GAB Decision 164
April 30, 1981 New Jersey Department of Human Services; Docket No.
79-231-NJ-HC Ford, Cecilia; Teitz, Alexander Settle, Norval
The New Jersey Department of Human Services (State) filed an
application for review of a determination by the Director, Bureau of
Program Operations, Health Care Financing Administration (Agency),
disallowing $91,392 claimed for the period June 1, 1978 to March 31,
1979 under Title XIX of the Social Security Act for payments to
Mountainview Nursing Home, a combined skilled nursing/intermediate care
facility. The costs were disallowed on the ground that the State did
not have a valid provider agreement with the facility in accordance with
the applicable regulations. This decision is based on the State's
application for review, the Agency's response to the appeal, the State's
response to an Order to Show Cause issued by the Board Chair, and the
Agency's response to a subsequent inquiry by the Board's Executive
Secretary. The arguments in the State's response to the Order are
substantially the same as those advanced in its application for review.
Accordingly, we adopt the Order's tentative conclusion and sustain the
disallowance.
Applicable Regulations
The applicable regulations are set forth in 42 CFR Part 449 (1977),
"Services and Payment in Medicaid Assistance Program." (The regulations
were recodified without any significant changes at 43 FR 45233,
September 29, 1978.) Federal financial participation (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. Section 449.10(b)(4)(i)(C) for skilled nursing services,
Section 449.10(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
care institutions in the state (state survey agency). Section
449.33(a)(6). The single state agency is required to certify that the
facility is in compliance with each condition of participation. Section
449.33(a)(4)(i). Certification can be based on an acceptable plan of
correction. Section 449.33(a)(4). The effective date of the provider
agreement may not be earlier than the date of certification. Section
449.33(a)(6).
A provider agreement between the state agency and a facility is not
necessarily a sufficient basis to claim FFP, however. The provider
agreement may be determined invalid if the Secretary establishes that
any of five provisions in Section 449.10(b)(4)(i)(C)(1) -- (5) for a
skilled nursing facility or in 449.10(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 Section 449.33 is not
recognized as a skilled nursing facility or an intermediate care
facility for purposes of payment under Title XIX. Section 449.33(a)(
10).
Statement of the Case
Mountainview Nursing Home had a provider agreement with the State,
the validity of which is uncontested by the Agency, with an expiration
date of May 31, 1978. In January 1978, the State Department of Health
surveyed the facility and found that it was out of compliance with
applicable standards. (Agency response to appeal, Tab B.) The
inspection revealed over 115 violations of State and Federal law.
(Application for review, Exhibit D, p. 6.) Accordingly, the Department
of Health recommended that the facility's provider agreement not be
renewed. (Agency response to appeal, Tab B.) The facility was not
certified for the period after the expiration of the provider agreement,
and no new agreement was executed. (Response to Order, p. 4.) The
State nevertheless continued payments to Mountainview for Medicaid
services beyond May 31, 1978, and continued to claim FFP in such costs.
In August 1978, the Department of the Public Advocate of New Jersey
filed a complaint for receivership of Mountainview, alleging that
conditions at the facility "have been found to be habitually in
violation of minimum standards of health, safety and patient care
mandated by law." (Application for review, Exhibit D, p. 2.) The
complaint was filed pursuant to a State statute, the purpose of which
was to provide an alternative to revocation of a nursing home's license
or Medicaid decertification. N.J.S.A. 26: 2H-36 (1977), Note. The
State Departments of Human Services and of Health subsequently
intervened in the action as parties plaintiff. (Application for review,
Exhibit E.) In September 1978, a receiver assumed control of the
facility. (Application for review, Exhibit G, p. 18.) Under the
receiver's management, many of the deficiencies were corrected, and on
April 27, 1979, the facility was certified for the period February 28,
1979 to September 30, 1979. (Response to Order, Exhibit G.) A new
provider agreement effective February 28, 1979 was forwarded to the
facility on June 21, 1979. (Agency response to appeal, Tab C.)
The Agency disallowed FFP claimed for the period June 1, 1978 to
March 31, 1979 on the ground that the facility had not had a valid
provider agreement since June 1, 1978. (Notification of disallowance,
p. 1.) The Agency later stated that no costs for March 1979 were
included in the claim for FFP with respect to which the disallowance was
taken. (Further Response of the Health Care Financing Administration to
the Board's March 20, 1981 Inquiry, dated April 16, 1981, pp. 1-2.)
State's Arguments
The State concedes that, at least until February 28, 1979,
Mountainview did not meet the applicable standards for certification for
participation in the Medicaid program. (Application for review, p. 2.)
