollment forms, as opposed to contracts. Further, it attempted to promulgate regulations forbidding providers from asserting MA reimbursement challenges in the Board of Claims (although such proposed regulations were rejected by the Independent Regulatory Commission as contrary to the Board of Claims Act, see 20 Pa. Bull. 3847-49 (1990)).

DPW vindicated its position, however, in Pennsylvania Department of Public Welfare v. River Street Associates, 798 A.2d 260 (Pa.Cmwlth.), appeal denied, 569 Pa. 710, 805 A.2d 526 (2002). There, a nursing home facility challenged DPW's methodology in computing MA reimbursement rates; specifically, the facility contested the figures employed by DPW in setting certain parameters used in its case-mix reimbursement system.⁹ The facility filed a class action complaint in the Board of Claims, alleging that DPW's calculations resulted in a breach of its provider agreement. The Commonwealth Court disagreed, however, adopting the Department's position that the controversy represented a regulatory, as opposed to a contractual, dispute for purposes of the Board's jurisdiction. In reaching this conclusion, the court emphasized the requirement that, for jurisdiction to lay in the Board of Claims, the rights asserted must derive from the provisions of the contract. See River Street, 798 A.2d at 263

(citing Keenheel v. Pennsylvania Securities Comm'n, 523 Pa. 223, 228, 565 A.2d 1147, 1149 (1989) ("The jurisdiction of the Board of Claims is not triggered simply because a contract may be involved in an action, rather the jurisdictional predicate is satisfied only when the claimant relies upon the provisions of that contract in asserting the claim against the Commonwealth.")). In this regard, the court observed that the facility was able to cite no provision of the provider agreement that DPW had allegedly breached (as the provider agreement involved was DPW's short form).

River Street acknowledged the Commonwealth Court's previous recognition of Board of Claims jurisdiction over MA provider claims as reflected in Divine Providence and its progeny, but appeared to draw a distinction based on the complexity of the provider's claim. See River Street, 798 A.2d at 264

("At issue is a complicated method of establishing payment rates and setting payment rates. This is within the specific expertise and delegated legislative authority of DPW."). Additionally, the court noted that its earlier line of cases all dealt with the supplanted, long form of the standard provider agreement. The Commonwealth Court concluded:

While DPW's obligation to pay Riverstreet in accordance with law and regulation may be an implied term of the provider agreement a regulatory dispute cannot be converted into a contractual one through the device of implied terms.

Id. at 265 (citing Yurgosky v. AOPC, 554 Pa. 533, 722 A.2d 631 (1998)).

In the present case, the Board accepted jurisdiction over Oakmont's claim of MA underpayment by DPW and, after a hearing, awarded Oakmont $311,324, plus costs and interest. On appeal, however, a divided, en banc Commonwealth Court reversed, placing substantial reliance on River Street in determining that the Board of Claims lacked jurisdiction. See Oakmont,826 A.2d at 37 ("Here, as in River Street, Oakmont challenges DPW's application of its regulations arguing it made erroneous audit adjustments and therefore failed to make certain payments to Oakmont."). The majority again distinguished prior cases as involving less complex questions or matters as to which DPW's regulatory expertise was less relevant. See id. at 37 n. 8. Additionally, the majority invoked this Court's decisions in Keenheel, 523 Pa. at 227-28,565 A.2d at 1149 ("[T]he jurisdictional predicate [of the Board of Claims' enabling act] is satisfied only when the claimant relies upon the provisions of that contract in asserting the claim against the Commonwealth."), and Yurgosky, 554 Pa. at 533,722 A.2d at 631, the latter of which the court described as directing...