GAB Decision 277
March 31, 1982 Pennsylvania Department of Public Welfare; Docket No.
80-37-PA-HC Garrett, Donald; Seattle, Norval Teitz, Alexander
The Pennsylvania Department of Public Welfare (State) appealed the
disallowance by the Health Care Financing Administration (HCFA, Agency)
of $657,364 in federal financial participation (FFP) claimed for
expenditures for the survey and certification of long-term care
facilities pursuant to section 1903(a)(4) of the Social Security Act
(Act) for the periods of July 1976 through June 1977 and January through
March 1978. The disallowed funds were claimed by the State as licensure
costs.
Background
Title XIX of the Act established a federal-state program of medical
assistance for the needy known as Medicaid. In Pennsylvania the
Department of Public Welfare (DPW) was the single State agency
administering the plan for medical assistance pursuant to section 1902(
a)(5) of the Act. The single State agency had to use the State survey
agency designated pursuant to section 1864(a) of the Act to determine
whether skilled nursing facilities (SNFs) and intermediate care
facilities (ICFs) qualify for participation in the Medicaid program
under section 1902(a)(33)(B). In Pennsylvania this State agency was the
Department of Health (DOH). Section 1903(a)(4) of the Act provides for
payment of Medicaid funds at 100% for compensation or training of
personnel responsible for inspecting facilities providing long-term care
to recipients of medical assistance to determine whether such
institutions comply with health and safety standards applicable to such
institutions under the Act. The implementing regulation is 45 CFR
250.120(d) (1974).
This decision is based on the entire record in this case, including
all submissions of the parties and the transcript of a conference.
Based on our analysis, we reverse the disallowance. For reasons stated
below, we have concluded that the Agency interpretation of the pertinent
regulation permits the State to be reimbursed 100% for the costs of
personnel for inspecting long-term care facilities during the periods
covered by the disallowance. (2) State's Position
The State maintained that the cost of inspecting SNFs and ICFs for
the purpose of state licensure should be covered under Title XIX of the
Social Security Act because State licensure is a part of the requirement
for certification of facilities participating in the Medicaid program.
The State cited 42 CFR 442.101 and 442.110 as the basis for this
contention. These regulations were recodifications of earlier
regulations, located at 45 CFR Part 249 and 42 CFR Part 449, which were
in effect during the periods when the expenditures were made. Section
442.110 applies to the certification period but has no application here.
Paragraph (d)(1) of 42 CFR 442.101 states that for a facility to be
certified for Medicaid it must meet:
. . . the applicable requirements under Subpart D, E . . . of this
part, except for waivers or variations granted by the Secretary or the
survey agency under those subparts; . . .
Facilities were required to meet State licensing standards to be
certified for Medicaid participation.(For SNFs, section 442.201 of
Subpart D; for ICFs, section 442.251 of Subpart E) Thus, the State
concluded that these regulations make State licensure a part of the
Medicaid certification process.
The State also submitted with its appeal two pieces of
correspondence. The first was a memorandum from the Acting
Administrator, SRS, to the SRS Regional Commissioner in Region IX
pertaining to costs of inspections in California. The second was a
letter from the Acting Director of the Program Operations Division,
Medicaid/ HCFA, to DPW's Commissioner of Medical Programs, pertaining to
the inspection costs in Pennsylvania. The State eventually also
introduced the inquiried to which these two documents were in reply, and
used all four as a basis for an equitable estoppel argument. The State
claimed that it was led to believe by representations of Agency
officials that the costs of surveying facilities for State licensure
would be paid in full by the Agency as Title XIX expenditures, and the
State relied on these representations to its detriment. These documents
will be discussed in detail in the analysis below.
Agency's Position
HCFA maintained that the process of inspecting an institution for
State licensing was separate from inspection for Medicaid participation,
and even in states where the state licensing inspection is identical to
the inspection for Medicaid participation, the state (3) must absorb the
costs involved in the state licensing inspection. The Agency pointed
out that if the State had not broken out the licensure costs on the
billing by DOH for the inspection costs, and if, as is apparently the
case here, a joint certification and licensure inspection was made, then
it follows that the costs would have to be allocated between State and
federal programs. The Agency stated that commonly the allocation was
50% for State licensure and 50% for Medicaid certification. The Agency
in its Response to the Application for Review, cited 45 CFR 250.120
(1974) /1/ which states that "Federal financial participation is
available only for those expenditures of the State licensing agency
which are not attributable to the overall costs of meeting
responsibilities under State law and regulations." The Agency maintained
that the State licensure program predated Medicaid and did not result
from Medicaid program requirements. Therefore, the costs of inspection
for State licensure was a state cost.
