Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
In the Case of:
Waterman Convalescent Hospital, d/b/a Mt. Rubidoux Convalescent Hospital,
Appellant,
- v. -
Health Care Financing Administration
DATE: November 13, 1995
Docket No. A-96-22
Decision No. 1548
FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE'S ORDER OF DISMISSAL
Effective October 1, 1995, the Secretary of the
Department of Health and Human Services delegated the
authority to review the Administrative Law Judge's
(ALJ's) order of dismissal, issued on January 27, 1994,
to the Departmental Appeals Board (Board) in the Office
of the Secretary. This authority was formerly vested in
the Social Security Administration Appeals Council. This
case was transferred to the Board, and the case was
assigned Board Docket No. A-96-22. A panel of three
Board members reviewed the transferred record, which
included the record before the ALJ as well as all
documents submitted to the Appeals Council, and found
that briefing was complete and the matter was ready for
decision.
Procedural Background
This case was previously before the Appeals Council
(Docket No. 000-92-7060) because the appellant requested
review of the Administrative Law Judge's order of
dismissal issued on January 27, 1994. The Appeals
Council notified both parties by letter dated May 23,
1995, that it was granting the request for review
pursuant to 42 C.F.R. 498.83. The appellant submitted
a brief on June 29, 1995 and HCFA submitted a response on
August 31, 1995.
Factual Background
On December 16, 1991, a survey by the California
Department of Health Services of the appellant's facility
found that the facility was not in compliance with three
level A requirements of participation in the Medicare
program. The appellant was notified on February 14, 1992
that its agreement of participation in the Medicare
program would extend through March 16, 1992 and not be
renewed. On February 19, 1992, the appellant submitted a
plan of correction and a second survey completed on March
6, 1992 found that the appellant was in compliance with
all level A requirements of participation. By letter
dated March 25, 1992, the appellant was notified that its
Medicare agreement was renewed conditionally effective
March 17, 1992, even though the second survey identified
some level B deficiencies. The appellant appealed this
determination. On January 27, 1994, the ALJ granted
HCFA's motion to dismiss the appellant's hearing request
pursuant to 42 C.F.R. 498.70(b). The ALJ determined
that pursuant to the applicable statute and regulations,
there had been no appealable initial determination
because the appellant's provider agreement had not been
terminated nor had HCFA failed to renew the agreement.
It is that determination which is the subject of this
review.
Discussion
For the reasons discussed below, we conclude that the
ALJ's order dismissing the appellant's request for a
hearing was consistent with the statute and applicable
regulations.
The appellant contended that its right to a hearing
derives from sections 1866(b)(2) and 1866(h)(1) of the
Social Security Act and that the ALJ failed to properly
apply these provisions. Section 1866(b)(2) provides:
(2) The Secretary may refuse to enter into an
agreement under this section or, upon such
reasonable notice to the provider and the public as
may be specified in regulations, may refuse to renew
or may terminate such an agreement after the
Secretary-
(A) has determined that the provider fails to
comply substantially with the provisions of the
agreement, with the provisions of this title and
regulations thereunder, or with a corrective
action required under section 1886(f)(2)(B),
(B) has determined that the provider fails
substantially to meet the applicable provisions
of section 1861, or
(C) has excluded the provider from participation
in a program under this title pursuant to section
1128 or section 1128A.
Section 1866(h)(1) states:
(h)(1) Except as permitted under subsection (a)(2),
an institution or agency dissatisfied with a
determination by the Secretary that it is not a
provider of services or with a determination
described in subsection (b)(2) shall be entitled to
a hearing thereon by the Secretary (after reasonable
notice) to the same extent as is provided in section
205(b), and to judicial review of the Secretary's
final decision after such hearing as is provided in
section 205(g).
The appellant argued that these provisions give a
Medicare provider a right to a hearing whenever HCFA
makes a "determination" that the Medicare provider does
not substantially comply with Medicare regulations, not
just when there has been a determination to terminate or
a refusal to enter into or renew a provider agreement.
