GAB Decision 290
April 30, 1982 Michigan Department of Social Services; Docket No.
80-99-MI-HC Garrett Donald; Settle Norval Ford, Cecilia
The Michigan Department of Social Services (Michigan, State) appealed
a disallowance of $5,584,508 by the Health Care Financing Administration
(HCFA, Agency). The $5,584,508 had been paid to the State based on
reports for the quarters ended December 31, 1978 through September 30,
1979 and represented the federal share of payments for services to
Medicaid recipients rendered by 28 skilled nursing and intermediate care
facilities. /1/ The 12-month periods of certification of these
facilities as Medicaid providers had expired prior to the time covered
by the disallowance -- for many facilities, several years prior -- and
each facility had been engaged in a process of administrative of
judicial review (appeal) of its termination.
Title XIX of the Social Security Act and implementing regulations
authorize federal financial participation (FFP) in payments to
facilities only if they are duly certified. /2/ The issues in this case
involve the application of an Agency interpretation of the statutory and
regulatory requirements.
(2) This interpretation was set out in PRG-11, disseminated to the
states in December 1971. /3/ In Ohio Department of Public Welfare,
decision No. 173, April 30, 1981, the Board held that PRG-11 authorizes
FFP where state law continues payments to a provider during an appeal
from a nonrenewal or termination (provider appeal), up to a maximum of
12 months from the expiration of the provider's certification.
With that, the primary issues and or resolution of them are as
follows:
1. Whether Michigan State law required the State to continue
payments to decertified facilities pending appeal.
We find that it did.
2. Whether the Michigan State plan for Medicaid required the State
to continue payments to decertified facilities pending appeal.
We find that Michigan failed to show that it did.
3. Wheterh HCFA is estopped from taking this dissallowance because
of its failure to act more promptly and because of the representations
of some HCFA officials.
We find that Michigan did not show that the elements necessary for
estoppel are present here.
4. Whether FFP is available in payments for services during the
pendency of these provider appeals, and, if so, whether FFP is limited
to a maximum of 12 months after expiration of certification.
We find that FFP is available for a maximum of 12 months after
expiration of certification.
In addition, there are several issues involving specific facilities:
5. Whether the Avonside Convalescent Home was certified or in an
appeal status during the period covered by the disallowancce.
We find that it was, and reverse that part of the disallowance
attributable to payment for services provided by Avonside.
(3) 6. Whether the provider appeals by Avonside, Carmel Hall,
Clintonaire, Craig, Sunnyview, and Oshtemo are appeals within the
meaning of PRG-11.
In the absence of a showing by the Agency that the sole purpose of
these provider appeals was to allow time for the facilities to correct
their deficiencies, we find that these were appeals within the meaning
of PRG-11.
7. Whether the State is entitled to FFP for the period of time
between the expiration of Carmel Hall's certification and the notice of
intent to decertify.
We find that it is not so entitled.
This decision is based on the application for review; the Boards's
request for an Agency response and questions to the State; a response
by the Agency; /4/ an Order to Show Cause dated October 16, 1980 and
the responses by the Agency and the State; a Notice of Conference; the
transcript of a conference held February 11-12, 1981; the
post-conference memoranda by the Agency and the State; an Order to Show
Cause dated August 25, 1981 and the responses by the Agency and the
State; a Notice of Hearing; the summations of telephone conferences;
the State's supplemental brief; the transcipt of a hearing held
February 18-19, 1982; the exhibits introduced by both the Agency and
the State at the hearing; and the post-hearing briefs by both parties.
DISCUSSION
1. Michigan law requires continued payments to decertified
facilities pending appeal.
In its August 1981 Order to Show Cause the Board indicated that it
would likely find in this case that Michigan state law continued
certification in effect -- and thus payments -- pending a provider
appeal. In its October 1981 response, HCFA acknowledged that the
Michigan Public Health Code required continued participation pending
appeal from the denial or revocation of certification, but argued (4)
there and again in its Post-Hearing Memorandum (Memo.), that this
continued participation was limited to the original one year term.
The section to which HCFA referred makes certification "valid for not
more than one year after the date of issuance." Memo., p. 11. HCFA
contends that prior Board decisions on the state law issue did not deal
with such a limitation and thus are distinguishable. Ibid., p. 13.
We are not persuaed that reference to a one-year limit for
certification contradicts or overrides provisions continuting
certification pending appeal. As shown by numerous documents and the
consistent testimony of State officials at the hearing, those
responsible for administering the law regarded the State law as
requiring continued certification.
