GAB Decision 137
December 1, 1980 New Jersey Department of Human Services; Docket Nos.
78-126-NJ-HC, 78-106-NJ-HC (only portion of disallowance involving the
Springview Nursing Home) Ford, Cecilia; Przybylinski, Donald Settle,
Norval
By letter dated November 13, 1978 the New Jersey Department of Human
Services (State) appealed an October 12, 1978 determination by the
Administrator of the Health Care Financing Administration (HCFA, Agency)
to uphold the disallowance of $218,471 in Federal financial
participation (FFP) claimed for Title XIX skilled nursing and
intermediate care services rendered by the Springview Nursing Home
(Springview, facility) during the period October 21, 1975 through March
22, 1976. The appeal was assigned Board Docket No. 78-126-NJ-HC.
Springview is the subject of disallowances in two other cases
currently before the Board. Springview is one of several nursing homes
which were the subjects of disallowances in Board Docket No.
78-16-NJ-HC. In that case, appealed by the State in a letter dated
October 20, 1978, FFP in the amount of $428 was denied for skilled
nursing services rendered at Springview during the period October 21,
1975 through March 22, 1976. The Board has determined that this $428
disallowance was also included by the Agency in its October 12, 1978
disallowance of $218,471 in FFP for services rendered by Springview.
(See schedule accompanying July 11, 1978 letter from Ms. Klein to Mr.
Martz, Reconsideration Record (RR), Item 54.) Accordingly the Board has
therefore decided to delete the $428 disallowance from Board Docket No.
78-16-NJ-HC.
On August 28, 1978 the State appealed a July 27, 1978 disallowance of
$109,975 in FFP for services performed at seven nursing homes. Included
in this amount was a disallowance of $3,353 for services performed at
Springview prior to March 22, 1976. This case was assigned Docket No.
78-106-NJ-HC. The Board has determined that this $3,353 was not
included in the $218,471 disallowance in Board Docket No.
78-126-NJ-HC.In the interests of expediting these cases and because the
disallowances involving Springview concern the same issue of the
validity of Springview's provider agreement for an identical period of
time, the Board will consider jointly all the disallowances of
Springview currently before the Board, in the amount of $221,824
($218,471 + $3,353).
The record on which this decision is based includes the
Reconsideration Record concerning Springview, the applications for
review, the Agency's responses thereto, the State's response to an Order
to Show Cause communicated by a telephone conference on August 13, 1980,
and the parties' responses to additional questions communicated by the
Board in another telephone conference on October 22, 1980.
I. Statement of the Case
On October 21, 1975 the State Department of Health, on the basis of a
"licensure walk-through," issued to Springview a temporary permit
to
operate a nursing home. On that same day the State executed a Title XIX
provider agreement with Springview for the period October 21, 1975 to
April 30, 1976. A survey of the facility for Medicare and Medicaid
compliance was conducted on January 12 and 13, 1976. That survey
revealed numerous deficiencies in the the operation of Springview, with
five conditions out of compliance. A plan of correction was submitted,
and a revisit to the facility was conducted on March 22, 1976 that
demonstrated the facility had made progress in correcting its
deficiencies. The facility was certified on March 22, 1976.
In disallowing $222,824 in FFP claimed for services rendered by
Springview during the period October 21, 1975 throuugh March 22, 1976,
the Administrator of HCFA held that the provider agreement executed by
the State on October 21, 1975 was invalid in that it had been executed
without a prior Title XIX survey and certification of the facility by
the State survey agency.
The State maintains that its Division of Medical Assistance and
Health Services received a handwritten note, consisting of one sentence,
on October 28, 1975 from the Acting Director of the State survey agency
that Springview "now meets the standards for Medicaid participation"
(RR, Item 3). The State argues that this communication was an effective
certification under the Medicaid regulations, and that, therefore, the
provider agreement executed with Springview was valid.
