GAB Decision 217
September 30, 1981 Pennsylvania Department of Public Welfare; Docket
No. 80-101-PA-HC Ford, Cecilia; Garrett, Donald Settle, Norval
Introduction
On May 30, 1980, the Pennsylvania Department of Public Welfare
(Pennsylvania, State) requested reconsideration of the April 30, 1980
decision by the Health Care Financing Administration (HCFA, Agency) to
disallow $1,367,968 in Federal financial participation (FFP) for Title
XIX (Medicaid) services provided at the Sara Allen Nursing Home from
April 1, 1977 through September 30, 1979. HCFA determined that there
was no valid provider agreement in effect between the facility and the
State during that period of time. After the State supplemented its
application for review and the Agency responded to the appeal, the Board
issued an Order to Show Cause on October 16, 1980 pertaining to one of
the two major issues in the appeal. This Order encompassed 38 appeals
brought by several States, including Pennsylvania. The Board issued a
second Order to Show Cause on November 3, 1980 which pertained to the
other major issue in this appeal. Pennsylvania responded to both Orders
but chose not participate in a conference stemming from the first Order.
Also included in the record are responses by both parties to questions
posed by the Board on May 12, June 29, and July 2, 1981.
As will be discussed below, we find that Pennsylvania law does
provide for continued validity of a provider agreement pending appeal
from a termination and therefore brings this appeal within the scope of
MSA-PRG-11. The State is entitled to FFP for services performed during
the period April 1, 1977 through January 30, 1978 but is not entitled to
any for the remainder of the disallowance period.
Statement of the Case
The provider agreements for the Sara Allen Nursing Home, which
provided both skilled nursing and intermediate care services, were set
to expire on March 17, 1977. Both agreements contained clauses
providing for the automatic cancellation of the agreements as of January
31, 1977. The cancellation clauses would be invoked unless certain
events took place.
(2) (See further discussion on page 5.) The State notified the
facility on February 25, 1977 that "the Department was acting to
initiate the automatic cancellation clause." (Letter to Board dated July
23, 1981.) The facility requested an administrative hearing under 71
P.S. Sec. 1710.31.
According to the State, subsequent to the "notice of termination"
(Application for Review, p. 4), representatives of the State and
facility met to discuss correction of deficiencies in the facility. The
State determined that correctons could be made and that the facility
should not be terminated from the Medicaid program. On April 15, 1977,
a health management corporation assumed responsibility for the operation
and maintenance of the facility and subsequently proposed corrections
which were accepted by the survey agency. From April 1977 to September
1978, the survey agency "continually monitored" the correction efforts.
The State has admitted that there were no certifications or provider
agreements executed between March 17, 1977 and September 6, 1978.
(Letter to board dated September 11, 1980.)
The State has asserted that "on March 17, 1978, a new Plan of
Correction was developed and made part of the provider agreement entered
into by the Department and the Home on September 6, 1978." (Application
for Review, pp. 4-5.) In response to a question posed by the Board, the
State admitted that there was no certification of the facility prior to
execution of that provider agreement and subsequent to the expiration of
the prior one. (State's letter to Board dated September 11, 1980.) * On
January 23, 1980, the termination was upheld after a hearing, but the
facility had withdrawn from the Medicaid program on September 12, 1979.
The issue before this Board is whether FFP is available for services
provided by this facility after the termination of its provider
agreement pending an appeal by the facility under State law of the
State's decision to terminate the facility from the Medicaid program,
and if so, for what period.
Discussion
1. The Applicability of MSA-PRG-11 s
MSA-PRG-11 (PRG-11), a December 1971 Program Regulation Guide issued
by the predecessor to HCFA, sets out the basic rule that FFP is not
available if a facility does not have a currently effective provider
agreement, but notes two exceptions:
(3) 1) (If) State law provides for continued validity of the provider
agreement pending appeal; or
2) (If) the Facility is upheld on appeal and State law provides for
retroactive reinstatement of the agreement.