Contrary to the assertions of the appellant, we find that
the ALJ properly construed these provisions. As the ALJ
found, central to the right to a hearing is the
requirement that there be a determination by the
Secretary to refuse to enter into or renew a provider
agreement or a determination to terminate an existing
agreement. We agree with the ALJ that "[i]nsofar as
section 1866(h)(1) refers back to Section 1866(b)(2), the
`determination described' refers to a refusal by the
Secretary to enter an agreement with the facility" or a
refusal to renew or terminate such an agreement. 1/
Order of Dismissal at 5-6.
The appellant's construction of the statutory provisions
fails to read all of section 1866(b)(2) together. The
appellant first contends that section 1866(b)(2) lists in
three subparagraphs the three types of HCFA
determinations that will trigger the right to a hearing.
The appellant also contends, however, that section
1866(b)(2)(A) requires a hearing whenever the Secretary
determines that the provider fails to comply
substantially with either the provider agreement, the
controlling statute and regulations, or with required
corrective action. We agree with the ALJ that the three
types of findings referred to in section 1866(b)(2)(A),
(B), and (C) are intended as bases for a decision by the
Secretary under the primary clause of section 1866(b)(2)
not to enter into or renew a provider agreement or to
terminate an existing agreement, and that only the latter
decision gives rise to the right to a hearing.
The appellant also argued that the regulations at 42
C.F.R. Part 498 are inapplicable here where HCFA has made
a determination concerning the appellant's compliance
with Medicare and HCFA requirements, because Part 498 is
meant to apply only to appeal rights regarding a
determination to terminate or not renew or enter into a
provider agreement. The appellant contended that the
appeal procedures for HCFA determinations of non-
compliance are expressly controlled by sections
1866(b)(2) and 1866(h)(2) of the Social Security Act.
The regulations, however, specify that Part 498
implements section 1866(b)(2) of the Act and sets forth
the procedures for reviewing initial determinations for
which there are administrative appeal rights. 42 C.F.R.
498.1. We conclude that the ALJ applied the
appropriate regulations here.
The ALJ examined Part 498, which sets forth the scope and
applicability of the procedures for reviewing initial
determinations made by HCFA. Section 498.3(b) sets forth
what will be considered "initial determinations" by HCFA
and lists at section 498.3(b)(5) as one kind of initial
determination "whether services of a supplier [provider]
continue to meet the conditions of coverage." The ALJ
found that while HCFA initially determined that the
facility's provider agreement would not be renewed, that
determination was reopened and revised upon
reconsideration to find that the provider agreement would
be renewed. Order of Dismissal at 6. The ALJ therefore
determined that since the facility's participation in the
Medicare program had never been interrupted there was no
initial determination under this section. The ALJ next
examined section 498.3(d), which specifies which actions
are not considered "initial determinations." That
section states, as follows:
(d) administrative actions that are not initial
determinations. Administrative actions other than
those specified in paragraphs (b) and (c) of this
section are not initial determinations and thus are
not subject to this part. Administrative actions
that are not initial determinations include, but are
not limited to, the following:
(1) The finding that a provider or supplier
determined to be in compliance with the
conditions of participation or level A
requirements . . . or the conditions for coverage
has deficiencies.
The ALJ explained that this section was applicable to the
appellant because deficiencies were found but the
facility was otherwise determined to be qualified as a
provider of services, and the appellant was never denied
Medicare provider status for any period of time. Since
the regulation specified that this type of finding is not
considered an "initial determination," the ALJ concluded
that section 498.5(b) did not apply. This section sets
forth the appeal rights of providers and specifies that
"any provider dissatisfied with an initial determination
to terminate its provider agreement is entitled to a
hearing before an ALJ." Emphasis added. The ALJ found
that in this case there had been no initial determination
to terminate the appellant's provider agreement.
After a careful analysis of these regulations to the
facts involved, the ALJ correctly concluded there was no
right to a hearing because the facility was at all
relevant times a provider of services with an
uninterrupted provider agreement. The ALJ correctly
concluded there was no initial determination within the
meaning of 42 C.F.R. 498.3(b), and therefore, the
provisions of 42 C.F.R 498.5(b), which provides a
provider dissatisfied "with an initial determination to
terminate its provider agreement" the right to a hearing
before an ALJ, was not applicable.
