Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
In the Case of:
Arbor Hospital of Greater
Indianapolis, Petitioner,
- v. -
Health Care Financing Administration.
DATE: July 19, 1996
Docket No. A-96-13
Decision No. 1591
FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE DECISION
Arbor Hospital of Greater Indianapolis (Petitioner)
appealed a February 12, 1992 decision by Administrative
Law Judge Stephen Jon Ahlgren. See Arbor Hospital of
Greater Indianapolis, OHA Docket No. 000-51-7193 (1992)
(ALJ Decision). Petitioner, a psychiatric hospital, had
requested a hearing before the ALJ on the determination
of the Health Care Financing Administration (HCFA) that
Petitioner's provider agreement be given an effective
date of October 16, 1990, rather than one of two
alternative earlier dates requested by Petitioner. The
ALJ concluded that the effective date established by HCFA
was proper under 42 C.F.R. § 489.13(b), since only as of
that date had Petitioner established to HCFA's
satisfaction that it met all of the Medicare conditions
of participation for a psychiatric hospital. Petitioner
reargued on appeal that an earlier effective date should
have been permitted.
Our standard for review of an ALJ decision on a disputed
factual issue is whether the decision is supported by
substantial evidence in the record. The standard of
review on a disputed issue of law is whether the ALJ
decision is erroneous. As discussed below, we conclude
that the ALJ did not err when he concluded that HCFA
properly established the effective date of October 16,
1990 for Petitioner's provider agreement. Accordingly,
we sustain his decision.
The record on appeal includes the record before the ALJ,
the parties' briefs on appeal, and the transcript of the
oral argument before the Presiding Board Member. 1/
Applicable Authority
To participate in the Medicare program, psychiatric
hospitals must meet certain requirements imposed by
applicable statute and regulations. The regulation at 42
C.F.R. § 482.60 describes the special provisions that
apply to psychiatric hospitals. 2/ Section 482.60
states that a psychiatric hospital must--
(a) Be primarily engaged in providing, by or under
the supervision of a doctor of medicine or
osteopathy, psychiatric services for the diagnosis
and treatment of mentally ill persons;
(b) Meet the conditions of participation specified
in §§ 482.1 through 482.23 and §§ 482.25 through
482.57;
(c) Maintain clinical records on all patients,
including records sufficient to permit HCFA to
determine the degree and intensity of treatment
furnished to Medicare beneficiaries, as specified in
§ 482.61; and
(d) Meet the staffing requirements specified in §
482.62.
The survey process is the means by which HCFA and its
agents (including state survey agencies) assess
providers' compliance with federal health, safety, and
quality standards. 42 C.F.R. § 488.26(b)(1). HCFA
regulations specify that when a provider agreement
between a provider (such as a psychiatric hospital) and
HCFA can become effective following an onsite survey.
Specifically, section 489.13 provided as follows
concerning the effective date of the provider agreement:
Effective date of agreement
(a) All Federal requirements are met on the date
of the survey. The agreement will be effective on
the date the onsite survey is completed . . . if, on
the date of the survey, the provider meets all
Federal health and safety conditions of
participation . . . and any other requirements
imposed by HCFA.
(b) 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 (a)
of this section, the agreement will be effective on
the earlier of the following dates:
(1) The date on which the provider meets the
requirements.
(2) The date on which the provider submits a
correction plan acceptable to HCFA or an approvable
waiver request, or both.
42 C.F.R. § 489.13(b).
With limited exceptions, a provider may not receive
Medicare or Medicaid reimbursement for services provided
to patients prior to the effective date of its provider
agreements. See sections 1814(a) and 1902(a)(27) of the
Social Security Act.
Background
The relevant facts were fully developed by the ALJ and
are not disputed by the parties. The brief summary below
is merely for the reader's convenience and is not
intended to substitute for any of the ALJ's findings.
Arbor opened as a free-standing psychiatric hospital on
September 4, 1990. The State of Indiana began its two-
day survey of the facility on September 6. Upon
completion of the survey on September 7, Petitioner was
notified of deficiencies with respect to the Hospital
Conditions of Participation, which are not identified in
the record. Petitioner submitted a plan of correction
concerning these deficiencies on September 20, 1990 and
this plan was accepted by the state agency and HCFA.
Petitioner subsequently described the following
development that also occurred upon completion of the
survey on September 7:
the state survey team informed hospital staff that
another survey would be required by HCFA in order to
certify Arbor Hospital for the special medical
records and staffing requirements [applicable to
psychiatric hospitals] set forth at 42 C.F.R. §§
482.61 and 482.62. The hospital was further
informed that HCFA was in the middle of negotiation
with its subcontracting entity, HCR, which [had] in
the past conducted certification surveys on behalf
of HCFA, and as a result, the HCR survey probably
could not take place for another month.
Petitioner's Letter of September 25, 1990 at 2. 3/
The survey by HCR of the two special conditions relating
to psychiatric hospitals took place on October 15, 1990.
