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Forbes Health Systems v. Harris

decided: October 14, 1981.

FORBES HEALTH SYSTEMS, A CORP.
v.
PATRICIA HARRIS, INDIV. AND AS SECRETARY OF THE U.S. DEPT. OF HEALTH, EDUCATION & WELFARE, HELEN O'BANNON, INDIV. AND AS SECRETARY OF PENNA. DEPT. OF PUBLIC WELFARE, GLENN JOHNSON, INDIV. AND AS DIRECTOR OF THE BUREAU OF MEDICAL ASSISTANCE OF THE PENNA. DEPT. OF PUBLIC WELFARE, AND PENNA. DEPT. OF PUBLIC WELFARE; WASHINGTON HOSPITAL AND SOUTH HILLS HEALTH SYSTEM AND ALL SAINTS HOSPITAL AND LOCK HAVEN HOSPITAL AND ANDREW KAUL MEMORIAL HOSPITAL (INTERVENOR) V. HELEN B. O'BANNON IND. AND AS SECRETARY OF THE DEPARTMENT OF PUBLIC WELFARE OF THE COMMONWEALTH OF PENNSYLVANIA, AND GERALD F. RADKE, INDIV. AND AS DEPUTY SECRETARY FOR MEDICAL ASSISTANCE OF THE DEPARTMENT OF PUBLIC WELFARE OF THE COMMONWEALTH OF PENNSYLVANIA, AND COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF PUBLIC WELFARE; HELEN B. O'BANNON, GLENN JOHNSON AND GERALD F. RADKE, APPELLANTS



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA (D.C. Civil Nos. 79-1811 & 80-1106)

Before Gibbons and Hunter, Circuit Judges, and Gerry,*fn* District Judge.

Author: Hunter

Opinion OF THE COURT

Secretary of the United States Department of Health, Education and Welfare Patricia Harris, Pennsylvania Secretary of Public Welfare Helen B. O'Bannon, Deputy Secretary for Medical Assistance of the Pennsylvania Department of Public Welfare Gerald F. Radke, and Director of the Bureau of Medical Assistance of the Pennsylvania Department of Public Welfare Glenn Johnson (collectively referred to as "DPW"), defendants below, appeal from the grant of an injunction forbidding them from implementing a regulatory requirement that nursing homes be on the site of an acute care facility in order to be reimbursed as "hospital-based" nursing homes. The district court found that the regulation had, prior to 1980, contained no on-site ("co-location") requirement, and that the 1980 amendment to the regulation was invalid because it had not been submitted to the Secretary of the Department of Health, Education and Welfare ("HEW" or "HHS") for approval.*fn1 We affirm.

The facts are fully and ably set forth in the district court's opinion, 504 F. Supp. 974, 975-78 (W.D.Pa.1980). The following outline of the facts is drawn from that opinion.

In 1973, the Pennsylvania Department of Public Welfare issued a regulation defining two categories of skilled nursing facilities ("nursing homes"): hospital-based and non-hospital based. The regulation provided, in relevant part:

Nursing facilities desiring to participate ... under Medical Assistance (Medicaid) must meet the following requirements:

(1) ....

(c) A hospital-based skilled nursing home unit must be licensed or approved by the Office of Medical Programs and/or certified for Title XVIII (Medicare) participation.

Medical Assistance Manual § 9424.6 (55 Pa.Code § 9424.6) ("the 1973 regulation"). Hospital-based nursing homes received reimbursement at a higher rate than those falling into the non-hospital-based category.*fn2

The following regulation amending the 1973 regulation allegedly became effective on July 1, 1980:*fn3

9424.6 Skilled Nursing Facility Participation Requirements

Nursing facilities desiring to participate in the Skilled Nursing Facility Care and Services Program under Title XIX, Medical Assistance ...


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