GAB Decision 184
May 31, 1981 Nebraska Department of Public Welfare; Docket No.
79-77-NE-HC Ford, Cecilia; Garrett, Donald Teitz, Alexander
1. Introduction
By letter dated April 4, 1979, the Administrator of the Health Care
Financing Administration (HCFA, Agency) upheld the May 28, 1976 decision
by the former Regional Commissioner, Region VII, to disallow $68,408 in
Federal financial participation (FFP) claimed under Title XIX of the
Social Security Act (Medicaid) for services provided by Orchard Hill
Nursing Manor for the period January 1 through September 1975, and
Gra-Mar and Linden Manor Nursing Homes for the period May 18 to June 30,
1975. The disallowance was based on a review conducted by the Regional
Office of Medical Services and Financial Management and the Office of
Long-Term Care Standards Enforcement to determine the validity of
intermediate care facility (ICF) and skilled nursing facility (SNF)
provider agreements entered into by the State of Nebraska (the State).
The dispute in the Orchard Hill portion of the disallowance pertains to
a plan of correction subject to an automatic cancellation clause. The
dispute in the Gra-Mar and Linden Manor portions of the disallowance
pertains to the necessity of conducting a survey based on ICF standards
before a facility is certified as an ICF.
This decision is based on the State's application for review dated
April 30, 1979, the Agency response, the reconsideration record (SRS
Docket No. ME-NE7601), and an Order to Show Cause. The State chose not
to respond to the Order; the Agency was not required to respond and did
not do so. The State has elected to have its appeal governed by 45 CFR
Part 16.
2. Applicable Regulations
The Medicaid regulations have been recodified several times in recent
years, but for the period in question the applicable regulations are set
forth in 45 CFR Part 249 (1975), "Services and Payment in Medical
Assistance Programs." Federal regulations provide that to obtain FFP for
payments made to an ICF, a state must comply with Sec. 45 CFR
249.10(b)(15)(i)(E) which requires the single State agency and the
provider facility to execute an agreement which is evidence the facility
meets all of (2) the conditions of Sec. 249.10(b)(15)(i). The
regulations require that prior to the execution of the provider
agreement and the making of payments, the agency designated pursuant to
Sec. 250.100(c) (the survey agency) must certify that the facility meets
the definition in Sec. 249.10(b)(15) and is in full compliance with
standards prescribed in the regulations.
Upon certification for ICF services by the survey agency, the single
State agency then executes a provider agreement with the facility in
accordance with Sec. 249.33(a)(6). Facilities which are determined to
have deficiencies requiring decertification or termination may enter
into a plan of correction with the state agency pursuant to Sec.
249.33(a)(4). Certification with a plan of correction may be for a
period no longer than 60 days following the end of the correction period
(Sec. 249.33(a)(4)(iii)(A)) or a conditional term of 12 months, subject
to an automatic cancellation clause that the certification will expire
at the close of a predetermined date unless the corrections have been
satisfactorily completed or the facility has made substantial progress
in correcting the deficiencies (Sec. 249.33(a)(4)(iii)(B)). Section
249.33(a)(6) sets forth the permissible length of provider agreements
and states that the effective date of the provider agreement may not be
earlier than the date of the certification by the survey agency. FFP is
not available until a valid provider agreement is in effect.
Section 1902(a)(28) of the Social Security Act provides that a SNF
participating in Medicaid must meet the standards and requirements set
forth in Section 1861(j) of the Act, under Medicare. FFP in payments to
a facility providing SNF services is available only if the facility is
certified as having met all the requirements for participation in the
Medicaid program as evidenced by a provider agreement between the single
State agency and the facility (Sec. 249.10(b)(4)(i)(C)). The execution
of the provider agreement is contingent upon certification of the
facility by the designated state survey agency (Sec. 249.33(a)(6)).
The single State agency is required to certify that the facility is
in compliance with each condition of participation (Sec. 249.33(a)(4)(
i)). In order for the state to obtain FFP, the execution of the
provider agreement must be in accordance with Sec. 249.33(a)(6). A
facility which does not qualify under Sec. 249.33 is not recognized as
an SNF for purposes of payment under the Medicaid program (Sec. 249.33(
a)(10)).