HCFA has contended that even if the State is required by State law to
continue payments, FFP is not authorized because the first part of
PRG-11 has been superceded by subsequent regulations. However, in Ohio
Deparrment of Public Welfare, Decision No. 173, April 30, 1981, the
Board held (p. 14) that PRG-11 had not been nullified, repealed, or
amended. The Board applied the first exception set forth in PRG-11
where a facility appeals the termination or nonrenewal of its provider
agreement and a court orders the state to continue payments. The effect
of this exception is limited in duration, as discussed in the second
part of this discussion. In Colorado Department of Social Services,
Decision No. 187, May 31, 1981, the Board concluded (p. 7) that its
holding in Ohio also applied to an appeal under the Colorado
Administrative Procedure Act. See also, Georgia Department of Medical
Assistance, Decision No. 192, June 30, 1981; Minnesota Department of
Public Welfare, Decision No. 215, September 24, 1981.
Our discussion will focus only on the first exception set forth in
PRG-11 since the facility was not upheld on appeal and the second
exception, therefore, does not apply.
Pennsylvania law pertaining to administrative appeals at 71 P.S.
Sec. 1710.31 states that:
No adjudication shall be valid as to any party unless he shall have
been afforded an opportunity to be heard.
An "adjudication" is defined in 71 P.S. Sec. 1710.2(a) as "any
final
order, decree, decision, determination or ruling by an agency affecting
personal or property rights, privileges, immunities, or obligations of
any or all of the parties to the proceeding in which the adjudication is
made. . . ."
The State has asserted that the decision to terminate the facility
represented an "adjudication" under State law (Brief in Support of
the
State's Appeal, p. 2); the Agency has not refuted this assertion. Two
cases cited by the State in its "Brief In Support of the State's Appeal"
dated June 12, 1981, stand for the proposition that the hearing must
take place before Agency action can be taken and that the status quo
remains until such a hearing. In Fair Rest Home v. Dept. of Health, 401
A.2d 872 (1979), the court concluded that under State law, a nursing
home's license could not be revoked prior to a hearing. In Smith v.
Dept. of Public Welfare, filed August 21, 1980, 938 C.D. 1980, the (4)
court dealt with a disputed suspension of a doctor from the Medicaid
program. The doctor had been notified that he was entitled to an
administrative hearing, but that a request for a hearing would not stay
the suspension. The court determined that the notice of suspension is
an "adjudication" under State law, and that the doctor was entitled
to a
pre-suspension hearing. The court enjoined the State from enforcing its
suspension order until a hearing could be held and a final determination
made on the merits of the suspension order.
Both the State statutory language and the case law supports the
conclusion that the decision to terminate Sara Allen was an
"adjudication" so that no action could be taken to actually terminate
the facility until the facility had been afforded the opportunity for a
hearing. We find, therefore, that Pennsylvania law meets the
requirement of a State law for the purposes of the first exception set
fort in PRG-11.
The Agency has argued that even if Pennsylvania law can be construed
as requiring FFP during the appeal period, the facts of this appeal
differentiate it in significant ways from the facts in the Ohio appeal,
and therefore, the Board's reasoning in Ohio should not be applied to
this appeal. In particular, the Agency highlights language in the
decision that a court order continuing Medicaid payments "is merely to
preserve the status quo pending review and does not pretend that the
provider is in compliance" (p. 15) and that the Board did not include
court orders "intended merely to give the facility more time to achieve
compliance" (p. 15). By citing the facts in the instant appeal, the
Agency insinuates that the constant communication between the State and
facility and the delay in the administrative hearing shows that the
State pretended that Sara Allen was in compliance and gave the facility
more time to achieve compliance. Indeed, in its July 2, 1981
submission, the Agency states:
the State agency apparently opted to indefinitely postpone an
administrative hearing designed to finalize its termination action while
it sought to bring Sara Allen into compliance. . . The State agency did
not merely continue Sara Allen in Medicaid program by force of State law
pending a final adjudication; rather, the State kept the final
adjudication pending. (pp. 2-3)
The Agency's emphasis on the Ohio quotations it chooses to cite is
misplaced. First, Ohio involved only court orders, and the
aforementioned language on page 15 refers only to orders; in Ohio there
was no statutory appeal right effectively maintaining a provider
agreement in effect during the pendency of an appeal. In Pennsylvania,
on the other hand, there is such a right, which in this case was
invoked. Second, the (5) sentence emphasizes that the order staying
termination must not be intended merely to give a facility more time to
achieve compliance. The Agency asks us to make cicumstantial inferences
concerning the motives of the facility and the State in maintaining an
appeal, but we decline to do so. The facility took advantage of a
statutory right to have a hearing before its termination took effect.
Given such a statuutory provision, we assume that when a facility takes
an appeal, it is primarily contesting the State's decision and is not
merely seeking time to achieve compliance.
