Decision No. CR646 Department of Health and Human Services DEPARTMENTAL APPEALS BOARD Civil Remedies Division |
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IN THE CASE OF | ||||
SUBJECT: Ross Hospital - Behavioral Health Center of Petaluma, et al., Petitioner, |
DATE: Feb.15, 2000 | |||
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Health Care Financing Administration. | Docket No.C-99-473 | |||
DECISION | ||||
I sustain the determination of the Health Care Financing Administration (HCFA) to deny certification to Petitioners, Behavioral Health Center of Petaluma (Petitioner Petaluma), Ross Hospital - Sequoia Mental Health and Recovery Services (Petitioner Sequoia), and Ross Hospital - Behavioral Health Center of Ukiah (Petitioner Ukiah) to participate in the Medicare program as provider-based facilities of Petitioner, Ross Hospital (Petitioner Ross), effective March 16, 1998. Background, undisputed
material facts and law HCFA offered five exhibits
with its brief which it designated as HCFA Exhibits A - E. HCFA offered
an additional exhibit with its reply brief which it designated as HCFA
Exhibit F. Petitioner offered eight exhibits with its brief which it designated
as P. Ex. 1 - P. Ex. 8. I am receiving all of the parties' exhibits into
evidence. The facts in this case and the law which I discuss in this section are not disputed. I base my statement of the facts on the parties' briefs and on their exhibits. Petitioner, Ross Hospital (Petitioner Ross) is a psychiatric hospital that is located in Kentfield, California. Petitioner Ross is certified to participate as a psychiatric hospital in the Medicare program. In 1993 and 1994 Petitioner Ross determined that there was a need to provide partial hospitalization services to individuals in the communities of Petaluma, Santa Rosa, and Ukiah, California. P. Ex. 3 at 1. "Partial hospitalization services" are defined under section 1861(ff) of the Social Security Act (Act) to include a comprehensive set of mental health services that are prescribed by a physician and which are furnished by a physician pursuant to a physician-written individualized plan of treatment. Act, sections 1861(ff)(1), (2). A program of partial hospitalization services is a program which is furnished by a hospital to its outpatients or by a community mental health center and which is a distinct and organized intensive ambulatory treatment service offering less than 24-hour-daily care. Act, section 1861(ff)(3)(A). Medicare will not reimburse for partial hospitalization services unless they are provided by a hospital or by a community mental health center. Id. Petitioner Ross established partial hospitalization programs which included Petitioners Petaluma, Sequoia, and Ukiah. Petitioner Ross held out to the public that these three programs were being operated as departments of Petitioner Ross. P. Ex. 3 at 2. Petitioner Ross submitted reimbursement claims to Medicare for the services provided by Petitioners Petaluma, Sequoia, and Ukiah from the inception of these programs. P. Ex. 3 at 2. The services that were provided by Petitioners Petaluma, Sequoia, and Ukiah were claimed by Petitioner Ross as if they had been provided by Petitioner Ross. Additionally, Petitioner Ross included the costs incurred by Petitioners Petaluma, Sequoia, and Ukiah on its Medicare cost reports. Id. For a time, Medicare reimbursed Petitioner Ross for the services and the costs that it claimed on behalf of Petitioners Petaluma, Sequoia, and Ukiah. However, on April 30, 1998, HCFA advised Petitioner Ross that it could not claim reimbursement for the services that were provided by Petitioners Petaluma, Sequoia, and Ukiah. P. Ex. 4. HCFA issued its final determination in a letter that is dated January 25, 1999. P. Ex. 6. In that letter, HCFA advised Petitioners that it would not reimburse for the partial hospitalization services provided by the three programs effective March 16, 1998. As a consequence of HCFA's April 30, 1998 letter, Petitioner Ross determined to cease operating the three partial hospitalization programs. It transferred Petitioner Petaluma's operations to another entity effective July 1, 1998. P. Ex. 3 at 4. It closed Petitioner Sequoia effective July 17, 1998. Id. It closed Petitioner Ukiah effective June 30, 1998. Id.