The central issue presented is whether or not the State properly
surveyed and certified Springview, meeting all the requirements of the
Medicaid regulations, so that the provider agreement executed on October
21, 1975 was valid for the period October 21, 1975 through March 22,
1976.
II. Applicable Regulations
The Medicaid regulations have been recodified several times in recent
years, but for the period in question (October 1975 through March 1976)
the applicable regulations are set forth in 45 CFR Part 249 (1975),
"Services and Payment in Medicaid Assistance Programs."
FFP in payments to a facility providing skilled nursing and
intermediate care services is available only if the facility is
certified as having met all the requirements for participation in the
Medicaid program as evidenced by an agreement (provider agreement)
between the single state agency and the facility. (45 CFR 249.10(b)(
4)(i)(C) for skilled nursing services, 45 CFR 249.10(b)(15)(i)(E) for
intermediate care services.) The execution of the provider agreement is
contingent upon certification of the facility by an agency designated as
responsible for licensing health institutions in the state (state survey
agency). 45 CFR 249.33(a)(6).
The survey agency is required to certify that the facility is in
compliance with each condition of participation. 45 CFR 249.33(a)(4)(
i). The survey agency is also required to perform at least one on-site
inspection of a facility during the term of the facility's
certification. 45 CFR 249.33(a)(4)(iv). In order for a state to obtain
FFP the execution of the provider agreement must be in accordance with
the federal regulations. 45 CFR 249.33(a)(6).A provider agreement
between the state agency and a facility is not necessarily valid
evidence that the facility meets all requirements for certification
under federal regulations. The provider agreement may be determined
invalid if the Secretary establishes that any of the five provisions
listed in Sec. 249.10(b)(4)(i)(C)(1)-(5) for a skilled nursing facility
or in Sec. 249.10(b)(15)(vi)(A)-(E) for an intermediate care facility
were violated in the certification of the facility. A facility which
does not qualify under Sec. 249.33 is not recognized as a skilled
nursing facility or an intermediate care facility for purposes of
payment under the Medicaid program. 45 CFR 249.33(a)(10).
In determining provider eligibility and certification under the
Medicaid program the state survey agency is required to use whatever
forms, methods and procedures may be designated by the Agency. 45 CFR
250.100(c)(1).
III. Discussion
In an August 13, 1980 telephone conference with the parties, the
Board asked the State to show cause in writing why the disallowances for
Springview should not be sustained on the basis of a prior Board
decision, New Jersey Department of Human Services, DGAB Docket Nos.
78-41-NJ-HC and 78-124-NJ-HC, Decision No. 104, June 9, 1980. In that
decision, involving the same parties as this appeal, the Board
determined that when the State of New Jersey executed a provider
agreement with a nursing facility, the Emerson Convalescent Center, the
State survey agency had not certified the facility for Medicaid
participation, but, on the basis of a licensing survey, only had orally
assured the single State agency that Medicaid certification would follow
without difficulty. In sustaining the disallowance of FFP for services
provided by the facility and finding that no valid provider agreement
was in effect, the Board held, "The regulations provide that
certification must precede issuance of a provider agreement." (page 5.)
In its response to the Order the State has attempted to distinguish
Decision No. 104 from the facts of the present appeal by noting that,
unlike the circumstances of the Emerson Convalescent Center case, the
handwritten communication from the State survey agency was a written
document and a statement that Springview currently met, not would meet,
the standards for Medicaid participation. The State further contended
that since the handwritten note was from the Acting Director of the
survey agency, the agency responsible for performing both licensing and
Medicaid surveys for nursing facilities, it was a "certification"
of
Springview's ability to participate in the Medicaid program.
