GAB Decision 225
October 30, 1981 Colorado Department of Social Services; Docket No.
80-140-CO-HC Settle, Norval; Teitz, Alexander Ford, Cecilia
On August 7, 1980, the Director, Bureau of Program Operations, Health
Care Financing Administration (HCFA, Agency), issued a notification of
disallowance to the Colorado Department of Social Services (State),
denying $60,471 in Federal financial participation (FFP) for skilled
nursing facility (SNF) services rendered at the Stovall Care Center
(facility) under the Medicaid program after the expiration of the
facility's provider agreement on December 1, 1977.
After the State submitted copies of a provider agreement and a HCFA
Certification and Transmittal Form (C&T) for the facility, the Agency on
May 20, 1981 reduced the disallowance to $32,267 for services rendered
at the facility after December 1, 1977 and prior to April 10, 1978.
There are no material issues of fact in dispute. We have, therefore,
determined to proceed to decision based on the written record and
briefs, including the parties' responses to an Order to Show Cause
issued on September 2, 1981.
Applicable Regulations
The Medicaid regulations in effect for the period in question are set
forth in 42 CFR Part 449 (1977), Services and Payment in Medical
Assistance Programs.
To obtain FFP for payments made to an SNF, a State must comply with
the provisions of 42 CFR 449.10(b)(4)(i)(C), requiring the single State
agency and the provider facility to execute an agreement which the
single State agency determines is in accordance with 42 CFR 449.33. The
regulations require that, prior to the execution of a provider agreement
and the making of payments, the agency designated pursuant to 42 CFR
450.100(c) (the State survey agency) must certify that the facility is
in full compliance with standards prescribed in the regulations. 42 CFR
449.33(a)(1).
The term of an agreement may not exceed twelve months and the
effective date of the agreement may not be earlier than the date of the
provider facility's certification. 42 CFR 449.33 (a)(6). Section
449.33 (a)(6) also states: (2) (The) single State agency may extend
such term for a period not exceeding 2 months where the survey agency
has notified the single State agency in writing prior to the expiration
of a provider agreement that the health and safety of the patients will
not be jeopardized thereby, and that such extension is necessary to
prevent irreparable harm to such facility or hardship to the individuals
being furnished items or services or that it is impracticable within
such provider agreement period to determine whether such facility is
complying with the provisions and requirements under the program.
Factual Background
The facility's provider agreement was due to expire on December 1,
1977. On November 30, 1977 the State survey agency, the Colorado
Department of Health (CDH), notified the single State agency, the
Colorado Department of Social Services (CDSS), that it was requesting an
extension of the facility's provider agreement for a period of two
months pursuant to Sec. 249.33(a)(6); the letter contained three
alternative paragraphs, with a checkmark next to the paragraph stating
it was impracticable within the provider agreement period to determine
the facility's compliance with the program requirements. A paragraph
stating that the health and safety of the facility's patients would not
be jeopardized by the extension and that such extension is necessary to
prevent irreparable harm to the facility or hardship to the patients was
not checkmarked. (Application for Review, Exhibit 4.) The State claims
that a December 16, 1977 letter from CDSS extended the facility's
provider agreement to February 1, 1978. (Application for Review,
Exhibit 5.)
Based on a September 13, 1977 survey and subsequent revisits in
November and December 1977, CDH notified the facility on January 4, 1978
that it was initiating proceedings to delicense the facility and to not
renew its Medicaid certification because of uncorrected deficiencies.
According to this notification, the facility's certification would
remain in effect until final adverse agency action. (Application for
Review, Exhibit 6.) On January 16, 1978 the facility initiated an
administrative appeal, under Colorado law, of the delicensure and the
nonrenewal of its certification.
On February 24, 1978, CDH, CDSS, and the facility signed an agreement
which allowed the facility to remain open. In this agreement, termed a
Final Agency Order, the facility agreed that all the deficiencies were
corrected by the date the Final Agency Order was signed. (Application
for Review, Exhibit 10.) The facility was resurveyed on (3) March 27,
1978. On April 10, 1978 CDH executed a C& Tfor the period February 25,
1978 through February 23, 1979. The C&T stated that "all Conditions
of
Compliance were found to be in compliance," that a plan of corrections
for cited deficiencies was acceptable to the State's consultants, and
that the conditions in the Consent Decree portion of the Final Agency
Order had been met. On April 13, 1978 CDSS executed a provider
agreement with the facility for the period February 25, 1978 to February
23, 1979, with an automatic cancellation date of July 10, 1978 unless
deficiencies were corrected. Subsequent surveys were conducted in April
and June 1978, and the facility was found in compliance.