With respect to the State's estoppel argument, the Agency maintained
that neither the letters nor the memorandum referred to above stated
that costs related to the State licensure would be covered, only that
those costs for determining compliance with Medicaid standards would be.
The Agency also maintained that even if the intent of the Regional HCFA
representative was to say that State licensure costs would be paid, his
statement would have been unauthorized and would clearly contravene
statute and regulation.
The Agency maintained that the regulatory provisions were explained
to state survey agencies and single state agencies in 1973 in MSA
Information Memorandum No. 17/BHI State Agency Letter No. 178 (IM-17).
This provided that the cost of activities performed by this single
survey unit for the purposes of the state licensure program or any other
state program must be borne entirely by the state.
Discussion
I. Interpretation of the regulation
The State's principal defense to the disallowance is based on five
documents. The first three constitute a group: (4) 1. a memorandum
from the Acting Administrator of the Social and Rehabilitation Service
(SRS) to the SRS Regional Commissioner of Region IX in San Francisco
dated December 15, 1975 (Exhibit B to the appeal);
2. a letter from Roger A. Cutt, DPW Commissioner of Medical
Programs, to Alvin A. Pearis, Acting Director, Program Operations
Division, Medicaid/HCFA, dated August 10, 1977 (Cutt letter, State
submission January 26, 1982); and
3. a reply letter from Pearis to Cutt dated August 18, 1977 (Pearis
letter, Exhibit A, appeal).
The first document bears the identifier "PIQ 75-148" and its subject
heading is "Request for Clarification of 100 Percent FFP for Costs of
Inspecting Long-Term Care Facilities."
The relevant portions of this memorandum are the following:
This is in response to the subject memorandum of October 16, 1975, in
which you ask for clarification concerning Federal financial
participation in State expenditures for certification activities.
As you know, 45 CFR 250.120 is the controlling regulation. It
specifies that, effective October 1, 1972, through June 30, 1977,
Federal financial participation at 100 percent is available in necessary
costs incurred for the compensation and training of all surveyor
personnel whose function it is to assure that institutions providing
long-term care comply with health, safety, and other applicable
standards for provider participation in Medicaid.
Your questions concerning the regulation's interpretation have been
summarized as follows:
Question I: Where California's licensing standards for SNFs and ICFs
are identical to the conditions of participation under title XVIII and
title XIX, is the State entitled to 100 percent FFP for all, a portion,
or none of the costs of inspecting SNFs and ICFs?
Answer: The SNF and ICF facilities must meet the standards
established by federal regulations in order for the payments for such
services to be eligible for Federal financial participation. Although
the State law and regulations may require SNF and ICF facilities to meet
the same standards for licensure, (5) the cost attributable to
compensation or training of personnel responsible for inspecting such
facilities for the purpose of meeting the Federal standards may be
claimed at 100%.
When the inspecting is done for the purpose of determining whether a
facility meets the Federal requirements, the allowance of the personnel
costs at the 100% FFP rate is not in conflict with 45 CFR 250.120(d)
which requires that such costs not be attributable to the overall cost
of meeting responsibilities under State law and regulations.
Given the above conditions, the State is eligible for FFP at the 100
percent for all of the personnel costs of inspecting SNFs and ICFs.
The two letters both came about as a result of PIQ 75-148. The State
happened to see this memorandum, and to be certain that the Region IX
clarification for California would apply to Pennsylvania as well, Cutt,
then State Commissioner for Medical Programs, wrote to Pearis. (See
Affidavit of David Feinberg, Exhibit E to Memorandum in Support of
State's Appeal) Cutt addressed Pearis as SRS Regional Commissioner for
Medical Services. Pearis replied as Acting Director of the Program
Operations Division of Medicaid/HCFA, presumably due to the
organizational change transferring Medicaid from SRS to HCFA.