As the Board held in provider appeals case dealing with a similar
state law:
Where the language of the regulation reasonably encompasses the
meaning the State attributes to it, the Board will not substitute its
intrepretation for that of the State, absent substantial evidence that
the State's intrepretation is unsupportable.
Missouri Department of Social Services, Decision No. 233, November
30, 1981, p. 6.
We do not find HCFA's citation of a state law provision paralleling a
federal requirement for annual renewal of certification to be
substantial evidence that the State misintrepreted its own law when it
continued certification in effect pending appeal after nonrenewal or
termination.
2. The Michigan State plan for Medicaid does not authorize an
indefinite extension of a facility's certicication pending appeal.
Michigan has argued that a State plan amendment authorized continued
payments to the facilities by the State and thus entitled the State to
FFP for those payments. Post hearing Brief (Br.), p. 11.
The amendment to which the State referred was approved by HCFA to be
effective January 1, 1978. The amendment dealt with policy and methods
for establishing payment rates for long term care facilities and as part
of that enunciated procedures for "appeals which are allowable under
this plan" (rate appeals). Michigan April 1981 Post-Conference
Memorandum of Law, Ex. D, p. 10.
(5) The procedures adopted were the same as those used in provider
certification appeals. The amendment lists several types of rate
disputes which are not appealable. Because provider certification
disputes are not on the non-appealable list, the State argued they are
necessarily included "by ommission." Testimony of Paul M. Allen,
Transcript (Tr.), p. 44. /5/ On this basis the State contended that the
State plan required certification, like a disputed rate, to remain in
effect pending appeal. Tr., p. 45; Br., p. 24.
We find that the State has failed to show any connection -- much less
the one it claims -- between the State plan amendment and provider
appeals. As counsel for HCFA brought out in cross examining Mr. Allen,
neither the subject nor the content of the amendment dealt with provider
appeals. Tr., pp. 83-88. The State's witness testified that by
reference to use of the same appeals procedure the amendment necessarily
incorporated the entire provider appeals process, prompting counsel for
HCFA to question whether that logic was not "a little circular." Tr.
p.
88.
Indeed, where the connection was so tenuous, the State might have
offered testimony or documentation to corroborate the claimed
interpretation of the plan amendment, but this was not done. Instead,
the State's case rests on the self-serving testimony of a witness who
did not know how the State plan purportedly incorporated provider
appeals. See fn. 5 of this decision.
These circumstances, in addition to the wording of the amendment
itself, constitute "substantial evidence that the State's interpretation
is unsupportable." Missouri Department of Social Services, Decision No.
233, November 30, 1981, p. 6.
3. Michigan has not shown that the elements of estoppel are present
here.
A substantial question exists as to whether HCFA, as an agency of the
United States Government, may be estopped. /6/ Moreover, a party
alleging estoppel must satisfy each of the following criteria:
(1) the party to be estopped must know the facts; (2) he must intend
that his conduct be acted on, or must so (6) act that the party
asserting estoppel has a right to believe it is so intended (3) the
latter must be ignorant of the true facts; and (4) he must rely on the
former's conduct to his injury. /7/
Unless the State can satisfy its burden of proof of every element
necessary to establish an estoppel, the Board need not consider the
underlying question of whether estoppel can be asserted against HCFA.
/8/
The State argued that the disallowance should be reversed because
"HCFA is estopped from claiming that the nursing homes in question were
not properly participating in the Medicaid program during the timeframe
encompassed by the disallowance." Br.., p. 28. Michigan characterized
the factual basis for estoppel as "compellig." Ibid., p. 31. Michigan
argued with regard to the elements of estoppel that:
1) HCFA knew that "in accordance with Michigan law and the approved
State plan, the State was continuing to reimburse facilities . . .
pending appeal." Ibid., p. 31-32.
2) The plain language of PRG-11 coupled with approval of the
expenditures for the facilities in question "support an inference that
the Agency intended its conduct to be acted upon." Ibid., p. 32.
As addditional conduct HCFA intended Michigan to rely on, the State
points to the "approval of the Michigan State plan provision requiring
pre-termination hearings" and the statement at 44 Fed. Reg. 9749,
February 15, 1979, that the question of reimbursement of payments to
nursing homes pending appeal had not been "adequately addressed" in
the
regulations proposed January 19, 1977 (42 Fed. Reg. 3665), and would be
addressed later. Ibid., p. 32.