4/ That survey also cited deficiencies, which again are
not identified in the record. Petitioner submitted a plan
of correction the following day. On November 6, 1990,
HCFA sent Petitioner a letter establishing an effective
date of participation for Petitioner of October 16, 1990.
This date was established based on HCFA's application of
the controlling regulations at 42 C.F.R. § 489.13(b).
HCFA stated:
According to these regulations, Arbor Hospital is
entitled to certification on the earlier of either
of two dates: the date on which it meets all
program requirements, or the date on which it
submits a correction plan . . . . The regulation
provides no other options. Since Arbor Hospital did
not meet all program requirements at the time of the
federal survey, it was certified as of the earliest
possible date, the date it submitted a plan of
correction acceptable to HCFA, which was October 16,
1990.
Letter of November 6, 1990, at 1.
Analysis
Petitioner reargued on appeal that the effective date for
its provider agreement should have been one of two
alternative earlier dates, either September 7, 1990, the
date the state agency's survey was completed, or
September 20, 1990, the date Petitioner submitted a plan
of correction acceptable to HCFA in response to the
survey performed by the state survey agency.
1. Petitioner's primary argument on appeal
Petitioner's primary argument on appeal was that the
applicable regulation only required that it be in
compliance with health and safety conditions of
participation and that the survey ending September 7,
1990 demonstrated that Petitioner was in compliance with
those conditions. In particular, Petitioner argued:
The clear language of the regulation requires only
that a provider demonstrate compliance with the
health and safety conditions of participation--not
all conditions of participation. At the close of
the survey on September 7, 1990, Arbor Hospital was
found to be in compliance with every condition of
participation which could reasonably be considered a
"health and safety" condition. HCFA's failure in
drafting its regulations to specify which conditions
of participation fall within this category, should
not be held against Arbor Hospital.
Petitioner's Supplemental Brief dated December 12, 1994
(Petitioner's Supp. Br.), at 9-10; see also Petitioner's
Reply Brief dated January 17, 1995, at 1-5, and
Transcript of Oral Argument at 6-14.
Petitioner's argument lacks merit for several reasons,
however. At the outset, we find that Petitioner
improperly interprets the meaning and effect of the
reference in the regulation to "all Federal health and
safety conditions of participation." We can find no
evidence in section 489.13(b) or in the parts of the
regulations that describe the applicable conditions of
participation that some conditions were intended to have
a different status as "health and safety" conditions from
other conditions of participation. Rather, the reference
to "federal health and safety conditions" appears to
cover all of the conditions of participation that would
be subject to survey. The compliance issues raised by
the conditions all directly or indirectly relate to the
health and safety of the patients in the facilities. 5/
In any event, a careful review of the two conditions at
issue here confirms that these conditions affect the
health and safety of the patients under any reasonable
interpretation of those terms. The regulation at 42
C.F.R. § 482.61 concerns the condition of participation
entitled "Special medical record requirements for
psychiatric hospitals." Among other things, this section
requires that each patient must receive a psychiatric
evaluation within 60 hours of admission that includes a
medical history. It also requires that each patient must
have an individual comprehensive treatment plan that
includes a substantiated diagnosis, short-term and long-
range goals, and specific treatment modalities to be
used. The regulation at 42 C.F.R. § 482.62 concerns the
condition of participation entitled "Special staff
requirements for psychiatric hospitals." This provision
specifies that the hospital must have an adequate number
of qualified professional and supportive staff to
evaluate patients, formulate individualized comprehensive
treatment plans, provide active treatment measures and
engage in discharge planning. We conclude that both of
these special conditions of participation unquestionably
affect the health and safety of the patients of the
psychiatric hospitals and thus unquestionably qualify as
"health and safety" conditions of participation.
Finally, we conclude that even if the two conditions of
participation at issue somehow were not considered to be
"health and safety" conditions of participation, section
489.13(b) could still reasonably be read as requiring
that psychiatric hospitals comply with these conditions
of participation before a provider agreement could be
effective. Section 489.13(b) requires in addition
compliance with "any other requirements imposed by HCFA."
Clearly, these two conditions of participation for
psychiatric hospitals should be considered
"requirements" imposed by HCFA even if they were not
viewed as "health and safety" conditions of participation
(which they clearly should be under any reasonable
interpretation). Indeed, these two special conditions
are expressly required by statute as a basic part of the
definition of a "psychiatric hospital" in section
1861(f)(3) and (4) of the Social Security Act.
2. Petitioner's other arguments
Petitioner also argued that HCFA had the discretion under
the regulations to impose an earlier effective date in
spite of the absence of a survey of the two special
conditions of participation. Petitioner argued that it
should not have to bear total financial responsibility
for medically necessary services provided to Medicare or
Medicaid patients where HCFA's survey agents took more
than five weeks to complete the survey of Petitioner.
Finally, Petitioner argued that it reasonably relied on a
letter dated April 5, 1990 from the state survey agency,
which, according to Petitioner, indicated that all
conditions of participation would be surveyed at the same
time.
