OFFICIAL OPINION No. 15

OFFICIAL OPINION No. 15 Department of Welfare-Philadelphia State H ospitalr---M ercy-Douglass H ospitalr--- State-owned institutions-State-aided institutions-Contracts-Mental health- The Administrative Code of 1929, § 604-Auditor General. The Secretary of Welfare was authorized to contract to pay certain funds to Mercy-Douglass Hospital out of an appropriation to Philadelphia State Hospital where Mercy-Douglass agreed to operate a psychiatric unit as an addition to the State Hospital under the control of the Department of Welfare and the State Hospital. The Auditor General should not withhold approval of payments under § 604 of The Administrative Code of 1929 unless and until the Governor notifies him of a department's failure to submit requested estimates. Where a contract between Department of Welfare and Mercy-Douglass Hospital provided for monthly payments to the hospital at a set rate, but went on to provide that if the income of the hospital exceeded a designated amount the department's payments would be diminished in a like amount, the fact that there might not be a complete discharge of the department's contractural liability did not affect the validity of the contract. Harrisburg, Pa., September 27, 1957. Honorable Charles C. Smith, Auditor General, Harrisburg, Penn- sylvania. OPINIONS OF THE ATTORNEY GENERAL 85 Sir: You have requested an opinion as to: (1) under what statute is the Secretary of Welfare authorized to enter into a contract for the expenditure of funds for which neither the Governor in his Budget nor the Legislature in any appropriation act had made any provision, (2) whether the Secretary of Welfare may properly contract to ex- pend funds specifically appropriated to a State-owned and operated institution for payments to a privately operated State-aided institu- tion where the facilities and services for which these payments are made are not for the operation and maintenance or under the control of the State-owned institution, (3) whether in view of the provisions of § 4 of Act No. 95-A, approved July 19, 19571 your department can approve these payments without notification of compliance with § 604 of The Administrative Code of 1929, Act of April 9, 1929, P. L. 177, as amended, (4) if the amounts received as contemplated under para- graph 61 of the contract are not, at least, equal to the amount dis- bursed under paragraph 52 of said contract, how will reimbursement of its appropriation be effected to the Philadelphia State Hospital and (5) whether payments provided for under a contract3 between the Department of Welfare and the Mercy-Douglass Hospital may legally be made in view of the provisions of the General Appropriation Act No. 95-A, Act of July 19, 1957, passed by the 1957 Session of the Legislature and other applicable statutes, including The Administrative Code of 1929? By the Act of September 29, 1951, P. L. 16521 the Legislature au- thorized the construction of an addition to the Philadelphia State Hospital by the General State Authority on certain lands already conveyed or to be conveyed to the Authority by the Mercy-Douglass Hospital. Section 1 provided that "upon erection, construction and completion said hospital building shall be constituted an addition to the Philadelphia State Hospital." Section 2 provided for the leasing by the General State Authority to the Commonwealth of Pennsyl- vania and the subleasing by the Department of Property and Supplies to the Board of Trustees of Mery-Douglass Hospital of the lands and hospital building upon terms and conditions agreeable to the parties. By the Act of March 15, 1956, P. L. (1955) 1294, the Legislature 1 In paragraph 6 of the contract Mercy-Douglass agrees to credit against the payments required to be made by the department any sums in excess of nine dollars ($9.00) per day per patient which Mercy-Douglass may receive from, for or in behalf of patients quartered in the psychiatric unit. 2 In paragraph 5 the Department of Welfare agrees to pay Mercy-Douglass twenty-nine thousand two hundred fifty dollars ($29,250.00) per month out of funds appropriated to the Department for the operation and maintenance of Philadelphia State Hospital. •Under the contract Mercy-Douglass Hospital agreed to continue to provide 110 beds together with all services and personnel, except professional medical personnel, for a psychiatric unit in the addition to Philadelphia State Hospital. 