3) From the beginning of the disalowwance period until the
disallowance was issued on April 30, 1980, Michigan was ignorant of
HCFA's "(intent) (to) (ignore)" PRG-11 and Maxwell v. Wyman, (478
F.
2d. 1326 (2d. Cir. 1973)). In addition, Michigan was not given "the
opportunity to address" the disallowed expenditures before the actual
disallowance.
Ibid., p. 33.
(7) 4) HCFA led Michigan to believe its reimbursement of these
facilities was consistent with federal policy by approving the State
plan amendments and, in essence, standing by while Michigan continued
these homes in their provider status from 1971 forward. Ibid., p. 33.
HCFA led Michigan to believe its reimbursement of these facilities
was consistent with federal policy by approving the State plan
amendments and, in essence, standing by while Michigan continued these
homes in their provider status from 1971 froward. Ibid., p. 33.
HCFA argued that the State failed to meet the "exacting factual
showing" required for estoppel. The Agency argued that the record shows
1) no misconduct rightfully relied on by Michigan, 2) Michigan was not
ignorant of the true facts, and 3) HCFA did not condone the State's
payments to nursing homes with no current provider agreement. Memo., p.
3.
The Agency pointed out that by letter in September of 1977 HCFA
questioned the payments made to Avonside, which had not been recertified
since 1971. The Agency also referenced an October 1978 opinion letter
from Agency councel to the States's Attorney General which
"specificially states that the 12 month limitation applies irrespective
of whether payments were made pending an appeal by the facility." Memo.,
p. 4.
We conclude that the Agency is not estopped from taking this
disallowance. We are not persuaded that there was affirmative
misconduct by any federal official (s) which induced the State to
continue to pay these facilities.
Rather, we find that the State chose to continue these facilities in
an active provider status in its implementation of State law and
administrative procedures despite confusion concerning the availability
of FFP. The state was certainly aware that the availability of FFP to
facilities pending appeal was far from clear, given the proposed rules
on this issue in January of 1977 and the letters cited by the Agency
that the State received in 1977 and 1978 which state Agency's position.
We find that the State was not lured into making these payments in
reliance on the certainty of FFP.
The pertinent facts are discussed below. The disallowance covers
expenditures claimed during fiscal year 1979. Sometime around March
1979, Michigan became aware that HCFA was conducting a review of
Michigan's quarterly expenditure reports for the quarters in question.
Tr., p. 52. During April of 1979 the HCFA Regional Administrator told a
Michigan official that the regional office was recommending the
disallowance of payments made pending provider appeals. Although there
is some confusion about whether the Regional Administrator at first
assured the State that the disallowance would not be retroactive, the
record shows that the Regional Administrator informed the State in May
of 1979 that any disallowance taken would cover the first two quarters
involved here. Tr., pp. 55-57, 61-62, 78, 300. (Since the Regional
Administrator then had no authority to disallow, we consider these
conversations only informative.) Michigan stated it had no (8)
opportunity to "address" this matter prior to the actual disallowance,
although it pointed to no requirement for such an opportunity. Indeed,
the State was on notice as of April of 1979 that such a disallowance was
being considered and could then have made whatever comments it chose.
As the Agency pointed out, the State plan amendments set forth the
State's rate setting methodology and merely reference "appeals allowable
under the plan" and the "procedures" governing such appeals.
Memo., p.
6. Approval of the amendments coupled with HCFA's failure to disallow
such expenditures sooner are not a reasonable basis for State reliance
on FFP payments. The plan amendments do not expressly detail the
State's practives concerning payment to facilities in an appeal status
so that there was no direct decision by HCFA on that practice when it
approved the amendments. HCFA's failure to disallow such expenditures
sooner does not support a finding that such expenditures were presumed
by the State to be consistent with the applicable federal requirement.
There is no showing in the record that HCFA determined that such
expenditures were proper merely by continuing to make quarterly payments
to Michigan for its Medicaid program.
The regulations governing services in long term care facilities
demonstrate a basic concern with the health and safety of the patients
served. There is no dispute that for the period in question the
regulations required that such facilities be surveyed and certified
every twelve months as meeting all health and safety requirements.
Michigan urged us to conclude the HCFA was estopped, even given these
regulations, from denying FFP to facilities which did not have current
certification. Although we cannot condone the absence of clear policy
guidance conccerning PRG-11 and the matter of reimbursement of providers
in an appeal status during the 1970's, neither can we find that the
Agency's conduct misled the State and caused it to incur the
expenditures in question here.
