GAB Decision 181
May 29, 1981 New York Department of Social Services; Docket Nos.
78-19-NY-HC, 78-40-NY-HC, 78-138-NY-HC, 79-35-NY-HC, 79-51-NY-HC,
79-226-NY-HC, 80-7-NY-HC, 80-14-NY-HC, 80-47-NY-HC, 80-87-NY-HC,
80-139-NY-HC, 80-174-NY-HC Ford, Cecilia; Garrett, Donald Settle,
Norval
These are twelve appeals by the New York Department of Social
Services (New York, State) from decisions of the Health Care Financing
Administration (HCFA, Agency) disallowing Federal financial
participation (FFP) in the cost of services to Medicaid recipients by
three skilled nursing facilities (SNF) and one intermediate care
facility (ICF) whose provider agreements had been terminated and
allegedly not validly renewed. Some details concerning the
disallowances are set out in the Appendix to this decision.
Although all 12 appeals are included in this decision, the
disallowances were considered in three groups, each of which was the
subject of a separate Order to Show Cause. The disallowances in Group A
and B involve the same facilities, but raise different issues. Group A
deals with FFP during the provider appeal and Group B with FFP during
the State receivership. Group C involves the two other facilities and
deals with FFP as a result of court-ordered State payments in an action
brought by patients.
Group A -- Introduction
The first, or "A", group consists of parts of four cases involving
Kings Harbor Manor (Kings Manor), an ICF, and Kings Harbor Care Center
(Kings Care), a SNF. The State terminated its provider agreement with
Kings Manor on April 1, 1978 and with Kings Care on May 23, 1978. Kings
Care had also been terminated by the (then) Department of Health,
Education, and Welfare (HEW) as a Medicare provider on March 31, 1978.
The terminations of these facilities were the subject of several court
orders (described in greater detail below) culminating in the
appointment of the Commissioner of the New York Department of Health as
involuntary receiver for both facilities on February 13, 1979 and
attempted recertifications on March 5 and 6, 1979. The disallowances in
Group B deal with FFP for those facilities after February 13, 1979.
(2) Issue
In the Group A disallowances the issue is whether, and for what
periods of time, FFP is available where the provider agreement is
terminated but as a result of a court order the provider agreement is
constructively extended. The Board here decides that FFP is available
in payments to Kings Manor for services through February 13, 1979, and
to Kings Care, through December 29, 1978.
The Group A decision is based on the appeals; HCFA's responses;
copies of court orders and other documents in the records of the Agency
proceedings and submitted by New York; an Order to Show Cause issued by
the Board on October 16, 1980 for these and related appeals by other
states; responses by New York and HCFA to that Order; transcripts of
informal conferences held October 9, 1979 and February 11-12, 1981; and
post-conference briefs and other materials submitted by New York and
HCFA.
Background
Federal litigation
Shortly after the Medicare termination of Kings Care and the Medicaid
termination of Kings Manor, these facilities were the subject of
litigation in federal and state courts. On April 19, 1978, the United
States District Court for the Southern District of New York issued a
preliminary order in an action brought by the facilities, enjoining the
Agency from terminating Kings Care as a Medicare provider or
discontinuing reimbursement to Kings Care for services to Medicare
patients and enjoining the State from terminating Kings Care and Kings
Manor as Medicaid providers or discontinuing reimbursement for services
to Medicaid patients rendered by those facilities. Schwartzberg v.
Califano, 78 Civ. 1039. /1/
(3) On June 14, 1978, noting that the State had commenced an
administrative hearing concerning the non-renewal of its provider
agreement with Kings Manor, the Court dismissed that part of the case
involving Kings Manor. The Court held that pending the outcome of the
administrative hearing, the provider agreement remained in effect. /2/
On June 23, 1978, the Court withdrew its injunction against the
Agency and against the State with respect to Kings Care. In its
decision the Court observed that Kings Care had been aware of the
deficiencies upon which decertification was based "for quite some time"
and had been given ample opportunity to correct them. 453 F. Supp.
1042.
State litigation -- Kings Care
Shortly thereafter, on June 19, 1978, the Supreme Court of the State
of New York for Kings County, in an action brought by Kings Care, issued
a temporary restraining order enjoining the State from terminating Kings
Care as a Medicaid provider and discontinuing reimbursement for services
to Medicaid patients at Kings Care pending an Administrative hearing
under the State Public Health Law. Schwartzberg v. Whalen, Index No.
12172/78. The order was made final on August 10, 1978.
On December 29, 1978, the Appellate Division reversed, holding that
an administrative hearing was not required because the State's refusal
to renew the Medicaid provider agreement "cannot be equated with an
actual limitation of the operating certificate for violations of the
Public Health Law." The Court also held that "while the State has
an
independent duty to provide Medicaid assistance to its residents (Matter
of Kane v. Parry, 41 NY 2d 1051), that right does not attach to nursing
home provider status." 411 NYS 2d 667.
