GAB Decision 708
December 6, 1985
New Mexico Human Services Department;
Settle, Norval D.; Teitz, Alexander G. Ballard, Judith A.
Docket No. 85-81
The New Mexico Human Services Department (State, HSD) appealed a
disallowance by the Health Care Financing Administration (Agency, HCFA)
of $197,884 in federal financial participation (FFP) under title XIX
(Medicaid) of the Social Security Act (Act). The disallowance was based
on HCFA's determination that the State had improperly extended for six
months the Medicaid certifications and provider agreements of two long
term care facilities, without the required annual surveys.
The major issues presented are whether HCFA approved of or acquiesced
in
the State's extension of the certifications for the two facilities
for
six months despite the lack of surveys and whether HCFA should
now
accordingly be estopped from taking a disallowance. For the
reasons
stated below, we find that HCFA's actions did not constitute an
approval
of the six-month extension of the certifications, but that the State
did
properly extend the certifications and provider agreements for
two
months. Accordingly, we uphold the disallowance in part and reverse
it
in part.
Applicable Regulations
The standards for the payment of FFP for Medicaid services are
contained
at 42 CFR Part 442 (1982). FFP is available to a facility
providing
skilled nursing and intermediate care services only if the facility
has
been certified as meeting the requirements for Medicaid participation
as
evidenced by a provider agreement between the single state agency
and
the facility. 42 CFR 442.30(a). A state Medicaid agency may
not
execute a provider agreement with a facility unless the state
survey
agency has first certified the facility. 42 CFR 442.12(
a). The
effective date of a provider agreement is the date on which the
on-site
survey is completed if all federal requirements have been met;
if all
federal requirements have been met; if all federal requirements
have
not been met, the effective date is the earlier of the date when
the
facility meets all the requirements or when an acceptable plan
of
correction is submitted to the state survey agency. 42 CFR
442.13.
The requirements for the extension of a provider agreement without
a
survey are set forth at 42 CFR 442.16 --
A Medicaid agency may extend a provider agreement for up to 2
months
beyond its original expiration date if it receives written notice
from
the survey agency, before the expiration date of the agreement,
that
extension will not jeopardize the patients' health and safety, and
--
(a) Is needed to prevent irreparable harm to the facility or
hardship
to the recipients in the facility or
(b) Is needed because it is impracticable to determine, before
the
expiration date, whether the facility meets certification standards.
Factual Background
The provider agreements for Socorro Good Samaritan Village (Socorro)
and
Grants Good Samaritan Center (Grants) were due to expire,
respectively,
on May 31, 1983 and June 30, 1983. In October 1982
federal on-site
surveys were conducted at both facilities. On March 21,
1983, the state
survey agency, the New Mexico Health and Environment
Department (HED),
executed a Certification and Transmittal form (C&T)
recommending that
the certification for Socorro be extended for six months to
November 30,
1983. (Ex. G) On March 28, 1983, HED executed a C&T
recommending that
Grants' certification be extended for six months to
December 31, 1983.
(Ex. F) Both C&T's stated that the extensions were
recommended because
of a shortage in state survey staff. The State had
previously notified
HCFA in 1981 that some certifications might be issued
without surveys
due to budget limitations on survey staff. (Ex. A)
HSD then executed provider agreements with the facilities for the
periods
covered by the HED certifications. On July 14, 1983, HED
surveyed
Socorro and found, on July 18, 1983 (block 19 of the C&T), that
the
facility was certifiable based on an acceptable plan of correction.
(Ex. I)
On October 3, 1983 /1/ HED completed its survey of Grants and
found, on
October 12, 1983 (block 19 of the C&T), that the facility was
certifiable
based on acceptable plans of correction. (Ex. H)
HCFA disallowed $290,170 ($197,884 FFP) in payments made to
the
facilities on grounds that the provider agreements had been
improperly
extended with the State using the October 1982 federal surveys in
place
of the required state surveys. Specifically, HCFA disallowed
payments
to Socorro for the period June 1, 1983 to August 5, 1983, and to
Grants
for the period July 1, 1983 to October 3, 1983.