4. HFCA was authorized to pay FFP during the pendency of a provider
appeal for a maximum of 12 months following the expiration of
certification.
In Ohio Department of Public Welfare, Decision No. 173, April 30,
1981, the Board held that pursuant to PRG-11 and 45 CFR 205.10 (b) (3),
FFP was available during the pendency of a provider appeal, but --
(The) period of reimburseable services may not exceed 12 months from
the termination or nonrenewal determination . . . (p. 14)
(9) a. Michigan's reliance on State of Florida v. Mathews is
misplaced.f
Michigan contended that FFP is available indefinitely during the
pendency of a provier appeal. To support its position that HCFA must
pay FFP where a state law requires continued payments and there is no
federal regulation dealing specifically with FFP during provider
appeals, the State relied on State of Florida v. Mathews, 422 F. Supp.
1231 (D. D.C. 1976).
Michigan did not cite a specific holding from the long and complex
Mathews decision, but instead quoted an excerpt from a memorandum of law
filed by the Department of Health and Human Services in another court
case. That memoranddum represented Mathews as standing for the
proposition that in the absence of regulation states are free to adopt
any interpretation of the Social Security Act as long as it is
reasonable. Michigan points to the Agency's admitted failure to adopt
regulations in 1979 as proof that no regulation existed. Br., pp.
21-23.
We agree with Michigan that the Agency has not promulgated a
regulation dealing dealing specifically with the subject of FFP during a
provider appeal. The Board pointed that out in Ohio, supra, p. 10, fn.
5.
Michigan is not wholly correct in its premise that there is a total
absence of regulations, however, for the fact is that the Agency has
issued a number of regulations governing the availability of FFP.
Michigan's payments must be consistent with these regulations in order
to qualify for FFP. Thus, FFP is available only to certified
facilities; certification is time-limited to 12 months or less; and
certification is based on a determination that a facility meets Medicaid
standards, backed up by survey findings. See fn. 2, p. 1 of this
decision.
b. PRG-11 authorizes FFP within limits
By implication, these regulations do speak to the subject of our
concern: the availability of FFP during a provider appeal. In 1971 in
PRG-11 the Agency interpreted these regulations to permit the payment of
FFP where state law continued certification in effect (and thus
reimbursement for services to Medicaid patients) during the pendency of
a provider appeal. See fn. 3, p. 1 of this decision.
Michigan relied on PRG-11, but contended that there is no basis in
that document or elsewhere to impose any limit on the length of time FFP
continues to be available. Thus, in the context of this appeal,
Michigan sought FFP for payments to facilities which had not been
certified for varying periods ranging from four to seven years, solely
because those facilities were in various stages of administrative or
(10) judicial review of their dercertification. All but six of the 28
had been decertified for more than 12 months preceding the period
covered by the disallowance. /9/
Michigan would have us overlook the statutory/regulatory requirement
for periodic (i.e., at least annual) inspection (survey) and
certification. Congress made this an express precondition for federal
payment and a facility which has met the certification requirement is
still required to meet it again in the succeeding 12 months. It follows
that the State should not be entitled to FFP for payments to a
decertified facility for more than 12 months without a new survey and
determination of certification, solely because the facility's appeal has
not been resolved. To do as Michigan asked would entitle the State to
FFP an indefinite period for a decertified facility even though a
facility which had met the standards and had been certified would have
to be recertified within 12 months.
c. Maxwell v. Wyman is not a basis to disregard limits.
Michigan supported its argument by reference to a 1973 decision of
the United States Court of Appeals for the Second Circuit. The year
before, in Maxwell v. Wyman, 458 F. 2d 1146 (2d Cir. 1972), the Court
had directed New York to continue Medicaid payments pending review
hearings for 148 nursing home providers terminated five months prior to
the Court's decision. The Court refused to order the Department of
Health, Education and Welfare to pay FFP because such relief would have
been premature and because the Court assumed that HEW procedures were
sufficiently flexible to allow provider appeals "if done on an
accelerated basis" (p. 1152).
In a second Maxwell decision, approximately one year later (478 F.
2d 1326), the Court ordered that HEW be enjoined:
(From) terminating reimbursement to the State of New York for any
skilled nursing home . . . for which the State is required by court
order to continue reimbursement pending review by the New York state
courts of an administrative decision adverse to the nursing home
facility. (p. 1329)
In the interim between the two decisions, HEW had stipulated that FFP
would be available for payments to any nursing home affected by (11) the
first Maxwell order until a hearing (appeal) decision was rendered.
