GAB Decision 179
May 28, 1981 Maryland Department of Health and Mental Hygiene; Docket
No. 79-40-MD-HC Ford, Cecilia; Settle, Norval Garrett, Donald
The Maryland Department of Health and Mental Hygiene (State), by
letter dated March 7, 1979, sought review of a February 5, 1979
determination by the Director of the Medicaid Bureau, Health Care
Financing Administration (HCFA, Agency), to disallow $82,188 in Federal
financial participation (FFP) claimed by the State under Title XIX of
the Social Security Act. The notification of disallowance stated that
FFP in the amounts of $75,613 and $6,575 was being denied for,
respectively, intermediate care facility (ICF) services and skilled
nursing facility (SNF) services provided by the Wildwood Health Care
Center (Wildwood) during February and March 1978. The basis of the
disallowance was the alleged failure by Wildwood to have valid ICF and
SNF provider agreements in effect with the State during that period.
The notification of disallowance stated that the Title XIX provider
agreements with Wildwood expired January 31, 1978 and that Wildwood had
not been recertified to provide care under the Medicaid program.
There are no material issues of fact in dispute. We have, therefore,
determined to proceed to decision based on the written record and
briefs, the parties' responses to an Order to Show Cause issued on
January 19, 1981, and a March 25, 1981 telephone conference with the
parties.
I. Applicable Laws and Regulations
The Medicaid regulations have been recodified several times in recent
years, but for the period in question (February and March 1978) the
applicable regulations are set forth in 42 CFR Part 449 (1977),
"Services and Payment in Medical Assistance Programs."
FFP wad denied for both SNF and ICF services provided by Wildwood
during this period. To obtain FFP for payments made to a SNF and an
ICF, the State must comply, respectively, with the provisions of 42 CFR
449.10(b)(4)(i)(c) and 42 CFR 449.10(b)(15)(i)(E) requiring the single
State agency and the provider facility to execute an agreement which the
single State agency determines is in accordance with 42 CFR 449.33. The
regulations require that prior to the execution of a provider agreement
and the making of payments, the agency (2) designated pursuant to Sec.
450.100(c) (the survey agency) must certify that the facility is in full
compliance with standards prescribed in the regulations. 42 CFR
449.33(a)(1) and (2).
In the situation where a facility providing SNF services participates
in both the Medicare and Medicaid programs, Sec.1902(a)( 28) of the
Social Security Act (Act) provides that the requirements and standards
for a SNF participating in Medicare set forth in Sec. 1861(j) of the
Social Security Act shall also be applied to a SNF participating in
Medicaid. Similarly, Sec. 1910(a)(1) of the Act provides that any SNF
certified to be qualified for Medicare shall be deemed to meet the
standards for certification as a Medicaid SNF.
II. Statement of the Case
The State does not contest the fact that no valid ICF and SNF
provider agreements for Wildwood were in effect during the period in
question. The State does argue, however, that it was not responsible
for the failure of Wildwood to have provider agreements, but rather that
it was the dilatory actions of HCFA's Health Standards and Quality
Bureau (HSQB) that ultimately caused the provider agreements not to be
issued.
Wildwood's provider agreements expired on January 31, 1978. Without
indicatingg when it sent the survey reports of Wildwood to the HSQB for
review, the State claims that it was not until September 14, 1978 that
its Division of Licensing and Certification (State survey agency)
received the Sec. 1866 (Medicare) HSQB certification for Wildwood for
the period February 1, 1978 through October 31, 1978. The State survey
agency thereupon notified the State's Medical Assistance Program (single
State agency) of Wildwood's certification.The State argues that it was
impossible for it to execute provider agreements with Wildwood prior to
September 14, 1978. Furthermore, the single State agency was then
unable to locate or contact the owners of Wildwood to execute Title XIX
agreements for the period approved by the HSQB. The State declares that
provider agreements have not subsequently been executed to cover the
period of the disallowance because the owners of Wildwood have left the
State and it has been impossible to contact them.
Wildwood was experiencing financial difficulties in 1978 and
negotiations were in process to sell the facility. Wildwood's
administrator disclosed to the State on June 16, 1978 that she did not
know who the current owners of Wildwood were. Throughout the summer of
1978, the State sought explanations of the ownership status of Wildwood,
but, despite repeated attempts, was unable to contact the owners.
Eventually on October 1, 1978, the facility was relicensed under new
ownership as the Bethesda Health Care Center.