2. The Period for Which FFP is Available
The Ohio decision stated that if the first exception set out in
PRG-11 is applicable, the rule for providing FFP following the
termination date of a provider agreement is that "the period of
reimbursable services may not exceed 12 months . . . except that if
within the aforesaid 12 months a state surveys the facility and makes a
new determination on certification, FFP may not be available beyond the
date of that determination . . ." (p. 14). See also, Colorado
Department of Social Services, Decision No. 187, May 31, 1981, p. 8.
a. The automatic cancellation clause
The issue is whether the State should be entitled to FFP from the
automatic cancellation date (January 31, 1977) or from March 17, 1977,
the expected expiration date of the provider agreements if the automatic
cancellation clauses had not taken effect.
A facility may be certified with deficiencies if it enters into a
plan of correction with the state agency. Vcertification may be for a
conditional term of 12 months, subject to an automatic cancellation
clause that the certification will expire at the close of a
predetermined date unless the corrections have been satisfactorily
completed or the state survey agency informs the Title XIX agency that
the facility has made substantial progress in correcting deficiencies.
42 CFR 449.33(a)(4)(iii)(B).
The Board specifically asked whether the State had provided the
necessary documentation (See 42 CFR 449.33(a)(4)) to prevent the
cancellation date from taking effect; the State provided no direct
response. No such documentation is in the record, and under Federal
regulations, the provider agreements would have been automatically
cancelled on January 31, 1977. The State has also asserted (Letter to
Board dated July 23, 1981) that:
(6) By letter dated February 25, 1977, the facility was advised that
the Department was acting to initiate the automatic cancellation clause
. . . (The) Department, as a matter of state law, was prohibited from
actually implementing the termination clause without first providing the
facility an opportunity to contest the termination of its provider
agreements.
Although the record does not indicate the date that the facility
appealed, the Agency has acknowledged that it has in its records some
documentation dated March 9, 1977, "the date that the State acknowledged
receipt of the facility's appeal of the State's invocation of the
provider agreement cancellation clause with respect to both SNF and ICF
services." Agency Response dated July 28, 1980, p. 3.
The State has asserted that State practice at that time (as evidenced
by the incorporation of a standard provision in every provider
agreement) required that a party appeal the notification of a pending
adjudication within 30 days of the notification. The State's notice of
termination issued almost a month after the date of the automatic
cancellation so that the facility did not appeal within 30 days of the
expiration date as set by the automatic cancellation clause.
Nevertheless, the facility did appeal within 30 days of the State's
notification and the State therefore considered its appeal to be timely.
Under the first exception set forth in PRG-11, the relevant date is the
automatic cancellation date -- January 31, 1977 -- since it is on this
date that the provider agreement expired under the terms of the
automatic cancellation clause.
b. Survey determinations
As was stated on page 4, FFP is available for a period of time
following termination not to exceed 12 months except if there has been a
survey during that period and a determination on that survey. FFP is
not available beyond the date of that determination. The State has
provided documentation of a survey done in January 1978. Letter to
Board dated June 12, 1981 and Attachment C. The State has also provided
documentation of a "survey determination" based on the January survey
which states that the facility did not comply with Federal, State, and
local laws. (Letter to Board dated July 23, 1981.)
This determination does not affect the disallowance because (1) the
State asserts that the determination was made on February 1, 1978, which
falls outside of the year period following the automatic cancellation
clause, and (2) there is no evidence that this determination was
anything more than a file memorandum rather than a certification
determination. (7) since it was not communicated to the single State
agency or Facility. See Washington Department of Social and Health
Services, Decision No. 176, May 26, 1981.
Conclusion
For the reasons stated above, we find that part one of MSA-PRG-11 is
applicable and that the disallowance is overturned for services rendered
from April 1, 1977 through January 31, 1978. The disallowance is upheld
for services rendered from February 1, 1978 through September 30, 1979.
The parties should calculate the amount of FFP appropriately paid for
services in accordance with our determination. If the parties are
unable to reach an agreement, the Board will consider an appeal on the
amount involved at that time. * In its early submissions, the State
appeared to indicate that it considered the September 6, 1978 provider
agreement to be valid. In response to the second Order, the State has
withdrawn its argument as to the validity of this provider agreement.
("Grantee's Response to Order to Show Cause" dated November 24, 1980.)
OCTOBER 22, 1983