On September 7, 1978, the State had revoked the operating
certificates of both facilities. Both sought judicial review of that
determination, filing a request for an Order to Show Cause in the
Supreme Court for Albany County (Calendar No. 47). On November 3, 1978
that court (4) enjoined the State from prohibiting the admission of new
patients and from requiring the surrender of the operating certificates.
On February 13, 1979, the court appointed the State as involuntary
receiver for both facilities, vacating the court's prior order.
On March 5, 1979, the State purported to certify Kings Care; and on
March 6, Kings Manor. Docket Number 80-47-NY-HC, Record Tab 15; Exhibit
D, New York Response to December 16, 1980 Order to Show Cause in Docket
Number 80-47-NY-HC. Both facilities had been surveyed in January 1979.
Exhibits J and K, supra. HCFA does not dispute that new provider
agreements were issued annually pursuant to this and later
certifications. See HCFA response to appeal in Docket No. 80-47-NY-HC.
Discussion
The primary question is the effect of the federal court orders of
April 19 and June 14, 1978 on the availability of FFP in payments to
Kings Manor during the period April 1, 1978 to March 6, 1979. The Board
held recently in Ohio Department of Public Welfare, Decision No. 173,
April 30, 1981, that where a facility appeals the termination of its
provider agreement and a court orders the state to continue to reimburse
the facility for the cost of services to Medicaid recipients pending the
appeal, the provider agreement is constructively extended and FFP is
available for up to 12 months from the termination, or until there is a
new survey and determination thereon. The Board based its decision on
1) a program regulation guide issued by the Medical Services
Administration, Social and Rehabilitation Service (predecessor to HCFA)
(MSA-PRG-11) and 2) 45 CFR Sec. 205.10(b)(3). /3/ By applying those
policies and the holding in Ohio, we reach the result for each facility
indicated below.
(5) Kings Manor
Kings Manor was the subject of both a federal and a State court
order. Inasmuch as we find that the federal court order covers the
entire period at issue, it is not necessary to address the effect of the
State court order (we will discuss that order with respect to Kings
Care, infra).
As we noted in our Background, supra, the State's review of the
proposed revocation of the operating certificate for Kings Manor was
expanded to include review of the termination of the provider agreement.
/4/ It was on the basis of this representation that the federal court on
June 14, 1978, chose not to continue its April 19 order, dismissing the
Kings Manor part of the case and declaring that the provider agreement
would remain in effect pending the outcome of the State's hearing. The
record does not show when, or if, that hearing was ever held, nor does
it matter. We find that FFP was no longer available on that basis after
the State's appointment as involuntary receiver on February 13, 1979.
Ohio Department of Public Welfare, supra. The federal court order did
not have any effect after February 13 because the revocation of the
operating certificate mooted out the issue of the Medicaid termination.
The State could not issue a provider agreement in the absence of an
operating certificate.
Kings Care
On April 19, 1978, the federal court enjoined the State from
terminating Kings Care as a Medicaid provider or discontinuing
reimbursement for services to Medicaid patients by Kings Care. On June
23, 1978, the court withdrew the injunction with respect to Kings Care
but by contrast with its June 14 action on Kings Manor, the court did
not specify continuation of the provider agreement, nor did it refer to
a State hearing. We do not have before us in these cases (or elsewhere
on our docket) a HCFA disallowance, for the period May 23 -- June 23,
1978, so we do not reach the question of the effect of the federal court
order.
The June 29, and August 10, 1978 orders of the Kings County court
also enjoined the State from terminating or discontinuing the Medicaid
reimbursement of Kings Care -- pending an administrative hearing under
State law. In the case of Kings Care, however, unlike Kings Manor, the
State did not amend its notice of hearing to include the termination (6)
of Kings Care, on the grounds that the termination of Kings Care, as an
SNF terminated from Medicare, was mandated by federal law. /5/ Thus the
administrative hearing concerned only the issue of the proposed
revocation of the operating certificate and not the Medicaid
termination. PRG-11 deals only with termination of a provider
agreement, not a state operating certificate or other license and does
not apply here. New York January 16, 1981 Response, Exhibit B.
These State court orders, however, are a basis for the application of
45 CFR 205.10(b)(3). That regulation does not depend on whether the
court order is tied directly to the Medicaid termination, but whether
the result (i.e., revocation of the state license) is that Medicaid
reimbursement to the facility would otherwise cease. Nor does the
reversal of the Kings County decision on December 29, 1978, deprive the
State of its right to FFP as a result of the earlier erroneous order.
Section 205.10(b)(3) applies if the order directs payments in the
context of the review of a decision to discontinue reimbursement for
Medicaid services, and is not barred because a court order is ultimately
reversed. Thus, the State is entitled to FFP through December 29, 1978.