Parties' Arguments
In its application for review the State argued that the facility's
provider agreement was properly extended for two months, even though the
November 30, 1977 letter from CDH to CDSS did not check off the optional
paragraph indicating that the health and safety of the patients would
not be jeopardized. The State contended that 24 CFR 449.33(a)(6) is
vague and can be reasonably interpreted as permitting an extension if
the health and safety of the patients were not jeopardized or if it were
impracticable to determine the facility's compliance with the Medicaid
program requirements within the duration of the agreement. Under the
State's interpretation of Sec. 449.33(a)( 6), the fact that one
paragraph in the letter was checked, indicating that it was
impracticable to determine within the agreement period if the facility
was in compliance with Medicaid requirements, meant that the provider
agreement was properly extended.
The State further contended in its application for review that the
facility's January 16, 1978 appeal of the State's proposed delicensure
action and nonrenewal of its Medicaid certification caused the
facility's certification to remain in effect, under Colorado law,
pending the outcome of an administrative hearing. Final State agency
action, the State argued, was concluded on February 24, 1978, and the
facility was subsequently given a new provider agreement effective from
that date.
In response the Agency contended that the State's reading of Sec.
449.33(a)(6) is patently unreasonable. The Agency argued that the
regulation clearly states that in order for an extension to be granted,
the health and safety of the patients must not be jeopardized. This,
according to the Agency, is an absolute requirement and not an
alternative reason for granting an extension. The Agency also argued
both that it does not believe that a state law which requires a formal
hearing prior to termination of a facility's participation in the
Medicaid program requires or authorizes FFP during that appeal period,
and that the provider agreement had expired when the facility appealed
so that FFP was beyond the scope of even MSA-PRG-11 (a Program (4)
Regulation Guide issued on December 20, 1971 by the Commissioner,
Medical Services Administration, Social and Rehabilitation Service, the
predecessor to HCFA).
Discussion
In its September 2, 1981 Order to Show Cause the Board essentially
divided the disallowance period into three distinct periods; December
2, 1977 to January 3, 1978; January 4, 1978 to February 24, 1978; and
February 25, 1978 to April 9, 1978.
December 2, 1977 to January 3, 1978
The issue concerning this period is whether the State properly
extended the facility's provider agreement. In its Order the Board
tentatively concluded that the Agency's interpretation of Sec. 449.33(
a)(6) is correct. The Board reasoned that under the State's
interpretation of Sec. 449.33(a)(6) a two-month extension of a provider
agreement could be granted even if the health and safety of the patients
were endangered as long as the proposed alternative -- insufficient time
to determine provider compliance -- was present. Given the placement of
the comma before the two disjunctive clauses, the regulation is
reasonably read to require both a determination concerning patient
health and a determination concerning either of the other circumstances.
The regulation does not appear to be vague as the State suggests, but
straightforward in declaring that a provider agreement may be extended
only if the health and safety of the patients are not put in jeopardy.
In its Request for an Agency Response, the Board asked the Agency
whether the State's Exhibit 4 showed substantial compliance with Sec.
449.33(a)(6), nothwithstanding the lack of a checkmark for the paragraph
indicating that the patients' health and safety would not be
jeopardized. The Agency responded in the negative, saying that there
was no indication in the record that the checkmark was inadvertently
omitted, and, more importantly, without the checkmark there was no
written communication from the survey agency to the single State agency,
as required by the regulations, that the health and safety of the
patients would not be jeopardized.
In the Order the Board stated that there was nothing in the record
before the Board to indicate that a finding that the patients' health
and safety would not be jeopardized was ever made by the State survey
agency and the single State agency so notified. The Order then directed
the State to show cause why the Board should not sustain the
disallowance for the period December 2, 1977 to January 3, 1978 on the
grounds that the facility's provider agreement had been improperly
extended and that no appeal of the facility's decertification was then
(5) in progress. The Order further directed the State to produce any
documentation that would show that the State survey agency has made a
finding that the health and safety of the facility's patients would not
be jeopardized by an extension of the provider agreement.
In response to the Order, the State submitted on October 2, 1981
affidavit from the person who signed the November 30, 1977 letter from
CHD to CDSS. The affidavit stated that it was CDH policy to request an
extension of a provider agreement only when the health and safety of the
patients would not be jeopardized. The affidavit further stated that a
check in the box next to the "health and safety" paragraph was
"inadvertently omitted." The State also submitted a September 24,
1981
letter from another CDH official stating that the failure to mark the
"health and safety" paragraph was an inadvertent omission, and that
"had
the patient's health and safety been in jeopardy, we (CDH) would have
acted under our summary and/or receiver powers."