The letter from Cutt to Pearis contains the following language:
Enclosed is a memorandum of December 15, 1975 from John A. Svahn,
Acting Administrator of SRS/HEW to Mr. Charles W. Goady, SRS Regional
Commissioner, Region IX. This memorandum states that if the licensing
standards for skilled nursing and intermediate care facilities are
identical to certification requirements under Title XVIII and XIX, the
State is eligible for 100% Federal Financial Participation (FFP). In
Pennsylvania, although the standards for licensure and for certification
are not identical, the differences are minimal.
The Pennsylvania Department of Health has submitted an invoice to the
Department of Public Welfare for the costs of licensing facilities that
are certified for participation in the Medicare and Medicaid Programs.
The Department of Public Welfare intends to reimburse the Department
of Health for these expenditures and to submit the claim for FFP to HEW.
Prior to the submission, I would like this policy reaffirmed by you. I
would appreciate a reply as soon as possible. (6) Should you have any
questions, please contact me.
The reply from Pearis to Cutt was as follows:
This is in reference to your letter of August 10, 1977, concerning
Federal matching payments for compensation and training costs for survey
agency personnel engaged in inspecting skilled nursing facilities and
intermediate care facilities. As you know, 45 CFR 250.120(d)
establishes this rate at 100 percent. Also, as mentioned in your
letter, our position nationally has been that this rate would be paid
even where State standards licensure and certification are identical to
Federal certification standards. In Pennsylvania the standards are
almost identical.
Our position remains the same on this issue. However, under 45 CFR
250.120(d) the authority to pay the 100 percent matching rate was to
have expired June 30, 1977. Fortunately, President Carter signed PL
95-83 into law on 8/1/77 which extended this matching rate through
September 30, 1978.
I hope this information is sufficient for your needs.
The State was originally unable to find the Cutt letter and submitted
only the Pearis reply, together with PIQ 75-148. The Pearis letter
standing alone could be ambiguous. Thus, in its tentative conclusions
in the Order to Show Cause, the Board analyzed the Pearis reply alone as
not conclusive that State licensure costs would be paid in full, as well
as the costs of Medicaid certification.
If the Pearis letter is read in connection with the Cutt letter to
which it is a reply, then an entirely different meaning appears. The
Cutt letter states that the State DOH, the survey agency, has submitted
an invoice to DPW "for the costs of licensing facilities that are
certified for participation in the Medicare and Medicaid programs"
(emphasis supplied).
There would be no need for such a question if Cutt was referring only
to the costs of inspecting the facilities for federal certification, as
distinguished from state licensure costs, because 100% FFP was clearly
available for those certification costs. It is only when the standards
are the same (or substantially so) for federal certification and state
licensure that any problem would arise.
This can be illustrated by an example. Assume that inspection for
federal certification of a particular facility took 20 person-hours and
inspection for completely different state licensure requirements
required another 18 hours. The state would bill separately and (7) get
100% FFP for the 20 hours, but nothing for the 18. Now assume the state
began making its licensure requirements closer to the federal
certification ones, so the next time it still took 20 hours for
certification and only 11 hours for licensure. The state would still
get 100% for the 20 hours and nothing for the 11.
Then the state, wishing to maximize its FFP, as well as upgrading its
licensing requirements, makes the requirements for state licensure
identical with those for federal certification. Now it takes 20 hours
to inspect the facility for both requirements. As PIQ 75-148 points out
in question I, there are three possibilities. The state may be entitled
to FFP at 100% for "all, a portion, or none of the costs." That is,
the
time spent can be considered as all inspection for federal
certification, and therefore all the costs get 100% FFP; it can be
considered that the inspection is all for state licensure, in which case
none of the costs would be eligible for FFP; or a portion can be
eligible for FFP by taking perhaps an arbitrary allocation of 50% to
each. The latter was the Agency's position in its original response.
PIQ 75-148 specifically says "(Given) the above conditions," that
California's licensing standards are identical to the conditions of
participation under Title XIX, "the State is eligible for FFP at the 100
percent for all of the personnel costs of inspecting SNFs and ICFs."
Here again, the meaning of PIQ 75-148 is made clear by the inquiry to
which it was a reply. /2/ This inquiry, the fourth document submitted by
the State, indicates that the language of 45 CFR 250.120( d) was of
great concern to the Regional SRS Commissioner. The paragraph leading
to the first question answered in PIQ 75-148 reads as follows:
The regulations (45 CFR 250.120(d)) provide the 100 percent FFP ". .
. is available only for those expenditures of the State licensing agency
which are not attributable to the overall cost of meeting
responsibilities under State law and regulations for establishing and
maintaining standards but which are necessary and proper for carrying
out these regulations."