86 OPINIONS OF THE ATTORNEY GENERAL amended this act in the following manner: while the original act had provided for the construction of a medical and surgical hospital build- ing as an addition to the Philadelphia State Hospital, the amended act now reads "mental, medical and surgical hospital building." On September 24, 1955, there was executed between the Common- wealth of Pennsylvania, acting through the Department of Property and Supplies, and the Board of Trustees of Mercy-Douglass Hospital .a lease of the building constructed under the 1951 Act and of certain removable equipment, furnishings and improvements installed or placed in the addition to the Philadelphia State Hospital. Under the lease Mercy-Douglass Hospital agreed to- " (a) Maintain and operate the leased premises as an addi- tion to the Philadelphia State Hospital in accordance with the provisions of the Act of September 29, 1951, P. L. 1652, as amended by the Act of March 15, 1956, P. L. 1294 (Act No. 399) and in so doing further agrees to comply with all the laws, rules and regulations of the City and County of Phila- delphia and the Commonwealth of Pennsylvania;" Further, the hospital agreed that it would make no alteration or addi- tion costing more than $1,500.00 without first obtaining written per- mission from the Department of Welfare. The hospital agreed that it would remove no equipment or furnishings without the consent of the Department of Welfare, nor would it use or occupy the addition to the Philadelphia State Hospital or the equipment for any other purpose than those provided in the Act of 1951, supra, as amended. Mercy-Douglass was required to secure the consent of the Depart- ment of Welfare prior to a subleasing of any portion of the addition to Philadelphia State Hospital or prior to permitting its use by any other party. Mercy-Douglass also agreed that if any dispute would arise in connection with the lease, such dispute would be referred to the Department of Justice for decision. The Legislature by Act No. 33-A, approved F ebruary 10, 1956, -recognized that the General State Authority had "recently completed .a two hundred thirty-eight (238) bed ten story addition to the Phila- .delphia State Hospital which the Legislature has authorized the Mercy-Douglass Hospital to operate* ·~ *." It also took cognizance of the fact that Mercy-Douglass Hospital lacked funds to open and ·operate this "new addition to the hospital." Thereafter, the General Assembly appropriated the sum of $650,000.00, or as much thereof as was necessary to the Department of Welfare to assist in paying for the "operation and maintenance by the Board of Trustees of the Mercy-Douglass Hospital of the addition to the Philadelphia State Jiospital * * *." OPINIONS OF THE ATTORNEY GENERAL 87 Prior to June 1, 1957, as under the present contract, the psychiatric unit, located in the State Hospital addition, was supplied by Mercy- Douglass with beds, food and services other than professional medical services. The University of Pennsylvania under a contract with the Department of Welfare provided skilled medical personnel. These two combined to provide an efficient research and treatment unit for which no counterpart existed in the overcrowded Philadelphia State Hospital4 • All patients in the psychiatric unit are referred or approved by agencies of the Department of Welfare. Mercy-Douglass does not enter its own patients in this psychiatric unit. The Department of Welfare does not exercise this control over the facilities of the Mercy- Douglass Hospital other than the psychiatric unit in question. In the budget estimates for the 1957-1959 biennium prepared by the Department of Welfare for the Governor there was listed, under the Philadelphia State Hospital budget request, an item in excess of one-half million dollars to be used in the program to be carried on in Mercy-Douglass Hospital. The Governor submitted his budget re- quest to the Legislature in the same amount as that requested by the department. The Legislature appropriated funds to the Department of Welfare for the Philadelphia State Hospital. There was no indica- tion in that appropriation that the funds should not be used for psychiatric unit in question. Act No. 33-A, approved February 10, 1956, recited the need for the facilities at Mercy-Douglass Hospital, the deficiency of funds to operate the hospital and thereafter the appropriation to meet that need. In May of 1957 officials of Mercy-Douglass Hospital estimated a biennial deficit of $778,118.00 for the 1957-1959 period. In review- ing the budget estimates submitted by the Department of Welfare to the Governor, it is obvious that it was the intention of the Depart- ment of Welfare to secure a 1957-1959 counterpart for Act No. 33-A. Because of the unique fashion in which the Legislature chose to con- struct and lease the hospital and because of the subsequent adminis- trative history, the Mercy-Douglass-Philadelphia State Hospital re- lationship is one which has no counterpart in Pennsylvania. The first question states that the Governor did not provide in his budget and the Legislature did not provide in any appropriation for •As of June 1 1957 the rated capacity of the Philadelphia State Hospital was 5,366. The occupanc/ on that date was 6,453, which meant that the hospital was obliged to house 1,087 patients more than its rated capacity. 