Noting that the parties did not disagree on the essential facts of the
case, the State admits that "Mountainview was an unacceptably poor
facility in May 1978 and did not merit renewal of its Title XIX provider
agreement." (Response to Order, p. 6.) It argues, however, that no
purpose would have been served by ceasing payments to the facility, and
that appointment of a receiver to correct the deficiencies while
continuing to provide Medicaid services was a more constructive action.
In support of this argument, the State notes that it had a shortage of
Medicaid beds at the time in question, so that there was in fact no
place to relocate the patients; that had it been able to relocate the
patients, it might have been subject to claims based on "transfer
trauma," harm to the patients precipitated by relocation; and that
under current case law, it would have had to continue payments to the
facility if the revocation or non-renewal of the provider agreement were
to be appealed by patients in the facility. (Application for review,
pp. 2-4.) Included with the State's application for review is a copy of
a proposal (undated) for amendment of the Federal regulations to permit
"certification with deficiencies on account of receivership."
(Application for Review, Exhibit G, p. 1.) The State also argues that
the Social Security Act does not authorize the Secretary to require
"extensive provider agreements," and that even if the regulations
requiring such agreements are valid, the Secretary has no authority to
inquire into the validity of a provider agreement since the Federal
government is not a party. (Application for review, pp. 9-10.)
discussion
Both the State of New Jersey and other states have in prior appeals
called to the attention of this Board the problems noted by the State in
the instant case which may be involved in terminating or refusing to
renew a provider agreement. See, for example, New Jersey Department of
Human Services, Decision No. 104, June 9, 1980, p. 5; Nebraska
Department of Health and Mental Hygiene, Decision No. 111, July 16,
1980, p. 7; Maryland Department of Health and Mental Hygiene, Decision
No. 124, October 2, 1980, p. 4. It may well be that the State
successfully avoided those problems here with the appointment of a
receiver charged with bringing the facility into compliance with
applicable standards. As the State itself has recognized in proposing
the amendment of the Federal regulations to permit certification of a
facility with deficiencies if a receiver is appointed, however, the
regulations do not now contain any such exception. Furthermore, they
clearly require that a provider agreement based on certification by the
survey agency be in effect in order for a state to receive FFP for
Medicaid services provided by a skilled nursing or intermediate care
facility. In the instant case, there was no provider agreement and no
underlying certification, and FFP was therefore properly disallowed.
As noted previously, according to the Agency, the State had not as of
the date of the disallowance claimed FFP for costs incurred in March
1979. It is not clear from the record whether the State claimed costs
which can be specifically identified as incurred on February 28, 1979.
As also noted previously, that was the effective date of the
certification and the provider agreement. Even if the disallowance does
include costs for February 28, 1979, however, we still sustain the full
amount of the disallowance. This Board has held that a certification
becomes effective on the date the survey agency indicates its approval.
Maryland Department of Health and Mental Hygiene, Decision No. 107, July
2, 1980. In the instant case, that approval was given on April 27,
1979. Accordingly, the certification and provider agreement was not
effective until April 27, 1979, and the State was not entitled to FFP
claimed for any costs incurred prior to that date.
Since this case turns on the facility's lack of certification for the
period in question, the State's argument that the Social Security Act
does not authorize the Secretary to require "extensive provider
agreements" is not relevant. The State's further argument that the
Secretary may not inquire into the validity of a provider agreement is
also without merit. Sections 449.10(b)(4)(i)(C)(5) (for skilled nursing
facilities) and 449.10(b)(15)(vi)(E) (for intermediate care facilities)
both specifically allow the Secretary to "look behind" the provider
agreement itself, before FFP is allowed, and determine that the
agreement does not constitute valid evidence that the facility met all
requirements for certification if certain conditions were not in fact
met. One of these conditions is that execution of the provider
agreement was contingent upon certification by the state survey agency
under Section 449.33(a)(6).
In its response to the Order, the State contended that the Order was
deficient because it did not indicate that the Agency's regional office
had been aware before taking the disallowance that the facility was in
receivership. The State indicated that a hearing on this point might be
desirable. (Response to Order, p. 4.) We do not believe that a hearing
would serve any purpose, however, since the Agency was not required to
advise the State that it would be subject to a disallowance regardless
of the receivership arrangement.
Conclusion
Since there was no valid provider agreement in effect from June 1,
1978 through February 28, 1979, we sustain the disallowance taken by the
Agency for that period.
OCTOBER 04, 1983