However, on the basis of an internal memorandum stating that PRG-11
applied only to state administrative hearings, HEW refused to pay FFP
for the period of judicial review of those hearing decisions. /10/
The court saw HEW's action as an attempt to negate PRG-11 and held:
HEW must give recognition to the process of judicial review also and
that within the meaning of its own stipulation of December 8 (1972)
there has been no administrative 'decision' that is final and binding
until such time as that review has taken place (p. 1328)
As in its first decision, the Court prefaced its holding with the
assumption that the New York courts would act promptly in determining
the appeals.
Pointing out that the facilities in New York had been terminated for
almost 17 months at the time of the second Maxwell decision, Michigan
argued that the 12 month limitation which the Board laid down in Ohio is
contrary to Maxwell.
The Court's actions and words in the second Maxwell decision must be
read in light of its effort to ensure that the State would not suffer
financial loss for carrying out the Court's order in the first Maxwell
decision. The Court was impressed that the State had "demonstrated good
faith compliance" with the court's order and "acted with due despatch"
on the provider appeals. 478 F. 2d at 1328.
Michigan has not demonstrated in this appeal that it always moved
with similar urgency to adjudicate provider appeals. Noting the Maxwell
court's repeated concern with expeditious handling of provider appeals,
we do not agree that the Maxwell court would have directed HEW to pay
FFP under the circumstances here. In Maxwell, the court was dealing
with what it found was an arbitrary line HEW had attempted to draw
between administrative and judicial review. Here, no such distinction
has been suggested and the 12 month limitation Michigan complained of
merely treats decertified facilities on appeal the same as certified
facilities. To do otherwise would be arbitrary indeed.
Even assuming that the Second Circuit might hold that Maxwell is
precedent for a court in that Circuit to order HEW to pay FFP during the
pendency of a provider appeal no matter how long administrative (12) and
judicial review might take, it does not follow that we are authorized,
much less bound, to apply that precedent in Michigan. /11/
As in Ohio and subsequent decisions, we find here that
PRG-11 is limited by statutory and regulatory provisions which make
FFP available for no more than a period of 12 months following
nonrenewal or termination or until the next survey/certification cycle
has been completed, whichever comes first. This limitation was in
effect at the time PRG-11 was issued and has been in effect ever since .
. . The survey requirement predates and necessarily limits PRG-11 . . .
Ohio Department of Public Welfare, supra, p. 8.
We note also that in August 1973, subsequent to the second Maxwell
decision, HEW promulgated a regulation codified as 45 CFR 205.10 (b)
(3). That regulation limited FFP for payments made in accordance with a
court order to such payments as are "within the scope of Federally aided
assistance programs," In Ohio and subsequent decisions, the Board held
that language to mean that for decertified facilities on appeal, as for
certified facilities, FFP was available for a maximum additional 12
months. We think it is likely that if the Maxwell court had been
confornted with a timely application of 45 CFR 205.10(b)(3), it might
have decided that case differently.
5. Avonside was certified or in an appeal status during the time
covered by this disallowance.
The notification of disallowance in this case indicated that Avonside
had been decertified since October 31, 1970. If that were so, its
appeal status would be irrelevant because more than 12 months had
elapsed prior to the start of the disallowance period and FFP would no
longer be available on the basis of a provider appeal.
Michigan contended that HCFA did not controvert testimony of
Michigan's witness that Avonside was recertified November 1, 1977. Br.
pp. 36-37.
HCFA argued that the document submitted by Michigan as proof of
Avonside's recertification (Michigan form R-12) was not signed nor was
there a date stamped thereon showing either transmittal or receipt (13)
(from the Department of Public Health to the Department of Social
Services). /12/ HCFA asserted that each of the other certification
documents (R-12s) in the record is signed and bears a date of
transmittal and of receipt. HCFA cited the Board's decision in
Washington Department of Social and Health Services, Decision No. 176,
May 26, 1981, as holding that while the Agency's form (HCFA 1539) is the
best evidence of certification, other clear evidence may be used. HCFA
concluded that the R-12 in Avonside does not meet that standard. HCFA
also pointed out that the State informed HCFA auditors in March 1979
that Avonside had not had a provider agreement since 1970 and a State
computer printout dated June 28, 1979 showed a certificate renewal date
of November 1970 for Avonside. Futhermore, the State did not submit the
R-12 on Avonside with the R-12s of other facilities which the State had
recertified. Memo., pp. 14-17; Tabs D-2, D-3, and D-4 of HCFA R-2, the
Agency record of disallowance for the quarter ended June 30, 1979,
enclosed with HCFA's submission of September 3, 1980.
a. The R-12s in this record are not consistently signed or stamped.
