Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Texas Department of Human Services
DATE: July 15, 1992
Docket No. A-92-42
Decision No. 1344
DECISION
The Texas Department of Human Services (Texas/State) appealed
a
determination by the Health Care Financing Administration
(HCFA)
disallowing $1,272,812 in federal financial participation (FFP)
claimed
by the State under the Medicaid program. The disallowance
represents
the federal share of payments made by the State to eight long-term
care
facilities for services rendered for periods during which HCFA found
the
facilities did not have valid provider agreements.
HCFA's disallowance was based on the results of a financial
management
review of a selected sample of long-term care facilities for the
period
October 1, 1986 through September 30, 1989. HCFA Exhibit (Ex.)
1. The
disallowance has two components. HCFA identified seven
facilities whose
provider agreements (which allowed them to participate in
Medicaid) had
been terminated due to deficiencies discovered by the
State. HCFA found
that the State had subsequently allowed the
facilities to reenter the
Medicaid program, and had made Medicaid payments to
them, prior to
completing federal provider survey requirements. HCFA
found that these
facilities did not have valid provider agreements for
varying periods
during 1987 and 1988 because the State had failed to conduct
full health
and life-safety code surveys before readmitting these
facilities.
Consequently, HCFA disallowed $1,207,634 in FFP.
HCFA also found that Texas claimed FFP for court-ordered payments made
to
a decertified facility. The State had decertified the facility
and
terminated its provider agreement. The facility did not contest
these
actions. Subsequently, a State court granted Texas' petition to
have a
trustee appointed to run the facility. In turn, the
trustee
successfully petitioned the court to order .the State to
release
Medicaid funds for the facility. Pursuant to the court order,
Texas
paid those funds over a six-month period in 1989 during which
the
facility did not have a provider agreement. HCFA asserted that FFP
is
available in expenditures for long-term care facility services only
if
the facility has been certified as meeting the requirements for
Medicaid
participation as evidenced by a provider agreement. Since the
facility,
did not have a provider agreement, HCFA disallowed $65,178 in
FFP
claimed by the State.
Generally, Texas maintained that it was not required to conduct a
full
survey prior to entering into a new provider agreement with a
terminated
facility. Rather, Texas asserted that its practice was to
conduct
follow-up surveys to see that a facility had corrected the
deficiencies
which had caused its decertification. Texas argued that
HCFA was aware
of this practice and, in fact, had approved it.
Additionally, Texas
asserted that federal regulations allowed FFP in
expenditures for
Medicaid services provided under a court order. Since
the FFP in
question for one facility was allegedly for such court-ordered
payments,
Texas argued that this part of the disallowance should be reversed
as
well.
Based on the following analysis, we sustain the entire disallowance
of
$1,272,812.
Background
The Medicaid program under Title XIX of the Social Security Act
(Act),
provides grants to states for medical assistance to eligible
low-income
individuals. Generally, section 1902 of the Act requires
that a state
participating in Medicaid have a State plan for medical
assistance
(State plan). The State plan sets the parameters of a
state's
participation in Medicaid. Section 1902(a)(27) requires a state
to
maintain agreements (provider agreements) with every person
or
institution providing services under the State plan. Section
1902(a)(5)
of the Act requires that a state designate a "single state agency"
to
administer the State plan and enter into provider agreements. The
Texas
Department of Human Services serves that function.
Section
1902(a)(33)(B) requires a State health agency to be designated as
a
survey agency. The survey agency is responsible for surveying
health
institutions participating in Medicaid to insure that facilities
meet
the various health and safety requirements designed to protect
the
patients. The Texas Department of Health (TDH) is the State
survey
agency..Federal regulations at 42 C.F.R. Part 442 establish
the
standards for payments for skilled nursing and intermediate
care
facility services. 1/
In pertinent part, the regulations provide--
FFP is available in expenditures for SNF [skilled
nursing facility]
and ICF [intermediate care
facility] services only if the facility
has been
certified as meeting the requirements for Medicaid
participation, as evidenced by a provider agreement executed
under
this part. An agreement is not valid
evidence that a facility has
met those requirements
if HCFA determines that--
* * *
(2) The survey agency failed to follow the rules and
procedures
for certification set forth in Subpart C of this part
and
.431.610 of this subchapter;
* * *
(4) The survey agency failed to use the Federal standards
and
the forms, methods, and procedures required . . .
for
determining the qualifications of providers; . . .
