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CASE | DECISION | ISSUES | FINDINGS OF FACT AND CONCLUSIONS OF LAW | ANALYSIS | CONCLUSION | JUDGE | FOOTNOTES

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Appellate Division


IN THE CASE OF  
Metropolitan Methodist
Hospital,
Petitioner,
Date: 1999 June 21
- v. -  
Health Care Financing
Administration.
Civil Remedies CR574
App. Div. Docket No. A-99-40
Decision No. 1694

DECISION
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FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE DECISION

Metropolitan Methodist Hospital (Metropolitan) appealed the February 8, 1999 decision of Administrative Law Judge (ALJ) Edward D. Steinman dismissing this case for lack of jurisdiction. Metropolitan Methodist Hospital, DAB CR574 (1999)(ALJ Decision). Metropolitan had sought an ALJ hearing to review the denial by the Health Care Financing Administration (HCFA) of Metropolitan's request to exclude its rehabilitation unit from the Medicare prospective payment system (PPS).

In his dismissal order, the ALJ concluded that the March 26, 1998 and May 29, 1998 HCFA actions denying Metropolitan's request were not the kinds of determinations over which he had jurisdiction under section 1866(h)(1) of the Social Security Act (Act) or 42 C.F.R. � 498.3(b).

On appeal, Metropolitan submitted that the ALJ erroneously concluded that HCFA's denial was not an appealable determination under either section 1866(h)(1) of the Act or section 498.3(b) of the Medicare regulations.

Our standard for review of an ALJ decision on a disputed issue of law is whether the ALJ decision is erroneous. Our standard for review on a disputed issue of fact is whether the ALJ decision as to that fact is supported by substantial evidence on the record as a whole. As discussed below, we uphold the ALJ's dismissal, concluding that the ALJ did not err in determining that section 1866(h)(1) of the Act and Part 498 of the Medicare regulations do not authorize review of Metropolitan's claim and that substantial evidence on the record supports the ALJ's findings.

Accordingly, we sustain the ALJ's dismissal of Metropolitan's request for review.

I. Background

Metropolitan built a 10-bed rehabilitation unit which the Texas Department of Health licensed effective March 12, 1998. On or about March 5, 1998, Metropolitan requested HCFA to exclude the unit from PPS for the cost period ending March 31, 1999.(1) HCFA Exs. 1, 2. By letter dated March 26, 1998, HCFA denied Metropolitan's request, stating that exclusion requests must be made several months before an applicant's fiscal year ending (FYE) date in order to arrange for and conduct a validation survey before that date.(2) HCFA Ex. 4; P. Ex. A.

On May 8, 1998, Metropolitan requested a reconsideration of the HCFA action. P. Ex. B. HCFA responded on May 29, 1998, confirming its earlier denial. HCFA wrote, among other things, that it was not made aware of Metropolitan's exclusion request until three weeks prior to the end of the Metropolitan's fiscal year. HCFA added that "the hospital can currently operate the unit as a PPS rehabilitation unit and apply for exemption for the next cost report period." P. Ex. C.

On July 27, 1998, Metropolitan requested an ALJ hearing of HCFA's denial. HCFA filed a motion to dismiss Metropolitan's appeal for lack of jurisdiction on September 29, 1998. The ALJ granted the motion, dismissing the case, on February 8, 1999. In his dismissal order, the ALJ issued the following single finding of fact and conclusion of law:

I find that neither HCFA's determination of March 26, 1998 nor its May 29, 1998 determination responding to Metropolitan's request to HCFA to reconsider its March 26, 1998 determination is the kind of determination over which I have jurisdiction to review under the Social Security Act . . ., section 1866(h) and the applicable regulations at 42 C.F.R. � 498.3(b).

In its request for review, Metropolitan excepted to the ALJ's finding of fact and conclusion of law. Metropolitan contended that: under the statute and regulations "providers, as well as 'prospective providers,' are entitled to appeal adverse determinations"; and "the fact that the statute and HCFA created jurisdiction for both providers and potential providers reflects an intent to include all providers." P. App. Br. at 3. Further, Metropolitan alleged, the ALJ had jurisdiction over this case based on section 1866(h)(1) of the Act because Metropolitan was "an institution dissatisfied with a determination that it [was] not a provider of services excluded under PPS." P. App. Br. at 3. If Metropolitan was not such an institution, Metropolitan submitted, it was a "prospective provider" under 42 C.F.R.

� 498.2, and HCFA's action was an appealable initial determination that the prospective provider did not qualify as a provider under section 498.3(b)(1) of the regulations. Finally, Metropolitan contended, the ALJ had accepted jurisdiction in similar cases where the action at issue was not specifically described under Part 498 of the Medicare regulations.


