GAB Decision 148
February 2, 1981 New Jersey Department of Human Services; Docket Nos.
78-121-NJ-HC, 78-106-NJ-HC (only portion of disallowance involving the
Alps Manor Nursing Home) Ford, Cecilia; Garrett, Donald Settle, Norval
By letter dated October 25, 1978 the New Jersey Department of Human
Services (State) appealed an August 25, 1978 determination by the
Administrator of the Health Care Financing Administration (HCFA, Agency)
to uphold the disallowance of $484,430 in Federal financial
participation (FFP) claimed for Title XIX skilled nursing and
intermediate care services rendered by the Alps Manor Nursing Home (Alps
Manor, facility) during the period December 1, 1975 through September
12, 1976. The appeal was assigned Board Docket No. 78-121-NJ-HC.
Alps Manor is the subject of disallowances in two other cases
currently before the Board. Alps Manor is one of several nursing homes
involved 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 $256 was
denied for skilled nursing services rendered at Alps Manor during the
period November 30, 1975 through September 13, 1976. The Board has
determined (see Reconsideration Record (RR), Item 44, attached schedule)
that this $256 disallowance was also included by the Agency in its
August 25, 1978 disallowance of $484,430 in FFP for services rendered at
Alps Manor. Accordingly, the Board has decided to delete the $256
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 $1,235 for services performed at
Alps Manor during the period December 1, 1975 through September 12,
1976. This case was assigned Docket No. 78-106-NJ-HC. The Board has
determined that this $1,235 was not included in the $484,430
disallowance in Board Docket No. 78-121-NJ-HC. In the interests of
expediting these cases and because the disallowances involving Alps
Manor apparently concern the same issue of the validity of Alps Manor's
provider agreement for an identical period of time, the Board will
consider jointly all the disallowances of Alps Manor currently before
the Board, in the amount of $485,665 ($484,430 + $1,235).
The record on which this decision is based includes the
Reconsideration Record, the applications for review, the Agency's
responses thereto, and the State's response to an Order to Show Cause
issued on September 12, 1980. The Agency was not required to respond to
the Order and did not do so.
I. Statement of the Case
On December 11, 1975 a provider agreement for skilled nursing and
intermediate care services was executed with Alps Manor. The duration
of the agreement was from Novermber 30, 1975 to November 30, 1976; the
agreement carried a cancellation date of March 31, 1976, if
deficiencies, including those relating to the Life Safety Code, were not
satisfactorily corrected or if waivers of the deficiencies were not
granted.
The provider agreement was executed in the absence of certification
of Alps Manor by the State survey agency. A survey of the facility on
October 27, 1975 revealed that ten Life Safety Code and numerous
physical environment deficiencies had not been corrected that had been
noted during a previous survey. On December 11, 1975 the State survey
agency issued a Medicaid/Medicare Certification and Transmittal form (C
& T, HCFA Form 1539) denying certification to Alps Manor and recommended
that a provider agreement not be given, noting that the plan of
correction for staffing in nursing was not accepted and that the
Agency's Office of Long Term Care (OLTC) has not yet approved requested
waivers of the Life Safety Code deficiencies (RR, Item 9). The OLTC had
previously denied certain requested waivers on June 2, 1975. On
February 23, 1976 the Agency again disapproved the State survey agency's
recommendation for Life Safety Code waivers for Alps Manor. On March 1,
1976 the OLTC notified Alps Manor that an Agency on-site inspection on
January 29, 1976 had revealed that certain items needed to be corrected
before waivers of other provisions would be granted. On February 27,
1976 the State survey agency issued another C & T (RR, Item 16), in
which it noted that nursing, dietary, and building conditions were still
not met and again recommended that a provider agreement not be given.
On March 5, ]1976 the State survey agency wrote the facility that it
could not make a favorable recommendation for Alps Manor because of a
failure to submit an acceptable plan of correction. On March 19, 1976
the State's Division of Medical Assistance and Health Services (DMAHS,
the single State agency) informed the facility that because of continued
deficiencies it was proceeding to invoke the March 31, 1976 cancellation
date in the provider agreement; the letter stressed the seriousness of
the situation and stated that no new patients were to be admitted to the
facility and that all Medicaid patients would be removed if the
questioned deficiencies were not corrected.