42 C.F.R. .442.30(a).
The effective date of a provider agreement in various circumstances
is
governed by regulation at 42 C.F.R. .442.13. In relevant part,
the
regulation provides--
(b) All Federal requirements are met on the
date of the survey.
The agreement must be effective
on the date the onsite survey is
completed (or on
the day following the expiration of a current
agreement) if, on the date of the survey the provider meets: .
(1) All
Federal health and safety standards; . . .
(c) All Federal requirements are not met on the date of
the
survey. If the provider fails to meet any of the
requirements
specified in paragraph (b) of this section, an agreement
must be
effective on the earlier of the following dates:
(1) The date on which the provider meets all requirements.
(2) The date on which the provider submits a correction
plan
acceptable to the State survey agency or an approvable
waiver
request, or both.
The certification of a facility with deficiencies either must be for
a
time-limited period set according to 42 C.F.R. .442.111(b) or
must
contain an automatic cancellation date as described in 42
C.F.R.
.442.111(c).
Analysis
Ordinarily, if a state Medicaid agency enters into a provider
agreement
with a facility, that constitutes evidence that the facility has
met the
certification requirements. However, as was the case here, HCFA
may
exercise its authority under 42 C.F.R .442.30 to "look behind"
a
provider agreement where HCFA finds that a state has not complied
with
the federal procedural requirements for the survey and
certification
process. See Louisiana Dept. of Health and Hospitals, DAB
No. 1116, at
1 (1989), request for reconsideration denied, (1990); Oklahoma
Dept. of
Human Services, DAB No. 1043, at 2 n.1 (1989). Where a state
has not
followed the applicable rules and procedures for certification,
a
provider agreement is not valid evidence that a facility
met
certification requirements. Absent other evidence that
certification
requirements were in fact met, FFP is not available for the
period when
the facility lacked a valid provider agreement.
A. The State's Use of Follow-Up Surveys
HCFA identified seven facilities terminated from Medicaid based
on
deficiencies discovered during full health and safety surveys. 2/
Texas
had either declined to renew the.certification or invoked an
automatic
cancellation date for these facilities. HCFA found that,
subsequent to
the facilities' terminations, Texas had entered into new
provider
agreements with the facilities to readmit them to the Medicaid
program
without conducting complete onsite surveys. Thus, HCFA
concluded, those
provider agreements were invalid and the State could not
receive FFP for
payments to the facilities prior to the time the facilities
were
certified based on full health and safety surveys.
Texas conceded that these facilities had not received full surveys
prior
to entering into new provider agreements. However, Texas
contended that
it was not required to perform full surveys. Texas
asserted that its
practice was to conduct a follow-up survey directed at the
problems
which led to a facility's termination. Texas argued that not
only was
HCFA aware of the State's policy, but HCFA officials had, upon
requests
for clarification from the State, interpreted the federal
requirements
as permitting the State to use follow-up surveys in this
manner. Texas
offered testimony 3/ from a State official involved in
the certification
process. That individual stated that since HCFA's
State Operations
Manual (SOM) did not contain clear instructions for
certification of a
long-term care facility after the facility's termination,
he had sought
guidance from the HCFA liaison. The HCFA liaison
allegedly informed him
that if more than 120 days had elapsed since the last
full survey,
another full survey was required. However, if less than
120 days had
elapsed, only a follow-up to the deficiencies which led to
the
termination was required. Texas indicated that its use of
follow-up
surveys was a long-standing practice, existing as far back as the
early
1980's. Based on these circumstances, Texas asserted that HCFA
should
be estopped from disallowing FFP for these facilities. Texas
Brief
(Br.) at 3-5; Texas Ex. 3; Hearing Transcript (Tr.) at 37-38.