The inquiry then asks, where California's licensing standards are
identical to Title XIX conditions of participation, whether the State
should be entitled to 100% FFP "for all, a portion, or none of the
costs" of inspecting SNFs and ICFs. (8) The reply is clear:
. . . allowance of the personnel costs at the 100% FFP rate is not in
conflict with 45 CFR 250.120(d). . .
Although Cutt in his letter to Pearis does not mention 45 CFR
250.120(d), the reply from Pearis does, referring to it as providing for
100% FFP. If Pearis meant that licensure costs, as distinguished from
federal certification costs, would not be paid where the requirements
were the same, this would have been the time to say so, when he cited
the regulation. A reading of the Cutt-Pearis correspondence together
with PIQ 75-148 compels the conclusion that Pennsylvania was told that
it would get 100% FFP for all its personnel costs for inspecting
long-term care facilities.
The fifth document submitted by the State is entitled "Report on
Financial Review of Licensing Long Term Care Facilities Claimed by the
California Department of Health for Fiscal Year 1975." (Attachment C to
January 25, 1982 State submission) This does nothing more than confirm
that, at least in California, the State received 100% FFP for all
inspection costs of long-term care facilities. This is hardly a
surprise, considering that Question and Answer I in PIQ 75-148 were
about California.
II. California and Pennsylvania
In its Response to the Appellant's January 25, 1982 Memorandum, the
Agency admitted that in California personnel costs for long-term care
inspections were reimbursed at 100% FFP.
It is undisputed that California received one hundred percent Federal
financial participation for personnel and training costs incurred by the
responsible state agency for the inspection of health care institutions
participating in the Medicaid program. (p. 2)
The Agency hastened to explain, in the next sentence, that PIQ
75-148, the authority for that practice, "was based on the supposition
that the California state licensure requirements were identical to
Federal certification requirements." Then the Agency attempted to
distinguish the situation in Pennsylvania by saying that:
In the instant case, no evidence has been presented to indicate that
Pennsylvania's state licensure requirements are identical to
certification requirements imposed by Federal law. (Id. p. 3)
The inevitable conclusion is that if Pennsylvania's requirements for
State licensure and federal certification were the same, then (9)
Pennsylvania too would have received 100% FFP for all personnel and
training costs incurred for inspection of the institutions participating
in the Medicaid program.
This represents a complete reversal of the Agency's position as
stated in its Response to the Commonwealth's Application for Review,
April 17, 1980, p. 14. There the Agency stated that:
assuming that Pennsylvania standards are identical to the Federal
Conditions, . . . if . . . a joint certification and licensure
inspection is made, it follows that the costs would have to be allocated
between the State and Federal programs. Commonly, the allocation is 50%
for state licensure and 50% for Medicaid certification.
The Board is now left with two important factors to consider. The
first is the factual one, whether the State licensure and federal
certifications requirements were identical, or substantially so, in
Pennsylvania, and if they were, whether Pennsylvania has to be treated
the same as California.
A. The certification and licensure requirements in Pennsylvania
In its March 1, 1982, submission the Agency stated that "no evidence
has been presented to indicate that Pennsylvania's state licensure
requirements are identical to certification requirements imposed by
Federal law." (p. 3)
This statement is technically correct, as far as evidentiary
material, such as affidavits or documents, is concurned. But we have
the statement of Pearis on the record. Cutt, in his letter to Pearis,
first noted that PIQ 75-148 stated that if the "licensing standards (for
SNFs and ICFs) are identical to the certification requirements under
Title XVIII and XIX," the State is eligible for 100% FFP. Cutt then
went on to point out to Pearis:
In Pennsylvania, although the standards for licensure and
certification are not identical, the differences are minimal. (emphasis
supplied)
In his reply Pearis said:
Also, as mentioned in your letter, our position nationally has been
that this rate (100%) would be paid even where State standards (sic)
licensure and certification are identical to Federal certification
standards. In Pennsylvania the standards are almost identical.
(emphasis supplied) (10)
It is interesting to note that Pearis did not just quote Cutt, or say
as he did earlier, "as mentioned in your letter." Pearis did not even
use the same words as Cutt. He said that the standards in Pennsylvania
were "almost identical", without any reference to Cutt's opinion that
the "differences are minimal."
