In Spierling v. First American Home Health Services, Inc. and Integrated Health Services, the Superior Court reviewed a decision of the court of Common Pleas, which dismissed a Plaintiff’s Claim that she was wrongfully terminated after she reported suspected evidence of Medicare fraud. The Court found that because the Plaintiff did not have a statutory duty to investigate and report the suspected fraud, and because her cause of action was not based on the Pennsylvania Whistle Blower Law, she had no basis for a wrongful termination action.

The Plaintiff, Leslie Spierling, was hired as a Registered Staff Nurse by First American Home Health Services, Inc. Three months later she was promoted to Supervisor of Staff Nurses. In 1993, she became the Administrator of one of First American’s offices, and held that position until her termination of June 28, 1996. Integrated Health Services became successor to First American after First American filed for Chapter 11 bankruptcy in January of 1996.

During Spierling’s employment, the federal government investigated First American for Medicare fraud. As part of the investigation, the federal investigators notified all First American employees that they had established an 800 fraud hotline and asked employees to utilize it to report suspected fraud. Spierling subsequently conducted her own investigation by reviewing a number of discarded files in First American’s Shadyside Pennsylvania office. Spierling found what she considered to be evidence of past Medicare fraud. She notified her supervisor, who in turn reported it to a First American vice president. Several days after receiving the information, the vice president traveled to Pittsburgh and terminated the employment of Spierling and her supervisor.

In her Complaint, Spierling originally alleged that she was wrongfully terminated because she reported suspected evidence of Medicare fraud and that her wrongful termination constituted age discrimination under the Pennsylvania Human Relations Act. In support of her Complaint, Spierling alleged that both the State and Federal Governments have strong policies protecting individuals who report Medicare fraud.

In response to the Complaint, the Defendants filed Preliminary Objections and requested that the Court dismiss the Complaint. The Court granted Defendant’s Preliminary Objections and dismissed the Complaint. Spierling appealed to the Superior Court.

On review, the Superior Court found that no statutes or case law cited by Spierling imposed a duty and corresponding threat of penalties for failure to investigate and report Medicare fraud to her supervisors. The Court rejected Spierling’s assertion that the Professional Nursing Law, 63 Pa C.S. §§211-225.5 required her to investigate or report the fraud to her supervisor. Additionally, the Court found that Spierling’s investigation and reporting to her supervisors did not implicate 18 U.S.C. §1001, 18 U.S.C §287, 42 U.S.C. §§1320 a-7a and 1320 a-7b, 31 U.S.C. §3729 or 31 U.S.C. §3730(h). In its analysis, the Court focused on the fact that Spierling did not have a legal duty to take it upon her self search her employers discarded files for evidence of Medicare fraud. Further, the Court found that Spierling was under no statutory duty to report the suspected past Medicare fraud. The Court found that Defendants did not request that Spierling commit a crime and that there was not statutory prohibition against her discharge. Therefore, the Court found that the Pennsylvania Court Doctrine of wrongful termination did apply and that there was no specific statute providing her with a cause of action for her termination. The case was dismissed.

It is important to note that Spierling did not base her claims on the Pennsylvania Whistle Blower Law. Therefore, although seeming contradictory, the case can be harmonized with the Superior Court’s later decision in Silverstream in Denton v. Silverstream. However, it is possible that had Spierling included such a claim, the Superior Court may have viewed her case differently.

Recently, the Pennsylvania Superior Court issued a decision that subjects privately owned nursing facilities to the Pennsylvania Whistleblower Law. Because of the increased risk of liability for employment related decisions resulting from this decision, facilities should re-evaluate their personnel policies, as well as how they manage, discipline and terminate employees. The decision has the potential to drastically increase the number of employees raising challenges to employment decisions made by Nursing Homes facilities.

Denton v. Silver Stream Nursing and Rehabilitation Center and Genesis Health Ventures, 739 A.2d 571 (Pa.Super, 1999), began in April 1997 when the Appellant, Mary Denton, was terminated as Director of Silver Stream Nursing and Rehabilitation Center, a Genesis Health Ventures nursing center. In her Complaint, Denton claimed that the termination was the culmination of multiple investigations by the Pennsylvania Department of Health into allegations of theft of patient funds, faulty administrative records, possible theft of medical supplies and an accidental death of a patient.

The Court of Common Pleas found that prior to her termination, Denton was "carrying on a ‘vigorous’ clean-up campaign with management and corporate officials for at least three months previously regarding the abuse and instances of wrong doing she had recently discovered." Further, the Court found that on March 17, 1997 Denton spoke with DOH investigators about these alleged abuses. In her Complaint, Plaintiff claimed that on March 28, 1997 she was asked to resign her position, however she refused to do so. Plaintiff alleged that she was then subject to intense harassment designed to cause her to resign and that she was eventually discharged from her position on April 17, 1997.