We also conclude that the ALJ did not err in rejecting
the appellant's argument that the decision in Nassau
Nursing Home v. Heckler, 614 F. Supp. 1091 (E.D.N.Y.
1985), was controlling here. In Nassau, the district
court found that the Secretary's determination banning
Medicare and Medicaid admissions to a nursing home for
survey deficiencies was a "determination," within the
meaning of section 1866(b)(2) of the Social Security Act,
sufficient to confer federal court jurisdiction to
contest the validity of the Secretary's action. The ALJ
found that Nassau was an isolated case and was
subsequently never cited for the holding upon which the
appellant relied. In any event, the ALJ properly found
that even if Nassau was applicable, it was
distinguishable from the present appeal. In Nassau, the
facility was found to have been substantially out of
compliance with the statutory nursing home standards, a
violation which, if not corrected, would justify non-
renewal or termination of the provider agreement. In
this matter, as the ALJ found, there was no outstanding
finding of substantial non-compliance by the appellant
nor any threat of termination or non-renewal which might
reasonably give rise to a right to a hearing. Moreover,
the ALJ correctly noted that the ban on new admissions
imposed in Nassau had the immediate and adverse
consequence of denying the provider payments for new
admissions, whereas in the present case, the appellant
has incurred no loss because its participation in the
Medicare program has continued uninterrupted.
We also conclude that the ALJ appropriately determined
that a September 1991 ALJ order in Devon Gables Health
Care Center (Docket No. HIP 000-91-7050), on which the
appellant relied, had no precedential value. The ALJ
found that Devon was not binding based on EPI
Corporation, d/b/a/ Briarwood Nursing and Convalescent
Center, Docket Number 000-42-7071 (February 19, 1991), at
7, which states "decisions issued by adjudicators within
the Office of Hearings and Appeals are nonprecedential,"
and because the ALJ in Devon failed to state his
rationale for his conclusion. 2/ In Devon, the ALJ in
the September 1991 order stated only that "it is
concluded that the Appellant is entitled to a formal
administrative hearing per section 405(b) of the Social
Security Act" and struck his proposed finding of August
1, 1991 which stated, "the imposition of the lesser
sanction of temporary management . . . is not an initial
determination subject to a formal administrative hearing
per Section 405(b) of the Social Security Act." The ALJ
also found that Devon was distinguishable from the
present appeal in that the facility in Devon was faced
with a sanction that had immediate, concrete consequences
for the operation of the facility. The ALJ reasonably
determined that nothing in Devon suggests that a hearing
is also available where, as here, deficiencies have been
noted but no sanction or consequence has occurred.
Conclusion
We conclude that the ALJ's decision to dismiss the
appellant's request for review was in accordance with the
applicable statute and regulations. Thus, we affirm the
ALJ's order dismissing the appellant's request for a
hearing pursuant to 42 C.F.R. 498.5(b).
_____________________________
Cecilia Sparks Ford
_____________________________
M. Terry Johnson
_____________________________
Norval D. (John) Settle
Presiding Board Member
1. As a factual matter, the ALJ found that HCFA "did
not refuse to enter into a [Medicare provider] agreement
with this facility, and in fact renewed its agreement
with the facility on a conditional basis and in August
1993 determined that the facility was not subject to the
restrictions and limitation with respect to the nurse
aide training program." Order of Dismissal at 5-6.
2. In the final decision in Devon, the ALJ addressed
the merits of the appellant's substantive argument and
determined that surveys conducted in accordance with the
protocols mandated by the 1987 Omnibus Budget
Reconciliation Act (OBRA) were not properly promulgated
and thus were invalid. The final decision did not
mention the ALJ's September 1991 order or the ALJ's basis
for that order which determined the appellant was
entitled to a formal administrative hearing. The ALJ's
final decision in Devon was reversed on appeal by the
Appeals Council on the merits, finding that the ALJ erred
in holding the OBRA survey process and subsequent audit
findings invalid on that basis. Health Care Financing
Administration v. Devon Gables Care Center, Docket No.
000-91-7050 (December 7, 1994). The Appeals Council did
not address the question of the appellant's right to a
hearing under the statute and regulations because it was
not raised in the appeal.