The regulations required CDH to determine, prior to the extension of
the provider agreement, that the health and safety of the patients were
not jeapardized and to communicate that decision in writing to the
single State agency. The documents submitted by the State were prepared
in 1981 and detail only general policies. These documents are
insufficient evidence that there was a contemporaneous finding that the
patients' health and safety were not endangered and an actual
communication of that finding to the single State agency. The mere
assertion some four years later of general CDH policies does not satisfy
the regulatory requirements for a facility whose provider agreement was
extended in 1977.Even if general CDH policy were sufficient to indicate
what occurred, we find the form used by the State in the November 30,
1977 letter deficient in complying with the regulations because the form
is phrased in the disjunctive. This suggests that an assurance of the
patients' health and safety is only one of the alternative reasons for
extending a provider agreement, rather than an absolute requirement.
The form itself is inconsistent with a stated policy to extend a
provider agreement only when the health and safety of the patients would
not be jeopardized and diminishes the weight that might otherwise be
given to the statements in the documents submitted by the State that the
checkmark next to the "health and safety" paragraph was inadvertently
omitted.
The State has not supplied us with any evidence that in 1977 a
determination was made that the health and safety of Stovall's patients
would not be jeopardized by an extension of its provider agreement.
Accordingly, we find that the provider agreement had been improperly
extended. As discussed further below, we therefore sustain the
disallowance for the period December 2, 1977 to January 3, 1978. (6)
January 4, 1978 to February 24, 1978
In its Order the Board tentatively concluded that the action which
initiated the facility's appeal of its decertification was the January
4, 1978 notice from CDH that the facility's Medicaid certification would
not be renewed. The Agency has not contested this. Thus, the issue for
this period is whether, despite the improper extension of the provider
agreement, which had an expiration date of December 1, 1977, the
facility's provider agreement continued in effect pending appeal of the
decertification under Colorado law so that FFP would be available under
MSA-PRG-11.
The State argues that under the Colorado State Administrative
Procedure Act (APA) the timely appeal by a facility of a proposed
delicensure and decertification continues the facility's certification
in effect pending outcome of an administrative hearing. The State
contends, "(the) state agency proposed action in refusing to renew the
certification was not effective until the entry of the final agency
order affirming said action and the certification continued in effect
until such time." (Application for Review, p. 6.) The final agency
action, the State continues, was concluded on February 24, 1978.
The Agency argues that "appeal was not filed . . . until almost two
months after the agreement had already expired, a period which could
have been encompassed by the regulations if the State had acted
properly." (Agency's May 20, 1981 submission, p. 3.) The Agency
considers that the "Board's application of PRG-11 to a situation when
the agreement had already expired, and an appeal had not yet been taken,
goes beyond the scope of even PRG-11." (Agency's May 20, 1981
submission, pp. 3-4.)
There are no statutory or regulatory provisions which explicitly
address whether FFP is available during administrative review of
decisions to terminate or not renew a facility's participation in the
Medicaid Program. MSA-PRG-11 sets out two exceptions to the basic rule
that FFP is not available without a current effective provider
agreement. Relevant here is the first exception in which FFP is
available if "State law provides for continued validity of a provider
agreement pending appeal."
The Board recently considered the question of the continued validity
of a provider agreement pending a provider appeal under state law in
Colorado Department of Social Services, Decision No. 187, May 31, 1981.
In that decision, involving the same parties as the present appeal, the
Board found that the Colorado APA met the requirements of a "state law"
under MSA-PRG-11, so that a decertification action and subsequent appeal
resulted in the continued validity of the previous provider agreement
and certification during the appeals process. The (7)Board applied Ohio
Department of Public Welfare, Decision No. 173, April 30, 1981 and
further found that FFP was available during a provider's administrative
appeal for a period up to 12 months, subject to certain limitations,
from the date of the provider agreement's termination or nonrenewal.
The completion of the appeals process during the 12 months period would
end the availability of FFP.
The Board tentatively concluded in the Order that it should look to
State law to determine whether this facility's certification and
provider agreement continued in effect throughout the provider appeals
process, even though the provider agreement was not properly extended.
From its review of the State APA, the Board concluded in Colorado
that the term "license" included Medicaid certification. The Colorado
decision quotes certain provisions from the State APA also relevant
here, including Section 24-4-104(6), C.R.S. 1973, which provides for a
hearing before revocation of a license, and Section 24-4-104(7), C.R.S.
1973, which provides that a license up for renewal "shall not expire
until such application (for renewal) has been finally acted upon by the
agency, and if . . . denied, it shall be treated in all respects as a
revocation".