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ISSUE, FINDINGS OF FACT AND CONCLUSIONS OF LAW | ||||
A. Issue The issue in this
case is whether HCFA properly determined that, effective March 16, 1998,
Petitioners Petaluma, Sequoia, and Ukiah failed to qualify for Medicare
reimbursement as provider-based facilities.
Under applicable HCFA
criteria, an outpatient facility must be located in "close proximity"
to a hospital in order to be eligible to be considered as part of the
hospital for Medicare reimbursement purposes. Johns Hopkins Health
Systems, DAB CR598 (1999). HCFA determined that Petitioners Petaluma,
Sequoia, and Ukiah did not meet applicable criteria because none of these
programs was located in close proximity to Petitioner Ross. Petitioner
Petaluma was located 27 miles from Petitioner Ross, Petitioner Sequoia
was located 42 miles from Petitioner Ross, and Petitioner Ukiah was located
100 miles from Petitioner Ross.
Petitioners do not
dispute that HCFA determined correctly that the three programs did not
qualify for provider-based reimbursement status. What Petitioners dispute
is the effective date - March 16, 1998 - that HCFA determined
Petitioners Petaluma, Sequoia, and Ukiah failed to meet the applicable
reimbursement criteria. Petitioners characterize HCFA's determination
that Petitioners Petaluma, Sequoia, and Ukiah failed to meet the applicable
criteria as of March 16, 1998 as a determination to terminate retroactively
these three programs' participation in Medicare, or alternatively, as
a retroactive denial of the three programs' provider-based status. They
argue from these characterizations that HCFA unlawfully terminated or
denied retroactively the three programs' provider-based reimbursement
status. Petitioners contend that, at a minimum, Petitioner Ross should
be permitted to claim reimbursement for the services that were provided
by Petitioners Petaluma, Sequoia, and Ukiah through the dates that these
programs were closed or transferred to another entity.
B. Findings
of fact and conclusions of law
I make findings of
fact and conclusions of law (Finding) to support my decision that HCFA
properly determined to deny certification to Petitioners Petaluma, Sequoia,
and Ukiah effective March 16, 1998. I set forth each Finding below as
a separately numbered heading. I discuss each Finding in detail.
1.
HCFA did not terminate improperly the participation Petitioners characterize
HCFA's determination in this case as a determination that Petitioners
Petaluma, Sequoia, and Ukiah were entitled to be recognized as provider-based
prior to March 16, 1998 but were not entitled to such status after that
date. Petitioners' brief at 8; see P. Ex. 6. Petitioners
rely on the fact that HCFA issued its final determination in this case
on January 25, 1999 as a basis for asserting that the alleged termination
of provider-based status of Petitioners Petaluma, Sequoia, and Ukiah was
a "retroactive" termination of these Petitioners' participation in Medicare.
Petitioners assert that a "retroactive" termination of participation is
contrary to HCFA's established policy and is, therefore, unlawful.
Petitioners premise
their argument on an incorrect characterization of HCFA's determination.
Consequently, Petitioners' argument fails. HCFA never determined that
Petitioners Petaluma, Sequoia, and Ukiah were provider-based participants
in Medicare at any point in time. And, HCFA never "terminated" - retroactively
or otherwise - the participation in Medicare of these Petitioners or their
provider-based status.
Participation in Medicare
is subject to legal requirements. In order to qualify to participate in
Medicare a provider must file a provider agreement with HCFA. Act, section
1866(a)(1); 42 C.F.R. � 489.11(b). HCFA will not enter into a provider
agreement to enable a provider to participate in Medicare until HCFA has
determined that the provider is complying substantially with Medicare
participation requirements. See Act, section 1866(b)(2)(A); 42
C.F.R. � 489.10(a).
There is no such thing
as de facto participation. Nor is there such a thing as a de facto provider-based
program. An entity either has been certified to participate in Medicare
or it has not. The fact that HCFA may, through inadvertence or error,
reimburse an uncertified entity for Medicare reimbursement claims that
the entity submits or which are submitted on behalf of that entity does
not confer participant status or provider-based status on that entity.
