GAB Decision 107
July 2, 1980 Maryland Department of Health and Mental Hygiene; Docket
No. 77-157-MD-HC Przybylinski, Donald; Woodruff, Robert Dell'Acqua,
Frank
I. Procedural Background
The Maryland Department of Health and Mental Hygiene (State), by
letter dated July 19, 1979, sought review of a June 22, 1979
determination by the Director of the Medicaid Bureau, Health Care
Financing Administration (Agency), to disallow $226,796 in Federal
financial participation (FFP) claimed by the State under Title XIX of
the Social Security Act. The notification of disallowance stated that
FFP was being denied for intermediate care facility (ICF) services
provided by eight nursing facilities for the quarter ended December 31,
1978, because the facilities did not have valid provider agreements in
effect with the State. In its August 30, 1979 response to the State's
appeal, the Agency reduced the amount of the disallowance to
$162,304.95, stating that the Agency had erroneously computed the amount
of FFP which must be disallowed under the governing Federal regulations
for four of the facilities. Disallowances for three of the facilities
were eliminated entirely, and the disallowance for a fourth was
significantly reduced. On February 27, 1980, an Order setting forth the
facts and issues as they appeared from the record and directing the
State to show cause why the appeal should not be denied on certain
grounds (set forth below) was issued by the Board Chairman. The Order
was based on the application for review and attachments and the Agency
response thereto. The Order also asked the Agency to explain its method
of calculating the amount of the disallowance for one of the facilities
involved. In its March 17, 1980 response to the Order, the Agency
explained its method of determining the amount of the disallowance to
the Board's satisfaction. The State in a March 27, 1980 response to the
Order raised several issues which were deemed to require further
elaboration. On April 21, 1980 the Board's Executive Secretary issued a
letter to the parties requesting additional information. The Agency, in
a response dated May 22, 1980, withdrew the disallowance for one
facility in the amount of $14,426, but maintained that the remaining
disallowance ($147,878) should be sustained. The Board did not receive
a response from the State to the April 21, 1980 letter.
II. Statement of the Case
The disallowances for services provided at four nursing facilities
remain in dispute: Potomac Valley Nursing Home, University Nursing
Home, Salisbury Nursing Home, and Manor Care-Towson. The record
indicates that in 1977 the State had executed written provider
agreements with these facilities which expired on October 30, 1978 for
Potomac Valley and on September 30, 1978 for the other three facilities.
The State then executed new provider agreements with the facilities on
March 14, 1979, March 15, 1979, February 26, 1979, and March 5, 1979
respectively. Each of these agreements was for a term of twelve months.
The agreements with University, Salisbury, and Manor Care commenced on
October 1, 1978; the term of the agreement with Potomac Valley began on
November 1, 1978. The State claimed FFP for services provided at the
facilities during the last three months of 1978.
The State is asserting that the provider agreements had retroactive
effect to an earlier date than the date of the actual written execution
of the agreements. The Agency has agreed that a provider agreement can
have retroactive effect. The Agency has insisted, however, that the
controlling date for approving the validity of a provider agreement is
the date when a facility has been certified (discussed below) to have
met the health and safety standards prescribed by Federal regulations.
The facilities whose disallowances were withdrawn by the Agency in the
course of this case all had provider agreements executed at a date later
than the beginning of their year-long duration, but these facilities had
been certified prior to the commencement of the terms of their provider
agreements. Potomac Valley, University, Salisbury, and Manor Care,
however, had been certified on November 10, 1978, December 6, 1978,
January 5, 1979, and January 12, 1979 respectively, all after the
purported provider agreements had commenced to run. It is the Agency's
position that a provider agreement can be effective retroactively, but
only to the date upon which the facility has been certified as evidenced
by the approval of the survey agency on a completed HCFA Form 1539. The
State argues that the applicable regulations also permit the backdating
of the certification of a facility to the date of the expiration of the
previous provider agreement, and therefore the disallowances should be
reversed.
III. Regulations
The nursing facilities that were the subjects of disallowances in
this case all provided ICF services. To obtain FFP for payments made to
an ICF, the State must, in accordance with 42 CFR 440.150 (1978), ensure
that the facility has been certified to have met the requirements of
Subpart C of 42 CFR 442 as evidenced by a valid agreement between the
State medicaid agency (the single State agency) and the facility to
provide ICF services. The regulations require that prior to the
execution of the provider agreement and the making of payments, the
agency designated pursuant to $442.101(c)(the survey agency) must
certify that the facility is in full compliance with the standards
prescribed in the regulations at Sec. 442.101(d) (1). 42 CFR 442.12(a).
The survey agency may certify a facility for up to 12 months if it meets
applicable requirements. 42 CFR 442.110(a).
The effective date of a provider agreement may not be earlier than
the date of certification (42 CFR 442.12(b)), and the duration of the
agreement must be for the same duration as the certification period set
by the survey agency (42 CFR 442.15(b)).
IV. Discussion
The central issue in this case is whether valid provider agreements
were in effect with the four remaining facilities during the last
quarter of 1978. The State contends such agreements were in effect,
while the Agency maintains they were not.
In an Order to Show Cause dated February 27, 1980, the State was
asked why the disallowances for the facilities should not be sustained
on the ground that 42 CFR 442.12(a) and (b), requiring that a provider
agreement may not be executed with a facility before the facility is
certified by the State survey agency and that the effective date of the
agreement may not be earlier than the date of certification, are
controlling in this case.