.HCFA
asserted that, following termination from Medicaid, a facility
seeking
to reenter the program is treated as a new applicant. HCFA
maintained
that a full survey was required to ascertain whether each facility
met
all federal requirements at the time of certification before a
facility
could have a valid provider agreement. HCFA argued that the
earliest
effective date for the new provider agreements would be either the
date
of a facility's full survey or the date on which a facility submitted
an
acceptable plan of correction. HCFA Br. at 5-8.
HCFA submitted affidavits from two employees in the HCFA Regional
Office
encompassing Texas whose duties included reviewing state surveys
and
certification of long-term care providers. The employees stated
that
follow-up surveys were used by a state to determine whether a
facility
found to have serious deficiencies had corrected those
deficiencies.
While follow-up surveys could be used to prevent termination of
a
provider with serious deficiencies, they were not used to
demonstrate
that a facility without a current provider agreement met all
federal
health and safety standards. Also, long-standing HCFA policy
required
that the effective date of a provider agreement be no earlier than
the
date of a full survey even for a facility that had
previously
participated in Medicaid. See HCFA Ex. 5.
Finally, HCFA asserted that there was no factual support for the
State's
estoppel argument. HCFA provided testimony from the individuals
alleged
by Texas to have indicated that follow-up surveys would be
sufficient.
Those individuals denied making the statements which the
State
attributed to them. Moreover, HCFA argued that, even if these
people
had made the statements attributed to them, the government could not
be
estopped. HCFA Br. at 8-12; HCFA Ex. 5; Tr. at 49.
Texas conceded that it would be required to perform full surveys
to
readmit a terminated facility if more than 120 days had elapsed
since
the most recent full survey. HCFA provided the Certification
and
Transmittal (C&T) Forms for the seven facilities in issue. See
HCFA Ex.
2. We reviewed those C&T Forms and found that at four
facilities
(Barton Heights, Retema Manor, Serenity and Valley View) more than
120
days had elapsed between the last full survey and the date on which
the
facilities were surveyed/recertified. Thus, even if we were to
accept
the State's argument, that it could use follow-up surveys to
certify
after termination if the follow-up survey was performed within 120
days
of the last full survey, only the disallowances for Hillcrest
(96
days),.Pine Haven (105 days) and Cresthaven (111 days), would
be
affected.
However, we conclude that the State could not reasonably read 42
C.F.R.
.442.13 to permit it to certify a terminated facility and enter into
a
new provider agreement based only on a follow-up survey. 4/
Section
1902(a)(27) of the Act requires that states participating in
Medicaid
have provider agreements with facilities providing services under
the
state plan. Section 442.12 of 42 C.F.R. provides that a state may
enter
into a provider agreement only with a certified facility.
Section
442.13(a) plainly states that the effective date for a
provider
agreement "must be in accordance with this section." Paragraph
(b)
requires that, where all Federal requirements are met on the date of
the
survey, a provider "agreement must be effective on the date the
onsite
survey is completed." In relevant part, paragraph (c)(1)
provides,
that, "where a provider fails to meet any of the requirements . . .
in
paragraph (b)," the agreement must be effective on the "date on
which
the provider meets all requirements" or the "date . . . the
provider
submits" an acceptable waiver request or plan of correction.
(Emphasis
added.)
The regulations clearly state that a provider agreement cannot take
effect
until an onsite survey is completed demonstrating compliance with
all federal
requirements (including by waiver or plan of correction).