This was no casual opinion by a low-level employee. It was the
considered statement by the Acting Director of the Program Operations
Division of Medicaid/HCFA given in response to a specific inquiry by the
Pennsylvania Commissioner for Medical Programs. He was certainly in a
position to know how the requirements for State licensure and Medicaid
certification compared. His statement that the standards were almost
identical is not contradicted by anything in the record.
The Agency in its March 1st submission argued that there were two
facts "which seem to indicate the contrary." (p.3) The first was the
fact that the bill submitted by DOH to DPW for the survey costs broke
out separately "those costs attributable to activities insuring
compliance with state licensure requirements." This troubled the Board
as shown by the questioning at the conference.
MR. TEITZ. Well, Mr. Baron, from the record here, we find that
Pennsylvania . . . actually broke out separately the charges for
licensure inspection and for certification inspection.
Now, they do not appear to be exactly fifty percent either. Do you
know what basis was used -- whether they were time sheets or how they
were broken out separately? (Transcript (Tr.), p. 27)
In response the State attorney stated that he did not know what bases
were used for the separate billings by DOH. This was on March 2, 1982,
although the Agency had referred to the separate billings in its
response of April 17, 1980. The State managed to find promptly someone
who knew about the basis for the separate billings for licensure
inspection and Medicaid inspection after the conference, because two
affidavits executed on March 11, 1982 were submitted with the State's
Supplemental Memorandum of that date.
The Board is reluctant to give much weight to these affidavits
submitted so late in the case. This is particularly true where the
affiants were readily available all the time. Louis Welfel, according
to his own affidavit, has held the same position with DOH during the
relevant periods as he does now. The other affiant is also still with
DOH, although in a different position. It would not have required much
diligence to have located them long before the last submission.
(11) Nevertheless, the Board does not totally disregard these
affidavits. They do furnish some plausible explanation of the way in
which the separate billings for licensure and Medicaid certification
were prepared.
The affidavits do indicate what went into the preparation of the
columns headed "Identified Licensure Costs" on the DPW worksheets
and
"Fed. Share LTC Licensure" on the Medicaid invoices marked "DoH
Billing"
(Record of Disallowance, Tab 3). They explain why there was not an even
allocation of 50% of inspection costs to federal certification and 50%
to State licensure.
The issue is not whether DOH billed separately for State licensure
and federal certification inspection costs. The point is, if the
requirements were identical, then the total cost of inspection could be
reimbursed at 100 percent FFP, no matter how it was broken out in the
billing from DOH to DPW. /3/ If the costs were all in one column, or
equally in two columns, or divided between two columns in any
proportion, the State should still get its 100% FFP.
The second reason given in the Agency's March 1, 1982 submission for
arguing that Pennsylvania's licensure requirements were not identical to
federal certification requirements was that Pennsylvania had a statute
providing for licensing health care institutions six years before the
enactment of P.L. 92-603, the statute in question here. This missed the
point that PIQ 75-148 and the Cutts-Pearis correspondence were based on
the fact that there were State licensing requirements that had to be
checked at the same time that inspection was made for federal health and
safety certification standards. The question is whether the State
licensing requirements were the same as the federal requirements at the
time of the relevant inspections, not when the State licensing statute
first went into effect.
The remainder of the Agency argument is well taken, that:
the state should not now be heard to argue that Federal funds should
bear the costs of meeting that separate and independent responsibility
(of state licensure inspections) or so much of that responsibility which
is independent of Federal requirements. (Id, p. 4)
The whole basis of the State's position, however, was that none of
the responsibility for State licensure inspections was "independent"
of
federal requirements, since they were the same, or at least
substantially the same.
(12) B. "Identical" and "Substantially Identical"
The analysis above has been based on the assumption that in
Pennsylvania the requirements under State licensing statutes and for
federal health and safety certification were the same. The State
admitted they were not exactly the same. The Board must determine
whether they were so similar that for the purpose of this case they can
be treated as identical.
The State contended that the Agency should bear the burden of showing
how the two requirements were distinguishable. The Board does not
agree, but it is immaterial here in view of the Pearis statement. The
claim by Cutt, standing alone, that "the differences are minimal",
would
certainly not be enough, for the possibility of a self-serving
declaration cannot be overlooked. But the reply of Pearis, that "in
Pennsylvania the standards are almost identical", stands on an entirely
different footing. Pearis was asked about the application of PIQ 75-148
to the specific Pennsylvania situation. He knew that Pennsylvania would
file for 100% FFP if his reply was favorable. His response is an Agency
answer.