The reversal of the Kings County decision on December 29, 1978, does
not, however, deprive the State of its right to FFP as a result of the
earlier erroneous order. The application of 45 CFR 205.10(b)(3) does
not depend on whether a court order is ultimately affirmed, but rather
whether it directs payments in context, as this one did. Thus, the
State is entitled to FFP through December 29, 1978. /6/
Kings Care was also the subject of an order by the State Supreme
Court (Albany County) dated November 3, 1978. That order, however, did
not direct the continued reimbursement of Medicaid - based claims, nor
did it enjoin the termination of the provider agreement. No one
disputes that without an operating certificate there can be no provider
agreement, but conversely an operating certificate alone (court ordered
or otherwise) does not support reimbursement for services to Medicaid
recipients. We find this court order is not a basis for FFP.
(7) Res Judicata
At the February 11-12, 1981 conference, HCFA argued for the first
time that New York is barred by the doctrine of res judicata from
litigating in these appeals the issue of whether it is entitled to FFP
pending the outcome of court-ordered provider termination hearings.
Conference Transcript, pp. 31-45. HCFA relied principally on a portion
of a transcript of a May 4, 1978 proceeding in Schwartzberg v.
Califano, supra, allegedly showing that although the court was asked by
New York to order HCFA to provide FFP, the court chose not to do so.
Conference Transcript, p. 32. HFCA also contends that even if New York
had not made such a request, the opportunity to make it would also bar
the State from claiming FFP here, under the doctrine of collateral
estoppel. Conference Transcript, p. 38.
By letter dated March 2, 1981, New York supplied the transcript of a
March 31, 1978 proceeding in Schwartzberg, supra. Where there was only a
passing reference to the FFP question in the May 4 proceeding, on March
31 the parties had discussed the matter with the court at some length.
The Assistant United States Attorney informed the court that "(if) the
State is refused reimbursement they do have an administrative remedy."
The court commented:
I hope it doesn't come back here. I don't know my attitude in the
matter . . . I don't think I can order you to do anything about that.
There is nothing before me on it. You haven't done anything so far.
Transcript, p. 5.
The implication is that the State must first exhaust its
administrative remedy (i.e., request reconsideration by this Board on
the FFP issue). We find that HFCA's reliance on res judicata and
collateral estoppel is misplaced in view of the position taken by the
federal government in Schwartzberg, supra, that the State had an
administrative remedy. Our disposition of the issue on this basis does
not mean that we agree with HCFA that the res judicata doctrine might
apply in the absence of a showing that the Agency had argued the
exhaustion of remedies defense in court. Having disposed of the issue
on this basis, we simply do not reach the other arguments pressed by New
York and HCFA.
Group B - Introduction
The second, or "B", group consists of four cases involving Kings
Manor and Kings Care. These cases begin February 13, 1979, when the
State was appointed as receiver.
(8) Issues
In the Group B disallowances the principal issues are:
1) Whether the State's status as involuntary receiver allows it to
certify a facility with repeat deficiencies in the absence of
documentation that the facility did achieve compliance with the
standards at some time during the prior period.
2) Whether the State's status as involuntary receiver allows it to
certify an SNF as a Medicaid provider where the facility had been
terminated from the Medicare program and some of the same deficiencies
found in the survey on which the decision to terminate was based are
repeated in subsequent surveys.
The Board here decides that the State improperly certified the
facilities and upholds the disallowances. The decision is based on the
appeals, HCFA's responses, the December 16, 1980 Order to Show Cause
issued by the Board, and the responses thereto.
Background
The Commissioner of the New York State Department of Health became
receiver for both facilities by virtue of a February 13, 1979 order of
the State Supreme Court (Albany County) directing him to:
(take) all necessary and practical steps to eliminate serious
operating deficiencies and to attempt to maintain and /or regain
medicaid reimbursement from the federal government so that he can
maintain the patients in both facilities, provided however, that if he
cannot eliminate the deficiencies or he cannot obtain medicaid
reimbursement from the federal government, then nothing in this ordering
paragraph shall impede on his power under subdivision (2) of Sec. 2810
of the Public Health Law to orderly transfer the patients to other
facilities, and further provided the limiting terms of this ordering
paragraph shall expire, in any event, on July 15, 1979.
Tab 11, p. 3 of Agency Record filed in Docket No. 80-47-NY-HC (80-47
Record) (also 416 NYS 2952).
In a subsequent Order, on June 6, 1979, the Court directed the
receiver to "take all steps which may be necessary, including resort to
judicial relief, to ensure expeditious and continuing receipt of payment
for (9) all services rendered by Kings Care and Kings Manor, including,
without limitation, reimbursement from governmental sources for Medicaid
- sponsored patients . . ." Tab 9, p. 7, 80-47 Record.
On March 5, 1979, the State purported to certify Kings Care; and on
March 6, Kings Manor, both for the period February 14 to July 31, 1979.