Four of these
facilities' provider agreements had been terminated "due
to the existence of
serious deficiencies which would jeopardize patient
health and safety and
seriously limit this facility's capacity to render
adequate care." HCFA
Ex. 2 at 1, 3, 5, and 7 (unnumbered). The other
three had been given
opportunities to correct their deficiencies but had
failed to make adequate
progress in correcting those deficiencies so
that TDH invoked an automatic
cancellation date. Id., at 9, 11 and 13
(unnumbered). Under these
circumstances, a partial survey is not
adequate evidence that all
requirements for participation were met. 5/
Given the overall concern
with.the health and safety of patients
evidenced in the regulations, we
conclude that the only reasonable
reading of 42 C.F.R. .442.13 is that a full
health and safety survey is
required for a provider agreement to take
effect. Moreover, as we
discuss below, the applicable provisions of the
SOM provided notice of
this reading of the regulations.
The State conceded that its follow-up surveys did not address
the
providers' adherence to all federal requirements, but were limited
to
the specific deficiencies underlying the terminations of the
various
facilities. The State made the general argument that the SOM
did not
contain clear instructions for the certification of a long-term
care
facility after the facility's termination. However, HCFA
provided
evidence which discredits the State's assertion. HCFA's
Exhibit 8
contains section 3744 of the 1980 SOM addressing a
facility's
readmission to Medicaid after involuntary termination or
nonrenewal of
its provider agreement. Generally, that section provided
that a
facility in these circumstances could not participate in Medicaid
unless
(among other criteria) "all of the statutory and
regulatory
responsibilities are fulfilled." Additionally, that section
stated
"[p]rocess readmissions in the same way that initial certifications
are
handled." Subsection D, titled Survey and Certification, provided
that
upon receipt of the forms from the facility requesting readmission,
the
state must "schedule a complete survey of the facility."
This
subsection then describes the detailed statement which must
accompany
the C&T Form to show that the deficiencies have been
corrected.
Further, section 2016 of the SOM as revised in 1985 also provided
that
"an institution cannot again participate in . . . Medicaid . . .
unless:
. . . [a]ll statutory and regulatory requirements are
fulfilled."
Texas' use of follow-up surveys is further undercut by the
SOM
requirement that facilities terminated from the program
provide
reasonable assurance that deficiencies will not recur by operating
for a
"period of time" before being readmitted. Here, Texas permitted
these
facilities to reenter the program a short time
after
termination.(generally less that 30 days) based only on a
partial
survey. HCFA Ex. 9.
Finally, there is no merit in the State's estoppel argument.
Estoppel
is not available against the federal government on the same terms
as
would apply to private parties. As we stated in
Acadia-Vermillion
Community Action Program, Inc., DAB No. 1201 (1990)--
There can be no estoppel absent the traditional requirements
of
a misrepresentation of fact, reasonable reliance, and
detriment
to the opposing party. Heckler v. Community Health
Services of
Crawford County, Inc. 467 U.S. 51, 59 (1984); see also
Tennessee
Dept. of Human Services, DAB No. 1054 (1989).
Moreover,
estoppel against the federal government, if available at all,
is
presumably not available absent affirmative misconduct by
the
federal government. Schweiker v. Hansen 450 U.S. 785
(1981).
Id., at 8.
Moreover, in Office of Personnel Management v. Richmond, 496 U.S.
414
(1990), reh'g denied, 111 S.Ct. 5 (1990), the Supreme Court said
it
would "leave for another day whether an estoppel claim could
ever
succeed against the Government." In that case, the Court ruled
that a
government agent cannot obligate the government to pay funds
in
violation of statutory authority.
Here, Texas did not allege that the advice allegedly given by
HCFA
officials constituted affirmative misconduct. In any event, the
record
does not establish that the traditional elements of estoppel
are
present.
As we discussed above, the applicable regulations cannot reasonably
be
read to permit Texas' use of follow-up surveys, and the State had
notice
of HCFA's reading of the regulations through the SOM.