88 OPINIONS OF THE ATTORNEY GENERAL the expenditure of funds of this contract. In view of the facts set forth above, we conclude that the Governor did make such provision in his budget and we are of the opinion that the failure of the Legis- lature to exclude payments to Mercy-Douglass Hospital for operation of the addition to the Philadelphia State Hospital is authority for the Secretary of Welfare's action in regard to this contract. The second question contains assertions which are contrary to the facts as we find them. The psychiatric unit in the Mercy-Douglass addition is being operated for and on behalf of the Philadelphia State Hospital, under the control of the State Hospital and the Department of Welfare. In view of the legislative background, the provisions of the lease and the terms of the contract, the psychiatric unit in question is an operation of the Philadelphia State Hospital. As such, the Secretary of Welfare was authorized to expend Philadelphia State Hospital funds under the contract. In this regard you refer in your letter to a separate appropriation in the amount of $275,000.00 to Mercy-Douglass Hospital, as a State- aided institution under Act No. 81-A, approved July 15, 1957. Other facilities of Mercy-Douglass Hospital, not part of the psychiatric unit, are not such an integral adjunct to the Philadelphia State Hospi- tal. These other facilities may be eligible for grants under Act No. 81-A. Unquestionably, however, the psychiatric unit being operated as a State-owned institution is not merely a State-aided institution. Turning to the third question you ask whether your department can approve payments under the contract without first receiving notifica- tion that there has been compliance with § 604 of The Administrative Code of 1929, the Act of April 9, 1929, P. L. 177, as amended, 71 P. S. § 224. Section 604 of The Administrative Code of 1929 states that the Auditor General shall not draw any warrant in favor of any depart- ment if the Governor has notified the Auditor General, in writing, of such department's failure or refusal to submit an estimate to the Governor. It does not provide, as your question implies, that you are to draw warrants only upon notification from the Governor that such requests have been met. In the fourth question you inquire as to how reimbursement of the Philadelphia State Hospital appropriation will be effected if the amounts received as contemplated under paragraph 6 are not, at least, equal to the amount disbursed under paragraph 5 of the contract. A fair reading of the contract in question indicates the reimbursement feature to be merely incidental to the main purpose of the contract. OPINIONS OF THE ATTORNEY GENERAL 89 It provides a relief clause whereby the Department of Welfare will be excused from making certain payments if the income from Mercy- Douglass Hospital exceeds the figures stipulated in the contract. The contract does not provide for a loan of money which is definitely to be repaid to the Department of Welfare. Rather it provides for the payment by the Department of Welfare for services and facilities furnished by Mercy-Douglass Hospital as are necessary for the oper- ation of the Philadelphia State Hospital. The last inquiry appears to be a summation of the previous four questions discussed. It is, therefore, the opinion of this department-and you are accord- ingly advised that- (I) The Secretary of Welfare was authorized under the provisions of Act No. 95-A to contract for the expenditure of the funds in question. (2) The Secretary of Welfare may contract to expend funds speci- fically appropriated to a State-owned and operated institution for payments to a privately operated State-aided institution where the facilities and services for which these payments are made are for the operation and maintenance of or under the control of the State- owned institution. (3) Nothing in Act No. 95-A prevents you from approving these payments unless and until you are notified by the Governor that the Department of Welfare has failed to comply with § 604 of The Administrative Code. ( 4) If the amounts received as contemplated in paragraph 6 are not, at least, equal to the amount disbursed under paragraph 5 of the contract, reimbursement will not be made to the Philadelphia State Hospital. Such reimbursement is not an essential feature of the con- tract nor is it required by any provision of the law. ( 5) Payments provided for by the contract in question may be legally made. Very truly yours, DEPARTMENT OF JUSTICE, JEROME H. GERBER, Deputy Attorney General. THOMAS D. McBRIDE, Attorney General. 90 OPINIONS OF THE ATTORNEY GENERAL