Tab 15, 80-47 Record; Exhibit D to New York Brief dated March 16, 1981
(New York Brief). Again on September 5, 1979, the State purported to
certify both facilities, for the period August 1, 1979 to July 31, 1980.
Tab 13, 80-47 Record; Exhibit D, New York Brief.
The purported certifications in March were based on a January 1979
survey. The State concedes that Kings Care had 12 repeat deficiencies
and Kings Manor, four. The September 5 purported certification was
based on an April 1979 survey. Again, the State concedes that Kings
Care still had six deficiencies and Kings Manor two deficiencies,
repeating from the November 1977 survey (on which termination was
based). Kings Manor also had two other deficiencies repeating from the
January 1979 survey.Exhibits G, I, J, K, New York Brief.
Regulations
42 Sec. 442.20(b) requires termination of the Medicaid provider
agreement when a facility is terminated from the Medicare program.
Under Sec. 442.20(c) the State may not make another Medicaid agreement
with the facility until:
(1) The conditions causing the termination are removed; and
(2) The SNF provides reasonable assurance to the survey agency that
the conditions will not recur.
42 Sec. 442.105 permits certification of a facility if certain
findings are made /7/ and the State:
(b) . . . finds acceptable the facility's written plan for correcting
the facilities.
Moreover, the State must also do one or both of the following, as the
situation warrants:
(c) If a facility was previously certified with a deficiency and has
a different deficiency at the time of the next survey, the agency
documents that the facility -
(10) (1) Was unable to stay in compliance with the standard for
reasons beyond its control, or despite intensive efforts to comply; and
(2) Is making the best use of its resources to furnish adequate care.
(d) If a facility has the same deficiency it had under the prior
certification, the agency documents that the facility -
(1) Did achieve compliance with the standard at some time during the
prior certification period;
(2) Made a good faith effort, as judged by the survey agency, to stay
in compliance; and
(3) Again became out of compliance for reasons beyond its control.
Discussion
In its December 16, 1980 Order to Show Cause, the Board pointed out
that the State had not yet provided information to the Board showing
that it met the conditions for certification under Sections 442.20 and
442.105. In its response the State submitted an affidavit by the
Assistant Director of the Facility Surveillance Group of the Office of
Health Systems Management (OHSM), New York State Department of Health.
The affidavit asserts that basd on the evaluation of the January 1979
survey by OHSM the deficiencies (repeat and new) "did not individually
or in combination jeopardize the health and safety of the patients" in
both facilities, nor did the deficiencies "seriously limit the
(facilities') capacity to give adequate care." New York Brief, Exhibit
G. The affidavit also states that a number of "standards" were
deficient (17 in January and seven in April), but "0 Conditions" were
deficient in the case of Kings Care. The State has not shown here that
either facility achieved compliance with the standards under which
deficiencies were found during the prior certification period. The
State also did not offer any proof that prior to either certification
Kings Care had provided reasonable assurance that the deficient
conditions would not recur.
New York as New Operator
New York's principal argument is that as receiver it should be
treated like a new operator, contending that as a new operator Kings
Care would not have to make the showing required by Section 442.20 and
neither facility would have to meet the conditions for certification
with deficiencies in Section 442.105.
(11) Even assuming arguendo that New York had the status of a new
operator when it attempted to certify the facilities on March 5 and 6,
1979, this does not support its claim for FFP from February 14, 1979,
when it became receiver, or after July 31, 1979 when that certification
expired. The first period in question (2/14 to 3/5/6/79) is governed by
42 CFR 442.12(b) (1978), which requires that the effective date of a
provider agreement may not be earlier than the date of certification.
The record shows that certification took place March 5 for Kings Care
and March 6 for Kings Manor, the dates on which the survey agency signed
the HCFA Form 1539 Certification and Transmittal (C&T). It is this date
which HCFA would regard as certification (if the certification were
valid). Maryland Department of Health and Mental Hygiene, Decision No.
107, July 3, 1980. /8/ We find here that March 5 and 6 are the dates of
certification even though the C&Ts show the period of certification as
starting February 14.
This conclusion would also require that the C&T signed September 5 be
effective from that date, rather than the period of certification shown
therein starting August 1, 1979. However, we do not have to reach that
point because the attempted September 5 certification is invalid under
the terms of Section 442.105. Even with a new operator, the facilities
could not be certified September 5 with admittedly repeat deficiencies.
Accordingly, we find that FFP is not available after July 31, 1979
(whether or not available prior to that date).
HCFA argues that it does not matter whether the State is considered a
new operator, because the regulations address the facilities, not the
owners or operators. HCFA Response to Appeal, Docket No. 80-47-NY-HC,
pp. 7-8. Although the regulations obviously use the term "facility,"
we
would not necessarily agree with HCFA that they apply equally to a new
operator as to something less. The parties have not cited, nor have we
found any regulations defining a new operator or suggesting different
treatment on that basis. However, because we find here that New York is
not a new operator, we do not reach the question posed by HCFA's
argument.