Furthermore,
there is no convincing evidence that HCFA officials
made
misrepresentations, in the form of misleading advice, to
State
employees. HCFA offered testimony from the federal officials
cited by
the State as having provided the misleading information. That
testimony
contradicted the State's allegations that HCFA had approved
follow-up
surveys as valid instruments for facility certification. HCFA
Ex. 5;
Tr. at 51-54, 60-63. The testimony of one State witness provided
only a
general assertion that a particular HCFA official told him that
a
follow-up survey would be sufficient if it occurred within 120 days
of
the .full survey which had led to termination. Texas Ex. 3; Tr.
at
37-41. HCFA asserted, and the State did not deny, that the official
in
question had transferred out of the Regional Office serving Texas
in
1983, three years before the period covered by this
disallowance.
Moreover, that official denied having offered the advice
attributed to
him. HCFA Br. at 8 n.3; Tr. at 59-60. Another Texas
employee offered
equally general testimony that a HCFA official told him that
a follow-up
survey was sufficient. Texas Ex. 2; Tr. at 32-34.
However, the HCFA
official in question denied that HCFA policy ever permitted
the use of
follow-up surveys as envisioned by Texas and did not recall
the
conversation attributed to him. HCFA Ex. 5 (Chancellor Affidavit);
Tr.
at 61-62.
Additionally, HCFA submitted a letter (June 13, 1988), from the State
to
HCFA which further undercuts the State's position. The letter arose
in
the context of another disallowance proceeding. There, the
State
referred to "verbal notice . . . received by . . . TDH . . . from
HCFA,
on July 17, 1987" that a full survey was needed after a
facility's
termination from Medicaid participation. HCFA Ex. 7.
The letter states
that the "verbal notice" was given to one of the State
officials who has
since testified in this proceeding that HCFA led him to
believe that
follow-up surveys were sufficient. Also, by letter dated
February 2,
1988, HCFA advised Texas that its had identified a problem area
for
Title XIX and instructed Texas to "remind your surveyors that before
a
terminated facility can be recommended for certification as
a
participating provider, the facility must undergo a full health
survey
and provide reasonable assurance that the reasons for termination . .
.
will not recur (emphasis in original)." HCFA Ex. 6. This
evidence
undercuts the State official's testimony that "during 1986 through
1988"
he was led to believe that a full survey was not necessary. See
Texas
Ex. 2.
After considering the testimony of the HCFA and Texas officials, we
find
that State failed to support its allegations that HCFA officials
gave
misleading advice. We find no basis for concluding that oral
advice
given by HCFA officials was the source of Texas' practice regarding
the
use of follow-up surveys. The actual language of the SOM
provisions
does not support Texas' assertion the federal policy was
unclear.
Moreover, the federal officials' testimony evidenced no confusion
about
federal policy concerning reentry of a terminated facility, and,
once
aware of the State's practices, they had acted to promptly inform
Texas
that a full survey was required. .Based on the preceding
analysis, we
sustain the disallowance of $1,207,634 in FFP paid to the State
in
connection with Medicaid payments to Barton
Heights,
Cresthaven,Hillcrest, Pine Haven, Retema Manor, Serenity, and
Valley
View.
B. The Valle Star Court Order
Effective February 28, 1989, TDH determined that Valle Star Nursing
Home
(Valle Star) of Alpine, Texas did not meet the requirements
for
participation in Medicaid and denied the facility's recertification.
6/
The facility's provider agreement was terminated that date. Valle
Star
did not appeal. In April 1989, the Texas Attorney General
petitioned a
State court to appoint a trustee to operate Valle Star.
The court
complied. Subsequently, the trustee petitioned the court to
order the
State to release Medicaid (and other) funds, to which the
trustee
alleged the residents were entitled, for the care and services
provided
to them for the period of the trusteeship. Texas Ex. 5.
On July 18,
1989, the trustee's request was granted and the State
complied. Texas
Br. at 6-7; Texas Ex. 6. On July 27, 1989 TDH
resurveyed Valle Star and
again denied certification. 7/ Ultimately,
Valle Star was certified and
entered into a provider agreement effective
October 4, 1989. HCFA Ex.