The Board stated in the Order:
It appears that under State law a facility's certification could not
expire without final agency action and that if a facility is
decertified, as here, the State must treat its decision as a revocation.
Accordingly, the Board's preliminary conclusion is that the facility's
certification and provider agreement were continued in effect by State
law during the administrative appeal process. (page 7.)
The Order noted that while the decertification action and subsequent
appeal occurred after the expiration date in the provider agreement both
the State and the facility believed at the time that the provider
agreement had been extended to February 1, 1978 and both parties acted
within the time frame. The Board stated, "(It) does not appear
warranted to conclude that either the facility or the State was dilatory
so that the appeals process should not be treated as occurring under the
State APA and within the PRG-11 exception."
(page 7.)
The Order tentatively concluded on page 7 that:
(State) payments to the facility from December 1, 1977 until
proceedings were intitiated by the State under the APA on January 4,
1978 were unrelated to the (8) appeals process and were made solely
because of the improper extension of the provider agreement . . . .
(The) State's improper extension of the facility's provider agreement
precludes payment of FFP from December 2, 1977 through January 3, 1978
so that FFP is only available during the actual administrative appeal
process . . . .
The Order then directed the Agency to show cause why the Board should
not reverse the disallowance for the period January 4, 1978 to February
24, 1978, the duration of the appeals process, on the basis of the
Board's Ohio and Colorado decisions. In its September 17, 1981 response
to the order, the Agency stated that, in view of the analysis in the
Order and prior Board decisions, it had nothing further ot offer in
argument. Accordingly, we reverse the disallowance for the period
January 4, 1978 to February 24, 1978.
February 25, 1978 to April 9, 1978
The appeals process was completed on February 24, 1978, so there
still remains the question of the availablity of FFP for the period from
February 25, 1978 to April 9, 1978. The State contends that a provider
agreement executed on April 13, 1978 for the period February 25, 1978 to
February 23, 1979 effectively covers this time. The Agency contends
that a provider agreement cannot be effective prior to certification as
shown by a completed C&T; the C&T for this facility was not executed
until April 10, 1978.
In its applications for review, the State in essence argued that the
C&T executed on April 10, 1978 was effective February 25, 1978.
The Board recently decided a case involving a similar issue,
Washington Department of Social and Health Services, Decision No. 176,
May 26, 1981. The analysis that follows is adopted from that decision.
(While Washington concerned intermediate care facilities for the
mentally retarded and the other decisions discussed below concerned
intermediate care facilities (ICFs), the regulations discussed in these
decisions are also applicable to Medicaid-only SNFs.)
The Board in Maryland Department of Health and Mental Hygiene,
Decision No. 107, July 2, 1980, considered the applicability of 42 CFR
442.12 (42 CFR 449.33(a)(6) during the period of Stovall's disallowance)
to the requirement for certification of an ICF prior to the existence of
a valid provider agreement for FFP purposes, and the use of the C&T form
for certification. The actual holding in Maryland is that the Agency
was not arbitrary in interpreteing 42 CFR 442.12(a) and (b) as meaning
that a provider agreement can be effective only from the date of a
facility's certification as meeting (9) certain requirements, in view of
the Medicaid program's aim to ensure quality care in sanitary and safe
conditions. The decision also states that it is the Agency's
interpretation that this certification "becomes effective on the date
the survey agency indicates its approval by completing a HCFA Form 1539
(C&T)". It was not necessary for the Board to decide whether
certification could be effective prior to execution of the C&T form in
Maryland, which involved recertification of a facility. Maryland was
there contending that when the survey agency signed the C&T forms it
could backdate them to the date the prior agreements expired. The
decision did not reach the issue of whether the date of certification
had to be the date the C&T was signed, or whether it could be some
earlier date, if all the requirements for certification were then met
and certification was manifested in some other manner.
The Board has also said in New Jersey Department of Human Services,
Decision No 137, December 1, 1980, that there was no requirement that a
particular form be used by a state survey agency in certifying a
facility for Medicaid participation. Thus, the Board concluded in New
Jersey that it is possible to certify a facility without having the C&
Tsigned. In order to do so, a state survey agency "must communicate
certain information in order that a facility be certified for Medicaid
participation and that other requirements of the Medicaid regulations
are met" (p.5). If the C&T is used, the Agency has not required that
there be an actual communication to the single state agency, or to
anyone else, to make certification effective. When the form is signed,
certification is complete, before anything else is done.
While the date of the signature on line 19 of the C&T is
presumptively the best evidence of the date a certification
determination was in fact made, the Board will find that the
certification determination was made on the earlier date, if established
by other clear evidence. This evidence must show convincingly that all
the requirements for certification were met, and the survey agency not
only so determined, but committed its determination in writing in the
form of notification to either the single state agency or the facility.