After her termination, Denton filed a Complaint in the Common Pleas Court against Silver Stream, which included allegations that her employer violated Pennsylvania’s Whistleblower Law. In response to Silver Stream’s Preliminary Objections, Denton filed an Amended Complaint, which the Court subsequently dismissed. On Appeal, the Superior Court found that the Plaintiff successfully pled a cause of action under the Pennsylvania Whistleblower Law. The central issue in this case was whether a private nursing facility fit within the definition of the term "employer" which has traditionally been interpreted to only include public entities such as the Pennsylvania Department of Health, Department of Public Welfare or any other public agency.

The Pennsylvania Whistleblower Law, 43 P.S. §1421 et. seq., makes it unlawful for a public employer to "discharge, threaten or otherwise discriminate or retaliate against an employee . . . because the employee makes a good faith report. . . to the employer or appropriate authority of an instance of wrong doing or waste". The Law provides that wronged individuals may file suit against an employer within 180 days of the alleged wrongful action. Under Section 1422 of the Law, the term "employer" is defined as "a person supervising one or more employees including the employee in question; a superior of that supervisor; or an agent of a public body". The term "public body" is defined as any body created by the Commonwealth or "which is funded in any amount by or through Commonwealth or political subdivision or a member or employee of that body." In her Appeal, Plaintiff argued that Silverstream was a public body for purposes of the Whistleblower Law because it received Medicaid funds through the state.

The Court agreed with Denton and found that receipt of Medicaid funds was sufficient to qualify an employer as a "public body". In reaching its decision the Court relied on the definition of public body as set forth in the Act. It found that "the statute plainly and unequivocally makes any body ‘funded in any amount by or through Commonwealth . . . authority a public body for purposes of the Whistleblower Law." The Court found the language unambiguous on its face and that it was therefore compelled to find that a medical provider that is a recipient of Medicaid funds falls within this definition. In reaching this decision, the Court rejected the Federal District Court for the Eastern District of Pennsylvania’s decision in Kellin v. Salic Health Care, 772 F. Supp. 1520 (E.D. 1991), which found that mere receipt of Medicaid funds does not define an agency as a "public body." Later in the decision, the Court when on to find that the Plaintiff’s allegations also gave rise to a valid cause of action for wrongful termination. The Court found that while Pennsylvania embraces the "at will" employment doctrine, the Supreme Court has recognized an exception where the employee is discharged in violation of public policy, a concept that was first developed in Geary v. United States Steel Corp., 456 Pa. 171 3198 2d. 174 (1974). The Court found that the Whistleblower Law was a statute that clearly prohibited discharge.

The practical implications of this decision for Pennsylvania’s nursing facilities are enormous. Because of this decision, employers who receive Medicaid funds may now be liable for terminating employees if a Court finds that the employee made a good faith report to the employer or another appropriate authority regarding "instances of wrong doing or waste." Scenarios that would once justify a termination may now result in liability. For example, in the case where an employee disregards the employer’s chain of command to complain about how a nursing home is being managed may now be protected from disciple for ignoring procedures. Further, poor performing employees or employees who are discipline problems may engage in a campaign of complaints to the employer or regulator authorities in order to fall under the Whistleblower Law’s umbrella of protection. As a result, nursing facilities can expect to see an increase in the frequency of challenges to their termination decisions.

A practical response to this decision is to carefully review current disciplinary policies and procedures. Those policies that have not been updated in recent years should be reviewed with competent counsel. It is now more critical than ever that employers document all of their employee’s disciplinary offenses to eliminate any question of whether an adverse employment action is justified.

The Pennsylvania Legislature recently passed, and Governor Ridge signed, legislation changing several laws that govern Powers of Attorneys ("POA") in Pennsylvania. These changes are slated to take effect for any POA executed after April 12, 2000 (executed in this context means the day POA is effectively transferred to a holder by a principal, not when the power is first utilized.) However, as the new legislation gains stability and acceptance, it may become more difficult to exercise any POA that was drafted under the old statute, where it conflicts with the amendments.

The first change is a simple change of terminology. The legislation changes the term used for a holder of Power of Attorney from "attorney-in-fact" to "agent". Although this does not affect the substantive relationship between the holder and principal, it defines the relationship in a more exact manner. It is now clear that the POA creates a principal/agent relationship that includes all fiduciary duties and responsibilities that go along with a principal/agent relationship.

The second significant change is that the legislation added certain new requirements for the proper and effective execution of a POA. The new law states that a POA should include two additional items: (1) a statement that the principal is knowledgeable or "aware" of the effect and extent of the POA and (2) a statement that the principal understands the fiduciary relationship between him or herself and the agent. While the statements are not mandatory, if any action taken by the agent on behalf of the principal is questioned, it will be incumbent upon the agent to prove that the action is within the intended scope of the POA. This creates the possibility that agents may have a difficult time taking some actions on behalf of the principal, where the scope of the POA is not clear.