3. HCFA disallowed the State's claim
for $65,178 in FFP for payments
made to Valle Star during the trusteeship,
from April 6 through October
3, 1989, while the facility did not have a
provider agreement. 8/ .Texas
did not contest the facts. However, Texas
asserted that FFP was
available in payments made during the trusteeship under
42 C.F.R.
.431.250(b)(2). This regulation provides that FFP is available
in
payments--
For services within the scope of . . . Medicaid . .
. and made
under a court order.
Texas argued that this regulation permitted FFP for these payments,
which
were disbursed to the trustee pursuant to a court order. However,
Texas
conceded that the court order did not focus on whether Valle Star
met the
federal requirements for provider certification and a
provider
agreement. Instead, the court was concerned with the
residents'
eligibility for Medicaid and the trustee's statutory right to use
the
residents' Medicaid-eligible status as a resource to provide
ongoing
care. Texas Br. at 6-8.
Texas noted that it had moved for appointment of the Valle Star
trustee.
Texas asserted that the court order need not require it "to
certify
itself and contract with itself before it is considered valid
under
Federal regulations." Texas Br. at 9. Citing Missouri Dept.
of Social
Services, DAB No. 1035 (1989), Texas asserted that the
paramount
interest of a Medicaid recipient should be the basis for measuring
the
validity of a court order under 42 C.F.R. .431.250(b)(2). The
State
noted that the court order releasing Medicaid funds had been
obtained
for the benefit of recipients who were unable to relocate due to
Valle
Star's isolated geographical location. 9/ Texas argued that
compliance
with federal certification standards could be implied by the
State's
operation of the facility. Texas also maintained that the State
law
under which the Medicaid funds were released was designed to
prevent
situations in which closure of facility would have an adverse effect
on
the residents and their families and intended that released
Medicaid
funds be matched with federal funds. Further, Texas argued
that this
law also created property rights (i.e., an entitlement) in
the
recipients and was designed to operate in the narrow circumstance
where
relocation was impractical and the best interests of the recipients
had
been entrusted to the State. Texas Br. at 9-13. Texas then
asserted
that the "conflict of laws principle of .comity should be applied
to
give effect to the state law and the court order." Texas Br. at
13.
We conclude that the payments made to Valle Star were not "[f]or
services
within the scope of . . . Medicaid . . . and made under a court
order" within
the meaning of 42 C.F.R. .431.250(b)(2). The State's
reliance on this
regulation is misplaced. In general, no FFP is
available for services
provided by a nonqualifying facility such as
Valle Star. See Missouri
Dept. of Social Services, DAB No. 1035 at 7
n.3 (1989). Valle Star was
a decertified facility which had not
appealed its termination from the
program. While HCFA regulations
provide for the limited availability of
FFP where a facility has
appealed its termination, there is no basis
whatsoever for continued
payments under the circumstances presented here.
Section 431.250 is found in Subpart E of the regulations, which
is
entitled Fair Hearings for Applicants and Recipients. The
regulations
contained there implement section 1902(a)(3) of the Act, which
requires
that a State plan provide an opportunity for a fair hearing for
any
person whose claim for assistance is denied or not acted upon
promptly.
42 C.F.R. .431.200. In relevant part, the regulatory
preamble
provided--
Section 431.250 concerns . . . (FFP) for
expenditures in services
for individuals who are
successful in their appeal. Paragraph (b)
of
this section is amended to continue from 45 C.F.R.
205.10(b)(3)
the authorization of FFP in payments
within the scope of the
Medicaid program in
accordance with a court order. The provision
contained in 45 C.F.R. 205.10(b)(3) was especially important
since
it restricted FFP to Medicaid services under
the scope of the
Federal program. For example,
even when there is a court order
against a state to
provide services beyond the limits of the
program,
FFP is not available when there are other . . .
limitations upon the receipt of Federal funds.