The issues
The State disputed HCFA's finding that the provider agreements were
based
on certifications from federal surveys. According to the State,
HSD as
the single State agency followed the recommendations of the State
survey
agency, HED, when it extended the provider agreements. The State
explained
that HED in March 1983, prior to the expiration of the
provider agreements,
had contacted HCFA regional office personnel to
inquire whether the
certifications could be extended without state
surveys. The State
supplied affidavits (Exs. M, Q, and R) from HED
staff members who claimed
that HCFA personnel had either approved or did
not object to HED's proposal
to extend the certifications six months
without state surveys. The
affiants declared that they had informed
HCFA of HED's inability to survey
timely because of staff shortages and,
that, if HCFA personnel had told them
that the extensions were not
permissible, HED would have managed to schedule
timely surveys. The
State further argued that HCFA was formally notified of
the extensions
in March and April 1983 when the C&T's were forwarded to
HCFA, yet HCFA
did not decide the extensions were improper until May
1984. The State
concluded that HCFA, having approved of or acquiesced
in HED's extension
of the certification periods for six months, should now be
estopped from
questioning the validity of the provider agreements and taking
a
disallowance. If the extensions are not recognized as valid, the
State
argued in the alternative, HCFA should disallow FFP only for that
period
of each extension which exceeded two months because 42 CFR
442.16
authorizes a two-month extension of a provider agreement without
a
survey if certain conditions are met.
HCAF responded that its personnel never advised HED that a
six-month
extension of certification without a survey as permissible and
supplied
an affidavit to that effect. (Ex. 6) HCFA claimed that its
regional
office personnel questioned the State in April and August 1983
wheter
recertification surveys of the facilities had been concluded.
(Ex. 4)
According to HCFA, this is a clear indication that it had not
approved
of or acquiesced in the extensions. HCFA(4) argued that, even
if the
State had notified HCFA of its intent to delay surveys because of
budget
limitations (Ex. A), HCFA did not formally approve that
proposal.
According to HCFA, the requirements for surveys and certifications
were
clearly announced in the regulations at 42 CFR Part 442 and in
Medicaid
guidelines. HCFA contended that the State was well aware of
these
requirements, and even if HED did receive the advice it claimed it
got
from HCFA personnel, the State should have known that that
advice
directly contradicted the published regulations and the State should
not
have relied on that advice. As to the State's claim that the
provider
agreements at issue could have been extended for two months under 42
CFR
442.16, HCFA responded that in order for the State to receive FFP for
a
two-month extension of the provider agreements, HED would have had
to
inform HSD, as required by 42 CFR 442.16, that the extension would
not
jeopardize the facilities' patients' health and safety, which HED
did
not do.
Discussion
I. Is HCFA estopped from taking a disallowance?
Both parties to this appeal agree that HED staff contacted HCFA
regional
personnel in March 1983 to discuss what options were available to
HED
concerning the certification of the facilities. One
possibility
discussed was the use of federal surveys. One HCFA staff
member told a
HED staff member that reliance on federal surveys was not
permitted
(State's Ex. Q), while another HCFA employee initially told another
HED
employee that HED could rely on the federal surveys, but soon
retracted
that advice (State's Ex. R). HED then proposed that the
certifications
be extended for six months.
It is at this point that the parties' versions of the events begin
to
diverge. One HED employee claimed that a HCFA employee on March 7,
1983
told her that such a six-month extension was acceptable. (Ex. Q)
The
contemporaneous notes of the telephone call taken by the HCFA
employee,
however, do not give any indication that approval of a
six-month
extension was given:
I told her our (federal) surveys should not affect their
scheduling
of annual recertifications in any way and they should go ahead and
do
their annual survey.
Ex. 3, p. 1
Another HED employee claimed that the second HCFA employee on March
17,
1983, while stating federal surveys could not be used, said
the
certifications could be extended since HED(5) could not timely
perform
the surveys. (Ex. R) The contemporaneous notes of that HCFA
employee
read:
. . . I told (HED staff member) they could delay the
certification,
but could not use the federal survey to replace a State
survey.
Ex. 3, p. 2
It is unclear from the record whether this second HCFA employee
was
assenting to the six-month extension proposed by the State or
the
two-month extension allowed under 42 CFR 442.16.
The content of the March 7, 1983 conversation is thus disputed, while
the
March 17, 1983 conversation is ambiguous as to the length of
extension
approved.
In order for the State to prevail on its estoppel claim it must
establish
that all the essential elements of estoppel are present and
that the
particular circumstances of this case warrant a finding that an
agency of the
federal government can be estopped.
The essential elements of estoppel are:
(1) the party to be estopped must know the facts;
(2) he must intend that his conduct shall be acted on or must so
act
that the party asserting the estoppel has the right to believe it is
so
intended;
(3) the latter must be ignorant of the true facts; and
(4) he must reasonably rely on the former's conduct to his injury.
United States v. Georgia Pacific 421 F. 2d, 92 at 96 (9th Cir. 1970)
While there have been federal district court and court of
appeals
decisions supporting estoppel against the government in
particular
circumstances, the Supreme Court has never permitted an estoppel,
as
such, although it has declined to say a situation could never
arise
where estoppel might be appropriate. Heckler v. Community
Health
Services of Crawford County, 467 U.S. 51, 104 S. Ct. 2218 at
2224
(1984).