(12) New York as Receiver
We conclude that New York is not a new operator based on the New York
law under which it was appointed receiver. Under that statute, Section
2810 of the New York Public Health Law (New York Brief, Exhibit C), the
State is described as having "the powers and duties of a receiver
appointed in an action to foreclose a mortgage on real property" and
must, within 18 months, provide for the orderly transfer of all
patients.While it operates the facility, the State must correct
deficiencies that "seriously endanger the life, health or safety"
of the
patients except where this would involve "major alterations of the
physical structure of the facility." We find that these conditions do
not give the State the same freedom with these facilities that an
operator would be expected to have -- particularly the capacity to make
major physical alterations if necessary to ensure the life, health or
safety of the patients. Nor is the State exempt from the requirements
of the Medicaid regulations because of any special status as a receiver.
See New Jersey Department of Human Services, Decision No. 164, April
30, 1981, p. 4; and Missouri Department of Social Services, Decision
No. 175, April 30, 1981, p. 12. Accordingly, we find that the State is
subject to the regulations as though the status had not changed.
On this basis, the certification with repeat deficiencies on March 5
and 6 is no more valid than that of September 9, which we have already
determined to be lacking the documentation required by Section 442.105.
Moreover, having held that the State is not a new operator for the
purposes of Section 442.105, we also find that the State is bound by
Section 442.20.
New York argues that its January and April 1979 survey findings that
no conditions were deficient shows that it met the requirement that the
deficient conditions found in the November 1977 survey be removed. New
York Brief, p. 9. New York relies on an affidavit by the Director,
Bureau of Health Facility Coordination, OHSM (Ibid, Exhibit A) which
attempts to draw a distinction between major headings on a survey report
("conditions") and subheadings ("standards" and "elements")
and
concludes that it is not necessary for each and every standard under a
condition of participation to be met for the condition to be in
compliance.
The Medicare regulations do list several standards under each
condition of participation, but New York does not cite nor do we find
support for its suggested interpretation of Section 442.20. Moreover,
the State has not shown that Kings Care gave reasonable assurance that
the conditions would not recur, nor was such a declaration likely since
(13) both the March and September attempts at certification were based
on acceptable plans of correction of the very deficiencies that had led
to termination. Thus the certifications of Kings Care are not valid
under Sec. 442.20.
Other Issues
The Agency also relies on its authority under 42 CFR Sec. 442.30 to
"look behind" the State's provider agreement and certification to
determine that the facility is not certifiable. The State objects that
the Agency did not specify in sufficient detail in the disallowances to
satisfy the requirement of this regulation that there be a determination
by the Administrator, HCFA. The "look-behind" regulation does specify
that a provider agreement is not valid evidence of certification if the
Administrator of HCFA determines that the requirements listed in Sec.
442.30 have not been met. Other than general statements in the
disallowance letters, the Agency has not shown in these cases that the
Administrator made formal findings. However, this Board has not held
that such formal findings are necessary and has relied on the
"look-behind" authority in upholding disallowances based on similarly
general statements by HCFA that certifications or provider agreements
were invalid. Nebraska Department of Public Welfare, Decision No. 111,
July 16, 1980; New Jersey Department of Human Services, Decision No.
164, April 30, 1981.
New York also argues that the Board has no "implied" authority to
"look behind." Here we need not reach these issues of the use of
"look-behind" by HCFA or by this Board, because we find that sections
442.105 and 442.20 are sufficient bases to uphold the disallowances.
The State continues to object to the admittedly erroneous citation of
Section 442.20 as a basis for the disallowances for Kings Manor, an ICF,
in Docket Nos. 80-139 and 80-174. The Board noted this in its Order to
Show Cause, but we do not find that this is a basis for reversing those
two disallowances. In the first place, the earlier disallowances also
cited Section 442.105 which, as we have already held, supra, is a proper
basis for upholding disallowances for both facilities in all four cases.
Second, we find that the two disallowances as a whole and in the context
of being merely additional quarters of the earlier disallowances satisfy
the requirement of notice to the State in 45 CFR Sec. 16.91. In any
event, HCFA could still re-issue the disallowances, and we choose not to
further delay resolution of this dispute on such a basis.
(14) Group C - Introduction
The third, or "C", group consists of all or parts of eight
disallowances involving two SNF's -- Doane's and Earle (see Appendix).
In its appeal in 80-87-NY-HC, New York asked that the Doane's and Earle
issues be considered separately from the Kings Care and Kings Manor
issues; HCFA agreed; and the Board has proceeded accordingly.
New York terminated Doane's as a Medicaid provider on May 10, 1975;
and Earle, June 9, 1976. Shortly thereafter, Medicaid recipients at
each facility obtained a court order directing the State to continue
reimbursing the facilities for services to these recipients pending the
outcome of administrative hearings on the State's decisions to terminate
the facilities.