The copy of the R-12 in question submitted by the State does not bear
any signature or initials, nor any date stamp indicating transmittal or
receipt. Michigan Ex., Q-18. However, contrary to HCFA's allegation,
the record does not show that every other R-12 was signed and stamped to
indicate a date of transmittal and of receipt. Of the twelve R-12s in
HCFA's Ex. R-2, Tab D-4, supra, only one had both dates. Three others
were stamped only with a date of receipt, a fourth only with a date of
transmittal, and a fifth with a stamp too faint to tell the date or if
it was transmittal or receipt. All 12 had the initial "R" opposite
the
line "From Maurice S. Reizen, M.D., Director, Michigan Department of
Public Health." /13/ Of 24 R-12's in Michigan's Exhibit Book, 12 were
not signed or initialled (A-2, E-1, H-1, H-2, M-2, N-2, Q-18, R-12, W-2,
X-1, AA-10, and BB-3(2)) and five had neither a stamped dated of
transmittal nor receipt (A-2, M-2, Q-18, R-12, BB-3(2)).
(14) b. Other evidence shows Avonside was recertified.
When HCFA challenged the State's documentation of Avonside's
recerfication at the hearing, the Presiding Board Member suggested to
counsel for Michigan that in its post-hearing submittal the State
indicate where in the record the recertification of Avonside was to be
found. Tr., p. 364. Besides its implied reliance on the R-12 itself,
Michigans's only reference in its brief is to "the State's witnesses."
Br., p. 36. Although Michigan did not identify which witnesses, Mr.
Davis (see fn. 8, supra) testified that Avonside was recertified some
time subsequent to a letter which he drafted in October 1977. Tr., p.
225. /14/
The apparent conflict in the proff offered by both parties can be
resolved by closer examination of the procedural history of the Avonside
decertification appeal. Avonside appealed the 1970 proposal to deny it
certification as a skilled nursing facility (SNF) and in July 1972 the
Director of the Michigan Department of Public Health denied Avonside SNF
certification but granted it certification as an intermediate care
facility (ICF). Michigan Ex. Q 27, 24, 22(2). The Director's decision
initially was stayed by court order, but the court case was dismissed on
stipulation by the parties dated October 19, 1977 that Avonside would
"continue to be certified" as an ICF "in conformity with federal
certification standards." Ibid., Q 23, 19. The R-12 dated November 1,
1977 purports to certify Avonside as an ICF until October 31, 1978., Q
18.
On July 26, 1978, the Department of Public Health notified Avonside
of the Department's intent not to renew Avonside's ICF certification.
Ibid., Q 16, 28. Appeal hearings were held on November 1, 1978 and
September 24, 1979. Ibid., Q 29, 32. The director accepted the hearing
officer's recommendation that ICF certification he denied and that
Avonside be closed. Ibid., Q 36.
Based on this record, we find that the Department of Public Health
did certify Avonside as an ICF some time prior to July 26, 1978. Thus,
for (15) the purposes of this appeal, Avonside was recertified prior to
the period covered by the disallowance. /15/
HCFA's reliance on Washington Department of Social and Health
Services, supra, is mistaken. In Washington, the record showed that the
requirements for certification could not have been met prior to the date
of execution of the HCFA form 1539 because the determination to certify
had not been made and communicated to either the facility or the single
state agency. In the case of the Avonside certification, there is no
HCFA 1539 and whether Avonside was certified on November 1, 1977 is not
as issue.
Our decision on this issue is not more than that the R-12 and other
evidence in this record establishes the needed proof of the facility's
certification. Neither in its disallowance nor in its response to this
appeal did HCFA attack the underlying basis for the State's
certification action. That issue was not before us and our decision is
not meant to preclude HCFA from further examination of the validity of
Avonside's certification, as permitted by the regulations.
Michigan argued also that HCFA had not credited two other facilities
with having been recertified, Anchorage and Health Haven. HCFA credited
Anchorage with having been recertified on July 1, 1979. At the hearing,
Michigan introduced an R-12 purporting to certify Anchorage from
September 1, 1977 to June 30, 1978, but did not show that FFP had been
disallowed for any services prior to September 1, 1978. Michigan Ex.