Neither Petitioner
Petaluma, Petitioner Sequoia, nor Petitioner Ukiah ever was certified
by HCFA to participate in Medicare. HCFA never determined that any of
these programs were complying substantially with Medicare participation
requirements. Nor did HCFA determine at any time that any of these programs
were provider-based programs of Petitioner Ross. None of these programs
ever was invited to file, nor did it file, a provider agreement with HCFA.
HCFA never told Petitioner Ross that any of the programs qualified as
a provider-based program.
Contrary to Petitioners'
assertions, the determinations which HCFA sent to Petitioners cannot be
read as acknowledgments by HCFA that Petitioners Petaluma, Sequoia, or
Ukiah ever were provider-based programs. On April 30, 1998, HCFA told
Petitioners that it had determined that "the Ukiah, Santa Rosa [Sequoia]
and Petaluma programs cannot be considered provider-based with . . . [Petitioner
Ross] for Medicare purposes." P. Ex. 4. This determination says only that
the three programs did not qualify as provider-based programs. Nothing
in the determination states or suggests that any of these programs had
qualified as provider-based programs at some previous point in time.
HCFA sent its final determination to Petitioners on January 25, 1999. P. Ex. 6. In this letter, HCFA told Petitioners that:
Id. (emphasis
in original).
This language cannot
reasonably be construed as a statement from HCFA that any of the three
programs qualified as provider-based programs at any point in time. The
January 25, 1999 determination is a reaffirmation of HCFA's determination
that it is denying that any of the three programs qualified as
provider-based programs. It is true that HCFA allowed Petitioner Ross
to claim reimbursement for the three programs prior to March 16, 1998.
But that action by HCFA is not an acknowledgment that any of the programs
were provider-based prior to March 16, 1998. Rather, it is a conclusion
by HCFA that, as a matter of discretion, it would allow Petitioner Ross
to claim reimbursement for the programs prior to March 16, 1998, despite
the fact that they were not provider-based, due to the good-faith
efforts of these programs to obtain State licensure. HCFA's determination
was an act of discretionary largesse by HCFA and was not a finding that
any of the programs ever qualified as provider-based programs.
2.
HCFA did not contravene its policy in determining Petitioners assert
that, if HCFA's determination was not a retroactive termination of participation
of Petitioners Petaluma, Sequoia, and Ukiah, then it was a "retroactive
denial" of provider-based status for these three programs. According to
Petitioner, this alleged retroactive denial is inconsistent with HCFA's
own policies and is, therefore, arbitrary, capricious, and unlawful.
Petitioners premise
this argument on their characterization of the facts and on the contents
of a program memorandum issued by HCFA. Petitioners contend that they
were first advised by a notice from HCFA that is dated April 30, 1998
that HCFA was questioning whether Petitioner Ross lawfully could claim
reimbursement for the partial hospitalization services that were being
delivered by Petitioners Petaluma, Sequoia, and Ukiah. P. Ex. 3 at 3;
P. Ex. 4. Petitioners argue from this contention that HCFA's ultimate
denial of participation is "retroactive" inasmuch as HCFA ultimately determined
that Petitioner Ross could not claim provider-based reimbursement for
the three programs effective March 16, 1998.
Petitioners argue
that such a "retroactive" denial is contrary to the terms of a provider
policy document first issued by HCFA in August, 1997 as PMI A-96-7. P.
Ex. 2. Petitioners assert that PMI A-96-7 expressly prohibits "retroactive"
denials of provider-based status such as the denial which allegedly occurred
here. It is not clear from
HCFA's April 30, 1998 letter that Petitioners were unaware prior to that
date that HCFA was questioning whether Petitioner Ross could claim reimbursement
for the partial hospitalization services that were being provided by Petitioners
Petaluma, Sequoia, and Ukiah. The letter discusses HCFA's review of requests
that were made to HCFA on behalf of the three programs and evaluates information
that these programs or Petitioner Ross had supplied to HCFA. P. Ex. 4.
