The appointment of an institution as payee requires special handling because the institution is typically the beneficiary's primary creditor. Some States have enacted legislation limiting the instances where a State or private institution may act as the manager of a patient's funds.

In Vecchione, a Federal court ruled unconstitutional the Pennsylvania law permitting State revenue agents to act as statutory guardians and administer patient funds without court appointment. The decision prohibits State revenue agents or any other official of these institutions from disbursing funds for care and maintenance (i.e., the basic expenses of food, clothing, and shelter, etc.) of a patient. The official can only administer funds for personal needs expenses.

The guardian officer is the official who has the responsibility for the funds of patients/residents who have been preliminarily determined to be incompetent and to ensure that the patients' financial affairs are managed in the patients' best interests. The officer cannot use the money for care and maintenance expenses unless appointed legal guardian by a court.

If there is no better-qualified potential payee, appoint the guardian officer as payee pending appointment as legal guardian.

CAUTION: If the guardian officer is not appointed legal guardian or if the beneficiary is not found to be legally incompetent, initiate change of payee development immediately.

If no other qualified payee candidate is available and the beneficiary is a patient in a DVA hospital, solicit a payee application from the hospital director.