A provider agreement between the single State agency and a facility
is not necessarily a sufficient basis to claim FFP, however, The
provider agreement may be determined invalid if the Secretary
establishes that any of five provisions Sec. 449.10(b)(4)(i)(C)(1) --
(5) for a skilled nursing facility or in Sec. 449.10(b)(15)(vi)(A) --
(E) for an intermediate care facility were violated in the certification
of the facility.
(3) 3. Orchard Hill Nursing Manor (Orchard Hill)
Background
According to the record, on August 19 and 20, 1974, the Nebraska
Department of Health, the State survey agency, surveyed Orchard Hill to
determine its compliance with state and federal requirements for SNFs.
The survey determined "that Orchard Hill did not satisfy one required
condition of participation, and did not meet 20 requirements set by
federal and State regulations." See Agency Response, p. 6. Having
received notice of these deficiencies, Orchard Hill, on September 11,
1974, agreed to a plan of correction for the deficiencies disclosed by
the survey. According to the plan, all corrections were to be made by
October 31, 1974. See reconsideration record, SRS Docket No.
ME-NE7601, N-20. /1/
On September 28, 1974, the Nebraska Department of Health certified
Orchard Hill as an SNF. The record indicates that certification was to
be effective for 12 months, beginning September 29, 1974, subject to an
automatic cancellation clause effective 60 days following the scheduled
date of correction. See reconsideration record N-21. We assume that
ICF and SNF provider agreements were executed which contained the same
provisions.
On December 3, 1974, a post-certification revisit survey conducted at
Orchard Hill revealed that 7 out of 20 deficiencies had not been
corrected. See reconsideration record, N-22.
On October 8, 1975, the Nebraska Department of Health certified
Orchard Hill as an ICF based on a survey completed September 15, 1975.
ICF certification based on ICF standards was not required before March
18, 1975 (Sec. 249.10(b)(15)(i)(E)). The certification form (Form 1539)
showed an "effective date" of October 1, 1975. See reconsideration
record, N-26.
On October 28, 1975, Orchard Hill was recertified as an SNF. The
certification form showed an "effective date" of October 1, 1975.
See
reconsideration record, N-26, 27.
The Regional Commissioner determined that the SNF and ICF provider
agreements between the State and Orchard Hill were invalid for the
period between January 1 and September 30, 1975. The Commissioner based
his determination on his finding that Orchard Hill's certification had
expired 60 days after the last date for deficiencies to be corrected, as
provided by the cancellation (4) clause, and that no new certification
had taken place until the certification effective October 1, 1975. FFP
was disallowed in the amount of $45,441 relating to payments for SNF and
ICF services from January 1 to September 30, 1975. See notification of
disallowance, May 28, 1976, pp. 1-2. /2/ Discussion
Discussion
Plan of Correction
Section 249.33(a)(4)(iii)(B) provides for the automatic cancellation
of a conditional term provider agreement no later than sixty (60) days
following the end of the time period specified for correction of the
deficiencies, unless the state survey agency finds that all required
corrections have been made or the state survey agency informs the Title
XIX agency that substantial progress has been made and a new plan of
correction has been adopted. Indeed, Orchard Hill's provider agreement
expressly incorporates the language of Sec. 249.33(a)(4)(iii)(B). See
reconsideration record, N-21. The record shows that the State survey
agency did not find all corrections completed, nor was the single State
agency, the Department of Public Welfare (DPW), informed that progress
had been made and a new plan of correction signed. Thus, since the time
period for correction ended October 31, 1974, Orchard Hills's provider
agreement was cancelled automatically on December 31, 1974, and FFP in
payments made on or after January 1, 1975, until recertification, was
properly disallowed.
The State argues that "no disallowance is justified because Orchard
Hill's deficiencies were temporary and did not pose a substantial threat
to patient health." See Administrator's decision, April 4, 1979, p. 2.
HCFA is correct, however, in stating, ". . . that deficiencies are
temporary and do not threaten patient health and safety is a
precondition of certification based on a plan of correction; these
factors (5) cannot be used to avoid cancellation of the agreement if the
deficiencies remain uncorrected." See Agency Response, p. 17 and Sec.