The third significant amendment to the POA law regards the power the agent has to give gifts on behalf of the principal. An authorization given to an agent to "make gifts" will now be interpreted to mean that the agent may give gifts up to the $10,000 annual exclusion (usually revolving around reducing taxes and estate planning). Furthermore, the gifts will be limited to certain family members. Moreover, for any gift to the agent (or the agent’s business) to be legal and valid, the power to make such a gift must be specifically stated in the POA.

As it becomes more and more common for nursing home residents to appoint POAs upon admission to a facility, nursing home operators will be more likely to be faced with issues concerning the validity and enforcement of POAs and actions taken pursuant to a POA. While POAs drafted pursuant to these new amendments may make determining these issues easer to address, interpreting and enforcing old POAs will likely become more difficult.

One of the most frustrating aspects of Medical Assistance ("MA") reimbursement for Nursing Facilities in Pennsylvania is the resident that has been improperly denied MA by the County Assistance Office and that has appealed this decision to the Department of Public Welfare’s Bureau of Hearings and Appeals ("BHA") and is pending eligibility. Often because of the backlog at BHA, these residents can accrue significant debt while the appeal process is pending and in the worst case scenario the nursing facility is forced to absorb this cost or pursue collection when an appeal results in an unfavorable decision. One of the best kept secrets in DPW’s regulations is Interim Assistance which assures that if a timely appeal of an eligibility determination has been made and the resident is awaiting a Determination from BHA, the nursing facility will be paid for that resident commencing 90 days from the appeal until BHA issues an adjudication. Perhaps the best feature of Interim Assistance is that these funds are not subject to restitution if BHA eventually issues an unfavorable decision.

The interim assistance system is designed to compensate individuals who have appealed their denial of MA eligibility, but have not received a final decision from the Bureau of Hearings and Appeals in a timely manner. Pursuant to 55 Pa. Code § 275.4, DPW must issue a Final Administrative Action (a decision by the hearing officer) from an MA eligibility appeal by the ninetieth (90) day after the appeal is filed. If a Final Administrative Action is not issued, the Deputy Secretary, upon request by the appellant, is required to notify the County Assistance Office to authorize the assistance which the appellant has requested in his/her appeal until final administrative action is rendered, effective the first day after the applicable time limit expires. 55 Pa. Code § 275.4(d). Moreover, the Deputy Secretary must authorize payment within 48 hours of the request for interim assistance. Interim assistance will continue until a final administrative action is rendered. Where an appellant (resident or the resident’s authorized representative) is responsible for delaying the hearing process the time limit for final administrative action will be extended by the length of the delay. 55 Pa. Code § 275.4( c)(2). Significantly, interim assistance payments are not subject to restitution or recoupment except in cases where the appellant has deliberately misrepresented facts. See 55 Pa. Code § 275.4(d)(4).

Please note, however, that although a request for interim assistance is helpful, it is not a perfect remedy. In particular, the Department will only issue interim assistance ninety (90) days from the date of an appellant’s appeal. In addition, interim assistance may be denied, as noted above, where the appellant is responsible for the delay. For example, if an appellant requests a continuance of a hearing, DPW may argue that the individual is not eligible for interim assistance because they were responsible for the delay in the decision beyond the ninety (90) day deadline. It is also important to note that DPW takes the position the Bureau’s rules on standing and representation before BHA require that a facility obtain the resident’s authorization to pursue Interim Assistance on his/her behalf. The Commonwealth Court has indicated in an unpublished decision (which unfortunately is not legal precedent) that DPW’s regulations require DPW to automatically authorize Interim Assistance when the ninety (90) days are up and not wait for the resident to request it. Facilities may need to pursue an Interim Assistance Petition for those residents who cannot pursue it on their own behalf and are unable for medical reasons to give the facility authorization to do so. Until these issues are settled by the courts, facilities should pursue Interim Assistance petitions whenever the ninety (90) days are up for a resident awaiting Final Administrative Action.

In order to receive Interim Assistance, the facility should take the following steps. First, a facility can identify all residents who have been improperly denied MA eligibility and encourage them appeal the County Assistance Office’s findings (with the facility’s assistance). For those residents who have appealed the adverse eligibility determination of the CAO, a determination should be made as to whether the residents have received a decision from the BHA within ninety (90) days. The relevant date should be appropriately calendared. For those individuals who have not received a decision within this time period, the facility should discuss the Interim Assistance issue with the resident (or the resident’s attorney in fact) and obtain authorization to request payment on their behalf. Once this authorization is received, a facility or the facility’s Legal Counsel should request, on the resident’s behalf, Interim Assistance effective the ninetieth (90^th) day from the date of the appeal. For those residents who have yet to reach the ninety (90) day threshold, a facility should be prepared to request Interim Assistance as soon as the deadline is breached. It has been our experience that the BHA will expedite final decisions for residents who have requested Interim Assistance.

By carefully recording and calendaring all relevant dates a facility can actively pursue on the resident’s behalf all Medical Assistance that residents are entitled to. Further by pursuing Interim Assistance on a resident’s behalf a facility can avoid the unpleasant task of pursuing a private collection action against a resident for payment for services rendered while the resident was pending MA eligibility.