In its response to the Order, the State has argued that it has
complied with all the applicable regulations and that, therefore, the
provider agreements are valid. The State contends that the provider
agreements were in fact not executed until after the certification forms
had been signed, thus meeting the requirements of Sec. 442.12(a). The
State then asserts the Agency's interpretation of Sec. 442.12(b) as
meaning that a provider agreement cannot take effect prior to the date
on which the certification form (HCFA form 1539) is signed is erroneous.
Rather, the State looks to Sec. 442.15(b), which states that the term of
a provider agreement must be for the same duration as the certification
period, as justification for its interpretation of Sec. 442.12(b) that a
provider agreement may not be effective earlier than the effective date
of the certification. The State points out that when its survey agency
signed the certification forms for the facilities, the survey agency
backdated the terms of the certification periods to the date the prior
provider agreements expired. Thus, according to the State, any time
differential between the expiration of the prior provider agreements and
the actual signing of the certification forms is covered by the
backdating of the start of the certification period for the facilities.
The new provider agreements therefore had the same duration as the
certification periods set by the survey agency, satisfying Sec.
442.15(b). In support of this line of reasoning the State refers to 42
CFR 442.20(a)(2) which requires that any Medicaid provider agreement
with a skilled nursing facility (SNF) participating in both the Medicaid
and Medicare programs must be for the same duration as the Medicare
certification. The State has supplied documents showing that the
facilities in question participate in both programs and that the Agency
has approved backdated certifications of the facilities for the Medicare
program.
While it is true, as the State contends, that provider agreements
were not executed for the four facilities until after they had been
certified, the fact remains that for a period of time after the
expiration of its prior provider agreement, each of the four facilities
involved was not certified by the single State agency as meeting the
standards required for participation in the Medicaid program.
Throughout the time period between the expiration of the prior provider
agreements and the recertification of the facilities patients remained
in the facilities. If the State's interpretation of 42 CFR 442.12(a)
and (b) were to be accepted, a facility, in the interval between its
prior provider agreement's expiration and subsequent recertification,
could provide substandard care to patients but still receive a backdated
certification from the single State agency qualifying the facility for
Medicaid participation based on a subsequent survey showing that, at the
time of the survey, the facility complied with Federal requirements.
The Agency's interpretation of 42 CFR 442.12(a) and (b) as meaning
that a provider agreement can only be effective from the date of a
facility's certification as meeting certain requirements is not
arbitrary in view of the Medicaid program's aim to ensure quality care
in sanitary and safe conditions. Under the Agency's interpretation, a
facility is unable to participate in the Medicaid program until it has
shown it has met basic requirements as evidenced by certification by the
single State agency. This certification becomes effective on the date
the survey agency indicates its approval by completing a HCFA Form 1539.
No interval where the facility could fall below these standards is
permitted under this interpretation, while under the State's reasoning
such a possibility could occur. Even though the State has supplied
documents purporting to show that the four facilities were surveyed
prior to the intervals between the expiration of their prior provider
agreements and their recertification, that does not excuse the State
from adherence to the regulations that were in effect during the period
in question. A recent HCFA regulation announcement (45 FR 22933, April
4, 1980) would appear to allow a provider agreement to become effective
on the date of the onsite health and safety survey, but the rule will
not become effective until July 3, 1980. Nevertheless, we find that the
Agency's interpretation of the regulations in effect during the period
of the disallowance represents a valid exercise of its administrative
responsibilities. The fact that the Agency has now decided to change
its policy does not invalidate its prior actions.
The State's reliance on 42 CFR 442.20(a)(2) in support of its
position is also misplaced. The State's argument that the Medicaid
provider agreements executed with the four facilities must be considered
valid because the agreements were for the same duration as Medicare
agreements executed with the facilities as required by Sec.
442.20(a)(2) overlooks one decisive factor. The disallowances in this
case were for ICF services provided at the facilities. The scope of
Sec. 442.20 is limited to SNFs which participate in both the Medicare
and Medicaid programs.
It is apparent from the record that the facilities involved in this
disallowance provided both ICF and SNF services. The State's argument
is deficient in that it fails to take cognizance of the regulatory
distinctions that exist between ICFs and SNFs. Different standards are
imposed for each type of facility reflecting the different services
provided at each type of facility. The responsibility for certifying an
ICF for Medicaid certification lies solely with the single State agency.
42 CFR 442.101(c). For a SNF participating in both the Medicare and
Medicaid programs, however, Agency approval of the State's certification
of the facility is required. 42 CFR 442.101(b)(2). The Agency allows a
SNF provider agreement for a Medicare/Medicaid facility to be backdated
to the date of Medicare certification to protect a state from permanent
loss of FFP where, for some reason, there is a delay in the Agency
approval of the SNF for Medicaid participation. None of these
regulations pertaining to SNFs, however, are applicable to this case in
which the disallowance was for ICF services only.
Federal regulations require that for a state to receive FFP for
services provided by a facility a valid provider agreement must be in
effect with that facility. Under 42 CFR 442.12 a provider agreement
cannot be effective prior to the date of the facility's certification.
In this case all four facilities lacked valid provider agreements for
some period of time during the quarter ended December 31, 1978. For
this reason the disallowance of FFP for services provided at the
facilities prior to their certifications is sustained.
IV. Conclusion
For the reasons stated above, we conclude that 42 CFR 442.12 is
controlling in this case and sustain the disallowance in the amount of
$147,878.
OCTOBER 04, 1983