Court Opinion

ID: 9706105
Source: CourtListenerOpinion
Date Created: 2023-08-26 01:31:36.503324+00
Date Added: 2024-06-11T18:22:19.268927
License: Public Domain

DISSENTING OPINION BY
Judge LEAVITT.
Respectfully, I dissent. With this decision, we hold for the first time that reimbursement disputes arising from a provider’s agreement to deliver medical or nursing services to a Medical Assistance client must be heard exclusively by the Department of Public Welfare (DPW). In doing so, we divest the Board of Claims of jurisdiction over provider reimbursement claims, even though its jurisdiction over such claims has been expressly recognized by DPW since at least 1981.1
The Board of Claims is a venerable institution that was created in 1937 to “arbitrate claims against the Commonwealth arising from contracts entered into by the Commonwealth.... ” Section 1 of the Act of May 20, 1987, P.L. 728, as amended, 72 P.S. § 4651-1. DPW has recently revised its standard provider agreement from a document of many pages to a shorter one that it calls an “enrollment form.” However, the length or shape of a document is irrelevant to a determination of the kind of legal relationship it establishes between two parties.2 The provider agreement is an adhesion contract that was prepared by DPW and imposed upon the provider, ie., the weaker party who has no choice about its terms. Black’s Law DictionaRy, 318-319 (7th ed.1999). It evidences, nevertheless, a contractual relationship.
The contractual nature of the relationship between Oakmont and DPW is demonstrated by more than one authority. Federal regulations require a provider to have a contract with DPW in order to be able to receive payment for providing services to Medical Assistance clients. 42 U.S.C. § 1396a(a)(27); 42 C.F.R. § 431.107; 42 C.F.R. § 442.12. Recent case law is consistent with this federal statutory and regulatory authority. See Sun Healthcare Group, Inc., No. CIV.A 00-986-GMS, 2002 WL 2018868 (D.Del. Sept.4, 2002); Barnes v. Gorman, 536 U.S. 181, 122 S.Ct. 2097, 153 L.Ed.2d 230 (2002) (wherein the Supreme Court noted that payments made to private entities for their services pursuant to Spending Clause legislation, such as the Medicaid Act, establish a contract). DPW’s own regulations expressly stated that provider agreements establish a contractual relationship. 13 Pa. B. 3655 (1983).
Department of Public Welfare v. River Street Associates, 798 A.2d 260 (Pa. Cmwlth.2002), upon which the majority relies, is distinguishable. River Street was a class action that sought to change the payment rates for providers that deliver services to Medical Assistance clients of DPW that were established in DPW’s regulations. We held that a challenge to the adequacy of those rate levels must be presented to DPW for disposition and not to the Board of Claims. Here, by contrast, we are presented with a challenge not to *39DPW’s rate levels, but, rather, their application by DPW to calculate the amount owed to a particular provider under a particular contract.
It is a distinction perhaps best explained by reference to the “filed tariff doctrine.” Utility rates are established by review and approval of the Public Utility Commission, and once set, they are binding on both the customer and the utility. Philadelphia Suburban Water Co. v. Pennsylvania Public Utility Commission, 808 A.2d 1044 (Pa. Cmwlth.2002). They may be challenged only in accordance with the statutory procedures governing the establishment of said rates,3 and they may not be set aside in a breach of contract action brought in a court of law. However, if the rate has been improperly applied in an individual case, the individual rate payer may sue the utility in contract for return of an excess charge. Likewise, the utility has a contract action against the customer for any undercharge. 64 Am JuR 2d, Public Utilities § 62 (2001). See e.g., American Telephone & Telegraph Co. v. Central Office Telephone, Inc., 524 U.S. 214, 118 S.Ct. 1956, 141 L.Ed.2d 222 (1998); West Penn Power Co. v. Nationwide Mutual Insurance Co., 209 Pa.Super. 509, 228 A.2d 218 (1967).
Here, Presbyterian Medical Center of Oakmont (Oakmont) does not challenge the rate level set by DPW’s regulation for all providers. Rather, it challenges the amount of its particular reimbursement, which it claims has not been calculated in accordance with DPW’s approved rules and rates. This is a contractual matter that can be heard by the Board of Claims. Our Supreme Court has held that the Board of Claims
provides a forum in which companies which do business with the Commonwealth and its various agencies can present contractual disputes and seek remedies for the Commonwealth’s alleged breaches.
Keenheel v. Pennsylvania Securities Commission, 523 Pa. 223, 228, 565 A.2d 1147, 1149 (1989). Oakmont is a provider that does business with a Commonwealth agency, DPW, and it seeks redress for DPW’s alleged breach of its obligation to pay for services Oakmont rendered to DPW’s Medical Assistance clients.
Other cases cited by the majority are distinguishable. They do not involve payment for services rendered to the Commonwealth, and they sought relief that could not be granted by the Board of Claims.
Keenheel concerned the settlement of a charge of racial discrimination filed against the Pennsylvania Securities Commission by one of its former employees. The agreement to settle a violation of the Pennsylvania Human Relations Act bears no resemblance to a contract for services, which is the arrangement here. Further, Mr. Keenheel did not seek payment but, rather, sought to have the settlement nullified. The Board does not have equitable powers. Our Supreme Court appropriately held that the Board of Claims lacked jurisdiction over such a dispute because it did not originate with a contract for goods and services.
Yurgosky v. Administrative Office of Pennsylvania Courts, 554 Pa. 533, 722 A.2d 631 (1998), is similarly inapposite. *40Yurgosky was a district justice who claimed that the Pennsylvania Rules of Judicial Administration required the Administrative Office of Pennsylvania Courts to provide him with a legal defense when he was charged with a crime that occurred in his official capacity. There was no jurisdiction in the Board of Claims because there was no contract; Yurgosky was a public official not a Commonwealth vendor.
On the other hand, the precedent to support the proposition that the Board of Claims has jurisdiction to consider disputes over DPW’s reimbursement to medical providers that treat Medical Assistance clients is both longstanding and extensive.
In Smock v. Com., 496 Pa. 204, 436 A.2d 615 (1981), our Supreme Court held that a claim for reimbursement for services rendered to Medical Assistance patients after its provider agreement with DPW was terminated should be heard by the Board of Claims. In Department of Public Welfare v. Shapiro, 91 Pa.Cmwlth. 64, 496 A.2d 887 (1985), DPW claimed that it had exclusive jurisdiction over Medical Assistance reimbursement disputes because its regulations governed the Medical Assistance program. This Court did not agree, holding that the Board of Claims also had subject matter jurisdiction. Again, in Department of Public Welfare v. Maplewood Manor Convalescent Center, 168 Pa.Cmwlth. 314, 650 A.2d 1117 (1994) we addressed the question of DPW’s exclusive jurisdiction and, reiterating Shapiro, found it limited to: 1) a determination eligibility for Medical Assistance benefits, and 2) a termination of a provider’s contract authority to- treat Medical Assistance clients. We concluded that “[ojtherwise, the Board [of Claims] has jurisdiction over a Medical Assistance Program appeal.” Id. at 1120, 496 A.2d 887. Thus, we held that the Board of Claims had jurisdiction over reimbursement for services rendered by a nursing home to Medical Assistance clients.
The fact that DPW’s regulations4 may affect the outcome of Oakmont’s contract dispute with DPW does not divest the Board of Claims of jurisdiction. In Shovel Transfer and Storage, Inc. v. Simpson, 523 Pa. 235, 565 A.2d 1153 (1989), the petitioner characterized its claim as “statutory,” rather than contractual, and filed a complaint with this Court. The Supreme Court reversed this Court on jurisdiction, stating that:
The mere fact that the validity of a contract may turn upon issues of statutory duty does not create a statutory right of action. Rather, the focus is on the origin of the rights claimed. In the instant matter, Shovel’s objective is to establish the contractual relationship.
Shovel, 523 Pa. at 241, 565 A.2d at 1156 (emphasis added). Thus, the Supreme Court held that the proper forum was the Board of Claims.
Shovel was consistent with this Court’s prior ruling in Department of Public Welfare v. Divine Providence Hospital, 101 Pa.Cmwlth. 248, 516 A.2d 82 (1986) in which we held that the Board of Claims had jurisdiction over a provider reimbursement dispute even though the claim was based upon the allegation that DPW had not followed its own regulation. In short, the Board of Claims is not divested of *41jurisdiction simply because a contract dispute may involve the interpretation and application of statutes and regulations; this should not be surprising when the party purchasing goods and services is the Commonwealth.
DPW has previously sought, and failed, to have this Court reverse Shapiro and Divine Providence. Department of Public Welfare v. Soffer, 118 Pa.Cmwlth. 180, 544 A.2d 1109 (1988); Department of Public Welfare v. Jerrytone, 118 Pa.Cmwlth. 474, 545 A.2d 395 (1988). When litigation failed, DPW attempted to adopt regulations that would forbid providers from bringing reimbursement disputes to the Board of Claims. This proposed regulation was rejected by the Independent Regulatory Review Commission as contrary to the statute establishing the jurisdiction of the Board of Claims. 20 Pa. B. 3847-49 (1990).
For all of these reasons, the Board of Claims had jurisdiction5 over the dispute between Oakmont and DPW on what Oak-mont is owed for its services to certain Medical Assistance clients. Oakmont’s claim sounds in contract. Although that contract incorporates by reference certain rate level regulations of DPW, the contract is the source of Oakmont’s rights. Without a contract, it could not claim any rights to flowing under DPW’s Manual for Allowable Cost Reimbursement for Skilled Nursing and Intermediate Care Facilities, 55 Pa.Code §§ 1181.201-1181.274.
Accordingly, I dissent.
Judge SIMPSON joins in this dissent.