These arguments led the Board to seek further information from the
parties. In an October 22, 1980 telephone conference the State was
asked to explain the inspection process of a licensure walk-through and
what standards were applied in such a walk-through. The Agency was
asked whether a particular form (Medicare/Medicaid Certification and
Transmittal Form 1539) was requuired to be used by a state survey agency
as evidence of certification of a facility for Medicaid participation,
or whether any other type of document could be used to evidence
certification and what type of information had to be included in that
document. The Agency was also asked to provide authority for the
proposition that a state survey agency is required to survey a facility
before issuing a certification for the facility.
The State replied in the form of an affidavit by the Director of the
State survey agency, the author of the handwritten note. The Director
stated that, at the time in question, licensure and Medicare/Medicaid
certification were separate functions in his agency. The Director also
stated that his note purporting to certify Springview was based on
information supplied to his office by the licensure inspectors. He
further explained the licensure walk-through process, noting that the
standards for the areas actually inspected do not differ significantly
between licensure and Medicaid certification, but that the areas
observed in licensure walk-throughs are fewer.
To the Board's questions the Agency responded that 45 CFR 250.100
gives the Agency's Administrator the authority to designate the use of
certain forms to determine Medicaid certification and that a State
Survey Agency Manual, in effect during the period in question and sent
to the State, instructed the State survey agency to use the Form 1539 as
the means of certifying a facility's eligibility to participate in the
Medicaid program. As to the necessity of a survey prior to
certification, the Agency referred to 45 CFR 249.33(a)(4)(iv) and other
regulations requiring a state survey agency to conduct surveys of
nursing facilities.
We believe that this case turns on the question of whether the
handwritten note was an effective certification for Medicaid purposes.
We conclude that it was not. The State has argued that no particular
form for denoting the certification of a facility is mandated by
regulation, though it has admitted that it has used Form 1539 as a
matter of practice (RR, Item 21). It is apparent from other cases that
have been brought before the Board that the accepted and customary
method of certifying a facility for Medicaid participation is for a
state survey agency to execute a Form 1539. Yet we agree with the State
that the use of Form 1539 is not mandated by regulation and that other
forms or documents might be employed to certify a facility. Section
250.100 does authorize the Agency's Administrator to designate the use
of certain forms, but the State Survey Agency Manual, referred to by the
Agency, only states, "Certification and Transmittal Form SSA-1539 is
used by the State survey agency to certify its findings . . ." (p. 59.)
There are no words placing a mandatory responsibility upon the State to
use that particular form to convey certification.
Regardless of whether or not the State Survey Agency Manual is read
as mandating the use of Form 1539, it is clear that a state survey
agency must communicate certain information in order that a facility be
certified for Medicaid participation and that other requirements of the
Medicaid regulations are met. The duration of the certification period,
the type of facility involved, whether the facility is in compliance
with program requirements, and the existence of special conditions are
typical of the type of information that should be included on a document
evidencing certification of a facility. Such information is routinely
furnished on a completed Form 1539. If the State elects not to use the
Form 1539, then the State must assume the risk that the means it uses to
certify a facility may be questioned by the Agency. A handwritten
document by the State survey agency supplying the information described
above might be expected to satisfy the demands of the Agency and the
requirements of the regulations. A one-line note saying, "Now meets the
standards for Medicaid participation" and nothing else, however, is not
a reasonable and adequate means of compliance with the regulations on
the State survey agency's part. Such a note cannot be held to be an
effective certification of Springview.
We do not therefore reach the question of whether the State survey
agency's failure to survey Springview for Medicaid compliance before a
provider agreement was executed would have nullified that agreement or
whether the licensure walk-through could have satisfied the requirements
of a Medicaid survey. We do note, however, that the regulations cited
by the Agency in support of its position, specifically 45 CFR
249.33(a)(4)(iv), only require that a facility be surveyed at least once
during the term of its certification, and not necessarily before the
facility is certified for the first time by a state survey agency.
IV. Conclusion
For the reasons stated above we sustain the disallowance of FFP for
services rendered at the Springview Nursing Home in the full amount of
$221,824.
OCTOBER 04, 1983