It is unfortunate that neither party has seen fit to determine
exactly what the differences were between the State licensure and
federal certification requirements, and whether it in fact took more
time to train and inspect for both together than it would have taken for
the federal requirements alone. It is obviously impractical at this
date to attempt such an identification, and therefore, in the absence of
any evidence in the record on this point, the Board disregards any
differences between "identical" requirements and "substantially
identical" ones.
C. The legal effect of "substantially identical" requirements
Having found that Pennsylvania's requirements for State licensure and
federal certification inspection may be treated as being in effect the
same, there remains the question of what effect this has in the appeal
before us. Standing alone the fact that California received 100% FFP is
not necessarily conclusive. One Region of the Agency may have
mistakenly construed a statute or a regulation and this would not
necessarily be binding on another Region. We have here something much
more than that. The PIQ response by the Acting Commissioner of SRS was
an official Agency interpretation binding on the Agency in all Regions.
The definition of a PIQ appears in Health Care Financing Administration
Rulings, Publication No. MBR-1 (11-78), p. 169.
The Policy Interpretation questions (PIQs) are a series of policy
interpretations responded to by the Medicaid Bureau, pertaining to
issues which need to be clarified in administering the Medicaid program.
(13) It is significant that in the publication dated 11-78 PIQ 75-148
is specifically listed.
The Agency contended correctly that it could not be bound by an
interpretation of a statute or regulation which was directly contrary to
its terms. But obviously this could only apply where the statute or
regulation was unambiguous. On their face the statute and the
implementing regulation seem clear enough. It is only when the state
licensing and federal inspection requirements become the same that there
is a problem. Then clearly the regulation is ambiguous in its
application. As the first question asks in PIQ 75-148, is a state then
entitled to 100 percent FFP "for all, a portion or none of the costs of
inspecting SNFs and ICFs?"
The Agency recognized that there was a question of interpretation:
The Agency concedes that there was some disparity between the various
regions as to the interpretation of this regulation and to the extent
that the treatment of California is in some way different from the
treatment of other states, both in 1975 and thereafter, the mistake if
such it was, should not be carried forward because there was confusion
at that time. (Tr. p. 13)
Another example of the uncertainty which continued in the Agency as
to treatment of licensure costs appears in a letter from the Regional
Medicaid Director of Region III to the Assistant Director of the Office
of Financial Management dated June 1, 1979. (Record of Disallowance,
Tab 4, Attachment F)
. . . In past review of licensure costs, HSQB (Health Standards
Quality Bureau) has not allowed such expenditures for reimbursement,
while such costs have not been disallowed in past periods by the
Medicaid Bureau. This difference in treatment of licensure costs has
resulted from the lack of a clear cut compliance interpretation by the
Medicaid Bureau in defining Licensure Costs as being costs necessarily
incurred by a State in implementing State law or as being a requirement
for certification as required by Federal law.
It may also be noted that by definition a PIQ is an interpretation
"pertaining to issues which need to be clarified." (HCFA Rulings,
supra)
Many factors thus point out that the Agency itself recognized that the
implementing regulation was ambiguous in the factual situation we have
here. The interpretation of it in PIQ 75-148, and as cited by Pearis,
cannot be said to be contrary to the terms of the regulation. The
statute itself does not cover the particular situation.
(14) II. Estoppel
Much of the later submissions of the parties was on the applicability
of estoppel here, since the Board specifically advised the parties to
consider this subject at the conference. Based on the analysis above,
however, it is not necessary to consider whether the requirements for
estoppel generally are made out, and if so, whether the federal
government can be estopped.
Equitable estoppel is when one party is misled by representations of
the other, and in reliance on them, acts to his detriment, so that the
party making the representation is "estopped", or prevented from showing
the true state of facts. That is not the situation before us. There
was no misleading representation. Instead, we have here an authorized
interpretation of an ambiguous regulation. We therefore need not
discuss all the specific requirements before an estoppel can exist, as
laid out in several Board decisions. See, e.g., South Dakota Department
of Social Services, Decision No. 198. The Agency interpretation is
binding on it, without each estoppel requirement being met.