After Alps Manor had indicated in a March 24, 1976 letter that the
deficiencies had been corrected, DMAHS on April 5, 1976 wrote the
facility that it would not invoke the cancellation clause and that it
was requesting an immediate resurvey of the facility. On April 14, 1976
the State survey agency informed DMAHS that it could not immediately
resurvey Alps Manor because of a manpower shortage. On that same day
the OLTC approved Life Safety Code waivers for Alps Manor, contingent
upon the continued sealing off of the facility's third floor, On
September 13, 1976 the State survey agency confirmed the correction of
the previously noted deficiencies, and the Agency has provided FFP
starting on that date.
Based upon a September 15, 1976 letter form the State survey agency,
the OLTC in a January 12, 1977 memorandum recommended that FFP for Alps
Manor be reinstated as of September 17, 1976; in a February 18, 1977
memorandum that date was corrected to September 13, 1976 by the Regional
OLTC Director.
On October 5, 1976 the Agency's Acting Regional Commissioner notified
the State that pursuant to 45 CFR 249.10(b) the OLTC had determined that
the State had claimed FFP for Alps Manor despite the absence of a valid
provided agreement after November 30, 1975. The terms of Alps Manor's
provider agreement were alleged not to have met the requirements of 45
CFR 249.33(a)(6) and (10). The Regional Commissioner's disallowance was
upheld by the HCFA Administrator in a letter dated August 25, 1978; the
basis for the decision was the absence of Title XIX certification of
Alps Manor by the State survey agency before the execution of the
provider agreement.
II. Applicable Regulations
The Medicaid regulations have been recodified several times in recent
years, but for the period in question (December 1975 through September
1976) the applicable regulations are set forth in 45 CFR Part 249
(1975), "Services and Payment in Medical 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 single state agency is required to certify that the facility is
in compliance with each condition of participation, Sec. 249.33(a)(4)(
i). In order for the state to obtain FFP the execution of the provider
agreement must be in accordance with the federal regulations, Sec.
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 to be 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 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).
III. Discussion
In a September 12, 1980 Order the Board asked the State to show cause
in writing why the disallowances for Alps Manor should not be sustained
on the basis that 45 CFR 249.10(b)(4)(i)(c) and 45 CFR 249.33(a)(6)
preclude the payment of FFP for a provider agreement that has been
executed without the certification of a facility by the State survey
agency.
In an October 2, 1980 response the State has contended that Alps
Manor was in fact certified by the State survey agency, and the issuance
of a provider agreement was thus entirely proper under the Medicaid
regulations. The State has argued that the uncorrected deficiencies at
Alps Manor were apparently not so numerous as to prevent certification
since the State survey agency prepared a C & T and recommended a 12
month provider agreement by filling in block 11 of the form, contingent
upon receipt of a new nurse staffing plan and OLTC approval of waivers
for the Life Safety Code deficiencies. The State has contended that the
C & T did not direct DMAHS to withhold a provider agreement but
"provided unequivocal authority for the single State agency to issue a
provider agreement." (State's submission of October 2, 1980, p. 10.)
Contrary to the State's assertions, we find that Alps Manor was not
certified by the State survey agency prior to the issuance of a provider
agreement as required by the Medicaid regulations. The State apparently
considers that the mere issuance of C & T by the State survey agency is
tantamount to the certification of a facility. This is not true. In
both the December 11, 1975 and the February 27, 1976 C & T's executed by
the State survey agency during the period of the disallowance, the
survey agency checked off block 10(b), indicating Alps Manor was not in
compliance with Medicaid program requirements. The State survey agency
had the option of checking off block 10(a), indicating compliance based
on an accepted plan of correction or on approved waivers of
deficiencies, which would have resulted in a certification, but it did
not elect to do so. We direct the State's attention to the Agency's
Exhibit N in its February 23, 1979 submission, an April 14, 1976
memorandum from the Acting Director of the State survey agency to the
single State agency, in which it is stated that both C and T's
recommended that a provider agreement for Alps Manor be denied. We see
no way of construing such unambiguous language as being a certification
of Alps Manor that satisfies the Medicaid regulations.