The state reasons, based on its view of the facts, "i.e., that the
Federal government was solely responsible for the absence of an executed
contract (3) covering the period in question, and that the Maryland
Program has acted as expeditiously as possible to execute a provider
agreement covering that period we feel that the State is entitled to FFP
for the cost of care rendered in the Wildwood Health Care Center from
February 1, 1978 through March 31, 1978." (State's request for
reconsideration, March 7, 1979, p. 2.)
In its response to the State's appeal the Agency argues that the
State was solely responsible for the certification of Wildwood for ICF
Medicaid participation with the HSQB having no role in the process. As
for the SNF services, while admitting that a delay by the HSQB in
certifying a facility could prevent the State from executing a timely
provider agreement for SNF Medicaid participation, the Agency contends
that the fact that a provider agreement was never ultimately executed
with Wildwood for SNF services precludes the State, under the Medicaid
regulations, from receiving FFP. The Agency does not dispute the fact
that the State was unable to locate the owners of Wildwood to execute a
provider agreement, but argues that the Agency "should not be held
responsible for strange happenings which are totally beyond its control
and which are not reasonably forseeable." (Agency's April 13, 1979
Response, p. 7.)
III. Discussion
The central issues in this appeal are whether the State's claim that
the Agency's HSQB, by delaying its certification of the facility, was
responsible for the failure to have ICF and SNF provider agreements in
effect with Wildwood during the period in question is valid, and, if so,
whether that provides a basis for the Board to reverse the disallowance.
In addition to participating in the Medicaid program as a provider of
ICF and SNF services, Wildwood also participated in the Medicare
program. This is relevant because the Agency's HSQB only becomes
involved in the Medicaid program through its role in the Medicare
program.
The HSQB was established by the Health Care Financing Administration
to monitor the quality of care provided to Medicare beneficiaries. The
HSQB requires that facilities providing care to Medicare beneficiaries
are structurally safe, provide for a sanitary environment, are well
staffed, and have needed services available. The HSQB also requires
that the actual care provided to beneficiaries is of high quality and
ensures that medical services are necessary and are provided in the most
appropriate setting. The HSQB's Office of Standards and Certification
monitors standards enforcement and the State's survey and certification
of health care facilities.
Medicare is a federally administered program, while Medicaid is a
cooperative federal-state program administered by the individual states.
(4) The two major types of services provided by nursing facilities
participating in the Medicaid program are intermediate care facility
(ICF) services and skilled nursing facility (SNF) services.Different
standards are imposed for each type of facility, reflecting the
different services provided in each type of facility.
It is through the common standard enunciated in Sec. 1902(a)(28) of
the Social Security Act for SNFs participating in both the Medicare and
Medicaid programs that the HSQB becomes involved in the Medicaid
program. A SNF participating in Medicare must receive HSQB approval.
Since the SNF standards for Medicare and Medicaid participation are
identical, if the same SNF wishes to participate as a SNF in the
Medicaid program, the HSQB has the responsibility for the ultimate
certification of the facility as a Medicare/Medicaid SNF provider.
Under such circumstances, a state may not execute a provider agreement
with that SNF for Medicaid unless the facility is approved by the HSQB
for participating in Medicare. Thus a delay by the HSQB in approving
requests for waivers, for example, may well prevent a state from
executing a SFN provider agreement with a facility. In order not to
penalize a state for delays by the HSQB in certifying a Medicare/
Medicaid SNF facility, the Agency permits a SNF Medicaid provider
agreement to be backdated to the expiration date of the previous
provider agreement where such delay has occurred. (Agency's April 13,
1979 Response, p. 4.)
Only July 31, 1980 the Board issued its decision in the case of the
Maryland Department of Health and Mental Hygiene, Decision No. 113. In
that case, involving the same parties as this appeal, the Board
addressed the question whether a delay by the HSQB in certifying a
facility for Medicare/Medicaid participation as a SNF was responsible
for the State's failure to execute an ICF provider agreement with the
facility. In sustaining the disallowance for ICF services in that case,
the Board held, at page 4:
(The) responsibility for certifying an ICF for Medicaid participation
lies solely with the states. 42 CFR 449.33(a)(2)...
The HSQB has no responsibility in the process of the certification of
a facility for ICF services. Thus, if a facility wished to participate
as a SNF in the Medicare and Medicaid programs and as an ICF in the
Medicaid program, the HSQB would have to approve the SNF certification.