45 Fed. Reg. 24878 (April 11, 1980).
Prior Board decisions have concluded that 45 C.F.R. .205.10(b)(3)
applied
to permit continued FFP in payments to a facility when a court
ordered a
state to continue to reimburse the facility for the cost of
services to
Medicaid recipients pending the facility's appeal from the
termination or
nonrenewal of its provider agreement. The Board
concluded that such a
court order would .constructively extend the
facility's provider agreement
for up to 12 months from the termination
or until there is a new survey and
determination thereon. See Ohio
Dept. of Public Welfare, DAB No. 173;
and New York State Dept. of Social
Services, DAB No. 181, at 19.
In Illinois Dept. of Public Aid, DAB No. 1320 (1992), the Board noted
that
it has interpreted the court-ordered payment regulations at 45
C.F.R.
.205.(10)(b)(3) and 42 C.F.R. .431.250(b)(2) "as providing
limited exceptions
to program limitations to the extent the exceptions
are the subject of the
court order, while retaining other program
limitations." Illinois, at 9
(emphasis in original) (footnote omitted).
Section 431.250 of 42 C.F.R. then
presents a two-prong test for the
allowability of FFP for medical
services. The services must be "within
the scope of . . . Medicaid . .
. and made under a court order (emphasis
added)."
Thus, the mere fact that the court ordered the payment of the funds
in
issue is not enough to qualify the expenditures for
federal
reimbursement. Since Valle Star had no appeal pending, the
court order
requiring payments to the facility cannot be regarded as
extending the
facility's provider status. The court order was not
adequate to
overcome applicable Medicaid program limitations; Medicaid will
not
reimburse a state for services provided to recipients in a
facility
without a valid provider agreement. See section 1902(a)(27) of
the Act.
Consequently, there is no basis for concluding that the payments
at
issue are within the scope of the program within the meaning of
42
C.F.R. .441.250(b)(2).
Moreover, in 1987 HCFA issued final regulations to clarify its policy
on
the availability of FFP to a long-term care facility after its
provider
agreement has been terminated or not renewed. The preamble to
those
regulations stated--
As a basic rule, FFP is not available in State
Medicaid payments
made to a facility after its
[provider agreement] has been
terminated or has
expired and not been renewed. As an exception
to
the basic rule, FFP may be continued for up to 30
days after
termination or expiration . . . to allow
time for transfer of
residents . . . .
* * *
. . . . one of the purposes of the
proposed rule was to change the
meaning of "within the scope of the Medicaid
program" as it appears in
431.250(b). The effect of this final rule is
to change the meaning to
"up to 120 days" . . . The new 442.40
clarifies the meaning of
431.250(b) when providers appeal the termination or
nonrenewal of a
[provider agreement].
52 Fed. Reg. 32544 and 32548 (August 28, 1987).
In pertinent part 42 C.F.R. .442.40 (1987) provided--
(2) Applicability (i) . . . When the survey agency
certifies
that there is jeopardy to recipient health and safety, or
when
it fails to certify that there is no jeopardy, FFP ends on
the
effective date of termination or expiration. . . .
This regulation established requirements for the continued availability
of
FFP for up to 120 days during the pendency of a provider's appeal
from its
termination or nonrenewal, so long as the survey agency had
certified that
there is no jeopardy to recipient health or safety.
However, this regulation
also restated the basic rule, which applies
here, that FFP is unavailable in
payments to a nonqualifying provider.
Thus, it is clear that continued FFP is
not available here based on 42
C.F.R. .431.250(b)(2) since Valle Star did not
appeal its termination
and, more importantly, TDH had denied recertification
"due to the
existence of serious deficiencies which jeopardize patient health
and
safety and seriously limit this facility's capacity to render
adequate
care." HCFA Ex. 3.
Although Texas argued that compliance with federal standards could
be
"implied" by the State's operation of the facility (Texas Br. at
10),
this facility was clearly substandard throughout this period.