ISSUES
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FINDINGS OF FACT AND CONCLUSIONS OF LAW
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ANALYSIS
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The starting point for purposes of analyzing this case is section 1866(h)(1) of the Act, which provides in pertinent part: "An institution or agency dissatisfied with a determination by the Secretary that it is not a provider of services or with a determination described in subsection (b)(2) shall be entitled to a hearing thereon by the Secretary."(3) Congress defined the term "provider of services" at section 1861(u) of the Act to mean "a hospital, critical access hospital, skilled nursing facility, comprehensive outpatient rehabilitation facility, home health agency, hospice program, or for [certain limited purposes]. . ., a fund." The Act separately defines each of the entities listed in section 1861(u) (e.g., section 1861(e) defines the term "hospital"). Each of these definitions refers to the requirements for (or conditions of) participation for that type of entity. Each of these definitions also ties into the Act's definitions of Medicare-covered services, such as the definition of "inpatient hospital services" at section 1861(b). In addition, subsection 1866(e) of the Act states that, for purposes of section 1866, the term "provider of services" includes other entities that meet requirements specified in the Act and provide specified services. This includes a "rehabilitation agency" but only with respect to furnishing certain outpatient services that are not at issue in this case.(4)

Substantial evidence in the record supports the ALJ's finding that Metropolitan, including its distinct part rehabilitation unit, was already qualified as a "hospital" to provide inpatient hospital services under Medicare when it sought the PPS exclusion. Neither the statute nor the regulations recognize distinct part rehabilitation units of hospitals as independent providers of inpatient hospital services. To the contrary, 42 C.F.R. � 412.25, which sets forth the requirements for PPS excluded hospital units, states that in order to be excluded, a distinct part rehabilitation unit must: "Be part of an institution that--(I) Has in effect an agreement under part 489 of [HCFA's regulations] to participate as a hospital. . . ." (Emphasis added.)

In addition, Metropolitan did not allege that it sought to have the distinct part unit certified as a provider separate from Metropolitan, nor that HCFA's action deprived Metropolitan of its existing status as a participating provider hospital. Further, Metropolitan did not allege that HCFA's action affected Metropolitan's Medicare provider agreement or the type of Medicare-covered services that could be provided in the rehabilitation unit. To the contrary, HCFA stated in its May 29, 1998 letter that "the hospital [could] currently operate the unit as a PPS rehabilitation unit and apply for exemption for the next cost report period." P. Ex. C.

Metropolitan asserted that section 1866(h)(1) of the Act establishes appeal rights in this case because Metropolitan was an institution "dissatisfied with a determination that it [was] not a provider of services excluded under PPS." P. Br. at 3. This argument has no merit. The Act's definitions of "provider of services" list categories of entities that may participate in the Medicare program and do not separately list a "provider of services excluded under PPS." Treating "services excluded under PPS" as a type of Medicare-covered service that the rehabilitation unit was providing would in fact conflict with the Act. Specifically, while "inpatient hospital services" represents a category of covered services under the Act, "services excluded under PPS" is not. Indeed, under the PPS exclusion scheme, the types of services that may be excluded are those that would otherwise be reimbursed using PPS--inpatient hospital services. Further, participation as a hospital provider, such as Metropolitan, allows any unit included in the certification, including a rehabilitation unit, to furnish inpatient hospital services.

Section 1866(h)(1) of the Act does not explicitly refer, or implicitly allude, to determinations about how Medicare will pay for services furnished by participating entities, or by a distinct part unit of a hospital provider, as Metropolitan suggested. Yet, HCFA's action here fundamentally related only to how Medicare would pay for the inpatient hospital services provided in the rehabilitation unit; the action was not a determination that Metropolitan or its rehabilitation unit was not a provider of services under sections 1866 and 1861(u) of the Act. Metropolitan did not seek to appeal here to establish that it met the conditions of participation to qualify as a "hospital" to provide inpatient hospital services under Medicare. Rather, Metropolitan sought to establish that its rehabilitation unit met the conditions for reimbursement of those services using a different methodology.

We additionally conclude that the ALJ did not err in determining that HCFA's action was not subject to his jurisdiction based on 42 C.F.R. � 498.3(b) of the regulations, which describes appealable "initial determinations" by HCFA. As noted above, Metropolitan submitted that 42 C.F.R. � 498.3(b)(1) supports the ALJ's jurisdiction over this case because HCFA's action may be characterized as a determination "whether a prospective provider qualifies as a provider."(5) The Medicare regulations, however, do not recognize a distinct part rehabilitation unit of a hospital as an entity that may be a prospective provider of inpatient hospital services independent from the hospital. Specifically, section 498.2 of the regulations defines the term "prospective provider" to mean "any of the listed entities [a hospital, critical access hospital, skilled nursing facility, comprehensive outpatient rehabilitation facility, home health agency, or hospice] that seeks to participate in Medicare as a provider." Thus, the ALJ did not err when he determined that neither Metropolitan nor its rehabilitation unit could be characterized as a prospective provider within the plain meaning of the regulations because neither Metropolitan nor its rehabilitation unit was trying to attain provider status from the outset when Metropolitan requested the PPS exclusion.