The principle that there can be no estoppel against the federal
government
was stated in the clearest language in
Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380 (1947). /2/
In
Merrill, a private person relied on the misrepresentation of
a
government agent as to the coverage of a federal crop insurance
policy.
The Court said that under those circumstances a private
insurance
carrier would have been estopped, but the same principles did not
apply
to dealing with the federal government. Published regulations
were
binding upon all, even though a government agent purported to
say
otherwise. Ignorance of the law, whether the law was in a statute
or a
published regulation, was no excuse.
Since Merrill, the Supreme Court's position on estoppel has been to
some
extent ambivalent: (1) it appears possible under some
circumstances to
estop the government; but (2) the case before the
court is never that
type of case. The Court's view seems to be that it
will know a true
estoppel when it sees one.
In Community Health Services the Supreme Court said that the
requirements
for proving estoppel against a private person were not
present, let alone
proving it against the government. We should
therefore first see here
if there would be an estoppel against a private
person in similar
circumstances. These requirements are stated in
Community Health
Services. They include that the party claiming the
estoppel must have
relied on its adversary's conduct in such a manner as
to change its position
for the worse, and the reliance must have been
reasonable. 104 S. Ct.
2218 at 2223.
In Community Health Services the Court said that the reliance was
neither
reasonable nor detrimental. The misleading statement was made
by an
insurance company which was a "fiscal intermediary" in handling
Medicare
reimbursement. The Court stated that the insurance company
was
therefore a mere conduit upon whose advice the health
service
organization had no right to rely. Assuming that the State's
version of
the conversations is true, here the advice was given by
government
employees in a HCFA regional office, with whom HED normally dealt
in
such matters. However, this in itself is not determinative on
whether
the reliance on the advice given HED was reasonable.(7)
The Supreme Court in Community Health Services said that the reliance
must
have been reasonable "in that the party claiming the estoppel did
not know
nor should it have known that its adversary's conduct was
misleading." 104 S.
Ct. 2218 at 2223. Here it is fair to say that HED
knew, or at least
should have known, that the advice it was given was
misleading; at a
bare minimum, the circumstances gave rise to a duty to
make further
inquiry.
The Medicaid regulations are explicit that provider agreements are not
to
exceed twelve months, except for the two-month extension allowed
under 442
CFR 442.16. Even if we accept as fact that the HCFA regional
staff told
HED that it could extend the certification periods for
another six months
without a survey, it was not reasonable for HED to
assume that any government
employee could vary the provisions of a
published federal regulation.
Therefore, it was not reasonable for the
State to relay on the advice it
obtained by telephone.
We therefore find that the State has not met the requirements
for
estopping a private person. The Supreme Court tells us that
the
requirements for estopping the federal government are much
stricter.
These additional requirements show that, even if the State met
the
requirements for estoppel against a private person or organization,
it
would fail in such a claim against the government.
The Supreme Court has said that if there were ever to be estoppel
against
the government, it would have to be based on "affirmative
misconduct." INS v.
Hibi, 414 U.S. 5 at 8 (1973). The Court has never
defined "affirmative
misconduct" or outlined its essentials. But from
the cases it appears
to require something more than negligently giving
wrong advice. Thus,
in Schweiker v. Hansen, 450 U.S. 785 (1981), the
government employee advised
claimant she was not eligible for benefits
although she in fact was eligible
on the information she gave the
employee. In addition, the employee did
not follow the Claims Manual's
direction to give a claimant an application to
fill out and file in any
doubtful case. Yet the Court said that these
errors fell "'far short'
of conduct which would raise a serious question
whether petitioner
(government) is estopped from insisting upon compliance
with the valid
regulation." 450 U.S. 785 at 790. If the advice at issue
were actually
given, the conduct here can be classed similarly as falling far
short of
affirmative misconduct, being no more than giving erroneous
advice.
There is still one more reason why the State cannot prevail here, and
that
is because the only specific advice the State alleged it received
approving
the extension was oral advice. In Schweiker v. Hansen the
majority
intimated that whether(8) there was a written agreement might
make a
difference in finding an estoppel against the government. See
450 U.S.
785 at 788, n. 4. In Community Health Services the Court was
much more
definite:
The appropriateness of respondent's reliance is further
undermined
because the advice it received from Travelers was oral. It
is not
merely the possibility of fraud that undermines our confidence in
the
reliability of official action that is not confirmed or evidenced by
a
written instrument. Written advice, like a written judicial
opinion,
requires its author to reflect about the nature of the advice that
is
given to the citizen, and subjects that advice to the possibility
of
review, criticism and reexamination. The necessity for ensuring
that
governmental agents stay within the lawful scope of their authority .