. 11 Pa. B. 2630 (1981).

. Notably, the Commonwealth Procurement Code defines “contract” as follows:
A type of written agreement, regardless of what it may he called, for the procurement of supplies, services or construction.
62 Pa.C.S. § 103 (emphasis added).

. DPW’s reliance upon Ciamaichelo v. Independence Blue Cross, 814 A.2d 800 (Pa. Cmwlth.2002) is misplaced because that case concerned whether the rates were excessive and, thereby, generating excess profits. Rate setting, whether to correct inadequate or excessive rate levels, is an activity that belongs before the appropriate state agency, in this case DPW. Here, Oakmont does not challenge the rate levels in its contract. It accepts the terms of its adhesion contract with DPW, including the payment terms. It contends, simply, that DPW has not met its obligations under that contract.

. Oakmont’s reimbursement is governed by DPW's "Manual for Allowable Cost Reimbursement for Skilled Nursing and Intermediate Care Facilities.” The terms of this Manual have been published by DPW at 55 Pa.Code §§ 1181.201-1181.274.
The majority seems to suggest that the com-plexify of DPW’s regulations requires that Oakmont’s claim be removed from the Board of Claims. However, jurisdiction of the Board of Claims is not determined on this basis. It was established to hear cases that are complex legally and factually. Indeed, because it has been deciding provider reimbursement disputes for decades, it has expertise in such claims.

. The General Assembly has divested the Board of Claims of jurisdiction over the category of contract claims at issue here for the future in the event DPW issues a standing order pursuant to the Act of December 3, 2002, P.L. No. 142, consolidated at 62 Pa.C.S. § 102(e). I would not remove the 300 claims now pending in the Board of Claims.