Issue
In the Group C disallowances the principal issue is whether, and for
what periods, if any, FFP is available subsequent to the May 10, 1975,
and June 9, 1976 terminations, as a result of the court orders. The
Board here decides that FFP is available (1) in the cost of payments to
Doane's for services through May 10, 1976; (2) in the cost of payments
to Earle for services through June 9, 1977; (3) plus up to 30 days to
cover the times in December 1978 and January 1979 (Doane's) and in
December 1977 (Earle) when the State made reasonable efforts to transfer
the patients to another facility or to alternate care (for individuals
admitted prior to termination). The decision is based on the appeals;
HCFA's responses; the Board's Order to Show Cause dated December 10,
1980; New York's response to the Order (the Agency was not required to
respond); and the records of the proceedings before the Agency.
Background
Doane's
On June 11, 1975, the Supreme Court of the State of New York (Orange
County) issued a temporary restraining order enjoining the Commissioner
of the Orange County Department of Social Services and the Commissioner
of the New York Department of Social Services from denying Medicaid
benefits to recipients at Doane's. Kane v. Parry, Index No. 2928-75.
On July 28, 1975, the court issued a final order directing the above
named parties to afford the medicaid recipients at Doane's a hearing "to
consider the appropriateness of the proposed action" and enjoining the
removal of the recipients or the termination of payments by the "local
agency" pending "final administrative disposition of said proceedings."
The Court expressed its view:
(15) that petitioners do not seek any judgment declaring that federal
reimbursement should be continued. Although it is a relevant
consideration, respondents' obligation to provide medical assistance is
independent of the federal law and regulations with respect to Federal
financial participation. The State's own administrative letter (74
ADM-172) acknowledges that payments to decertified nursing homes after a
certain time period may be made but that they will be
"non-reimbursable."
Kane v. Parry, 371 NYS 2d 605.
On December 27, 1976, the Appellate Division reversed, holding that
the failure of the recipients to comply with the reasonable condition of
residing in a qualified nursing home constitutes a waiver of their right
to receive payments. Kane v. Parry, 390 NYS 2d 191.
Subsequently, the Court of Appeals reinstated the judgment of the
Supreme Court on the grounds that "(in) the interests of administrative
and judicial economy the better discretion would have been to proceed
expeditiously with the fair hearings." Kane v. Parry, 396 NYS 2d 182.
The State conducted hearings on or about January 5, 1978, and on
March 6, 1978 reached decisions in effect requiring the Medicaid
recipients at Doane's to transfer or to be terminated from medical
assistance. New York Response, p. 3. Enforcement of these decisions
was enjoined by the Supreme Court (Orange County) on April 3, 1978, and
the aforementioned State and County commissioners were ordered to
continue payments pending a show cause hearing. On June 27, 1978, the
court directed the further continuation of medical assistance payments
to Medicaid recipients pending new administrative hearings at which
evidence of the "actual" fire hazards had to be considered and weighed
against the "threat to life . . . established by the medical and
psychiatric reports in the record. . . ."
It does not appear from the documents filed with this Board that the
State ever conducted such hearings, but by January 17, 1979 all of the
Medicaid recipients had been removed from Doane's. New York Response,
p. 4.
Earle
On July 8, 1976, Medicaid recipients at Earle obtained a temporary
restraining order from the Supreme Court (Orange County) directing (1)
the continuation of payments and prohibiting the removal or transfer of
these patients pending "the determination and decision (16) of this
proceeding;" and (2) the examination of the recipients "by another
doctor with respect to the advisability of moving the petitioners from
Earle Nursing Home pending the outcome of a fair hearing." Gardner v.
Parry, Index No. 3471/76.
In its final order on July 29, 1976, the Court directed the
continuation of payments pending a fair hearing determination as
required by both State and federal law. The Court noted its earlier
decision in Kane that the State was obliged to provide medical
assistance even if the federal government would not reimburse the State.
Gardner v. Parry, 386 NYS 2d 322.
The State conducted hearings on August 10, 1976, and on August 3,
1977, rendered decisions to terminate payments to Earle and transfer the
recipients to another facility.New York Response, p. 5. On August 19,
1977, the Supreme Court (Orange County) reversed the State's decisions
and ordered more hearings "as may be necessary to evaluate the hazards
to the health and safety of petitioners from transfer trauma. . ."
Gardner v. Toia, Index No. 4630-77. This order was lifted by the court
on December 3, 1977 because Earle had lost its operating certificate.
All of the Medicaid recipients had been removed by December 31, 1977.
New York Response, p. 6.