That strongly suggests that discussions and communications between Petitioners
and HCFA concerning the programs' status predated April 30, 1998. However,
for purposes of this decision, I accept Petitioners' representation that
they did not know prior to receiving HCFA's April 30, 1998 notice that
HCFA was questioning whether the partial hospitalization services given
by Petitioners Petaluma, Sequoia, and Ukiah were provider-based. See
P. Ex. 3 at 3.
But, the facts as
contended by Petitioners do not support a conclusion that HCFA contravened
its policy in denying Petitioners Petaluma, Sequoia, and Ukiah provider-based
status effective March 16, 1998. I conclude, contrary to Petitioner's
arguments, that HCFA's determination in this case was not inconsistent
in any respect with HCFA's policy governing provider-based status determinations.
The HCFA policy language
cited by Petitioners does not suggest that HCFA may not deny provider-based
status effective a date which predates the date of the determination.
The policy addresses the circumstance where a HCFA Regional Office is
required to correct a previous determination that it made erroneously.
It does not address the circumstance - which is present in this case -
where a HCFA Regional Office determines to deny a request for provider-based
status in the absence of any previous determination by that office that
the applicant enjoyed provider-based status.
The language in PMI A-96-7 on which Petitioners rely states:
P. Ex. 2 at 12 (emphasis
added). What PMI A-96-7 plainly
states is that where a HCFA Regional Office has made a determination that
an entity qualifies for provider-based status which predates the date
of the policy statement (August 1997) and which is erroneous in light
of the policy statement, the Regional Office may correct its previous
determination. However, in the event that the Regional Office does correct
a previous determination, it should do so prospectively and not retroactively.
PMI A-96-7 does not
address the circumstance where HCFA reviews a request to confer provider-based
status on an entity in the absence of any previous determination by HCFA
that the entity enjoyed provider-based status. In that circumstance there
is nothing in the policy
statement which precludes HCFA from denying provider-based status effective
a date which predates the date of the determination to deny provider-based
status. HCFA never determined
that Petitioners Petaluma, Sequoia, and Ukiah qualified for provider-based
status. When HCFA ultimately determined to deny provider-based status
to these programs it was not "correcting" a prior determination that these
programs were provider-based. It is true that for a period of several
years Medicare had made payments for partial hospitalization services
provided by these programs based on the representations to HCFA that were
made by Petitioner Ross. From the vantage point of hindsight, such payments
never should have been made to Petitioner Ross. Payments were made for
the services without HCFA having made any affirmative determination of
provider-based status.
However, the fact
that payments may have been made in error is not equivalent to an affirmative
determination that the three programs had provider-based status. The payments
to Petitioner Ross for the services that were provided by Petitioners
Petaluma, Sequoia, and Ukiah were erroneous payments and were not the
consequence of any affirmative determination by HCFA that the three programs
were provider-based.
Petitioners argue
that it was unfair for HCFA to deny provider-based reimbursement status
to Petitioners Petaluma, Sequoia, and Ukiah, effective March 16, 1998.
They assert that after these programs received notice from HCFA of the
"termination" of their participation status, they were obligated to find
alternative care for their patients in a way that minimized interruptions
in the course of treatment for these patients. Petitioners assert that
the three programs could not simply close their doors upon receipt of
notice from HCFA. Rather, they were required to stay open for a transitional
period of time during which they incurred substantial expenses. Petitioners
contend that HCFA should be required to reimburse the claims generated
and the costs accrued during the transitional period.
This argument is in
large respect a claim for equitable relief. Petitioners assert, essentially,
that HCFA's actions put them in a no-win situation in which they were
forced to subsidize the care that they provided to their patients. Petitioners
assert that it would be inequitable to compel them to provide this care
without compensation. Additionally, Petitioners argue that HCFA's refusal
to compensate them for the transitional period contravenes the letter
and spirit of regulations that HCFA proposes to adopt which address the
issue of provider-based status.