249.33(a) (4)(ii)(A) and (B).
In response to the State's allegation than the survey agency never
notified DPW of the continuing deficiencies, HCFA argues that
"expiration of a conditional certificate is automatic unless corrections
have in fact been made or a new plan submitted; notice to the Title XIX
agency (single State agency) is not required." See Agency Response, p.
19.
According to HCFA, nowhere in the federal regulations is the survey
agency charged with the responsibility of giving notice of deficiencies
to the single State agency, and DPW has not asserted that the survey
agency is required to do so by any independent agreement or provision of
its State plan. See Agency Response, p. 19. Section 249.33(a)(4)(
iii)(B) requires notice to the single State agency only if a new plan of
correction is tendered and accepted. Furthermore, internal
communication problems between the single State agency and the survey
agency do not relieve either agency of the obligation to insure that a
facility meets the requirements for participation in the Medicaid
program. Therefore, the lack of notice from one State agency to another
does not provide a basis for overturning the disallowance here.
Retroactivity of Date of Certification
The State asserts that Orchard Hill was certified on October 1, 1975,
but there is no issue before us of possible retroactivity of the date of
certification. Section 249.33(a)(6) requires that the effective date of
the provider agreement may not be earlier than the date of
certification. Orchard Hill was certified as an ICF on a Form 1539
signed October 8, 1975 but purporting to have an effective date of
October 1, 1975. It was also certified as an SNF on a Form 1539 signed
October 28, 1975, but purporting to be effective October 1, 1975. The
disallowance here does not cover any part of the month of October 1975,
and the certifications do not purport to be effective before October 1,
1975.
4. Gra-Mar Manor and Linden Manor Nursing Homes
Background
Both Linden Manor and Gra-Mar were properly certified as providers of
SNF services for the periods in question; the payments in question
pertain only to ICF services. From July 28-31, 1975, an SNF survey and
an accompanying intermediate care supplemental survey were completed at
Linden Manor. Linden Manor was certified as an ICF by a Form 1539 dated
(6) July 30, 1975 for the period July 1, 1975 to June 20, 1976. See
reconsideration record, E-1. An ICF provider agreement for the facility
was signed by DPW on August 28, 1975, for the period July 1, 1975 to
June 30, 1976.
Gra-Mar Manor was certified as an ICF by a Form 1539 dated July 31,
1975 for the period May 17 to December 31, 1975, based on a survey
(apparently pertaining to SNF standards) done August 15, 1974, and a
follow-up visit February 11, 1975. See reconsideration record, E-2.
From August 19-21, 1975, an SNF survey and the accompanying intermediate
care supplemental survey were conducted at Gra-Mar Manor. An ICF
provider agreement was signed by DPW on August 14, 1975, for the period
May 17 to December 31, 1975. /3/
The Regional Commissioner determined that no valid agreement for ICF
services existed for Gra-Mar and Linden Manor from May 18, 1975 to June
30, 1975. FFP in payments to these two facilities during this period
was disallowed in the amount of $22,967. See notification of
disallowance, May 28, 1976, p. 2.
The Administrator, HCFA, in his April 4, 1979 decision upheld the
Regional Commissioner's decision. /4/
Discussion
The Agency maintains that the regulations required all provider
agreements between a single State agency and an ICF to be based upon a
determination by the survey agency that the provider met standards as
(7) set out in Secs. 249.33(a)(2), 249.10(b)(15)(i)(E), and 249.10(b)(
15)(ii) (A).
HCFA contends, "In order to meet the definition of an intermediate
care facility, even though already certified as a skilled nursing
facility, a facility must be independently certified by the survey
agency as meeting the distinct requirements established for ICFs." See
Agency Response, p. 5. The Agency relies on Secs. 249.10(b)(15)(i)(E)
and (ii)(A), which were promulgated on January 17, 1974 and provided
that a facility must meet the required standards for an ICF no later
that 12 months following the effective date of the regulation, or by
March 18, 1975. The record indicates that there were no provider
agreements in existence that met these standards. Gra-Mar and Linden
Manor did not have ICF surveys on or before March 18, 1975 and during
the periods in question. The record also indicates that the State
concedes this fact. See reconsideration record, N. 14. The State
claims that it retroactively certified the facilities as having been in
compliance during the May 18 to June 30, 1975 period and that they had
been surveyed and found in compliance with SNF standards.