Regulations
New York relies on Medicaid regulations codified under "General
Administration -- Public Assistance Programs -- Hearings (a) State plan
requirements and (b) Federal financial participation." These are:
45 CFR 205.10(a)(5) and (6) (1976) (in pertinent part):
(5) An opportunity for a hearing shall be granted to any applicant
who requests a hearing because his claim for financial or medical
assistance is denied, or is not acted upon with reasonable promptness,
and to any recipient who is aggrieved by any agency action resulting in
suspension, reduction, discontinuance or termination of assistance.
(6) If the recipient requests a hearing within the timely notice
period:
(i) Assistance shall not be suspended, reduced, discontinued or
terminated, (but is subject to recovery by the agency if its action is
sustained), until a decision is rendered after a hearing, unless:
(17) (A) A determination is made at the hearing that the sole issue
is one of State or Federal law or policy, or change in State or Federal
law and not one of incorrect grant computation . . .
45 CFR 205.10(b)(1) and (3) (1976):
(b) Federal financial participation. Federal financial participation
is available for the following items:
(1) Payments of assistance continued pending a hearing decision.
(3) Payments of assistance within the scope of Federally aided public
assistance programs made in accordance with a court order.
Discussion
It is not disputed here that the courts ordered payments pending
hearings. The Board held in Ohio Department of Public Welfare, supra,
that FFP is available where a facility appeals a termination and a court
orders the state to continue reimbursing the facility pending appeal,
constructively continuing the provider agreement. The question here is
whether FFP is available for court-ordered payments pending hearings
sought by recipients as a result of the termination of the facility in
which they are housed.
The Ohio decision was based in part on PRG-11. That guidelines does
not apply here because it is confined to provider appeals. The other
basis for Ohio was 45 CFR Sec. 205.10(b)(3), which is not restricted to
provider appeals. Moreover, it is part of a regulation requiring states
to establish a system of hearings for applicants and recipients.
HCFA argues that the fair hearing provisions do not apply here
because the State was not required to give recipients hearings when
facilities are terminated. Indeed, the State concedes that the issue in
the hearings was not the termination but the possible detrimental effect
on the elderly patients of a transfer from the facility (transfer
trauma). New York Response, pp. 3, 4, 5.
HCFA cites the decision of the Supreme Court in O'Bannon v. Town
Court Nursing Center, 447 U.S. 773 (1980). The Court found
"unpersuasive" the argument that the risk of transfer trauma was
"tantamount to a deprivation of life or liberty, which must be preceded
by a due process hearing," holding:
(18) Whether viewed singly or in combination, the Medicaid provisions
relied upon by the Court of Appeals do not confer a right to continued
residence in the home of one's choice. 42 U.S.C. Sec. 1396a( a)(23)
gives recipients the right to choose among a range of qualified
providers, without government interference. By implication, it also
confers an absolute right to be free from government interference with
the choice to remain in a home that continues to be qualified. But it
clearly does not confer a right on a recipient to enter an unqualified
home and demand a hearing to certify it, nor does it confer a right on a
recipient to continue to receive benefits for care in a home that has
been decertified. Second, although the regulations do protect patients
by limiting the circumstances under which a home may transfer or
discharge a Medicaid recipient, they do not purport to limit the
Government's right to make a transfer necessary by decertifying a
facility. Finally, since decertification does not reduce or terminate a
patient's financial assistance, but merely requires him to use it for
care at a different facility, regulations granting recipients the right
to a hearing prior to a reduction in financial benefits are irrelevant.
Ibid, p. 785. Also, in Ohio, supra, p. 5, the Board held that the
possibility of transfer trauma was not a valid reason for failing to
discontinue Medicaid reimbursement for a decertified facility.
We find that New York's reliance on Sections 205.10(a)(5) and (6) is
misplaced. These regulations provide for hearings to which applicants
and recipients do have a right, unlike the transfer trauma hearings
ordered by the New York courts in these cases. The Agency promulgated
these regulations in response to the Supreme Court decision in Goldberg
v. Kelly, 397 US 254 (1970), dealing with due process for applicants and
recipients. We find that HCFA is not arbitrary in its interpretation of
the regulations in question as being confined to protected due process
rights. This does not mean that the applicant or recipient has to
prevail to have the benefit of these provisions, but that the basis for
the hearing must be within the pale of due process. Transfer trauma
clearly was not.
New York counters that the O'Bannon decision can be given only
prospective application, but we disagree. Transfer trauma did not fall
outside of the due process circle as a result of O'Bannon; it never was
in it, the New York State court decisions notwithstanding.
(19) This analysis also leads us to the conclusion that Sec. 205.10(
b)(1) is not a basis for authorizing FFP here. We reach a different
result, however, with respect to the application of section 205.10(b)(
3). As we pointed out in Ohio, supra, p. 11, in the instance of that
regulation the Agency has taken a broader view. It does not limit its
application to applicant/recipient hearings, nor to established due
process rights. The Agency has taken the position that Section 205.10(
b)(3) applies to provider appeals, although in O'Bannon, supra, p. 485
n. 17, the court indicated that providers did not have a due process
right to a pretermination hearing. Accordingly, the transfer trauma
nature of the hearing is not a bar to the application of Section
205.10(b)(3). Section 205.10(b)(3) applies because the court directed
the State to continue payments, constructively extending the provider
agreement. Ohio, supra. It is not a bar that the order was pending
hearings on the issue of transfer trauma, rather than the provider's
deficiencies.