In addition, we reject as overly broad Metropolitan's contentions based on section 1866(h)(1) of the Act and sections 498.1 and 498.3 of the regulations that: "providers, as well as 'prospective providers' are entitled to appeal adverse determinations"; and "the fact that the statute and HCFA created jurisdiction for both providers and potential providers reflects an intent to include all providers." P. Br. at 3. As we discussed above, section 1866(h)(1) of the Act provides for appeals by specified entities of certain types of HCFA determinations. While the jurisdiction established under Part 498 of the regulations is broader than that established under section 1866(h)(1) of the Act, there is no indication that the Secretary intended to include the type of action involved in this case as an appealable determination under Part 498 of the regulations. Further, that the jurisdiction established under section 1866(h)(1) of the Act and Part 498 of the regulations is not as broad as Metropolitan contended is evidenced by the fact that these sections do not represent the exclusive sources of authority to obtain administrative and judicial review of HCFA actions. For example, section 1878 of the Act and Part 405, Subpart R, of the Medicare regulations authorize review by the Provider Reimbursement Review Board of certain types of provider reimbursement determinations.(6)

Finally, we conclude that the ALJ did not err in rejecting Metropolitan's contention that the denial of Metropolitan's request to exclude its rehabilitation unit from PPS was appealable because the ALJ accepted jurisdiction in analogous cases, including Homelife Nursing, Inc., DAB CR417 (1996). As the ALJ noted in Affordable Skilled Nursing, DAB CR562 (1999), the HCFA determination in Homelife Nursing, regarding whether an entity was a subunit or a branch of a home health agency, was integrally connected to the question whether a prospective provider qualifies as a provider. That is, by determining that the office at issue in Homelife Nursing was a home health agency subunit, rather than a branch, HCFA essentially conferred separate provider status on the entity. In fact, HCFA assigned the office at issue in Homelife Nursing a new provider number. The assignment of the new provider number was consistent with the Medicare home health agency regulations which, in contrast to the regulations addressing distinct part hospital rehabilitation units excluded from PPS, establish that a home health agency subunit must independently meet the Medicare conditions of participation for home health agencies. 42 C.F.R. � 484.2. Accordingly, we conclude that the immediate matter must be distinguished from the unique facts and the home health agency regulations at issue in Homelife Nursing.


CONCLUSION
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Based on the foregoing analysis, we uphold the ALJ Decision dismissing Metropolitan's request for hearing.


JUDGE
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Donald F. Garrett
M. Terry Johnson
Judith A. Ballard
Presiding Board Member


FOOTNOTES
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1. The regulations implementing PPS and the rules governing how hospital units may be excluded from PPS are set forth at 42 C.F.R. Part 412. Essentially, the PPS system pays a prospectively determined rate per discharge for inpatient hospital services, based on the patient's diagnosis. Certain hospitals or hospital units may be excluded from PPS. If a unit is excluded from PPS, the hospital may be reimbursed under a different methodology for inpatient hospital services provided by that unit.

2. HCFA sent a letter to Metropolitan on March 8, 1998, stating that hospitals requesting PPS exclusions must forward their requests at least two-three months in advance of their fiscal year end dates and that HCFA's and the fiscal intermediary's records reflected that Metropolitan's fiscal year end date was December 31, as opposed to March 31. HCFA Ex. 2. In response, Metropolitan wrote on March 25, 1998, that it "requested a PPS exemption survey prior to 3/31/98 as the facility has a 3/31/98 fiscal year end." HCFA Ex. 3. HCFA wrote in a May 29, 1998 letter to Metropolitan that "[i]n view of the fact that the hospital was planning to change the FYE from December 31 to March 31, the request should have been made much earlier." P. Ex. C.

3. Subsection (b)(2) authorizes the Secretary to refuse to enter into an agreement with a provider of services or to refuse to renew or to terminate an agreement after making one of four specified determinations.

Section 1866(h)(1) of the Act is part of the statutory basis for the appeals regulations at 42 C.F.R. Part 498, but that part also implements certain provisions permitting sanctions other than termination for certain types of providers and includes procedures for review of determinations that affect suppliers and practitioners. 42 C.F.R. � 498.1(a).

4. Section 498.2 of the regulations defines "provider" to mean "a hospital, critical access hospital (CAH), skilled nursing facility (SNF), comprehensive outpatient rehabilitation facility (CORF), home health agency (HHA), or hospice, that has in effect an agreement to participate in Medicare . . . ." See also 42 C.F.R. � 489.2, listing the types of providers subject to the rules governing Medicare provider agreements.

5. Under section 498.5(a)(1), a prospective provider dissatisfied with an initial determination that it does not qualify as a provider may request reconsideration, and section 498.5(a)(2) states that the prospective provider dissatisfied with a reconsidered determination under paragraph (a)(1) is entitled to a hearing before an ALJ.

6. We note that HCFA stated that Metropolitan may possibly obtain review of the agency's action by the Provider Reimbursement Review Board under section 1878 of the Act and 42 C.F.R. Part 405, Subpart R, in the context of seeking review of the cost settlement for the relevant year. HCFA Br. at 10-11; HCFA Reply to Metropolitan's Response to HCFA's Motion to Dismiss at 3-4.


CASE | DECISION | ISSUES | FINDINGS OF FACT AND CONCLUSIONS OF LAW | ANALYSIS | CONCLUSION | JUDGE | FOOTNOTES