The State has additionally argued that an understanding, expressed in
an April 1, 1975 letter from the Regional OLTC Director, existed between
the Agency and DMAHS that permitted the issuance of a day-to-day
provider agreement under extenuating circumstances. The letter,
apparently a review of discussions on several matters between the Agency
and DMAHS, details how in circumstances where a two-month extension of a
provider agreement (permitted under 45 CFR 249.33(a)(6)) has been
insufficient to complete the certification process, a day-to-day
provider agreement may be issued if the reason for the delay is
well-documented and appropriate action is in progress; once the new
provider agreement is issued, it would be retroactive to the expiration
date of the two month administrative extension. The State has claimed
that on the basis of this letter, beginning April 1, 1976, DMHAS issued
a day-to-day provider agreement to Alps Manor as the March 24, 1976
letter from Alps Manor indicated that the deficiencies had been
corrected or were in the process of being corrected. Manpower shortages
in the State survey agency are cited as the extenuating circumstances
preventing the actual certification of Alps Manor. The Agency is now
estopped, the State has argued, from issuing a disallowance for services
performed at Alps Manor after April 1, 1976 because DMAHS had relied on
the April 1, 1975 letter from the OLTC Director in executing a
day-to-day provider agreement with Alps Manor.
We do not believe it is necessary to examine the theory of whether
estoppel can be asserted against the federal government to dispose of
this argument by the State. The April 1, 1975 letter states that a
day-to-day provider agreement may be executed only after the two month
administrative extension proves insufficient to allow certification
action. This presupposes that the requirements set forth in 45 CFR
249.33(a)(6) for a two-month extension will also be met throughout the
duration of the day-to-day provider agreement. In order that such an
extension be granted a survey agency must notify the single State agency
in writing prior to the expiration of a provider agreement that the
health and safety of the patients wil not be jeopardized by the
extension. There is nothing in the record to indicate that such an
extension was ever recommended by the State survey agency or granted by
DMHAS. As the procedure set forth in the OLTC Director's letter for the
issuance of a day-to-day provider agreement was never followed by DMHAS,
the State cannot now assert reliance upon that letter as a defense
against the disallowance.
Furthermore, as was discussed in the Board's September 12, 1980
Order, the State's reliance on Alps Manor's own March 24, 1976 assertion
that the deficiencies were corrected is an action without basis in the
regulations. Mere assertions by a facility that it has corrected
deficiencies cannot be accepted as evidence that Title XIX standards
have been met without actual subtantiation by the State survey agency.
The Medicaid regulations require that a certification be based on
on-site surveys, not unsupported assertions by a facility. In this case
the on-site survey did not occur until September 13, 1976.
One final point remains to be discussed. The State has argued that
the amount of the disallowance is significantly out of proportion to the
deficiencies that may have existed at Alps Manor. The State has
declared:
(Services) of some quality were provided for the entire period of
this disallowance, and some reimbursement for such services could
properly be expected from Title XIX funds. The appropriate level of
disallowance, if one exists, should bear some relationship to actual
harm suffered by the intended beneficiaries of the program, Title XIX
recipients. It is suggested that the harm caused by these deficiencies
was minimal, but certainly cannot exceed the value of the actual
corrections made . . . The "all-or-nothing" approach to FFP adopted
by
(the Agency) works a serious injustice upon (state medicaid) agencies
and upon local taxpayers who must bear the entire burden of medicaid
administrative decisions. (State's submission of October 2, 1980, pp.
20-21.)
The State had earlier argued, "(There) is no question of quality of
care to patients at Alps Manor raised by this disallowance, except for a
purely conjectural relationship between quality of care and the
deficiencies noted." (State's submission of December 29, 1978, p. 2.)
We do not agree with these contentions. The Board has stated on
several occasions that the denial of FFP is the Agency's main weapon to
ensure that facilities meet minimal statutory and regulatory
requirements for Medicaid participation. See Nebraska Department of
Public Welfare, Decision No. 111, July 16, 1980, p. 9 and Maryland
Department of Health and Mental Hygiene, Decision No. 124, October 2,
1980, p. 4. The Agency could reasonably determine that there is nothing
"conjectural" about the quality of care in a facility where Life Safety
Code violations existed and where nursing staffing deficiencies
prevented the State survey agency from certifying the facility. The
Agency could reasonably conclude that the Title XIX recipients in Alps
Manor were not receiving the protection or the services they were
entitled to under the Medicaid regulations. To receive FFP the State
must ensure that a facility meets all the standards and requirements set
forth in the regulations, not an amount of FFP proportional to the
standards actually met. The disallowance resulted not because the
Agency imposed unreasonable conditions upon the State, but because the
single State agency chose not to follow the recommendations of the State
survey agency. We further note that the amount of the disallowances
could have been significantly reduced if the State survey agency had
immediately conducted an on-site survey of Alps Manor after receiving
OLTC approval of the Life Safety Code waivers on April 14, 1976 instead
of waiting to September 13, 1976.
IV. Conclusion
For the reasons stated we sustain the disallowance of FFP for