We find, then, that Section 205.10(b)(3) requires the payment of FFP
through May 10, 1976 for Doane's and through June 9, 1977 for Earle. As
in Ohio, supra, although the court orders overcome the terminations of
the facilities, the effect of the court orders does not extend beyond 12
months from the terminations (there being no subsequent survey/
certification determination). We held in Ohio that reimbursement for
court ordered "payments . . . within the scope" of the Medicaid program
could not exceed that limitation.
In addition, although it is not an issue in these cases, the State is
entitled to FFP for periods up to 30 days when it was engaged in
transferring the patients to other facilities. 42 CFR Sec. 441.11, Sec.
442.15; Weikel Letter, Tab E, Order to Show Cause dated October 16,
1980, supra. For Doane's, this occurred some or all of the 30 days
preceding January 17, 1979; for Earle, between December 3 and 31, 1977,
depending on HCFA's determination.
Summary of Our Holdings
In conclusion, we have made the following determinations in these
cases:
A. In 79-35, 79-51, 79-226, 80-14, 80-47:
1. Kings Manor
Pursuant to PRG-11 and the federal court order, FFP is authorized in
claims for the cost of services to Medicaid recipients from April 1,
1978 to February 13, 1979.
(20) 2. Kings Care
Pursuant to Sec. 205.10(b)(3) and the State court order, FFP is
available May 23, 1978 to December 29, 1978.
B. In 80-47, 80-87, 80-139, 80-174:
1.Kings Manor
Because of the failure of the State to provide the necessary
documentation under 42 CFR 442. 105, we find the March 6, 1979 and
September 5, 1979 certifications to be invalid and uphold the
disallowances.
2. Kings Care
Because of the failure of the State to provide the necessary
documentation under 42 CFR Sec. 442.20 and Sec. 442.105, we find the
March 6, 1979 and September 5, 1979 certifications to be invalid and
uphold the disallowances.
C. In 78-19, 78-40, 78-138, 79-35, 79-51, 79-226, 80-7, and 80-14:
1. Pursuant to the State court orders, FFP is available for Doane's
May 10, 1975 to May 10, 1976, and for Earle June 9, 1976 to June 9,
1977.
2. Pursuant to 42 CFR Sec. 441.11 and Sec. 442.15 and the Weikel
letter, FFP is available for patients admitted prior to termination for
up to 30 days in December 1978 (Doane's) and January 1979 (Doane's and
Earle) of such time as HCFA determines the State made reasonable efforts
to transfer the patients to another facility or to alternate care. /1/
The court was anticipating the Medicaid termination under 42 CFR
Sec. 449.33(a)(9), which requires that the Medicaid provider agreement
be terminated when a facility is terminated from Medicare. Copies of
this and other court orders are to be found at various places in the
record, but for convenience unless otherwise noted we refer to the set
of orders enclosed with the New York letter dated September 25, 1980.
Where citations to reported decisions are available, these are given
also. /2/ New York states in its January 16, 1981, brief in
response to the Board's October 1980 Order that the State gave the
District Court an affidavit attaching an amendment to the notice of the
State hearing on the proposed revocation of the operating certificate.
The amended notice added to the proceedings the issue of the termination
of Kings Manor's provider agreement. Brief, p. 4 and Exhibit B.
/3/ These provide, in pertient part, for FFP: MSA-PRG-11: (If) State
law provides for continued validity of the provider agreement pending
appeal (from the nonrenewal or termination of a provider agreement). 45
CFR Sec. 205.10(b)(3): (In) payments of assistance within the scope of
Federally aided public assistance programs made in accordance with a
court order. /4/ Section 2806 of the New York Public Health Law
provides that "no hospital operating certificate shall be revoked,
suspended, limited or annulled without a hearing." /5/ Kings
Care was terminated as a Medicare facility on March 31, 1978.
/6/ The disallowances before us do not cover any period of service by
Kings Care prior to December 1, 1978. /7/ The State must find
that the facility's deficiencies, individually or in combination, do not
jeopardize the patient's health and safety, nor seriously limit the
facility's capacity to give adequate care and must maintain a written
justification of these findings. /8/ In New Jersey Department of
Human Services, Decision No. 137, December 1, 1980; and Washington
Department of Social and Health Services, Decision No. 176, May 26,
1981, the Board held that the State may rely on documentation other than
the C&T, but that is not an issue here. The presumption is that
certification is effective as of the C&Texecution date and nothing in
this record overcomes that presumption.
OCTOBER 22, 1983