IV. Other arguments by the parties
The Board has considered other contentions advanced by the parties
but has not felt that extended consideration need be given them. The
first is the Agency's reliance on IM-17 dated June 1973. This explained
generally the effect of several Medicare and Medicaid amendments to the
Social Security Act of 1972, P.L. 92-603, which would affect state
agencies. A detailed explanation was given of the new requirement for a
single state survey unit to inspect ICFs for Medicaid and SNFs for
Medicaid and Medicare. The Agency referred particularly to the
statement that:
(The) costs of activities performed by this single survey unit for
the purposes of the State licensure program must be borne entirely by
the State. (p. 10)
The Board has not believed it necessary to give further consideration
to this part of the 1973 notification to the states because the later
/4/ regulation implementing the statute (45 CFR 250.120(d)) says
substantially the same thing:
(15) (Such) Federal financial participation is available only for
those expenditures of the State licensing agency which are not
attributable to the overall cost of meeting responsibilities under State
law and regulations for establishing and maintaining standards but which
are necessary and proper for carrying out these regulations.
Therefore the argument based on the 1973 notice to the states has
been considered by the Board in its analysis of the regulation.
It is unnecessary to consider other contentions made by the State in
view of the decision in its favor. These include the contention that
the disallowance notice was not specific enough, and that the "changed"
policy of the Agency was not published as required under the
Administrative Procedure Act.
There is one point raised by the Agency which was not considered
during the consideration of this appeal until mentioned as the
conference, namely, that a portion of this disallowance was for State
costs other than for personel inspecting long-term care facilities and
for their training (Tr. p. 51). The arguments of the parties generally,
and the Board's analysis, have been based on the assumption that the
State licensure costs disallowed were all personnel and training costs.
So far as any part of the costs disallowed was for other than
personnel in inspection and training, it would not be entitled to FFP at
100%. This decision is without prejudice to the right of the Agency to
disallow at least part of such costs if it can identify their nature and
amount, and notify the State within a reasonable time. If the State
does not agree, it may appeal the particular item to the Board within 30
days of notification.
Summary
A reversal of the disallowance is not unfair to the Agency. If the
requirements for Medicaid certification and State licensure were
identical, then it should have taken no longer to complete the joint
inspection than it would have taken for the Medicaid inspection alone.
It would therefore not cost the Agency any more for a joint inspection
than for a Medicaid inspection alone. It is true that the State is in
effect getting an advantage. It will be getting 100% of the full cost
of inspecting for State licensure, where with entirely different
requirements, it would have received nothing in FFP. There is nothing
wrong in a state changing its licensing requirements so that it could
get the maximum amount of FFP. The Agency could have interpreted 45 CFR
250.120(d) to require a 50% allocation to state licensure and 50% to
Medicaid inspection, as it claimed in this disallowance. During the
periods covered by the disallowance, however, the (16) Agency chose to
interpret it otherwise, to permit 100% FFP for all personnel costs.
This reasonable interpretation by the Agency which issued the regulation
will be upheld by the Board.
Conclusion
The Board reverses the disallowance in full, based on the Agency's
own interpretation of an ambiguous regulation and the statement by an
Agency representative that the requirements for Medicaid certification
and State licensure were "almost identical" in Pennsylvania. /1/ The
disallowance letter cites and sets our 42 CFR 449.33( b)(2)
(formerly 45 CFR 249.33(b)(2)) and 42 CFR 432.50(b)(4) (formerly 42 CFR
446.175(b)(4)) as authority for the Agency's position. The quoted
pertinent language of 45 CFR 250.120(d) (1974) is the same as 42 CFR
449.33(b)(2) (1977). /2/ The inquiry from the Regional
Commissioner, SRS, addressed to the "Executive Secretariat" dated
October 16, 1975, was submitted by the State as attachment "B" to
its
Memorandum in Support of the State's Appeal dated January 25, 1982. The
Cutt letter to Pearis was submitted the following day. /3/ This
assumes of course that there was no duplicate billing for federal
inspection and licensure, so that the State would not end up being
reimbursed twice. No such contention has been made here. /4/
The Agency in its Response (p. 12) says that IM-17 explained the "new
statutory and regulatory provisions" to the states. Actually 45 CFR
250.120(d) was first promulgated in May 1974, almost a year after the
document sent to the states. So far as the Information Memorandum is
the same as the later regulation, it adds nothing. So far as it may be
different, it would of course be superseded by the regulation.
OCTOBER 22, 1983