P-7. As part of its Post-Hearing Brief, Michigan filed an R-12 for
Health Haven purporting to recertify it as of July 13, 1979. Michigan
Ex. R-12. The R-12 was not signed or stamped with a transmittal date
and Michigan apparently had not supplied it to the HCFA auditors. We do
not find that this R-12, standing by itself and cited by Michigan at a
time when HCFA has had no opportunity to comment, entitles Michigan to
reversal of any part of the disallowance. /16/
(16) 6. HCFA has not shown that when these facilities took advantage
of an appeal right under State statute such proceedings were not
provider appeals within the meaning of PRG-11.
HCFA alleged that the record shows that six facilities admitted their
deficiencies and used the provider appeals process "only to show that,
given time, they could correct those deficiencies." Memo., pp. 16-17.
As HCFA noted, the Board itself had raised this question (in a telephone
conference). Ibid.; Board letter to the parties dated January 29, 1982.
/17/
HCFA argued rthat were a facility does not take issue with a finding
of non compliance the State's determination could not be reserved and
"the underlying purpose" of PRG-11 "would not be served,"
citing Ohio,
supra, at p. 7. The Board did not make such a holding at page 7 or
elsewhere in Ohio, although the Board did indicate that it did not
consider PRG-11 to include court orders directing a state to continue
payments where such orders were "intended merely to give the facility
more time to achieve compliance." Ohio, supra, p. 15.
Since Ohio, the Board has had occasion to deal with the more specific
issue of the nature of a statutory appeal. In Pennsylvania Department
of Public Welfare, Decision No. 217, September 30, 1982, the Agency
alleged that the State postponed a hearing on the appeal in order to
allow the facility more time to achieve compliance. The Board declined
to make "circumstantial inferences concerning the motives of the
facility and the State in maintaining an appeal." Nothing that in Ohio
there was no statutory appeal right such as in Pennsylvania, the Board
held:
Given such a statutory 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. (p. 5)
(17) See also, Wisconsin Department of Health and Social Services,
Decision No. 276, March 31, 1982. In light of Pennsylvania, it was
incumbent on HCFA to make a showing demonstrating that these facilities
had abandoned their appeals and were interested only in holding off the
threat of closing until they could correct the deficiencies. HCFA's
vague reference to the record to support its conslusion is not
sufficient, particularly since Michigan supplied transcripts of the
appeal hearings. /18/ Those hearing evidenced the facilities' intent to
contest their decertifications, and because HCFA did not counter with
specific references demonstrating that the facilities were merely
seeking time to achieve compliance, we find that these were appeals
within the meaning of PRG-11.
7. Michigan is not entitled to FFP for payments between the time
that certification expires and the State notifies the facility of the
State's intent to decertify.
HCFA argued that Michigan is not entitled to FFP for the period
between the expiration of a facility's certification and the issuance by
the State of the notice of intent not to recertify. Memo., pp. 17-18.
HCFA cities the instance of Carmel Hall. The ICF certification of the
facility expired June 30, 1978 and the State issued notice on July 27,
1978. Michigan Ex. S-12. /19/
It is likely that the 27-day period in question is not covered by the
disallowance here. HCFA Ex. 4, fn. 1. /20/
On the possibility that it may be an issue here, we find that the
State would not be entitled to FFP in payments for any services rendered
between June 30, 1978 and July 27, 1978. PRG-11 authorizes FFP only
pending appeal and an appeal could not be considered as having commenced
until the State has given notice to the facility of the action giving
rise to the appeal. Thus, as far as this record shows, Carmel Hall had
no basis for an appeal until July 27. Any payments by the State for
services prior to that date could not be said to be due to the
facility's appeal. To hold otherwise would be (18) to reward the State
for its lack of promptness in notifying a facility of adverse action.
Futhermore, if the State had recertified Carmel Hall on July 27, it
would not have been entitled to FFP from June 30 - July 27 since there
would have been no effective certification for this period. A state
should not be entitlted to more FFP for a decertified facility than a
certified one.