.
. argues strongly for the conclusion that an estoppel cannot be
erected
on the basis of the oral advice. . . .
104 S. Ct. 2218 at 2227.
The Court does not come out and say that oral advice can never per se
be
the basis of an estoppel. But combined with the absence of
any
affirmative misconduct, such as fraud or deliberate
misrepresentation,
we find that the facts here do not establish an estoppel
against the
government.
II. Did the State satisfy the conditions of 42 CFR 442.16?
Section 442.16 of 42 CFR allows a two-month extension of a
provider
agreement for either of two reasons -- the prevention of harm to
a
facility or the inability to conduct a survey and determination of
a
facility's status -- provided that the extension does not jeopardize
the
health and safety of the patients. HCFA, while conceding that the
C&T's
submitted by HED (Exs. F & G) note in block 17 that the
extensions are
needed because of a shortage of survey staff, contended that
HED failed
to satisfy the precondition of 442.16 by not notifying HSD that
the
extension would not jeopardize the patients.
In Colorado Department of Social Services, Decision No. 225, October
30,
1981, the Board examined what a state survey agency needed
to
demonstrate to qualify a provider agreement for a two-month
extension.
There, Colorado used a form letter for an extension. There,
Colorado
used a form letter for an extension of a facility's provider
agreement.
The letter contained three alternative paragraphs, with boxes next
to
each paragraph to denote its applicability. Colorado's survey
agency
checked a paragraph stating it was impracticable within the
provider
agreement period to determine the facility's compliance with
Medicaid
requirements. A paragraph stating that the health and safety
of the(9)
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. The Board
found that
42 CFR 449.33(a)(6), the predecessor to 42 CFR 442.16, required
a
contemporaneous finding that the patients' health and safety were
not
endangered, and determined that Colorado had not met this
precondition
and sustained the disallowance.
Here, the State claimed that it had met the precondition concerning
the
patients' health and safety. The State argued that HED had placed
an
"x" in block 12(A) on each of the C&T's. This block reads
"in
compliance with program requirements."
We find that HCFA is being unreasonable in asserting that the
checkmarks
in block 12(A) did not meet the precondition of 42 CFR
442.16. If HED
determined that the facilities were in compliance with
Medicaid
requirements, that determination would of necessity include a
finding
that the health and safety of the patients would not be
jeopardized
while remaining in the facilities. While perhaps it would
have been
preferable for HED to explicitly inform HSD on the health and
safety
issue, HCFA's position denying that the checkmarks in block 12( A)
did
this elevates form over substance. All 442.16 requires is
"written
notice from the survey agency." It does not specify that certain
forms
or certains words have to be used. As the State has pointed out,
the
Medicaid program is a joint federal/state program, with the states
given
considerable discretion in administering their individual state
Medicaid
plans. We believe that HED's use of block 12(A) under the
circumstances
here met the requirements of 42 CFR 442.16.
We therefore find that HSD properly extended Socorro's provider
agreement
to July 31, 1983 and Grants' to August 31, 1983. While in
its
disallowance letter HCFA stated that it was disallowing FFP for
services
performed at Socorro to August 5, 1983, it was established during
the
course of this appeal that Socorro was surveyed on July 14, 1983
and
found in compliance on July 18, 1983 (box 19 of the C&T).
Ex. I. In
Washington Department of Social and Health Services,
Decision No. 176,
May 26, 1981, the Board declared that "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." Id., p. 5. Since
July
18, 1983 fell within the two-month extension of Socorro's
provider
agreement, we conclude that there should be no disallowance of FFP
for
services at Socorro.
HCFA disallowed FFP for services performed at Grants from July 1, 1983
to
October 3, 1983. Since the State properly(10) extended Grants'
provider
agreement to August 31, 1983, the only period subject to
disallowance is
September 1, 1983 to October 3, 1983. HCFA should
calculate the amount
of FFP owed by the State for that period.
Conclusion
For the reasons stated above, we sustain the disallowance in an
amount
reduced to the period September 1, 1983 to October 3, 1983 for
services
performed at Grants. /1/ This is the date of survey indicated
in block
9 on Grants' C&T (Ex
H). In the oral argument held in this
appeal HCFA explained that the
health survey of Grants was completed on
September 22, 1985, while the Life
and Safety Code survey was held on
October 3, 1983. /2/ Merrill is
still presumably good law, being
cited
in both the majority and
concurring opinion in Community Health
Services. (See 104 S. Ct. 2218
at 2226, n. 17, and 2228)
MARCH 28, 1987