The state, however, would not have to await any HSQB action before it
could enter into an ICF provider agreement with the facility.
In a January 19, 1981 Order, the Board noted that the State could
have surveyed Wildwood, granted whatever waivers were needed, or agreed
to a plan of correction, and certified Wildwood for ICF participation in
the Medicaid program prior to the expiration of Wildwood's former ICF
provider agreement on January 31, 1978.
(5) The Order directed the State to show cause why the Board should
not sustain the disallowance of $75,613 of FFP for ICF services provided
by Wildwood on the basis of Decision No. 113.
In its February 10, 1981 response to the Order, the State did not
address this issue. In the March 25, 1981 telephone conference, the
Board asked the State to provide documentation as to when the State sent
its surveys of Wildwood to the HSQB, what those survey reports
contained, and whether the State had ever certified Wildwood. On April
27, 1981, after the due date for the submission of the documentation,
the Board received certain documents from the State. Despite their
untimeliness, the Board reviewed these documents, which consisted solely
of the survey reports for Wildwood. The State did not submit any
documentation concerning the State's certification of Wildwood or when
the State submitted the survey reports to the HSQB. Thus, not only did
the State not have a provider agreement with Wildwood as required by the
regulations, the State has failed to produce documentation that the
State survey agency ever certified Wildwood as an ICF provider as was
also required by the regulations.
On the basis on Decision No. 113 and the State's failure to supply
the Board with any arguments or documents that would cause that decision
not to apply to this case, we sustain the disallowance for ICF services
in the full amount of $75,613.
As for the disallowance for SNF services, the Order noted that the
Agency had stated that if the State and Wildwood had executed a SNF
provider agreement, it could have been backdated to encompass the period
of the disallowance, but since no agreement was ever executed, the
disallowance must stand. In the Order the Board, noting the confusion
the State was confronted with over the ownership of Wildwood and its
good faith efforts to locate the owners and the fact that Wildwood's
patients did not receive substandard care during the period in question,
asked the Agency whether a provider agreement could now be executed
between the State and the successors in interest to Wildwood to satisfy
the regulatory requirements. The Order also directed the State to show
cause why the disallowance should not be sustained because of the
absence of a provider agreement.
In its January 30, 1981 response, the Agency agreed, with certain
reservations, that the State could now execute a provider agreement for
the SNF services only. The State, however, declared it would be
impossible to execute a provider agreement with the current owner
because the current owner is a different corporation and there is no
privity of interest between the previous and current owners.
This case represents a unique situation. The State is faced with a
disallowance of $6,575 for SNF services.It is possible that the Agency's
HSQB was late in its certification of Wildwood as a (6)
Medicare/Medicaid SNF provider; yet the Agency provides for a SNF
Medicaid provider agreement to be backdated under circumstances where
the HSQB may have been dilatory. The problem arises because, when the
State went to execute the provider agreement, it was unable to locate
Wildwood's owners to do so. In the March 25, 1981 telephone conference
the Agency said that it was willing to give the State the opportunity to
show that it had submitted the survey reports to the HSQB before the
State first became aware of the absence of Wildwood's owners, but the
State has not provided that information.
Thus, after January 31, 1978, Wildwood was without a SNF provider
agreement. The Board has previously held that as a general rule FFP is
not available for a facility with an expired provider agreement.
Delaware Department of Health and Social Services, Decision No. 87,
February 29, 1980, p. 9. The regulations are explicit in requiring a
provider agreement for FFP to be paid. 42 CFR 449.10(b)(4)(i)(C).
Furthermore, the State's assertion that the HSQB was ultimately
responsible for the lack of a SNF provider agreement because of its
dilatory actions has been weakened by the State's failure to produce
documentation showing when it sent the survey reports to the HSQB. We
do not know for a fact that there was a delay at the HSQB or the extent
of the delay if one occurred, or if the delay actually resulted in the
inability of the State to execute an agreement.
We conclude that the disallowance for SNF services must be sustained
on the basis of the explicit requirement for a provider agreement set
forth in the regulations. Unusual situations may arise, but there is no
basis here to compel the Agency to carve out an exception to express
regulatory requirements.
IV. Conclusion
For the reasons stated above, we sustain the disallowance of FFP for
ICF and SNF services rendered at the Wildwood Health Care Center in the
full amount of $82,188.
OCTOBER 22, 1983