Conclusion
For the reasons stated above, we reverse the disallowance in part and
sustain it in part. We reverse the entire disallowance with respect to
FFP in payments to Avonside, Clintonaire, Craig, and Oshtemo. We
reverse the entire disallowance for Carmel Hall except for FFP in
payments for services rendered between July 1 and July 2m, 1978. We
reverse the disallowance with respect to FFP in payments for services
rendered by Sunnyview prior to Januray 1, 1979. We sustain the
remainder of the disallowance. /1/ These facilities are listed in
alphabetical order in the Appendix to this decision. This
listing also shows the ending date of the 12-month period of
certification for each facility and the date the facility was
recertifed, if pertinent. /2/ To qualfy for FFP under Title XIX
of the Social Security Act, a state must have a plan requiring periodic
inspections (surveys), a determination that a facility (provider) meets
applicable requirements (cerfitication), and an agreement with the
provider (provider agreement) that it will keep the necessary records
and furnish them to the state upon request. 42 U.S.C. 1396a(19), (26),
(27), (31), (33), and (36). Implementing regulations require surveys at
least every 12 months, make the period of certification coterminous with
that of the provider agreement, and generally limit that term to 12
months or less. 42 CFR 431.107, 442.12, 442.15 (1978 - 1979); 42 CFR
Part 449 (1977); and 45 CFR Part 249 (1970-1976). /3/ This is
Program Regulation Guide Number 11 (PRG-11), published by the Medical
Services Admnistration of the Social and Rehabilitation Service, the
predecessor to HCFA. /4/ On August 1, 1983, the State submitted
as it only response to the Board's questions two boxes of documents
relating to the facilities. There was no accompanying explanation and
the materials were neither tabbed nor indexed. In briefs and memoranda
filed after that date and at the hearing the State submitted numerous
documents relating to each of the 28 facilities. Neither party has
referenced the material in the boxes and we assumed that as much of it
as was relevant was included elsewhere in the record. /5/ Mr.
Allen is Director of the Medical Services Administration, Michigan
Department of Social Servicces. He initially stated that the plan
"explicitly" included reference to provider appeals, but after examining
the plan (on the stand) modified this to "I guess it does it by
ommission." Tr., p. 44. /6/ See, Schweiker v. Hansen, 450 U.S. 785
(1981). /7/ Montana Department of Social andd
Rehabilitation Services, Decision No. 171, April 30, 1981 and cases
cited therein. /8/ Washington Department of Social and Health
Services, Decision No. 176, May 26, 1981. /9/ The six are
Avonside, Carmel Hall, Clintonaire, Craig, Oshtemo, and Sunnyview.
Their appeals are discussed infra, pp. 16-17. Unless otherwise
indicated, we assume in this decision that the period covered by the
disallowance is, as HCFA indiacted, September 1, 1978 - August 31, 1979.
HCFA Ex. 4, fn. 1. /10/ The memorandum acknowledged that FFP may
be paid if a court order continues payments to a facility until a state
can schedule an administrative hearing. /11/ Michigan is in the Sixth
Circuit. /12/ The Department of Public Health surveys
and certifies facilities to the Department of Social Services, which
executes provider agreements and otherwise administers the Medicaid
program in Michigan. /13/ According to William Davis, Director
of the Division of Long-Term Care, Medical Services Administration,
Michigan Department of Social Services, there never is an indication on
an R-12 that Mr. Reizen signed it and the initial "R" is "of
no
significance in terms of the certification of the facility." Tr., pp.
26-27. /14/ The letter, dated November 7, 1977, is from the
Director of the Michigan Department of Social Services to the Acting
Regional Medicaid Director, HEW Region V. The letter asserts that
Avonside was in the process of administrative and judicial review of a
January 14, 1970 notice of the State's intent to deny certification as a
SNF and for that reason the State was entitled to FFP. The letter does
not mention any cerfitication or recertification of Avonside subsequent
to 1970. Michigan Ex. Q-17. /15/ As noted previously, fn. 6 p.
6, the disallowance covers payments for services from September 1, 1978
through August 31, 1979. As discussed in the next part, Avonside was in
appeal status from November 1, 1978 through the remainder of the period
covered by the disallowance. /16/ As we note in the Appendix,
the State submitted materials indicating different recertification dates
for several other facilities. Inasmuch as Michigan did not mention
these facilities in its Post-Hearing Brief, we assume that it accepted
HCFA's dates. /17/ As indentified by HCFA (and the Board), the
facilities are Avonside, Carmel Hall, Clintonaire, Craig, Oshtemo, and
Sunnyview. /18/ There was no hearing in Clintonaire. The
facility dropped the appeal when it was recertified June 1, 1979.
Michigan Ex. F-15. /19/ Carmel Halls's SNF certification also
expired June 30, but the State gave notice of that action on June 12,
1978. Ibid., S-11. /20/ HCFA's Memorandum mentions only Carmel
Hall and we know of no other facility where this might be an issue.
OCTOBER 22, 1983