Valle
Star failed its recertification survey in February 1989, so that
its
certification was denied "due to existence of serious deficiencies
which
jeopardize patient health and safety and seriously limit this
facility's
capacity to render adequate care." HCFA Ex. 3 at 1.
Then, the State's
own surveyors again determined, after the court order, that
the facility
still did not meet federal standards. See HCFA Ex. 3 at 2
(unnumbered)
(C&T Form dated 7/27/89). Consequently, the facility
was not even
certifiable during the period of these payments.
Finally, the State's argument concerning the "entitlement" created by
the
Texas legislature when it enacted the law permitting the release of
Medicaid
funds.is not persuasive. Here, Texas would have HCFA pay FFP
for a
facility otherwise ineligible to receive federal funding due to
the lack of a
provider agreement. The State's position, if accepted,
would elevate
state law over federal law. Federal law establishes the
conditions
under which federal funds are available to the states for
Medicaid
services. State law cannot override federal limitations as to
the
proper expenditure of those funds. While we recognize the
difficulty
Texas is placed in if there is no realistic possibility of
transferring a
decertified facility's patients, allowing FFP under such
circumstances,
simply because Texas is the trustee, would take away
incentives to correct
deficiencies and would potentially place the
recipients in greater
jeopardy.
Consequently, we sustain the disallowance of $65,178 in FFP in
connection
with State Medicaid payments to Valle Star during the period
when Valle Star
did not have a valid provider agreement.
Conclusion
Based on the preceding analysis, we sustain the entire disallowance
of
$1,272,812 in FFP.
_________________________
Judith
A.
Ballard
_________________________
Donald
F.
Garrett
_________________________
Cecilia
Sparks
Ford
Presiding
Board Member
1. Although the disallowance covers varying periods of time in 1987
--
1989, HCFA, throughout its brief, cited to the Medicaid regulations
as
amended October 30, 1990. While the substantive effect of these
later
regulations is the same, we cite the version of the regulations
which
applies to the time period at issue.
2. The facilities were -- Barton Heights Nursing Home (Barton
Heights),
Cresthaven Nursing Residence (Cresthaven), Hillcrest Manor Nursing
Home
(Hillcrest), Pine Haven Nursing Home (Pine Haven), Retema Manor
Nursing
Center (Retema Manor), Serenity Haven Nursing Home (Serenity),
and
Valley View Care Center (Valley View). See Notice of
Disallowance
(November 14, 1991).
3. In this case the affiants for both parties were also witnesses
at
the hearing. Unless otherwise indicated, we use the general
term
"testimony" to refer to individual affidavits and hearing testimony.
4. Furthermore, there is no basis in this record to find that,
under
the particular circumstances presented for any one or more of
these
facilities, a follow-up survey was adequate evidence of
certifiability.
5. A Texas witness stated that its surveyors were "staying
very
conscious of all areas of patient-care services" (Tr. at 43),
although
they were specifically surveying only the past deficient
areas. That is
no guarantee, however, that a facility did not, for
example, cut
required services in an unsurveyed area to below standards in
order to
improve services in an area it knew to be critical to restoring
its
status as a Medicaid provider.
6. Valle Star is also referred to in certain exhibits as the
Alpine
Valley Care Center.
7. HCFA first indicated that this survey occurred prior to
the
trustee's petition for the release of funds. HCFA Br. at 2-3.
However,
Valle Star's C&T Forms indicate otherwise. See HCFA Ex.
3.
8. The owner of Valle Star indemnified the Texas Department of
Human
Services for, among other things, losses due to a disallowance
or
litigation brought by the Department of Health and Human Services
which
resulted in a finding that Texas was responsible for FFP arising out
of
the court-ordered release of Medicaid funds. But for
the
indemnification, Texas would not have agreed to release the
Medicaid
funds without a further court challenge. HCFA Ex. 4 at
3-4.
9. Texas indicated that the city of Alpine has 7,000 residents and
that
Valle Star was the only facility within 90 miles. Texas Br. at
6,