I find Petitioners'
assertions to be without merit. First, I do not have the authority to
grant relief to Petitioners based on equitable considerations. There is
nothing, either in the Act, or in implementing regulations, which gives
me that authority. Charity Behavioural Services, Inc., DAB CR635
(1999); T.L.C. Mental Health Center, DAB CR636 (1999).
Even if I had the
authority to grant equitable relief to Petitioners I would not find such
relief to be appropriate in this case. The facts of this case are that
Petitioner Ross received Medicare reimbursement for several years
based on Petitioner Ross' incorrect representations that Petitioners Petaluma,
Sequoia, and Ukiah were providing hospital-based services. In fact, Petitioner
Ross was not entitled to receive any of that reimbursement. Not only did
the three programs not qualify as provider-based, but Petitioner Ross
had never applied to HCFA to have these Petitioners certified as provider-based
facilities. It is apparent from the exhibits submitted by the parties
that, at no time prior to 1998 did Petitioners ever seek a designation
of provider-based status from HCFA.
Moreover, the evidence
in this case does not suggest that Petitioners were harmed by HCFA's actions.
The costs associated with the transitional period that occurred after
HCFA determined not to compensate Petitioner Ross for the partial hospitalization
services that were being provided by Petitioners Petaluma, Sequoia, and
Ukiah are only a small percentage of the payments that HCFA made to Petitioner
Ross for services that were not compensable under Medicare as provider-based
services. HCFA has allowed Petitioner Ross to retain far more than it
was entitled to keep. Petitioner Ross was the beneficiary of a windfall
that greatly exceeded any costs that it may have incurred in the transitional
period during which it divested itself of the three programs.
HCFA's action in this
case is not in any respect inconsistent with the letter or spirit of proposed
regulations. The proposed regulations do not govern this case. But, had
the proposed regulations been applicable to this case, they would make
it clear that, as a matter of law, Petitioners would not be entitled to
any relief. The regulations in question are proposed amendments to 42
C.F.R. Part 413. 63 Fed. Reg. 47552 - 47610 (Sept. 8, 1998); P. Ex. 1.
These proposed regulations are intended to established criteria for determining
whether outpatient facilities may be certified as provider-based. In some
respects, they incorporate the policies that are contained in PMI A-96-7.
The proposed regulations
prohibit a provider from claiming reimbursement for a program on the ground
that it is provider-based without first obtaining explicit approval from
HCFA. Petitioner Ross' actions in claiming reimbursement for the services
provided by Petitioners Petaluma, Sequoia, and Ukiah without first obtaining
HCFA's approval to do so thus plainly contravenes the proposed regulations.
Proposed regulation 42 C.F.R. � 413.65(b)(1) states:
A
facility or organization is not entitled to be treated as provider-based
And, proposed regulation 42 C.F.R. � 413.65(b)(2) states:
Second, the proposed
regulations do not suggest that HCFA must pay claims for services for
allegedly provider-based programs until it makes a prospective determination
to disallow those claims. As was the case with PMI A-96-7, the proposed
regulations authorize HCFA to correct past erroneous determinations
to confer provider-based status. Proposed regulation 42 C.F.R. �
413.65(j) allows HCFA to review a past determination of provider status
if it believes that the determination is inappropriate. The proposed regulation
provides, essentially, that if HCFA determines to cease an entity's provider-based
status, then reimbursement for that entities services will cease prospectively,
with the first day of the next cost report period following notification
of HCFA's redetermination.
However, nothing in this section suggests that HCFA's policy is or will be to provide a prospective cessation of reimbursement in a circumstance like the present case. As is the case with PMI A-96-7, the purpose of the proposed regulation is to enable HCFA to change a prior determination. The policy is wholly inapplicable to the present case because there is no prior determination by HCFA that partial hospitalization services provided by Petitioners Petaluma, Sequoia, or Ukiah were provider-based.
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JUDGE | ||||
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