(Washington, p. 5.)
It should be pointed out that neither under Maryland nor under
Washington may the "date of certification" of an ICF or Medicaid SNF
be
backdated. Washington permits the "date of certification" to be earlier
than the date the C&T is signed, under certain prescribed conditions.
Both Maryland and Washington state that an ICF or Medicaid SNF provider
agreement may be backdated to be effective from the date of
certification, but not any earlier. Since FFP is dependent upon a valid
provider agreement being in effect, FFP is not available in any case
prior to the "date of certification," whatever that may turn out to
be
for a particular facility. (10) In its Order the Board stated that it
would appear that unless the State can show by clear and convincing
evidence that the facility met all the requirements for Medicaid
participation and that CDH communicated that finding in writing to
either CDSS or the facility prior to April 10, 1978, the earliest date
when FFP would be available is when CDH executed the C&T.
The Order directed the State to show cause why the Board should not
sustain the disallowance for the period February 25, 1978 to April 9,
1978 on the grounds that the facility was not properly certified as
required by the Medicaid regulations. The State was directed to produce
documentation that would show that the facility was certified by means
other than a C&T as provided for in the Board's Washington decision.
It its response to the Order the State argues that the Consent Decree
portion of the February 24, 1978 Final Agency order complied with the
criteria expressed in the Washington decision. The State refers to
Paragraph 1 at page 3 of this document as evidence that the facility had
corrected all the deficiencies which had been discovered at the facility
during prior surveys. This paragraph states in part:
The facility shall have corrected every deficiency in the deficiency
lists of September 13, 1977 and November 11, 1977, by the date of the
signature of this stipulation by the parties.
The State contends that the February 24, 1978 signature of the CDH
Executive Director on this document is an acknowledgement that as of the
date the facility was in compliance with certification requirements.
The State adds that if the facility had not been in compliance, the CDH
director, by the terms of the paragraph 1 of the consent decree, could
not have signed the stipulation for entry of agency order.
As previously stated, the Board in New Jersey said that no specific
form must be used for the certification of a facility, but, according to
Washington, this certification determination must be established by
clear evidence that convincingly shows that all the requirements for
certification are met. The document submitted by the State is
essentially a recognition by the State that an agreement has been
reached that all the deficiencies at the facility are corrected.
It is not, however, a determiniation by CDH that the corrections have
actually been made. The paragraph cited by the State in the Consent
Decree continues:
Validation of correction shall be made by the Department of Health.
The validation shall be done on survey document From SSA-2567 . . . .
(11) This indicates that, at the time the Consent Decree was signed,
there was a future determination to be made that the facility was in
compliance with the Medicaid regulations. The Board has previously held
that certification cannot be based on mere assertions by a facility that
it has corrected deficiencies; the State survey agency must have actual
substantiation that Medicaid standards have been met before a facility
can be certified. New Jersey Department of Human Services, Decision No.
148, February 2, 1981, p. 5.
In its application for review the State provided a copy of the survey
form SSA-2567, dated April 3, 1978. This survey form included a Summary
Statement of Deficiencies and a Provider's Plan of Correction. We have
no record of this plan of correction being accepted by CDH prior to the
execution of the C&T on April 10, 1978. Item 15 of the C& T states in
part:
The plan of correction for deficiencies cited is acceptable to our
consultants. The conditions stated in the consent decree portion of the
Final Agency Order have been met. The facility now qualifies for
participation in the Title XIX program and is recertified for the period
indicated in Item 11. (emphasis added)
The provision in the Consent Decree that the deficiencies will have
been corrected by the date of the signature of the Consent Decree
(February 24, 1978) is not persuasive that the facility was free of
deficiencies and in fact certified by CDH by that date, in light of the
later acceptance of a plan of correction. The best evidence before us
of when the State survey agency actually made a determination that the
facility qualified, with an acceptable plan of correction, for Medicaid
participation is the completed C&T.We, therefore, sustain the
disallowance for the period February 25, 1978 to April 9, 1978.
Conclusion
For the reasons stated above, we sustain the disallowance for the
period December 2, 1977 to January 3, 1978, reverse the disallowance for
the period January 4, 1978 to February 24, 1978, and sustain the
disallowance for the period February 25, 1978 to April 9, 1978. The
Agency is directed to calculate the amount of the sustained
disallowances. If the State should disagree with that (12) calculation,
it should appeal to the Board within thirty days after receipt of that
calculation.
OCTOBER 22, 1983