The regulations are clear, however, that the facilities must meet ICF
standards by March 18, 1975. Since ICF surveys were not completed until
after the disallowance periods, the facilities could not possibly be
certified as meeting ICF standards during the periods in question.
Section 1904 of the Social Security Act
The State takes the position that it substantially complied with all
the federal requirements pertaining to the provider agreements in
question. The State contends that "the Social Security Act,
specifically Section 1904, requires only substantial compliance, and
incidents of isolated, insubstantial noncompliance are not just cause
for a disallowance." See Administrator's decision, April 4, 1979, p. 2.
Section 1904 of the Social Security Act provides in pertinent part:
If the Secretary, after reasonable notice and opportunity for hearing
to the State agency administering or supervising the administration of
the state plan under this title, finds:
* * *
(2) that in the administration of the plan there is a failure to
comply substantially (with the provisions of section 1902) the Secretary
shall notify such State agency that further payments will not be made to
the State.
(8) Section 1904 authorizes the Secretary to withhold further Title
XIX payments where a state has failed to "comply substantially" with
the
federal requirements for a state Medicaid plan under Section 1902.
Section 1904 provides the drastic remedy of withholding federal funds
for an entire state plan (or the affected category). It has nothing to
do with the right of the federal government to recover overpayments made
to a state where it has not followed a specific statutory or regulatory
requirement in a particular instance. The statutory right to stop
federal funding completely for substantial noncompliance does not limit
the right to recoup the federal share of payments improperly made by a
state. Under Section 1903(d)(2) of the Act, the Secretary is obligated
to recover the federal share of any Title XIX overpayment he determines
to have been made to a state.This section and Section 1116( d) of the
Act have consistently been interpreted as authorizing a determination
that an item or class of items, such as the payments here, are
unallowable. See 45 CFR 201.14; 45 CFR 16.91.
5. Conclusion
For the reasons stated above, we conclude that the disallowances
pertaining to Orchard Hill, Gra-Mar, and Linden Manor should be upheld.
/1/ This decision follows the code at p. 6 of the Agency
response when referring to documents in the reconsideration record. n2
The Administrator, HCFA, later determined that Orchard Hill had not been
properly recertified until October 8, 1975 (the actual date on line 19
of the certification and transmittal form, Form 1539), and instructed
the Regional Medicaid Director to disallow FFP claimed for all services
for the period from October 1-7, 1975. HCFA argues that the
Administrator further determined that FFP in payments for SNF services
should be disallowed for the additional period October 9-27, 1975,
because the effective date (October 1, 1975) preceded the actual
certification date (October 28, 1975). See Agency Response, p. 16.
However, the Administrator's decision of April 4, 1979, which is all
that is before us, is the Agency disallowance with respect to the period
between January 1 and September 30, 1975 only. /3/ Gra-Mar and
Linden Manor each received a letter from DPW, dated August 5, 1975,
which advised "that a 60-day extension from March 18 to May 17, 1975 was
granted for your ICF provider agreement." See reconsideration record, D.
/4/ The Administrator also determined that neither facility had ICF
surveys before March 18, 1975 as required by federal regulations;
therefore, the State was not entitled to FFP for ICF services from that
date until the first ICF survey and certification in each facility (July
30, 1975 for Linden Manor and July 31, 1975 for Gra-Mar). He instructed
the Regional Medicaid Director to determine the amount of FFP paid to
the State for ICF services for the periods between March 18 and May 17,
1975 for both facilities and July 1 to July 30, 1975 for Gra-Mar and
July 1 to 29, 1975 for Linden Manor, and take appropriate action.
However, the Administrator's decision of April 4, 1979 does not indicate
that payments for ICF services were disallowed for these periods.
Therefore, the issue of FFP in payments for ICF services for the periods
March 18, 1975-May 18, 1975 and July 1-30, 1975 is not before the Board.
OCTOBER 22, 1983