As we stated above, the regulations require that the
survey process must be utilized to examine a facility's
compliance with the applicable program requirements.
Moreover, the regulation at 42 C.F.R. § 489.13(b)
provides that a provider agreement may not become
effective until a facility has been found to meet all
federal health and safety conditions of participation.
6/ Thus, we conclude that in the absence of a survey to
determine whether Petitioner was in compliance with the
two special conditions of participation applicable to
psychiatric hospitals, HCFA lacked the authority to give
Petitioner an earlier effective date.
Moreover, we conclude that it is solely within HCFA's
discretion to determine whether under the particular
circumstances of this case it could authorize a
substitution in the established survey arrangements as it
may have done in the past. HCFA would necessarily have
had to consider whether state surveyors (or any other
survey entity) available within this limited time period
had the requisite expertise in the two special conditions
of participation for psychiatric hospitals to serve as a
substitute for HCR. Petitioner pointed to no evidence
suggesting that HCFA's exercise of its discretion in this
instance was an abuse.
As to the argument that Petitioner should not have to
bear the financial responsibility for medically necessary
services to Medicare or Medicaid patients, the ALJ's
undisputed finding was that Petitioner's corporate owner
had had experience with the survey process before,
including experience with potential delays because of
contract difficulties between HCFA and HCR. Petitioner
acknowledged that it had received the survey agency's
letter of April 5, 1990, which indicated that only three
patients were required in the facility for the survey to
take place--not 40. Petitioner, moreover, did not
dispute the ALJ's finding that none of the initial
patients had to be eligible for Medicaid or Medicare
under the regulations. Thus, as the ALJ concluded,
Petitioner's decision to admit a number of Medicare or
Medicaid patients in the facility immediately after
beginning operations "was a risk it assumed voluntarily"
and not because of pressure from HCFA or requirement of
law. ALJ Decision at 9.
Finally, we can find no basis for concluding that
Petitioner was misled by the April 5, 1990 letter of the
survey agency. The survey agency stated that the
hospital must be open at least three days and have had a
minimum of three patients before the survey could be
performed. Letter of April 5, 1990. The letter,
moreover, states that the survey will be scheduled by
both the Indiana Board of Health and HCR. It gives no
assurance that the two entities will complete their
portions of the survey at the same time and makes no
guarantee as to the closing date of the complete survey.
In any event, the Social Security Act and its
effectuating regulations do not require that all
conditions, including special conditions, be surveyed
simultaneously or even within a set period of time
relative to when a new provider begins operations.
Conclusion
On the basis of the foregoing, we conclude that the ALJ
did not err when he concluded that HCFA properly
established the effective date of October 16, 1990 for
Petitioner's provider agreement. Accordingly, we sustain
his decision.
__________________________
Judith A. Ballard
__________________________
M. Terry Johnson
__________________________
Donald F. Garrett
Presiding Board Member
* * * Footnotes * * *
1. Petitioner's request for review was
initially before the Social Security Administration
Appeals Council. The Board was subsequently substituted
for the Appeals Council as the reviewing authority for
this type of appeal, and the case was transferred to the
Board on October 2, 1995. The Presiding Board Member
held an oral argument by telephone on April 3, 1996,
which supplemented arguments made in written briefs
previously submitted by the parties to the Appeals
Council.
2. Unless otherwise indicated, the regulations
cited in this decision are the version in effect in 1990.
3. Counsel for Petitioner acknowledged in the
same letter that Petitioner's corporate owner,
Psychiatric Institutes of America, had previously had the
same difficultly in arranging a survey by HCR at a
different facility and had been able to make special
arrangements with HCFA in that instance to have the state
survey agency perform the entire survey.
4. The record nowhere gives the full name for
the subcontracting entity, "HCR."
5. Petitioner conceded that providers would
ultimately have to come into compliance with the special
conditions that Petitioner said did not pertain to
"health and safety" but argued that such compliance could
occur after the provider agreement had gone into effect.
Petitioner Supp. Br. at 9. The regulations, however,
make no express provisions for delayed compliance with
any of the conditions of participation. Moreover,
nothing in the regulatory history of section 489.13,
including the references to the history cited by
Petitioner, provides any support whatsoever for
Petitioner's interpretation.
6. The ALJ described the process for
determining compliance as follows:
The regulations are specific in laying out the
extent of the surveyors' responsibilities and
authority. Those responsibilities include the
surveying of the subject facility, recording the
findings and reporting recommendations based on
those findings to HCFA. HCFA must evaluate the
findings and make conclusions on whether the
conditions are satisfied. Unlike the surveyors,
HCFA is looking not just at the findings, but at how
those findings comport with the [Social Security]
Act and regulations. Only then may a finding of
compliance or noncompliance be made, and that
finding may be made only by HCFA. Until there is a
finding of full compliance by HCFA, HCFA does not
have the authority to issue a provider number.
ALJ Decision at 10.
(..continued)